Lords Sitting of 23 July 1998

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Exeter): The LORD CHANCELLOR on the Woolsack.
Lord Gretton Lord Gretton—Sat first in Parliament after the death of his father.
Lord Craigmyle Lord Craigmyle—Sat first in Parliament after the death of his father.

Radio Authority: Licence Terms
Lord Hunt of Kings Heath Lord Hunt of Kings Heath asked Her Majesty's Government:
Whether they are satisfied with the performance of the Radio Authority in consenting to departures from the terms of independent radio licences.
Lord McIntosh of Haringey: My Lords, the Radio Authority is responsible under the provisions of the Broadcasting Acts 1990 and 1996 for the award and regulation of independent radio licences in the UK, including any variations in licence terms. Those are not matters on which it is appropriate for the Government to comment.
Lord Hunt of Kings Heath: My Lords, I thank my noble friend for that Answer. Is he aware of anxiety that a considerable number of small, local, independent radio stations have been merged into larger groups? As a consequence, many locally produced programmes have been transferred into network programmes mainly produced in London. Does he agree that that undermines the whole purpose of local commercial radio stations? Does he agree also that the Radio Authority is showing yet again that regulatory agencies are too close to the producers and not close enough to the interests of the users?
Lord McIntosh of Haringey: My Lords, it is certainly the case that the 1996 Act made it possible for major players in the commercial radio field to expand their area of operations. Some of us observed the matter with disfavour at the time. However, at the moment we do not have an opportunity to introduce primary legislation. On the other hand, there are some improvements in transparency. From the autumn the authority will have to give reasons for its award of a licence. It will have to widen its Promise of Performance so that it covers the statutory duties to secure the character of services. I do not expect that to be sufficient consolation for my noble friend because it is certainly the case that the amount of purely local programming in some parts of the country has declined.
Lord Chalfont: My Lords, perhaps I should declare a past interest as a former chairman of the Radio Authority. Is the Minister aware that I, for one, welcome
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his assurance that the authority will be allowed to get on with its job under the Broadcasting Act without too much interference from government? But does he believe it is wise that the authority should give reasons for the award or non-award of licences? Also, can he say in more specific terms in what form of consultation the authority will engage before it changes the important Promise of Performance regime?
Lord McIntosh of Haringey: My Lords, my description of the position as it stands at present is an accurate reflection of the facts. The whole question of regulation of radio for the longer-term future is discussed in the Green Paper on convergence which we published recently. There is no reason to assume that in the longer term it will necessarily be right to have the same regime of regulation—for example, for local and community radio—as for national radio. In that sense, though we have no immediate plans for legislation, we are opening out the field. The noble Lord queried whether it is right for the authority to give reasons for its decisions. I should have thought that that was an essential part of transparency in regulation.
Lord Ewing of Kirkwood: My Lords, in his original reply my noble friend said that these are not matters upon which the Government should comment. Being the simpleton that I am, then why is my noble friend commenting?
Lord McIntosh of Haringey: My Lords, my noble friend is the most subtle simpleton that I know. I have not commented and refrain from commenting on any specific decision of the Radio Authority. And I shall resist any temptation to make me do so.
Lord Monkswell: My Lords, bearing in mind the experience of successful commercial operations owned and operated by local authorities or consortia of local authorities—for example, Manchester International Airport—can my noble friend tell the House whether it is possible for local authorities or groups of local authorities to own commercial radio stations? If it is not possible, have the Government any plans to allow it to become possible?
Lord McIntosh of Haringey: My Lords, one of the matters which we are discussing and which is covered in the Green Paper is increased opportunities for all forms of community radio, whether they are local authorities, hospitals or student radio; for example, in educational establishments. We hope that there will be an expansion of this kind of community radio which can be carried on frequencies that have limited geographical scope.
Lord Inglewood: My Lords, before asking my question I should declare an interest in a company which is interested in acquiring radio licences. Is the Minister satisfied with the progress that is being made towards the coming on to air of digital terrestrial radio, and can he say when he expects the multiplexers to be broadcasting?
Lord McIntosh of Haringey: My Lords, the noble Lord and other noble Lords will be aware that the Select Committee in another place was keen that we should go for a "big bang" approach to digital radio and television. In our Green Paper we have taken a much more evolutionary approach. We believe it is likely that progress towards digital radio and television will be market-led and take a considerable time. We are not in a position to make forecasts of when that will happen.

England/Scotland Road Link: Status
3.9 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
Whether they have yet approved upgrading to motorway status, as part of the M.6, of the stretch of trunk road now confined to two lanes each way from the Scottish Border to Junction 44 near Carlisle.
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Baroness Hayman): My Lords, the noble Lord will be aware that the Government are currently undertaking a review of the roads programme in line with our manifesto commitment so to do. A decision on the future of this scheme will be made as part of that review. We plan to publish the results before the parliamentary Recess.
Lord Campbell of Croy: My Lords, I thank the noble Baroness for her reply. Does she recognise that this is the missing link in the motorway system on the west side of Britain; that is, the gap between the M.6 in the south and the M.74 which starts at the Scottish Border? Since upgrading is supported by all concerned, and particularly by businesses in Scotland, will approval be granted soon, whether or not as a result of the review, by the Minister responsible for roads in England?
Baroness Hayman: My Lords, I am the Minister responsible for roads in England. We are making decisions about the schemes, including this one, against the criteria which we set out: integration, economy, accessibility, the environment and safety. I am well aware of the particular importance placed on this scheme and on completing the motorway link to Scotland. I have discussed these issues with colleagues at the Scottish Office. However, I have to say that, in terms of the roads review, we have to make sure that all schemes are properly assessed against those criteria.
Lord Renton: My Lords, can the noble Baroness tell us whether any further road construction would be needed in order to achieve this purpose? Is it not a fact that all that would be needed really is the alteration of road signs?
Baroness Hayman: Would it were that simple, my Lords. The scheme under review is to provide a dual-three rather than a dual-two stretch of road. Once one has a motorway it is not simply a matter of changing the signs from green to blue because certain traffic is not allowed
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to go on motorways. Therefore, the access roads that currently go into a dual carriageway road have to be changed; and in order to give access to settlements on the current road, slip road arrangements have to be made. That ends up being a quite large construction scheme.
Lord Cledwyn of Penrhos: My Lords, in view of the establishment of the assembly in Cardiff, will my noble friend take immediate action to improve the road from north Wales to south Wales?
Baroness Hayman: My Lords, in reviewing roads within England I have been well aware of the cross-Border issues with both the Principality and Scotland. As well as having discussions about the integration of roads on either side of the Border with colleagues in the Scottish Office, equally I have discussed these matters with Mr. Peter Hain who, as my noble friend will be aware, is looking at roads solely within Wales.
Lord Inglewood: My Lords, bearing in mind the remarks of the noble Lord, Lord Cledwyn, and also the surge of nationalism and separatism which events in Scotland have recently precipitated, does the noble Baroness agree that the reason for improving up to the higher standard links between the north west of England and the south of England and the Continent involves an overriding political imperative above and beyond the normal transport considerations?
Baroness Hayman: My Lords, political imperatives were not on the list of the five criteria that I put forward for assessing road schemes. There have been instances in the past when political imperatives of less—
Noble Lords: Oh!
Baroness Hayman: My Lords, I am thinking of particular schemes perhaps in the more recent past. There have been instances in the past where political imperatives of less national significance have been assessed for those reasons. We have to look at the issues of integration and it would be foolish not to look at transport links on both sides of the Border. Certainly, we have to look at issues such as regional services, the CTRL and Eurostar services. We have to look also at cross-Europe issues, as this route is a trans-European network. So wide issues of integration are involved.
Lord Gisborough: My Lords, the noble Baroness will be aware of the vast amounts of money that have been wasted on building dual carriageways which have then been made into six-lane carriageways. I have in mind the A.19, the M.25, the A.1, the M.6 and so on. Would it not be a great deal cheaper if in the first place six-lane roads were made whenever possible?
Baroness Hayman: My Lords, I do not think that the general spirit of an integrated transport policy and the emphasis the Government want to put on cutting pollution and congestion are such that we should go to the philosophy of predicting and providing in terms of

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road space. If one looks at the predictions for traffic growth if no change is made, it becomes perfectly obvious that we cannot build our way out of transport problems. That is why we need an integrated approach and why we need to look closely both at integrating transport issues with land-use planning issues so that we do not generate unnecessarily the need for travel and journeys and also at providing clean, affordable, acceptable public transport alternatives to individual car journeys where appropriate.
Lord Walton of Detchant: My Lords, in view of the interest expressed by the Minister in cross-Border links, does she not feel that equal priority should be given to the long awaited dualling of the A.1 between Newcastle and Edinburgh?
Baroness Hayman: My Lords, the dualling of the A.1 between Newcastle and Edinburgh is being considered in the context of the Scottish roads review, the results of which will be published later this year. There are also schemes proposed for the A.1 south of the Border, which comes within my responsibilities and about which I hope to be able to give information to the House next week.
Baroness Carnegy of Lour: My Lords, it is encouraging to hear the noble Baroness's response to the question asked by my noble friend Lord Campbell about this stretch of road. She has shown that she understands precisely what the problem is and why there is a difficult bottle-neck on that stretch. I gather that the decision as to whether the work goes ahead is to be taken within the next few days. When she returns to her office today, will she underline those particular details in red because they are very important?
Baroness Hayman: My Lords, I was trying to be studiedly neutral in my response to the noble Lord, Lord Campbell of Croy, about this scheme and in explaining the issues we have to take into account. I said that I understood very well that locally and north of the Border great emphasis was put on the issue of having motorway standard links all the way down. But I also pointed out, in the context of less emphasis on road building and more emphasis on road maintenance and making the best use of what we have, that we have to assess rigorously claims, for example, that a specific part of a road is a particularly bad bottle-neck and needs to be addressed because of that.

Prisons: Suicide Rate
3.18 p.m.
Lord Dholakia Lord Dholakia asked Her Majesty's Government:
How many people since April 1992 have committed suicide in prisons managed by the commercial sector.
The Parliamentary Under-Secretary of State, Home Office (Lord Williams of Mostyn): My Lords, since April 1992 there have been 19 apparent
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self-inflicted deaths of prisoners in custody in contractually-managed prisons. I understand that inquest verdicts have been returned on 12 of those deaths: 10 were suicides and two were accidental deaths.
Lord Dholakia: My Lords, I am grateful to the Minister for that reply. Can he explain why the staffing ratio in private sector prisons is less than in publicly-managed prisons? Does he accept that the very high prison population results in prison officers being unable to provide adequate care to those who may have a suicidal tendency? What is the Government's plan in relation to housing prisoners near to their homes and in relation to mentally ill offenders who may have a depressive illness and may be a suicide risk?
Lord Williams of Mostyn: My Lords, staff ratios vary according to the regime in a particular prison and the type of prisoner in it. I take the noble Lord's point about imprisoning prisoners close to their homes. Unfortunately, one finds that the suicide rate in prisons is larger in local prisons, partly because it is found that suicide among prisoners, which everyone regrets, tends to occur in the very early stages of incarceration, whether on remand or following sentence. Prison officers are trained to be aware of suicide risks. There are a number of schemes which have been developed, and which are still being developed, with various organisations such as the Howard League for Penal Reform, to make sure that suicide risks are identified as soon as possible when a prisoner is taken into custody.
Lord Windlesham: My Lords, as regards the latter part of the Minister's reply, can he confirm that the Prison Service policy of having trained suicide-awareness teams applies to the prisons in the private sector as well as to HM Prison Service establishments? Can he also confirm that a majority of the suicides which the noble Lord mentioned—that is, 17—were not convicted offenders at all, but were on remand awaiting trial or sentence?
Lord Williams of Mostyn: My Lords, certainly many were on remand. It is a very serious problem indeed. As regards the specific question about private prisons, Doncaster prison, for instance, was the subject of a report published by the Chief Inspector of Prisons in October 1996. He particularly commended the systems of management of healthcare and suicide prevention, so there is no distinction in the quality that one aims to provide in this context between private prisons and publicly-run prisons.
Lord Judd: My Lords, does my noble friend agree that in a civilised society one death of this kind in prison is one too many? Does he further agree that, while there is a real issue of prison needing to be a deterrent and a punishment, the biggest challenge of all is the process of rehabilitation to full and positive citizenship and that has to start on day one of internment? In that context, does my noble friend also agree that there is a cultural issue to be tackled here in the entire Prison Service in

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which, of course, there are very many prison officers who serve with distinction and commitment which would challenge us all?
Lord Williams of Mostyn: My Lords, even one death is one too many. The apparent rise in the rate of suicide in custody has generally mirrored a similar rise in similar age groups throughout the community. I dare say that the reasons for that are manifold and subtle and I cannot pretend to pinpoint all of them. My noble friend Lord Judd is right. We have to have constructive regimes in prison. When I repeated the Statement that Mr. Straw made in another place quite recently in your Lordships' House, I pointed out that extra funding was going to be made available to increase the target of productive activity from 22.5 hours a week to 24 hours a week, which is an important start.
Lord Harris of Greenwich: My Lords, is the noble Lord aware that many of us accept what he said a few moments ago that the most difficult area lies in local prisons? Is he aware also that many of us have seen over-staffing in some prisons? Does he agree that under-staffing raises particularly difficult issues in prisons because, by definition, the governor, or whoever is in charge of the establishment, does not have the staff to keep watch on the most vulnerable prisoners? Will he guarantee that this particular matter is looked at with some care?
Lord Williams of Mostyn: My Lords, certainly under-staffing is a distinct problem, not only as regards the numbers of staff, but their quality. Dealing with potentially suicidal prisoners is a very difficult skill to acquire. That is undoubtedly a problem. I can tell your Lordships that that is under review. Any remedy for reducing the suicide rate is something that we all take most seriously.
Lord Janner of Braunstone: My Lords, does my noble friend agree that both as regards suicide and many other prison problems, it is overcrowding which lies at the root of them? In those circumstances, can he give the House any kind of hope that there will be a substantial reduction in the prison population through the introduction of other methods for the treatment of offenders than incarceration which so often leads to further offences?
Lord Williams of Mostyn: My Lords, there is a number of distinct points there. Sometimes over-crowding is a contributory factor; sometimes prisoners prefer to share a cell because they like human company during the day. I do not put that forward frivolously: it is a fact. Of course, we want to reduce the prison population. That should occur reasonably soon when we have the managed return from custody to the community, about which I spoke to your Lordships some months ago. That should reduce the demand for places to some extent next year. Ultimately we have to look at this problem across the whole spectrum and that is the whole rationale behind the Crime and Disorder
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Bill; namely, that we stop people going to prison by helping them not to offend in the first place and use non-custodial remedies before they get within the custodial system.
Lord Elton: My Lords, is the noble Lord aware of the welcome that his last utterance will have among those who wish to see a reduction in the suicide rate in prison and in the number of prisoners? Is it not too late to intervene by preventing re-offending or by trying to deter by punishment so many thousands of young people who could be saved from getting into crime at all by early intervention? Is the noble Lord aware how warmly that intervention on his part will be received?
Lord Williams of Mostyn: My Lords, I am most grateful for what the noble Lord has said. I believe that the general welcome that has been given to the Crime and Disorder Bill comes entirely from the factors which he has identified; namely, that one intervenes early, productively and helpfully to stop children getting into the continuous cycle of further offending, without effective intervention by the state, so that they end up in a dustbin, which is what prison is for many.

Tax Fraud
3.26 p.m.
Baroness Ludford Baroness Ludford asked Her Majesty's Government:
Whether they intend to consult on proposals for tackling tax fraud, given that the Green Paper Beating Fraud is Everyone's Business covers only social security fraud.
Lord McIntosh of Haringey: My Lords, the tax authorities already have effective programmes in place to counter tax fraud and evasion. The Inland Revenue's work in countering tax evasion yields about £1.5 billion a year in extra tax, interest on that tax and civil penalties. The revenue also takes criminal proceedings in the most serious cases of all types of tax fraud. The Green Paper explains how the Department of Social Security itself is moving towards a similar approach; that is, civil sanctions backed up by prosecutions.
Baroness Ludford: My Lords, I am grateful to the Minister for his reply. In the light of that statement of commitment, can he explain why the title of the consultation paper Beating Fraud is Everyone's Business raised an expectation that it would be of general application, but only on opening it was it found to apply solely to social security fraud? Is it not the case that many of the aims and techniques in that paper, particularly as regards developing an anti-fraud culture in society, need to be applied to tax evasion? I note the figures that the noble Lord gave, but in the Inland Revenue's annual report for 1996 it is stated that compliance work brought in almost £5 billion. I understand that as a result of fraud work Customs and Excise recovered £1.5 billion in the same year. Therefore, is it not reasonable to assume that the sums involved in tax fraud may be even greater than in social security fraud? Can the Minister tell us how the

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Government will show that they appreciate the need for even-handedness? Do the Government have any specific plans for having a national tax fraud hotline to match the national benefits fraud hotline?
Lord McIntosh of Haringey: My Lords, I cannot answer all seven of the questions that the noble Baroness put to me. She referred to the Green Paper and said that she had to open it in order to see that it referred to social security fraud. She clearly did not observe that it was published by the Department of Social Security. That is made clear on the cover. I do not accept that there is any way in which tax fraud is being approached with less diligence than all other kinds of social security fraud. Nor do I accept that social security fraud is necessarily perpetrated particularly by poor people. On the contrary, a lot of social security fraud is carried out by systematic, organised criminals working on a very large scale. The analogies which the noble Baroness draws between social security fraud and tax fraud do not always hold up to examination in the way that she suggests.
Earl Russell: My Lords, does the Minister agree that, although fraud is always wrong, there is no more reason to suppose that there is fraud in the social security system than elsewhere, and that in taking measures against fraud, we must also take account of their cost-effectiveness? Is the noble Lord satisfied that the priority which tends to be given to social security fraud is cost-effective?
Lord McIntosh of Haringey: My Lords, one difference which ought to be pointed out between tax fraud and social security fraud is that it is possible to estimate the level of social security fraud by a systematic examination of a sample of paid claims. One cannot make the same assumption from an examination of tax returns. One cannot tell whether the person concerned has income which has not been declared for tax purposes. Although it is possible to estimate the level of social security fraud, that is not possible with tax fraud. I can only repeat that a very great deal of intensive effort both in this country and internationally is given to countering tax fraud.
Lord Hayhoe: My Lords, although they may not be very popular, does the noble Lord agree that the officers of the Inland Revenue and of the Customs and Excise service deserve approbation and praise for their dedicated work on behalf of the nation as a whole in trying to reduce fraud within the tax system as effectively as possible?
Lord McIntosh of Haringey: My Lords, I am grateful for the noble Lord's comments. A great deal of the investigative work into tax fraud is carried out routinely by local offices of the Inland Revenue. The Inland Revenue special compliance office deals with more complex and serious cases. That office alone brought in almost £0.5 billion last year. My understanding from the social security Green Paper is that the Department of Social Security recognises the need to develop a similarly highly skilled core of professionals to investigate benefit fraud. We can all learn from each other.
Baroness Williams of Crosby: My Lords, the noble Lord will recall that several months ago the Government
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promised to look into the issue of overseas tax havens. Can the noble Lord give us any idea of when the report of that study is likely to come before Parliament?
Lord McIntosh of Haringey: Yes, my Lords, and I am grateful for that question. With other member states of the Community, we have been taking steps to curb large international tax frauds. In May, the Chancellor announced UK-inspired G7 initiatives for the better exchange of information in action against tax crimes. We have appointed a member of the Inland Revenue staff to the National Criminal Intelligence Service to feed back laundering reports to the Revenue for use in tackling tax evasion.

Tamar Bridge Bill
3.32 p.m.
Baroness Fookes: My Lords, I beg to move that this Bill be now read a third time.
I shall be as brief as possible. An Instruction was attached to the Bill asking whether the Bill was necessary and whether its purpose could be achieved at a lower cost by strengthening the existing bridge without widening it. The Select Committee met for three days, deliberated and decided that the Bill should proceed. In those circumstances, I commend it to the House.
Moved, That the Bill be now read a third time.-(Baroness Fookes.)
On Question, Bill read a third time, and passed, and returned to the Commons with amendments.

Scotland Bill
3.34 p.m.
The Parliamentary Under-Secretary of State, Scottish Office (Lord Sewel): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.—(Lord Sewel.)
On Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMMITTEES in the Chair.]
Schedule 5 [Reserved matters]:
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 181:
Page 66, line 9, leave out ("and non-domestic rates)") and insert ("but not locally raised business or non-domestic rates or any local sales or local tourist industry tax).").
The noble Lord said: Before speaking to this amendment, perhaps I should congratulate the Government on managing to start the Scotland Bill on this fifth Committee day at about the right time—
Noble Lords: Hear, hear!
Lord Mackay of Ardbrecknish: Indeed, it is only fair that I should congratulate the Government on that, given that I criticised them on our previous three Committee days when we did not start this business until six or seven o'clock in the evening. The Government have excelled themselves today. There is not even to be an interruption for a Statement. I hope that we shall therefore be able to catch up with where we ought to have been on Tuesday evening and that we shall manage to complete our consideration of all the amendments on the groupings list before the end of today. However, if we do so, I repeat that we shall only have caught up with where we should have been by the end of Tuesday evening.
This amendment relates to the taxation powers of the Scottish parliament. When the Government produce their White Paper to which my fellow Scots gave such a resounding vote, they made it clear that the tax would relate to only income tax. This amendment seeks to ensure that that promise to the Scottish people is written on the face of the Bill.
I have two worries on this subject, both of which the amendment seeks to address. I refer first to the uniform business rate. For many years, businesses in Scotland had a serious problem with the rates. Businesses in Scotland faced had much higher rateable values than equivalent businesses on equivalent sites in England. On top of that, they had higher rate poundages. The net result was that many businesses in Scotland, competing with businesses south of the Border, were paying significantly more—many times more—in rates to the local authority than were their competitors south of the Border.
When we were in government, we introduced the concept of the uniform business rate in order, over time, to equalise rates not only throughout Scotland—there was a distortion throughout Scotland—but throughout the United Kingdom as a whole. For businesses, that control of business rates was one of the most important tax-cutting measures introduced by the previous Conservative Government.
Since April 1995, the UBR poundage has applied to Scotland at the same level as in England. When in government, we pledged that that linkage should be permanent. Indeed, on Budget day in November 1996, we announced that the 1997–98 Scottish national non-domestic rate at 45.8p in the pound would be the same level as in England. As a result of that policy, businesses in Scotland have paid £1.4 billion less in rates over the five-year period since 1990 than would have been the case if we had not introduced the UBR. If the rate poundage had risen in line with inflation since 1990, businessmen would be facing a poundage rate of £1.10 in the pound and not the 45.8p that I mentioned earlier.
Given that the introduction of the UBR also involved a rates revaluation, we introduced a transitional relief scheme to avoid some businesses facing unduly large rises. In 1995–96, that support amounted to £72 million, with a further £65 million in 1996–97. The fact of the matter is that Scottish businesses value the UBR above
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almost anything else that any government have done or can do. That is because of its importance in terms of creating what we all like to call "a level playing field".
That level playing field between Scotland and the rest of the kingdom could potentially be upset if responsibility for the UBR is to be devolved to the Scottish parliament, which is what we understand. The Scottish parliament—the Scottish executive—would then have the right to change the UBR, to increase it above the level for England and thus to make business and commerce in Scotland less competitive than their counterparts south of the Border. In addition to that danger the Scottish parliament has the option to abandon UBR for ever and return the business rate to each and every local authority in Scotland; in other words, to put the clock back to the damaging situation that business faced before the Conservative government embarked on the introduction of UBR.
Lord Monkswell: I apologise to the noble Lord for intervening. The noble Lord has been going on about the terrific advantages that accrued to Scottish business from the uniform business rate as a result of the actions of the previous Conservative government. However, he has not told the Committee the reason why business and domestic rates went up. I hope that this intervention saves my noble friend on the Front Bench from having to correct the historical record. It was the cut in the revenue support grant to pay for cuts in the income tax of the Conservatives' rich friends that forced local authorities to push up the domestic and business rates in order to continue to provide the services that local people required.
3.45 p.m.
Lord Mackay of Ardbrecknish: I thank the noble Lord, Lord Monkswell, for that intervention. I shall draw it to the attention of Scottish business. But I suggest—perhaps quite wrongly—that he speaks for his party when he makes that suggestion. Anyone who knows about Scotland—clearly, the noble Lord does not—is aware that for example in the City of Glasgow, the Labour council took delight in setting high rates. It pretty well frightened business out of the city and into the surrounding areas. That stopped because it no longer had control of the business rate, but it continued to do it for individuals. Council taxpayers in Glasgow pay the highest council tax anywhere in Scotland. That takes some going; competition is pretty fierce among Labour local authorities. That is the reality of the matter.
Outside Glasgow there are other councils. One of them, which has just passed out of Conservative control—the Labour Party has not had sufficient time to damage the residents yet—charges significantly lower rates. It has attracted the establishment of many businesses outside the city. More importantly, a good many Glasgow businessmen have gone to live outside the city boundaries. I have not done that but frankly there is a considerable financial temptation to which many businessmen whose companies make their living in the centre of Glasgow have succumbed. That is a fact, and I am delighted that the intervention of the noble Lord gives me this opportunity to explain it.

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I return to the UBR and the problems that may be faced under the Scottish parliament. As we shall see when we come to discuss those parts of the Bill that relate to extra taxation, the maximum that is likely to be raised by the three pence in the pound is about £450 million. That is a lot of money but in comparison with the Scottish block of £14 billion, it is not hugely significant. If in future anything happened to the Barnett formula or anything of that nature, the Scottish parliament might find that the extra £450 million was insufficient. Therefore, it would look for other ways to raise money. As the parliament would have control over all government finance including the business rate it is possible that control of the uniform business rate could be used to increase the amount available to the Scottish parliament and Scottish executive to spend at their own hand. It is conceivable that in an attempt to raise additional expenditure, control over local business rates will be handed back to councils, those councils being allowed to set the local business rate with all the problems that that may cause. In so doing the advantage to the Scottish parliament is that it can reduce the amount of grants that it gives to local authorities which they will have to make up by increasing both the business and the domestic rate. The parliament may increase its income or have more income to hand from the block grant by this means.
The parliament may also keep the UBR but increase it in Scotland above and beyond that which local authorities need. While it may be a nice sleight of hand by presenting to the local authorities what it takes in by way of UBR, equally by sleight of hand it may reduce the amount of the other grant that it gives so that it retains a little more of the money which it can then spend on whatever is its favourite projects. Either way the business community in Scotland will be back to the position in which it found itself before we started out on the uniform business rate. It would face an increasing burden. My amendment seeks to make clear on the face of the Bill beyond any ministerial assurances that that cannot happen.
The second part of the amendment refers to local sales or tourist tax. This arises because of a suggestion by a very senior Labour councillor who I believe has been allowed onto the list for the Scottish parliament. I am not very sure because I do not closely follow the internal machinations of the Labour Party. Councillor Keith Geddes, who is Leader of Edinburgh City Council and who was the Labour Party's candidate for Tweeddale, Ettrick and Lauderdale at the previous general election, suggested that the parliament could raise money by a tourist tax. He made that suggestion in January and has repeated it recently. He went further and said that he would levy £2 per night per tourist. It would mean that if, say, a family of four had a fortnight's holiday in Scotland—this should interest the noble Lord, Lord Gordon of Strathblane, as chairman of the Scottish Tourist Board—it would have to find an extra £112. That may discourage people from coming to Scotland. I suspect that this year they have been discouraged because of the value of sterling which makes it less attractive to people from abroad to holiday in Scotland. It makes it more attractive for people in
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England to holiday abroad rather than in Scotland. In addition, the weather this summer has not been all that good. I blame the Government for that but that is another matter. I have not tabled an amendment to deal with that.
A tourist tax in Scotland would be a distinct disadvantage to the Scottish tourist industry. I do not want to labour the point. I believe that Councillor Geddes was flying a kite of his own. In case he is not, I have tabled this part of the amendment. Without wanting to labour the importance of tourism to Scotland, I should like to record that for many areas it is a vitally important industry. It brings in lots of money to the Scottish economy, especially to the parts of Scotland where there are not many ways in which local people can generate wealth.
The tourist industry was not very fussed by the idea. Mr. Peter Taylor of the British Hospitality Association said that obviously the tax would have to be passed on to the customer and would thus make Scotland less competitive and create a spiral effect. This is an important industry which generates about £2 billion a year for the Scottish economy. Therefore, I have thought it right to try to provide some protection for that industry in case the idea promoted by Councillor Geddes becomes contagious and spreads to other members of his party who have a leading role in the Scottish parliament. That is why the local business rate and any other local sales or tourist tax is addressed in this amendment. I beg to move.
Lord Hughes of Woodside: In the noble Lord's introductory remarks he spoke about a novel constitutional principle; namely, that those from the Back Benches spoke for their party and should be chastised for that, whereas the noble Lord in speaking from the Opposition Front Bench was wholly innocent of any party politics in this matter. I take his comment with a pinch of salt.
As to the uniform business rate, the view of business and commerce in Scotland is not 100 per cent. in favour of the UBR. I recall the discussions that I had with representatives of Aberdeen Chamber of Commerce when an elected Member of the other place. They presented a shopping list of projects that they wanted Aberdeen City Council to undertake: better roads and services and many other things. I asked how it would be paid for. They took refuge in the usual response that the Government would have to make the money available. Since it was a Conservative government, at the time we all agreed that there was not much prospect of it.
One of the problems was that in supplying services and reacting to local demands, needs and desires local councillors were hemmed in by restrictions on what they could spend, limits on capital spending, limits on how much money they could raise through the uniform business rate and so forth. I was solemnly told by the representatives of the chamber of commerce—and I have no reason to believe that it put up a bunch of mavericks to see us; they were speaking generally for the Aberdeen Chamber of Commerce—that if local

1045
services were to be improved it would be quite happy to trade off local decision-making against the uniform business rate.
The uniform business rate has not been of untrammelled benefit throughout Scotland. Its effectiveness and efficiency have been as variable as the local determination of business rates. It was very variable. The cost of the business rates to individual businesses was a very small proportion of any company's turnover and expenses.
I am against the amendment. The Scottish parliament should have the right to decide whether there should be a uniform business rate. I do not think that there should be, but I am not going to be there—and I have no desire to be there—to influence it one way or the other. It should have the right to decide.
Above all, if we are to see real change as a result of devolution, we need to give local government more power and responsibility. The only way that we can do that is to allow them to raise as much of their own revenue as they possibly can. They will have to answer to the electorate. If the electorate does not like what they do they will soon chuck them out. I am in favour of the maximum devolution, the maximum decentralisation of power. To retain in Westminster the uniform business rate goes totally against the grain. I hope that the noble Lord will not press this to a Division.
Lord Mackie of Benshie: I was struck by the noble Lord's praising the Conservative Government for abolishing the business rate. There were certainly some extraordinary examples of the differences in rates just over the Border. It took the Conservatives from 1979 to 1995 to do it. It took them some little time to realise what harm it was doing.
As to the noble Lord's main point, he is at his old business: that you cannot trust a Scottish parliament; that the people who are elected will be extremely foolish. If they are foolish, that is democracy. All that I have seen of the people who wish to stand is that there is a far greater desire in Scotland to do something about the ills of Scotland through the Scottish parliament than exists at the present time. There is a certain delusion about politics which the Scottish parliament will almost certainly cure.
The noble Lord is simply taking away the power of the Scottish parliament not only to raise taxes but to lower them. Often the lowering of taxes can benefit the community and the country enormously. It might attract people, more money might be invested and the revenue might rise at the end of the day.
The noble Lord can no longer go on saying that the Scottish parliament will be foolish and must be prevented from being foolish by what is on the face of the Bill. It will not work.
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As to the local taxes, the noble Lord, Lord Hughes of Woodside, is absolutely right. If there is a decent system of local democracy then the people who overburden their electorate will be put out. It is a bad amendment and I trust and hope that the noble Lord will withdraw it.
Lord Rowallan: I disagree wholeheartedly with what the noble Lord, Lord Mackie, has just said. I must declare an interest as a business rate payer in Scotland. I have always objected most strongly to having to pay a larger sum than someone who has exactly the same business as mine in England. I think rates should be uniform throughout the country.
Lord Mackie of Benshie: I think we have agreed that the business rate is very bad in Scotland. I was saying that the Conservative Government took a long time to abolish it.
Lord Rowallan: The noble Lord also went on to say that local government could always be put out by the local voters. Very few people actually pay business rates. The vast majority of voters within a local authority area do not care what the business rate is. They are slightly concerned with the domestic rate but not the business rate. Therefore rates can go up enormously, with absolutely no thought being given to businesses.
It is clear that whenever local authorities offer free rates in a particular area—as various new towns have done over the years, such as East Kilbride, Cumbernauld and Greenock—businesses have flooded in. As soon as the 10-year period of grace is over and a business rate comes back on, those businesses have moved on somewhere else where they can get a cheaper rate. There is no doubt about that. The facts prove it.
I strongly support this amendment. We should have a uniform business rate throughout the country. It will save any aggravation and, because very few people pay the business rate within a local authority, it is more democratic.
The Earl of Balfour: Once again I would ask that the Government bear in mind that there should be only one body holding the purse strings in the country, and that is the Chancellor of the Exchequer. If there is to be any variation it should be a very small one. The tax concessions given to this Scottish parliament under the provisions of the Bill are at least limited to 3 per cent.
At the very least the Government should take on board that any variation, particularly of the business rate, should be limited to no more than the 3 per cent. difference. If it is more than that I am concerned that when businesses look at their expenses—particularly those that want to set up a business—they not include within their inquiries coming to Scotland, and the Scots will miss out.
Lord Gordon of Strathblane: The noble Lord, Lord Mackay of Ardbrecknish, has kindly declared my interest for me, so perhaps I can avoid doing so again. The noble Lord's allusion to a Scottish tourist bed tax is wide of the mark. My understanding is that Councillor Geddes' proposal is for a hypothecated tax on tourism,

