Lords Sitting of 20 October 1998

Preamble
The House met at half-past two of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.
Prayers—Read by the Lord Bishop of Blackburn.

Lord Clarke of Hampstead
Anthony James Clarke, Esquire, CBE, having been created Baron Clarke of Hampstead, of Hampstead in the London Borough of Camden, for life—Was, in his robes, introduced between the Lord Cocks of Hartcliffe and the Baroness Gould of Potternewton.
Lord Evans of Watford
David Charles Evans, Esquire, having been created Baron Evans of Watford, of Chipperfield in the County of Hertfordshire, for life—Was, in his robes, introduced between the Baroness Dean of Thornton-le-Fylde and the Lord Paul.

Democratic Republic of Congo: Political Solidarity
2.45 p.m.
Lord Judd Lord Judd asked Her Majesty's Government:
What action they are taking bilaterally and multilaterally, including action through the European Union, the Commonwealth and the United Nations Security Council, to promote political solidarity to the problems of the Democratic Republic of Congo and to prevent the escalation of instability and conflict across the region and the African continent.
The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): My Lords, Britain is working hard for peace. We are actively encouraging all the states involved in the fighting in the Democratic Republic of Congo to pursue a negotiated settlement. We have made clear that there can be no military solution. Only a process of dialogue and negotiation can bring about a settlement that will last. We are also taking action with our European Union partners and in the United Nations Security Council to promote a peaceful solution.
Lord Judd: My Lords, does my noble friend agree that it was highly significant when the Prime Minister said at the UN in New York last month that there are few higher priorities than bringing peace to the Great Lakes region? Does she agree that apart from promoting the kind of approach which she has constructively suggested, if peace is to be brought it is absolutely essential to work at an economic programme for the region which makes use of the immense mineral
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resources in the interests of the people of the region as a whole? Meanwhile with 14 nations involved, thousands of refugees, ethnic cleansing and indiscriminate killing, are we encouraging and supporting Dr. Kofi Annan as the first African Secretary General of the UN to use all his authority and good standing to try to promote the solution which my noble friend has outlined?
Baroness Symons of Vernham Dean: My Lords, of course I can agree that bringing peace to the Great Lakes region is an important priority. We support the initiatives of the Southern African Development Community and the Organisation of African Unity for a peaceful solution. We have encouraged them to use all their influence and, of course, through our chairmanship of the Security Council this month, we are actively encouraging the discussions between the Secretary General and other council members to find concrete ways in which the UN can support a regional peace initiative. In our view it is vitally important that there is regional backing for any solution to this grave problem.
The noble Lord also raises the question of the immense resources of the area. We believe it is important that there should be a future programme in the area. Before the current conflict began a trust fund to help reconstruction and rehabilitation in the DRC was set up by the World Bank. I hope the noble Lord will be pleased to learn that we pledged 10 million US dollars to that. The future of the fund will need to be re-examined when there is a peaceful resolution to the conflict. However, we are looking ahead.
Lord Steel of Aikwood: My Lords, does the noble Baroness accept that when I was in Kinshasa in April it seemed to me that neither the political structures nor the communication structures were anywhere near in place for the holding of elections? Can the noble Baroness confirm that, since then, matters have deteriorated and there are about four or five forces from neighbouring countries now in the country? Does she welcome the declaration yesterday by the rebels of a ceasefire, and will we, therefore, encourage President Kabila to enter into direct discussions with those rebels in order to bring some relief to the people of that country who suffered so much under the rule of President Mobuto?
Baroness Symons of Vernham Dean: My Lords, the noble Lord, Lord Steel, is of course quite right. There is a highly complex situation on the ground in the DRC. There are many different elements involved in this struggle from within that country and of course from neighbouring countries too. A few days ago the rebels took the strategic eastern town of Kindu.
The noble Lord raises the question of President Kabila's discussions with the rebels. We have actively encouraged all those involved in the fighting to pursue a negotiated settlement. Both the internal issues and the concerns of the neighbouring states must be addressed if a lasting peace is to be achieved. We have, therefore, urged President Kabila to accept that the rebels must be

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included in any talks. We hope that those talks will establish a basis for a genuine, representative and accountable government in the DRC.
Viscount Brentford: My Lords, can the Minister tell us to what extent institutions such as schools, hospitals and other medical facilities still function in eastern Congo, or is it the case, as normally happens, that it is the poorest and most vulnerable who suffer most from the conflict?
Baroness Symons of Vernham Dean: My Lords, as is always the case in these terrible conflicts, it is the poorest who suffer most. At the moment the situation is highly complex and volatile. The rebels hold a number of major towns in the east and strategic areas in the south west. Their advance on Kinshasa was halted by the intervention of sizeable contingents from Angola and Zimbabwe, with Namibia providing logistical support. Chad and the Sudan have recently provided troops to Mr. Kabila's forces and there are also credible reports that Libya is providing logistical and financial support. I give your Lordships this overview to indicate the complexity of the problems that are faced and the undoubted disruption to the people of the DRC.
Lord Hughes of Woodside: My Lords, does my noble friend agree that the United Nations' capacity to provide a peaceful solution in the Congo is diminished by the inability of the United Nations to resolve the issue in Angola, where the UNITA rebels have still not carried out their agreements under the Lusaka protocol? Does she not agree that failure there diminishes the credibility of the United Nations and makes its work more difficult?
Baroness Symons of Vernham Dean: My Lords, I do not believe that apportioning blame or saying who has failed where is helpful. I hope I have made it clear that a number of different countries are involved in this conflict and that we, chairing the United Nations Security Council this month, are doing all we can to ensure that the United Nations plays a leading role in trying to find a solution to this enormously complex war.
Lord Moynihan: My Lords, the Minister mentioned the work of the United Nations. What assessment have the Government made of the criticism by Human Rights Watch of the United Nations Security Council presidential statement issued in July as "weak" and an "insult to the victims" of humans rights abuses?
Baroness Symons of Vernham Dean: My Lords, we have supported the special envoys from the United Nations, Mr. Dinka, the Secretary General's representative and regional adviser for the Great Lakes, and Mr. Sahnoun, the Secretary General's special envoy in Africa. The fact is that neither has a specific mandate to make recommendations about a settlement in the DRC. We believe that the circumstances in the DRC call for action on behalf of the UN by a high level political
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figure with real clout, possibly a former head of state or a senior Minister with influence in Africa. The view of Her Majesty's Government is that we should not look back to statements of criticism but should look forward and try to find a real solution to a real problem in the DRC.
Lord Rea: My Lords, does my noble friend agree that part of a solution to the conflict in the Congo area might be some redrawing of national borders which were put in place by the colonial powers at the time and, as in many parts of Africa, do not reflect the ethnic realities on the ground?
Baroness Symons of Vernham Dean: My Lords, such a proposal begs all kinds of questions, not only about the DRC itself but about the surrounding countries. We must look for a clear role to be given to the Southern African Development Community and the Organisation of African Unity. Both of those bodies are working hard to bring the parties together, to negotiate initially a ceasefire and then a peaceful solution. We shall, of course, listen to what they say about issues of borders and ethnicity. We fully support their efforts and will do everything that we can to help them achieve a negotiated settlement.

Dog Registration
2.57 p.m.
Lord Stanley of Alderley Lord Stanley of Alderley asked Her Majesty's Government:
Whether they will take steps to start a national dog register when they alter the regulations for quarantine for pets entering the United Kingdom.
Lord Carter: My Lords, the Kennedy Advisory Group on Quarantine did not consider a national dog register to be a necessary requirement for the proposed changes. The Government are sympathetic to the advisory group's proposals for the ending of quarantine in certain circumstances. After the public consultation, which runs until 31st December, the Government will decide what action to take.
The Government received a number of representations on the question of dog registration and have yet to take a decision on the way forward. Speaking personally, as Chief Whip I am all in favour of systems of licensing and even more in favour in some cases of the withdrawal of licences.
Lord Stanley of Alderley: My Lords, I thank the noble Lord for that Answer. But is he aware that he gave the impression that the Government are backing away from a dog registration scheme? If I misunderstood him, will the Government speed up the process by supporting a Private Member's Bill in the next Session of Parliament? I am sure the noble Lord realises that such a scheme would be of enormous benefit in regard to the

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marking and chipping of cattle and sheep. At the same time, could not the dog wardens which would be needed also be litter wardens?
Lord Carter: My Lords, as the noble Lord will know, electronic identification of farm animals can be carried out now on a voluntary basis. Cattle, sheep, pigs and goats can be tagged by electronic means. At present, boluses and electronic tags are the favoured approach. With regard to the possibility of government support for a Private Member's Bill, I cannot at this stage forecast what will happen in the next Session, but it is an idea that we could look at. A number of representations have been made regarding a dog registration scheme. The Government are considering those representations, but a widespread consultation period would be necessary before any action was taken.
Baroness Trumpington: My Lords, does the Minister agree that a national dog register may help to deal with the malpractices and horrible stories that emerge from so-called puppy farms? If dogs were registered there would at least be a responsibility to try to get rid of the evil side of puppy farms.
Lord Carter: My Lords, I believe that powers already exist to deal with that matter. One does not need a system of dog registration to deal with it. There are statutory powers to set standards, and a consultation exercise is about to start on the implementation of those standards through parliamentary order. We hope that that will take place some time next year.
Baroness Nicol: My Lords, does my noble friend recall that this House expressed a firm view a few years ago that there should be a dog registration scheme and the idea was overturned by another place for reasons of which I am unaware? I am quite sure that had one been introduced implementation of new quarantine regulations would have been a little easier. Is he aware that the cost of dealing with stray dogs alone is some £38 million? That represents the cost of livestock damage, traffic accidents, dog wardens and the cost to the police. Is it not time that the Government took these factors on board? In particular, now that the technology is so advanced it would be a good deal easier to do.
Lord Carter: My Lords, it is important to understand that dog registration is not relevant to the question of quarantine. It is estimated that out of a total dog population of 6.9 million there will be a maximum of a quarter of a million cats and dogs exported and imported back to the UK which will subject to quarantine. One does not have to register 6.9 million dogs in order to catch the maximum 250,000 dogs that will be caught under the proposals referred to in the Kennedy Report. As to dog wardens, under Section 149 of the Environment Protection Act 1990 each local authority is required to appoint an officer for the purposes of dealing with stray dogs in its area.
Baroness Fookes: My Lords, as I had the support of the then Labour Opposition when I sought in vain to
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introduce a dog registration scheme on two occasions in the other place, I am disappointed by the apparent dragging of feet by this Government in the matter. Why have they changed their mind now that they are in government?
Lord Carter: My Lords, this happens sometimes. It is correct that the Labour Party was in favour of a national dog registration scheme when in opposition but there was no commitment in that respect in the manifesto. All of us in this House know how important manifesto commitments are. Any scheme is likely to require changes to primary legislation and Ministers will need to consider a number of wide-ranging issues, including cost and enforcement. No decision has been taken on the need for a registration scheme, but we are prepared to consult and consider the merits of the issue.
The Viscount of Falkland: My Lords, is the Minister aware that many noble Lords in this House have pressed for some time for a dog registration scheme and that one of the points made persistently by the previous government was that such a scheme was unnecessary because people who handled dogs irresponsibly would be unlikely to register? Can the noble Lord say what the Government would do to police a registration scheme if they decided to introduce one? Incidentally, how many dogs does the Minister believe there are in this country; and how can they be counted without a registration scheme?
Lord Carter: My Lords, I have already answered that question. It is estimated that there 6.9 million dogs in 5.4 million households. I have now forgotten the noble Viscount's first question.
Lord Bruce of Donington: My Lords, has my noble friend considered the possible cost of the introduction of what he considers to be a feasible scheme? Will he bear in mind that should he introduce one there is every likelihood that the European Commission will claim competence in this field, which I believe will be a considerable embarrassment to some dog owners in various parts of the country, not least in this House?
Lord Carter: My Lords, there is no European Union legislation on the import of pets. The Commission regards this matter as a single market issue. But there is as yet no sign of any attempt to introduce legislation or a directive. If there were such a directive it would be subject to qualified majority voting.

United Nations: US Debt
3.5 p.m.
Lord Renton of Mount Harry Lord Renton of Mount Harry asked Her Majesty's Government:
Whether they will seek to persuade the United States to pay the money it owes to the United Nations.
Baroness Symons of Vernham Dean: My Lords, we have made it clear to the United States that we expect the

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United States to pay its United Nations arrears and future contributions promptly, in full and without conditions. We welcome the inclusion of the 475 million dollars for United Nations arrears in the budget agreed by Congress and the White House on 15th October, last week. But this is far short of what the US owes, and we have serious concerns about the conditions attached. The relevant legislation still contains unrelated abortion which the Administration has said would cause President Clinton to veto the whole legislation.
Lord Renton of Mount Harry: My Lords, while I thank the noble Baroness for what she has just said—I very much agree with it—is it not true that the 475 million-odd dollars that the United States has agreed to pay is only just sufficient to keep the US with a vote in the General Council? Further, is it not ironic that at the very moment when President Clinton is working so hard to broker a renewal of the Middle East peace talks the United States is itself 1.6 billion dollars—four times the figure for Russia—in arrears to the United Nations, which endangers peace-keeping operations all round the world? Can the noble Baroness use all her influence in Downing Street to persuade the Prime Minister that, if he has the close relationship with President Clinton of which the spin-doctors tell us so much, he should use it to get the United States to pay its dues to the United Nations?
Baroness Symons of Vernham Dean: My Lords, I should like to make an important point about the budget agreed last week. There are two parts that are relevant to the financing of the United Nations. The first is legislation to authorise payment of a further tranche of the 1998 dues. That is likely to be enough for the US to avoid the operation of Article 19 in January 1999. We welcome that but only as far as it goes. The second matter is the bill to which I referred in my initial response. That is an appropriation of 475 million dollars of arrears to the United Nations. It is that payment which remains tied to the "abortion" language.
The noble Lord asks how much the United Kingdom is able to bring pressure to bear on the United States on this matter. We have used our European Union and G8 presidencies to press for payment of all the arrears, not only those of the United States considerable as those are. The Foreign Secretary has raised the issue with Madeleine Albright. I have raised the issue on a number of occasions. The subject is raised frequently by Sir Christopher Meyer, our ambassador in Washington, and Sir Jeremy Greenstock, our Ambassador to the United Nations in New York. No one is left in any doubt about that. But it is not a matter of exerting influence upon Mr. Clinton. If Mr. Clinton had a free hand in such matters he would not be unwilling to make the prompt and unconditional payment that we all wish him to make. It is a matter of Congress using this as a vehicle for some of its other preoccupations to try to exert pressure elsewhere.
Lord Peyton of Yeovil: My Lords, does the Minister agree that it is a particularly shabby manoeuvre on the part of Congress to connect two issues which have nothing to do with one another, thus frustrating the strength and
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influence of the United Nations at a time when every day that institution becomes more necessary? It is surprising that the United States which provides the home for the United Nations should be doing that.
Baroness Symons of Vernham Dean: My Lords, I agree that the connection which Congress has sought to make is unrealistic. I hope that we shall not indulge in name calling so far as concerns Congress. I believe that all that will do is to harden attitudes. We should be trying to persuade the United States Congress that, as a responsible member of the United Nations, the United States must pay its contributions on time, in full and without conditions.
I stress to your Lordships that it is not only the United States which is in arrears. I told your Lordships last week that 149 countries are in arrears. There has been some updating. The figure is now only 145 countries in arrears—a marginal improvement, but none the less an improvement. However, the difficulties that that has engendered mean that we expect a deficit on the important peace-keeping finance of 864 million dollars by the end of this year. And that is on peacekeeping, which is at the forefront of so many of your Lordships' minds through Questions in this House.
Lord Bridges: My Lords, will the Government bear in mind that any decision by the United States to pay its arrears will be preceded by a tough negotiation between Congress in Washington and the Secretary-General in New York? The Secretary-General will be under severe pressure to impose across the board reductions in staff and budgets of the United Nations. Will the Government do their best to ensure that those cuts do not damage the most efficient and vital parts of the United Nations secretariat and its agencies?
Baroness Symons of Vernham Dean: My Lords, we support Mr. Kofi Annan's effort to make the United Nations a more efficient organisation. I hope that I have been able to make that clear to your Lordships on other occasions.
However, I believe that we must also reject the call by the United States for a reduction of their regular budget ceiling to 20 per cent. from the existing 25 per cent. I suspect that much of the negotiations which precede the payment of arrears will not only focus on the United Nations and efficiencies there, but also on the desire of the United States to cut its budgetary contribution to the United Nations.

Working Family Tax Credit
3.12 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
What action they are taking in order to counter the possible increase in fraud, if the scheme for working families' tax credit is continued in the form at present proposed.
Lord McIntosh of Haringey: My Lords, the working families' tax credit will build on and replace family credit

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from October 1999, legislation permitting. The working families' tax credit will help make about 400,000 more families better off in work than on benefit and the Government want the help provided by the working families' tax credit to go to all those who are eligible. It will be administered by the Inland Revenue which has considerable experience and expertise in detecting and combating fraud.
Lord Campbell of Croy: My Lords, I thank the Minister for his reply. Did the noble Lord note the reported comment by the former Minister for Welfare Reform, Mr. Frank Field, in his lecture to the Social Market Foundation that serious dangers were involved in those proposals because they offered large bonuses for dishonesty for both employers and employees? Are the Government prepared to be tough on fraud, and tough on the causes of fraud?
Lord McIntosh of Haringey: My Lords, I indeed saw the report of the speech by Frank Field. Part of it can be explained by his long-standing and honourable opposition to means testing. However, I believe that there were a number of errors in the analysis. First, it is not true that employers will need to calculate the working families' tax credit. That will be done for them by the Inland Revenue and they will simply be required to make the payment. Of course, if there is collusion between employers and employees to falsify employment records, that will be serious fraud. But there is no reason to suppose that the vast majority of honest employers will do that any more than they do so with their other obligations under the tax laws.
Lord Ashley of Stoke: My Lords, is the Minister aware that it is damaging to disabled people when newspapers grossly exaggerate any possible fraud on disability benefits? Some articles refer to a figure of £1 billion, or £0.5 billion. A figure is plucked from thin air. But that is after Ministers, including the noble Baroness, Lady Hollis, have said that after 30,000 investigations into the disability living allowance there was no evidence of one single confirmed case of fraud.
Is it not also disturbing that the Department of Social Security is responsible for some of those "leaks" to newspapers? The respected journalist, David Brindle, of the Guardian has said that the department is giving information about so-called fraud to journalists. Can we not stop that kind of practice?
Lord McIntosh of Haringey: My Lords, the Question before us is about the working families' tax credit rather than disability allowances. However, I understand my noble friend's fear; and I understand that other people have the same fear. If there is any evidence of leaks in an inappropriate way by officials, I am sure he will bring that to the attention of the authorities.
Lord Higgins: My Lords, is the Minister aware that many people regard the Labour Party's promise to cut social security in order to spend more on health and education as a fraud as it has totally failed to do so? Will not the matter raised by my noble friend in his Question exacerbate the situation?
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Does the Minister recall that he set out Mr. Darling's great achievement as Chief Secretary as the setting in concrete of the spending plans for the next three years? As the Secretary of State for Social Security, how will he now change those plans?
Lord McIntosh of Haringey: My Lords, as the noble Lord has seen fit to accuse this Government directly of fraud, let me say that the undertaking by the Government was to decrease the proportion of public expenditure spent on welfare rather than to decrease the absolute amount. We have been consistent in that and have achieved that.
As regards Mr. Alistair Darling's role, the noble Lord knows that Mr. Darling has been consistent in the Treasury and the Department of Social Security, and he will see the results of that when the welfare reform White Paper appears.
Lord Addington: My Lords, can the Government tell us whether the levels of fraud in the benefits system are in any way superior to those of non-payment of legally charged taxes?
Lord McIntosh of Haringey: My Lords, that is a fascinating question and I should love to be able to answer it. I shall try to give an answer to the noble Lord, and make it more widely available. The noble Lord will understand that it would be extraordinarily difficult because both are "unknowable" statistics. If we knew where the fraud was, we would know how much there was; and if we knew where it was, we should be able directly to tackle it.
Lord Brooks of Tremorfa: My Lords, as the Government are prepared to consider introducing a registration scheme for dogs and to consult widely on that, will they be prepared similarly to consider introducing identity cards, and to undertake widescale consultation on that issue? It is understood generally to be the most efficient way of reducing fraud.
Lord McIntosh of Haringey: My Lords, in the 30th minute of Question Time I shall not be tempted into a question which is not only wide of that on the Order Paper but also, as my noble friend knows, of huge political controversy.