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which would be used by the tourist boards locally to market tourism more effectively. There is no question of the tax going to the central exchequer.
I tend to side with the noble Lord, Lord Mackie of Benshie. We really should not circumscribe the powers of the Scottish parliament. I agree, partially at least, with the noble Lord, Lord Hughes of Woodside. Scottish local authorities are well seized of the importance of attracting new businesses to Scotland. They are also well seized of the disincentive that higher taxation represents. We should leave it to their own good sense.
It may give no comfort to the Government, but it is wrong that businesses have no say in local government. Businesses contribute more in business rates than the electorate contributes locally in community charges—and yet businesses have no say. The principle of taxation without representation is something which went out with the Boston Tea Party.
Later, when the Scottish parliament looks at ways of involving people outside the parliament in pre-legislative scrutiny, the key factor will be to have business involved in making some of the decisions. In that way, as with the analogy described by the noble Lord, Lord Hughes of Woodside, business may be prepared and may want to pay more for a better service. In my area we agreed voluntarily to install a closed-circuit security system because in the long run we think it will save us money. If the local authority had said, "We will do this if you will pay a higher rate", we would gladly have agreed. It would amount to the same figure. The key point is to involve business, and that is something that the Scottish parliament will do more effectively than Westminster has done.
4 p.m.
Baroness Carnegy of Lour: I do not believe that the amendment is just about the business rate. It is an important amendment. It raises the whole question of whether the Scots parliament will find itself capable of maintaining and improving Scotland's prosperity as a whole, and maintaining its economy, which has been going well over the past few years. That is what we hope the Scottish parliament will be able to do.
The anxiety being expressed publicly by some big businesses, and by many others quietly to one another, and, I am sure, to Members of the Committee, relates to uncertainty as to what will happen to taxation in general. I do not believe that that is rooted in the conviction that more will be spent; they just want to know what is likely to happen.
Business, of course, always has doubts about what the Chancellor of Exchequer will do and what will be the level of income taxes. In Scotland there is now a double anxiety. There is anxiety as to whether income tax is likely to rise by 3p in the pound or drop. It is inevitable that the uncertainty business faces will increase. It will be built into the system. We have to accept that. The additional uncertainty relates to what other taxes it may be possible for the parliament to raise. My noble friend has explained that, as it stands, the Bill opens up a number of possibilities. The amendment would limit them, and I am sure that that is wise.
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Members of the Committee are saying that the Scots parliament will be sensible and that it will not want to raise taxes if that is disadvantageous to Scotland. I am not certain about that. A number of people who seem likely to be prominent members of the Scots parliament—of course we still do not know who they will be—have expressed views which make one feel that they would like to see higher taxes. Mr. Henry McLeish, at present Minister of State at the Scottish Office, is on record as saying a while ago that he thought that it would be necessary to raise the extra 3p. I do not know whether he still thinks that. I understand that he is standing for the Scots parliament. We do not know whether he will be elected, but it is likely that he will be a prominent member. The SNP has expressed the view that it would like to see a 50p rate on higher incomes. That does not concern us at the moment, but it gives us an idea of its view on taxation, at any rate of those who are better off, and I should have thought of business.
It seems to me that the parliament will have some problems. I understand that the Scottish Office civil servants are getting themselves well kitted up for their new role. The Minister may be able to confirm this, but it seems that the number of Scottish Office civil servants has risen from 4,550 in 1995 to 5,465 in 1997. That is a biggish rise. It excludes of course some 6,000 people who work for non-departmental public bodies, most of whom are paid for by the taxpayer.
The new parliament building and its upkeep, the new Scottish Office building at Leith, in addition to the existing St. Andrew's House in the middle of Edinburgh and Dover House in Whitehall, all have to be funded, as does the increased number of people. The temptation for the Scots parliament to find extra money by way of taxes will be great. It may even find that it needs it unless, of course, the Barnett formula is rejigged to increase money for Scotland. It may be. We do not know. We shall all be watching that with great interest.
Scotland needs an increasingly beneficial economic edge over other countries in the EU and elsewhere, even, dare one say it, in relation to the rest of the UK. That is what we hope the Scottish parliament will be able to create. It will not be possible to raise all that money through local government in order to have more to spend at the centre. I do not believe that it should be allowed to do it. I like the amendment.
Viscount Thurso: I was pleased to hear the intervention of the noble Lord, Lord Gordon of Strathblane, in relation to the tourist tax, and grateful to him for explaining that Mr. Geddes' proposals were for a hypothecated tax. In my role as my party's tourism spokesman, I have spent considerable time looking into various types of hypothecated tourism taxes around the world. Without wishing to come down on one side or the other of the argument, it is clear that in many areas there is great merit in it. The headlong attack on the principle by the noble Lord, Lord Mackay of Ardbrecknish, was wide of the mark. I commend him to look, among others, at the State of Florida as an example of a hypothecated tourist tax which works well. What is dangerous is any form of taxation on a tourism activity

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which is not hypothecated and which is reserved to the central treasury. We do not have to look far to find a devastating example of that. It is called the airport tax.
Lord Selkirk of Douglas: I support the points made on the UBR by my noble friend Lord Mackay of Ardbrecknish. For a short time I was responsible for local government finance in Scotland. We had many representations, especially from smaller businesses, which stressed the unfairness of having different rates charged for comparable businesses in different parts of the country. Over a period of years, we resolutely transferred hundreds of millions of pounds from the Scottish block to make the UBR a successful reality. As my noble friend said, we were able to save businesses in Scotland approximately £1.1 billion a year. If that level playing field were thrown away overnight, it would make businesses a great deal less competitive and cause job losses in certain parts of the country. Whether or not my noble friend presses the amendment, the principle that he has asserted is one that should be remembered.
Lord Desai: First, I apologise to the noble Lord, Lord Mackay, for not being in my place when he started, but I can well guess what he said. I am astonished that the Conservative Party is such a centraliser. It hates any diversity or experimentation and it does not trust legislators of any kind. It somehow feels that there should be a single tax. It tried that. It was called the poll tax. We know what happened to that.
It is a good thing to let people devise their own little fiscal constitutions and take the consequences. If Glasgow charges too high a business rate and loses business, that is Glasgow's lookout. If businessmen move outside the limits of Glasgow, local authorities outside Glasgow will gain. I say, "good". Let there be lots of uneven playing fields because centralising uniformity is bad. We have succeeded in killing local initiatives by the policies on local authority finances. A substantial part of local authority revenue comes from the centre. That has a huge effect on any local authority innovation. That means that we do not have local authorities with any semblance of independence. With devolution we have a chance to let not a thousand flowers bloom but perhaps 15. Let them bloom. If it turns out badly, the Scottish people will punish those they do not like.
Lord Dixon-Smith: My Lords, it is somewhat historic that when President Ford was obliged to take over from President Nixon, he called for a report on the American economy. A fortnight later his staff produced 1,000 A4 pages, closely typed and with a few graphs and pie charts. He took one look and said, "I cannot study all that. I shall never absorb it all. Summarise it". His staff took it away, and two weeks later back came one line: there is no such thing as a free meal.
Whatever else we like to say, that will be the situation. I have spent a lifetime dealing with local authority finance. For once I find myself in some agreement with the noble Lord, Lord Desai. It has been
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unfortunate that controls over local authority expenditure have been over centralised. However, worse than that and more insidious—it is less of a party point in a way—has been the way in which over the years central government have constantly stepped in to bail out local government when local government has found itself in trouble. I have always argued, and I say now, that local authorities should not have full Treasury backing; they should be allowed to go bankrupt and face the consequences of their own irresponsibility. So I would impose a much harsher discipline on local government than has existed in this country for a very long time.
When considering what should or should not be on the face of the Bill, there is a case for arguing that there should be no possibility of raising the uniform business rate to a rate different from the domestic council tax. The noble Lord, Lord Gordon of Strathblane, has a margin of right on his side when he says that business contributes a great deal to local government—of course it does—and that it does not have sufficient say in the decisions that force up that expenditure. I disagree profoundly with the noble Lord when he says that business is not represented. If business is not represented in local government, there is a simple reason: that by and large business will not become involved in local government even though it has every opportunity to do so. We should remember that. There should be a linkage between the uniform business rate and the council tax so that they cannot be lifted at separate rates; otherwise the democratic impact will be diminished if business can be taxed at a higher rate.
As regards a Scots authority making itself uncompetitive, I would say, "Let it". If people move out of one city in Scotland into another area, that is fine. If they move over the Border into England—as I gather from what is happening to property prices in the north of England, is beginning to occur—well and good. I do not have too many worries about that.
At the end of the day these matters will be controlled through the Scottish block which comes under the Chancellor of the Exchequer who may not always be as generous as the present one. Because of that, there will not be enormous opportunity for fiscal transfers from a Scottish parliament to local government greater than they are at present because the absolute volume of money is constrained.
4.15 p.m.
Lord Lyell: Before the Minister replies in his usual excellent style, perhaps he will clarify this in my mind. As regards the wicked calumny against Councillor Geddes of Edinburgh, I heard the wise words of the noble Viscount, Lord Thurso, who has experience of tourism. I enjoyed his comments on hypothecated tax. I am a simple Angus man, not an expert, let alone from Caithness. It does not matter what one calls it. "Hypothecated" is a rather long word. I use a word with two syllables: is it extra cash? I think that it probably is. The tax may be called hypothecated; it may be diverted to making Caithness or Angus more beautiful. But every person who spends the night there will spend £2.

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The noble Lord, Lord Mackie, said that business rates or local government taxation might be reduced. If that is the policy of the Liberal Democrat Party, I am sure that bells will be rung all round Scotland. Local authorities will leap, as noble Lords tend to leap in winter time.
The noble Lord, Lord Hughes of Woodside, regaled us with stories of Aberdeen City Council. The noble Lord, Lord Mackie, introduces a sensible note into the debate.
Lady Saltoun of Abernethy: Following the comments of the noble Viscount, Lord Thurso, and the noble Lords, Lord Gordon of Strathblane, and Lord Mackay of Ardbrecknish, I should be very sorry to see any kind of rate or tax which added to the costs of accommodation for visitors. Already in this country the cost of hotel rooms and overnight accommodation is very high indeed compared with a great many other countries. For example, when I ask Canadian friends if they are coming over this year, the answer I receive is, "We should love to come but your hotel rooms are so expensive compared with ours that we cannot afford to come for at least another two years".
Lord Sewel: It is nice to know that we have put the early start to such good use. That absolute gem of a distinguished chartered accountant among us, the noble Lord, Lord Lyell, claims no knowledge of what a hypothecated tax is. Pull the other one, my Lords!
Lord Lyell: Perhaps I may stress to the Minister that we have debits and credits, not hypothecated items. The meaning of a hypothecated tax is not necessarily what I was taught between 1962 and 1967. Perhaps the Minister can answer whether hypothecated tax is extra cash. That is what I want to know.
Lord Sewel: I do not wish to engage in a debate between the noble Lord, Lord Lyell, and the noble Viscount, Lord Thurso. They may be able to take the matter further somewhere else. I shall certainly not be a participant in that little dispute.
Let us return to the main issue. The noble Lord, Lord Mackay of Ardbrecknish, is a recent and, I sometimes suspect, a reluctant convert to devolution. Most of the time he does quite well. The new script comes out persuasively. But every now and then his nerve fails him. He sees all sorts of horrors and disasters looming ahead, backs off and tries to put controls and constraints in the way of the Scottish parliament.
His approach seems to be based on the perverse idea that almost as soon as a Scottish parliament is elected it will deliberately implement policies which would have as their primary objective the inflicting of damage on the Scottish economy. That is the argument we are being asked to buy. That argument may spring from the deep lack of confidence of the noble Lord, Lord Mackay of Ardbrecknish, in the ability of the parliament, or even his own party's representatives in that parliament, to take wise and prudent decisions. I am prepared to trust
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them and if they get it wrong they will simply suffer the judgment of the electorate. It is as simple and straightforward as that.
Amendment No. 181 would remove a fundamentally important power from the Scottish parliament; an important building block of devolution. The Bill provides for the full devolution of an extremely important area relating not only to local government but to local government finance, too. The idea is that control of local government finance will rest wholly in Scotland. Non-domestic rates are part of the local government finance system and the devolution of them represents a key part of ensuring that accountability for local finance lies with the Scottish parliament rather than Westminster. We are deliberately transferring that responsibility to the Scottish parliament and ensuring that the proper lines of accountability run from the Scottish parliament to the Scottish people. We are not reserving the power to the Parliament of the United Kingdom.
Concerns were expressed that expenditure in Scotland will increase almost out of control as a result of this power. There is no basis on which that judgment can be made. But let us return to what was stated in the White Paper, because it tried to deal with the arguments that we have heard from the noble Lord, Lord Mackay of Ardbrecknish. It states that if its expenditure growth relative to England became excessive and was such as to threaten targets set for public expenditure as part of the management of the UK economy, and the Scottish Parliament chose not to intervene or to take any action, it would be open to the UK Government to take that excess into account in considering its level of support for expenditure in Scotland. That is right, because in that respect control is not being exercised in order to constrain or limit the activities of local government. Control is being exercised in order to protect the reserved matter of macro-economic policy. That is absolutely and understandably the way forward.
In dealing with the nature and perhaps future reform of local taxation, the White Paper—and the White Paper was endorsed in the referendum—dealt at some length with the possibility of changes in the local government taxation system. With the leave of the House, I shall quote from paragraph 7.26 on page 25 of the White Paper. It states:
"The Scottish Parliament will be responsible for determining the form of local taxation, both domestic and non-domestic, which local authorities will be permitted to levy. It will therefore be able to alter the form of the council tax, or replace it if it so decides. Non-domestic rates are also an important part of the local finance system and, they too will be a devolved matter. It will be for the Scottish Parliament to decide whether to retain the power to set the non-domestic rate poundage within its own control or to devolve that responsibility to local councils. It will clearly need to consult business interests before making any changes".
I believe that that is the right way forward. It shows a proper, mature and sensible approach to the relationship between the Scottish parliament and local government. Of course, the amendment as it stands is totally

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incompatible with that proposition. I hope that on that basis the noble Lord will feel able to withdraw his amendment.
Lord Mackay of Ardbrecknish: I am surprised that the Minister did not turn his attention in any detail to the second part of the amendment; namely, the tourist tax. But perhaps we can assume that we shall receive an answer from some of his noble friends who made, it has to be said, the first outing of Back Bench Labour Members in the Committee stage—
Noble Lords: No!
Lord Mackay of Ardbrecknish: Certainly, it is so long since I heard them last and I did not hear any of them on the previous day. I was going to say that for that I am grateful for the catalystic effect of the noble Lord, Lord Monkswell—he was a catalyst to bring everyone out of their lairs.
As regards the tourist tax, I thought that the noble Lord, Lord Gordon of Strathblane, gave a neat spin to the proposals of Councillor Geddes, saying that it was hypothecated and would go to the tourist industry. My noble friend Lord Lyell made a good point when he asked whether it was extra tax.
The simple fact of the matter is knowing how government of all parties works and how treasuries work. The treasury of the Scottish parliament will be no different. It will say to itself, "Well, they are getting a bit more money from that hypothecated tax, so perhaps next year I can shave a bit off the budget I would normally give them out of other taxes, save it and put it somewhere else". That is what will happen and it will simply be a tax—
Lord Gordon of Strathblane: I thank the noble Lord for giving way. For the avoidance of doubt, I am opposed to a bed tax, but I believe that it is worth examining. The noble Viscount, Lord Thurso, pointed out that it works well in other areas. If there were to be a bed tax it would probably be levied by the Scottish Tourist Board as part of the membership scheme of the board rather than the local authority or the government. I repeat that I am opposed to such a tax, but it is worth examining. Some people in the tourist industry have advocated it.
Lord Mackay of Ardbrecknish: I am aware that some people in the tourist industry have advocated such a tax as a way of bringing more money into tourism. However, I agree with the noble Lord, Lord Gordon, that it would probably cause more damage than good in the longer term.
I jotted down the remarks of the noble Viscount, Lord Thurso, because I thought that they summed up the Liberal Democrat party almost entirely. I am certain that it is an exact quotation, but it may be a word out. He said, "Without wishing to come down on one side of the argument or the other". I think that we can leave it at that; the Liberal Democrats' motto.
Viscount Thurso: We are not debating tourism tax and we are not debating hypothecation. Therefore I have
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no need to give my views on the subject. I was asking the noble Lord to accept the principle that such a tourist tax, in many countries of the world where it is hypothecated, has greatly benefited tourism. That is an indisputable fact. I linked it to the fact that unhypothecated taxes, such as the airport tax which he and his noble friends introduced and then doubled, have caused great harm.
Lord Mackay of Ardbrecknish: I am sorry to tell the noble Viscount that the amendment refers specifically to "local tourist industry tax", so we are talking about it. However, I notice that he is still sitting firmly on the fence as regards introducing it in this country.
That is not the main object of the amendment; the main object relates to the uniform business rate. All my noble friends who spoke underlined my point about the importance to business in Scotland of the uniform business rate and the fact that prior to its introduction businesses in many parts of Scotland were hugely disadvantaged as compared with business in England. I notice that no one from the government side addressed that problem.
I say to the noble Lord, Lord Mackie of Benshie, that the rate took some years to introduce because it had to be introduced gradually and cost quite a lot of money. One must introduce such changes in taxation gradually if one is to do it sensibly. The fact is that we are at that point now and I am sure that businesses in Scotland will notice that the noble Lord, Lord Mackie of Benshie, speaking on behalf of his party, would be content for us to return to the situation in which the UBR did not exist.
I am asked by everyone from the Government Benches to the Liberal Democrat Benches why I lack confidence in this parliament. There is a short answer which probably I shall have to explain. I live in Glasgow and I pay Glasgow's council tax. I am in a small minority because few people pay Glasgow's council tax. Most of them then promptly vote for an authority which raises council taxes to a rate much higher than in any other part of Scotland. Therefore, if I appear to lack confidence when I see barrow-loads of councillors lining up to join this parliament it is from bitter experience. As regards good financial control, I return to the barrow-loads of councillors. In North Lanarkshire Council and East Ayrshire Council was there good financial control and concern about local businesses when they used their DLO to undercut all the local businesses which then had to pay the business rate and taxes in the area? No, I am sorry, that argument does not fill me with confidence; indeed, I am not hugely filled with confidence.
The noble Lord, Lord Sewel, thinks that I occasionally appear to be falling in love with devolution but that my nerve then fails me and I back off. Well, my nerve does not fail me and, I suppose, regrettably for the Minister, neither do words fail me. However, they very nearly do when I think about the idea of councillors being translated from their brilliant running of local government in Scotland to running the Scottish parliament and what they might do to the uniform business rate if they keep it. I believe that they will do so. I really believe that they will

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not give it back to local authorities: they will keep it and they will use it in the way that I suggested in my introductory remarks.
I shall not continue with the argument. I believe this to be a vitally important point. It seems to me that the business community in Scotland ought to see how people fall and that they should realise that people occasionally have to fall off the fence. Therefore, I wish to test the opinion of the Committee on my amendment. Indeed, I hope the noble Viscount, Lord Thurso, will at least come down off the fence on one side or the other.
4.30 p.m.
On Question, Whether the said amendment (No. 181) shall be agreed to?
Their Lordships divided: Contents, 84; Not-Contents, 126.

Division No. 1

CONTENTS

Aberdare, L.

Lang of Monkton, L.

Ailsa, M.

Lauderdale, E.

Alexander of Tunis, E.

Lindsey and Abingdon, E.

Allenby of Megiddo, V.

Lucas, L.

Annaly, L.

Lucas of Chilworth, L.

Attlee, E. [Teller.]

Lyell, L.

Balfour, E.

McColl of Dulwich, L.

Belhaven and Stenton, L.

Mackay of Ardbrecknish, L.

Beloff, L.

Mackay of Drumadoon, L.

Berners, B.

Mancroft, L.

Brabazon of Tara, L.

Milverton, L.

Braine of Wheatley, L.

Montgomery of Alamein, V.

Brigstocke, B.

Montrose, D.

Byford, B. [Teller.]

Mountevans, L.

Cadman, L.

Munster, E.

Campbell of Croy, L.

Murton of Lindisfarne, L.

Carnegy of Lour, B.

Norfolk, D.

Clark of Kempston, L.

Northesk, E.

Courtown, E.

Park of Monmouth, B.

Cross, V.

Pender, L.

Cullen of Ashbourne, L.

Prior, L.

Dean of Harptree, L.

Quinton, L.

Denham, L.

Rees, L.

Denton of Wakefield, B.

Renton, L.

Derwent, L.

Renwick, L.

Dilhorne, V.

Roberts of Conwy, L.

Ellenborough, L.

Rowallan, L.

Elles, B.

Saltoun of Abernethy, Ly.

Elton, L.

Selkirk of Douglas, L.

Erroll of Hale, L.

Sempill, L.

Forbes, L.

Strange, B.

Gisborough, L.

Strathcarron, L.

Harrowby, E.

Strathclyde, L.

Hayhoe, L.

Sudeley, L.

Hemphill, L.

Swinfen, L.

Holderness, L.

Thomas of Gwydir, L.

Hooper, B.

Torphichen, L.

Hunt of Wirral, L.

Vivian, L.

Jauncey of Tullichettle, L.

Westbury, L.

Jenkin of Roding, L.

Wilcox, B.

Knight of Collingtree, B.

Wise, L.

Lane of Horsell, L.

Wynford, L.

NOT-CONTENTS

Addington, L.

Archer of Sandwell, L.

Alli, L.

Bassam of Brighton, L.

Amos, B.

Beaumont of Whitley, L.

Annan, L.

Berkeley, L.

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Blackstone, B.

McNally, L.

Borrie, L.

Maddock, B.

Bridge of Harwich, L.

Mallalieu, B.

Broadbridge, L.

Mar and Kellie, E.

Bruce of Donington, L.

Mason of Barnsley, L.

Carlisle, E.

Merlyn-Rees, L.

Carter, L. [Teller.]

Milner of Leeds, L.

Cledwyn of Penrhos, L.

Minto, E.

David, B.

Mishcon, L.

Davies of Oldham, L.

Molloy, L.

Dean of Beswick, L.

Monkswell, L.

Desai, L.

Monson, L.

Dholakia, L.

Montague of Oxford, L.

Diamond, L.

Morris of Manchester, L.

Dixon, L.

Palmer, L.

Donoughue, L.

Peston, L.

Dormand of Easington, L.

Pitkeathley, B.

Evans of Parkside, L.

Plant of Highfield, L.

Falconer of Thoroton, L.

Ponsonby of Shulbrede, L.

Falkland, V.

Puttnam, L.

Farrington of Ribbleton, B.

Ramsay of Cartvale, B.

Gordon of Strathblane, L.

Randall of St. Budeaux, L.

Graham of Edmonton, L.

Rea, L.

Grantchester, L.

Redesdale, L.

Grenfell, L.

Rendell of Babergh, B.

Grey, E.

Richard, L. [Lord Privy Seal.]

Hacking, L.

Rodgers of Quarry Bank, L.

Hamwee, B.

Russell, E.

Hanworth, V.

St. John of Bletso, L.

Hardie, L.

Serota, B.

Harris of Greenwich, L.

Sewel, L.

Haskel, L.

Shaughnessy, L.

Hayman, B.

Shepherd, L.

Healey, L.

Simon, V.

Hilton of Eggardon, B.

Smith of Clifton, L.

Hollis of Heigham, B.

Smith of Gilmorehill, B.

Hope of Craighead, L.

Stair, E.

Howie of Troon, L.

Stallard, L.

Hoyle, L.

Steel of Aikwood, L.

Hughes, L.

Strabolgi, L.

Hughes of Woodside, L.

Symons of Vernham Dean, B.

Hunt of Kings Heath, L.

Thomas of Gresford, L.

Hylton, L.

Thomas of Macclesfield, L.

Ilchester, E.

Thomas of Swynnerton, L.

Irvine of Lairg, L. [Lord Chancellor.]

Thomson of Monifieth, L.

Thurso, V.

Jay of Paddington, B.

Tope, L.

Jeger, B.

Tordoff, L.

Jenkins of Putney, L.

Turner of Camden, B.

Judd, L.

Uddin, B.

Kennet, L.

Walker of Doncaster, L.

Kintore, E.

Watson of Invergowrie, L.

Linklater of Butterstone, B.

Weatherill, L.

Lockwood, B.

Wedderburn of Charlton, L.

Ludford, B.

Whitty, L.

McIntosh of Haringey, L. [Teller.]

Williams of Crosby, B.

Williams of Elvel, L.

Mackenzie of Framwellgate, L.

Williams of Mostyn, L.

Mackie of Benshie, L.

Winchilsea and Nottingham, E.

McNair, L.

Young of Old Scone, B.

Resolved in the negative, and amendment disagreed to accordingly.
4.39 p.m.
[Amendment No. 182 not moved.]
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 183:
Page 66, line 17, at end insert—
("Exception from reservation
Scottish bank notes issued by the Scottish banks.").
The noble Lord said: This matter comes under Head 1, financial and economic matters, in Schedule 5. That reserves to the United Kingdom Parliament and Government fiscal and economic policy. That is perfectly understandable and correct. Local taxes are exempted from reservation, as we have discussed. I seek to add to that exemption from reservation,
"Scottish bank notes issued by the Scottish banks".
This amendment seeks to give the Scottish parliament control over the issuing of Scottish banknotes, but not over general currency questions. I do not want to hear anyone suggest that we seek to hand responsibility for monetary policy to the Scottish parliament. We seek simply to hand to the Scottish parliament responsibility for Scottish banknotes issued by Scottish banks under the Bank Notes (Scotland) Act of 1845 which gives Scottish banks the right to issue their own banknotes. That is one of the more colourful aspects of Scottish life which is much appreciated by visitors from around the world and indeed from south of the Border.
These matters are important to Scots. There was a huge outcry a few years ago when we moved to pound coins and it was proposed to abolish the one pound banknote. However, the Government had to accept that in Scotland one pound banknotes should continue to be issued. That is still the case. I can envisage that with inflation we shall soon face the dilemma of whether we should introduce £5 coins instead of £5 notes. The outcry will arise again. I think it would be far better for the Scottish parliament to have responsibility for the matter of Scottish banknotes. That seems perfectly sensible. I cannot see why the Government could possibly object to that.
Of course the amendment would not give the Scottish parliament any powers over the number of notes in circulation. That would remain firmly the responsibility of the Bank of England, not the Monetary Policy Committee. This amendment takes account of a Scottish tradition which is held dear by those of us who live north of the Border. In my view that Scottish tradition would be better safeguarded by the Scottish parliament in whom, on this occasion, I have trust. I beg to move.
Lord Mackie of Benshie: I support the noble Lord, Lord Mackay, on this occasion. He is often right as regards small, cosmetic measures. I love Scottish banknotes. I have spent my life trying to accumulate enough of them to accommodate my expensive tastes. I have not always been successful. Scottish banknotes are a useful and nice factor of Scottish life and I believe we should retain them. I have heard various explanations of what will happen if we adopt the euro, but in the meantime I trust and hope that we shall be able to continue to offer Scottish banknotes in England and find them accepted with delight by taxi drivers and others who also collect notes.
Lord Renton: I was brought up to believe that one should never love any banknotes. I am anxious that my noble friend Lord Mackay of Ardbrecknish, with whom I nearly always agree and whose arguments I greatly
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admire, should enlighten us before we go much further with regard to the following point. I can understand the desire—especially when one considers the Scottish banknotes Act—that the new Scottish parliament should have some say with regard to Scottish banknotes. However, Scottish banknotes are available in denominations of one pound sterling or a number of pounds. They are part of the common currency of the United Kingdom. I hope that when we have devolution to Scotland we shall continue to have a common currency within the United Kingdom.
My noble friend used the word "safeguarded" just now. There is a further safeguard that we should think about if we are to accept his amendment; namely, to write into the Bill that although the Scottish parliament is to have control over Scottish banknotes, those banknotes should be part of the common currency of the United Kingdom and should not be regarded internationally as a separate currency.
The Earl of Balfour: I think Scotland must be the last country in the world where each different bank produces its own banknote. I think that is a quite unique custom and one that I find rather fun. To the best of my knowledge Scottish banknotes have been controlled by the Bank of England, as far as I understand the position.
Lord Selkirk of Douglas: I understand that local designs are permissible under the protocol to the Maastricht Treaty. An amendment to this effect, which allows the Scottish parliament to legislate about the issue of Scottish banknotes, has considerable merit. I hope that the Minister will be able to accede to this request.
Baroness Carnegy of Lour: If this should be possible, it would of course be a popular measure to have in the Bill. Am I right in thinking that banknotes are not actually tender but are promises to pay?
The Earl of Mar and Kellie: I hope I can help the noble Earl, Lord Balfour, by telling him that four banks in Northern Ireland issue their own notes.
4.45 p.m.
The Lord Advocate (Lord Hardie): The background to the issue of Scottish banknotes by the banks in Scotland is, as the noble Lord, Lord Mackay of Ardbrecknish, properly pointed out, governed by the Bank Notes (Scotland) Act 1845. With the greatest of respect to the noble Lord, it is not possible to separate the issue of notes from the concept of currency and monetary policy. I shall have to address the question of currency and monetary policy in the context of this amendment. In that regard I am reinforced by the comments of the noble Lord, Lord Renton.
The Scottish banks are entitled to issue notes but there are various conditions attached to that. I say to the noble Baroness, Lady Carnegy of Lour, that any banknote is, of course, a promissory note, but Scottish banknotes are not in fact legal tender. They do not require to be accepted as payment in Scotland or in any part of the United Kingdom although, as has been observed by

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the noble Lord, Lord Mackie of Benshie, people in all parts of the United Kingdom are happy to accept them. That situation has developed over the years. I believe that many years ago taxi drivers in London were less happy to accept Scottish pound notes than they are Scottish "fivers" or Scottish £10 notes nowadays.
As I said, the Act imposes various conditions with regard to the issuing of notes, including the regulation of the number of bank notes which each bank is entitled to issue, the determination of the denominations—notes must be in whole pounds—and the number of notes which banks may have in circulation. Weekly accounts of notes in circulation have to be made; returns have to be made and published; and each bank is allowed to issue notes only when authorised. All of these provisions are intended to regulate the currency in circulation and concern currency standards in general. These matters are integral to the United Kingdom economy and must remain reserved, as set out in the White Paper. The amendment would allow the Scottish parliament to legislate on the issuing of banknotes by Scottish banks. One can imagine that the parliament may wish to impose different conditions from the United Kingdom Government with regard to the issuing of notes.
The Government cannot support the amendment. We want macro-economic policy to be reserved. That covers everything needed to ensure the ordinary conduct of monetary and fiscal policy at a United Kingdom level, including the power to issue money. The banknotes issued by Scottish banks are an integral part of our monetary policy. We need to keep controls over them in place; for example, central control over the number and value of notes in circulation. There will be nothing to stop Scottish banks continuing to issue banknotes under the 1845 Act. I trust and hope that they will continue to do so. Like other noble Lords, I am very fond of them. I urge the noble Lord to withdraw his amendment.
Lord Mackay of Ardbrecknish: Clearly we are all fond of banknotes; are even quite fond of coins, but banknotes come in larger denominations. This has been an interesting debate. I appear to have lost my noble friend Lord Renton and gained the noble Lord, Lord Mackie. I suppose that one cannot get everybody on the same side at any one time. I was not surprised to hear the view expressed by the noble Lord, Lord Mackie. His party proposed a similar amendment in the other place. So in a way I was merely checking for consistency. The noble Lord gets full marks on this occasion.
The answer given by the noble and learned Lord the Lord Advocate was a tinge on the heavy side. I made it perfectly clear that nothing I was suggesting interfered with the control of monetary policy by the Bank of England or the other controls on these matters exercised by government—those that are not yet handed over to the Bank of England. I thought the answer slightly weak. Scottish banknotes are an important part of Scottish life. It would have been a good thing if we could have said that their issue was a matter for the Scottish parliament to decide. If my amendment is defective, perhaps the Government might examine it
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during the Recess to see whether they can ring-fence merely the simple point that all noble Lords have addressed and make sure that questions of monetary policy, how many banknotes can be issued and so on, remain entirely reserved. I believe that no one in this Chamber would want otherwise. I suspect that there are a few in the other Chamber who would be happy to have the whole issue of monetary policy in Scotland independent of the Bank of England and the United Kingdom Government. But no one is on that side of the argument in this place.
We have had an interesting debate. I hope that the Government will reflect on the symbolic importance of giving the Scottish parliament at least some say over the issuing of banknotes. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Chairman of Committees (Lord Strabolgi): I have to inform the Committee that if Amendment No. 184 is agreed to, I cannot call Amendment No. 184A.
Lord Mackay of Drumadoon Lord Mackay of Drumadoon moved Amendment No. 184:
Page 66, leave out line 37.
The noble and learned Lord said: In moving this amendment, with the leave of the Committee I shall speak also to Amendment No. 185. I am happy for Amendment No. 184A in the name of the noble Earl, Lord Mar and Kellie, to be discussed at the same time.
These are probing amendments. They seek to explore the reasons why the Government wish to have legislative control over dangerous drugs as a reserved matter and to enable the Committee to debate this important matter. The purpose of my two amendments, were they to be acceptable at a later stage, would be to allow the Scottish parliament to have legislative control over the subject matter of the 1971 Act and, by necessary implication, give the Scottish executive competence over the same matters.
Perhaps I may pre-empt an argument which I anticipate may come from the Minister who will reply; namely, that this matter is dealt with in the White Paper. Factually speaking, that is correct. However, all that the White Paper says, in a subheading in paragraph 3.3, is that among the matters to be reserved, listed in general terms, there is,
"The protection of borders and certain matters subject to border controls including",
and then various examples are given. One of those is,
"the criminal law in relation to drugs and firearms, and the regulation of drugs misuse".
I fully accept that the matter was included in the White Paper that was before the Scottish people when they voted in the referendum. However, I very much doubt whether individuals who voted in the referendum took account of the intention to reserve the misuse of drugs as a factor which bore upon their decision as to whether or not to vote yes to either of the two questions.
The Misuse of Drugs Act covers a great variety of issues dealing with the possession of dangerous drugs: restriction on their production and supply; restriction on the cultivation of certain drugs—for example, the cannabis plant; and various other topics, including procedures for law enforcement and the punishment of offences relating to such drugs. Within that Act it is possible for any peculiarities of the Scottish position with regard to the enforcement of statutory offences to be taken account of.
I can well understand the Government's thinking in seeking to reserve this matter; namely, that there should be a common approach throughout the United Kingdom to the prohibitions against dangerous drugs and the enforcement of those prohibitions by law enforcement agencies and ultimately, when appropriate, by prosecution in the criminal court.
Having said that, and having accepted that at present there is a common statutory framework, there are nevertheless differences as between Scotland and other parts of the United Kingdom in relation to how these matters are handled, particularly in the criminal courts. The public prosecutor in Scotland has formulated certain policies as to which types of offences will be prosecuted in particular courts. He has evolved policies which he believes are relevant to Scotland. There is little doubt that different policies may apply in other parts of the United Kingdom.
More importantly, it is clear that in the sentencing of those convicted of drugs offences very different sentences are imposed in Scottish courts from those frequently imposed in English courts. It has certainly been my practical experience, when appearing for accused men in Scotland who happen to be English, that when one advises them of the sentence they are likely to receive they are amazed to discover that in some instances it may be two or three times the length that would be appropriate having regard to sentencing guidelines issued by the Court of Appeal in England. I make no criticism one way or another of the differing approaches adopted by the courts. I believe it is entirely for the courts and the judges who constitute them to decide on their policies, provided they lie within the framework of the legislation. But it illustrates that, notwithstanding the common statutory framework, it is possible at present to have different approaches to tackling the evils of the misuse of dangerous drugs.
While there may be an argument that the Scottish parliament should be free to legislate in these matters, it arises from the fact that, with law and order rightly being devolved, the issue of drugs permeates so much of our criminal law. Many crimes are committed by those who are addicted to drugs, some while they are under the influence of drugs. Many are committed to raise money to buy drugs, particularly when one talks of relatively minor, albeit upsetting and annoying, crimes such as house-breaking, bag-snatching, shop-lifting and the like. But many serious assaults and indeed murders are also committed by those involved on one side or another in the drugs trade. Those prosecutions take place with no mention of the Misuse
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of Drugs Act on the indictment but everyone involved in the case knows that drugs in part, if not wholly, lie behind the commission of the offence.
In seeking to address the problems of crime in more general policies, such as crime prevention, the care of offenders, the attempt to restrict or eliminate the suicides which unfortunately bedevil the Scottish prisons at the moment, the rehabilitation of offenders and the education of young people about the dangers of crime, one sees that, time and again, drugs are involved in the situation. Hardly a week goes by—again I make no criticism—without a Scottish Office Minister making a statement or taking part in some visit to draw attention to the problems of drugs, an issue on which the parties in Scotland have joined forces in recent years.
In these circumstances, there seems to me to be an argument for saying that the Scottish parliament should have some legislative competence over these matters. One issue on which that might prove useful is whether or not the possession of what are referred to as soft drugs might be legalised. I do not for a minute suggest that I or my party would support such a policy, but it is an issue that is debated from time to time.
Two situations might arise. This parliament might be persuaded that that was a good policy to adopt and seek to amend the 1971 Act to legalise the possession of soft drugs, while the people of Scotland, and in particular the members of their parliament, did not approve of that policy. I believe that in such a situation, the people of Scotland should have the right, by this legislative competence, to opt out of that change. One could reverse the argument. If in some years' time those in authority in the executive and the parliament are persuaded that decriminalising soft drugs might be a good way of tackling the drug problem—and perfectly respectable and highly experienced people in Scotland have from time to time suggested that this is an option worth considering—but this Parliament could not be persuaded by the British Government that that should happen, the argument arises as to why the Scottish parliament should not have the opportunity to take such action.
I am sorry to see that the noble Lord, Lord Desai, is not in his place. I am tempted to recall what he said earlier about the Tories never being prepared to depart from centralisation and to devolve power on difficult issues. This is clearly a difficult issue and it seems to me worth debating whether it should be devolved.
If it were devolved, there is no reason to believe that the power would be used irresponsibly. Whether or not we have concordats, one would anticipate that this issue would be discussed fully between officials of the Scottish executive and the United Kingdom Government. The Clause 95 order-making power would enable the Secretary of State to make any legislative changes affecting England, Wales and Northern Ireland, which would ensure that any separate law in Scotland was compatible with the law in the other parts of the United Kingdom. Indeed, there may be an argument that Clause 33 might be applicable if any problems were to arise. Ultimately, having regard to the terms of Clause 27(7), the supremacy of this Parliament would

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enable it to enact such legislation as it deemed appropriate if, for any reason, the various safeguards did not work.
This seems to me a good example of a matter on which the Government may have got the balance wrong. For that reason, I believe the matter is worthy of debate in support of my two amendments. I beg to move.
5 p.m.
The Earl of Mar and Kellie: I rise to speak to Amendment No. 184A, which is grouped with these amendments. The purpose of my amendment is to devolve the list of controlled drugs and the penalties for contravention of the Misuse of Drugs Act 1971.
Most of the effort in the war to combat drugs misuse in Scotland is to be devolved: education, health, social work, policing, prosecution and prisons. Drug misuse is a personal matter and is definitely in the social policy field. It is different in each locality and cannot be seen as a problem with Scotland-wide symptoms, let alone UK-wide symptoms. Broadly, it depends on two features: first, the level of depression and hopelessness in the locality; and, secondly, the activities of drug traffickers.
Clearly, a UK-wide policy may be too unfocused and possibly inappropriate. As the noble and learned Lord, Lord Mackay of Drumadoon, said, there are already significantly different sentencing practices. A successful drugs elimination policy might be stymied by unfocused legislation. The solution would be the devolution of that legislative framework.
We already have an example of Scotland-only drug legislation. The Licensing (Amendment) (Scotland) Act 1996 is the Scottish response to the problems of ecstasy abuse, initially in the town of Ayr and now across Scotland. There is no English equivalent of this legislation.
No doubt the Minister will mention the problem of cross-border variation. The UK already has experience of dealing with that on the land border in Ireland. I also suspect that the Minister will be unhappy at the undoubtedly childish prospect of a Scotland with legalised cannabis. I do not believe that such irresponsibility would come out of the Scottish parliament.
Lord Selkirk of Douglas: I rise to support the noble Earl. He is correct that the Licensing (Amendment) (Scotland) Act dealt with the misuse of drugs. I played a part in taking the Bill through, with all-party support. It was particularly interesting that the Scottish MPs genuinely believed that they had a right to legislate on subjects relating to the misuse of drugs. I believe that there is a dilemma for the Minister here. If he seeks to take away this responsibility from the Scottish Office and from the Scottish parliament, the Scottish MPs will have less influence than they had in the past on this subject. At a time when crime prevention is being devolved, it seems only sensible that the prevention of drug misuse should also be devolved. I do not imagine that the Minister will give a comprehensive reply this afternoon, but I hope that he will look at this matter over
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the Recess. I am certain that prospective members of the Scottish parliament will be very angry if they feel they cannot play any part in the prevention of drug misuse, which, sadly, is a great problem in many parts of Scotland.
Baroness Carnegy of Lour: From a layman's point of view, I wish to support what my noble friend has just said. I wonder whether the Minister could describe to us how any new legislation for Scotland on this subject in the UK Parliament would be presented to Parliament and who would handle it. I believe that that would be an important element in whether the public understand and accept the new arrangement. Since the cost of the health service, prisons and the police will be such a large part of the budget of the Scottish parliament, and since those costs will be greatly added to by the extent of drug abuse in Scotland, it will be frustrating for members of the Scottish parliament if they cannot do anything about it. My noble and learned friend Lord Mackay suggested that the balance which the Government have struck in this case between the two parliaments may not be quite right. I shall listen carefully to what the Minister says about this matter. I tend to agree with my noble and learned friend.
Lord Hughes: I must confess that I was impressed by the case put forward by the noble and learned Lord, Lord Mackay of Drumadoon. Unless my noble and learned friend on the Front Bench has some strong, convincing reasons for asking him to withdraw the amendment, my preference would be that the Government should be prepared to take away this matter and consider it, so that it might be brought back or disposed of at the next stage.
While I am on my feet, perhaps I may raise a matter which has nothing to do with this amendment. I was careful to say "the noble and learned Lord, Lord Mackay of Drumadoon", as there are two "Mackays" sitting side by side. The reason I emphasise that is that a speech was made in relation to the first amendment by my noble friend Lord Hughes of Woodside. I do not disagree with one word of what he said. However, several speakers attributed his speech to me and I do not want the record to show that I made that speech. Perhaps Hansard will make certain that if my noble friend Lord Hughes of Woodside makes a speech, it does not matter what anybody else calls him, he will be referred to as "the noble Lord, Lord Hughes of Woodside". The noble Baroness, Lady Carnegy, made a similar mistake when referring to her "noble friend Lord Mackay".
5.15 p.m.
Lord Hardie: We have had an interesting discussion on this amendment. The question is whether the legislative competence for the subject matter of certain statutes relating to the misuse of drugs should be devolved or, in the case of the noble Earl's amendment, whether certain parts of a specific statute should be devolved to the Scottish parliament rather than to Westminster.
The noble and learned Lord, Lord Mackay of Drumadoon, started by saying that he anticipated that in response I may refer him to the White Paper. Given that

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he has already referred the Committee to the appropriate passage in the White Paper, it is unnecessary for me to do so again. The White Paper made quite clear what was our intention in that regard. In respect of what the electorate made of the White Paper and what parts of it they relied upon, I would not venture to be as bold as the noble and learned Lord. Perhaps that is due to his greater experience in political matters.
The real issue is: what is the argument for leaving the question of the misuse and control of dangerous drugs to the UK Parliament rather than to devolve that issue, either in whole or in part, to the Scottish parliament? I start with the point made by the noble and learned Lord, Lord Mackay of Drumadoon. He began by saying that he could understand the Government's thinking on this matter; that is, that there ought to be a common approach in the United Kingdom. That is correct; there ought to be a common approach throughout the United Kingdom on the question of regulation of dangerous drugs. I shall come back to explain why I believe that to be the case.
The noble and learned Lord went on to say that that would not hold water because there is a different prosecution system, a different prosecution policy applied north and south of the Border and different sentences which one could expect to receive in Scotland and England. However, I do not wish to embark upon a discussion on the sentencing approach of the courts in England or, for that matter, in Scotland.
What is clear is that the courts both north and south of the Border have common powers. The statute which creates the offence and imposes the maximum penalty applies north and south of the Border. It is for the courts in the specific jurisdictions to apply what they believe to be the appropriate sentence for a specific offence having regard to the prevalence of the offence and the local characteristics. I do not take anything therefore from the fact that the Scottish courts may or may not impose greater sentences than English courts in connection with the offences under the Misuse of Drugs Act. That is not a good reason for devolving the regulations for the misuse of drugs to Scotland—because the courts appear to impose different sentences in some cases. As the noble and learned Lord is aware, each case must be decided on the specific facts, having regard to the situation which applies in a specific jurisdiction.
Nor do I believe that the application of different prosecution policies would be a justification for devolving the question of the misuse of drugs. I do not know what the Home Office policies are south of the Border and therefore cannot confirm or deny that there are differences. But even if there are, the policies of prosecution must take account of the local circumstances. In certain situations it may be appropriate to prosecute in one part of the United Kingdom and not in another, but that is entirely for the prosecutor to decide.
The question of the legalisation of soft drugs was raised. Again, I have difficulty, as the noble Earl anticipated, not with whether or not they should be legalised, but as to whether different laws should apply in different parts of the United Kingdom as regards
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regulating drugs, be they hard or soft drugs. As the noble Earl anticipated, I feel that there will be a problem with cross-border traffic; there will be a problem with the importation of soft drugs. For example, if cannabis was legalised in Scotland and not in England, the importation of cannabis into Scotland would become a regular occurrence and would not be an offence. Then it would be easier for the drug traffickers to transport the drug to England where it would be an offence.
We are speaking of a United Kingdom, not of separate states. That is the difference between the situation in Ireland where there is a different state in the Republic from the north. That is why I have problems with the question of different laws applying to the control of certain drugs in different parts of the United Kingdom.
The noble and learned Lord may say that that does not matter; that it is not a real answer because we have always got Clause 27(7). If it does not work out, the United Kingdom Parliament could enter into the fray and sort it out by re-legislating. But does that make sense? Why burden the United Kingdom Parliament with that obligation when there is no sound reason—at least not one that I have heard in this debate—why the regulation of drugs should be different north and south of the Border?
I have already noted that the different systems of drug control will inevitably give rise to problems of controlling trafficking between the two jurisdictions. At the moment, because there is a United Kingdom system of control, at least we can limit or seek to limit the entry of illegal drugs through international border controls. We should not expect any success at all in trying to maintain different regimes of drug control on either side of the open Border between Scotland and England.
These arguments apply with particular force to the statutes that are the subject of the amendments. The statutes provide powers for the police and customs, which are UK organisations, and the courts in connection with the investigation of drug trafficking and the confiscation of proceeds. What is to happen if it is lawful in Scotland or in England but not in other jurisdictions to possess drugs and to be involved in dealing with drugs, whether they be soft drugs or otherwise? What is to happen about the confiscation of the proceeds of this trade? Would it not mean that the traffickers could set up in the jurisdiction where it was lawful to traffic and then smuggle drugs across the Border?
If that were to happen, would the English courts, if it were still unlawful in England, have the same facility for confiscating the proceeds? Some of the proceeds might well be lawful. If the trafficking had taken place in Scotland, that would be a lawful trade; so the profits from that lawful trade ought not to be seized as attributable to the illegal trade south of the Border. What about money laundering offences in relation to drug trafficking? Those, too, would be difficult to regulate.
The present Government and their predecessor spent a considerable amount of time and effort setting up international treaties and arrangements to try to stop the evil of drug trafficking, to try to gain access to the

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proceeds of the illegal sale of drugs, and to try to gain access to the proceeds of money laundering. All of that would be put at risk if there were different systems north and south of the Border. This is not a parochial issue. It is an international issue. As such, it would not be appropriate for this matter to be devolved.
In the face of the continuing threat posed by international drug dealers, I am sure that we would all agree on the importance of maintaining a robust, consistent and coherent regulatory regime throughout the United Kingdom and that nothing should be done to prejudice that. Drug trafficking is a sophisticated, well-organised and highly profitable criminal activity that is carried out on a global basis. As I explained, this Government, as did their predecessor, regard it as essential that a common statutory framework should apply throughout the United Kingdom to enable us to comply with our international obligations in this regard. Otherwise there will inevitably be gaps for differences to develop as between the regimes north and south of the Border which drug traffickers and money launderers would be quick to exploit. We do not accept that the subject matter of the Misuse of Drugs Act 1971 or the other legislation under consideration here should be devolved.
The noble Baroness, Lady Carnegy of Lour, and the noble Earl, Lord Mar and Kellie, raised similar points. Of course drug abuse is related to social conditions. However, the Misuse of Drugs Act is a United Kingdom Act and is seen as a United Kingdom solution to a problem which is not confined to one part of the kingdom or another. Indeed, it is not confined to the kingdom. It is an international problem. With that explanation, I hope that the noble and learned Lord will withdraw his amendment.
Baroness Carnegy of Lour: Before the noble and learned Lord sits down, I listened with great interest to what he said. Through the years legislation relating to drugs has also appeared in criminal justice legislation; for example, with regard to penalties. It has been set out either in a Scottish Bill or in a Scottish clause in a United Kingdom Bill. Can the noble and learned Lord describe how a Scottish measure would be put to the Scottish parliament? Who would do that in the United Kingdom Parliament?
Lord Hardie: I beg the noble Baroness's pardon. I forgot to answer that question. A Home Office Minister, in consultation with other Ministers in the Scottish Office, would determine the policy as to whether there ought to be new legislation to deal with the matter. A United Kingdom Act would be introduced. The Scottish elements would be dealt with by the Scottish Office, as they are at the moment. The question of policing and the policy for the control of drugs would be a Scottish Office issue. The Secretary of State for Scotland would represent Scotland's interests in the United Kingdom Parliament in the event of such legislation coming forward.
The Earl of Balfour: I wish to raise one point. I am extremely grateful to the noble and learned Lord,
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Lord Hardie, for his explanation and I am very satisfied with it. However, something that was said by the noble Lord, Lord Hughes, has concerned me for some time and I wonder whether I have managed to think of a possible answer. As I understand the position, when there was a Northern Ireland Parliament, Members of Parliament in the United Kingdom could not discuss matters that concerned Northern Ireland only. I know that there were complications in that regard. From what the noble Lord, Lord Hughes, said—I hope I did not misunderstand him—I feel that there should be provision within the legislation to the effect that United Kingdom Members of Parliament can discuss and vote on all reserved matters but that perhaps they should be restricted on devolved matters. I have had discussions with various people as to what MPs can and cannot do in respect of Scotland. I wonder whether that might be helpful. Will the noble and learned Lord consider what I have said?
Lord Hardie: I shall certainly consider it. Perhaps I may explain to the noble Earl my understanding of the position. In the context of reserved matters, there is no question that the United Kingdom Parliament could legislate. Furthermore, in terms of Clause 27(7) of the Bill, the United Kingdom Parliament could legislate about any devolved matter if it considered it appropriate to do so. As my noble friend Lord Sewel said on a previous occasion, that is the nature of devolution. The United Kingdom Parliament still has the overriding power in terms of Clause 27(7) to intervene and to legislate. But it is hoped and expected that the United Kingdom Parliament would exercise the same restraint which it did when dealing with the provisions relating to the Northern Ireland Parliament. There would be a self-discipline in place and it would be expected that the United Kingdom Parliament would not as a rule legislate on devolved matters. Those would be left to the Scottish parliament. If I am wrong or if I should have said more, I shall certainly write to the noble Earl.
5.30 p.m.
Lord Hughes: When I indicated that I was minded to agree with what the noble and learned Lord, Lord Mackay of Drumadoon, had said, I attached a condition to it. I believe that my noble and learned friend has amply satisfied that condition. However, I did not like the reference in the latter part of his remarks to something which was perfectly true; namely, that the Westminster Parliament has the overriding power. I can think of nothing more damaging to the success of a devolved parliament, if the Scottish parliament ever embarked on a series of decisions on matters devolved to it, than if it were certain that the Westminster Parliament would override it. I do not expect that that is likely to happen, but if it did and on a number of occasions, I believe it would be a boost to the Scottish National Party.
Lord Mackay of Drumadoon: When I introduced these amendments I believe I made it clear that I was putting them forward as probing amendments to enable Members of the Committee to debate what I believe is

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an important issue. In my remarks at that stage I hope that I did not for a minute suggest that I did not accept there was some merit in the Government's position. I sought to explore whether the balance was quite right or whether there was some scope for giving the Scottish parliament some legislative competence in this area.
I am not sure that the noble and learned Lord the Lord Advocate replied explicitly to the point raised by the noble Earl, Lord Mar and Kellie, and my noble friend Lord Selkirk of Douglas, about the Licensing (Amendment) (Scotland) Act and whether it was a possibility that the subject matter of that Act, which covers the use of premises where certain activities involving drugs are taking place, might fall within the subject matter of the 1971 Act. As the noble and learned Lord will be aware, there is a provision in that Act which can punish the occupiers of premises for activities taking place in them which the owner operates.
I noted that I was very grateful to the noble Lord, Lord Hughes, for his kind remarks. I adhere to that notwithstanding the fact that his noble and learned friend has now persuaded him that the Government's argument is preferable to mine. I take the point he makes about the importance of referring to the right noble Lord. Certainly on these Benches we find it easier when both Front Bench spokesmen have the same name and we do not have a problem seeking to remember who is with us. Equally, we find it very important to make sure that each gets the right cheques, which for those of us in opposition is a more important matter than it used to be.
I fully accept that there is great force in what the noble and learned Lord the Lord Advocate said. No one in this House would wish to put at risk the fight against organised crime when it involves dangerous drugs, whether that is done on a local, national or international basis. In advancing my arguments earlier and pointing out the different sentencing policies, I hope that I did not suggest that that in any way drove a coach and horses through the common approach set out in the 1971 Act.
Clearly, I shall not be pressing these amendments to a vote. But I ask that the Government take on board the example given by the noble Earl, Lord Mar and Kellie, so as to be absolutely certain that the way in which this reservation is framed will not preclude the Scottish parliament from enacting legislation dealing with the periphery of the drugs problem.
The example given by my noble friend Lady Carnegy of Lour, as to what would happen were a Bill to be brought forward to this Parliament amending the 1971 Act and how the Scottish dimension would be taken account of, is a very good one. I suspect that it is one that we might use next week when we discuss the role of the Advocate General in the promotion of legislation and taking it through both Houses of this Parliament. I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 184A and 185 not moved.]
Lord Selkirk of Douglas Lord Selkirk of Douglas moved Amendment No. 186:
Page 67, line 11, at end insert—
("Exceptions from reservation
Appointments of persons resident in Scotland to the Data Protection Tribunal.
The procedure of the Data Protection Tribunal so far as it relates to cases arising in Scotland.").
The noble Lord said: This amendment is grouped with other amendments on tribunals. It devolves appointments to, and the procedure of, the Data Protection Tribunal, established under the Data Protection Act 1984. The Law Society of Scotland is of the view that it is appropriate to devolve the appointments, structure and procedures of tribunals operating, or which can operate, in Scottish matters. This would enable a comprehensive and coherent civil justice strategy to be formulated by the Scottish executive and by the Scottish parliament.
Interestingly enough, just yesterday the Law Society brought together a number of bodies in a civil justice forum, including the Scottish Law Commission, Citizens' Advice (Scotland) and the Faculty of Advocates, among other professional bodies and organisations. This forum provided an ideal platform for those involved in the civil justice system to suggest improvements. But the forum, although an ideal way to exchange views, is not a substitute for a civil justice strategy.
I believe that it would make sense to devolve the Data Protection Tribunal's appointments and procedures. After all, it would sit only rarely, but when dealing with Scottish jurisdictional matters it should surely be subject to Scottish procedures. I believe that that would be of great assistance. So the principle is that the appointments of tribunals operating in Scotland should be under the first minister of Scotland and be subject to the scrutiny of the Scottish parliament.
That brings me to Amendment No. 188. It devolves appointments to, and the procedures of, the Immigration Appeal Tribunal, established under the Immigration Act 1971. Here again the Law Society of Scotland is of the view that it would be suitable to devolve both the appointments to this tribunal and its procedures, which are either operating or can operate within Scotland's jurisdiction. Again, it believes that this will help to ensure that the Scottish executive and the Scottish parliament will be able to formulate a comprehensive and consistent civil justice strategy. This tribunal, when it operates in Scotland, is under the control of the Lord Chancellor's court service. Therefore it represents what might be described as an outpost of the Lord Chancellor's domain in Scotland. Is there not a case for issues involving deportation for those who are prospective Scots to be decided in Scotland, and subject to the Scottish parliament? With a new devolved structure it seems unnecessary for the Lord Chancellor to keep such an outpost.
Amendment No. 191 devolves appointments and the procedures of the competition commission appeals tribunal to be established under the Competition Act

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when it finally passes into law. Here again, in order to establish a coherent civil justice strategy, the devolution of appointments and procedures should be brought within the domain of the Scottish parliament: that seems to make sense. But as the tribunal has still not been finally established, I look forward to hearing what the Minister has to say on that subject.
Amendment No. 208 devolves the appointments and procedures of the Social Security Appeals Tribunal. The various tribunals listed in the amendment would be transferred to appeal tribunals constituted under the Social Security Act 1998 when that Act comes into force. They are important tribunals dealing with many issues affecting the lives of people living in Scotland. It is important to devolve because large numbers of people make appeals to these tribunals, particularly to the Social Security Appeals Tribunal. The annual report of the Council on Tribunals for 1996 confirms that more than 80,000 cases went before the tribunals or were intimated to them.
In 1996, some 25 tribunals which reported to the Scottish committee of the Council on Tribunals received 81,464 cases. To put that into perspective, the total number of cases brought in 1996 in the sheriff court was 195,000. The fact that over 80,000 cases were handled by the tribunals indicates their immense importance in Scotland.
Finally, Amendment No. 211 devolves the appointments and procedures of the industrial tribunals established under the Industrial Tribunals Act 1996. That Act consolidated enactments relating to industrial tribunals and the employment appeals tribunal. The industrial tribunals are of great significance and there are many applications before such tribunals in Scotland. Therefore, this should reasonably be a matter for the Scottish parliament. I hope that the Minister will look favourably on my proposals. I beg to move.
Lord Renton: I support the amendments of my noble friend Lord Selkirk of Douglas. He moved Amendment No. 186 with his usual lucidity. The appointments that he listed and the procedures that he mentioned should all, with one exception, be the responsibility of the Scottish parliament. In my opinion, the exception—I cannot easily agree with this provision—is to be found in Amendment No. 188, which deals with immigration appeals tribunals operating in Scotland. Fair enough. The new Scottish administration should be responsible for appointments and the Scottish parliament should be involved.
However, there is a danger in suggesting that there should be—not inevitably, but possibly—a different procedure operating in Scotland in the immigration appeals tribunal from that which will operate in England. This is a very sensitive matter. There is great pressure at present from refugees and bogus asylum-seekers. If by any chance the procedure in Scotland turned out to be more lax than the procedure in England, Wales and Northern Ireland, Scotland would be swamped by bogus asylum-seekers trying to gain entry. We must try to avoid that danger. So, with the
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greatest of respect to my noble friend—I am so glad to be able to agree to all his other proposals—we must be very careful about that provision.
Lord Hylton: Perhaps I may venture to disagree slightly with the noble Lord, Lord Renton. It is possible that the procedures in immigration appeals tribunals in Scotland might be superior to the English procedures.
Lord Renton: It depends upon what one means by "superior". If "superior" means "easier", I would disagree with the noble Lord.
Lord Hylton: Perhaps they will be more effective and swifter.
Lord Mackay of Drumadoon: I intervene to say a few words in support of the important issue raised in the amendments of my noble friend Lord Selkirk of Douglas. All procedures for appointing to UK tribunals those who are currently resident in Scotland required careful examination once devolution had been decided upon and the Bill introduced. The current system is complicated. Many people have a role to play in the appointments, including the Secretary of State, the Lord Advocate, the Lord President of the Court of Session and the Lord Chancellor. In certain instances, others are also involved.
It is important that the public should be aware of what procedure will be followed when UK tribunals meet in Scotland. Some Scots who are appointed to the tribunals serve not only in Scotland, but also in other parts of the United Kingdom. That applies whether the members are lay persons or have been appointed because of some professional qualification which is a prerequisite for serving on the tribunal.
I do not know which Minister is to reply to the amendment, but the noble and learned Lord the Lord Advocate will recall that this issue arose when the Social Security Bill was passing through your Lordships' House. A government amendment sought to take out of that Bill a clause giving the Lord Advocate a role in the appointment of members to social security tribunals. I wrote to the noble and learned Lord at that time on this point and I know that it was fully ventilated during our debates on the Bill. It would be of considerable assistance not only to Members of this Committee, but also to others, if the Minister who is to reply could fully explain to the Committee the procedures that are to be followed not only in relation to the procedures mentioned in my noble friend's amendment, but with regard to UK tribunals in general.
5.45 p.m.
Lord Hardie: Perhaps I may deal with the last question first. The noble and learned Lord asked what procedures would apply to appointments to UK tribunals generally, taking the debate much wider than the specific amendments. The answer is that it would depend on whether or not the tribunals were dealing with reserved issues. If they are reserved, what I am about to say on the specific amendments would also apply.

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The amendments seek to give the Scottish parliament competence over the appointments to, and the procedures of, a number of tribunals which deal with reserved matters. The tribunals have been set up specifically to deal with appeals on such matters. It is important that the appeals structures are as uniform throughout the United Kingdom as possible because we are dealing with reserved matters and with tribunals dealing with such matters. I draw comfort from the noble and learned Lord's comments and from the fact that he properly pointed out that on occasions Scottish members of the tribunals serve in England and English members serve in Scotland. That underlines the need for common procedures to be applied north and south of the Border.
It would make no sense for the Scottish parliament to be able to set up separate appointments and procedural rules for the tribunals in Scotland. In some cases, it may be appropriate, in dealing with the system of appointments that will flow from devolution, for Scottish Ministers to have a role in the making of appointments to some of the reserved tribunals or for setting their procedural rules. Provision will be made for that in appropriate cases through an order under Clause 59. Copies of a draft order were made available to your Lordships in the Printed Paper Office on Tuesday, 7th July.
In general terms, I believe that that deals with the points raised by the amendments but, out of deference to the noble Lord, Lord Selkirk of Douglas, I propose to deal with each amendment in turn as briefly as possible.
Amendment No. 186 relates to the Data Protection Tribunal. My right honourable friend the Home Secretary is responsible for making lay appointments to that tribunal. "Residence"—noble Lords will note that "residence" is referred to in the amendment—whether in Scotland or elsewhere in the United Kingdom is not relevant to such appointments. However, my noble and learned friend the Lord Chancellor appoints the legally qualified chairman and the deputy chairmen of the tribunal and currently does so after consultation with myself as Lord Advocate. The Government intend that after devolution the Lord Chancellor should exercise that function after consultation with the Scottish Ministers. Provision is made for that in the draft order under Clause 59.
Turning to Amendment No. 188, I draw comfort from the comments of the noble Lord, Lord Renton, about the Immigration Appeal Tribunal. I appreciate that the noble Lord does not agree with me in relation to other tribunals. However, as with those other tribunals, it is my contention that the Immigration Appeal Tribunal should not have different procedures north and south of the Border. The noble Lord, Lord Selkirk of Douglas, referred to immigration into Scotland. We are not talking about immigration into Scotland but into the United Kingdom. It is immigration into the United Kingdom with which the Immigration Appeal Tribunal is concerned. Whether the applicant is in Scotland, England, Wales or Northern Ireland matters not; the same rules should apply.
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My noble and learned friend the Lord Chancellor is responsible for all appointments to the Immigration Appeal Tribunal. Although he is under no statutory obligation to consult over those appointments, he does consult informally. He consults me as Lord Advocate over any appointments to the tribunal from the Scottish legal profession. It is expected that after devolution the Lord Chancellor will continue to consult Scottish Ministers informally on these appointment functions.
I turn to Amendment No. 191. The Government have already made clear that they intend to reserve matters relating to common markets for UK goods and services at home and abroad, including competition policy. This is essential to maintain a level playing field for business in the UK. That is one of our key objectives in framing the Scotland Bill. It is for this reason that the Scotland Bill reserves among other things all aspects of competition policy. I am sure that the noble Lords opposite wish to protect business interests in Scotland. I hope they recognise that this is best achieved by avoiding the possible operation in Scotland of criteria for appointment to tribunals different from those prevailing in the rest of the UK.
As to Amendment No. 208, it would be impractical and unfair to set up two different social security appeals systems in different parts of the United Kingdom. However, we recognise the need for a Scottish voice on these appeals tribunals, and the Social Security Act, which received Royal Assent on 21st May, will allow for the Lord Advocate to be consulted about the appointment of tribunal chairmen in Scotland up to the point of devolution. But we intend that the Lord Advocate's right to be consulted will devolve to the Scottish executive once the parliament is established and provision will be made for this by way of an order under Clause 59.
I turn finally to Amendment No. 211. The legislation under which complaints to industrial tribunals arise is reserved and appeals from industrial tribunal decisions go to the Employment Appeal Tribunal. That body sits in both England and Scotland. It therefore makes sense for the rules of procedure and appointments to be reserved and consistent. The rules of procedure under which Scottish industrial tribunals currently operate are virtually the same as those in England and Wales and it makes no sense to have different procedures to deal with complaints under the same legislation. For those reasons, I invite the noble Lord to withdraw the amendment.
Lord Rodger of Earlsferry: I listened with great interest to the comments of the noble and learned Lord the Lord Advocate, in particular in relation to the various appointments after devolution, and the careful way in which he compared the present position in which the Lord Chancellor consults him as Lord Advocate and the way in which in future the Lord Chancellor will consult Scottish Ministers. This is perhaps a foretaste of debates to come. I am aware that Scottish Ministers under the Bill are defined as including the noble and learned Lord the Lord Advocate.