City of Westminster Bill [H.L.]
Read a third time, and passed, and sent to the Commons.

European Parliamentary Elections Bill
3.20 p.m.
Read a third time.
Clause 1 [Number of MEPs, electoral regions and electoral system]:
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 1:
Page 2, line 1, leave out ("a registered party, or").
The noble Lord said: My Lords, this amendment and the three grouped with it seek to change the voting system for the European elections in a very significant way, in order to give the electorate more choice and the party apparatus less choice. We have been over this ground on a number of occasions, not just on this Bill but also on the Scotland Bill and the Wales Bill. However, I think it is worth rehearsing the Government's proposal and also that contained in my amendments.
We are moving from single-member constituencies in Europe, first past the post, to regional lists covering very large areas of the country, where a number of European Members of Parliament—sometimes as few as four, sometimes 10—will be elected on the basis of a list system. For example, in London there are 10; in Scotland there are eight. The order of the list is all-important because, depending on the number of seats a party gains on a proportional system, that will lead to a number of members on the list being elected. I do not wish to go into the various systems which will be used to determine how many seats each party will get. The d'Hondt system, if one has to have that kind of system, is as good as any other. I should put in my usual caveat and say that, although I am discussing how to improve this particular system of proportional representation, the whole thing could be properly improved by sticking with the first past the post. Having made that point, I go on to look at the system the Government have proposed.
When noble Lords go into the polling booths for the European elections next year, they will be confronted with the party names. Also on the ballot paper may be the names of the candidates selected by the party in the preferred order; no one will be able to alter the order of those names. All your Lordships and the voter will be asked to do is to vote for the party. Labour voters will therefore vote for the Labour Party; Conservatives for the Conservative Party and Liberal Democrats for the Liberal Democrat Party. That will be all. The votes will then be taken away; the d'Hondt divisors will be used and the number of seats for each party will be determined. The returning officer will then say that the Labour Party deserves three seats—though frankly I do not see why it deserves any—and the top three candidates will be elected.
The decision about that order of candidates is vitally important. As the Bill currently stands, that order will be determined entirely by the party itself. The three main parties represented in your Lordships' House have all chosen slightly different ways to decide on the order of that list. It would be fair to say that the Liberal Democrat Party has chosen the most open way in the form of a postal vote of its members. The Conservative Party has chosen the second most open way; that is, to hold general meetings of its members in each area. They come along, listen to the candidates, and then vote to determine the order of candidates. As I understand it, the Labour Party's decisions will be made by the powerful people who inhabit a certain floor of Millbank Tower, and so will be slightly less democratic and open.
That is how the three parties will do it. As our parties are independent organisations, it is only reasonable that they should be able to do it in their own way. It is odd that the Labour Party, which proclaims so much faith in democracy, has chosen the least democratic method of deciding the list. I hear my noble friends say that it is not odd at all. They are probably right: it is part of the control mechanism which so inhabits the Government. The real point, whether it is the Liberal Democrat, the Conservative or the Labour method, is that the one person who has no choice is the voter.
My amendments would mean that when the voter goes into the polling station next June, the voter who wants to vote for the Conservative Party would do so by placing his cross against the person on the Conservative list he would like to see being elected above all the others. The same is true of Labour; the same is true of the Liberal Democrats; in Scotland, the same would be true of the Scottish National Party. At the end of polling, all the votes cast for the Conservative candidates would be totalled, as they would be also for the Labour, Liberal Democrat and Scottish Nationalist candidates. The total votes for the parties will then be determined. The d'Hondt divisor will be brought into play; the number of seats to be given to each party will be determined, and the returning officer—let us say that the Labour Party are to get three members—will then look at the list and pick the three members who have received the most votes from the Labour electorate; not the general electorate but the Labour electorate. Those people who vote Labour, Conservative or Liberal Democrat, will therefore determine not just the number of seats the party will gain, but who on the party's list will gain those seats.
Your Lordships may well wonder why the Government are against a proposal which is so open and democratic. We will know a little later whether or not the Liberal Democrats are also opposed to it. A number of arguments have been heard over the course of this and related Bills. One is that our European neighbours have closed lists. Yes, some of them do. Germany, Spain, France, Greece and Portugal have a closed list system. Belgium, Denmark, Italy, Luxembourg, the Netherlands, Finland, Sweden, Austria and Ireland, however, have systems where the order of the names may be changed by casting personal votes for specific candidates. In Luxembourg and Ireland there can be cross-voting for people in different parties. The idea that, by moving to a closed list system, we are moving to one which accords with all our European neighbours is simply not true.
In any case, why do the Government seem to be so distrusting of our electoral system that they think that anything anybody else does must inevitably be better? That seems to be one of the themes that runs through it. I do not ask France and Germany to change their systems to our system, and I do not see why we have this obsession that what we have done for decades, in some cases centuries, is somehow worse than what some of them have done for only the blink of an eye when it comes to democratic elections this century.
The Government will tell us that the ballot paper will be too complicated. That is simply not true. The ballot paper will be reasonably straightforward. Indeed the Electoral Reform Society has produced a ballot paper which makes that quite clear. In case the Government still think that and the noble Lord, Lord Mostyn, tries to tell us that, perhaps I may suggest that he looks at Germany and the ballot paper that they used there a few weeks ago? He will see that it is not a straightforward ballot paper. The ballot paper outlined by the Electoral Reform Society for the system I am proposing would be a good deal simpler. I do not believe that the argument that the ballot paper will be too complicated holds any water at all.
What would the electorate like? The Home Office set up a focus group. That will not surprise your Lordships: if in doubt, set up a focus group! It commissioned some research by NOP last February and found that voters felt that the proposed closed list system appeared to be depriving them of their right to select individuals. For some voters it raised the question as to whether party loyalty will precede constituency loyalty. Focus group research carried out for the McDougall Trust by NOP found that voters' reactions were immediately negative to closed party lists, as they believed that they were being deprived of their right to vote for individual candidates.
I should have thought that to be fairly reasonable and self-evident. An organisation called the Democratic Audit carried out some work based on an ICM poll commissioned by the Joseph Rowntree Reform Trust. None of these organisations is a particularly a great supporter of the Conservative Party, but I believe that members of the Government and their friends on the Liberal Democrat Benches should be listening to what they are saying.
The poll asked people to vote on closed or open lists. The report stated that two-fifths used the opportunity to vote for individual candidates, while three-fifths voted for the party list. Charter 88 states that that is a significant majority, especially given that voters will never before have used a list system. The report states:
"In real campaign conditions, we would expect up to half the voters to use the opportunity to support a particular candidate".
If somebody straightforwardly wishes to vote for the party he simply votes for the person at the top of the party's list—if the party can put names in order. It could be alphabetical order. I have no objection to the party doing that, but I believe that people should be allowed so to vote.
One of the arguments used on a number of occasions by the noble Lord, Lord Williams of Mostyn, is that the first-past-the-post system is a closed list of one. That is significant and it is right, but in many regions when a voter votes for a party he will be voting for more than one person—he will be voting for two, three or four people. I suggest that in those circumstances a voter who does not like the names at the top of the list will be less likely to vote for another person or another party because he or she will realise that the vote counts for more than one person. However, we all know that in first-past-the-post elections a significant number of people say, "I put my hand over the candidate's name
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and voted for the party". There are a minority—not many—who say, "I am not voting for my party if that is its candidate". Therefore, I believe that the closed list of one is not a good argument because only one person is elected. One can decide not to vote for that person without endangering up to three or four of one's party's seats in a particular area.
I thought that the first-past-the-post system was a bit wobbly at the last election, and I even thought that it was a bit wobbly in 1987. But just because the result is not what I would have chosen that is not a good reason for changing the electoral system. I have always made that clear. However, the most important fact is that if the Government want to move away from the first-past-the-post system they should not hark back to some of its advantages in order to justify the closed list system, for goodness sake. If we are moving to proportional representation it ought to be not merely proportional representation; it ought to give the electorate more democratic control in terms of the people they elect.
Charter 88, in its handout on the issue, stated:
"We believe that voters should be able to choose between candidates of the same party. We are especially concerned that voters are not given the impression that the new voting system is being introduced for party political benefit. We are concerned that if the Government insist on the use of closed lists voters may be left with the impression that the voting system has been manipulated for party political aims".
I could not have put it better myself. It is being manipulated for the political ends of the party.
We agree to differ on the principles of first-past-the-post, but when we get into the nitty-gritty of the systems we can make common cause. Mr. Ken Ritchie said today:
"We are all for proportional representation and we give the Government credit for having moved so quickly in introducing PR for European elections. But there is more to electoral reform than PR. We want to see voters being able to exercise more choice, and certainly not less choice, over who their MEPs will be. Such a system [the closed list] is bad for voters, bad for candidates and bad for democracy".
I hope that at this last gasp your Lordships will agree that we ought to amend the Bill to ensure that the voters have some choice not just on the party colours of the people who represent them in the European Parliament, but also on who the individual who represents them should be. I beg to move.
3.30 p.m.
Lord Evans of Parkside: My Lords, last Monday at the Report stage I made it clear that the amendment we were debating, which was the same amendment as we are debating today, was superior to those that I had tabled giving the electorate choice of candidates. I stated that I would withdraw my amendments because I thought this amendment was better.
I have made it clear from the outset that I am hostile to the entire concept of the Bill in relation to closed lists as selected by central committees. I say to my noble friend the Minister that the amendment, if accepted by the Government, will not affect the Labour Party NEC's chosen list of candidates in any way whatever. Those chosen candidates will remain on the list. It will not

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affect proportionality in relation to the parties because, as the noble Lord, Lord Mackay of Ardbrecknish, made clear, the total of the votes cast for all the candidates will be given to the party. However, the electorate will have a small say in the positions of the candidates, and in one or two circumstances there might be a difference between the party's list and the electorate's final choice. It is a modest amendment which improves what I believe is a thoroughly bad Bill.
I also draw the Minister's attention, and the attention of the Liberal Democrats, to an interesting article in the Daily Telegraph of 15th October by Mr. George Jones, the paper's distinguished political editor. He was writing about the proposals of the noble Lord, Lord Jenkins of Hillhead, for the reform of voting systems for the House of Commons. I am certain that Mr. Jones had received some interesting information from a good source. He states that during a series of consultation exercises around the country he had been taken aback by the hostility to the idea that introducing some form of proportional representation based on a list system would increase party control.
The article quotes the noble Lord, Lord Jenkins. Apparently, the initial proposal was that the names would be selected by the parties from a pre-set closed list. However, the noble Lord proposes that voters should be able to vote for individual candidates on the list. I am sorry that the noble Lord is not in his place, but I believe that that is an important article. I submit that the proposal sounds like the amendment we are currently discussing, which tries to remove some of the tight control held by the central executive over the party's list. I trust that the Liberal Democrats will give the matter further thought in view of the fact that we might have to deal with the issue again when we receive the final report of the noble Lord and his committee.
I also refer to the comment made by the noble Lord, Lord Harris of Greenwich, when he dismissed my noble friend Lord Stoddart, who asked for an explanation of the system adopted by the Government in the Bill. The noble Lord rather loftily dismissed my noble friend by stating that election manifestos do not consist of the details of a Bill. I could not remember any mention in the manifesto, but that was probably my fault. Therefore, I searched through my copy and, sure enough, I found a reference towards the end of the document on page 37. There are 14 words in the manifesto, which state:
"We have long supported a proportional voting system for election to the European Parliament".
Yes, but it offered no explanation whatever. However, it did offer an interesting explanation of the system to be adopted for both the Scottish and Welsh elections to their respective parliaments next year. When we hide behind manifesto statements of such a brief nature and then produce Bills subsequently which leave a lot to be desired as far as democracy is concerned, it tends to bring politics into disrepute.
I suggest to my noble friend that if the Government accept this amendment it may actually assist the party in Wales. I understand that there are considerable difficulties with sections of the Welsh party because of
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the selection of the candidates to contest the five seats in Wales. My information is that the three Welsh Labour Party members on the NEC selection panel completely disagreed with the majority's placement of the candidates but were outvoted by the rest of the NEC members.
There have been considerable problems in Wales, with protests from various constituency parties about the Welsh list of candidates. If my noble friend can accept this amendment it will solve the Welsh problems at a stroke. It would give the Welsh electorate the opportunity to decide the order of the candidates to contest the election in Wales.
Is this Chamber a revising Chamber, as has often been pointed out? I am not parting company with the Government on any particular or major piece of legislation. I am asking them to have second thoughts about a particular element in a particular Bill, as are other noble Lords. When it discussed this issue in Committee, the House of Commons did not spend long debating particular methods. On Second Reading, on 25th November 1997, there was a rather astonishing exchange between the Home Secretary and various Members when, introducing the Bill, he said:
"To help hon. Members, I shall arrange for a brief description of how the Belgian system operates to be placed in the Library, alongside a greater description of how the system in the Bill is intended to operate, and I shall be interested to learn how hon. Members on both sides of the House perceive the system. This will therefore be a subject to which we can return at a later stage of the Bill's passage".
Hansard records that several honourable Members rose and Mr. Straw said:
"I give way first to the right hon. Member for North-West Cambridgeshire (Sir B. Mawhinney)."
Sir Brian said:
"I want to be clear as to what the Home Secretary has said. Has he just said that, having proposed the Second Reading of a major Government Bill, he is now signalling that he is willing to change one of the fundamental aspects of that Bill?"
Mr. Straw replied:
"It may come as a surprise to the right hon. Gentleman, as a member of the previous Government, who did so badly, that we are a party and a Government who listen to argument".—[Official Report, Commons; 25/11/97, col. 814].
That is precisely what is being attempted on this occasion. An argument is being presented in relation to one aspect of the Bill. It is not an instruction to the House of Commons that it has to accept anything from the House of Lords; it is an opportunity for it to have second thoughts about this particular aspect. If the Home Secretary is correct that this is a government who listen to argument, and if the noble Lord, Lord Jenkins of Hillhead, is correctly quoted in the Daily Telegraph as saying that he has been taken aback by the hostility to closed lists which increase central party control over candidates, surely this is a timely and helpful amendment from the revising Chamber to the principal Chamber. I trust that my noble friend will give serious consideration to accepting the amendment.
3.45 p.m.
Earl Russell: My Lords, I must declare an interest as president of the Electoral Reform Society. The society put out a press release at two o'clock today from which the noble Lord, Lord Mackay of Ardbrecknish, has already quoted. I wish to quote the paragraph following the one mentioned by the noble Lord:
"At present many candidates have been selected and put on lists in positions in which they have no hope whatsoever of being elected no matter how popular they are with the electorate. Others near the top of lists will almost certainly be elected even if the electorate thinks they are useless. Such a system is bad for voters, bad for the candidates and bad for democracy".
Having declared my interest, I have also read the Companion to the Standing Orders which says that noble Lords speak not for outside interests but for themselves. I am also aware that the attitude of my Front Bench towards this amendment is different from that of the society. That attitude has very great weight with me. But, faced with two conflicting pressures, I think that frees me to consider arguments of principle, of the national interest and of democracy. That is what I propose to do.
I shall not spend long on the case against the closed list. I have been outlining it since the Second Reading of the Bill. The basic point is that democracy involves the right to choose both what party and what person will represent us. This Bill allows us to choose what party represents us; it does not allow us to choose what person represents us. That appears to be a fundamental blow to democracy. It is bad for the candidates; it is even worse for the elected members. It destroys the accountability of the member to the voters. In doing so it destroys one of the very cardinal principles of democracy. All members of elected assemblies—or of any other assemblies—will try to please those from whom their title to sit comes. It is human and it is inevitable. This Bill creates an incentive to please a party machinery and not to please voters.
We on these Benches have always upheld two principles of electoral reform. One is the principle of proportionality, which this Bill meets. The other is the principle of accountability to the voters, extension of voter choice and the use of the injection of democracy to control unaccountable power. The one principle has always been as important to us as the other. The second principle this Bill does not meet at all. It is not a representation of the people Bill; it is a representation of the parties Bill.
The contrary case must rest almost entirely in terms of the appeal to loyalty. My loyalty to my party is one of the strongest emotions that I possess. It is a greater loyalty to a collective group of people than I ever believed myself capable of. I agree—we all do—that all political effort is and must be a team effort. In my actions so far I have tried to give effect to that principle. I had been here 10 years before I voted against the party Whip. Indeed, I was once reproved by Lady Seear, as deputy Leader, for insufficient willingness to vote against the Whip. Since then I have done it twice, on both occasions on this particular issue—three offences, if you like, but all on the same point, so I might ask for the sentences to run concurrently.
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The need for a team effort necessarily goes both ways. There is sense in what I am told is a disciplinary maxim in the American army: never give an order which is not going to be obeyed.
Loyalty is something about which I have thought in many contexts. It takes many forms. Loyalty can be loyalty to a person or it can be loyalty to principles. The distinction is most classically made in the famous "Saturday night massacre" in the United States when Richard Nixon ordered the Attorney-General to sack the Special Prosecutor. A1 Haig said to the Attorney-General, "Your Commander-in-Chief is giving you an order". The Attorney-General replied, "I am sworn to obey the constitution". There you have the two principles of loyalty. Your Lordships will have no difficulty in guessing which is mine.
Loyalty can also be a loyalty to a person or to a group. When I think of my loyalty to my party, I think of the people with whom I ran up steps in Oldham in a heat wave or who held the torch for me when I looked for numbers in Winchester Cathedral Close in the rain and in the dark. If I were to vote with this Whip, they would not understand me. That, of course, is not an insuperable argument. Occasionally, one has to do things which they do not understand. What is much more important to me is that I could hear myself, if I tried to answer them, getting to the point where my voice faltered and I had no argument.
I have listened to my Front Bench on this issue many times. They argue that there has been a deal. I do not know what deal; when it was reached; where it was reached; or for what inducement. I would need to know those things. I do know that when this Bill was first announced. It certainly was not known to those who managed the business for us that it was to introduce a closed list. I do know that my honourable friends in another place voted against a closed list. If we carry this amendment, I would expect it possible that many of them might do so again.
The other argument is simply in terms of the loss of the Bill. I argued last week that I do not really believe that that is a particularly large danger. All three parties have now chosen their candidates. If the Bill were to be lost, we would have to go back to the old constituencies and to the old candidates. I do not believe that the Prime Minister wants Mr. Ken Coates returned as a Labour MEP. Therefore, I believe that the danger of the loss of the Bill is small.
We must consider always, especially when in trouble with our parties, what the effect of our vote is. I do not believe that a vote for this amendment is just a gesture. I believe there is a possibility that the amendment might carry. If it carries, I believe it will attract support in another place. I believe it is not impossible that it might be accepted. The chances of course are slim, but if we do not try to change legislation where there is a slim chance, then, my Lords, what are we doing here?
I must of course listen, and will listen with the greatest care, to what my Front Bench says in reply to what I have said. I owe them that. But I must say to them that, as I see things at present, I am minded to