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Can the noble and learned Lord provide us with a sneak preview of whether or not, when he refers to Scottish Ministers, he is referring to himself as Lord Advocate who will therefore have knowledge of the Scottish legal profession, and therefore relevant knowledge for the purpose of making these appointments, or to a person who is not legally qualified and may not have the kind of specialised knowledge which the Lord Advocate can at present bring to bear on these appointments?
Lord Hardie: As usual, the noble and learned Lord asks a very pertinent question. Referring to the position after devolution, it will be for the Scottish executive and in particular the first minister to determine the distribution of functions other than those of the Law Officers and the Lord Advocate. At devolution all of the ministerial functions, including those of the Lord Advocate which do not relate to his independence as a prosecutor and as a Law Officer, will go into the melting pot with all of the other ministerial functions. Immediately after devolution and the appointment of first minister in discussion with his other Ministers, he will determine the distribution of those functions.
To answer the question shortly, although I cannot give the noble and learned Lord an assurance that these functions will revert to the Lord Advocate, I hope that, whoever he or she may be, the Lord Advocate will make an appropriate case to the first minister for the re-transfer of those functions, and perhaps functions other than ministerial functions, to the Lord Advocate. Therefore, if these come back to the Lord Advocate we will be in the same position. If not, I anticipate that whichever Minister has responsibility for advising the Lord Chancellor will involve the Lord Advocate in any consultation process. I take the point that has been made by the noble and learned Lord that a Minister who is not involved in the legal profession in Scotland may have difficulty in identifying appropriate candidates. But it would not be impossible for a Minister to make appropriate inquiries of professional bodies and of the Lord Advocate as to various candidates who might be considered for appointment. I anticipate that perhaps next week this matter will be addressed in greater detail.
Lord Selkirk of Douglas: I am grateful to the noble and learned Lord the Lord Advocate for his comprehensive reply, and in particular for going a long way to meet the purpose of this amendment by saying that the intention is to use Clause 59 by way of orders to ensure that Scottish Ministers have a say in both appointments and procedures. I am grateful to the noble and learned Lord for that concession and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Sewel Lord Sewel moved Amendment No. 186A:
Page 67, line 14, at beginning insert—
("Elections for membership of the House of Commons, the European Parliament and the Parliament, including").
The noble Lord said: Amendments Nos. 186A and 186B are technical and are simply intended to make clear that what is reserved by Section 3 (elections) of
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Head 2 of Schedule 5 are elections for membership of the House of Commons, the European Parliament and the Scottish Parliament, and that the reservations of Acts currently referred to in that section extend so far as those Acts apply to such elections. This represents no change of policy on our part and is consistent with the line that we have taken throughout on matters concerning elections. However, we believe that this redrafting makes the intention of the reservation clearer and I submit that it is therefore worth making. These amendments also give us the opportunity to make explicit in the Bill the status of elections to the Scottish parliament by confirming that they are reserved. The amendments do not change the position in relation to local government elections which, with the exception of the franchise, remain devolved. The wording, however, requires to be changed with the re-casting of this section. I hope that the Committee accepts that this is a useful and clarifying redrafting of the Bill, and I beg to move the amendment.
Lord Steel of Aikwood: I should like to put two questions on these allegedly technical amendments. Whenever a Minister gets to his feet to say that an amendment is purely technical, inquiry seems necessary. It is obvious that elections for membership of the House of Commons and the European Parliament must be a reserved matter. However, what is meant by the inclusion of "the Parliament"? Recently, we had a discussion as to whether or not the names of the regional candidates would appear on the ballot paper. The noble Baroness, Lady Ramsay of Cartvale, replied helpfully that the Government did not have a completely closed mind on this matter and it was to be referred to the working committee in Edinburgh dealing with electoral matters.
Of course, for the first election to the Scottish parliament there is nowhere else to determine these matters other than at the Parliament at Westminster. Once the Scottish parliament is up and running, surely the details of electoral administration should be a matter for the Scottish parliament. I hope that the Minister can clarify the position.
As to Amendment No. 186B, in the rewording as drafted the words "local government elections" disappear as a matter exempt from reservation. I trust I am not misinterpreting this, but by limiting the exemption to the franchise at local government elections, I hope that does not exclude the possibility that the Scottish parliament, in the fullness of time, may decide that local elections in Scotland in future should be conducted on a proportional representation basis. It would be wrong that a measure of that kind should come back to this House or the other House. Will the Minister clarify these two points?
6 p.m.
Lord Sewel: The noble Lord, Lord Steel of Aikwood, is suspicious. That may be a result of his spending far too long a time in another place.
As to the local government question, it is fairly straightforward. As far as I can see, nothing in the Bill in the reservations would prevent a Scottish parliament

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moving to a different system of election for local government. The only thing that is reserved is the franchise. It cannot mess around with the franchise; that remains reserved.
As to the noble Lord's first point about the nature of the elections to the Scottish parliament, the whole framework—the franchise, the electoral system—is in the Bill and will remain reserved. It will not be open to the Holyrood parliament to change the structure of the electoral system as set down in the Bill.
Lord Steel of Aikwood: I shall press the Minister a little further. If an Order in Council is made in future, once the Scottish parliament is up and running, on details of design of ballot papers and that sort of thing, surely that will not come back to Westminster. It must be within the competence of the Scottish parliament to deal with it.
Lord Sewel: It is difficult to draw the line where you move from something which looks relatively inconsequential and minor to, say, the design of the ballot paper. It is something which starts creeping up and changes the nature of the electoral system.
My understanding is that the rules of conduct of elections will be for Westminster to legislate on. Clearly in minor matters it would do so at the behest of the Scottish parliament.
On Question, amendment agreed to.
Lord Sewel Lord Sewel moved Amendment No. 186B:
Page 67, leave out lines 19 and 20 and insert—
("so far as those enactments apply, or may be applied, in respect of such membership.
The franchise at local government elections.").
On Question, amendment agreed to.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 187:
Page 67, leave out lines 24 to 31.
The noble Lord said: I beg to move Amendment No. 187. This is by way of a probing amendment. We are now at Section 5, which is headed "Entertainment". It does not tell me that is what we are providing this afternoon but that the subject matter, the Video Recordings Act 1984 and Sections 1 to 16 of the Cinemas Act 1985, will be reserved. It goes on to explain about the classification of films etc.
I am puzzled by this. As I understand it, local government can have some say, not in the classification of films but certainly in whether films should be shown in a local government area. If local government can be trusted to make decisions of that nature, then the Scottish parliament should have control over all entertainment matters, including film classifications. Perhaps the Minister can explain why film classification should be reserved and not devolved.
In the other place, on entertainment, the Government removed the subject matter of the Hypnotism Act 1952 from the list of reserved powers. They gave that to the
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Scottish parliament. When I read in the press that the Government are keen to promote the Scottish film industry, they are not sending out a good signal if the parliament taking over these responsibilities is not considered worthy of making decisions about the classification of films. I would be grateful for an explanation.
As to videos, I am not sure what the Video Recordings Act does, but I am sure that the Minister will explain to me why that should not be devolved to the Scottish parliament. A parliament which is a bit nearer the ground, so to speak, might look with a good deal more scepticism on some of the nastier parts of the video market than we have done from the grander heights of Westminster. I beg to move.
Lord Monson: My main interest in this Bill is to ensure that the English do not lose out. If we are going to all the expense and trouble of having devolution we might as well do the job properly. Matters such as videos and cinemas, food safety, consumer protection, telecommunications, gas, and so on, should be a matter for the Scottish parliament. I am very happy to support this amendment, for what it is worth.
Baroness Ramsay of Cartvale: We are not in favour of accepting the amendment which would devolve legislative competence for entertainment matters reserved under Head 2 of Schedule 5.
It has been said previously in Committee that we are not prepared to listen to arguments for widening the powers of the Scottish parliament. As the noble Lord, Lord Mackay of Ardbrecknish, has pointed out, we have already shown, in this very area, that is not the case. We listened in another place to a case for giving the Scottish parliament legislative responsibility for hypnotism and theatre licensing and agreed that such matters should be devolved, and that has now been done. However, we do not consider it is appropriate for the remaining entertainment matters in Schedule 5.
As my honourable friend the Scottish Office Minister for Home Affairs made clear during consideration of this Bill in another place, the need to reserve the regulation of films and videos is based on the vital, and non-statutory, role of the British Board of Film Classification.
The board has been responsible for classification of films for public exhibition since 1912. It operates on a voluntary basis. It is important that it maintains the confidence of the industry, the public and the local authorities, who exercise a final control on what is shown in cinemas through their licensing powers under the Cinemas Act 1985, as the noble Lord, Lord Mackay of Ardbrecknish, has pointed out. Local authorities have a right to impose their own restrictions on what is shown, but in practice they rarely disagree with the board's recommendations.
Within the UK there is, in effect, a single market and it is entirely sensible that the board operates on a UK basis. Cinema goers on both sides of the Border share standards of what is or is not acceptable for different age groups. If we had separate arrangements there could

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be duplication of the decisions taken by different bodies throughout the UK, or film producers would find themselves in the position of having to tailor their films to meet the differing requirements of the various boards and risk decisions that films that might be shown on one side of the Border could not be shown in that form on the other side. This would open up an undesirable and unnecessary area for controversy.
The control of exhibitions of films under the Cinemas Act 1985 is a matter for local authorities, and that will not change. Indeed, we are seeking to preserve this valuable local component of the system of control of film exhibitions—a system which works very well. We are not in the business of change for change's sake. Therefore, since no evidence has been presented to support a contrary view, we do not intend to overturn an efficient and effective system for no good reason.
The classification of videos is dealt with separately, under the Video Recordings Act 1984. The arguments for reservation of classification of videos are similar to those for classification of film. There are additional important differences which reinforce the argument that the classification of videos should be reserved. Videos are easily transported and most are used for home viewing. Classification is designed to regulate the sale of videos rather than to regulate public exhibition. Any difference in the regulation of videos on different sides of the Border would mean that one jurisdiction would risk undermining, or being undermined by, the other. In order to avoid compromising the protection which the legislation gives the public, it is necessary to continue with the common approach which the UK statute provides.
I hope that that reply gives the noble Lord, Lord Mackay of Ardbrecknish, the information that he was seeking. I hope that it satisfies him, and that he will withdraw the amendment.
Lord Mackay of Ardbrecknish: I am grateful to the noble Baroness for that explanation. I understand the point that it would seem to be unnecessary duplication to set up a Scottish hoard of film classification, or a Scottish classification body for videos, because it would be somehow wrong if films were treated differently on one side of the Border from the other. I understand the argument, but it does not accord with the great principle of devolution. In other parts of the Bill, and most of the schedule, the Government are admitting that on much more important issues than this there could well be different laws on different sides of the Border.
It seems a little hard, when we have swallowed many more important things that should be devolved, with the potential that they would be different on both sides of the Border, that we choke over film and video classification. However, all these classifications are rapidly becoming out of date with the advent of satellite television. Any classification that anyone wishes to make of anything on television or in the cinema in the UK is subverted by satellite television. So, on the basis that the modern world will overtake all this censorship, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 188 not moved.]
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 189:
Page 68, leave out lines 1 to 3.
The noble Lord said: The amendment takes out of reservation the Animals (Scientific Procedures) Act 1986. Again, this is a probing amendment to discover why the Scottish parliament is not to be given the responsibility for the Animals (Scientific Procedures) Act and scientific procedures on animals. After all, health is devolved to the Scottish parliament and I make no complaint about that. That is logical. Agriculture is devolved. The Committee will be aware that I am not happy about that, not because I do not believe that the Scottish parliament will act responsibly but because of the links with the EU, when it is in my view very much a UK matter. Other parts of agriculture relating to animal welfare and the like are devolved, so why is that Act not devolved?
In Scotland we have a major university community and major research establishments. The universities are funded by the Scottish Office. They will be funded by the Scottish parliament. There is no real reason why the issue of scientific procedures on animals should not also be devolved.
While I am on live animals, we had a Question yesterday about rabies. I appreciate that the Government may not be able to answer this point, but perhaps they could write to me. I wondered about the legislation on rabies and the legislation under which the import of animals into this country is banned unless they have been quarantined for the necessary time to ensure that rabies does not come into this country. It is a policy which, it has to be said, has been extremely successful in keeping this country and our neighbours on the island of Ireland free of that problem. I wonder what legislation that comes under and whether that is being devolved, because if it is, we would have an odd circumstance. I appreciate that it is a little outside the issue before us, but I would be grateful if someone could write to me about that. I beg to move.
Baroness Carnegy of Lour: I am afraid that I cannot agree with my noble friend on this point. It is an important part of the Bill that research in our universities is funded centrally and left as a UK matter. He is right that some research in universities will be funded out of their own resources, but the funding of the main body of research is a UK matter. The Scottish universities feel that that is important. They made representations to the Government who accepted them. When he reflects upon this matter my noble friend will probably think that the cost of the procedures and the use of animals in research can vary greatly according to what the procedures may be. I believe that it should stay as a reserved matter.
6.15 p.m.
Lord Sewel: It is a joy and a delight to find myself in agreement with the noble Baroness, Lady Carnegy of Lour. We both recognise that there are real dangers in

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fragmenting arrangements relating to vivisection between Scotland and the rest of the UK, to a large extent because the law impacts so significantly on the scientific community where there is a strong case for having a common policy.
Professionals in this field have to operate within a common ethical framework, given the inter-related nature of scientific research. There is a high degree of mobility of experimental activity and personnel in the research field. Major problems would arise if the regulatory regime were different on both sides of the Border in terms of the type of work that could be done and the type of controls. That would impact inevitably on the cost, capability, and ability of different research institutes being able to conduct scientific research as a result of a different regulatory regime on one side of the Border as opposed to the other.
There are strong practical reasons for this. We should always be guided by good commonsense considerations, and not, in all cases, by an appeal to some lofty principle. In this case there is a strong, commonsense, down-to-earth reason. I hope on that basis that the noble Lord will feel able to withdraw the amendment.
Lord Mackay of Ardbrecknish: I am grateful to the Minister for his reply and for giving us an insight into the Government's thinking on this issue. He clearly has my noble friend Lady Carnegy on his side. That shows that on this side of the Committee we do not carry with us the pagers issued by control freaks to keep us on message and on the same line. I take the point that my noble friend and the Minister made. In the competitive business of obtaining projects for university research, and the funding for those projects, it is important that there is no difference between Scotland and England when it comes to the experimentation which, let us say, pharmaceutical companies could do on live animals to find new and better drugs to deal with various problems in the human condition. I am satisfied with that answer. I am grateful to the Minister. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 190:
Page 68, line 21, at end insert—
("Exception from reservation
The distribution in Scotland of funds raised by the National Lottery.").
The noble Lord said: With this amendment we come to the question of the national lottery. My amendment suggests that at the end of the section on the national lottery, we should exempt from reservation,
"the distribution in Scotland of funds raised by the National Lottery".
I am perfectly content that we have a national lottery over the UK, but I am looking at the distribution of funds.
Lottery cash distribution has become extremely important for many bodies and organisations. Indeed lottery cash distribution, and the work that flows from
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it, is pretty big business. The original forecast made in 1994 for the whole of the United Kingdom was that there would be £9 billion over the seven-year licence. That has now been revised to £10 billion. That is a lot of money. It shows, dare I say, that the lottery has been run extremely successfully. The objective of gaining lots of money for good causes has been achieved to a far greater degree than was perhaps originally envisaged. That must be to the credit of the people who run and promote it.
As regards the £10 billion, on a pro rata basis—a Barnett formula for the lottery—it would suggest about £1 billion for Scotland. The current proposals in the Bill are that the Scottish executive should have power only to influence two parts of the distribution because the bodies involved are based in Scotland: the Scottish Arts Council and the Scottish Sports Council. The executives will have no power over the other four heads for distribution. Those are the New Opportunities Fund, the National Heritage Memorial Fund, the National Lottery Charities Board and the Millennium Commission. For something like two-thirds of the distributed lottery cash the Scottish parliament will have no influence on decisions about priorities between the different heads and competing interests. That is something we may need to look at. While this Parliament can shift money between one head and another, the Scottish parliament will be unable to do so. That seems wrong.
I would probably have let that pass if it had not been for the advent of what I think is grandly called the New Opportunities Fund. I remember sitting on the Government Back Benches at the time the lottery was set up and the legislation was passed. I remember many happy hours spent with the Labour Opposition probing the Government and seeking assurances that no lottery fund would ever be used for funding projects which government should fund through general taxation. They were insistent on obtaining those assurances. I cannot recall whether we were put to the test of Divisions on these issues but I recall my noble friends who manned the Government Front Bench on the issue being put to the test of debate. I suppose the Labour Opposition believed that the Conservative Government would promptly start to use the lottery to pay for things in the health service, education, the environment and other matters which government should pay for, and that by that substitution we would reduce government expenditure and be able to reduce taxation.
Many assurances were sought. We gave them; and we kept to those assurances. But now the grandly called New Opportunities Fund is funding the health service, the education service and other services that should be funded by government out of taxation. It is amazing how quickly the Government have done a major U-turn on this issue. They have cloaked it in the suggestion that they are providing new money for those important services and forgetting the assurances they demanded and received from us.
Lord Watson of Invergowrie: The noble Lord must surely have missed last week's announcement on spending over the next three years in which health and education were prioritised. I seem to remember that

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members of his party were critical of those spending projections. How does he reconcile that view with the view he has just expressed that the money raised through the lotteries should not be spent on those matters? He says that public expenditure in general, as announced last week, should not be used for those priorities. Where does he stand on those issues?
Lord Mackay of Ardbrecknish: I stand clearly with the assurances my party gave when in government in response to requests by the Labour Party: that we would not use—as we did not do—lottery funding to replace funding that should come from central government expenditure. That is the simple point. It is not an argument about whether the health service or education needs or can use extra spending. It is where that extra spending comes from. If the current Government were honest about the assurances they sought from us when the lottery legislation went through, they would not have created the New Opportunities Fund. They would not have set up a fund which is designed to put money into the health service, a service which should be funded by central government.
As for the Labour Party's smoke and mirrors spending last week, I suggest that the noble Lord has a look back over the past 20 years. My noble friend Lord Selkirk of Douglas recently asked a question. He will see that when the Conservative Party were in government there were many years when we spent considerably more year on year on the health service than their Government propose to do.
However, that is not the most important issue, which is this. The Government having broken the promises they appear to have made when in Opposition have now to realise that some lottery money is going into health, education, the environment and other matters which are devolved functions. That is the point I am driving at. If they are devolved functions, the money from the New Opportunities Fund in Scotland should be handed out on the basis of Scottish priorities and Scottish needs, not on the basis of United Kingdom priorities and United Kingdom needs.
If this fifth stream is to go to functions which are devolved and are to be paid for out of the Scottish block, some provision should be made for the Scots by setting up a new opportunities fund for Scotland, or whatever it may be called. In that way an organisation in Scotland will determine and work alongside government in deciding the priorities in education and health, for example, on which lottery money should be spent.
I have not created the problem; the Government have created it by the amazing U-turn they have made on lottery funding. If this is to happen and devolved functions are to receive lottery money as part and parcel of the core money they require to meet the demands of the public, the decisions about that money
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should be made in Scotland, just as the decisions on the core funding in the block will be made in Scotland. I beg to move.
The Earl of Mar and Kellie: I shall speak to my amendment, Amendment No. 190A, which is grouped with Amendment No. 190. Before doing so, perhaps I may say that I hope that the national lottery fund administrators will open Scottish offices and not rely on offices in London to administer the funds in Scotland.
The effect of Amendment No. 190A is to devolve lotteries which are organised at a local level. I believe that local lotteries should be devolved because of the existing responsibilities of local authorities in this respect. Not only is this a local authority issue, it is a social policy and a cultural issue. It seems nonsensical that a lottery in Clackmannon has to be conducted according to the writ of the Westminster Parliament. It is not a multi-national issue. It is a distinctly local issue.
Alternatively, do the Government fear the disapproval of the Church of Scotland? Is this another issue similar to the Government's fear of Cardinal Winning over the abortion issue, to which we shall come later? I believe that that type of moral issue is centred in the Scottish culture and should definitely be devolved to the Scottish parliament.
6.30 p.m.
Lord Sewel: I am sure that noble Lords recognise, because they are not questioning the reservation of the national lottery as a whole, that a single UK-wide national lottery, by offering the largest possible prize fund, offers the highest possible returns to good causes throughout the United Kingdom. A single UK-wide national lottery distribution fund is the most efficient and beneficial way of distributing national lottery funds. For example, it means that large individual projects can be supported which might not be possible if the distribution of funds was handled separately for Scotland. Subject to that, the Government recognise fully that money spent by the lottery on good causes has important implications for matters which are devolved. We intend to ensure that the Scottish executive can have the influence it needs over the distribution of lottery funds in Scotland.
Following discussions on the National Lottery Act earlier this year, my noble friend Lord McIntosh of Haringey set out our intentions very fully in a letter to the noble and learned Lord, Lord Fraser of Carmyllie, which is available in the Library. I shall therefore run through the main points briefly. Distribution of lottery funds for the arts and sport is handled by Scotland-only bodies. Their members are appointed at present by the Secretary of State for Scotland, who is also responsible for the issue of financial policy directions to those bodies. That point was recognised by the noble Lord, Lord Mackay of Ardbrecknish. In future these tasks will fall to Scottish Ministers. In other words, complete control over the membership of Scottish arts and sports councils will rest with Scottish Ministers and they will be able to

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direct the councils on matters of policy without reference to Whitehall and Westminster. In addition, Scottish Ministers will, if they choose, be able to appoint other bodies to act as distributors of the arts and sports shares.
The heritage and charities good cause and the new good cause for health, education and the environment are each administered by a single UK-wide distribution body; again, as the noble Lord, Lord Mackay of Ardbrecknish, identified. That approach offers some obvious savings in administrative costs, but I have to point out that Scotland receives a greater share of grants for these good causes—I had better say this quietly—than it does for the arts or sports good causes and also than it would if funds were allocated according to the Barnett formula. So it is going in Scotland's favour. That said, however, the Government recognise fully that the Scottish executive will have a keen interest in the activities of these bodies and are determined to ensure that the executive can influence their activities, bearing in mind only that they are independent, arm's length bodies.
There are two main dimensions to the way in which a degree of influence can be obtained. One is through appointments and the other is through direction-making powers. As regards appointments, four members of the National Lottery Charities Board are appointed to represent the interests of Scotland and they have in practice formed the Scottish committee of the board. These appointments are made by the Secretary of State for Culture, Media and Sport after close consultation with the Secretary of State for Scotland. We intend that Scottish Ministers should have a similar close involvement after devolution.
The National Heritage Memorial Fund is responsible for the distribution of lottery funds for the heritage. Appointments are made by the Prime Minister after taking advice from the Secretary of State for Culture, Media and Sport and the Secretary of State for Scotland regarding the member appointed to represent the interests of Scotland. The National Heritage Memorial Fund is expected to be designated as a cross-border public authority under Clause 83 of the Bill, which will ensure that Scottish Ministers are consulted on future appointments. The fund is in the process of forming a Scottish committee in order to give a sharper focus to its activities in Scotland.
The New Opportunities Fund has been set up to administer the new good cause for health, education and the environment. Under the legislation, the Secretary of State for Culture, Media and Sport must appoint one member who makes the interests of Scotland his or her special care. Of course there is no reason why other members of the board should not come from Scotland. Just as the Secretary of State has worked closely with the Secretary of State for Scotland on these first appointments, Scottish Ministers will have close involvement in appointments in the future.
The New Opportunities Fund will have a particularly important part to play in the delivery of the Government's policies on education, health and
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childcare. Unlike the NLCB and the NHMF, we intend to ensure that Scottish Ministers will play an important role in the appointments process and in the power to issue directions. We are convinced that these actions, the exact mechanics of which are still being worked out by officials, will ensure that Scottish circumstances and priorities are given due recognition. In terms of the representation of Scottish interests through appointments, Scotland is well covered through the various aspects of the lottery and in terms of the internal committee structure of the various funds and the setting up of particular Scottish committees.
I turn now to that other area of influence, directions on policy. The Government recognise that the Scottish executive will have a strong interest in the activities of these three bodies because of their implications for areas of devolved responsibility. We therefore intend to provide mechanisms for the Scottish Ministers to exercise appropriate powers of direction over these bodies' activities in Scotland while keeping control at the UK level and after consultation with the Scottish Ministers over matters which can only be settled at that level; notably, directions affecting the allocation of resources between the different parts of the United Kingdom. We are still considering the details of these mechanisms but hope to make an announcement shortly.
In terms of what we wish to achieve and the proper congruence between the policy objectives and priorities in Scotland and the distribution of funds from the various national lottery funds, I do not believe that there is anything between the noble Lord, Lord Mackay of Ardbrecknish, and myself. We are just choosing a slightly different route. Rather than formally devolving them, we are making sure that their internal structures are sensitive to Scottish interests and we are creating a power of direction which Scottish Ministers will be able to use. I believe that the outcome will represent what the noble Lord, Lord Mackay of Ardbrecknish, seeks to achieve.
I turn to Amendment No. 190A. The noble Earl is concerned that locally run lotteries will fare badly under the proposal to reserve all gambling matters. With respect, I cannot agree. One of the primary purposes of bringing all types of gambling under uniform statutory control is to protect those involved. Devolution will not create borders within Great Britain, so it is right that an individual can expect the same degree of protection wherever he chooses to gamble. I see no reason why that protection should not be extended evenly. Lotteries may, on the face of it, seem relatively small beer in comparison with other types of gambling. But even lotteries of the type described by the noble Earl generate significant sums of money. But that is not really the point at issue. The issue essentially is one of protection—protection for the public and operators alike. We want to provide that in equal measure throughout Great Britain.
The amendment would simply fragment what is a very effective policy and remove one aspect of the lottery's arrangement from the general protections which, under our present plans, will be available to

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the public for all other types of gambling. I hope that I have been able to convince the noble Earl that what is proposed is in the best interests of the Scottish people. I therefore ask the noble Earl not to move his amendment and the noble Lord, Lord Mackay, to withdraw his amendment.
The Earl of Mar and Kellie: Despite the Minister's response, I remain concerned that, in the event of the people of Scotland deciding that they have, for example, a stricter attitude towards gambling and a simultaneous desire by the people of England not to have such an attitude, Scotland will, as usual, remain as the minority partner who cannot in fact influence United Kingdom policy. It was for that reason that I was anxious to bring forward my amendment.
Lord Mackay of Ardbrecknish: Having listened to the noble Earl, Lord Mar and Kellie, I should say, first, that I have some sympathy with his point about local lotteries. However, judging by the reply that he received from the Government, I do not believe that he made much progress. As we are dealing with the section of Schedule 5 which deals with betting, gaming and lotteries, Members of the Committee will be interested to know that I did not put on a bet that the Government would actually concede on this or, for that matter, on any other point.
I must say that as the Minister explained it all to us, I became even more confused. Indeed, if I may hark back to a previous amendment of mine, it sounded more and more like a dog's breakfast. Arts and sport are handled by Scottish bodies. Those bodies will be appointed by the Scottish executive and, essentially, Westminster will have nothing to do with them. So everything is fine as regards arts and sport; indeed, the Scottish parliament can be trusted with them, so to speak. I suppose that the Government will say that that is just a carry-over of what is happening at present.
However, when it comes to heritage, charities and the New Opportunities Fund, that is a different matter. There will be a Scottish member or two on those bodies—even four members in the case of one of them—and they will be dealt with as cross-Border bodies under the Bill. But the Scottish executive will have the power of direction on them. I wonder whether I dare say this: if the Scottish executive has the power of direction on these bodies, why on earth has my amendment not been accepted and separate Scottish bodies set up to deal with the lottery fund distribution in Scotland?
Secondly I was totally unconvinced by the arguments about the New Opportunities Fund. Of course, the Minister ducked entirely my points about the way that the Government have done a "U" turn and on the way that they are now using the lottery fund in order to meet expenditure which should be properly met out of general taxation. If I had any doubts about my amendment to begin with, those doubts vanished when I heard the Minister's reply.
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Indeed, I am now even more convinced that we ought to do something about this, and I wish to seek the opinion of the Committee.
6.42 p.m.
On Question, Whether the said amendment (No. 190) shall be agreed to?
Their Lordships divided: Contents, 58; Not-Contents, 79.

Division No. 2

CONTENTS

Alexander of Tunis, E.

Lindsey and Abingdon, E.

Balfour, E.

Lyell, L.

Blatch, B.

McColl of Dulwich, L.

Broadbridge, L.

Mackay of Ardbrecknish, L.

Brougham and Vaux, L.

Mackay of Drumadoon, L.

Burnham, L. [Teller.]

Milverton, L.

Byford, B. [Teller.]

Minto, E.

Carnegy of Lour, B.

Molyneaux of Killead, L.

Chalker of Wallasey, B.

Montrose, D.

Clark of Kempston, L.

Mountevans, L.

Cranborne, V.

Moynihan, L.

Cross, V.

Munster, E.

Denham, L.

Newall, L.

Denton of Wakefield, B.

Oppenheim-Barnes, B.

Dilhorne, V.

Rankeillour, L.

Dixon-Smith, L.

Rees, L.

Dudley, E.

Renton, L.

Erroll, E.

Rowallan, L.

Fookes, B.

Saltoun of Abernethy, Ly.

Forbes, L.

Selkirk of Douglas, L.

Gardner of Parkes, B.

Sempill, L.

Harlech, L.

Simon of Glaisdale, L.

HolmPatrick, L.

Stair, E.

Hylton, L.

Stockton, E.

Kimball, L.

Strange, B.

Kintore, E.

Sudeley, L.

Lane of Horsell, L.

Torphichen, L.

Lang of Monkton, L.

Wise, L.

Lauderdale, E.

Wynford, L.

NOT-CONTENTS

Alli, L.

Hardie, L.

Archer of Sandwell, L.

Hardy of Wath, L.

Berkeley, L.

Haskel, L.

Blackstone, B.

Hayman, B.

Borrie, L.

Hilton of Eggardon, B.

Carmichael of Kelvingrove, L.

Hollis of Heigham, B.

Carter, L. [Teller.]

Howie of Troon, L.

Chandos, V.

Hoyle, L.

Cocks of Hartcliffe, L.

Hughes, L.

Currie of Marylebone, L.

Hughes of Woodside, L.

Davies of Coity, L.

Hunt of Kings Heath, L.

Davies of Oldham, L.

Irvine of Lairg, L. [Lord Chancellor.]

Dean of Beswick, L.

Desai, L.

Janner of Braunstone, L.

Dixon, L.

Jay of Paddington, B.

Donoughue, L.

Jeger, B.

Dormand of Easington, L.

Jenkins of Putney, L.

Evans of Parkside, L.

Judd, L.

Falconer of Thoroton, L.

Lockwood, B.

Farrington of Ribbleton, B.

Longford, E.

Gilbert, L.

McIntosh of Haringey, L. [Teller.]

Gordon of Strathblane, L.

Graham of Edmonton, L.

Mackenzie of Framwellgate, L.

Grantchester, L.

Merlyn-Rees, L.

Grenfell, L.

Milner of Leeds, L.

Hacking, L.

Molloy, L.

Hanworth, V.

Monkswell, L.

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Morris of Manchester, L.

Simon, V.

Pitkeathley, B.

Skelmersdale, L.

Ponsonby of Shulbrede, L.

Smith of Gilmorehill, B.

Puttnam, L.

Stoddart of Swindon, L.

Ramsay of Cartvale, B.

Strabolgi, L.

Randall of St. Budeaux, L.

Symons of Vernham Dean, B.

Rea, L.

Thomas of Macclesfield, L.

Rendell of Babergh, B.

Turner of Camden, B.

Rendell of Babergh, B.

Uddin, B.

Rogers of Riverside, L.

Walker of Doncaster, L.

Serota, B.

Watson of Invergowrie, L.

Sewel, L.

Whitty, L.

Shepherd, L.

Williams of Mostyn, L.

Shore of Stepney, L.

Young of Old Scone, B.