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vote for the amendment; and any argument that persuades me otherwise would have to be a very good one indeed.
Lord Renton: My Lords, we have heard three very impressive speeches in favour of the amendment. I am sure that all your Lordships will carry their mind back to other occasions when Parliament has had to decide on electoral reform. Certainly in this century—it was not so true in the previous century—we have generally managed to get a high degree of agreement between the parties on that matter and we have tried also to put the interests of the people first. One's mind goes back to giving votes to women, to the lowering of the voting age, and so on. It would be very unfortunate if an amendment which should achieve agreement between the parties, even though it is something of a compromise, were to fail in your Lordships' House. I therefore implore not only the members of the Government Front Bench but also the members of the Liberal Democrat Front Bench to bear in mind those two worthy ends: meeting the interests of the voters and trying to get agreement between the parties.
Lord McNally: My Lords, when I was Member of Parliament for Stockport, South I once went to a local club. The chairman said, "Before we start the bingo, we will have a few words from our Member of Parliament". Until the intervention of my noble friend Lord Russell, that was the most daunting softening up for any speech I had to make. Of course I understand his strong commitment to proportional representation, to democracy and to open lists, and certainly no orders are going from this Front Bench. We have a position, as we are entitled to have, and that is that we will invite Liberal Democrats to vote with the Government and against the amendment.
My favourite political play is "Antigone" in which Creon explains to Antigone that politics is sometimes about getting your hands a little dirty. I fear that my noble friend Lord Russell is my Antigone.
Noble Lords: Oh!
Lord McNally: I hear the "Ohs" from former Conservative Ministers who spent 18 years getting their hands dirty, so let us have a little silence from those Benches. I also remember George Woodcock, the former General Secretary of the TUC, reminding his members on many occasions that progress was often based on shabby compromises.
Of course my party believes in the single transferable vote. At earlier stages we have argued for the open list system. We have been working—that is not a matter of deals—with the Government across a wide range of constitutional reform. We wish we could have persuaded the Government at earlier stages of different shapes for not only this Bill but also for the Bills dealing with Scotland, Wales and so on. But what do we have tonight? We have the noble Lord, Lord Evans, telling us that he thinks this is a bad Bill. We have the noble Lord, Lord Mackay, telling us that he would have
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first-past-the-post if he could get it. It seems to me that the supporters of this amendment support it because they do not want the Bill at all.
I shall tell the House what we want. We believe that the Bill is a substantial advance on whatever has been on offer before for elections to the European Parliament. We have had nominated Members of the European Parliament and we have had Members of the European Parliament elected by first-past-the-post. As has been pointed out on a number of occasions, the first-past-the-post system on large constituencies produced grotesque swings in the representation of one or other party, Labour or Conservative, and until the last election totally excluded the Liberal Democrats. Under this system not only will parties be represented according to some proportion of the votes they receive in those elections but, almost as important, we will have a geographic spread so that from the south-west for the first time we may hear a Labour voice in the European Parliament, or from the West Midlands a Liberal Democrat voice, or from the north-east a Conservative voice. I believe that that makes a healthier representation in the European Parliament.
I also believe that it will bring about a development where those who hanker after the constituency system are really and truly behind the game. These elections will bring genuinely regional voices into our politics and into the European Parliament, not block voices but individuals who are voted in from those Euro-constituencies. They will then become a voice for their region.
As the noble Lord, Lord Mackay, was generous enough to acknowledge, many of the objections rest not on what is in the Bill but on how some powers internal to various parties have been interpreted. For my part, I know the individuals who will be holding the banner for the Liberal Democrats. I know how they have been chosen. They have not been chosen by any central committee but by our members voting freely. They have produced lists with an order which is their choice and which they will put to the electorate with enthusiasm.
Of course this Bill is not everything that we wanted. However, I say to my noble friend Lord Russell that I can face exactly the same activists as he has trouble facing. I shall tell them that by securing this Bill, for the very first time we shall send to the European Parliament a delegation, a representation, of Liberal Democrats commensurate with our support in the country. That is closer to my ideal of democracy than we have ever achieved before and it is worth supporting.
4 p.m.
Lord Stoddart of Swindon: My Lords, we heard some extremely distinguished speeches this afternoon. I rise to support my noble friend Lord Evans of Parkside who made a very penetrating, indeed distinguished, speech in support of this group of amendments.
I believe that my noble friend Lord Evans speaks for a number of people on the Labour side of the House. That must be taken into account. My noble friend has had a long and distinguished career and past in the Labour movement and, indeed, in the body politic. He was a Member of another place for a long time and has been a

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Member of this House for a little while during which time he has been extremely active and has made some distinguished contributions.
However, he has also been extremely active in the Labour movement generally, serving for many years as a member of the National Executive Committee. Therefore, he knows what he is talking about and has represented a wide range of people in the Labour Party over a long period of time. What he said about the Bill and the amendments is correct. Although he and I are for the continuation of the first-past-the-post system, which is respectable, he supports an attempt to make the proposals in the Bill more workable and more responsive to the people of this country.
What he wants to do and what the amendments seek to achieve is to give the electorate a voice in who is elected to the European Parliament. I see nothing wrong in that and everything right in it. I hope that the Minister will accept the amendment, but I should say to him that I have been in this House, in another place and in the Labour Party for a long time. My guess is that if the proposal in this Bill had been put forward by a Conservative government, the Labour Party in this place, led by the Front Bench, and indeed in another place, would be opposing it. I am quite sure that my noble friends in Opposition would say that this is a disgraceful Bill which strikes at the very roots of representative democracy. It is a great pity that we are not saying so now.
Only one mistake was made from the other side; it suggested that the Labour Party is doing this for its own electoral benefit. That is not so. I do not think that will happen. Labour supporters should not believe that this will be better for the Labour Party than the first-past-the-post system or an STV system. Oh no, it is designed not to help Labour candidates; it is designed to help Liberal candidates. They will gain most from this measure.
Therefore, I hope that the Minister, as was suggested to him by my noble friend Lord Evans, will understand that this House is entitled to make recommendations to another place. Indeed, with his support we should be very pleased to make the recommendation contained in these amendments.
Lord Cockfield: My Lords, as your Lordships will know, I had at one time a relationship—fortunately, an arm's length relationship—with the European Parliament. I was always extremely concerned about the peculiar effects of the first-past-the-post system in the United Kingdom on the balance of power in the European Parliament. Therefore, I was always in favour of some reform. But, frankly, I regard the closed list system as even more objectionable than the first-past-the-post system. Therefore, the proposal which my noble friend puts forward is at least an improvement on the thoroughly objectionable proposal in the Bill promoted by the Government.
The Minister of State, Home Office (Lord Williams of Mostyn): My Lords, it almost seems that the world reserves of hyperbole have been somewhat exhausted. Therefore, I shall try to approach the matter in a calmer way.
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The fact is that for any modern functioning democracy, it is political organised parties which bring forward candidates to elections. It is the party activists, the deeply committed minority, who organise party structures to bring forward candidates. The noble Lord, Lord Mackay of Ardbrecknish, indicated that our colleagues in Europe are somehow Johnnies-come-lately, whereas in this country for centuries we have been voting democratically. That is not really so. It was after 1918 that women got the vote on a basis of any sort of equality. If the noble Lord doubts my history, I shall indicate the dates: 1832, 1868 and 1884. Those are the dates of the Reform Acts which were significantly opposed by a large number of his then party.
The noble Lord said that NOP had carried out research. He said correctly that when it carried out that research about the closed list, the reaction was immediately negative. Is it not also the case that when the systems were explained to those who were polled, they changed their views quite significantly?
The noble Lord contended, as he does always most agreeably, that he does not want the Bill at all because he favours the first-past-the-post system; and, secondly, as he did in Committee and on Report, that he is the champion of internal party democracy. Again, that is not really so because the other day he confessed, which is always good for the soul, that he is one of the three not quite hereditary clansmen in Scotland who would determine not the order of the list but whether or not anyone should be allowed to stand at all for the Scottish parliament.
The fact is that when this matter was discussed in another place, my right honourable friend the Home Secretary said that he would look at the Belgian system. He commissioned research on that which indicated that one could have quite absurd results in terms of public acceptability.
We have been over this in the past, and I shall trespass very briefly on your Lordships' time and patience. The fact is that the so-called open list system, as shown by the way it has worked in Belgium, is quite capable of producing anomalous results. That is to say, someone can be elected with a lesser total of votes than someone who fails to be elected. That has never been gainsaid. I do not think that anyone controverted that proposition when I developed it previously; indeed, the noble Lord, Lord Mackay, described it as "a fiddle and manifestly unfair."
Earl Russell: My Lords, can the Minister tell us of any electoral system which is incapable of producing anomalous results?
Lord Williams of Mostyn: My Lords, of course not. Some representation depends upon no election at all and that produces anomalous results—for instance, as the noble Earl will know, the hereditary principle.
One has to make a judgment of what the appropriate scheme is. The noble Lord, Lord Stoddart, said that the proposal would not necessarily be of universal benefit to the Labour Party. I accept that. Similarly, mention

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was made of Scotland and Wales. My noble friend Lord Evans of Parkside said that the amendment would solve the Welsh problem. I do not think that anything is capable of solving the Welsh problem, certainly not the suggestion of the noble Lord, Lord Mackay. I am not adopting a partisan stance because I think we are entitled to look for your Lordships' support. The fact is that the Conservative Party had significant electoral support in Scotland at the last general election but secured no Members of Parliament there. In Wales, 20 per cent. of the electorate voted Conservative but the party has no Members of Parliament there. As I have said on a number of occasions, we have specifically designed these schemes to do away with a monolith in Wales and in Scotland, neither of which is likely to be healthy for the Scottish parliament or the Welsh assembly.
I revert to where I began. The party, I suggest, should not be confused with the mechanism we are proposing. A number of observations have been made. The noble Lord, Lord Mackay, says that the Conservatives are very democratic internally; the noble Lord, Lord McNally, says that his party is more democratic; and the noble Lord, Lord Evans, over the years, has tried to make the Labour Party more democratic internally, but that is nothing to the point of the system adopted. If one wants a better, more democratic internal party selection system, that is one thing. What we are doing here is offering to the voters a list of party supporters in a way which has been determined by internal party choice.
Internal party choice can be good or indifferent but that is nothing to the point on the list. I do not believe that it can be gainsaid—it has not been gainsaid on any occasion when we have had these lengthy debates in Committee and on Report—that the open list system can produce results which are deeply offensive to the public. I believe I am right in saying, from memory, that the sort of NOP polling to which the noble Lord, Lord Mackay of Ardbrecknish, referred, absolutely confirmed that.
Perhaps I may give an illustration. I want to put it neutrally. I think that most people of fair mind—that means most people who agree with me—would accept that women are grossly under-represented and ethnic minorities have an even less favourable deal. I believe that it is competent and proper for a party to select what is called a closed list; to bear that in mind; and to give women a fair deal and ethnic minorities a fair deal by putting them appropriately high in the list.
4.15 p.m.
Lord Evans of Parkside: My Lords, I accept the premise that my noble friend puts forward in relation to women and ethnic minorities. However, will he accept from me that a close study of the Labour Party's list of candidates indicates clearly that there will be 13 women elected to the European Parliament under these new proposals, as there were 13 elected under the first-past-the-post system, and one representative of
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ethnic groupings—one black member—will also be elected? There is an outside chance that a second black member may be elected, but that is somewhat doubtful.
Lord Williams of Mostyn: My Lords, I do not think that focuses on the principle I am contending. I readily recognise that there are some women and some people from ethnic minorities who do not want any consideration of this sort applied to them. But I believe that a party has a moral duty to ensure that women and those from ethnic minorities are not disadvantaged.
Perhaps I may give an example from the Home Secretary's own constituency. In a multi-member ward constituency it was noticeable that those who had names which were apparently of ethnic minority origin did significantly worse than those with apparent English, Welsh or Scottish names. We can argue and differ about these things but I believe that if a party wants to bring forward a certain number of women; to redress the monstrous endemic injustice from which ethnic minorities suffer or to bring forward—let us not forget—people of particular expertise whom it wishes to have at the top of the list, it is entitled to do so.
The noble Lord, Lord Cockfield, expressed displeasure about first-past-the-post. This provision remedies that in part. He expressed displeasure about the solution we propose. But if the Labour Party, the Conservative Party or the Liberal Party have people with particular expertise in the European context, people who are knowledgeable, experienced and practised, it seems to me perfectly justifiable that the party which is bringing forward the candidates should offer those candidates in the list as this Bill offers.
Lord Shore of Stepney: My Lords, perhaps I may take my noble friend back to where he was when he discussed the Belgian system and pointed out that it contained a defect; namely, that you could get more votes—but not be elected—than someone who was elected and that that causes resentment. I think that point has been understood in the House during our debate. But it is not true that only the Belgian system is available. As the noble Lord will remember from earlier exchanges, there is a Finnish system. The Finnish system rules out the danger of someone being elected who has not had a majority of votes cast by eliminating the chance of voting for a party. It simply lists the names of the candidates. Their party loyalty is indicated as well so that when the vote is cast, if the aggregate of those votes cast were for a particular name and he comes top of the list, he will be elected. That exists in practice. What is the defect with that?
Lord Williams of Mostyn: My Lords, I remember on the earlier occasion that the noble Lord was contending for the Finnish system and the Luxembourg system. The Luxembourg system seems to have fallen by the wayside.
I return to my fundamental point, namely that it is parties that bring forward candidates. If parties internally choose their candidates, I suggest to your Lordships that they are entitled to do that and offer that list in the way they have chosen for the reasons—

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perfectly honourable and legitimate reasons—I have outlined. If the individual voter does not wish that, he or she is perfectly entitled not to use the vote for that party or to use it for another party in exactly the same way as on the presently closed system.
If the only Labour candidate in my constituency—if I were able to vote—was someone I did not care for, I would have to come to a conclusion. Do I vote on party loyalty lines, identified by the noble Earl? Do I not vote for that particular candidate? Or do I swallow my doubts and vote for that candidate.
To revert to the description of the noble Lord, Lord Shore, the "Finnish system", as I understand it, has the same weaknesses as the Belgian system. Candidates in Finland can be elected with fewer votes than candidates who are not elected.
My next observation is simply a part of the picture and is not intended to be an overwhelming argument. It will be the fact that, should we go the way that this Bill indicates, Germany, France, Greece, Spain and Portugal will all have the same system that we do; in other words, it will apply to rather more than 70 per cent. of the voters in the European Union. It will not surprise your Lordships that I have not changed my view about the propriety of that.
I listened carefully—we listen sometimes with a full House and sometimes with a scanty House—to the arguments that have been rehearsed. I do not say that impolitely because many noble Lords feel strongly about this matter. First, I feel that we were honourably right in moving away from the first-past-the-post system for European elections. We are entitled to say that this is a reasonable scheme whereby, essentially, we are voting in large regional areas. That is wholly different from and unrelated to the size of our present constituencies. It is the fact that on the lists many voters—I say this without disrespect—will not have much knowledge of the individuals offering themselves except for the fact that they are on the party list.
It has been said—again it is not accurate—that this is an unprecedented step. In fact, this is a scheme which worked in Northern Ireland. The Northern Ireland (Entry to Negotiations, etc) Act 1996, piloted by the party opposite, provided for a list-based electoral system exactly the same as this in all essentials for elections to the peace forum. Therefore it is not unprecedented. The argument that it has not happened before and the question as to where it will all end—unattractive as it is—is not even founded on recent history.
I cannot usefully contribute further to these discussions. I invite your Lordships to come to the conclusion that this is an amendment that should not be supported.
Lord Mackay of Ardbrecknish: My Lords, we have had an interesting and thoughtful debate and I am grateful to all those noble Lords who took part. In summing up perhaps I can make a few points in response to what was said.
First, I say to the noble Lord, Lord McNally, that it is not a fair proposition to say that I tabled this amendment because I do not like the Bill. The
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amendment does not damage the Bill. My view is that it improves the Bill because it improves the PR method being used. As to sending Liberal Democrats to the European Parliament, which seems to be the objective of the noble Lord, Lord McNally—I suppose it is a reasonable one—having an open list will not prevent that happening if it is going to happen. It makes no difference to the numbers who go; it means that those who vote Liberal Democrat will actually decide who will go. That is the important point.
I shall not embarrass the noble Earl, Lord Russell, too much. As those noble Lords who were in the House in the last Parliament will know, he and I were frequently at daggers drawn, though they were genteel daggers. We had considerable differences of opinion. However, one thing I knew was that the noble Earl would conduct his arguments with dignity and honesty. He has done that again today and, if it does not embarrass him too much, as usual I take my hat off to him for his skills in that regard.
The noble Lord, Lord Evans of Parkside, said that this does not upset the principle of the Bill. The open list system which I brought before your Lordships obeys the Labour Party's manifesto in every way as much as the closed list system brought forward by the Government. Therefore it is not a problem. In relation to the need to hasten this Bill. I must say that this Bill has made the most stately progress through both Houses of any Bill of its size. My noble friend Lord Henley reminded me that it started in the other place last November. The Bill will not be lost simply because your Lordships ask the other place to think again.
The noble Lord, Lord Williams of Mostyn, performed many of his usual clever tricks—if I may so call them—learnt, no doubt, in many years of making excellent submissions at the Bar. In doing so he introduced a series of red herrings and, so to speak, "kippered" them. He produced an argument in relation to PR. But we are not arguing for or against PR; we are arguing inside the PR system.
The noble Lord argued against the Belgian system. But it is not the Belgian system. In this system, if three people are elected from the Labour Party, the three people who will go to Brussels will be the three who obtained the largest number of votes. Nobody with more votes than the three who go will be on the list. It cannot happen. The returning officer will take the candidate with the biggest vote, the next and the next. So I am afraid that the noble Lord, Lord Williams of Mostyn, produced a bit of a red herring in that argument.
The Belgian system has nothing to do with it; this is not the Belgian system. This is not an argument about PR. It is an argument about offering the voter a choice. Towards the end of the submissions of the noble Lord, Lord Williams, he showed us that he did not believe that Labour Party voters should have a choice; he did not believe that they would exercise it properly—properly was the way he defined it. That may be what he thinks about Labour Party voters. It is a sad reflection of what the Government think about the people who returned them to power with such an excellent majority, at least

1333
in the other place. I believe that Labour voters deserve better. It is not simply a matter of giving the voters a choice between the parties and ending up with proportionality; it is about giving the voters a choice between the candidates of their favoured party.
After last year it is not easy to say this, but I say it now because it is the position that I am taking here, clearly and firmly, and the Government are not. We should trust the electorate to decide who from a party's list should go to Brussels. We should trust the electorate. As a result of the debate last week it may seem a little odd to ask your Lordships to come to the rescue of democracy and voter choice. But that is exactly what I ask your Lordships to do. I do not believe that, unlike his usual performances, the noble Lord, Lord Williams of Mostyn, made out his case and I invite your Lordships to make a judgment.
4.26 p.m.
On Question, Whether the said amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 165; Not-Contents, 140.