Resolved in the negative, and amendment disagreed to accordingly.
6.50 p.m.
[Amendment No. 190A not moved.]
The Earl of Mar and Kellie The Earl of Mar and Kellie moved Amendment No. 190B:
Page 69, line 7, after ("individual") insert ("or partnership under section 4(2) of the Partnership Act 1980)").
The noble Earl said: This amendment has the purpose of altering the definition supplied in line 7 on page 69. The amendment seeks to exclude partnerships from the definition of business associations; that is, partnerships in Scotland within the ambit of Section 4(2) of the Partnership Act 1890. In Scotland people who have entered a partnership form a firm which is a separate legal person distinct from the partners who compose it. The law in England is, of course, different on this issue.
The amendment would place responsibility for Scottish partnerships with the Scottish parliament. As these partnerships are already defined in Scots law, their reservation to this Parliament makes little sense. The thought that this United Kingdom Parliament would find time to amend the laws of Scottish partnership, presumably at the request of the Scottish parliament, can be seen as unlikely. I beg to move.
Lord Mackay of Drumadoon: I support this amendment which, as I am sure the Minister will be aware, has the full support of the Law Society of Scotland. As many noble Lords will be aware, that society scrutinises Bills that come before this Chamber in great detail and is assiduous in its drafting of amendments and provision of briefing to noble Lords on all sides of the Chamber. It also sends briefing to government Ministers. This appears to be a good example of how the Government might take on board a helpful suggestion made by the Law Society, which is, of course, a non-political body and has members of all parties and of none. The noble Earl has explained the purpose—
Lord Sewel: I remind the noble and learned Lord that when he was in government and I was in opposition, the Law Society of Scotland provided a similar service, but on those occasions the noble and learned Lord always thought that its amendments were ill-founded and wrong.
Lord Mackay of Drumadoon: I have no recollection of that but one tends to put unpleasant memories out of
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sight and out of mind. I fully accept that on some occasions its views do not command universal support. When one deals with—dare I say it?—more political issues, such as the contents of the Crime and Disorder Bill, I can appreciate that different Members of this Chamber may take different views on the matter.
Section 4(2) of the Partnership Act 1890 states,
"In Scotland a firm is a legal person distinct from the partners of whom it is composed".
It seems to me that that is a highly non-political issue. A constructive suggestion has been made and I hope that the Minister will consider it seriously.
Lord Rodger of Earlsferry: I am not clear as to the intention of this amendment. I am not sure whether it seeks to devolve the whole of the law of partnership as it applies to Scotland. If that is the case, I can understand in a theoretical way why the amendment has been tabled. But one has to bear in mind that it was at the instigation of the Scottish legal profession that the law of partnership was made the same in both England and Scotland with, I believe, the sole exception of the existence of a separate legal persona. With that one exception—there may be another stray exception of which I am unaware—the law of partnership is, in effect, the same. If one is considering this matter from the point of view of trade and industry, I am not aware of the kind of issues which would be likely to arise where it would make sense for the law of partnership—which, as I say, applies uniformly with the one exception of the separate legal persona—to be devolved in the way the amendment suggests. I can see the sense of that in a theoretical way but not in a practical way.
Lord Hardie: I oppose the amendment for reasons which I can state no more clearly than as stated by the noble and learned Lord, Lord Rodger of Earlsferry. We are dealing here with business associations. The reservation of business associations is intended to include all business associations, including partnerships within the meaning of the 1890 Act, and limited partnerships within the meaning of the Limited Partnerships Act 1907. It would not make any sense to make a distinction between Scottish partnerships and partnerships south of the Border in this context. I accept, of course, that in terms of the Partnership Act a Scottish partnership has a separate legal persona. But that is really neither here nor there in the context of this provision. Indeed making a specific exception for Scottish partnerships would be anomalous in this context. Therefore I am sure the noble Earl will agree that there should not be competing regimes of business regulation—that is what we are talking about—north and south of the Border. For that reason I invite the noble Earl to withdraw his amendment.
The Earl of Mar and Kellie: I accept that competition policy is not being devolved. However, I am still left with the problem of knowing how the Scottish parliament will ask this Parliament to alter the law on Scottish partnerships when such an issue remains a minority one within all that the United Kingdom has

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to arrange and decide. However, as I suspect there is no answer to that point, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 191 not moved.]
The Earl of Balfour The Earl of Balfour moved Amendment No. 192:
Page 70, line 5, after ("solicitors") insert (", notaries public").
The noble Earl said: Under the competition provisions of Schedule 5 I felt that in the interpretation of the legal profession we should include the ancient position of notaries public. I understand that goes back long before the Union of the Crowns. I wondered why it had not been included. I think most of us have received letters from the Law Society of Scotland on this point as we are dealing with the interpretation of the legal profession. I know that the noble Earl, Lord Mar and Kellie, has tabled Amendment No. 192A on this point. The inclusion of estate agents and other such bodies in the definition of "the legal profession" leaves me with some doubts. I am sorry, but I cannot support that proposal. I beg to move.
7 p.m.
The Earl of Mar and Kellie: My Amendment No. 192A is grouped with this one. As the noble Earl said, that amendment goes further than his by adding definitions to "the legal profession".
The omission of notaries public, estate agents, those holding rights to conduct litigation and those with rights of audience from the definition is significant. I believe that the regulation of anti-competitive practices and agreements within the legal profession should be devolved. Aside from notaries public, estate agents are divided between solicitor estate agents and non-solicitor estate agents. An existing level playing field is now disappearing because the regulation of estate agents will fall under two different parliaments depending on whether they are solicitors.
Notaries public act wholly within Scots law; they are appointed by the Court of Session and are disciplined as solicitors. The position of those with rights of audience under Section 25 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 includes solicitor advocates as well as non-lawyers. As this section of Schedule 5 relates to competition policy, it would be appropriate to have one, rather than two, standards within the legal profession.
Lord Mackay of Drumadoon: I support both these amendments. They highlight a problem that has arisen in the drafting of this section of Schedule 5. A role carried out by certain professional persons is, in certain instances, a reserved matter and in others a devolved matter. I should perhaps declare an interest, having at one stage petitioned to be a notary public, but having abandoned the position because I had decided to be struck off the roll of solicitors pending my admission to the Faculty of Advocates. So I am a "suspended notary public", if that is a concept recognised by the law.
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The council of the Law Society of Scotland has the role of preparing and presenting petitions on behalf of individuals to the Court of Session so that they can be admitted to public office as notaries public. As I understand it, it also has responsibilities for the regulation of notaries as they discharge their public duties and deals with any disciplinary matters which may arise.
Under the Bill, as is clear from Section 3 of Schedule 5, the,
"Regulation of … practices of the legal profession for the purpose of regulating that profession or the provision of legal services",
is to be a devolved matter, and rightly so. The Law Society is concerned that part of its duties in respect of certain individuals is to be reserved and part is to be devolved. The society believes that there is a measure of illogicality in that.
The same point arises in relation to the amendment proposed by the noble Earl, Lord Mar and Kellie. The noble Earl has fully explained how the problem arises. The estate agent is the classic example. As noble Lords may know, a significant part of the work carried out in solicitors' firms involves the buying and selling of houses. The estate agency part of that transaction is frequently handled by solicitors in Scotland, whereas it is normally handled by estate agents in England. But estate agents in Scotland will be regulated under the Bill as a reserved matter, whereas solicitors doing exactly the same job will be regulated by the Scottish parliament as a devolved matter. That seems illogical. So, too, is the very limited possibility of people holding rights to conduct litigation and exercising rights of audience under the 1990 Act who do not fall within the qualification of being solicitors or advocates. These are helpful amendments suggested by the Law Society. Notwithstanding my lack of success with a previous amendment, I hope for a constructive response.
Lord Selkirk of Douglas: I support my noble and learned friend on this matter. It seems that the Government's drafting is based on a misunderstanding. I say that because the Scottish Home Affairs Minister, Mr. Henry McLeish, wrote to the Law Society of Scotland on 14th May. Perhaps I may quote from the letter. He said:
"As you say … all notaries public in Scotland … are solicitors",
and went on to say:
"That does not mean, however, that notaries public, as such, form part of the legal profession".
With the greatest respect to the Scottish Minister of State for Home Affairs, strictly speaking what he wrote was not correct. Notaries are admitted under the Solicitors (Scotland) Act; secondly, they are admitted by the Lord President of the Court of Session; thirdly, they are subject to the discipline of the Law Society of Scotland; and fourthly, they are capable of being prosecuted before the Solicitors Discipline Tribunal. I therefore suggest that as notaries have to sustain and endure the trials and tribulations of the legal profession, they should also be recognised for what they are. It seems that the definition of "legal profession" is defective for that reason. Should the Bill create a

1093
position where one branch of the profession—namely, notaries—is subject to United Kingdom regulation and control when their removal, admission and discipline are all functions of the Law Society, a body which comes in all other respects under the Scottish parliament?
Similarly, it is surely not appropriate that solicitors and advocates will be regulated by the Scots parliament, but that those with rights under Section 25 of the Law Reform (Miscellaneous Provisions) (Scotland) Act will be regulated by the United Kingdom Parliament. It could lead to problems with consumers in that it could create an uneven playing field. There might be difficulties in regard to local enforcement of competition rules.
I appreciate that Section 25 of the Law Reform (Miscellaneous Provisions) (Scotland) Act has not yet been enforced. However, it might come into force. If so, provision for that eventuality should be made in this Bill. It seems that for the purposes of competition law the Scots parliament should have jurisdiction over all the professionals acting in the same economic sector. If the Bill gives the Scots parliament powers over advocates and solicitors but fails to give those powers in relation to notaries and estate agents, the matter merits careful examination by the Law Officers. I hope that the noble and learned Lord the Lord Advocate will be able to give a favourable reply.
Baroness Carnegy of Lour: I have no owlish wisdom on this subject, except that some years ago I took through this House a Bill which became the Property Misdescriptions Act. That measure applied to both estate agents and solicitors acting as estate agents. I am wondering how the Act is affected by devolution. The noble and learned Lord may not be able to answer the question now. However, I believe it to be relevant.
Lord Rowallan: I must declare an interest as a member of the Royal Institution of Chartered Surveyors. The point raised by the noble Earl, Lord Mar and Kellie, needs to be examined closely. It seems totally illogical that estate agents and lawyers who are doing the same work should be dealt with in two different ways.
Lord Hardie: I am grateful to all noble Lords who have contributed to the debate on these amendments. I am also grateful to noble Lords for their explanation of the amendments, which seek to widen the definition of "the legal profession" for the purposes of the exception that was made to the reservation of competition policy.
The legal profession is currently defined in the Bill as meaning,
"advocates, solicitors and qualified conveyancers and executry practitioners within the meaning of Part II of the Law Reform (Miscellaneous Provisions)(Scotland) Act 1990."
It seems to us that that is an appropriate definition. I believe that the legal profession—indeed any profession—ought to be limited to those who can be said to be part of that profession or related to it and subject to its professional rules and practices.
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If I may deal with the point raised by the noble Lord, Lord Selkirk of Douglas, in relation to notaries public, I accept that from what I have said it would appear to follow that they ought to come within that definition because they are clearly part of the legal profession, are related to it and are subject to its professional rules and practices. However, the point may be academic. It is my understanding that all notaries public in Scotland are in fact solicitors. Therefore the word "solicitors" in the definition encompasses notaries public and it would be unnecessary to include them in the definition.
The issue might arise, as the noble Lord, Lord Selkirk of Douglas, anticipated, in relation to another aspect of the Law Reform (Miscellaneous Provisions) (Scotland) Act.
Lord Selkirk of Douglas: I am grateful to the noble and learned Lord for giving way. If notaries public are covered by the word "solicitor", would it not be enormously helpful if that could be clarified in the legislation? In other United Kingdom legislation they are not covered by the word "solicitor". It would make a great difference to notaries public throughout Scotland if that matter could be clarified and tidied up with an amendment.
Lord Hardie: With respect, I do not think that that is necessary. The concept of a notary in England is quite different. It is my understanding that, whereas in Scotland all notaries public are solicitors, the position is different in England and Wales, and in that case I can understand that there would be a need for a specific reference to notaries public in English legislation. In Scotland, where all notaries are solicitors, they are encompassed by the definition in the Scottish legislation.
I intended to go on to anticipate a point. The noble Lord referred to a provision in the miscellaneous provisions Act which has not been introduced. I can see that the question might be raised as to what would happen if at some stage in the future it were possible for a notary public to be admitted who was not a solicitor. If the position in Scotland were to change so that notaries public were not also solicitors, the matter would be reconsidered at that time. Clause 29 provides a mechanism for making changes to the schedule of reserved matters, and we can thus allay the fears of the Law Society of Scotland in that regard.
As far as estate agents are concerned, I am surprised that the Law Society of Scotland is promoting an amendment to include estate agents as part of the legal profession. As I understand it, the Law Society of Scotland has for many years been at pains to explain that estate agents are not solicitors and that they provide a quite different service, and a different quality of service, from that provided by surveyors who act as estate agents—with all due respect to the noble Lord, Lord Rowallan.
The position of estate agents is regulated in another way. Estate agents are reserved and are subject to regulation by the Department of Trade and Industry in the context of consumer protection. That regulation will apply not only to estate agents who are surveyors and

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to estate agents who have no qualification at all; it will also apply to solicitors in the conduct of their estate agency business. There is uniformity in the regulation. If solicitors choose to have an estate agency aspect to their business, that is regulated by the DTI, in the same way as other estate agents are subject to regulation and controls. When they are acting in their capacity as members of the legal profession, as solicitors in the proper sense of the word, they are subject to the regulation and control of the Law Society. That is why this exception is mentioned.
As the noble Lord, Lord Selkirk of Douglas, very properly pointed out, Section 25 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 is not yet in force and there are no present plans to commence the provision. Again, I am surprised at the Law Society of Scotland suggesting that, once this provision was in place, someone who qualified under it should be seen as a member of the legal profession. They would have gone through a different training exercise from that undertaken by solicitors. If one went out into the street and asked members of the public what they understand by the term "the legal profession", I am sure that in England they would say, "banisters and solicitors", or, in Scotland, "advocates and solicitors". One can see why it would be extended to people undertaking executry business under the Law Reform (Miscellaneous Provisions) (Scotland) Act because solicitors tend to undertake executry and trust business. If this provision came into force, one would be dealing with other professions, but non-lawyer groups, who would then be encompassed in the definition. In my respectful submission, it would not be appropriate to include such people in this definition—all the more so because the provision is not in force.
With that explanation, I invite the noble Earl to withdraw the amendment.
7.15 p.m.
Lord Rodger of Earlsferry: I wonder whether the noble and learned Lord the Lord Advocate can help me with one matter, on which he may wish to write to me. The definition of the legal profession is given as, "advocates, solicitors", and so on. But, as the noble and learned Lord will know, certain foreign lawyers set themselves up in Scotland and can deliver services there under various pieces of European legislation. In that regard, there is to be an establishment directive. So far as such people are subject to UK regulation, would they be subject to regulation by the Scottish parliament, or would that remain a reserved matter? Prima facie, unless they became solicitors, and so on, by virtue of the establishment directive, it does not appear that they would fall within that definition.
Lord Hardie: I should like to consider that point in some detail. As the noble and learned Lord observed, once the establishment directive is in place, if such people became, in terms of the directive, members of the profession of solicitors or of the
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Faculty of Advocates in Scotland, clearly they would fall within the definition. As far as the other issue is concerned, I should like to reflect on it. I do not think it would be appropriate to give an answer now. I shall write to the noble and learned Lord and place a copy of the letter in the Library.
The Earl of Balfour: As I think the noble and learned Lord, Lord Hardie, said, the law would need to be changed if notaries public were not necessarily solicitors. Who would change the law, the United Kingdom Parliament or the Scottish parliament?
Lord Hardie: Clause 29 would regulate that situation and Her Majesty, by Order in Council, would modify the schedule in the way in which Her Majesty considered it necessary or expedient. Accordingly, it would be an Order in Council in this Parliament which would alter the provision.
Lord Mackay of Drumadoon: Before the noble and learned Lord sits down, am I right in thinking that the Clause 29 procedure would require affirmative resolution of both the Scottish parliament and this Parliament? This may be a matter on which we touched the other night, but as I read Clause 102(1) and 102(3) of the Bill, we see "29" in both. As I construe what are inevitably complicated provisions, both parliaments would have the right to have a say as to whether a matter goes one way or another.
Lord Hardie: The position that I put before the Committee was that it would require the agreement of the Scottish parliament. I should like to stick with that position. If I am wrong on that, I shall write to the noble and learned Lord.
I have been given advice, but in the exercise of my discretion I would rather check up and be precise. It would involve affirmative resolution in both Houses of this Parliament and the agreement of the Scottish parliament. Whether it would then require a specific affirmative resolution of the Scottish parliament, I am not prepared to say at this stage.
The Earl of Mar and Kellie: Before the noble Earl, Lord Balfour, concludes, I believe that the Lord Advocate said that there is a level playing field and that all estate agency regulations will continue to come from this Parliament. I intend to withdraw my amendment. But I wonder whether that is the way everybody sees the situation. No doubt we shall return to this issue at Report.
The Earl of Balfour: I should be grateful if the noble and learned Lord, Lord Hardie, would be kind enough to send me a copy of his letter. I should like to read what he says. Although I shall withdraw the amendment, I reserve the right to come back with further questions at Report if I am not satisfied with his response. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 192A not moved.]
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 193:
Page 70, leave out lines 11 to 13.
The noble Lord said: Amendment No. 193 concerns intellectual property. There is a reservation on intellectual property and then an exemption from reservation for,
"The subject-matter of Parts I and II of the Plant Varieties Act 1997 (plant varieties and the Plant Varieties Seeds Tribunal)".
The Plant Varieties Act 1997 provides for a number of things. It seems odd that those matters are to be devolved to the Scottish parliament. If one reflects on the Government's arguments earlier about keeping films, videos, live animals, lotteries in part and various other matters in the UK—matters of health, animal health and labelling—it is odd that the Plant Varieties Act is being singled out to be exempt from reservation.
I should like to have a clear view as to why that subject was chosen. After all, plant varieties and seeds move pretty freely between different parts of the Kingdom. There is a fair trade in mail order catalogues; people order seeds and plants from different parts of the UK—Scotland to England or England to Scotland. It seems odd that Parts I and II of the Act are chosen to be exempted.
Given the arguments that I have been listening to for most of the afternoon—some of them I appreciated and some I did not and asked the Committee's opinion on at least one of them—I cannot understand why this Act was chosen to be the responsibility of the Scottish parliament. I should have thought we would want to keep plant varieties on a UK-wide basis, especially, as I suspect, European matters begin to impinge on this issue. I should be grateful for an explanation from the noble Lord, Lord Sewel, on this. I beg to move.
Lord Sewel: The key to the solution is the fact that agriculture generally is devolved and this fits in with our approach to agriculture as it reads across to plant varieties.
Let me make it clear. We plan that the Controller of Plant Variety Rights and the Plant Variety Rights Tribunal should be delegated as cross-Border public authorities in the Order in Council made under Clause 83. That will facilitate the maintenance of a single regulatory regime across the UK by those bodies after devolution.
Therefore, we have an arrangement which is repeated in a number of areas where the formal power and function is devolved, but that devolved power and function is carried out—given the reality—through an existing and maintained UK body. Basically, it is the best of both worlds.
Having said that, it remains the case that at some future date, because the power is devolved, it is open to the Scottish parliament—if, in its wisdom, it thinks that a better arrangement could be made—to move away from the present UK body and set up some other body.
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But it is our intention to designate those two cross-Border bodies in terms of the Order in Council under Clause 83.
It is not a matter of trying to set up a specific number of Scottish bodies; it is just that the power and function is devolved. That is expressed through existing UK bodies. I hope that that explanation is not too complicated. I appreciate that it brings together two slightly different ideas but I hope, on that basis, the noble Lord will feel able to withdraw his amendment.
Baroness Carnegy of Lour: I should have gone into this matter before coming to Committee, but I confess that I did not.
Does what the Minister said affect the seed potato industry? Very often a potato is invented south of the Border. It is kept under control until it has been multiplied sufficiently and much of the multiplication is done in Scotland; for example, in Angus, not far from where I live. It is still under the control of the inventors south of the Border.
I do not know whether this provision applies, but that aspect may be affected by what the Minister says. If he cannot answer at the moment, perhaps he will look at the issue. It is a matter which will be of interest to the National Farmers Union in Scotland.
Lord Sewel: I believe that seed potatoes are seeds. On that basis, I would hazard a guess that they are covered by this provision. If not, I shall certainly write to the noble Baroness.
Baroness Carnegy of Lour: If they are covered by that which is devolved, it will be extremely worrying.
Lord Sewel: That opens up again an area of potential misunderstanding. Although the power and function is devolved, the operational aspect by which that power and function is given reality is through an existing UK body. The intention is to maintain that existing UK body as a cross-Border authority.
7.30 p.m.
Lord Mackay of Ardbrecknish: My noble friend Lady Carnegy has raised a quite worrying point. Perhaps I may go on to look at the words in the exemption—the "subject-matter". I understood what the Minister said about the bodies which grant the proprietary rights and the tribunal. They would be designated "cross-border" and therefore nothing much would change except that the Scottish executive, I presume, would have some role in the appointments. But the "subject-matter" seems to go a little further than that. It implies that the Scottish parliament could change the legislation contained in Parts I and II of the Plant Varieties Act. That perhaps worries my noble friend and myself much more. I assume that Parts I and II of the Act do not cover the import of seeds and seed potatoes. The import of those products has to be controlled.
As my noble friend pointed out, and as the Minister will be the first to know, the seed potato industry is very important in Scotland. In many parts of eastern Scotland

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and the Borders seed potatoes are vital to the farming economy. I no longer need to bother declaring an interest because it is a long gone interest, but when I was a student I was a potato inspector. I actually decided the grade potatoes should have. So I look at potatoes in quite a different way from anyone else! I must say that it was a quite well paid summer occupation for students. I do not know whether it still is, but it certainly was then. Indeed, I can vouch for what my noble friend said. The Scottish seed potato industry is very important—
Lord Mackie of Benshie: Perhaps I may—
Lord Mackay of Ardbrecknish: Ah, another grower!
Lord Mackie of Benshie: Perhaps I may be able to assist the committee. It appears to me to be perfectly clear that, if the proprietary rights are laid down in Great Britain, the administration of the protection of those rights in Scotland should be done by the Scottish parliament. What happens is that some people try to swindle. They could be putting in potatoes which had run out of the period after the noble Lord, Lord Mackay, had inspected them, or they might be trying to sell seed without paying the premium to the inventor. In the case of potatoes, this appears to be fairly straightforward.
Lord Mackay of Ardbrecknish: I am grateful to the noble Lord for his intervention because he knows about this subject. My slight concern—perhaps the Minister can put me at ease—is that the subject matter of Parts I and II devolved to the Scottish parliament could lead to a position where the Scottish parliament either legislated ahead of the UK parliament or vice versa and the net result was that the cross-border traffic in seeds of all kinds and seed potatoes was disturbed. I realise that I am getting into technicalities, even for the Minister with responsibility for agriculture. Perhaps we might be grateful for a letter on the matter. If the noble Lord could give that assurance, that would end the debate.
Lord Sewel: The only thing I can say in response is that I shall now add seed potatoes and seeds to the two other minefield areas in your Lordships' House, which are salmon and forestry. At this stage, I think it is better that I write to the noble Lord—a well known and used expedient—and see whether we can clear up this matter through correspondence.
Lord Mackay of Ardbrecknish: I am grateful to the noble Lord. Perhaps I should have studied Parts I and II of the Plant Varieties Act 1997 with more care before I came to probe. However, I did think that the Minister would have all the answers at his fingertips!
Lord Carter: Perhaps I may help the noble Lord. I actually took the Plant Varieties Act through the House; and I cannot remember either! But I can remember that those on the Opposition Front Bench were entirely pleased with all the answers I gave them.
Lord Mackay of Ardbrecknish: We tend always to be pleased with the answers that the noble Lord,
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Lord Carter, gives. With that, and with the letter which I thought I could see coming a few minutes before the Minister promised it, I am content to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Sewel Lord Sewel moved Amendment No. 193ZA:
Page 70, line 27, at end insert—
("SECTION 5A - SEA FISHING
Reservation
Regulation of sea fishing outside the Scottish zone (except in relation to Scottish fishing boats).
Interpretation
"Scottish fishing boat" means a fishing vessel which is registered in the register maintained under section 8 of the Merchant Shipping Act 1995 and whose entry in the register specifics a port in Scotland as the port to which the vessel is to be treated as belonging.").
On Question, amendment agreed to.
Lord Haskel: I beg to move that the House do now resume. In moving this Motion, perhaps I may suggest that the Committee stage begins again not before 8.35 p.m.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Conditional Fee Agreements Order 1998
7.35 p.m.
The Lord Chancellor (Lord Irvine of Lairg)The Lord Chancellor (Lord Irvine of Lairg) rose to move, That the draft order laid before the House on 16th July be approved [42nd Report from the Joint Committee].
The noble and learned Lord said: My Lords, the draft Conditional Fee Agreements Order 1998 revokes the Conditional Fee Agreements Order 1995. The 1995 order specified the proceedings in which conditional fee agreements could be made: personal injury cases; insolvency cases; and cases before the European Court of Human Rights. The new draft order increases, to the fullest extent possible under the legislation, the proceedings in which a person may enter into a conditional fee agreement with his or her lawyers. Conditional fee agreements will be lawful in all civil proceedings, except family proceedings.
The Joint Committee on Statutory Instruments has reported the draft order as "making an unexpected use of powers". The committee says that "all proceedings" is not a description of proceedings which can be properly specified under Section 58. I disagree. For the purposes of Section 58(3) and (4) of the Courts and Legal Services Act 1990 the test to be fulfilled is whether or not the proceedings are of a description specified by order. In my opinion the proceedings that can be described can logically range from one specific proceeding to all proceedings. Under the Interpretation Act the singular includes the plural and proceedings of a description can embrace proceedings of all descriptions other than those excepted. In my opinion the order proposed complies with the statute.
The new draft order also specifies, as I am required to do by the primary legislation, the maximum percentage that may be charged as an uplift on the fees. This is set at 100 per cent., as it was before. Your Lordships will know that I am urged by my noble and learned friend Lord Ackner this evening to go further and to set a cap on the success fee by reference to a percentage of the damages recovered. I have to tell the House that I cannot accept his amendment, not least because I believe the course he urges me to take to be ultra vires.
Parliament has plainly provided, in subsections (2) to (5) of Section 58 of the Courts and Legal Services Act 1990, an exhaustive code by which the maximum uplift of normal fees is to be fixed. It is plain from subsections (2) and (5) that any order to be made by the Lord Chancellor shall prescribe the maximum permitted uplift by reference only to a percentage of the fees of the lawyer. There is no power to impose a cap as a percentage of the damages recovered. Therefore, the noble and learned Lord's amendment to my order, if carried, would produce this absurdity: the House would be inviting me to make an order which in law was ultra vires. Obviously I would not do that; and I would lack the authority of the House to make the order that I propose which is intra vires.
I turn now to the merits of the order. Conditional fee agreements will result in a huge expansion of access to justice. Today only the very rich or the very poor can afford to litigate. In future everyone with a really strong civil case will be able to secure his rights free of the fear of ruin if he loses. They will bring the majority of our people into access to justice. The Law Society has announced today that it strongly supports the order I bring before your Lordships this evening.
Conditional fees have been the means by which at least 45,000 personal injury cases have been brought. Many, in all likelihood, would not have been brought but for the existence of conditional fees.
In our consultation paper, Access to Justice with Conditional Fees, the Government sought views on the possibility of extending the availability of conditional fees as widely as possible. The responses we received showed conclusively that most respondents were in favour of extending the availability of conditional fee agreements more widely.
It is clear that people are enthusiastic to use funding arrangements which give them access to the courts and share the risks of litigation with their lawyers.
If successful, a lawyer is paid his normal fees and, as recompense for agreeing to share the risks of litigation and to take no fee in the event of an unsuccessful outcome, the lawyer charges a success fee. This is fixed in advance as a percentage of the normal fees. This cannot be more than 100 per cent. On average, the percentage is less than 50 per cent. Most lawyers have voluntarily agreed to a further restriction by agreeing that the success fee will not exceed 25 per cent. of the damages. This is of particular value in smaller claims.
Conditional fees do not give lawyers a direct interest in the amount of the damages. This can be contrasted with contingency fees, commonly used in America, where the lawyer's direct interest is in the amount of the damages because the fee is set as a proportion of the damages secured. A conditional fee agreement sanctions only an uplift on what the fee would be otherwise.
I also find it strange that complaint is sometimes made that lawyers should not have a financial interest in cases, as if our present system eliminated any interest of this kind. As my noble and learned friend Lord Hoffmann so lucidly pointed out to your Lordships on 9th December 1997,
"lawyers are paid according to what they do and they decide how much they are going to do. It is therefore in their financial interest to do as much as possible".—[Official Report, 9/12/97; col. 66.]
The profession has shown, and will continue to do so, that as professionals they are able to deal properly with any conflict and resolve it without detriment to their clients. It would be extraordinary if the only reason we continued to deny access to our courts through the use of conditional fees is that we cannot trust the lawyers to deal honestly with their clients.
In recent weeks I have spoken to the representatives of several leading insurance companies. I am impressed by the inventiveness and creativity of the industry in seeking to develop new products to meet the demands of clients who may now choose to use conditional fee agreements.
From my discussions with the representatives of the industry, I am confident that newer, even better products will be launched in the coming months, although for obvious reasons of commercial confidentially I cannot go into details at this stage. All of these products will make using conditional fees more attractive.
The Government are also considering making the success fee and the insurance premium recoverable from the unsuccessful defendant. To do so would require primary legislation. My present thinking is that it is reasonable to make those who have been held liable by the court responsible for all the costs the successful party incurs to secure justice, including the insurance premium and the success fee. This would substantially remove the argument that plaintiffs' damages should not be diminished by the amount of the uplifts.
The order demonstrates, if any further demonstration were necessary, the Government's determination to achieve maximum access to our courts. I commend this order to the House. I beg to move.
Moved, That the draft order laid before the House on 16th July be approved.—(The Lord Chancellor.)
7.44 p.m.
Lord Ackner Lord Ackner rose to move, as an amendment to the above Motion, to leave out from ("That") to end and insert ("this House calls on Her Majesty's Government to withdraw the draft Conditional Fee Agreements Order 1998 and re-lay it in amended form so that the maximum amount payable under a conditional fee agreement expressed in percentage terms in relation to the amount of any sums which may be recovered shall not exceed 25 per cent.")
The noble and learned Lord said: My Lords, we live in very strange times. From the Statute of Westminster 1275 until a little less than 10 years ago, speculative litigation was contrary to public policy. That was because it was considered that it affected, as it does, the independence of the lawyer so that his advice might be distorted; he might exploit his client and he might engage in practices which were contrary to the interests of justice and thus undermine its integrity.
Section 58 of the Courts and Legal Services Act 1990 changed the situation and made conditional fee arrangements permissible. It was introduced, I am sorry to say, and, I believe, quite unintentionally, on a false prospectus. We were told initially that only 5 per cent. could be added to the costs of the solicitor. Later it was increased to 10 per cent., then to 20 per cent. and then, with great hostility from the Lord Chancellor's own Advisory Committee, it went up to 100 per cent. However, it was intended that it would have no effect on legal aid. As a result we have provision in Section 15(4)(a) of the Legal Aid Act 1988, which provides:
"A person shall not be refused representation for the purpose of any proceedings on the grounds (however expressed) that it would be more appropriate for him and a legal representative of his to enter into a conditional fee agreement (as defined by Section 58 of the Courts and Legal Services Act 1990)".
It is now being proposed that legal aid should cease in money recovery cases and in its place should come the conditional fee. I am deeply concerned, as many others are, about the whole system. I appreciate that it is water under the bridge now as regards the whole question of conditional fees being permitted. But although it is water under the bridge, there is some significance that the section was enacted in the teeth of opposition from seven Law lords, the Master of the Rolls, a former Lord Chancellor, my noble and learned friend Lord Hailsham, a former Attorney General and the noble and learned Lord, Lord Rawlinson of Ewell, and the Law Commission as well.
The history has this relevance. It is incontrovertible that in this new field one should proceed gradually and with caution. It was in 1995 that a statement in Access to Justice. A Fair Way Forward produced, I believe, for the Labour Party conference of that year where conditional fees were dismissed as a
"gimmick designed to mask the chaotic state of the legal aid scheme and the court service".
It went on to say this—and I emphasise it,
"We regard conditional fees as an experiment to be monitored closely".
The Lord Chancellor's Advisory Committee advised my noble and learned friend's predecessor in 1995 that given the novelty and the potential risk to litigants of this untried scheme, it must be effectively monitored; merely monitoring a sample was not, in the committee's view, sufficient.
Conditional fees were introduced in July 1995 and all that the Lord Chancellor's advisory committee was permitted to do was to commission the Policy Studies Institute to provide a report on a sample. The sample involved only 60 lawyers and 197 cases. The report is
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entitled, The Price of Success. I refer briefly to one of its conclusions, headed, "Assessment of Risk". It is found on page 86 and it states:
"The research raises serious questions about the way in which solicitors assess the probability of success of cases. Personal injury claims generally have a very high success rate, yet solicitors in this survey rated a large proportion of cases as having relatively small chances of success. There are a number of possible explanations".
Those are referred to. It continues:
"This is a crucial issue, because it affects the level of fees that the client pays to compensate the solicitor for the risk of not being paid at all. If the public suspects that solicitors are inaccurately estimating the risk, it will undermine their confidence in the whole system. If they believe that solicitors are doing so in order deliberately to inflate the uplift, despite rules on professional conduct, there is a risk that the whole conditional fees system could be brought into disrepute. This would have serious implications for the extension of conditional fees (in other areas)".
The various respects in which further inquiries should be made are then set out.
In my noble and learned friend's speech in Cardiff—published after the report and no doubt at a time when my noble and learned friend the Lord Chancellor had had an opportunity to read it—no mention was made of that report. There was this observation:
"Conditional fees are working well in the personal injury field".
Were they? Not from the perspective of the litigant. The average level of uplift was 43 per cent. That is in an area where 90-plus per cent. of the cases are bound to succeed. In 10 per cent. of the cases, the uplift was between 90 per cent. and 100 per cent.
In June 1995, the House had the benefit of a debate on the first of the conditional fee orders in which an important contribution was made by my noble and learned friend the Lord Chancellor—he but being a mere shadow of himself. I had attacked the 100 per cent. because, in the view of his own advisory committee, it was excessive. My noble and learned friend said this:
"Personal injury cases, as the noble and learned Lord"—
that is me—
"has rightly observed, are a low risk area of litigation from the standpoint of plaintiffs. In the vast majority the plaintiff succeeds in whole or part. In fact I understand that around 95 per cent. settle, to the advantage of plaintiffs, without any court order. In my view the first thoughts of the noble and learned Lord on the Woolsack on this subject were correct. A 10 per cent. or at most 20 per cent.—uplift was sufficient incentive".—[Official Report, 12/6/95; col. 1553.]
The noble and learned Lord should have adhered to that. On that basis, the average being paid out in personal injury cases, the subject matter of the institute's report, is double what my noble and learned friend considered was a generous uplift.
I return to the question of monitoring. In a television programme, "File on 4"—again, this would have been well known to my noble and learned friend's department because featured on it was Mr. Hoon, his right-hand man in the Commons—Mr. Hoon observed—I quote from page 11 of the transcript:
"There was a specific piece of academic research conducted by the PSI into a number of cases, by no means the total, but which concluded that there were no substantial difficulties about the way that the scheme worked and indeed which encouraged us to consider extending conditional fees".

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There is no indication in that statement that those carrying out the research had any form of reservation or anxiety. That was, in my respectful submission, a classical "spin".
Fortunately, the lady who carried out the research, Miss Yarrow, was also on the programme and, having heard what Mr. Hoon had said, she said:
"We're concerned that solicitors may not be calculating accurately the risk of success of the case, and it's on that calculation that the whole success fee is based. They seem to be saying that cases are a higher risk than they actually are, and that then means that the client is going to pay more. I think the issues about the way the success fee is calculated have not really been resolved, and more attention needs to be given to this before such a drastic action is taken".
That was a reference to replacing legal aid. She then said:
"And so far we haven't seen any signs from the Lord Chancellor's department that they are addressing this issue. Instead they've tended to concentrate on the positive aspects of our findings".
I referred to those earlier.
On 18th February, I tabled a Written Question in these terms, to ask Her Majesty's Government:
"Whether, since the publication in September 1997 by the Policy Studies Institute of its report, The Price of Success, they have carried out or caused to be carried out any research to determine whether the practice of conditional fees is working; and if not why not".
Back came the answer, signed by the Lord Chancellor:
"In the five months since the Policy Studies Institute report was published. I have not commissioned further research on the practice of conditional fees. As the noble and learned Lord will know, the Policy Studies Institute report concluded that many of the potential problems identified with conditional fees before they were introduced appear to have been successfully addressed. I accept that further research, at the appropriate time, may be necessary and I plan to seek views on what further research might prove useful in the consultation paper that I plan to issue shortly".—[Official Report, 18/2/98; col. WA 49.]
That brings me to a comment made in the paper entitled Access to Justice with Conditional Fees, issued by the National Consumer Council in April 1988, in which it makes the sensible observation:
"Without knowing the answers to key questions"—
those are the questions about what has happened in the CFA agreements, which have been the subject matter of this very inadequate monitoring—
"it is impossible for us—or anybody else—to make an informed judgment about how well conditional fees are working and therefore whether they are a suitable alternative to legal aid for personal injury claims. At the very least, the LCD should begin immediately to monitor how CFAs are working in personal injury cases. It will be essential to follow selected cases through from beginning to end and therefore monitoring should begin as soon as possible".
It is the absence of the monitoring which has emboldened me to suggest that there should be the capping of the proceeds of the court action so that no more than 25 per cent. of the damages which are recovered can be taken by the solicitor. A hundred per cent can produce large sums and there may not be an equivalent sum recovered in court; or there may be a judgment for such a sum but it is reduced because of a finding of contributory negligence.
I have come to your Lordships' House with more than that thin veneer of confidence which I occasionally manage to simulate. I achieve this by going back to the debate on conditional fees in June 1995 to which I made reference. There I find the following observations of my noble and learned friend the Lord Chancellor (he being but a shadow in those days):
"The next question is whether the noble and learned Lord, if he is insistent on retaining a maximum of 100 per cent., should be imposing a statutory cap on the uplift of, say, 20 to 25 per cent. of the damages recovered. I regard such a cap as an essential protection for the consumer of legal services. Particularly in cases where the damages are low and the fees high, it would be possible to win but to have to pay out literally all the damages recovered in legal costs plus success fee. That would be litigation which would in practice have been conducted—this is how the public would see it—for the benefit of the lawyers alone. The Law Society itself sees the merit of such a cap because it will be recommending to its members a cap of 25 per cent. of the damages recovered. The noble and learned Lord"—
that is a reference to the Lord Chancellor—
"should himself be imposing a 25 per cent. cap as the only sure means of protecting the consumer".—[Official Report, 12/6/95; col. 1554.]
One understands that from time to time one wears a different wig or hat and that may condition one's views on policy. But what startles me is that my noble and learned friend has changed his view on the law, and that should not be the result of changing status.
I go back to the words of my noble and learned friend in the same column:
"I, however, for my part, do not agree that Section 58 of the Act does no more than permit the noble and learned Lord the Lord Chancellor to prescribe the level of uplift and so does not permit, or impliedly preclude, a cap being imposed on the amount of the uplift. There is no bar, in my view, on his prescribing such a cap. The issue is whether he should do so".
Before my noble and learned friend addressed the House I set out in detail why the Lord Chancellor had the power and how the chairman of his own advisory committee, the noble and learned Lord, Lord Steyn, had firmly disagreed with the Lord Chancellor, as had my Law Lord colleagues in this House when I informally asked their views. I shall be interested to hear how my noble and learned friend justifies this forensic volte face.
Accordingly, I move my Motion. I have been at some pains to deal with the absence of monitoring because I, and I believe others, wish to have an assurance from the Lord Chancellor that he will now institute the necessary detailed monitoring in order to satisfy us that this strange creature, as the former Lord Chief Justice Lord Taylor described the conditional fee, is working fairly. I beg to move.
8.5 p.m.
Lord Hunt of Wirral: My Lords, I support the order and welcome the opportunity to say a few words about conditional fee agreements. I strongly support the words of the noble and learned Lord the Lord Chancellor in opening the debate. He spoke of the need to improve access to justice. That is a wholly laudable aim with which I am sure everyone participating in the debate agrees. I also strongly support the words he has uttered on other occasions about the need to modernise the whole system of justice.

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Justice is often far too expensive and inaccessible. We must take steps to remove the obstacles. That is why I have always viewed conditional fee agreements as part of the picture, not the whole picture.
I speak as one who has specialised in defendant litigation for some 30 years. Although I started life as a solicitor for the Transport and General Workers' Union, it took me 10 years to learn the error of my ways. For the past 20 years I have acted only for defendants. The reason I see conditional fee agreements opening access to justice is that, notwithstanding the legal aid scheme, there is a gap.
I wish to make four brief points. First, conditional fee agreements must be only part of the picture. There are other ways to improve access to justice, for example, legal expenses insurance. I greatly welcome the comments of the noble and learned Lord the Lord Chancellor about new products. Insurance companies will come forward with new products, and legal expenses insurance is another example of the innovative nature of insurers in meeting market demand. But as a former Minister I see the heavy hand of the Treasury behind this whole scheme and greatly regret any hint that conditional fee agreements will take the place of a wide range of legal aid opportunities that presently allows access to justice.
I am very nervous about suddenly moving to this new system before it is tried and tested. I can understand the urge to move ahead swiftly but I share many of the reservations expressed by the noble and learned Lord, Lord Ackner. I have enormous respect for the noble and learned Lord, mainly because the decisions that he has handed down to me and my firm have always been favourable. I do not seek to court support. However, I must inform him that once again he has encompassed in his remarks many of the reservations that extend far and wide in the legal profession about the new method of conditional fee agreements. It is so important that we get it right, but it is only one of the opportunities to open up access to justice.
Secondly, a good deal of research still needs to be done. The noble and learned Lord, Lord Ackner, made that very point. I have spent some time studying the research already conducted. The report of the Policy Studies Institute, published as recently as last September by Stella Yarrow, sets out several of the reservations that have been expressed. It states:
"However, there is also evidence which casts some doubt over the way in which risk is assessed and the uplift calculated. Particularly if conditional fees are to be extended to other areas of civil litigation, these problem areas need to be addressed. This survey has simply given an indication that there seems to be a problem with these two fundamental aspects of the scheme … Any plans to extend conditional fees … need to take into account that there are many unanswered questions".
I hope that the noble and learned Lord the Lord Chancellor will take every opportunity to extend the monitoring and research that is taking place into conditional fee agreements.
My third point, which I make as a member of FOIL, the Forum of Insurance Lawyers, is about his indication that he might well be minded to introduce primary legislation at a future stage to allow the success fee and
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insurance premium to be payable by the defendant. Surely in CFAs this removes from the plaintiff and his solicitor the risk that they are being asked to bear, which risk sharing has always underpinned the concept of CFAs. The defendant is being asked to pay for those cases he has won through a levy on the cases he has lost. It is as simple as that. Surely access to justice requires fairness on both sides of the equation.
FOIL has made a very strong case. Surely if we are to have a system of no fault compensation for plaintiffs we ought to debate that proposal, just as we did following the Pearson Conunission in the 1970s. I am troubled. Christopher Hodges was troubled in the New Law Journal when he said:
"Is it really right that virtually all risk should be removed from a plaintiff in litigation?"
The defendant stands to pay out far more than he or she does currently. I hope that the noble and learned Lord the Lord Chancellor will listen carefully to the evidence of FOIL.
My fourth and last point is merely to say that there have been a number of developments in the past 12 months which have greatly increased the cost of litigation, not only to insurance companies but to health authorities, the Government and other defendants. We had the retrospective effect of the changes to the Compensation Recovery Unit last October; we had the decision last week in this House in Wells v. Wells, all hugely increasing the cost of claims. The noble and learned Lord the Lord Chancellor has power to rectify the unjust consequences of Wells v. Wells by laying an order under Section 1 of the Damages Act 1996, which no doubt we will be able to discuss in another debate. To include in this a provision that the costs of the action, including the additional success fee and the insurance premium will now have to be borne by the defendant does seem to weight the scales of justice unfairly.
I have enormous sympathy with the amendment of the noble and learned Lord, Lord Ackner. However, I am a spectator in a much more serious battle of legal opinions and I await the views of the noble and learned Lord the Lord Chancellor. Notwithstanding all that I have said, I strongly accept the principle of conditional fee agreements.
8.14 p.m.
Baroness Oppenheim-Barnes: My Lords, your Lordships will be relieved to hear that I intend to intervene very briefly, overwhelmed as I am by the legal expertise which surrounds me. The noble and learned Lord the Lord Chancellor knows that I am second to none in my admiration for him, for his courage and the way in which he has pressed on with reforms which are overdue and very badly needed.
Having said that, I pay great attention to the fact that he made the point that the amendment in the name of the noble and learned Lord, Lord Ackner, would be ultra vires. We shall have to see to what extent this will govern any decision. I was originally seduced by the amendment in the name of the noble and learned Lord, Lord Ackner, because it seemed so simple. Certainly he

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very kindly quoted from the National Consumer Council report Access to Justice which was published at the time when I was its chairman.
Many of the fears which have been quoted have been somewhat overdone. There is always a fear of the unknown. At the same time, quite legitimately, as my noble friend Lord Hunt of Wirral, and the noble and learned Lord, Lord Ackner, have said, people are apprehensive when they are faced with something and they do not know how it will work. It is important that the noble and learned Lord the Lord Chancellor tells us what are his views about the future monitoring of the scheme when it is expanded to the extent that it will be, in a welcome way, by this order.
I suspect that the noble and learned Lord is not keen on conditional fees. I get that feeling from what he has said, but it is mere suspicion. I see a number of difficulties. There will be difficulties; there will be hiccups; there will be all sorts of cases coming up where people will point and say, "There you are. Woe is us. We told you it would happen". I am sure that the noble and learned Lord the Lord Chancellor will want to protect his flank to ensure that people are satisfied that adequate monitoring is taking place.
A point that has not yet been raised—I might be wrong—is that very often those who would benefit from being able to bring a conditional case will have to find lawyers who will also think it is going to benefit them. Insurance or no insurance, they are certainly not going to want to take on that sort of case. Will they ever want to take on a case under those circumstances where the other side is being represented by legal aid? Where will they go for their damages if they win their case? That poses a certain restriction.
I have great sympathy with the points that the noble and learned Lord, Lord Ackner, made about the capping of the fees. I can see where the problem arises in relation to the original Act. There is a structure within Section 58 which is said to provide for a determination with regard to the fees, which should not allow a fee of 100 per cent. to be more than that which would be obtained in the damages. That is the point that is being made.
I hope that the noble and learned Lord the Lord Chancellor will be able to reassure us in relation to monitoring. After all, this is new to practically everyone in the legal world. I hope that he will also be able to give an assurance to the noble and learned Lord, Lord Ackner, with regard to the points that he has raised about the limitation of fees.
8.18 p.m.
Lord Hacking: My Lords, in this my first speech from these Benches, I am delighted to support my noble and learned friend—as I am pleased now to be able to address him—for the order that he has put before the House. I support him for the principal reason that he gave to the House, the great need for increase in access to justice. I also support him because, in the three years of their operation, the evidence from the Law Society is that the conditional fee arrangements are, on the whole,
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working well. I am told by the Law Society that there have been approximately 40,000 cases to date which have used the Society's Accident Line Protect insurance scheme.
I am also told by the Law Society that the fears of the automatic doubling of fees have not been realised. Your Lordships have heard from my noble and learned friend that the evidence is that fees have gone up by an average of no more than 50 per cent. The noble and learned Lord, Lord Ackner, gave a lower percentage of 43 per cent. I am therefore happy to agree that the time has come to expand this scheme.
The noble and learned Lord, Lord Ackner, opposes the scheme and seeks to put an amendment to it. I disagree with the noble and learned Lord for a number of reasons. First, there is a voluntary scheme already in place set up by the Law Society. In my submission, it is better to leave it as a voluntary scheme. Secondly, from my reading of the Act, there is no power for the Lord Chancellor to set up a cap based upon percentage of damages.
Although the noble and learned Lord, Lord Ackner, goaded my noble and learned friend the Lord Chancellor on views that he expressed in a debate in your Lordships' House on 12th June, the noble and learned Lord, Lord Ackner, did not address your Lordships on the basis of his submission that there is a power under the Act. If he examines Section 58(2) and (5) he will not find there a power in the Lord Chancellor to bring—
Lord Ackner: My Lords, I am not sure whether I am being criticised for not replying in some detail to the point about ultra vires in this debate or in the previous debate. In the previous debate, on 12th June 1995, it is set out in considerable detail. I propose to refer to that when I come to reply.
Lord Hacking: My Lords, I leave it there. Under Section 58(2), the conditional fee arrangement is set as a percentage uplift of the amount of the lawyer's fees. If we look at Section 58(5) there is a reference to the same percentage. That percentage is only the percentage, and can only be construed as the percentage, of the uplift of the lawyers' fees.
Even if there were the power to make the order in the form that the noble and learned Lord urges, the linking of lawyers' fees to the amount of damages is moving us towards a contingency fee system which is undesirable. I agree with the views expressed by the noble and learned Lord the Lord Chancellor which were the views that he also expressed in another place before the Home Affairs Select Committee last October. His noble and learned predecessor put it well in the earlier debate in your Lordships' House on 1st November 1994, when he said:
"It is not easy to suggest a particular cap as being justified by way of general regulation even if I had the power to do so. After all, in the case of a quadriplegic, for example, a cap might allow a huge uplift but in smaller cases it might not. I regard as very important the principle which underlies Section 58: that it is related to the work done. The work that the lawyer does should be basis upon which he or she is paid and not the amount of damages".—[Official Report, 1/11/94; col. 808.]

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It is impossible to see how the capping system could work in practice; for example, with a defendant or in the case of a structured settlement where moneys are paid by instalment over a period of time. There are practical and legal difficulties facing the noble and learned Lord's amendment. In those circumstances I hope that he will withdraw it.
8.23 p.m.
Lord Thomas of Gresford: My Lords, like motherhood and apple pie, all noble Lords, and certainly all lawyers, will be in favour of the proposition that access to justice should be increased. The issue is whether the conditional fee agreement should be the only route. The noble and learned Lord the Lord Chancellor said that the order is strongly supported by the Law Society. So it is. But conditional fee agreements are supported by the Law Society only as an alternative, and not in substitution for legal aid. I am with the noble Lord, Lord Hunt of Wirral, who said that there should be other routes of access to justice than that proposed by the Government. What one fears by the order is that the Government are closing down those routes and directing everyone into one flow of traffic.
I note that the noble and learned Lord the Lord Chancellor is still against contingency fees. In his evidence to the Home Affairs Select Committee in 1997 he described them as:
"The most eloquent criticism of contingency fees is that by giving the lawyers a significant slice of the action they run the risk of polluting the fountain of justice at the source. The lawyers have too great an interest in the outcome".
The curious thing is that since the noble and learned Lord the Lord Chancellor said those words the Court of Appeal in the Thai Trading case decided that it is possible for contingency fees to be charged. I declare an interest in that I have settled a petition to your Lordships' House in relation to that case, challenging that decision.
The Legal Action Group which exists for the purpose of promoting equal access to justice, and which has some 8,000 members from the legal profession—solicitors and barristers who are engaged in litigation— said about conditional fees:
"The experience of practitioners operating conditional fees in the personal injury field is that the voluntary 25 per cent. of damages capped on the amount of the success fee comes into play in most cases so that in effect a contingency fee of 25 per cent. is currently being charged".
Your Lordships will appreciate that if that cap is reached in every case, it becomes a contingency fee. The interest of the lawyer in settling the case below its value, or perhaps in interfering with the way in which that case is presented to the court, is in conflict with the interests of his client.
The order is now to extend the system to all proceedings. While the uplift is limited—the limitation has grown as the noble and learned Lord, Lord Ackner, said from 5 per cent. to 20 per cent. and now to 100 per cent. uplift on the success fee—the noble and learned Lord the Lord Chancellor is not prepared to extend it to a cap as a percentage of the damages. I wait to hear what the noble and learned Lord the Lord Chancellor
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says in answer to the point raised by the noble and learned Lord, Lord Ackner, that he appears to have given conflicting views to the House on this issue as to whether it is ultra vires.
In an earlier debate on this subject I urged the noble and learned Lord the Lord Chancellor to hasten slowly—festina lente. No one doubts his courage in pressing on with reforms, as the noble Baroness, Lady Oppenheim-Barnes, said. But it is an area which should await primary legislation and debate. Reforms in this field should not be introduced piecemeal.
Primary legislation is required for a number of reasons. First, the criticism of the Joint Committee on Statutory Instruments, and its reservations that this is an unexpected use of powers under Section 58 of the 1990 Act, should not be lightly dismissed. It is forcing the language to say that all proceedings can now be brought under that head.
That is not such an important matter as others. The proposals to alter the legal aid system have, as I understand it, been delayed until primary legislation can be brought into effect. I should have thought that it would have been sensible for all the matters concerning access to justice to be dealt with in a single Act, covering those fields.
The noble and learned Lord the Lord Chancellor, encouragingly said to your Lordships tonight that it is reasonable to make the uplift and the success fee payable by the defendant, but your Lordships have heard the strong reservations that the noble Lord, Lord Hunt of Wirral, expressed on behalf of the defence side of litigation. The matter is not absolutely straightforward; it should be debated. The various interests should be balanced because there is a public interest on both sides: from the insurance premium payer to the injured litigant. It is not a matter, I respectfully suggest, that can be dealt with lightly.
However, the most important reason why there should be a delay—a hasten slowly to bring in this scheme—is that, as noble Lords have said, there has been limited research in this field. There has been no research as to whether solicitors overestimate the risk in order to justify an excessive uplift of the fees. There may be a doubling of fees now that 100 per cent. uplift is permitted. But the solicitor who is charging the fees, who determines that uplift, has to justify that uplift, assessing the risk himself. Is he doing it properly?
The effect upon the lay clients has not been surveyed. There has been no research into whether clients feel they have had a fair deal as a result of conditional fee agreements. There may have been 40,000 cases, but how many of those have gone to court? How many of them have been successfully completed to the satisfaction of the client? We simply do not know. There is a lack of monitoring of the services available at present in personal injury cases from the insurance industry. It may take four or five years to judge the success of the insurance cover that is provided to the client and from the point of view of the insurance company. If we are now to have conditional fee agreements extended to all other proceedings, it will take a long time to work out the level of premiums that insurance companies will

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charge and in what type of case. Will those premiums be acceptable to the lay client? Will it be affordable litigation for him?
The answer to those questions—the protection for the consumer—lies in awaiting a comprehensive Bill, primary legislation, which could contain important safeguards. For example, if a solicitor enters into a conditional fee agreement with his client, at present that is entirely between him and his client. The degree of uplift is simply not known. Is it fair and appropriate? Whether the solicitor has assessed the risk properly is not clearly made out to the courts or to the public. A proper proposal for a Bill might be that a conditional fee agreement should be filed in court and be open for inspection by the court as the mitigation is commenced, so that the court can consider, should any problem arise, whether a proper risk has been assessed and whether the uplift charged is appropriate in the particular case.
Secondly, a provision could be made in primary legislation that the solicitor should make a file note of his risk assessment when he first sees the client and considers the problem placed before him. If the proposal that the noble and learned Lord the Lord Chancellor puts forward tonight comes into effect, and I support it—namely, that the uplift and the insurance premium be paid by an unsuccessful defendant—the defendant will want to have his say as to whether the uplift charged has been properly charged, and whether the risk that has been assessed and the insurance premium paid for that assessment, which will fall upon the defendant at the end of the day, was a fair and proper assessment in the first place.
Primary legislation could consider whether the Office for Supervision of Solicitors should have power to investigate the possibilities of malpractice that might arise in a delicate situation where, as the scheme is presently framed, the solicitor has an interest in the outcome of the proceedings.
To those of us who are trained as lawyers, there is something fundamentally wrong in the concept that lawyers should have an interest in the outcome. But if we are to accept that times have moved on, and that there is some advantage to be gained through having a personal stake in proceedings, then at least it should be possible for what the solicitor does to be investigated and for him to be before the Office for Supervision of Solicitors if he does something inappropriate.
I support the amendment of the noble and learned Lord, Lord Ackner. In the last case in which I appeared before the noble and learned Lord in which he gave the lead judgment, I was completely unsuccessful. But I have to tell your Lordships that the other side was completely unsuccessful; and their Lordships took their own view of the case we had presented to them. Neither side won at the end of the day. So I do not have the problems of the noble Lord, Lord Hunt, in supporting the noble and learned Lord, Lord Ackner, in his amendment.
With those comments, I invite your Lordships to accept the amendment that has been moved.
8.36 p.m.
Lord Kingsland: My Lords, so apposite and incisive have been the contributions of noble Lords and noble and learned Lords in this evening's debate that I hardly need do more than bang the drum in admiration.
As the noble and learned Lord, Lord Ackner, reminded the House, the notion that a lawyer should have a financial interest in the outcome of a case is wholly repugnant to our legal tradition, and has been for the past 700 years. Indeed, one of the ornaments of our constitution, with few exceptions, has been the incorruptibility of our legal profession. The introduction of contingency fees for civil matters on such a wide range can be justified only if it brings with it substantial benefits. In my submission, it is for the noble and learned Lord the Lord Chancellor to establish to your Lordships' satisfaction that these benefits are made out.
In that context I have three questions to put to the noble and learned Lord. First, does he believe that there is already hard evidence that the measures he proposes will substantially improve the access to justice of that category of persons he identified in his opening remarks—essentially the middle classes? Secondly, is he confident that the insurance industry is now ready with the right product at the right price on the right timescale to deliver the system that will meet his access to justice objectives? Thirdly, can he be sure that the new temptations that will be presented to the legal profession will be resisted? I shall briefly consider each of those questions.
On the question of access to justice, as short a time ago as 1995, in a document published by the Labour Party called Access to Justice, we read:
"We regard conditional fees as an experiment to be monitored closely and in the light of the Scottish experience do not expect their introduction to make a significant improvement to access to justice. They are at present little more than a gimmick designed to mask the chaotic state of the legal aid scheme and the Court Service".
Noble Lords have heard the exegesis by the noble and learned Lord, Lord Ackner, on the one study that has been made on CFAs, and relating only to CFAs in the context of personal injuries cases. Your Lordships will be aware that the conclusions of the report were couched much more in terms of questions than answers. Are solicitors being too conservative about risks and asking for too high an uplift? What percentage of damages are really being paid disguised as fees? What effect will CFAs have on the inclination to issue proceedings? There are many more questions besides those.
We do not even know the answers to those questions in the context of personal injuries, yet now we are seeking to expand the system to all civil litigation. There is no comparable set of surveys in any other country to give us help.
If your Lordships were the Medicines Committee deciding whether to grant a licence to a new drug, would you really grant a licence on the basis of the evidence in front of you tonight in relation to contingency fees? I believe I know what your Lordships' answer would be.

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The second question that I wish to address briefly is that of insurance. I turn to the statement made by the noble and learned Lord the Lord Chancellor, this time in the House of Lords Debate on 9th December 1997, when he stated:
"The insurance industry is competitive. It is already developing the products that will be needed, including products where there would be no up-front costs and where lawyers could protect themselves from an unlucky run of losing cases by `stop-loss' insurance".
The noble and learned Lord then went on to say:
"The innovative capacity of the industry to match insurance cover to need should not be doubted. The industry has told me that it expects to move sufficiently quickly to develop and launch new products so as to have them available by the time the changes that I propose to conditional fees and legal aid are made".—[Official Report, 9/12/97; col. 45.]
We are now on the threshold of those changes. The noble and learned Lord has said a little more tonight about what he thinks the insurance industry might deliver. But we still do not know what the costs are and, above all, we still do not know when the insurance industry will be able to deliver. Until we know the answers to those questions it would, in my submission, be extremely dangerous to take the matter further.
The final set of questions relates to the legal profession itself. I described our legal tradition as one, I am happy to say, of incorruptibility. But there is no doubt that the onset of these CFAs will present new temptations for the legal profession. There will be temptations not to reveal documents which ought to be revealed. There will be temptations to say things to witnesses which ought not to be said. There will be temptations not to disclose things to judges which ought to be disclosed. How are we to be sure that the profession will not be tempted? With respect, I believe that the noble and learned Lord ought to be thinking about, for example, setting down careful and detailed rules about the contents of CFAs; about whether to institute a system whereby in High Court litigation Masters have to review on a regular and spot-check basis a percentage of these agreements; the kind of instructions that ought to be given to taxing masters; and in what circumstances the agreements ought to be subject to compulsory taxation.
Until we have the answers to those questions, it is my submission that it would be unsafe for your Lordships to allow these matters to proceed. The thing that worries me most of all about the noble and learned Lord's approach is the suggestion that somehow the legal profession ought to behave more like businessmen. Indeed, in a previous debate I heard the noble and learned Lord, Lord Hoffmann, subscribe to that proposition. I have to say to your Lordships in all frankness that I do not subscribe to it. The right parallel for our profession is not business, it is the medical profession. I believe that if the noble and learned Lord keeps that in mind he is likely to find his way through the deep undergrowth that lies ahead of him with a great deal more success.
8.45 p.m.
The Lord Chancellor: My Lords, at this hour I shall not address your Lordships at great length, but I shall
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endeavour to cover the salient points. The noble and learned Lord, Lord Ackner, acknowledges that he is hostile to speculative litigation and that he regards proceedings under conditional fee agreements as speculative litigation. But I have to say he is fighting the battles of long ago, as he himself acknowledged when he said that all this was water under the bridge.
I submit that conditional fee agreements have been proved to work in the personal injuries field. In our extensive consultation, they have been virtually unanimously supported by our consultees. I submit that it is self-evident that they enhance access to justice. It is well known that only the very poor and the very rich can afford to litigate in this country because the risks of losing are too great. Middle England in Britain is left out in the cold and conditional fee agreements will bring it access to justice.
The Law Society supports the extension. So, too, do the National Consumer Council, the Consumers' Association, NACAB, the TUC, many trade unions, Victim Support and other bodies.
Legal aid is not to be removed pro tern. What I am proposing by the order is the extension of availability of conditional fee agreements—therefore, the freedom of the consumer and the potential plaintiff to use them—to the whole field, and removing nothing from legal aid. We are extending opportunities to people without removing any legal aid benefits.
I have indicated that when legislative opportunity arises I propose to make the success fee recoverable from the unsuccessful defendant. Despite the general reservations of the noble Lord, Lord Thomas of Gresford, I note that I had his support in that proposal. Perhaps I may reassure him that if the uplift is thought to be excessive it could be reduced for the benefit of the defendant via the unsuccessful defendant liable to pay it by an officer of the court, a taxing master, to a fair level. But I regard the recovery of the success fee as the answer to the point that uplifts are bad because they are at the expense of plaintiffs whose damages would otherwise be diminished.
I was gratified to learn that the noble Lord, Lord Hunt, favours conditional fees in principle, but he had particular concerns. Nothing that I say is intended to discourage individuals in their own interests from taking out before the event insurance. Of course that would be in their interests. Where I part company from him, however, is where he says that on the plaintiff's side no risk is run if the success fee can be recovered from the unsuccessful defendant in the event that the plaintiff wins. Of course the risk assumed by the plaintiff's solicitor and not the plaintiff himself, and which he continues to run if he loses, is that he recovers no fee. He has done a lot of work for nothing. That is what will ensure that only strong cases go forward. Indeed, it is only strong cases that should go forward. But where a strong case is won, I see no reason why a defendant should not in justice pay the success fee which the plaintiff has had to incur in order to establish a just liability against the defendant.
In the consultation process we are considering much of what has been said about the need for monitoring, and we are giving active thought to it. Meanwhile, we

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are giving people an opportunity to bring proceedings under conditional fee agreements, extended very widely, if they choose. Monitoring could be achieved either by establishing a monitoring system in agreement with the profession or by commissioning research, which includes consideration of the fairness of uplifts. Essentially, we would seek to establish whether the success fees were commensurate with the risk in much the same way as insurance premiums are intended to reflect the risk to the subject of the cover. However, if we make the success fee recoverable—and I have not concealed that I am minded so to proceed—then the protection for the unsuccessful defendant would lie in the taxation process.
The noble and learned Lord, Lord Ackner, reminded the House of a view that I expressed on a previous occasion. I have considered Section 58 of the statute most carefully and I am now of the view that there is no power under Section 58(3) to (5), for the reasons that my noble friend Lord Hacking conveniently summarised, to impose a statutory cap on the damages. I noted—as did my noble friend Lord Hacking—that the noble and learned Lord did not meet the specific reasons that I gave in support of the view that I now have of the ambit of Section 58.
However, even if I were wrong in that respect and I did have the power—and I do not doubt that the noble and learned Lord, Lord Ackner, will tell me that my first thoughts are always right, however long ago they were expressed, provided that they accord with his current thoughts—I would not be minded to exercise it because I consider that the way through is to make the success fee recoverable from the unsuccessful defendant, so the argument that the plaintiff's damages are diminished by uplifts goes. I think it right in principle that unsuccessful defendants should pay all the costs that the plaintiffs have to incur in order to establish a defendant's liability. For all those reasons, I urge the noble and learned Lord not to press his amendment and indeed to withdraw it.
8.52 p.m.
Lord Ackner: My Lords, I accept that there are many things that I do badly and one of them is to dissemble. I do not hesitate in admitting to my dislike of conditional fees. Indeed, that is certainly the view of the majority of the judiciary. However, to suggest that I am fighting battles long ago when all I do is produce an amendment to the order proposed by my noble and learned friend—in terms that he himself had enthusiastically approved some three years ago—seems to me a little unkind as a suggestion.
My amendment is not a wrecking one. It has the support of the Law Society—
Lord Hacking: My Lords, I should point out to the noble and learned Lord that that is not correct.
Lord Ackner: In that case, my Lords, perhaps I may read out what the brief says:
"The Society recommended the voluntary cap on damages received but does not disagree in principle that there should be a mandatory cap on the success fee".
1118
Perhaps the noble Lord has not read that brief. Further, the Legal Action Group says:
"Any general extension of conditional fees should be accompanied by a clear commitment by the government to keep their operation under review and to commission further research into the impact of conditional fees. In addition, the voluntary cap on the success fee of 25 per cent of damages should become statutory".
I do not know whether the group and the Law Society are also to be accused of fighting battles long ago.
Perhaps I may now deal with a few further matters. I begin with the vires of the Lord Chancellor. I am blamed for not immediately replying to an attack on the vires when, three years ago, the noble and learned Lord, in terms, contradicted his predecessor and said that it was well within his predecessor's power. It was because that was based on a forensic issue, where I assume that change in status does not mean a change in law, that I did not come complete with the full argument this evening. However, as my noble and learned friend the Lord Chancellor has himself given the barest of detail to support his proposition, I should point out that, in the debate on 12th June 1995 on conditional fees (at col. 1551 of Hansard), I said:
"Your Lordships may remember that in the debate on 1st November my noble and learned friend the Lord Chancellor took the point that he is taking today; namely, that he has no power to make the provision to cap. I respectfully submitted that I and a number of my judicial colleagues with whom I informally discussed the matter did not accept that view. I drew attention inter alia to his wide regulation making power in Section 120(3) of the Act which provides: 'Any such regulations … may contain such incidental, supplemental … provisions or savings as the person making the regulations … considers expedient'. In his letter of 24th March 1995 my noble and learned friend Lord Steyn"—
he was the chairman of the Lord Chancellor's advisory committee—
"informed the Lord Chancellor that the committee did not agree that he had no power to impose such a limit or that to do so would be to attempt to modify his power to set a maximum increase in fees. My noble and learned friend gave his reasons in detail. They were as follows:
'The committee finds that in the Act no expressed or implied restriction on that power such as to prevent its exercise in order to limit the proportion of damages payable to the legal advisers. The Committee recalls your substitution of the words "requirements" for "information" in an earlier draft of the provision at the Committee stage in the House of Lords. You then explained that "requirements" included, and went further than "information" so as to include, for example, the power to prescribe how conditional fee agreements should define success in the action. The Committee does not agree that a limit on the proportion of damages would modify your power to set a maximum uplift. Permission to increase a fee is logically distinct from any limit on the proportion of a particular source from which that increase may be satisfied. Moreover, the argument has no reasonable limit; it could presumably be said to apply even to your own example of a prescription of the way success in the action is to be defined. Such a definition would undoubtedly affect the amount of fees the legal adviser could recover"'.
Those were the submissions that I hoped the noble and learned Lord the Lord Chancellor would meet if he were going to withdraw his previous concurrence of what is there set out. But it is of no great consequence because,

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as the noble Lord, Lord Hooson, said in the earlier debate,
"If the Lord Chancellor does not have the power, for Heaven's sake he should seek it".
He added,
"I do not believe that there would be any impediment either in this House or the other place in obtaining power".
With respect, I do not look upon this as a serious answer to the amendment I have suggested.
I deal now with the contingency fee point. The Green Paper from which the conditional fee agreements have come was itself headed "contingency fees". A conditional fee is a contingency fee; the contingency being the success or failure. Without the capping mechanism, the conditional fee can produce a situation which is far more lethal than the American system which is attacked. Under the American system, you cannot obtain more than 40 per cent. of the proceeds of success, but under the conditional fees without a cap you could burn up the entirety of the amount you succeed in recovering by doubling the fees. In fact, the then Lord Chancellor agreed that this was such a case.
I have few other points to make. The noble Lord, Lord Hacking, says that the cap raises problems with regard to a defendant. It raises no such problem at all. It has no relevance to the position of a defendant because, unless he is counter-claiming, there is no fund that he is recovering, and nothing to be the subject matter of a cap. As regards structured settlements, it is not difficult to make an exception in that particular case.
Finally, I deal with the point about the uplift and the insurance to be payable by the unsuccessful defendant. I cannot find any principle upon which this can be justified. If a plaintiff is short of funds and takes up a big loan to bring his ex hypothesi successful action, can he charge the unsuccessful defendant with the interest he has to pay on that loan? That is certainly not the case on any principle of which I am aware, but the situation is comparable. The person who takes out the conditional fee and the insurance is supporting his action in that way.
The noble and learned Lord the Lord Chancellor has given no assurance—although we have requested it—that there will be any immediate research or monitoring of what is taking place. Yet this order is to move conditional fees right across the civil litigation board, a matter which many of those who have spoken say is unsafe. In that situation I think I would be lacking in responsibility, having raised the point, in not asking for the views of the House.
The Lord Chancellor: My Lords, the original Motion was, That the draft order laid before the House on 16th July be approved, since when an amendment to the Motion has been moved to leave out from ("That") to the end and insert ("this House calls on Her Majesty's Government to withdraw the draft Conditional Fee Agreements Order 1998 and re-lay it in amended form so that the maximum amount payable under a
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conditional fee agreement expressed in percentage terms in relation to the amount of any sums which may be recovered shall not exceed 25 per cent."). The Question is, That this amendment be agreed to.
9.4 p.m.
On Question, Whether the amendment shall be agreed to?
Their Lordships divided: Contents, 24; Not-Contents, 55.