Division No. 1

CONTENTS

Ackner, L.

Cope of Berkeley, L.

Alexander of Tunis, E.

Courtown, E.

Allenby of Megiddo, V.

Cox, B.

Ampthill, L.

Cranborne, V.

Anelay of St. Johns, B.

Crickhowell, L.

Astor of Hever, L.

Cuckney, L.

Beaumont of Whitley, L.

Cullen of Ashbourne, L.

Belhaven and Stenton, L.

Dahrendorf, L.

Beloff, L.

Davidson, V.

Berners, B.

Denbigh, E.

Bethell, L.

Denham, L.

Birdwood, L.

Dixon-Smith, L.

Blackburn, Bp.

Elibank, L.

Blatch, B.

Ellenborough, L.

Bledisloe, V.

Elton, L.

Boardman, L.

Erne, E.

Bowness, L.

Evans of Parkside, L.

Brabazon of Tara, L.

Exmouth, V.

Brentford, V.

Ferrers, E.

Bridge of Harwich, L.

Fraser of Carmyllie, L.

Bridges, L.

Gainford, L.

Brightman, L.

Gisborough, L.

Broadbridge, L.

Glasgow, E.

Brougham and Vaux, L.

Gray of Contin, L.

Bruntisfield, L.

Halsbury, E.

Burnham, L. [Teller.]

Harding of Petherton, L.

Burns, L.

Harmar-Nicholls, L.

Butterfield, L.

Harmsworth, L.

Butterworth, L.

Harris of High Cross, L.

Byford, B.

Harrowby, E.

Campbell of Alloway, L.

Headfort, M.

Carew, L.

Henley, L.

Carnarvon, E.

Higgins, L.

Carnegy of Lour, B.

Hogg, B.

Carnock, L.

HolmPatrick, L.

Chesham, L.

Hooper, B.

Clanwilliam, E.

Howe, E.

Clark of Kempston, L.

Hussey of North Bradley, L.

Cockfield, L.

Hylton-Foster, B.

Colwyn, L.

Ilchester, E.

1334

Iveagh, E.

Platt of Writtle, B.

Kingsland, L.

Rankeillour, L.

Kinloss, Ly.

Rawlings, B.

Kinnoull, E.

Renfrew of Kaimsthorn, L.

Kintore, E.

Renton, L.

Kitchener, E.

Renwick, L.

Knight of Collingtree, B.

Ritchie of Dundee, L.

Knollys, V.

Rotherwick, L.

Lamont of Lerwick, L.

Rowallan, L.

Lane of Horsell, L.

Russell, E.

Leathers, V.

Ryder of Wensum, L.

Leigh, L.

Saatchi, L.

Liverpool, E.

St. John of Bletso, L.

Long, V.

Sandford, L.

Lucas of Chilworth, L.

Sandwich, E.

Luke, L.

Seccombe, B.

McAlpine of West Green, L.

Selkirk of Douglas, L.

McConnell, L.

Shaw of Northstead, L.

Mackay of Ardbrecknish, L.

Shore of Stepney, L.

Mackay of Drumadoon, L.

Skelmersdale, L.

Marlesford, L.

Slim, V.

Mayhew of Twysden, L.

Stallard, L.

Mersey, V.

Stenley of Alderley, L.

Miller of Hendon, B.

Stockton, E.

Molyneaux of Killead, L.

Stodart of Leaston, L.

Monk Bretton, L.

Stoddart of Swindon, L.

Monson, L.

Strange, B.

Monteagle of Brandon, L.

Strathclyde, L. [Teller.]

Mottistone, L.

Sudeley, L.

Mountevans, L.

Swansea, L.

Mowbray and Stourton, L.

Teviot, L.

Moyne, L.

Thomas of Gwydir, L.

Munster, E.

Trefgarne, L.

Waddington, L.

Naseby, L.

Weatheril, L.

Noel-Buxton, L.

Wedderburn of Charlton, L.

O'Cathain, B.

Wharton, B.

Onslow of Woking, L.

Wilberforce, L.

Oppenheim-Barnes, B.

Wilcox, B.

Palmer, L.

Wilson of Tillyorn, L.

Pender, L.

Windlesham, L.

Perry of Southwark, B.

Wise, L.

Pilkington of Oxenford, L.

Wynford, L.

NOT-CONTENTS

Addington, L.

Dean of Beswick, L.

Ahmed, L.

Dean of Thornton-le-Fylde, B.

Alli, L.

Desai, L.

Amos, B.

Dholakia, L.

Archer of Sandwell, L.

Diamond, L.

Ashley of Stoke, L.

Dixon, L.

Bach, L.

Dormand of Easington, L.

Bassam of Brighton, L.

Eatwell, L.

Bath, M.

Evans of Watford, L.

Berkeley, L.

Ewing of Kirkford, L.

Blackstone, B.

Ezra, L.

Blyth, L.

Falconer of Thoroton, L.

Borrie, L.

Falkland, V.

Brooke of Alverthorpe, L.

Farrington of Ribbleton, B.

Bruce of Donington, L.

Fitt, L.

Burlison, L.

Gallacher, L.

Carmichael of Kelvingrove, L.

Geraint, L.

Carter, L. [Teller.]

Gilbert, L.

Charteris of Amisfield, L.

Gladwin of Clee, L.

Clarke of Hampstead, L.

Goodhart, L.

Cledwyn of Penrhos, L.

Goudie, B.

Clement-Jones, L.

Gould of Potternewton, B.

Clinton-Davis, L.

Graham of Edmonton, L.

Cocks of Hartcliffe, L.

Gregson, L.

Crawley, B.

Grenfell, L.

Currie of Marylebone, L.

Grey, E.

David, B.

Hacking, L.

Davies of Coity, L.

Hamwee, B.

Davies of Oldham, L.

Hardie, L.

1335

Harris of Greenwich, L.

Newby, L.

Haskel, L.

Ogmore, L.

Hayman, B.

Orme, L.

Hilton of Eggardon, B.

Paul, L.

Hogg of Cumbernauld, L.

Pitkeathley, B.

Hollis of Heigham, B.

Plant of Highfield, L.

Hoyle, L.

Ponsonby of Shulbrede, L.

Hughes, L.

Ramsay of Cartvale, L.

Hughes of Woodside, L.

Randall of St. Budeaux, L.

Hunt of Kings Heath, L.

Razzall, L.

Hutchinson of Lullington, L.

Rendell of Babergh, B.

Islwyn, L.

Renwick of Clifton, L.

Jacobs, L.

Rodgers of Quarry Bank, L.

Jay of Paddington, B. [Lord Privy Seal.]

Russell-Johnston, L.

Sainsbury of Turville, L.

Jenkins of Putney, L.

Scotland of Asthal, B.

Judd, L.

Sefton of Garston, L.

Kirkwood, L.

Serota, B.

Linklater of Butterstone, B.

Sharp of Guildford, B.

Lockwood, B.

Shepherd, L.

Lofthouse of Pontefract, L.

Sheppard of Liverpool, L.

Longford, E.

Simon, V.

Lovell-Davis, L.

Simon of Highbury, L.

Ludford, B.

Smith of Gilmorehill, B.

McIntosh of Haringey, L. [Teller.]

Steel of Aikwood, L.

Stone of Blackheath, L.

Mackenzie of Framwellgate, L.

Strabolgi, L.

McNair, L.

Symons of Vernham Dean, B.

McNally, L.

Taylor of Blackburn, L.

Maddock, B.

Thomson of Monifieth, L.

Mar and Kellie, E.

Thornton, B.

Mason of Barnsley, L.

Thurso, V.

Methuen, L.

Tomlinson, L.

Miller of Chilthorne Domer, B.

Tope, L.

Milner of Leeds, L.

Turner of Camden, B.

Mishcon, L.

Varley, L.

Molloy, L.

Wallace of Coslany, L.

Monkswell, L.

Warner, L.

Montague of Oxford, L.

Whitty, L.

Morris of Castle Morris, L.

Wigoder, L.

Morris of Manchester, L.

Williams of Elvel, L.

Murray of Epping Forest, L.

Williams of Mostyn, L.

Resolved in the affirmative, and amendment agreed to accordingly.
4.37 p.m.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendments Nos. 2, 3 and 4:
Page 2, line 2, at end insert—
("(2A) Each candidate shall declare that he is either—

(a) the candidate of a party and shall name that party; or

(b) an independent candidate.

(2B) There shall be added together the number of votes given for each party's candidates in each electoral region.
(2C) The number arrived at under subsection (2B) shall be the number of votes for the party for the purposes of this Act.").
Page 2, line 15, at end insert—
("(5A) After the allocation of seats to the parties, the order of candidates in each list shall be such that candidates are ranked in terms of the votes each received, with the candidate with the highest number of votes appearing first.
(5B) If two or more candidates have the same number of votes, their order on the list shall be determined by lot.").
Page 2, line 18, at end insert (", following the rearrangement required under subsections (5A) and (5B).").
On Question, amendments agreed to.
Lord Williams of Mostyn: My Lords, I beg to move that this Bill do now pass.
Moved, That the Bill do now pass.—(Lord Williams of Mostyn.)
On Question, Bill passed, and returned to the Commons with amendments.

Competition Bill [H.L.]
The Minister of State, Department of Trade and Industry (Lord Simon of Highbury): My Lords, I beg to move that the Commons amendments be now considered.
Moved, That the Commons amendments be now considered.—(Lord Simon of Highbury.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
[The page and line refer to Bill (140) as first printed for the Commons.]
1 Clause 1, page 1, leave out lines 15 to 17.
Lord Simon of Highbury: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 1, which is grouped with Amendments Nos. 46, 47, 48, 76, 93, 99, 104, 105 and 114.
We start proceedings today, rather unusually, with amendments which are mainly to be inserted at the end of the Bill and which are in a sense peripheral to its central features. Rather, they concern how we are to transit from the existing regime in the Restrictive Trade Practices Act and the Resale Prices Act to the prohibition regime introduced by the Bill. This starting-point is a consequence of the paving amendment to Clause 1 of the Bill, which was used to introduce amendments to the transitional schedule, Schedule 13, on the issue of resale price maintenance of over-the-counter medicine. The Commons amendments overturn both the paving and the substantive amendments passed by your Lordships. I shall have more to say on the issue of over-the-counter medicines in a moment.
First, however, the new transitional schedule gives me a convenient opportunity to explain at the start of our proceedings when the Government propose to implement the Bill should it gain Royal Assent and what transitional arrangements there will be for existing agreements.
When we debated the Bill in Committee, I said:
"It is important that the main elements of the regime should be in place in good time before the prohibitions start to apply".
I added:
"if the Bill is granted Royal Assent, there will be a period between Royal Assent and the coming into force of the prohibitions. I would expect this period to be about a year. I would also expect rules under Clause 49 and guidelines under Clause 50 to be issued early in that period".—[Official Report, 25/11/97; col. 899]
Those clauses in the print we are considering today are Clauses 51 and 52.

1337
As your Lordships will know, initial draft rules and guidelines have been issued by the Office of Fair Trading and I fully expect formal drafts to be issued shortly after Royal Assent. We have now decided, however, to give business more time to prepare for the introduction of the new regime. We have decided that the two new prohibitions should be brought into force on 1st March 2000. I am sure the House will agree that this provides an ample period for business to prepare.
We further intend that the new competition commission should come into being, taking over from the Monopolies and Mergers Commission, on 1st April 1999. I am sure that all of your Lordships will agree that that is a most opportune date! This will enable the new body to be fully prepared to perform its new functions once the prohibitions come into force.
For agreements made before the Chapter I prohibition is commenced, the new schedule introduced by Amendment No. 104 will provide further generous transitional periods. As a general rule, all such agreements will receive a one-year transitional period from the commencement date which, as I have said, I expect to be 1st March 2000. But to the extent that an agreement has bene found by the Restrictive Practices Court not to be contrary to the public interest, it will receive a five-year transitional period. This includes agreements in respect of resale price maintenance for goods which have received an exemption order under the Resale Prices Act. This will—this is an important point—cover resale price maintenance for over-the-counter medicines if the court again gives an exemption to it at the conclusion of the present proceedings. The schedule also preserves the amendment passed by your Lordships which removed the director's ability to terminate this five-year transitional period early. A five-year transitional period for over-the-counter medicines would be available if merited.
There are also special arrangements for certain agreements or provisions in the utility, financial services and broadcasting sectors.
Apart from this, the main intention behind the new schedule is to ensure that businesses are not burdened by the ineffective and bureaucratic Restrictive Trade Practices Act any longer than is necessary. Hence, almost all registrable agreements made between the Bill receiving Royal Assent and the Chapter I prohibition coming into force will be non-notifiable under the Act.
When the prohibition comes into force, businesses will be fully freed from their obligations under the Act. They will therefore no longer have to furnish particulars of agreements. Restrictive Practices Court orders will fall and undertakings will cease to have effect. Instead, we will have a modern and effective prohibition against anti-competitive agreements which is aligned with the European prohibition system.
I recognise that the new schedule is a substantial addition to the Bill, but it made sense to tackle the many detailed remaining points on the transitional regime only when we had decided on the direction in which we were going. It is now possible for the rather sketchy
1338
provisions of the schedule, as introduced, to be amended with the main provisions of the Bill in mind. Many of the amendments were a response to the points put to us in this House and in another place. In other words, before finalising the transitional provisions, we needed to know where exactly we were transiting to.
We have produced a guide, a copy of which is in the Library, to assist noble Lords in navigating their way around the new schedule. I would, of course, also be happy to take questions on it. First, I would like to deal with the question of over-the-counter medicines.
When we debated at Third Reading the amendments which were subsequently removed in another place, I made plain the Government's view that it would be undesirable to set aside the formal process which has been initiated by the Director-General of Fair Trading under statutory provisions. That remains the Government's position. I went on to indicate that the European Commission might want to intervene if the case is not heard by our own court. I warned that the consequences of accepting the amendments were, therefore, unpredictable and would not necessarily be to the advantage of the sponsors of the amendments.
It has become abundantly clear that the European Commission has refrained from pursuing its own investigation under Article 85 into agreements enforcing resale price maintenance in this sector only because the director-general had initiated action. In particular, Commissioner Van Miert wrote to Margaret Beckett stating, in effect, that if Parliament stops the Restrictive Practices Court from considering resale price maintenance on over-the-counter medicines, the Commission is unlikely to have any alternative but to take up the complaints it has received under Article 85. But if the court proceedings are allowed to continue, the understanding is that the Commission will not pursue the complaints, provided that the court's decision is acceptable to the Commission.
I am sure that the House will agree that, on the principle of subsidiarity, it is better, if possible, that these matters are dealt with domestically. Indeed, the Commission itself is committed to the decentralised enforcement of competition law, and has issued a notice on co-operation between the Commission and national competition authorities which sets out how cases in which both national authorities and the Commission have jurisdiction should be allocated, and how both are to co-operate in resolving a case. Hence the Commission's willingness for this matter to be dealt with by the director-general and the Restrictive Practices Court.
If the Commission subsequently takes up a complaint, it would be bound to give due consideration to the national court's findings if it is argued they are relevant to the assessment under Article 85. We would expect the view of the court to be an important factor in any Commission consideration under Article 85. Indeed, as the Government have made clear in another place, we would want to take a robust line with the Commission if it were to take action following the court's decision which flew in the face of that decision.

1339
In the light of this, I hope that your Lordships will agree with the Government, and with the Commons, that it would be better if we let the court reach a conclusion on the proceedings which have been brought before it. Perhaps I may emphasise that we expect the court to consider fully the views relating to the retention or abolition of resale price maintenance in this sector. In particular, having taken the view in 1970 that an exemption was justified on the grounds that a plentiful and well distributed supply of pharmacies was essential. we would expect the court to take full account of the role played by local pharmacies and the harm which would be caused if, as some pharmacists fear, many would be unable to survive without resale price maintenance. Certainly, the Government recognise the important role that independent pharmacies play in providing valuable advice as well as medicines, encouraging community life, reducing transport use and making life easier for those less fortunate in the community. With that summary, I commend the amendment to the House.
Moved, That the House do agree with the Commons in their Amendment No. 1.—(Lord Simon of Highbury.)
4.45 p.m.
Lord Morris of Manchester: My Lords, community pharmacists were most grateful for the approval of my two amendments in their defence when the Bill was considered at Report stage by your Lordships' House. The first provided that if the Office of Fair Trading lost its case against resale price maintenance, the exemption would be protected for the full five-year transitional period.
My second amendment had the effect of preventing the Director-General bringing proceedings under the legislation which this Bill will repeal when it comes into force.
What was sought by my first amendment is now accepted by the Government and I pay tribute today to the Minister's part in that outcome. To the disappointment of community pharmacists threats of action by the European Commission have, as he said, persuaded the Government to allow the case now brought by the Office of Fair Trading under old legislation to continue. But community pharmacists believe they have an overwhelming case and accept that if the Government themselves cannot protect the consumer interest, it should be the Restrictive Practices Court, not the European Commission, which decides the issue. The first stage in that case, the leave application, has been listed for hearing on 7th-8th December.
Community pharmacists believe that the Restrictive Practices Court will recognise, as your Lordships' House has done and as the court itself so eloquently did in 1970, how valuable local pharmacies are to the most needy: elderly and disabled people, the poor and mothers with small children, among others, who lack mobility or depend on medicines. The approval of the two amendments by this House was much appreciated by them as well as by community pharmacists.
There are 12,000 pharmacies in Britain today. They play a vital role at the heart of their local communities dispensing invaluable but free healthcare advice along
1340
with prescription and over-the-counter medicines. My noble friend the Minister voiced the Government's recognition of the value of community pharmacy in the debates on my amendments, as he has done again today. He acknowledged what no one can seriously doubt will be the case, namely,
"that independent pharmacies would close if it was merely a matter of repealing price maintenance".—[Official Report, 9/2/98; col. 883.]
When the Bill went to another place all the main political parties made clear their support for maintaining the network of local pharmacies. The Government's position could not have been made clearer. On 11th May my right honourable friend Margaret Beckett, then President of the Board of Trade, said:
"There is no doubt that the Government strongly support and care about community pharmacies. My right hon. Friend the Secretary of State for Health has made it clear how important community pharmacies are to his vision of health in the next century".— [Official Report, Commons, 11/5/98; col. 34.]
The Minister who took the Bill through Standing Committee for the Government in another place stated:
"Independent pharmacies are small businesses that provide important services to the community. Local shops encourage community life and reduce the use of private transport and local pharmacies provide invaluable advice as well as medicines. My right hon. Friend the Secretary of State for Health has spoken of his plans to make greater use of pharmacies".
He went on,
"The Government also want to support and encourage small businesses. When the restrictive practices court considers the Director General's application under the 1976 Act, it will undoubtedly take full account of the role played by local pharmacies and of the harm that would be caused if, as they fear, many were unable to survive without resale price maintenance".—[Official Report, Commons Standing Committee G, 23/6/98; col. 562.]
More recently, back here in your Lordships' House, my noble friend Lady Hayman, the Parliamentary Under-Secretary of State at the Department of Health, stated that she was,
"particularly interested in the potential role of community pharmacists in helping patients to understand their responsibilities"—[Official Report, 13/10/98; col. 779.]
in the area of compliance. And it will certainly not escape the Restrictive Practices Court's attention that community pharmacies will need to survive if they are to go on acting in the public interest as Ministers, more especially health Ministers, so clearly want them to do.
The depth of feeling here and in another place about the threat posed to thousands of community pharmacies by the campaign against resale price maintenance is echoed by many patient groups including Disability Scotland, the Joint Committee on Mobility for Disabled People and the Disability Advice and Welfare Network, among many others. The campaign against RPM, was initiated by a large supermarket chain, Asda. Abolition of RPM, which, as my noble friend the Minister readily acknowledged, would lead to the closure of pharmacies, may serve the interests of the supermarket giants but not those of local communities.
Last week Sir Donald Acheson, the former Chief Medical Officer, said that the growth of out-of-town supermarkets has led to food deserts in inner cities,