Division No. 3

CONTENTS

Ackner, L. [Teller.]

Mar and Kellie, E.

Addington, L.

Meston, L.

Carlisle, E.

Minto, E.

Clement-Jones, L.

Renton, L.

Craigavon, V.

Selkirk of Douglas, L.

Darcy de Knayth, B.

Stair, E.

Greenway, L.

Steel of Aikwood, L.

Hooson, L.

Thomas of Gresford, L. [Teller.]

Hunt of Wirral, L.

Thomson of Monifieth, L.

Linklater of Butterstone, B.

Thurso, V.

Mackie of Benshie, L.

Tope, L.

Maddock, B.

Wise, L.

NOT-CONTENTS

Alli, L.

Haskel, L.

Archer of Sandwell, L.

Hayman, B.

Bassam of Brighton, L.

Hilton of Eggardon, B.

Blackstone, B.

Hoyle, L.

Borrie, L.

Hughes of Woodside, L.

Carmichael of Kelvingrove, L.

Hunt of Kings Heath, L.

Carter, L. [Teller.]

Irvine of Lairg, L. [Lord Chancellor.]

Chandos, V.

Cocks of Hartcliffe, L.

Jay of Paddington, B.

Currie of Marylebone, L.

Judd, L.

David, B.

McIntosh of Haringey, L. [Teller.]

Davies of Coity, L.

Davies of Oldham, L.

Mackenzie of Framwellgate, L.

Dean of Beswick, L.

Monkswell, L.

Desai, L.

Pitkeathley, B.

Dixon, L.

Ponsonby of Shulbrede, L.

Puttnam, L.

Donoughue, L.

Ramsay of Cartvale, B.

Dormand of Easington, L.

Randall of Budeaux, L.

Evans of Parkside, L.

Rendell of Babergh, B.

Falconer of Thoroton, L.

Sewel, L.

Farrington of Ribbleton, B.

Simon, V.

Gordon of Strathblane, L.

Smith of Gilmorehill, B.

Graham of Edmonton, L.

Symons of Vernham Dean, B.

Grenfell, L.

Thomas of Macclesfield, L.

Hacking, L.

Turner of Camden, B.

Hanworth, V.

Watson of Invergowrie, L.

Hardie, L.

Whitty, L.

Hardy of Wath, L.

Young of Old Scone, B.

Resolved in the negative, and amendment disagreed to accordingly.
The Lord Chancellor: The Question is that the original Motion be agreed to.
On Question, Motion agreed to.

Food Protection (Emergency Prohibitions) (Paralytic Shellfish Poisoning) (No. 2) Order 1998
9.12 p.m.
Lord Sewel Lord Sewel rose to move, That the order laid before the House on 1st July be approved [40th Report from the Joint Committee].
The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the order laid before the House on 1st July be approved [40th Report from the Joint Committee].—(Lord Sewel.)
On Question, Motion agreed to.

Scotland Bill
9.14 p.m.
House again in Committee on Schedule 5.
Lord Selkirk of Douglas Lord Selkirk of Douglas had given notice of his intention to move Amendment No. 193A:
Page 71, leave out line 6.
The noble Lord said: The Government have already expressed their view on this subject. There are one or two additional points which the Law Society wish to be made. I shall, if I may, follow those up in correspondence. I believe that it is unlikely that the Government will have changed their view in the last hour and a half.
[Amendment No. 193A not moved.]
9.15 p.m.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 194:
Page 71, leave out lines 11 to 13.
The noble Lord said: I am pleased that we have managed to return to the Scotland Bill. We are returning to the issue of whether certain difficult matters should be placed with the Scottish parliament or retained at Westminster. We have now moved on to the field of consumer protection. A number of consumer protection items are reserved. I fully understand that and believe that the Government are right about it. In consumer protection there is so much of a flow of goods around the country, by one means or another, with people living in Scotland and shopping in England, and vice versa—mail order and so on—that it would not make much sense if consumer protection were devolved to a Scottish parliament. I suspect that that parliament would simply have to follow slavishly whatever was done here. The Government have my support in that regard.
I wish to turn to the question of the exemption from reservation under this section. The exemption is the subject matter of Section 16 of the Food Safety Act 1990. The problem here is that, given the inter-UK trade, if I may call it that, it is wise that
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there should be one control over food safety, labelling, and so on, and it would not make sense for Scotland to have different regulations on these matters. In addition, so much consumer protection is now controlled, or at least triggered, by material in Brussels that it would not make sense to devolve many of the consumer protection items.
We know that the food standards agency will be a UK body. That was said by Mr. Henry McLeish at col. 1004 of Hansard on 30th March. I wonder, as I have on a number of occasions, why the Government have decided to have any exemption under this head at all. I look forward to the Minister's explanation. I beg to move.
Lord Sewel: These amendments would seriously undermine the devolution of responsibility to the Scottish parliament over all matters related to food safety, plant health and animal health. Amendments Nos. 194 and 195 seek to include within the reservation of consumer protection and product standards matters related to devolved areas of food safety, animal and plant health, fertilisers and pesticides. We intend, however, that the Scottish parliament should be able to legislate in relation to agriculture, fisheries and food on a "field to fork" basis—the quality chain. That is becoming more and more important. It is critical that we operate on that basis if Scottish agriculture is to thrive. The whole legislative competence from field to fork ought to be located with one parliament. That is what we are doing. Consumer protection and product standards, safety and the related labelling thereof are essential aspects of that process and go together as a unity. For these reasons, the Government cannot support the amendments.
The noble Lord, Lord Mackay of Ardbrecknish, mentioned the food standards agency. It is true, as he reported, that that agency is to be a UK body. Food standards and safety will be devolved matters. The Scottish parliament would therefore inherit responsibility for funding the agency's activities in Scotland, and appropriate arrangements will be made for it to be accountable to the parliament and for joint control by the Scottish Ministers and the United Kingdom Government.
I understand the interest in these kinds of organisations. We come back to another example of a situation where responsibility for the power and the function is devolved. That responsibility is carried out and maintained in collaboration and co-operation through a UK agency. That is the choice of the Scottish parliament. It does not affect the logic of the devolution of those functions to the parliament in the first place. I hope that, on that basis, the noble Lord will be able to withdraw his amendment.
Baroness Carnegy of Lour: I see from the Notes on Clauses that tobacco advertising seems to be devolved. Is that the case? If so, how will that work?
Lord Sewel: There is only one possible response to that: if it is in Notes on Clauses, it is in Notes on Clauses.
Baroness Carnegy of Lour: Is it the case and how will it work?
Lord Sewel: I do not know how it will work.
Lord Gordon of Strathblane: I wonder whether my noble friend is assisted by the observation that it is not even devolved to the UK. Tobacco advertising is a European matter, as I understand it.
Lord Mackay of Ardbrecknish: Perhaps I can intervene here, as it is Committee stage. My recollection of tobacco advertising and the affair of Mr. Ecclestone suggests that it is a matter for the United Kingdom Parliament. The Government changed their policy on tobacco advertising in relation to Formula One motor racing, thanks to the pressure brought on them by Mr. Ecclestone.
My noble friend makes a good point. If the noble Lord, Lord Gordon of Strathblane, is right and it is entirely a European matter, why bother having it devolved at all? It is not worth it. If it is devolved, do different rules on advertising apply? I need not labour the point because, frankly, I cannot see how that would work. For example, would it work with television? Would our television pictures cut off at the Border if tobacco was advertised? We need an answer on that.
Again, I shall need to study what the Minister said. Is he saying that while these regulations and so forth will be carried out by a UK body, the regulations north and south of the Border could be different, or just the administration of them? If the regulations could be different north and south of the Border, it might be difficult. In agriculture, the supply of produce is a fairly unified market inside the United Kingdom, as are fish and fish products. For example, the Aberdeen-based fish processing industry sells its products in the whole of the United Kingdom. It would be extremely difficult if there were different regulations north and south of the Border. The same is true of other products. If product standards in fertilisers were different north and south of the Border, it would be extremely difficult for farmers. I hope the noble Lord can give us some help on these matters.
Viscount Thurso: Before the Minister gives that help, perhaps I can point out to the noble Lord, Lord Mackay of Ardbrecknish, that there are already a number of areas where the regulations north of the Border are quite different from regulations south of the Border. The one that immediately springs to mind—we had a short debate on it in your Lordships' House not so long ago in which the noble Lord, Lord Sewel, was kind enough to reply for the Government—relates to fire regulations. The fire regulations north of the Border are
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quite different and based on different principles to those south of the Border. In fact, we believe that those north of the Border are better than those south of the Border.
Lord Mackie of Benshie: Perhaps I could also point to the noble Lord that the fishing industry is now concentrated in Peterhead and not Aberdeen.
Lord Mackay of Ardbrecknish: Before both noble Lords sit down, I did not refer to the catching sector; I referred to the fish processing sector. I can assure the noble Lord, Lord Mackie, that that is still concentrated in Aberdeen.
As to the other point, there is a considerable difference between fire regulations which concern premises which clearly are in Scotland and cannot move too readily to England and a fish or food processing factory whose markets may be throughout the UK and abroad.
Lord Sewel: I shall try to answer the point made by the noble Baroness, Lady Carnegy, on tobacco. As I understand it, we are moving towards the implementation of an agreement on a European basis on tobacco advertising. But that must be implemented. It is the implementation of that type of agreement which would be a devolved matter. I hope that gives the noble Baroness some clarification.
On the basic point, I see the tension in the approach of the noble Lord, Lord Mackay. At the end of the day, it comes down to this. We start with a principle which says that agriculture, fisheries and food are an entire devolved area. That seems to me to be a good starting point. We then get into areas of subdivision but we maintain the essential unity of the policy and the principle that that subject should be devolved. When it comes to matters such as food safety, animal and plant health, in the application of the principle we say, "Yes; that means that those subdivisions are devolved to the parliament", but in fact there is every practical, commonsense and pragmatic reason to maintain a UK approach.
Although the power is devolved, the way in which that power is exercised is through a UK agency. Formally, that means that it would be within the scope of the parliament to withdraw from that kind of arrangement if it so chose. But that would not be the wisest or the most prudent thing for the parliament to do.
Lord Mackay of Ardbrecknish: To be honest, I am totally bemused by that answer. I am still extraordinarily puzzled. However, I can see that we will not get very much further this evening. I think I will take this away and check with some of the people I know in the fishing industry and in agriculture and try to work out with them how this will work, and during the long Recess I may correspond with the Minister. I may be much better informed after the past few minutes, but I am afraid that I am none the wiser. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 195 not moved.]
Lord Mackay of Drumadoon Lord Mackay of Drumadoon moved Amendment No. 196:
Page 71, line 38, at end insert—
("The regulation of the design and erection of telecommunication masts and equipment.").
The noble and learned Lord said: This is an amendment to Section 9 in Schedule 5. The section deals with telecommunications and wireless telegraphy. The purpose of the amendment is to except from the reservation of telecommunications and wireless telegraphy and the other related topics the issue of the regulation of the design and erection of telecommunication masts and equipment.
The reason for the amendment is straightforward. Throughout Scotland one sees erected a variety of steel structures. Some are for the transmission of electricity and some are for the transmission of telephone messages. In the area of telecommunications and wireless telegraphy one has masts and associated equipment which, on occasion, are quite frankly an eyesore. Planning issues and environmental issues arise. It seems to me that there is a strong argument for saying that the design and siting of such equipment should be a devolved matter, albeit that I fully accept that there is good sense in the topic of telecommunications and wireless telegraphy falling within the reservation. I beg to move.
Lord Hardie: As the noble and learned Lord explained, the purpose behind the amendment is to ensure that the Scottish parliament will be able to regulate the design and erection of telecommunication masts and equipment. As such installations will be subject to the Scottish parliament's competence in the field of land use planning, it is the Government's position that the amendment is unnecessary.
We recognise the need to balance the benefits of nationwide access to telecommunications networks against any consequent detriment to the environment. That is why the licences granted to operators under the Telecommunications Act 1984 contain a variety of conditions designed to protect amenity and the environment. Masts and equipment are also covered by planning legislation. Major installations are subject to full planning controls, while smaller installations enjoy certain permitted development rights. As the noble and learned Lord, with his experience of planning law, will appreciate, where there is permitted development rights, the person who benefits from those may erect the mast or whatever it is without the necessity of formal planning permission.
However, the permitted development rights to operators under the Act have certain environmental safeguards granted on the strength of the licences. The operators are not even as advantaged as others who have the benefit of permitted development rights. They have to look to the safeguards in operators' licences. Included within them is a provision that operators should not install masts or other equipment without planning authorities having had an opportunity to have their say on the appearance and siting of proposed developments.
1126
So large installations have to obtain planning permission. The operators of smaller installations with permitted development consent as a condition of the licence still have to go to the planning authority about siting appearance. If the noble and learned Lord finds, as I do, that many of these installations are unsightly, that could be the fault of the local planning authority.
These planning matters are to be wholly devolved and, accordingly, the amendment appears to be unnecessary. Therefore, I invite the noble and learned Lord to withdraw it. I sympathise with his objective and share his concern. But his objective will be achieved without this amendment in view of the fact that planning law will be devolved.
9.30 p.m.
The Earl of Mar and Kellie: I believe that the Scottish parliament will have to take an interest in the fact that these masts are to last for about 15 years. At the end of that period almost all mobile phones which the masts are erected to serve will have converted to satellite. Therefore, the Scottish parliament may have to legislate for their removal, which will be important for the environment.
Lord Mackay of Drumadoon: I am happy to accept the assurance given by the noble and learned Lord the Lord Advocate that the amendment is unnecessary. I am sure that what he said will reassure those concerned. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 197:
Page 72. leave out lines 14 to 16.
The noble Lord said: This amendment removes from reservation,
"The subject-matter of section 1 of the Industrial Development Act 1982".
This is something more than just a probing amendment because there is no doubt that the Scottish Office, through Locate in Scotland, Scottish Enterprise and the Highlands and Islands Enterprise, has been extremely successful in the economic work it has done in Scotland in the attraction of inward investment to such an extent that the United Kingdom as a whole has received more foreign investment from outside Europe than the rest of the European Union put together. That has been due almost entirely to the successes of the policies of the Conservative government and those pursued by my noble friend Lord Lang, when he was Secretary of State, and others.
What bothers me here is that this may well be the thin end of the wedge. I want to explore just how thin or thick is that part of the wedge. Late last year it became clear that the Government were planning to end Scottish control over inward investment matters by centralising power in the DTI. Designation of assisted areas is an important part of that inward investment. It is an important part of the attractions that Scotland can offer to incoming industry. The DTI Minister, Mr. Ian McCartney, confirmed on 18th November last year

1127
plans to strengthen Whitehall control over Scottish aid packages aimed at wooing major job-creation projects by multinational companies. Indeed, it was also reported that Sir George Russell, the chairman of the Northern Development Company, was complaining that Scotland and Wales had tried to poach inward investment from his region by offering over-inflated packages. Also in November—
Lord Gordon of Strathblane: Does the noble Lord agree that a committee of the other House agreed that was not the case and that the Scottish Office had not been pinching jobs from the North-East? The reason for Whitehall supervision—I should not say "control"—is to stop the different regions of Britain outbidding each other with the same public money in an attempt to get jobs from abroad.
Lord Mackay of Ardbrecknish: That is exactly the point that I thought I was making. I was reporting that Sir George Russell had claimed that. I did not say whether or not it was true. I was merely laying out the background for my suspicions about the "wedge"—and the noble Lord has just confirmed them.
Last November, the Scotsman and Herald reported a leaked document suggesting that Whitehall would decide the size of the aid packages aimed at securing inward investment. That document said that there would be strict limits on the value of the grants that Locate in Scotland could offer.
The passing to Whitehall of control over those grants and perhaps of control over the designation of assisted areas may well be designed to level up the playing fields, as some parts of the Kingdom see it. However, if that is the case, they are being levelled—perhaps "levelled" is not the right word—to Scotland's disadvantage. As I have explained on a number of occasions, I do not believe in level playing fields. If there were such a thing, there would be no need for teams to change ends at half-time, yet that seems part and parcel of any game.
My worry is not that there will be a levelling up of the playing field, but that the playing field will be tilted to the disadvantage of Scotland by the DTI, Ministers of which will be here in London, answerable to the other place on industrial matters relating to England and Wales, who will no longer be terribly concerned about what happens in Scotland. They may well take the view, as we heard in this House not long since, at Question Time, that they want to clip the wings of Locate in Scotland, Scottish Enterprise and the new Scottish executive so that they will not be able, as the DTI might see it, to have unfair competition with other areas of the country.
This is a serious matter. I hope that the noble Lord can explain the reasoning behind the reservation. If I may say so, I hope that that reasoning will be a little clearer than was the reasoning behind the exemptions in relation to foodstuffs which we discussed a few moments ago. I beg to move.
Lord Lang of Monkton: My noble friend Lord Mackay of Ardbrecknish said that this was little more
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than a probing amendment. I hope that it is not much more than a probing amendment because I am hound to say that I think that the Government are probably right on this point. It is, nevertheless, right to debate this subject. Similarly, I believe that the Government were wrong on the business rates issue. I must apologise to the Committee because I was unable to be present in time to participate in that debate. I got here in time only to make up my own mind and to vote in favour of the amendment! That was an example of how Scotland could be seriously disadvantaged if we forfeited the uniform business rate, which we achieved after great difficulty over a period of years, funded by the Treasury in a way in which will no longer be open to a Scottish parliament.
Scotland stands to lose considerably on this point if the present arrangements are forfeited. However, as my noble friend pointed out, when consideration is next given to the redrawing of the map, if a strong Scottish voice is not participating in those negotiations privately within government—not in the Chamber of the House of Commons, this place or any other forum, and we shall have forfeited the right to have a Secretary of State who is able to do that—we shall be disadvantaged because the criteria that will be brought to bear will be skewed in favour of other parts of the country. I know from experience of the previous parliament how this matter was addressed then. Although substantial changes were not made, consideration was given to changing the criteria quite considerably. Scotland would not be able to argue its own case in that situation. There is a real concern here which I do not think can be solved by removing the power from the Westminster Parliament. That illustrates what the schedule itself underlines. I hope that the schedule will be named "the San Andreas schedule" because it illustrates the faultline that runs all the way through this legislation.
Scotland's inward investment record has been a good one over the years. We have been able to achieve that within the existing designation of assisted areas under United Kingdom control. It is important that Scotland retains discretion to apply increased funds from its own budget, as was possible in the past, thereby attracting a larger number of inward investment projects by applying the criteria that apply universally. But it is inconceivable that Scotland can apply different criteria and yet expect the United Kingdom Treasury to continue to fund it in a way that enables it to bid up against other parts of the United Kingdom.
There is another reason why I believe it is impossible to change the situation. The rules of the European Union allow only a certain proportion of the population of the country to be within an assisted area. If we in Scotland unilaterally changed that assisted area designation we would be in breach of EU rules. It is inconceivable that the sovereign Westminster Parliament can possibly allow such a situation to arise. My noble friend addresses an important issue in tabling this amendment. The issue underlines the fatuity of seeking to achieve

1129
a devolved parliament within a sovereign state. Nevertheless, on balance I urge my noble friend not to press his amendment.
Lord Sewel: It is important to make clear what this amendment deals with; namely, the designation of assisted areas according to Section 1 of the Industrial Development Act 1982. Although I did not agree with everything that the noble Lord, Lord Lang, said, his appreciation and understanding of the interplay between assisted areas and our European obligations was absolutely spot on. To take away this reservation and give power to the Scottish parliament to make its own designation of assisted areas is simply not compatible with our European Union obligations.
Assisted areas are those areas which in the context of regional policy are identified as deserving or effectively requiring higher levels of aid to promote their economic development. To that extent a certain distortion in the single market is allowed in order to benefit those areas so identified. Because of that distortion it is important that designation is handled fairly across all areas. All parts of the country have a legitimate concern about the basis upon which assisted areas are selected and the criteria that are used.
The European Commission has the role of enforcing the European Union rules. As the noble Lord, Lord Lang, said, the Commission sets a ceiling on the total eligible population in a member state and expects evidence of a proper methodology adopted by each member state to determine which areas qualify for additional help. That applies across an entire member state. I believe that the argument starts and stops there. One cannot get round that problem by seeking to devolve responsibility to a devolved parliament for defining assisted areas. Essentially, it is a member state function. With that explanation, I hope that the noble Lord will feel able to withdraw his amendment.
Lord Steel of Aikwood: Before the Minister sits down perhaps he can clarify one point. It used to be the case that the UK Government could define assisted areas either on the basis of unemployment or (as in the case of the constituency that I once represented) depopulation. I believe that a Scottish parliament would be more sensitive to the second issue. Latterly, the UK Parliament has not been. For that reason I have sympathy with the amendment. It does not detract from the powers of the European Commission to determine the total population that is eligible for assisted area status, but I hope that the question of depopulation will not be overlooked in the future as it has been in the recent past.
9.45 p.m.
Lord Sewel: I make the general point again. A single methodology applying to the whole of the member state is required. We cannot take a methodology which is of particular benefit to Scotland and apply it to Scotland. One could keep on developing individual methodologies to one's heart's content. That is not a way forward. It has to be a single methodology applied within the
1130
member state. As I recollect, the main drivers of the methodology now are unemployment and GDP. I am not sure about depopulation. It may have been, but I am not sure that it still is.
Lord Mackay of Ardbrecknish: This has been a useful probe. I am pleased that at least some of my fears have been set aside by the Minister. It is odd that the Minister now changes his ground from that on which he stood firmly previously and tells me that the designation of assisted areas is deeply tied up with the European Union and that it would not be sensible to devolve it. If anything is deeply tied up with the European Union it is the common agricultural policy and the common fisheries policy. The Minister refuses to address the argument as to why they cannot be devolved, and yet the European dimension remains. Here we have the argument turned on its head because there is a European dimension, which I fully accept.
I remember one redrawing of the boundaries in the early 1980s when I was at the Scottish Office. I fully accept the European aspects of that. But why cannot that be devolved to the Scottish parliament? It can play within the European rules, just as it is supposed to do on farming and fishing without being represented at Europe and without being a member state. I am left in some puzzlement as to the contradiction in the Minister's arguments.
I see the point of keeping designated assisted areas at a UK level, as my noble friend Lord Lang explained. He is rather uniquely placed to do so; not only was he the Secretary of State for Scotland but the President of the Board of Trade—it is always nice to count a president among one's friends—and he saw the problem from both sides.
I am grateful to the Minister. I accept that the reservation here is narrowly drawn. Perhaps my fears—triggered by Mr. McCartney's interventions earlier in the year into this general field—were unfounded. I shall read the defence on the European aspect with some interest when we come back to the common agricultural policy and the common fisheries policy. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Sewel Lord Sewel moved Amendment No. 197A:
Page 73, line 14, at end insert—
("( ) the subject-matter of Part II of the Food and Environment Protection Act 1985 so far as relating to oil and gas exploration and exploitation. but only in relation to deposits in the sea outside such controlled waters,").
The noble Lord said: The purpose of this amendment is to ensure that the reservation of matters relating to the oil and gas industry will catch the deposit of substances or articles in the sea so far as that relates to oil and gas exploration and exploitation. This does not represent a change of policy. The amendment is needed merely because there is scope for doubt that the reference to "pollution" in the present text of the reservation will catch this matter.
In particular, this reservation will catch the ministerial powers to exempt from the licensing regime under the Food and Environment Protection Act 1985 "operational

1131
discharges" from oil and gas installations and, where compatible with international obligations and where safe and practicable to do so, to license the deposit in the sea of oil-related articles such as redundant oil installations.
The Government recognise, of course, that the Scottish executive and parliament will have an interest in the protection of the marine environment. We therefore propose that there should be a statutory requirement for a UK Minister to consult the Scottish Ministers before exercising his powers to license oil and gas-related deposits in the sea under Section 5 of FEPA in Scottish waters and for operations commencing in Scotland, and to approve the in situ abandonment or disposal of redundant oil installations within Scottish waters under Part IV of the Petroleum Act 1998. The Government intend that, before exercising these powers, the UK Ministers should not only consult Scottish Ministers but also use his best endeavours to secure the agreement of the devolved administration.
I hope this explanation makes clear the reason for the amendment. I beg to move.
Lord Fraser of Carmyllie: I do not like to disappoint the Minister, but it is not clear what he has amended. I shall read carefully what he said, and perhaps return to the matter at a later stage.
In dealing with a matter relating to oil and gas, I suppose that I am bound to make a declaration of interest, as I am a director of Elf Exploration (U.K.), which is engaged in the largest capital project in the North Sea at £1.4 billion. I guess that that is probably a declaration of interest that is more appropriate to any future debate we may have on taxation in the North Sea rather than this Bill.
I am concerned to discover in narrow ambit from the Minister that we are dealing, as I understand it, with two separate statutes. One relates to pollution with regard to oil and gas exploration and exploitation, but only outside what are described as "controlled waters". As I understand it they are defined in Section 30A(1) of the Control of Pollution Act 1974. The amendment relates to a change to the Food and Environment Protection Act 1985. Where we talk about "controlled waters" I should like to be clear that there is no difference in definition between "controlled waters" as they apply to the Control of Pollution Act and as they apply to the Food and Environment Protection Act 1985. I believe that it is intended that "controlled waters" are the same area under control, but it would be helpful if we could have that confirmed.
Furthermore, as I understand it, for oil and gas exploration purposes and other administrative reasons, Scottish waters are in UK legislation for administrative purposes defined as being those waters that fall north of parallel 55°50'. Is there any difference in the way those Acts apply to those areas which are within Scottish waters for administrative purposes and those south of them? It is not such an arcane matter as it might appear to be, because the parallel that is used comes out, as it were, in a straight line from the Border at Berwick. If one were to look at a BBC weather map it will be found as coming out in a horizontal line directly across at 90
1132
degrees, whereas of course if we were to think the unthinkable and Scotland were to be unwise enough to contemplate going its own way as a separate sovereign state, there is real dubiety about whether that is the correct line to be drawn if sovereign waters are to be adjusted.
If we were to do it properly, according to my understanding of the existing rules of international law, that line has to be extended in a fashion outwards from the line of the Border. That would mean that waters, and oil and gas developments which lie some 200 miles off Aberdeen, would fall within the waters of England. I consider this to be an important matter, because the Scottish nationalists would tell all and sundry that there is no question but that they would be Scottish. There are sound international legal principles upon which to argue for the line being that of the land boundary that lies between two countries extended out into the sea.
I hope that those are unnecessarily arcane matters to raise under this amendment. But given the way that the Government's policy—I have to say—has been so remarkably unsuccessful in stemming the SNP's advance in the polls in Scotland, before we finish consideration of the Bill, it might be marginally advisable to ensure that we do not so set in concrete the administrative lines about what are Scottish waters that those who have the desire to separate Scotland from the rest of the UK would take advantage of what has been originally introduced as a purely administrative arrangement to argue a case at some future point for their sovereignty over those waters.
Lord Sewel: We are not talking about establishing the sea boundaries of a sovereign state. That is an entirely separate and different exercise.
Lord Fraser of Carmyllie: If the noble Lord will give way, I should be grateful if from time to time he listened to the argument. I understand perfectly well that we are not discussing that. I had thought that for a moment he might listen to an argument while appreciating that we deal with matters which are extremely complicated. The provision may only run to some 25 lines in Schedule 5 to the Bill but it engages us in all manner of complicated matters which take us into international obligations, conventions and the like. I appreciate that. All I have asked—I should be grateful if he were not quite so peremptory when serious points are raised with him—is that he considers them in some detail.
Lord Sewel: I apologise if I gave the impression that I was peremptory. I was not being peremptory. I sought to make the point as quickly as I could that we are not involved in the exercise that would be necessary if we were setting up something like a separate sovereign state of Scotland. That is not what we are about. I know that the noble and learned Lord recognises that.
I am well aware of the discussions involved, and the difficulties of deciding on lines. What we have fallen back on—it is more a practical way rather than one that is necessarily driven by processes which would normally apply to international law—is the basis of

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Amendment No. 173ZA to Clause 29 which we debated on Tuesday. That establishes the building block of Scottish waters in relation to fisheries matters. We build from that because we have to go beyond that, for instance, to areas of the UK Continental Shelf which extend beyond fisheries limits, in particular to the west of Rockall. The details of those discussions still need to be agreed and clarified. But we shall be able to come back to the House on that.
I accept all the points the noble Lord made. I was not trying to be peremptory. I sought to make a distinction between what is almost a pragmatic decision which is required in the nature of the devolution exercise we are about now and a very separate type of approach which would be necessary if we were dealing with these matters in the context of a completely separate sovereign state.
On Question, amendment agreed to.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 198:
Page 73, leave out lines 24 and 25.
The noble Lord said: This is a probing amendment. I ask a simple question. I begin by quoting Section 2 in Schedule 5 to the Bill on oil and gas. Under Reservation, it states:
"Oil and gas, including—

(g) liquefaction of natural gas, and

(h) the conveyance, shipping and supply of gas through pipes".

That seems perfectly sensible; I understand it and have no problem with it.
I then turn to the Exceptions from reservation and the manufacture of gas, and the reference to,
"The conveyance, shipping and supply of gas other than through pipes".
I wonder why that distinction is being made. Leaving aside that I am not sure whether there is much manufacturing of gas currently, I refer to conveyancing. I presume that we are talking about cylinders and the like. I should have thought that if there is an argument in favour of reservation for pipelines, there is equally an argument in favour of conveyance, shipping and supply of gas, especially as liquefaction is being reserved. The two are related.
Having rightly decided to reserve the long list in subparagraphs (a) to (h) of items relative to oil and gas, including the two I read out, I cannot understand why the Government promptly make an exemption for the manufacture of gas and then for its conveyance, shipping and supply through pipes. Companies which do that do so on a United Kingdom basis. I cannot for the life of me see why it is exempted. The moment something is exempted, the possibility exists—I put it no higher than that—that there will be different rules and regulations in Scotland than in England and Wales. The Government having reserved everything else in oil and gas, quite wisely, I cannot understand why they have made these exemptions. I should be grateful for some kind of explanation, preferably one that we can all understand. I beg to move.
10 p.m.
Lord Fraser of Carmyllie: I join my noble friend in asking some questions about these reservations. Subparagraph (g) relates to the liquefaction of natural gas. Does that mean that it does not extend to the liquefaction of petroleum gas? Do I understand that as regards subparagraph (h) the conveyance, shipping and supply of gas through pipes extends to a wider classification and categorisation of gas and might include the old fashioned town gas?
I do not have the faintest idea whether these days anyone manufactures town gas in Scotland, but it seems to me that the provision would cover that if someone wished to revert to such a technique for manufacturing gas? What would be even more curious, as my noble friend has pointed out, is the exception from that of the manufacture of gas. But once manufactured and supplied through a pipe a different set of statutory regulations would apply.
Baroness Ramsay of Cartvale: Amendment No. 198 would extend the reservation of oil and gas to the manufacture of gas or its conveyance, shipping or supply by means other than pipelines. In the Government's view, that is unnecessary.
The intention behind the oil and gas reservation is to preserve a uniform regulatory regime for the exploitation of oil and gas reserves, and especially for the offshore oil and gas industry and pipelines. It would make no sense to break up, for example, the regulation of the integrated system of gas pipelines within Great Britain. Such considerations do not, however, apply either to the manufacture of gas or to the transport of gas other than in pipes—for example, the supply of camping gas in cylinders. The health and safety aspects of those activities are covered by other reservations on health, safety and transport. However, there is no need to reserve general control of the manufacture and conveyance of gas any more than there is for any other industrial process.
In answer to a point raised by the noble and learned Lord, Lord Fraser of Carmyllie, the liquefaction of natural gas is part of the process of conveyance. Petroleum gas is also natural gas. I hope that answers his point.
I hope that I have made the Government's position clearer for the noble Lord, Lord Mackay of Ardbrecknish. I hope therefore that he will be able to withdraw his amendment.
Lord Fraser of Carmyllie: I am grateful to the noble Baroness for explaining to me that natural gas also includes liquefaction of petroleum gas. Indeed, she might tell the Deputy Prime Minister and the Prime Minister that, because, as I understand it, they respectively use different gases for the cars that they now drive. However, I am happy to accept that definition.
However, I am still slightly troubled by the exceptions from the reservation. I am a happy camper who has travelled in the Lake District and bought some gas for my caravan. Am Ito expect that it will have a

1135
potentially different make-up, a different set of safety regulations, a different sort of packaging and that it is to be stored in a different way on site? Am I to understand that when I trundle out with my caravan all the way up to Loch Lomond, or wherever it may be, I will perhaps find that a different set of regulations applies? If that is so, it seems to me to be absurd.
I thought that the Minister's opening point was an extremely good one. If the noble Baroness wishes to maintain a regime across the whole of the UK so far as concerns the conveyance, shipping and supply of gas through pipes—in other words, that there should be a uniform arrangement across the country—that seems to me to be an extremely good idea and one which I would warmly support. But I do find the exceptions from the reservation rather tricky to understand.
Lord Mackay of Ardbrecknish: Before the noble Baroness replies, it may be helpful if I pose a few questions. In that way, she will, with any luck, only have to return to the Dispatch Box once—at least, "with any luck" from her point of view. I notice that the noble Baroness said that the Government wished to preserve a uniform regulatory regime. If that is so, why do they not just accept my amendment?
If I understood the noble Baroness correctly, she said that all the health and safety matters and all transport matters would not be devolved; in any words, they will be reserved. Therefore, all those items will be covered by UK-wide regulations. So what does that leave? What does that actually mean in real terms for a Scottish parliament? What decisions will a Scottish executive have to make with regard to regulations governing, say,
"the conveyance, shipping and supply of gas other than through pipes"?
There is more to this than just the case of the happy camper, which my noble and learned friend Lord Fraser suggested he might be. There is the simple fact that the same companies which provide gas for domestic consumers in Scotland not only transmit it through pipes but also do so by way of vehicles. Some outlying areas like parts of the Highlands, which I used to represent, actually get their natural gas by container vehicle. Presumably it is transmitted to the trucks in pipes and, then, when they get to Dunoon, Oban or Campbelltown; it is then, again, put into pipes. It seems to me to be illogical that that little gap in the middle should have regulations controlled by the Scottish parliament. That does not seem to me to make for a uniform regulatory regime. The noble Baroness gave us an explanation of the words, but we would be grateful for some examples of the kind of things that the Scottish parliament might do regarding the conveyance, shipping and supply of gas.
The Earl of Balfour: Perhaps I may just make two points in addition to what my noble friend has just said. There are also gases like carbon-dioxide for soda water or oxyacetylene torches for garages and welding gear. I believe that those types of gas should also be taken into consideration.
Lord Rodger of Earlsferry: I am having some difficulty in understanding the detail. If one bought a
1136
cylinder of gas—and I believe I understood the noble Baroness to say that that would be included—would it be a "product" for the purposes of this part of the schedule, where the product's safety would be a reserved matter and, therefore, a matter for the UK Parliament? In other words, would one have the situation where the specification of safety of the cylinder of gas would be a matter for the UK Parliament but the supply of the cylinder of gas would be a matter regulated by the Scottish parliament? It seems, prima facie, slightly surprising if that is so.
The Duke of Montrose: We are now reaching the stage where cars will be running on gas. I do not know whether that has been taken into consideration. That gas will presumably be supplied to cars through a pipeline.
Baroness Ramsay of Cartvale: I hope the Committee will forgive me for saying that I think it is making extremely heavy weather of what is, to my mind, a rather straightforward situation. I repeat what I said about the regulatory regime; namely, the intention behind the oil and gas reservation is to preserve a uniform regulatory regime for the exploitation of oil and gas reserves, especially for the offshore oil and gas industry and pipelines. That is where the regulatory regime comes in. The noble Lord, Lord Mackay of Ardbrecknish, queried that.
The health and safety aspects of the manufacture and transport of gas, either by "happy campers" or anyone else, are covered by other reservations on health and safety and transport matters. There is no need for a general reserve control over the manufacture of gas and its conveyance. The noble and learned Lord, Lord Rodger of Earlsferry, asked whether a safety aspect would be a reserve matter and whether a cylinder of gas would be a devolved matter. The answer is yes because health and safety matters cut across everything. I do not know why the Committee finds that odd.
Lord Mackay of Ardbrecknish: I am grateful to the noble Baroness for giving way. We are pleased to hear that health and safety will be a reserve matter and that transport will be a reserve matter. I do not think we find that odd. But what puzzles me is what the words mean in terms of what regulations and rules a Scottish parliament and a Scottish executive would be able to consider with regard to the,
"conveyance, shipping and supply of gas other than through pipes".
If I was given an answer to that I might understand why those words appear at all; otherwise I shall take a leaf out of the book of the noble and learned Lord, Lord Simon of Glaisdale.
Baroness Ramsay of Cartvale: The provision concerns anything that is not the manufacture of gas or its,
"conveyance, shipping and supply … other than through pipes".
Pipelines are covered, but conveying gas in any other way is not. Any question of health and safety is reserved under another heading. Cylinders and everything to do with marketing and matters other than health and safety will be devolved because there is no reason why that should not be the case, as with any other industrial process. It seems odd to me that noble Lords opposite find this so difficult to understand.
Lord Mackay of Ardbrecknish: The last sentence the noble Baroness utters is usually the despairing remark of a schoolmaster or mistress who has failed to get a point over to the class. In this case I do not think the class is entirely stupid. I still await a real example of what a Scottish parliament might do differently from the UK Parliament. I do not believe that the Scottish parliament will have anything to do with the marketing of gas. I believe these words are totally unnecessary. I shall take a leaf out of the book of the noble and learned Lord, Lord Simon of Glaisdale, and suggest that the words be removed from the Bill. I therefore seek the opinion of the Committee.
10.13 p.m.
On Question, Whether the said amendment (No. 198) shall be agreed to?
Their Lordships divided: Contents, 26; Not-Contents, 60.

Division No. 4

CONTENTS

Attlee, E.

Mackay of Drumadoon, L.

Balfour, E.

Minto, E.

Burnham, L.

Montrose, D.

Byford, B.

Mountevans, L.

Carnegy of Lour, B.

Rawlings, B.

Chesham, L.

Rowallan, L.

Courtown, E. [Teller.]

Saltoun of Abemethy, Ly.

Dixon-Smith, L.

Selkirk of Douglas, L.

Fraser of Carmyllie, L.

Sempill, L.

Kintore, E.

Skelmersdale, L.

Lang of Monkton, L.

Stair, E.

Lindsey and Abingdon, E.

Strathclyde, L. [Teller.]

Mackay of Ardbrecknish, L.

Torphichen, L.

NOT-CONTENTS

Addington, L.

Dean of Thornton-le-Fylde, B.

Alli, L.

Desai, L.

Archer of Sandwell, L.

Dixon, L.

Bassam of Brighton, L.

Evans of Parkside, L.

Blackstone, B.

Falconer of Thoroton, L.

Borrie, L.

Farrington of Ribbleton, B.

Carlisle, E.

Gilbert, L.

Carter, L. [Teller.]

Gordon of Strathblane, L.

Chandos, V.

Grenfell, L.

Cocks of Hartcliffe, L.

Hacking, L.

Currie of Marylebone, L.

Hanworth, V.

David, B.

Hardie, L.

Davies of Coity, L.

Hardy of Wath, L.

Davies of Oldham, L.

Haskel, L.

Dean of Beswick, L.

Hayman, B.

1138

Hilton of Eggardon, B.

Puttnam, L.

Hoyle, L.

Ramsay of Cartvale, B.

Hughes of Woodside, L.

Randall of St. Budeaux, L.

Hunt of Kings Heath, L.

Sewel, L.

Jay of Paddington, B.

Simon, V.

Judd, L.

Smith of Gilmorehill, B.

Linklater of Butterstone, B.

Steel of Aikwood, L.

McIntosh of Haringey, L. [Teller.]

Thomas of Gresford, L.

Thomas of Macclesfield, L.

Mackie of Benshie, L.

Thomson of Monifieth, L.

McNally, L.

Thurso, V.

Mar and Kellie, E.

Tope, L.

Monkswell, L.

Watson of Invergowrie, L.

Pitkeathley, B.

Whitty, L.

Ponsonby of Shulbrede, L.

Young of Old Scone, B.

Resolved in the negative, and amendment disagreed to accordingly.
10.21 p.m.
The Earl of Balfour The Earl of Balfour moved Amendment No. 199:
Page 73, line 40, at end insert—
("The subject-matter of the Radioactive Substances Act 1993.").
The noble Earl said: I rise to move Amendment No. 199. Amendment No. 200 is consequential upon that amendment. I believe that radioactive and nuclear materials should be a United Kingdom responsibility. I seek to place the Radioactive Substances Act 1993 in the reservation area of Section 4 under Head 4. In order to support my argument, perhaps I could ask the Committee to look at Head 5, Section 5, page 76, at line 31. The transportation of radioactive material is a reserved function, which I believe strengthens my argument that radioactive substances should be a reserved matter. I beg to move.
Lord Mackay of Ardbrecknish: My name is also down to this amendment. I have the same puzzlement. The Radioactive Substances Act 1993 is about registration of premises and so on, as far as I can see from the copy of Statutes in Force which I obtained from the Library. I wonder whether it is wise to take one small part of the nuclear industry and devolve it to the Scottish parliament. Would it not be better to keep the whole subject together and reserved?
Lord Sewel: We start from the point that environmental protection is a devolved area. We then go through and look at environmental protection in relation to radioactive waste. The Radioactive Substances Act 1993 contains provisions under which the Scottish Environment Protection Agency at present grants authorisations for the disposal of radioactive waste on or from premises in Scotland.
At the moment the Scottish Environmental Protection Agency (SEPA), operating with the authority given to it under the Radioactive Substances Act, controls the disposal of radioactive waste in Scotland in terms of environmental considerations. That specific part was taken out and not reserved because it reflects what happens at the moment. It is not a deviation of policy

1139
from that which obtains at the present time. On that basis, with that clarification, I hope the noble Earl can withdraw his amendment.
The Earl of Balfour: I am grateful to the Minister for that reply. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 200 not moved.]
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 201:
Page 74, line 27, leave out from ("training)") to second ("of') in line 28.
The noble Lord said: We now move on to Head 5 which concerns transport. The amendment relates to road transport. A number of matters are reserved about which I have no argument. Once again my puzzle comes from the exemption reservation. The exemptions are the subject matter of Sections 39 and 40 relating to road safety and training—I have no trouble with that—and Sections 157 to 159, which relate to payments for treatment of traffic casualties, of the Road Traffic Act 1988.
That seems to suggest that the payment for treatment of traffic casualties should be devolved to the Scottish parliament and implies that the Scottish parliament could opt for a different system. It may decide to claim all the costs of any patient treated as a result of a road traffic accident. I suspect that that would be an awkward position inside the United Kingdom where motorists move between one country and another and it would be even more awkward for insurance companies. They would clearly have to increase their premiums for any driver who lived in Scotland or anyone in the United Kingdom who drove in Scotland because they would be carrying a higher risk.
I am puzzled as to why the Government decided to devolve that matter. It seems to me to be part and parcel of the uniform way in which we deal with the National Health Service in the United Kingdom. I shall be grateful for an explanation. Perhaps 1 am missing some subtle point, but it seems to me to be worthy of at least a probe. I beg to move.
Baroness Linklater of Butterstone: I do not agree with the noble Lord, Lord Mackay, in his amendment. Sections 157 to 159 of the Road Traffic Act apply where the insurer or the vehicle owner contributes to the hospital treatment costs of the person injured up to a maximum of around £2,949. We do not see why the cost incurred of someone being treated should not be payable in Scotland to a Scottish health board.
The Scottish parliament should be able to vary the circumstances and rate at which payment for the treatment of patients in road accidents should be made. After all, the parliament is being entrusted with the responsibility of varying income tax by up to 3 per cent. and should also be able to take other decisions which impact on public spending. Health is one of those. Regulations on payments to health boards are a good example.
1140
The amendment would prevent the Scottish parliament from increasing the maximum amount that should be paid in compensation for hospital treatment or for stopping it altogether should it so choose. We do not support the amendment because it would further restrict the powers of the Scottish parliament.
Lord Hardie: For the reasons given by the noble Baroness, Lady Linklater, the Government cannot accept the amendment. The sections to which reference has been made deal with the recovery of payment for hospital treatment of road traffic accident casualties. The provisions are not an integral part of the roads legislation. Powers in relation to those charges are currently exercised by health Ministers. Most health matters are to be devolved to the Scottish parliament. Therefore, it would be inappropriate for this area of recovery of payment for hospital treatment to be reserved. I hope the noble Lord will accept that explanation and withdraw the amendment.
10.30 p.m.
Lord Mackay of Ardbrecknish: Frankly, no, I do not accept that explanation. The noble Lord, Lord Sewel, has taken pains to try to paint a logical pattern that if the major parts of an issue are devolved, that should drive where one goes with the other parts of the issue. I accept that the health service is devolved; but quite clearly, under transport, the bulk of transport is not devolved. I should have thought that there would be some logic in following the transport route here rather than the health route.
I do wonder whether the Government have spoken to the insurance industry about this. Will the provision lead to the possibility of higher or lower premiums? I did not understand the argument of the noble Baroness, Lady Linklater. She just seemed to think that the Scottish parliament should get as much as it can. But that was not my concern. I was concerned about what would happen to the customer. Will Scottish residents be treated differently from people in England for road accidents in the same National Health Service? That is what I am exploring. Before I decide what to do with the amendment, I should be grateful for an indication as to whether or not the Government have discussed this matter with the insurance industry.
Lord Hardie: I cannot give a direct answer to that question. But what I can say is that we are not treating Scottish customers differently from others. With respect, the noble Lord seems to misunderstand the position. Clearly, a driver from England who has an accident in Scotland and causes an injury would be liable to pay for the hospital treatment just as a Scottish driver in England or his insurers would be liable to pay for the hospital treatment of someone who was injured by him in England. I should be very surprised if the insurance industry were able to apply loaded premiums because someone drove in Scotland or might drive in Scotland.
Be that as it may, the issue is not a transport issue. The issue is a health issue. Health Ministers currently recover the costs from insurance companies for these accidents. If the noble Lord genuinely accepts the logic

1141
of my noble friend Lord Sewel, the position is that, if health is devolved, it makes sense to devolve this health aspect of the road traffic provisions. It happens to be a Road Traffic Act, but it is clearly a health provision.
Lord Mackay of Ardbrecknish: If a Scottish driver in England, or an English driver in Scotland, will be paying the same or will be liable to pay the same if he is involved in a traffic accident and has to go to hospital or have medical treatment, there does not seem to be any point in devolving it. The whole point about devolving it is the presumption that at some stage in the future the Scottish parliament may act differently. If it acts differently, if it says that for accidents in Scotland drivers will not have to pay anything, that is fine. I suspect that Scottish drivers will then suggest that they might pay slightly lower premiums. But if the parliament decides that they will pay more—I do not seem to be able to get this point over—I suggest that the insurance industry would then say, because that is the way its business works, that there is a risk of greater payments having to be made to a Scottish driver who is involved in an accident in Scotland.
I suggest to the Government that it would be nice if they would just take something away and think about it without commitment. Perhaps I may suggest to them that, before we come back for Report stage, they should explain this and say whether they envisage that there could be different arrangements for the payment. Perhaps they could even talk to the insurance industry. With those comments, I rather reluctantly withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 202:
Page 75, line 28, leave out ("or finish or both") and insert ("and finish").
The noble Lord said: I hope that this amendment is not too complicated for the Government to cope with. It is about shipping services. The implication is that the Scottish parliament will be able to finance, help and subsidise shipping services that run within Scotland; namely, leave ports in Scotland and arrive at ports in Scotland. So that deals with Caledonian MacBrayne, shipping services to the northern isles and so on. That is fine; I have no problem with it. However, there is a reservation on those services which do not start or end in Scotland. I take it that that means that the new service running from Campbeltown to Ballycastle in Northern Ireland or the services from Stranraer to Belfast or Larne will not be eligible for financial assistance. I do not believe that the Stranraer to Larne or Belfast service receives any financial assistance, but I suspect that the Campbeltown to Ballycastle service does. Does that mean that that is not to be a responsibility of the Scottish parliament but reserved to Westminster?
There is a possibility of a service from Kircudbright to the Isle of Man. Clearly, that would be outwith the powers of the Scottish parliament. The argument about it is based on the economic well-being of Kintyre and pulling in more tourists. All these are devolved matters.
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It seems a little illogical that when the case for subsidising a shipping business to get it started, if not to run it, is based on grounds which are devolved, I am puzzled as to why a restriction is contained in the schedule to forbid the Scottish parliament helping such shipping lines. I beg to move.
The Earl of Balfour: Amendment No. 203 is grouped with this amendment. I am quite happy that the protection of wrecks prohibition on approaching dangerous wrecks is a reserved function because the buoying and marking of such wrecks while at sea is carried out by the Northern Lighthouse Commissioners. Equally, I am quite happy that "ports, harbours, piers and boatslips" should be a devolved function.
Except in relation to paragraph (d), which is the protection of wrecks, I cannot see why, if there is a wreck within the precincts of the port or harbour, it should not be dealt with by the devolved parliament. That is my reason for deleting that paragraph.
Lord Sempill: I support my noble friend Lord Mackay of Ardbrecknish on this amendment. There is one issue which I find slightly baffling. Making the assumption that the company concerned is Scottish—there are quite a few of them—and it pioneers a new destination in which the port is outwith Scottish waters, surely it is right for the Scottish parliament to be in a position to give assistance in setting up or subsidising the company. After all, it is to the benefit of the Scottish economy that the boats return laden with tourists. I can see no reason why Scottish shipping companies should not turn to their own parliament to look for that financial assistance.
Lord Mackie of Benshie: Perhaps the Minister can tell us whether that phrase means that help will be available from the UK Treasury for those shipping lines which start or finish there (or both)?
Lord Hardie: On the question of the Campbeltown to Ballycastle ferry service, support for, or subsidy to, that service would be reserved to Westminster, so the noble Lord, Lord Mackay of Ardbrecknish, has correctly interpreted those provisions. That services operates commercially and without financial assistance, although the harbour facilities at Campbeltown and Ballycastle were both upgraded with support from public funds, including European assistance. The Scottish parliament would continue to have competence to provide assistance for ferry services in the form of support for pier and harbour works, just as they have already been so provided in that example.
I regret that I cannot accept Amendment No. 202. It would have the effect of devolving to the Scottish parliament the matter of financial assistance for shipping services between Scotland and another part of the United Kingdom, or even another country. Financial assistance to shipping services operating wholly within Scotland is a devolved matter.
The Government recognise that shipping services between Scotland and other countries are of economic significance to Scotland. Our intention in the Bill is to

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give the Scottish parliament appropriate powers to maintain and develop the internal shipping services it considers necessary for the maintenance and improvement of economic and social conditions in Scotland, particularly in island and remote Highland communities. The noble Lord's amendment would give the Scottish parliament and executive competence over financial assistance to existing or new external shipping services. I shall come in a moment to the point raised by the noble Lord, Lord Sempill, when I deal with the European position.
In the case of services between Scotland and other parts of the United Kingdom, the Government consider that those services are best dealt with on a UK-wide basis because they are as much the concern of the UK in its entirety as they are of Scotland. Furthermore, in the case of the devolution of international shipping services to or from Scotland, such a provision would be inconsistent with the general reservation of international matters, including trade.
Finally, if competence were exercised so as to provide for financial assistance to shipping services to or from Scotland where such financial assistance was not available to operators of services in other parts of the United Kingdom, there might be a valid complaint of unfair competition from those other shipping operators. There might also be difficulties with EC state aid regulations. That deals with the point of the noble Lord, Lord Sempill.
State subsidies to assist passenger ferry services are subject to EC state aid guidelines. Any subsidy agreed by the European Commission would have to seek approval as a public service obligation under these guidelines which apply strict criteria about when support is justified.
Support is available only for services serving,
"peripheral regions of the Community or thinly served routes considered vital for the economic development of that region where the operation of market forces would not ensure a sufficient service level".
In view of my earlier comments, the examples given by the noble Lord, Lord Mackay of Ardbrecknish, are not in that position. Therefore, one cannot accommodate that service.
I turn to the amendment in the name of the noble Earl, Lord Balfour. I begin by declaring an interest as an ex officio commissioner of the Northern Lights. The noble Earl has set out the reasons for the amendment. I recognise that he brings experience to this subject and I understand the arguments behind his explanation, but I should like to draw the Committee's attention to our concern over his amendment and ask that it be withdrawn. The effect of Amendment No. 203 would be to give the Scottish parliament responsibility for the subject-matter of Section 2 of the Protection of Wrecks Act 1973 as it applies in ports, harbours, piers and boatslips around Scotland's coastline. Noble Lords will recall that responsibility for ports and harbours is devolved.
The Scotland Bill reserves to the Westminster Parliament legislative competence over matters relating to marine transport where there is a need for consistent
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provision across the United Kingdom. Schedule 5, Head 5, Section 3, reserves the subject-matter of the relevant legislation on marine safety and pollution matters. But the Bill identifies ports, harbours, piers and boatslips in Scotland as an exception from the reservation. That exception is, however, subject to a qualification which continues to reserve the subject-matter of certain legislation including at item (d) the subject-matter of Section 2 of the Protection of Wrecks Act 1973.
As the noble Earl explained, under Section 2 of the 1973 Act the Secretary of State has powers to designate an area round a wreck as a prohibited area if because of anything contained in it the vessel is in a condition which makes it a potential danger to life or property and on that account it should be protected from unauthorised interference. It is an important role in securing overall levels of safety in and protection against pollution of territorial waters throughout the United Kingdom. It is operated in practice by the Maritime and Coastguard Agency. Section 2 of the Protection of Wrecks Act 1973 is a reserved matter for very good reasons. The Government's guiding principle was clearly set out in the White Paper. Paragraph 3.3 states that transport safety and regulation, including regulation of shipping and marine services, would be reserved.
The subject-matter of this legislation is a reserved matter on the grounds that it is a matter of maritime safety regulation and pollution prevention which requires consistent provision across the UK. Section 2 of the Protection of Wrecks Act 1973 in our view comes clearly within that criterion and the Government wish to ensure that such matters are treated consistently on a UK-wide basis. Furthermore, these matters are bound up with international conventions to ensure the security of navigation throughout UK territorial waters. I hope noble Lords agree that for the reasons stated the Bill should remain unchanged. I hope that, given the explanations, the noble Earl is able to seek leave to withdraw his amendment.
Lord Mackay of Ardbrecknish: I cannot speak for my noble friend, but I believe he indicates that he is satisfied. I have one small point. I understand the distinctions that have been drawn, but I am not entirely sure that the reasons have been explained. I understand that in the case of the Campbeltown to Ballycastle ferry no financial provision could have been made by the Scottish executive under this Bill. Could the Scottish executive have contributed to the harbour costs at Campbeltown?
Lord Hardie: That is so, because harbours and piers are devolved.
Lord Mackay of Ardbrecknish: I understand that that applies even to a ferry service that is not covered by the provision. I am grateful for that response. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 203 not moved.]
Lord Sewel Lord Sewel moved Amendment No. 204:
Page 75, leave out lines 36 to 39.
On Question, amendment agreed to.
[Amendments Nos. 205 and 206 not moved.]
The Earl of Mar and Kellie The Earl of Mar and Kellie moved Amendment No. 206A:
Page 77, line 24, leave out ("section 22") and insert ("sections 22 and 26").
The noble Earl said: Amendments Nos. 206A and 206B are grouped together. Amendment No. 206A seeks to devolve the powers and duties of social work departments to provide residential accommodation and to recover the costs in respect of accommodation provided both by the social work department and by private contractors. As conditions vary widely throughout the United Kingdom and because social work is one of the most essential matters to be devolved, the setting of cost limits and charges of residential accommodation should be devolved to the Scottish parliament. It would be especially useful if the Scottish parliament were to adopt policies towards residential accommodation which differed substantially from elsewhere.
Amendment No. 206B seeks to devolve social security policy in respect of Section 25 of the Children (Scotland) Act 1995 concerning the provision of accommodation for children. That Act allows the local authorities to make financial charges on parents for the provision of accommodation. It would be sensible if these charges were approved by the Scottish parliament, especially as it will set social work policy and standards. I beg to move.
Baroness Ramsay of Cartvale: I have listened carefully to what the noble Earl has said. The Government do not consider that the subject matter of Section 26 of the 1948 Act is covered by the reservation anyway. However, in view of the points he has raised and the relationship between Sections 26 and 22, I would like to take the opportunity to consider the noble Earl's views more fully. I would like to take this away and I would find it helpful if he would agree not to press this amendment tonight.
Amendment No. 206B seeks to except Section 25 of the Children (Scotland) Act 1995 from the social security reservation. This amendment is unnecessary. Section 25 of the Children (Scotland) Act imposes a duty and powers on local authorities to provide certain children and other young persons with accommodation. Along with other local authority responsibilities, these fall to be devolved to the Scottish parliament. In view of this explanation, I hope that the noble Earl will agree that the amendment is not necessary and withdraw it.
The Earl of Mar and Kellie: I am most grateful to the noble Baroness, Lady Ramsay of Cartvale, for her encouraging remarks. It is quite remarkable. As usual, I do not know what to do with myself.
Lord Mackay of Ardbrecknish: Perhaps I can congratulate her.
The Earl of Mar and Kellie: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 206B not moved.]
[Amendment No. 207 not moved.]
[Amendment No. 208 not moved.]
Baroness Ramsay of Cartvale Baroness Ramsay of Cartvale moved Amendment No. 208A:
Page 78, line 3, at beginning insert ("The regulation or).
The noble Baroness said: I speak to Amendments Nos. 208A to 208C, 209A, 209B, 292NA, 293ZA, and 294ZA. Over the past two weeks we have looked again at the structure of the pensions reservation at Section 3 of Head 6. We have concluded that this section would benefit from some restructuring to make it easier to follow. Amendment Nos. 208A to 208C, 209A and 209B bring about these changes. They do not reflect any change of policy. Occupational and personal pensions are to be reserved, but matters relating to the provision of pensions for certain persons are to be within the competence of the Scottish parliament. The amendments reflect an attempt to make our policy intentions clearer.
The amendments should be looked at as a group. The net result of the amendments is that Section 3 on occupational and personal pensions will now contain two parts only. The first will be an expanded section dealing with the reservation of the various pension matters, making clearer the particular areas where the parliament can legislate. The second will be a much smaller interpretation section. The section dealing with the illustration of the reservation will no longer be necessary as the material from that will be incorporated within the section dealing with the reservation itself. The same applies to the exceptions from the reservations section.
As the Committee may remember, the section dealing with Scots private law has already been discussed in Amendment No. 209. The key amendments in the group are Amendments Nos. 208A and 208B. Amendments Nos. 294ZA and 293ZA move the definitions from the pensions section to the general definition in Clause 112 because they are also needed for other provisions in the Bill.
Amendments Nos. 208C, 209A and 209B are consequential amendments which delete material that is no longer necessary. Amendment No. 292NA is of course a purely technical drafting amendment. I can expand on the amendments, but in view of the lateness of the hour I shall stop there. I shall expand on the matters if any noble Lord wishes to put any questions. I beg to move.
Lord Mackay of Ardbrecknish: The Minister will be happy to hear that due to the lateness of the hour I have just one question to put to her. This is an important matter. When I read it. I appreciated that the Government were doing a considerable rewrite of the way they were approaching the issue. I should be grateful if during the Recess I could have a letter which will show me what the clause will look like, rather than just have the amendments, and an explanation. I should be grateful to have that so that I can study it. Pension matters are of some interest to me. That is not just a reflection of my age

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but of the fact that I took the Pensions Act through this place, and I should like to study this to ensure that the Government are doing the wise and sensible thing with regard to those people who will be affected by a reservation on pensions.
Baroness Ramsay of Cartvale: I understand that, and of course I am happy to agree to the noble Lord's request.
On Question, amendment agreed to.
Baroness Ramsay of Cartvale Baroness Ramsay of Cartvale moved Amendments Nos. 208B and 208C:
Page 78, line 3, at end insert ("including the obligations of the trustees or managers of such schemes.
Provision about pensions payable to, or in respect of, any persons, except—

(a) the persons referred to in section 76(3),

(b) in relation to a Scottish public authority to which paragraph 1 or 2 of Part III of Schedule 5 applies, persons who are or have been a member of the public body, the holder of the public office, or a member of the staff of the body, holder or office.

The subject-matter of the Pensions (Increase) Act 1971.
Schemes for the payment of pensions which are listed in Schedule 2 to that Act, except those mentioned in paragraphs 38A and 38AB").
Page 78, leave out lines 13 to 26.
On Question, amendments agreed to.
Lord Sewel Lord Sewel moved Amendment No. 209:
Page 78, leave out lines 27 to 35.
On Question, amendment agreed to.
Baroness Ramsay of Cartvale Baroness Ramsay of Cartvale moved Amendments Nos. 209A and 209B:
Page 78, leave out lines 37 to 42.
Page 78, leave out lines 44 to 46.
On Question, amendments agreed to.
House resumed.

City of Westminster Bill [H.L.]
Reported from the Unopposed Bill Committee with amendments.

Government of Wales Bill
Returned from the Commons with one amendment agreed to with an amendment, with certain amendments disagreed to with reasons for such disagreements, and with the remaining amendments agreed to; the Commons amendment and reasons ordered to be printed. (HL Bill 149).
House adjourned at one minute before eleven o'clock.