1341
increasing the incidence of poor nutrition and disease among the neediest people in our society. On 15th October 1998, the Independent reported:
"Ministers have already signalled action to deal with food deserts on inner-city housing estates under the social exclusion initiative launched by Tony Blair last month. Eighteen task forces have been set up, including one headed by Tessa Jowell, the Health Minister, which will examine ways to support shops in poor areas".
Unquestionably, for the most vulnerable people, the local pharmacy is often the most vitally important of those shops.
Many of your Lordships will have read in recent weeks about the bankrupting of farmers as a result of low prices paid for beef and lamb by the major supermarket chains, and of the high prices paid for meat by shoppers. They will have read that supermarket profit margins, and prices paid by consumers, are higher here than in other countries. They will have read also that the largest supermarket chains now have an enormous market share, amounting to market domination.
It cannot be in the interests of the consumer for one of the few surviving High Street businesses to be swallowed up in the ever-growing market domination of the supermarket giants. No one should be persuaded that Asda's attempt to grab business from local pharmacies is motivated other than by the pursuit of more profit. Anyone who thinks otherwise will have no difficulty in believing that the earth is flat or that the moon is made of green cheese.
The consequences of the pursuit of more and more profit could be devastating. For those with low incomes and frequent healthcare needs, the survival of small businesses and local communities is essential. Local pharmacies are an essential part of those communities. This House attempted to ensure the survival of a network of these pharmacies by the amendments we made to the Bill. It is now for the Restrictive Practices Court to protect the consumer. We must all hope that right will be done.
Lord Jacobs: My Lords, I have listened again to a strong argument in favour of the small pharmacies. I had the opportunity to study the arguments of the pharmacies as to why the Restrictive Practices Court should not examine the situation. I sometimes feel that the emotion of the situation—I recall the description given in this House of an old lady in a village who needed just one prescription but who could not get any transport and whose nearest pharmacy was 30 miles away—rings bells with all of us. We can see that it would be disadvantageous to these communities to lose small pharmacies.
I have read the data regarding how many pharmacies are involved. The figure is 3,000 out of 12,000. However, there are just a few hundred pharmacies situated in the country far away from towns. I did not argue then—and I do not argue now—that those small pharmacies should be protected. It would not be difficult or unaffordable for the large pharmacies to transfer some of their revenue to support the small pharmacies.
1342
I do not say that they should do it voluntarily; it could be done by means of a graduated scale for prescription charges.
I believe not that we were hoodwinked but that we were emotionally misled on this issue. According to the data sheets to which I referred, the cost to the consumer if resale price maintenance continued would be an extra £900 million over a period of five years. That is an enormous amount of money and I find it difficult to understand why the House feels that that is not of any consequence.
It is not for the House to decide the future of small pharmacies. The matter will be considered by the Restrictive Practices Court. When that court makes its decision, I am sure that we shall all abide by it. In my opinion, the case for helping small pharmacies but abolishing RPM remains very strong.
5 p.m.
Lord Fraser of Carmyllie: My Lords, I thank the Minister for his explanation of this group of amendments. I congratulate him on introducing what I think is the longest amendment I have ever seen and also on his explanation of the various points at which these provisions will come into force. I am not sure that I took in everything that he said, but for those who will have the important task of implementing this legislation it is valuable to have on the record at such an early date exactly when it is anticipated the provisions will come into force. If I understood the Minister correctly, it will be March 2000.
I do not intend to revisit the issue of small pharmacies. I still feel strongly about the matter and I believe there is an essential contradiction between the Government's health policy and their competition policy, one of which will have to come out on top at the end of the day. It is not just rural communities which are affected. If there is one pharmacy that I wish to see retained, rather than pharmacies in some of the pretty villages up the glens in the Grampians, it is a pharmacy on one of the worst estates on the outskirts of Dundee. Pharmacies such as that one are central to government health policy and those are the ones which we wish to see retained. We have been over that ground. Commissioner Van Miert managed to terrify those who might otherwise have wished to continue the debate, and we accept that outcome.
Paragraph 23(1) of the new schedule proposed in Amendment No. 104 provides that, if the court has found an agreement,
"not to be contrary to the public interest, the transitional period lasts for five years".
I understand that five-year period in subparagraph (1) of paragraph 23 to start from March 2000. In subparagraph (3) there is envisaged a set of circumstances where, at the time these provisions come into force, the legal proceedings have not yet terminated. From the narrative that has been given of the proceedings in relation to community pharmacies, I am bound to say that, though at this time March 2000 may seem fairly distant, it would be surprising if all legal proceedings on that matter were concluded by that date. If at a point after

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March 2000 the court were to determine that agreements in place were not contrary to the public interest, will that five-year period still run from March 2000 or will it run from the time and date of the determination by the court? I may be making the matter unnecessarily complicated, but it would be useful to have clarification of that point.
I am grateful to the noble Lord for what he said about the transitional arrangements. I have no doubt that they will be studied carefully outside your Lordships' House.
Lord Simon of Highbury: My Lords, I am grateful to all noble Lords who have spoken and who have helped in formulating the Government's approach to the question of over-the-counter medicines. I quite understand that strong views are still held in the House. I thank my noble friend Lord Morris for the work he has done. I believe we are now at a stage where the Government must listen to the views of the court and formulate their health policy accordingly.
I thank the noble and learned Lord for his kind words on the expectation that we will have helped the business community by extending the date to give them time to prepare and clarifying how that will work in the transitional schedule, which is tabled in the Library for those who wish to see the detail. In answer to the noble and learned Lord's question, the five-year period starts when the court has reached its conclusion.
On Question, Motion agreed to.

COMMONS AMENDMENT
2 Clause 6, page 4, line 34, leave out ("an agreement does not") and insert ("there is a failure to").
Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 2. In doing so, I shall speak also to Amendment No. 3.
Amendment No. 2 corrects the drafting of Clause 6(6)(b), which provides for the cancellation of a block exemption where an obligation under the block exemption order is not complied with. Currently the clause refers to the agreement, rather than the parties to that agreement, not complying with the order. The amendment remedies that.
Amendment No. 3 fulfils a commitment made to your Lordships by my noble friend Lord Haskel in response to an amendment tabled on Third Reading by the noble Lord, Lord Kingsland, to consider whether there should be a limitation on the director's power to cancel a block exemption in respect of a particular agreement, along the lines of the limitation on the Commission's corresponding power in European law. Clause 6(6)(c) currently confers a general power for a block exemption order to specify circumstances in which the director may cancel the exemption given by a block exemption order in respect of a particular agreement. The amendment makes it clear on the face of the Bill that this power is to he limited to the ground that the agreement does not fulfil the criteria specified in Clause 9 of the Bill. The Bill will thus generally follow the position under European Community law contained in Article 7 of
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EC Regulation 19/65. It will be for the director to judge whether a particular agreement falls within the terms of Clause 9.
The power for the block exemption order to enable the director to cancel the benefit of a block exemption when there has been a breach of an obligation remains.
Moved, That the House do agree with the Commons in their Amendment No. 2.—(Lord McIntosh of Haringey.)
Lord Kingsland: My Lords, I am much obliged to the Minister for his amendment.
On Question, Motion agreed to.

COMMONS AMENDMENT
3 Page 4, line 37, leave out from ("that") to end of line 38 and insert ("if the Director considers that a particular agreement is not one to which section 9 applies, he may cancel the block exemption in respect of that agreement.").
Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 3.
Moved, That the House do agree with the Commons in their Amendment No. 3.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

COMMONS AMENDMENT
4 Clause 13, page 8, line 22, leave out from ("with") to end of line and insert ("such date as may be specified in a notice in writing given to the applicant by the Director when the application has been determined.
() The date specified in a notice under subsection (4)(b) may not be earlier than the date on which the notice is given.").
Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 4. In doing so, I shall speak also to their Amendment No. 5.
These amendments are a response to amendments moved in Committee by the Liberal Democrats. The point was argued that the Bill might allow a party to an agreement which he has notified to the director to be liable to penalty before the director's decision was made known to him. We do not think that the director would impose a penalty before a person had received notice of his determination. However, the point that the Bill should be clear on this point is not unreasonable.
Moved, That the House do agree with the Commons in their Amendment No. 4.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

COMMONS AMENDMENT
5 Clause 14, page 8, line 40, leave out from ("with") to end of line and insert ("such date as may be specified in a notice in writing given to the applicant by the Director when the application has been determined.
() The date specified in a notice under subsection (4)(b) may not be earlier than the date on which the notice is given.").
Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 5.
Moved, That the House do agree with the Commons in their Amendment No. 5.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

COMMONS AMENDMENT
6 Clause 16, page 9, line 38, leave out ("does not infringe") and insert ("has not infringed").
Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 6. At the same time, I should like to speak also to Amendments Nos. 8, 21, 22, 26, 28, 37, 58, 59, 74 and 75. The purpose of these amendments is to correct and make consistent the tense used in the Bill in relation to a prohibition being infringed and to ensure consistency and clarity in the operation of exclusions from the Chapter I prohibition. I can give the longer speech if noble Lords wish it. I have four or five pages which are fairly generously typed.
Lord Fraser of Carmyllie: My Lords, before the noble Lord sits down, I hope that noble Lords will resist that threat.
Lord McIntosh of Haringey: My Lords, I am grateful to noble Lords. With the correction that I missed out Amendment No. 29 from the list, I commend Amendment No. 6 to the House.
Moved, That the House do agree with the Commons in their Amendment No. 6.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.
5.15 p.m.

COMMONS AMENDMENT
7 Leave out Clause 19.

MOTION MOVED ON CONSIDERATION OF COMMONS AMENDMENT No. 7
That this House do disagree with the Commons in their Amendment No. 7, but do propose the following amendment in lieu thereof—
Leave out Clause 19 and insert the following new clause—

THE PRESS DIVERSITY PROHIBITION
(".—(1) This section shall apply if a monopoly situation exists within the meaning of section 6 of the Fair Trading Act 1973 in relation to the supply of—

(a) national newspapers, or

(b) national newspapers of any particular description.

and where this section applies it applies to any person or persons in favour of whom that monopoly situation exists within the meaning of section 49(2)(b) of the Fair Trading Act 1973.
(2) Any conduct on the part of any person to whom this section applies shall be prohibited if—

(a) it constitutes an anti-competitive practice; and

(b) it may reduce the diversity and independence of the national newspaper press in the United Kingdom.

(3) For the purposes of this section "an anti-competitive practice" is a course of conduct which has, is intended to have, or is likely to have the effect of restricting, distorting or preventing competition.
(4) The prohibition imposed by subsection (2) is referred to in this Act as "the press diversity prohibition".").
Lord McNally Lord McNally rose to move, That this House do disagree with the Commons in their Amendment No. 7, but do propose the amendment set out in lieu thereof.
The noble Lord said: My Lords, I was much encouraged in an earlier debate to find the House in a frisky mood. I hope that noble Lords on the Government Benches who preach the wisdom of this House by sending messages to another place will hold firm for the next short debate.
Noble Lords were informed earlier that the previous Bill had taken rather a long time in its passage through Parliament. The Bill was introduced into this House on 15th October 1997, so it has just had its first birthday. I am not sure that the Whips made that clear when they convinced the Minister that this was a good maiden Bill for him to try to take through Parliament. The most significant event in relation to this Bill occurred on 9th February of this year when noble Lords passed an amendment standing in my name and that of the noble Viscount, Lord Astor, the noble and learned Lord, Lord Ackner, and the noble Lord, Lord Borrie, to insert specific protection for the newspaper industry against unfair competition. That amendment was removed by the Commons in Committee.
In considering this amendment today, I ask noble Lords to exercise the real but rarely used power to ask the Commons and the Government to think again. There are those who say that this House has no real influence. I ask noble Lords to cast their minds back to 9th February and their victory that night and see what the consequences have been. On Monday The Times had gone up from 10p to 30p. I wanted something more substantial for my political epitaph than the creation of 300 per cent. inflation. Nevertheless, that is a fact. The Office of Fair Trading has spontaneously mounted an inquiry into the pricing policy of The Times. We eagerly await an inquiry that newspapers tell us is a robust one. Perhaps most exciting of all, we discovered on the night of 9th February that there are almost as many independent directors of The Times in this House as there are Bishops on the Bishops' Bench. We also discovered (to paraphrase Dorothy Parker) that they represent the full gamut of emotions from A to B.
I understand that for those Labour rebels who supported the amendment that evening it becomes a little more difficult. When governments reach this stage in a parliamentary year, we know that intellectual argument is abandoned and they simply plead that defeat will disrupt their timetable and put this and other legislation into jeopardy. But I ask noble Lords to remember that this has never been a wrecking amendment; it is an amendment to make a good Bill better.
What are the differences between me and the Minister? I believe that they can be narrowed down to his belief that a cocktail produced by Clause 60 of the Bill and Articles 85 and 86 of the Treaty of Rome will create in British law a veritable legislative "Viagra", as far as concerns competition law. The Minister believes that, because the Bill incorporates prohibitions based on Articles 85 and 86 of the treaty and brings into domestic competition law, via Clause 60 of the Bill, provisions to be interpreted consistently with the corresponding provisions of Community law, predatory pricing and other abuses will be subject to the tests of predatory pricing laid down by the European Court of Justice. That is why, if the Minister runs true to form, we shall hear a good deal this evening about Tetra Pak. All I can say to the Minister is that Tetra Pak is an excellent packaging but makes a poor fig leaf.
European case law on manufactured goods and industrial products is hard to square with the realities of the newspaper industry. As Mr. Richard Fowler, QC, has said:
"In my opinion European case law could not be relied upon".
Yet the Government rest their case on an almost a blind belief in the strength of European case law. I understand that competition lawyers sometimes refer to certain sections of legislation as "Klondike clauses" because of the lucrative litigation to which they give rise. Without the specific prohibitions contained in my amendment, I believe that the Bill will offer a Klondike for lawyers with no guarantee of protection for the quality, diversity and choice of our newspapers. That is why I commend to noble Lords the amendment now before the House. It is less sweeping in its terms than the clause that noble Lords supported in February, which was removed by another place. It confines its prohibitions to anti-competitive practices. Any action that is not an anti-competitive practice would escape prohibition even if it threatened to reduce diversity in the press.
I have never opposed vigorous competition; nor do I want to fossilise the present structure of the newspaper industry. But I want the new Competition Commission to have explicit and freestanding duties to watch anti-competitive conduct that threatens press diversity. This is more likely to happen where its responsibility is specific rather than part of a wider and more general duty. The nub of my case, and the cause of the differences with the Minister, is encapsulated in a single quote from Mr. Ian McCartney, the Minister responsible in another place. When rejecting proposals to lower the threshold of what is "dominant" in the newspaper market he said:
"I see no justification for treating newspapers differently".— [Official Report, Commons; 8/7/98; col. 1165.]
My whole case is that newspapers must be treated differently. Why? I give the answer provided by Mr. Robin Cook on 20th July 1994 when he was the Labour Party spokesman on these matters. He called then for specific action against predatory pricing and unfair competition. He said that at that time Labour Party policy was,
"informed by a view of a need for a diverse media and of the importance of a diverse media for a healthy democracy".
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That is why there is justification for treating newspapers differently. They are important for the preservation of a healthy democracy. That position was adopted by spokesman after spokesman of the Labour Party before the general election.
I shall leave it to others to speculate on the reasons for the change of heart. But I say to the Minister, "U-turn if you want to", but on these Benches we remain convinced of the need for special treatment and protection. In this we are consistent, as indeed, I understand, is the Opposition Front Bench. It consistently appeased Mr. Rupert Murdoch when in government, as the diaries of the noble Lord, Lord Wyatt, now reveal, and is set fair to appease him again tonight. And much good may it do them. Let me reassure them that parties, compared with dead parrots, do have an after-life.
I make only two other points. One is to the editor and staff of The Times. When Mr. Petter Stoddart, editor of The Times, addressed a meeting in the House before the Summer Recess, he accused me of attacking the integrity of The Times journalists. Nothing could be further from the truth. I repeat my affirmation of last February: some of my best friends write for The Times. Let me go further. If the integrity of The Times journalists were ever to be under threat, I suspect they could rely more on support from these Benches than from some who will pose as their friends today.
Finally, I say this to your Lordships. My perseverance on the issue relates to a wider picture. We are told that we are on the threshold of the information age. At the dawn of that age, control of technology and information is concentrating at an alarming rate. During the summer there was a photograph in our national newspapers of a gathering of about two dozen people who between them controlled most of the means of disseminating news and information to our democratic world. That concentration of power, married with the advance in technologies, offers a challenge to democratic governments and free societies which we have scarcely begun to address.
Last week we agonised about how rich men could buy themselves influence and access by donating money to political parties. So we stop foreigners giving money to our political parties. But buy yourself a newspaper or a television station and you buy power and influence which makes and unmakes governments; it makes 10 Downing Street an ever-open door and sends Chancellors of the Exchequer scurrying to obscure mid-western locations to pay court.
The amendment will not end such power, but it will send a message. The media moguls are not self-regulators. One day we shall have to contain them. I realise that I am asking the House to exercise a rarely used power. But the independence and diversity of our national press is an exceptional cause. Let us draw a line in the sand tonight and ask the Government and another place to think again. I commend the amendment to the House.
Moved, That this House do disagree with the Commons in their Amendment No. 7 but do propose the amendment set out in lieu thereof—(Lord McNally.)
Lord Harris of High Cross: My Lords, I accept the proposition of the noble Lord, Lord McNally, that newspapers are different. Indeed, newspapers are already constrained under the Broadcasting Act and by the merger provisions of the Fair Trading Act. As the Minister will no doubt tell us at greater length, the noble Lord's purpose is to graft on to a general competition Bill a most specific clause discriminating further against newspapers with the unconcealed objective of regulating the commercial policy of one newspaper.
As one of the independent national directors of Times Newspapers in the House, I believe that it may help the subsequent debate to set the context. History tells us that The Times has lost money throughout most of this century, despite successive changes of ownership from Northcliffe to Astor and to Thomson. When the Government accepted News International's last ditch rescue attempt in 1981, Rupert Murdoch followed the agreement with the noble Lord, Lord Thomson, in accepting six independent directors—I am one of them—with the responsibility of ensuring that the proprietor should not have influence over the editor or editorial policy.
Throughout the 1980s, severe losses continued and mounted despite several changes of editor, approved by the independent directors. The circulation of The Times fell to one-third of that of the Daily Telegraph which retained the dominant market position it had in turn acquired in the 1930s through the practice of old-fashioned price competition.
The aim of price cutting was not to destroy the Independent, nor even the Daily Telegraph. It was to escape from chronic loss-making and to endeavour to increase circulation, which is essential if advertising revenues are to be increased. Advertising revenues form the major part of the income of all the broadsheet newspapers. By any standard, that strategy has proved remarkably successful. The circulation has doubled, and advertising revenue roughly likewise. The total market for broadsheet papers has been enlarged; the size of papers has increased; and the average price has reduced.
Other papers naturally did not like price competition. As Corporal Jones used to say of the enemy's response to bayonets, "They don't like it up them". Nevertheless, the Guardian managed to retain its circulation and, with some less publicised price cutting, the Daily Telegraph has also managed to remain within the one million total circulation.
The noble Lord, Lord McNally, referred to Report stage at which he said that he had one intention and one only:
"to promote the framework of fair and transparent competition in our newspaper industry, with the intention of sustaining diversity, quality and choice".—[Official Report, 9/2/98; col. 913.]
That sounds all very well, but it does not explain, let alone excuse, the noble Lord's vendetta against what was a deeply considered and widely researched policy
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by the executive and non-executive directors of Times Newspapers who carry the responsibility for its fortunes.
The noble Lord emphasises his good intentions. That is not enough. We know the road to hell is paved by little else. I wish to put a few fairly simply practical questions which are left unresolved. What constitutes fair and transparent competition? Does open price cutting have any part to play? If so, how much? If not, how could we prevent well established newspapers from colluding to raise their price, as they did comfortably enough in the 1980s? And how could a new entrant break into the market if it cannot deploy deep price cutting without the noble Lord's permission?
Closer to home, how can a declining newspaper attempt to revive its flagging fortunes if it is forbidden to deploy effective price competition? Price is not everything—that is a mistake which, to some extent, the noble Lord makes—but how important is price compared with the quality of the newspaper in building up circulation? If a declining paper such as The Times attempts a major reconstruction and relaunch, is there a better way of getting new readers to sample it than by dramatic price cutting? Those are not hypothetical questions. They are the do-or-die issues which came to a head shortly after I joined the board of Times Newspapers in 1988. When the circulation of The Times fell below that of the Guardian in 1992 or 1993, that may have been the galvanising element to radical reform.
No one supposed that cutting price would guarantee increased circulation—the key to higher advertising revenue. Many a hopeful entrepreneur has embarked on price cutting only to find that it is a spectacular way of throwing ever larger sums into a black hole. The perennial challenge for serious newspapers remains: what is the optimum blend of quality, quantity and price in a newspaper? We are not talking about baked beans, but about sophisticated products. So who is the best judge of the right mixture? Is it the scattered army of readers, faced with a wider choice in Britain than elsewhere in the world, or the noble Lord, Lord McNally, or even the Office of Fair Trading?
At Report stage, the noble Lord, Lord Peston, from his rather lofty professorial perch, airily countered my economic logic with his customary dismissive wave, although without anything remotely resembling coherent argument. Accordingly, I am setting a more scholarly example by avoiding dogmatic assertion. On this occasion I have relied on posing questions, although the answers may seem self-evident. One thing should be clear even for unworldly professors. It is that lasting success in competitive markets for complex products, such as newspapers undoubtedly are, could never be secured by price-cutting alone, however deep the proprietor's pockets.
Among other questions that remain I might ask: is a competitive dynamic market feasible in newspapers, or any other product, if no participant is to risk getting hurt? Why should one participant, say the Independent, be shielded from the decline brought about, to a degree, by its own editorial and management failures? If such

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a paper is truly vital to some people's conception of democracy as we know it, why should not readers or backers be prepared to pay enough to save it? Has the noble Lord thought of putting the Independent on the protected list, or perhaps launching a flag day?
I come to the most awkward question of all on the noble Lord's amendment. How can The Times be charged with exploiting a dominant position in the broadsheet market when it was struggling against terminal decline in the early 1990s? In the earlier debate, the noble Lord, Lord Borrie, whom I see in his place, put his finger on the nub of popular concern when he said:
"News International holds a substantial degree of market power … and is able, for long periods, to cross-subsidise its loss-making newspaper sales from its highly profitable operations in satellite television".—[Official Report, 9/2/98; cols. 915–6]
That seemed quite powerful, but the noble Lord's finger pointed in several wrong directions at the same time. First, News International does not run Times Newspapers which is a wholly owned subsidiary, but operates as an independent, free-standing company, also running The Sunday Times and the three supplements. Secondly, the price cutting has been financed entirely within Times Newspapers' own budget, with never a penny piece from satellite television. Thirdly, the only cross-subsidy comes from the highly profitable Sunday Times, just as in the Telegraph stable the Daily Telegraph subsidises the less profitable Sunday Telegraph.
All this talk about predatory pricing is an excitable distraction. Serious, destructive predatory pricing is an extremely rare phenomenon, as shown by two classic texts: McGee on the celebrated Standard Oil case in the Journal of Law and Economics, and Koller's Empirical Study on Anti-Trust in the Law and Economics Review. My experts tell me that the worst recent example of predatory pricing was the collusion of other airlines, backed by government, to drive the challenger Freddie Laker out of the market.
What we have here is a good old-fashioned circulation war, such as helped to test and shape the present newspaper industry. If price competition is forbidden, will the noble Lord try to curb competition through bigger papers, give-away offers, lotteries, travel vouchers and all the other special deals? All such promotions are quasi or substitute price cuts, offering more without extra charge.
It seems characteristic of the Liberal Democrats to prefer a namby-pamby world of harmless, ineffective competition where no one must win lest their friends get hurt. The crowning facts are fourfold. First, The Times has been a loss-maker for most of the century. Secondly, Rupert Murdoch was allowed to take over the ailing paper in 1981 because he could carry current losses, though hardly increasing cumulative losses forever. Thirdly, he has found a strategy to put The Times on the high road towards self-sustaining profitability. Fourthly, his critics are outraged by his success.
My concluding question is: why should we let the Liberal Democrats, and sundry other malcontents, vent their pique against The Times by smuggling through this wholly unnecessary amendment?
5.30 p.m.
Lord Borrie: My Lords, I was rather glad that the noble Lord, Lord Harris, made his speech before I made mine because he threw a whole number of red herrings over the trail, especially when he talked about what the 9th February amendment was about, and indeed what the noble Lord, Lord McNally, is proposing today.
The cut-price policy of The Times, which has now lasted for more than five years, cannot possibly be compared with a cut-price promotion, whether literally in price form or in the form of coupons, prizes or anything else. The policy has been going on for a long time. It is not and could not be regarded as a temporary or promotional exercise. Of course I do not know how The Times has managed it. If The Times was wholly isolated, even from the Sunday Times, let alone from the wonderful moneys coming in from other sources of related companies, I do not know how they could have paid the costs of printing, the costs of marketing and the tremendous programme, through television and elsewhere, which has advanced the cause of The Times.
No, my Lords, it has been a predatory policy. A line can be drawn between cut-pricing for a new newspaper on the scene or for an old newspaper, for that matter; but that is quite different from the policy that has now gone on for so long. It is a policy which must have been, and can be demonstrated to have been, damaging, even seriously jeopardising the very existence of rival broadsheets, whether one has the Independent or the Telegraph in mind. Even if their existence is not jeopardised because somehow or other they are enabled to survive, the service that they provide to readers must be damaged because their costs are always under close scrutiny. The mischief of The Times's policy over five years, to my mind restricting or distorting competition, has forced rivals both to follow suit and to reduce costs by cutting the service to their readers.
Leaving aside for the moment what the noble Lord, Lord Harris, has been saying—though I would love to go on—I turn to the Government's view. I have been extremely disappointed both by the manner in which they dealt with the matter in the House of Commons a few months ago and, as it seems from briefing received last week, again today.
The Government's view seems to be that if there is predatory pricing by The Times, or indeed by anyone else, then Clause 18 of the Bill, which covers industry in general and not just newspapers in particular, prohibits all forms of abuse by dominant companies; that it is fully effective; and that it is for the competition authorities—the Office of Fair Trading or the competition commission—to use it. I have carefully considered that argument. It is possibly correct, but it is doubtful. The purpose of the amendment originally passed by this House on 9th February—and, as I understand it, the purpose of the amendment in the name of the noble Lord, Lord McNally,—is to strengthen the law where it is needed in order to make more certain what the Government are saying the Competition Bill provides for.
The Government admit that the European law which is brought into the Competition Bill via Clause 60 defines dominance to mean—I paraphrase only

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slightly—such economic strength as to allow a firm to behave to an appreciable extent independently of its competitors and customers. I do not believe that The Times is in that position, because if next week The Times doubled its price would all the readers remain with it? I think not. Some of them would go, or gradually go, to other available broadsheets. It is not possible for The Times to act independently of its competitors and customers.
Mr. Richard Fowler, Queen's Counsel, is the expert in competition law to whom the noble Lord, Lord McNally, has already referred. I quote from his opinion, which is freely available—the Government's legal opinions have been kept entirely secret to themselves. Mr. Fowler said that it is:
"unlikely that The Times or News International would meet the European Court of Justice tests for dominance",
in the broadsheet or general newspaper market.
The Government rely on the case to which the noble Lord, Lord McNally, referred, the Tetra Pak case, about dominance in one market being abused in another related market. Therefore, the Government may wish to argue, as they have in another place, that as News International, with its admittedly minority stake in BSkyB, is undoubtedly dominant in the satellite TV market, abuse in the newspaper market may be a breach of Clause 18. But as Mr. Richard Fowler points out in his opinion, the European Court of Justice held in Tetra Pak that it is only in special circumstances that abuse of a dominant position could apply to conduct in another non-dominated market. It seems to me that although the Government's case is possibly correct, it is unwise for Parliament to rely on it as being correct because it builds a case for the adequacy of Clause 18 and existing European jurisprudence on a feeble foundation.
So why are the Government adamant that an amendment to the Bill to deal specifically with anti-competitive predatory pricing of newspaper proprietors should be rejected? The nub of the Government's objection seems to be an assertion rather than an argument. The assertion is that it would be wrong to treat newspapers as a special case. Why? Competition between newspapers and the availability of a multiplicity of choice is far more important in the newspaper market than it is in other markets because democracy requires that there should be a good range of choice, diversity and plurality. That is important in newspapers but may not be important in ball-bearings or baked beans.
The Government admit that the special Fair Trading Act provisions which deal with newspaper mergers—and solely and only with the merger of newspapers—and specifically refer to the need for diversity are a good thing. The Government more than once during debates in both Houses have specifically stated that they have no intention of changing the Fair Trading Act provisions and are content with them. They could have amended them or they could have got rid of them if they thought that newspapers mergers did not need to be dealt with separately and specifically, but they are keeping them.
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I say to your Lordships that a newspaper title can disappear through the pricing tactics of a rival, just as it can disappear by takeover. Therefore, there is nothing peculiar in dealing with the anti-competitive risk of the disappearance of a newspaper by special provision for abuse of power.
The Competition Bill, as it has gone through both Houses, makes special provision for a number of different markets: civil aviation, agriculture and the professions. A short while ago, your Lordships may have received from the Treasury, as I did, a substantial draft of a financial services and markets Bill which may well come before us in the next Session. It provides for a special competition regime for financial services regulators, exchanges, clearing houses and so on. The Government are very clear—and in my view, rightly so—as provided in Clause 60 of the Competition Bill, that our law should be consistent "so far as possible" with EC jurisprudence. However, the relevant Minister, when introducing the new clause on vertical agreements, which we shall deal with later tonight, said in another place that the Government do not intend to copy all the various qualifications and conditions that the European Community proposes. There would be nothing inconsistent with the Government's general approach in the Competition Bill if special provision were made concerning predatory pricing in the newspaper market. That is what the Government are refusing to do and what the noble Lord, Lord McNally, is seeking to move tonight, as he did successfully in another context some months ago.
5.45 p.m.
Baroness Oppenheim-Barnes: My Lords, I, too, support the Motion proposed by the noble Lord, Lord McNally. I would have preferred to have seen the previous sweeping amendment retained rather than this narrower version. My interest in Patman/Robinson-type legislation goes back a very long way. Although in those days I was persuaded that that would have been going too far, in the 1980 Competition Act we introduced the flexible power for the Director-General to refer a matter to the Monopolies Commission, with action to follow, if a complaint were made about predatory pricing and it had not been put right at his instigation.
I hope that when the Minister replies he will be able to tell your Lordships what is to happen in the interim period. The 1980 Act will be repealed by this Bill, but this Bill will not come into operation for another year. What will happen to the flexible powers which will vanish with the 1980 Bill until the new Bill is brought into being? Secondly, I believe that every aspect of discriminatory discounting, when it is used as a blunderbuss either to sway opinion or wrongly to gain support, as no doubt is the case in the newspaper industry today, is wrong.
I had hoped not to use the "M" word in this context. However, the noble Lord, Lord McNally, made a mistake in referring to Lord Wyatt's diaries on the subject. I was the Minister responsible at the time and I can assure your Lordships that there was no intervention from the Prime Minister of the day. Our considerations were those which would normally take

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place when such an application was made. They included the consumer interests, the national interests and, last but by no means least, unemployment interests. They were extremely important in that particular case, as vouchsafed by the noble Lord, Lord Hams. I would like the noble Lord to withdraw those remarks at an appropriate time.
The situation arises in which the Government, for whatever reason, refuse to listen to people who really do know better. The noble Lord, Lord Borrie, is second to none in his knowledge and experience of these matters. He has the voice of reason, too. For the Government to bypass such expertise, and for whatever reason to say that the interfering European Commission with its second-rate competition policy might not permit this to happen, is not an excuse. In relation to an earlier amendment the noble Lord said that if the Commission acted in a certain way the Government would take a strong line. I should be very interested to know what strong line they would take and what effect it would be likely to have.
I do not wish to detain your Lordships from what will be a most interesting debate, other than to say that I hope that your Lordships will support the Motion tonight.
Lord Haskel: My Lords, the noble Lord, Lord McNally, spoke of Dorothy Parker's emotions A to B. The amendment of the noble Lord is also based on two emotions—affection for the newspaper industry and distrust of Rupert Murdoch and News International. In my private moments I share these emotions. But there are times when I must put them aside, and this is one of them. We are here to deal with principles and not with individual cases. Individual cases are for lawyers, regulators and the courts. We are here to lay down the rules.
My noble friend Lord Borrie asks why we should not deal with specific cases. There are good practical reasons why this should not be so. Laws directed at particular cases or individual newspapers—
Lord Borrie: My Lords, I have to point out to my noble friend that I did not say that. Of course it appears that we are talking about—to use the "M" word—Mr. Murdoch, because only his organisation happens to be engaged in these practices at the present time. The law we are supposed to be talking about is a general law specific to the newspaper market. It is not specific to any particular proprietor.
Lord Haskel: My Lords, I am glad that my noble friend has clarified that point.
There are good practical reasons why laws directed at particular cases, individual newspaper proprietors or their companies, will fail. They will fail because before the ink is dry on the Royal Assent they will have thought of ways round the law. Our job is to deal with the general and not with the specific.
Quite rightly, the noble Lord, Lord McNally, wants to protect diversity and quality in the newspaper industry. We all want diversity and quality in
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newspapers—we want it in every industry. I have heard rousing speeches in this House calling for it in the City, in coalmining, in farming. Indeed, I have called for it in the textile industry, where I spent 30 years. But this understandable desire for quality and diversity does not justify special pleading. Innovation and competition produce quality and diversity, not special pleading.
Generally, I am not in favour of special pleading in your Lordships' House because it is often difficult to know where the pleading ends and the lobbying begins. Usually we try to indicate this by declaring an interest. I draw this to the attention of the noble Lord, Lord McNally, because I think it might be helpful for us to know where he stands in view of some of the articles which have appeared in recent press reports.
Lord McNally: My Lords, would the noble Lord care to expand? I have no interest to declare as far as the newspaper industry is concerned. If I had, I would have done so. If the noble Lord has any further information, perhaps he would share it with the House.
Lord Haskel: My Lords, I was referring to an article in the press which indicated that the noble Lord is in the lobbying business.
The noble Lord is concerned about price cutting. In the textile industry I experienced price wars far more cut-throat and long-lasting than the price war about which the noble Lord, Lord McNally, and my noble friend Lord Borrie are concerned. As a result of that price war many people wear good quality clothes and have nice fabrics in their home. Thankfully, price is not the only factor. That is why the share of the market taken up by the more expensive broadsheet newspapers is steadily increasing.
I shall not support the amendment. That is not because I do not have affection for the newspaper industry nor because I approve of the tactics of News International; it is because it is misplaced special pleading for a particular interest. It specifically deals with behaviour in the newspaper industry. This clouds the clarity which I think it is your Lordships' duty to inject into this Bill. Our task is to see that abuses of market dominance by predatory pricing is clearly tackled throughout the economy and not just in newspapers. Our task is to see that the rules are fair to everyone trading in the European area. The Bill does this and I say leave it alone.
Lord Astor of Hever: My Lords, I have no interest to declare, no involvement with the newspaper industry and I have never met "M"—Mr. Murdoch. But I do take an interest in The Times and for this reason I cannot support this amendment.
My family owned the newspaper for over 40 years and, like the Thomsons and Rupert Murdoch, poured money into The Times to keep it alive. The Times has seldom been a profitable concern; indeed, its history is one of journalistic success in the face of financial uncertainty.
I strongly believe that newspapers should not be prevented from using every means at their disposal—promotions, price cutting, adding new sections,

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recruiting new talent or investing in new computer systems—to improve their products and to attract new readers, thereby increasing their profitability. I do not believe that The Times should be consigned to yet more uncertainty by having its hands tied over its pricing strategy. I would much rather that The Times increased its circulation by pricing itself into the market, rather than descending into the tabloid fray.
Lord Judd: My Lords, I had not intended to intervene in this debate but, in view of some of the speeches that have been made, I feel compelled to do so.
When we debated this issue previously we put our view firmly on the record. The other place has considered our advice and rejected it. That is the right of the other place. I, for one, feel bound to accept that that is the right of the other place because it is consistent with everything that I argue about the relationship between the two Houses. But that does not mean that I have to accept that the other House is necessarily right.
My anxiety remains that, to put it kindly, the force of enthusiasm with which the Government's case has been advanced against the amendment, and the mobilisation of every possible opportunity to tell us that the Bill covers all that the amendment seeks to cover, make me uneasy. I hope I will be forgiven, after quite a considerable life time in politics, for saying so. It might be that the amendment is superfluous, but why this degree of pressure to resist it? It indicates to me that the amendment may indeed cover the issue which concerns us more thoroughly than the Government's own proposition.
Let me leave that particular argument on one side for a moment. It has been established in this debate—and I was sorry that my good noble friend seemed to skirt over it in his latest intervention—that we are not dealing with any ordinary product. We are dealing with the lifeblood of democracy; and the lifeblood of democracy is the information, the quality of information and the reliability of the sources of information on which the public rely for the formulation of their attitudes towards the issues that confront the nation. Anyone who cares about democracy must care about a pluralist media and pluralist newspapers.
I have great respect for the Minister. I do not call his personal integrity or conviction on this matter into question. I just suggest that there might have been a degree of overkill which stimulates the Bolshie part of me. The Government are repeatedly telling us about their concern for the quality of democracy, about their determination to regenerate the constitution, about the whole life of democracy and about the reform of institutions and the rest. I would be greatly reassured if the Minister could say just a bit about the strategy of the Government for not just holding the line of our media in its present diminished state but for enhancing our media, for enhancing the cause of pluralism in our media and for enhancing the cause of different sources of information on which the public should be able to rely.
I suspect—I say this in all modesty—that by simply looking at this issue in the context of the rather specialist legal debate we have had today and earlier in the year
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we may be demeaning the issues which I am trying to raise. I think it is high time that we saw a strategy for the future of democracy which has at its heart the cause of pluralism in our media.
6 p.m.
Lord Phillips of Sudbury: My Lords, I speak as a member of the Scott Trust which owns the Guardian, the Observer and other newspapers. I say that I speak as a member. In fact, I do not speak for the trust in any way.
There seem to be two primary issues in this debate. The first is whether or not the Bill under consideration should give special regard to, and special protection for, newspapers as a cultural product. The second is whether or not the protections that exist in the Bill as it stands, by incorporating Articles 85 and 86 of the Treaty of Rome, are sufficient.
I think that enough has been said in the debate so far for me not to need to belabour either of those two points. Plainly, in other legislation—the Fair Trading Act—very special consideration is given, for the best of reasons, with regard to newspapers vis-à-vis mergers. The noble Lord, Lord Borrie, gave some other striking examples of special legislative treatment of other areas of economic activity. Secondly, speaking as a lawyer, I really must plead with the Minister that the notion that the issue is beyond doubt in legal terms in relation to Articles 85 and 86 simply is not sustainable. I know my own profession well enough, and I know a little but enough about European law, to be confident that there is a real need in this Bill to make clear beyond peradventure that there are effective safeguards against predatory activities vis-à-vis newspapers. I hope therefore that those points will be carried home tonight.
Lord Desai: My Lords, in a previous debate the noble Lord, Lord Harris, referred to malcontents, and he again referred to me, for which I am very grateful. I do not want to speak about The Times, although my previous speech on this subject got me a mention in the editorial of The Times, which had always been my highest ambition. I have nothing against Mr. Murdoch. I have written for the Sun newspaper, and it pays very well. It has stopped hiring me since we came to power. I regret that, but there are some small compensations.
The new clause proposed by the noble Lord, Lord McNally, should not be argued solely in terms of The Times newspaper. That is important. The special pleading referred to by my noble friend Lord Haskel came more from the noble Lord, Lord Harris, who spoke of nothing but The Times, than from my noble friend Lord Borrie, who drew a much more general canvas. Whoever owns a newspaper—whether it is Mr. Murdoch, Mr. Black, Mr. Montgomery, or someone else—we would like him to follow such practice as not deliberately to reduce the diversity and pluralism of our newspapers.
Arguments have already been advanced that in other parts of the Bill special provision is made for particular industries. Therefore, it cannot be an objection that Clause 19 is not in the spirit of the Bill. If Clause 19 is

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ineffective, there is no harm in including it. We do not really have legislation so tightly drawn that we could not add a clause. If it were the case that Clause 19 was so feebly drafted and would be so contentious that no one could be brought under its aegis and no one could be punished, lawyers would get lots of money, and good luck to them! No harm would be done.
What people are worried about is that Clause 19 has teeth, and because it has teeth people want to do it down. I think it is a good clause. I voted for it last time and unless my noble friend tells me something entirely stunning—that he accepts the clause—I shall be hard put to follow him in the Division Lobby and I shall probably follow the noble Lord, Lord McNally.
Lord Ackner: My Lords, I take it to be common ground that independent newspapers are an essential cornerstone of the democratic process. The Fair Trading Act 1973, which has been referred to more than once, made special merger provisions for the newspaper market. The rationale for these provisions, according to a previous Secretary of State, is that, by increasing the concentration of newspaper ownership,
"you threaten freedom and variety of expression of opinion".
I should have thought that it equally follows that the elimination through predatory pricing of a competitor newspaper would lead again to the concentration of ownership and consequently, to re-quote,
"threaten freedom and variety of expression of opinion".
As I understand the Government's attitude, the main objection to the clause is that it is unnecessary. It can only be unnecessary if the law is certain. It is perfectly clear that the law is not certain. There are cases—this is such a case—where assurance should be made doubly sure. If this clause does not turn out to be necessary, I do not understand, even having listened to the noble Lord, Lord Harris of High Cross, what harm it can do. But if it is necessary and it is left out, then great harm will follow.
I submit to your Lordships that the risk of abuse of power in this field must be eliminated. Accordingly, I will support the clause.
Lord Rees-Mogg: My Lords, I wish to take the opportunity again to declare an interest. I do not have the good fortune to be one of the independent directors of The Times but I do write for that newspaper. I have been struck by a couple of points. First, the pricing of newspapers seems to me more complicated than your Lordships' House has altogether realised or indeed altogether been told. Newspaper pricing is designed to maximise the profit which arises out of the cover price of the newspaper and the advertising revenue of the newspaper. There is a third variable, which is how much you have to spend on the newspaper, how many supplements you have, and so on. That variable is very important. The cover price of a broadsheet newspaper produces probably about 30 per cent. of total revenue. The advertising revenue is usually therefore about 70 per cent. of the total revenue.
I spent 20 years deciding on cover pricing when I was on the board of The Times in the old days. You had to decide what effect a particular cover price would have
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on your circulation and, through the circulation, what effect it would have on your advertising revenue. Therefore, it is not predatory pricing if you keep your cover price low or actually reduce it with a view to increasing your advertising revenue. That is a commonsense thing to do in commercial terms.
Perhaps I may explain the matter in mathematical terms. Let us suppose that the cover price is reduced by 10 per cent. That reduces the revenue from that source, except in so far as the sales increase, from 30 per cent. to 27 per cent. Let us suppose that that produces a 10 per cent. increase in advertising revenue. That increases the advertising revenue from 70 to 77 per cent. Therefore, one would end up with a total sum of 104 rather than 100.
If the propositions which have been put are correct, obviously in this country there would be a supreme example of predatory pricing of a most unacceptable kind and we should all wish to find laws which would shut it down; that is, the free sheets. The free sheets charge nothing. What could be more unfair than that? A free evening paper is given away to anybody who chooses to have it. That draws in advertising and competes with the local evening paper which is trying to earn revenue from its cover price.
If it were true that you can just consider the cover price, as we have tended to do in this debate and in the previous debate, and say that it is unfair because the cover price is so low, then free sheets would clearly be a predatory practice.
There is one other point I should like to make. I believe strongly in the contribution which newspapers make to democracy. But in this country we have far and away the largest national press of any major country. In London we have five broadsheets and six tabloid newspapers, one of the tabloids being an evening newspaper. All those are published in London and all are fairly good newspapers, with perhaps one or two exceptions. In New York, which is comparable—a major city in a rather similar country—there are four newspapers. We have 11 newspapers in London while New York has only four.
Therefore, it is odd that we should be in a state of acute anxiety when it is, in my view—and I have lived in that world for the whole of my adult life—the competition which has created that situation. The problem with New York is that it has become monopolistic. The position is far more monopolistic in the rest of the United States, where most major cities have only one newspaper.
We have a couple of monopoly newspapers in this country. They are not the newspapers we have been talking about. They are the Financial Times, a great and good newspaper which has a monopoly in the financial and business field, and the Evening Standard, a somewhat less great and good newspaper, which has a monopoly in the London evening field. I should very much welcome it if people entered into competition with them. But it seems to me that the situation in relation to our newspapers does not justify the anxiety which has been expressed.
6.15 p.m.
Lord Razzall: My Lords, we have probably reached the stage in the debate when it is appropriate for me to sum up on behalf of the movers of the amendment. First, as a number of noble Lords have indicated, it is a pity that this has become potentially an anti-Murdoch debate. Despite the fact that a number of speakers in favour of the amendment have indicated that their support is based on general principles, we have been assisted by the fact that a number of defenders of the Murdoch position have jumped to their feet, in particular from the Cross-Benches. However, as the noble Lord, Lord Borrie, indicated, the reason that the Murdoch allegations about predatory pricing are relevant is that, as we speak today, those are the current allegations about monopolistic practices in the newspaper industry.
However, this amendment, as proposed by my noble friend Lord McNally, goes much wider than that. It seems to us on this side of the House that when noble Lords decide what to do with regard to the amendment, they must ask two questions: first, does the Bill, as returned to us from the Commons, provide satisfactory protection to the public against anti-competitive practices in the newspaper industry; and secondly, as a subsidiary question, does the newspaper industry require special treatment in the legislation because it has special characteristics that do not apply to other industries?
The answer that my noble friend Lord McNally gives to those questions is that, first, the Bill as returned does not give that satisfactory protection; and, secondly, that there are specific characteristics of the newspaper industry which require special protection to be built into the Bill.
I shall not go over the details of the technical arguments. The noble Lord, Lord Borrie, did that better than all noble Lords in this House put together could have done, being one of the world's experts on the subject. Perhaps I may briefly touch on the opinion to which he referred of Richard Fowler QC. Those of us who have been involved both with the law and the mergers and acquisitions industry know well that lawyers' opinions are lawyers' opinions and for every lawyer's opinion on one side there is usually a lawyer's opinion on the other side, in particular if large amounts of money are involved. But also those of us who have been involved with that industry are aware that one ignores an opinion of Richard Fowler QC at one's peril. As the noble Lord, Lord Borrie, indicated, his opinion is on the record. We do not know the legal basis on which the Government are relying but we have Richard Fowler's opinion that if one looks at the structure of the newspaper industry at the moment, it is unlikely, in his view, that any of the newspaper groups would pass the necessary test for dominance, thereby bringing them within the European law on which the Government are relying to control those practices.
On this side of the House, we disagree with the Government in their view that if this Bill is passed in its existing form, it will provide the protection which the Government believe it will.
Perhaps I may touch on the second and fundamental question to which a number of noble Lords have referred; namely, why the newspaper industry should
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require special treatment. It is strange that that issue should still be being debated. After all, in 1973, in the legislation dealing with mergers, it was accepted that the newspaper industry required different treatment. That is now 25 years ago. Throughout that period it has been accepted generally that the newspaper industry requires special treatment in our competition legislation. The reason for that is as the noble Lord, Lord Judd, indicated. It is the industry which is the lifeblood of our democracy. For that reason and that reason alone, the newspaper industry requires special treatment in legislation.
There are a number of fundamental differences in the newspaper industry. Currently, in aggregate, it is worth about £700 million and, in aggregate, shows a net loss of £50 million. No other industry in this country would continue year after year to have that significant net loss were there not some other reason for people wanting to run newspapers. People want to own newspapers not only to make money out of them, if they can, but also for the express and specific purpose of exercising power and influence.
When the Sun ran its headline after the 1992 election,
"It was the Sun what won it",
it did not run that headline because it thought it would increase its circulation but because it believed it had exercised political control over the democracy of this country. When Rupert Murdoch and Conrad Black, through their newspapers—and perhaps I may rephrase that before other noble Lords indicate that proprietors do not influence the policies of their newspapers—when The Times, the Sun and the Daily Telegraph run their campaign against the euro, it will not be because they wish to increase the circulation of their newspapers but because they wish to exercise power and influence over the deliberations of the democracy of this country.
For that reason and for that reason alone, as the noble Lord, Lord Judd, indicated, the newspaper industry requires separate legislation and separate protection. The purpose of my noble friend's amendment, which nobody has mentioned since he introduced it, is to lower the point at which the dominant position test kicks in in our legislation and in our jurisprudence. For that reason, we wish this amendment to be carried.
Finally, in winding up, perhaps I may deal with the point made by the noble Lord, Lord Judd. "All right", he said, effectively, "I agree with everything the noble Lord, Lord McNally, said. However, because of the constitutional position, we made that point; the Commons disagreed with us and have sent it back to us."
I ask noble Lords to bear in mind that on a similar amendment at least 23, if not 25, Labour Members of Parliament defied the three-line Whip in order to support the position that the noble Lord, Lord McNally, is producing today. Seven Select Committee chairmen signed an amendment in the other place similar to the amendment which the noble Lord has brought forward today.
I ask noble Lords finally to think carefully. To revert to our debates last week, perhaps I can paraphrase the noble Lord, Lord Richard. I urge Members of the House

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to think independently, to peruse the clause independently, then vote for the amendment, voting against the exercise of power without responsibility which, as we all know, is the prerogative of the harlot throughout the ages.
Lord Fraser of Carmyllie: My Lords, the Minister will know, if no one else knows, that during the passage of the Bill through this House at an earlier stage, if we had a consistent theme it was that the regulatory regime set out in the Bill should be as simple and coherent as possible. Accordingly, for that reason, from time to time we resisted what we saw as unnecessary overlaps of regulatory regimes, particularly in relation to the utilities, in an attempt to achieve that objective.
Our position on this amendment is that the existing law, and the law that is presently contained in the Bill, is sufficient to deal with the issue of predatory pricing in the newspaper industry. We may be wrong about that, but it is, I say to the noble Lord, Lord McNally, a consistent position that we have taken throughout the Bill and one to which we intend to stick.
I am bound to say that when such a distinguished lawyer as the noble and learned Lord, Lord Ackner, says that the law is not clear, it undoubtedly troubles me. I should like to think about that carefully. However, the conclusion of his doubts lead me not to believe that we should include Clause 19 in the Bill but, if anything, we should be looking rather more carefully at Clause 18 to ensure that if predatory pricing in the newspaper industry is to be covered, it is properly and consistently covered in that provision. I do not intend to take up much time with that. That is our position and we maintain it.
I say to the noble Lords, Lord McNally and Lord Razzall, that we take some exception to the rather grand view that this debate has become slightly anti-Murdoch. The noble Lord, Lord McNally, indicated that the position we were adopting was not one of consistency or one we have taken throughout the Bill but arose from some hope that we might re-secure the affections of the Murdoch press. I come from Scotland. It is a long time since I thought the Sun in Scotland espoused, with all the historical duplicity of Braveheart, the Scottish national cause. I have long abandoned any belief that the Tory party in Scotland will secure its support again. No, we act on the basis that we consider that the Bill should be kept as simple and clear as possible.
There is only one good reason for sending the Bill back to another place and that is, once again, to enjoy the malicious pleasure of seeing Labour Members of Parliament, both new and old, having to troop through the Lobbies in support of Murdoch.
Lord Simon of Highbury: My Lords, yet again I rise after a very high quality debate enlightened by opposition from all sides of the House. This is now becoming a regular occurrence in a very short career. However, I shall battle on because I was heartened by the early entreaty of the noble Lord, Lord McNally, that we should make this an intellectual debate. Indeed, for
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some time we were on the right track. Unfortunately, we lost the track when we started to debate how the amendment, which is what we are currently discussing, could be applied to the Bill. I shall return to that point. I make it forcibly because many people have been debating the clause as it stands. That is not what we are debating. That has been rejected. We are debating the "McNally amendment". Many of my colleagues, I think inadvertently, have spoken to the clause, which we should not be doing.
The clause has been rejected but we all recall the issues raised by it which were discussed at length in the House in a debate of very high quality. I shall try to take into account arguments that the Government have been trying to develop which are effective, in my view, in making both the clause as it existed and this amendment untenable and unworkable.
Perhaps I may say straightaway to noble Lords that the Government recognise that the newspaper industry requires and indeed receives special treatment. That is not at issue. There has been no U-turn from the Government on that point. In all our debates the Government have, I hope, been very clear about the importance of having a strong, diverse and independent press in this country. That is why we have the special merger provisions for newspapers in the Fair Trading Act. They are there precisely to protect plurality of ownership and diversity of content. Clearly, there are specific public interest issues—not least accurate presentation of news and free expression of news—which need to be considered in merger cases involving newspapers. That is why we keep the special provisions in the Fair Trading Act.
As my noble friend Lord Borrie reminded us, it is also true that many industries are treated differently. That is absolutely correct. That is why the newspaper industry is treated differently in terms of its ownership and the requirement to meet the test of a strong, diverse and independent press. I have no doubt that the question from my right honourable friend in another place, Robin Cook, which was raised by the noble Lord, Lord McNally, is answered entirely by that point.
However, the Bill deals with matters, as many of my noble friends have observed, which are common across the entire industry. That is the critical point. The Bill is not about ownership; it is about dealing with abuses of dominance and other anti-competitive behaviour which are wrong wherever they occur. That is essentially why we do not need or want to treat newspapers differently under the Bill—the very point made by the noble and learned Lord, Lord Fraser. In that sense the Bill is inclusive. It is about prohibiting abuse across industry at large.
Why do we think it is important? I turn to the point made by my noble friend Lord Judd. He asked if we have a strategic view of why this is important. I have a very strong strategic view, and that is that competition is the essence here. That is what is important in the newspaper industry, as in any other industry, because competition breeds innovation and excellence. if the noble Lord does not believe that, he does not understand our strategy. I believe that in many areas in our nation,

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the competitive instinct needs to be developed. That is why the Bill is about competition in every sector of the business. In saying that we do not want to treat newspapers differently. Do not get me wrong. It does not mean that we are complacent about the newspaper industry—far from it. This Government have acted on the need for a stronger competition law. To crack down on anti-competitive behaviour is one of our first priorities. We are serious about competition. There are no special favours. Newspapers will not be exempt from that.
Of course, as many of your Lordships will know and as the noble Lord, Lord McNally, reminded us, the Director General of Fair Trading is already investigating complaints against The Times made by other newspaper companies. If he concludes that there is a case to do so, the director may make a reference to the Monopolies and Mergers Commission under his existing powers. If he does make a reference, the MMC will investigate and report on whether there are any adverse effects to the public interest. If it finds that there are adverse effects, it may make recommendations to the Secretary of State, who would then have wide powers to impose remedies.
I say particularly to my noble friend Lord Borrie—whom we all agree is an expert in this area—that we should wait for the facts of that case to be found. No one should draw conclusions in regard to individual cases until the facts have been found. Of course, once the prohibitions come into force, the director general will have stronger powers to investigate anticompetitive behaviour and to enable him to bring it to an end much earlier.
It is absolutely clear that the prohibition in Clause 18 covers firms abusing their dominance by predatory pricing. The case law shows that beyond doubt. As the noble Lord, Lord McNally, foresaw, the case of Tetra Pak in the European Court of Justice is not only a "fig" for what I am about to say, it is also at the very root, if I do not mix my culinary metaphors, of what we are saying. Following the earlier court decision on AKZO, where prices are below the average variable cost of production, predation should be presumed. In other words, proof of intent is not required. That is an objective test. The ECJ also held that if prices are above average variable costs but below total average costs, conduct is to be regarded as predatory where it can be established that the purpose of the conduct was to eliminate a competitor.
It is clear where the case law stands. But I should also like to examine a second point—the issue of dominance—to which many alluded. Again the jurisprudence is clear. The European Court, for example in the case of Michelin, defined dominance as a
"position of economic strength which enables an undertaking to hinder the maintenance of effective competition in the relevant market by allowing it to behave to an appreciable extent independently of its competitors and customers and ultimately of consumers".
That definition is well established and well understood. It addresses the right competition concerns. There is no case for applying something different.
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Those principles, which are established in European case law, will apply under the Competition Bill by virtue of Clause 60. As your Lordships are well aware, subsection (2) of Clause 60 makes it clear that there must be no inconsistency in the principles applied by courts in applying the domestic prohibition and those laid down by the European Court and any relevant decision of that court. So the principles on predatory pricing established in AKZO and Tetra Pak, and the meaning of dominance established in Michelin and other cases, will apply under the Competition Bill.
It is important to have that clearly in our minds because I should now like to address Amendment No. 7A as debated tonight in some parts, and not Clause 19, which was rejected in the other House.
First, I say to the noble and learned Lord, Lord Ackner, that it is our submission that the clause is not necessary. I understand that to be a legal term, though I use it in the way in which it was put to me. What is more important is our belief that it is unworkable and that is one of the points that I should like to make.
This amendment addresses some of the deficiencies of Clause 19. However, it has problems of its own, as any amendment which seeks to impose a different prohibition in one particular sector is bound to do, as the noble Lord, Lord Harris, reminded us. First, this amendment throws out the whole concept of dominance and introduces a rigid market share test instead. It is simply not right to introduce what is a threshold for investigation in the Fair Trading Act into the very different prohibition-based approach in the Bill. The right test for a prohibition approach is the one we have under the Bill, in which dominance means a position of economic strength which enables an undertaking to act independently of competition. That principle is established in EC case law, for example in the Michelin case.
The opinion of Richard Fowler QC was mentioned as being an open opinion which we must respect. It is interesting that he says we may have to modify the Bill to address newspaper pricing. I return to something I said earlier. Whether or not The Times is dominant depends on the facts. It is surprising that that opinion can reach a view on that position without proper investigation and I wonder whether the eminent QC had the facts in front of him when drawing up the opinion. We are not aware of that. The DGFT could only assess the matter following a thorough investigation. The implication of the opinion is that The Times cannot operate independently of competition. In my view that is a matter to be determined on the facts.
I repeat that we believe the dominance test, as brought from EC law, to be the right test. It is companies which are able to act without worrying about their competitors who are liable to be able to abuse their position. The Bill will deal with such abuses.
By contrast, the rigid market share test in the amendment means it would apply to any national newspaper business with 25 per cent. of the market. There is indeed a 25 per cent. market share threshold in the Fair Trading Act, as the noble Lord, Lord Razzall, pointed out. But that is not the threshold for imposing a

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prohibition. It is the minimum threshold for allowing an investigation by the MMC. Under the Bill, the threshold for investigation is that the director should have reasonable grounds for believing that there has been an infringement of the prohibitions. There is no market share threshold. Nor should there be. The test for dominance is based on the real economic circumstances of the case in question, not some arbitrary percentage figure.
Under the Fair Trading Act nothing is prohibited per se. We need to remember that important distinction. The prohibition approach in the Bill is a much more serious proposition. Infringements will be unlawful, liable to stiff financial penalties and to civil actions for damages. This is the strength of the prohibition approach: it provides a much stronger deterrent and more effective remedies.
The other side of the coin is that it must be clear what "abuse" means, and that companies which are not dominant will not be caught. Otherwise businesses which are not dominant, but which are, on the contrary, vigorously competing in a very competitive environment, will not know whether or not what they are doing is lawful. The unintended result of the amendment would therefore be to create uncertainty, stifling legitimate competition and innovation.
The amendment will also create uncertainty by introducing a new definition of prohibited conduct. Clause 18 prohibits the same type of conduct which is prohibited under Article 86, and is to be interpreted according to EC jurisprudence. By contrast, there is no case law on which to draw in interpreting this amendment. Again, business will be left wholly uncertain as to what is lawful and what is not. Noble Lords talked of a Klondike for lawyers. This would be bigger than the Klondike ever was. It could be, in oil terms, another Alaska. If there were that much doubt about how the clause was to be applied, by golly, our loyal friends in the profession would have a good time! These are fundamental objections.
Finally, Parliament has given a great deal of close and careful scrutiny to the question of how the Bill will apply to predatory behaviour. I have tried, because it is important, to place on the table some of the legal doubts about the application of the amended clause. The debate has been very detailed, serious and well-informed. I thank the noble Lord for that.
The conclusion reached in another place in the light of all these deliberations was that Clause 19 should be removed and that an identical amendment to Amendment No. 7A, which we are now debating, should be rejected. Although I shall not go through the arithmetic of the vote in any detail since it may not be necessary, it was a very clear decision of the other House, however many 20s one may count. We may be satisfied that the arguments have been thoroughly and carefully examined during the Bill's passage and that the concerns raised by this House have been thoroughly addressed. On that basis, I urge the noble Lord to withdraw his amendment.
Lord McNally: My Lords, I can certainly echo the Minister in regard to the thoroughness of the debate.
1368
I thank him for his unfailing courtesy in dealing with the issues that have arisen. I do not intend to delay the House long on the matter.
There are a couple of "tidying up" points. The noble Lord, Lord Haskel, made a curious intervention. I know the noble Lord to be one of the kindest men in this House; therefore I am sure that he was not suggesting that what I have been doing in relation to the Bill is in any way connected to the way in which I earn my living working for a PR company. Since entering this House, I have voluntarily given a quarterly record of what I do in PR to the Register of Members' Interests. When it was last examined by an investigative journalist, he said that it was the most thorough entry in the House. I challenge any Member to look at it. My interests in this matter go back 30 years. I know that it was a debating point, as was mine to the noble Baroness, Lady Oppenheim-Barnes. I never believed Woodrow Wyatt when he was alive, so why should I believe him now that he is dead? With the noble and learned Lord, Lord Fraser, I know that the Front Bench has arrived at its conclusions in the way that Front Benches always do—from the highest of principles.
I had hoped that the Minister, having heard the noble Lords, Lord Borrie, Lord Desai and Lord Judd, and the noble and learned Lord, Lord Ackner, might have merely echoed Peel at the end of the debates on the Corn Laws. He tore up his speech and said, "You must answer them, for I cannot." Instead, the Minister insisted on sticking to his brief, Tetra Pak and all. We had the old chestnut rolled out that the amendment is unworkable. What the Minister means is that his department does not want to make it work, which is different.
We have a difference of opinion. The Minister believes that by bringing this European jurisprudence into our law, it will provide sufficient teeth to this legislation to offer protection for our newspaper industry. I do not. I also share with the noble Lord, Lord Judd, the concerns that are coming down the track to us. Some massive problems have to be addressed in relation to the concentration of media power and how it influences our democracy.
I have no illusions that this one amendment will meet all those fears. However, it would send out a very strong signal. Yesterday, in The Times, William Rees-Mogg wrote:
"Debates in the Lords do not count for much; they scarcely travel to the other end of the Palace of Westminster, let alone to the country at large".
If your Lordships support this amendment, your voice will carry to the other end of this palace and to the country at large. It will say that this House is a bastion against this vested interest and an over-powerful executive. I ask the House to agree to my amendment in lieu of Commons Amendment No. 7. I wish to divide the House.
6.46 p.m.
On Question, Whether the said amendment in lieu of Commons Amendment No. 7 shall be agreed to?
Their Lordships divided: Contents, 87; Not-Contents, 116.

Division No. 2

CONTENTS

Ackner, L.

Linklater of Butterstone, B.

Addington, L.

Ludford, B.

Ampthill, L.

McNair, L.

Beaumont of Whitley, L.

McNally, L. [Teller.]

Bethell, L.

Maddock, B.

Biddulph, L.

Mar and Kellie, E.

Borrie, L.

Meston, L.

Brightman, L.

Methuen, L.

Brougham and Vaux, L.

Miller of Chilthorne Domer, B.

Cadman, L.

Milverton, L.

Campbell of Alloway, L.

Mountevans, L.

Carlisle, E.

Moyne, L.

Clancarty, E.

Newby, L.

Clement-Jones, L.

Nicholson of Winterbourne, B.

Craigavon, V.

Ogmore, L.

Crickhowell, L.

Oppenheim-Barnes, B.

Darcy de Knayth, B.

Perry of Southwark, B.

Desai, L.

Platt of Writtle, B.

Dholakia, L.

Razzall, L. [Teller.]

Elton, L.

Rodgers of Quarry Bank, L.

Ezra, L.

Rowallan, L.

Falkland, V.

Russell, E.

Fookes, B.

Russell-Johnston, L.

Salisbury, Bp.

Freyberg, L.

Sharp of Guildford, B.

Geddes, L.

Shaughnessy, L.

Geraint, L.

Skelmersdale, L.

Glasgow, E.

Steel of Aikwood, L.

Goodhart, L.

Steel of Leaston, L.

Gray of Contin, L.

Stodart of Leaston, L.

Greenway, L.

Swinfen, L.

Grey, E.

Taverne, L.

Thomas of Gresford, L.

Haddington, E.

Thomas of Gwydir, L.

Hamwee, B.

Thomas of Walliswood, B.

Harmar-Nicholls, L.

Thomas of Monifieth, L.

Harris of Greenwich, L.

Thurso, V.

Hunt of Wirral, L.

Tope, L.

Inchyra, L.

Tordoff, L.

Jacobs, L.

Torrington, V.

Jopling, L.

Trenchard, V.

Kinnoull, E.

Vinson, L.

Kirkwood, L.

Vivian, L.

Knight of Collingtree, B.

Waddington, L.

Lawrence, L.

Wallace of Saltaire, L.

NOT-CONTENTS

Ailesbury, M.

Crawley, B.

Alli, L.

Cuckney, L.

Amos, B.

David, B.

Archer of Sandwell, L.

Davies of Coity, L.

Bach, L.

Davies of Oldham, L.

Bassam of Brighton, L.

Dean of Beswick, L.

Bell, L.

Diamond, L.

Berkeley, L.

Dixon, L.

Berners, B.

Dormand of Easington, L.

Blackstone, B.

Evans of Parkside, L.

Bledisloe, V.

Ewing of Kirkford, L.

Burlison, L.

Falconer of Thoroton, L.

Burns, L.

Farrington of Ribbleton, B.

Carmichael of Kelvingrove, L.

Gallacher, L.

Carnegy of Lour, B.

Gilbert, L.

Carter, L. [Teller.]

Gladwin of Clee, L.

Clinton-Davis, L.

Gordon of Strathblane, L.

Cocks of Hartcliffe, L.

Goudie, B.

1370

Gould of Potternewton, B.

Murray of Epping Forest, L.

Gregson, L.

Nicol, B.

Grenfell, L.

O'Cathain, B.

Griffiths of Fforestfach, L.

Orme, L.

Grimston of Westbury, L.

Paul, L.

Hacking, L.

Pitkeathley, B.

Hardie, L.

Plant of Highfield, L.

Hardy of Wath, L.

Ponsonby of Shulbrede, L.

Harris of High Cross, L.

Ramsay of Cartvale, B.

Haskel, L.

Randall of St. Budeaux, L.

Hayman, B.

Rea, L.

Hilton of Eggardon, B.

Rees-Mogg, L.

Hogg of Cumbernauld, L.

Rendell of Babergh, B.

Hollis of Heigham, B.

Renwick of Clifton, L.

Howell of Guildford, L.

Richard, L.

Hoyle, L.

Sainsbury of Turville, L.

Hughes, L.

Sawyer, L.

Hughes of Woodside, L.

Scotland of Asthal, B.

Hunt of Kings Heath, L.

Serota, B.

Islwyn, L.

Shannon, E.

Jay of Paddington, B. [Lord Privy Seal.]

Shepherd, L.

Simon of Highbury, L.

Jeffreys, L.

Smith of Gilmorehill, B.

Jenkins of Putney, L.

Stoddart of Swindon, L.

Kintore, E.

Stone of Blackheath, L.

Lockwood, B.

Symons of Vernham Dean, B.

Lofthouse of Pontefract, L.

Taylor of Blackburn, L.

Macdonald of Tradeston, L.

Thornton, B.

McIntosh of Haringey, L. [Teller.]

Tomlinson, L.

Turner of Camden, B.

Mackenzie of Framwellgate, L.

Uddin, B.

Mallalieu, B.

Varley, L.

Mason of Barnsley, L.

Walker of Doncaster, L.

Merlyn-Rees, L.

Warner, L.

Milner of Leeds, L.

Wedderburn of Charlton, L.

Mishcon, L.

Whitty, L.

Molloy, L.

Williams of Elvel, L.

Monkswell, L.

Williams of Mostyn, L.

Montague of Oxford, L.

Willoughby de Broke, L.

Morris of Castle Morris, L.

Winston, L.

Morris of Manchester, L.

Wynford, L.

Resolved in the negative, and amendment disagreed to accordingly.
6.54 p.m.
Lord Simon of Highbury: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 7.
On Question, Motion agreed to.

COMMONS AMENDMENT
8 Clause 25, page 13, line 2, leave out ("does not infringe") and insert ("has not infringed").
Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 8.
Moved, That the House do agree with the Commons in their Amendment No. 8.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

COMMONS AMENDMENT
9 Clause 27, page 13, line 38, after ("document") insert (", or to provide him with specified information,").
Lord Simon of Highbury: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 9, with which is grouped Amendments Nos. 11 to 15, 27, 42 and 43 and 100 to 102.
These amendments are necessary to fill a gap in the investigation provisions of the Bill as currently drafted. The current provisions are largely focused on allowing the director to require the production of documents and explanations of those documents. While "documents" are very widely defined (in Clause 59) to include information "recorded in any form", there are circumstances where it would be essential for the director to be able to require the production of information which is not in such a form but which has to be compiled for the purpose. This may happen in the context of an investigation of a dominant undertaking; for example, where under the Bill as currently drafted, the director would not be able to require the undertaking concerned to produce, say, its sales by volume unless a document containing this information already existed; instead he might have to identify and require individual receipts. Information on market shares might not be compiled systematically by an undertaking in recorded form. It could, however, be compiled, by using the knowledge and experience of the undertaking's sales manager, and this amendment would enable the director to obtain that information, which would otherwise be denied to him.
Similarly, there may be a need for information which is in recorded form to be produced in a different recorded form; for example, the information contained in a large number of individual invoices to be produced, as an overall statement of sales by volume. The power would therefore allow information to be required to be compiled or created to meet the request.
The Bill's powers to investigate suspected infringements of the prohibitions enable the director to require the production of "forecasts". The investigation powers in the Fair Trading Act 1973 had been taken to extend to forecasts. However, the Bill mentions forecasts specifically and the Fair Trading Act provisions do not. This has raised a concern that the inference may be drawn that the 1973 Act does not cover forecasts. Amendments No. 42 and 43 and 100 to 102 are necessary, in tidying up terms, to avoid that inference being drawn. They also deal with the investigation powers in the Competition Act 1980 which will continue to apply for those provisions that are not being repealed.
Moved, That the House do agree with the Commons in their Amendment No.9.—(Lord Simon of Highbury.)
On Question, Motion agreed to.

COMMONS AMENDMENT
10 Clause 27, page 13, line 41, leave out ("signed by the Director").
Lord Simon of Highbury: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 10, with which is grouped Amendments Nos. 16 to 20 and 40 and 41.
Amendments Nos. 10, 40 and 41 are concerned with an important element of the Bill; namely, that the director should be able to delegate the exercise of his functions under the Bill. It would be wrong and, indeed, impractical to require him to exercise them in person.
It might possibly be argued that the director cannot delegate his powers under Clause 27 in this way to require the production of documents because the power to do so is subject to the issuing of a
"notice signed by the Director".
It could be argued that this expressly required him to act personally and sign the notices.
We do not want there to be any risk that this argument could be successfully advanced. It is our clear intention that this power should be capable of delegation. Accordingly, to put the matter beyond doubt, Amendment No. 10 deletes the reference to the notice being "signed by the Director".
I turn to Amendments Nos. 40 and 41. The Bill was earlier amended in this House to ensure that the director's general power to delegate, under Schedule 1 to the Fair Trading Act 1973, also applied to the domestic investigation function. We need to make the equivalent amendments to the EC investigation provisions so that they operate in precisely the same way. Amendments Nos. 40 and 41 do so by deleting unnecessary references in Clauses 62 and 63 to persons acting on behalf of the director.
Amendments Nos. 16 and 20 are amendments to the power, when the premises of an undertaking are entered during the course of an investigation, to require a person to state the whereabouts of a document. In an "off-site" investigation under Clause 27, where a specified document is not produced, the investigating officer is empowered to require a person to state the whereabouts of that document,
"to the best of his knowledge and belief".
In Clauses 28 and 29 the equivalent power omits that qualification. We consider it desirable to remove that discrepancy and include these additional words, so that if a person is not certain of the exact location of a document but believes it is in a particular place, then he must give that information rather than simply stating that he does not know its whereabouts.
Amendments Nos. 17 to 19 are minor, technical amendments intended to clarify exactly what documents a warrant under Clause 29 of the Bill will authorise an investigating officer to search for, or take possession of or about which an explanation may be required to be given where premises have been entered under the warrant.
Clause 29 sets out three separate circumstances where a warrant may be obtained from a High Court judge enabling an investigating officer to enter premises in this way. As at present drafted, the Bill is unclear whether, when the warrant is issued, the investigating officer is then able to exercise his powers in subsection 29(2)(b),

1373
(c) and (e) only in relation to the category or categories of document which formed the grounds for obtaining the warrant or all of the categories in subsection (1). This amendment makes it clear that these powers relate only to the category or categories of documents which were the basis for obtaining the warrant in the first place.
Moved, That the House do agree with the Commons in their Amendment No. 10.—(Lord Simon of Highbury.)
On Question, Motion agreed to.
7 p.m.

COMMONS AMENDMENTS
11 Clause 27, page 14, line 2, leave out (""specified document" means any document which") and insert (""specified" means—")
12 Page 14, line 3, leave out ("is").
13 Page 14, line 4, leave out ("falls within a category of document") and insert ("falling within a category").
14 Page 14, line 7, after ("produced") insert ("or any information is to be provided").
15 Page 14, line 8, at end insert ("or provided").
16 Clause 28, page 15, line 6, after ("state") insert (", to the best of his knowledge and belief,").
17 Clause 29, page 15, line 39, leave out ("mentioned in subsection (1)") and insert ("in respect of which the application under subsection (1) was granted ("the relevant kind");").
18 Page 15, line 40, leave out ("that") and insert ("the relevant").
19 Page 16, line 2, leave out ("a kind mentioned in subsection (1)") and insert ("the relevant kind").
20 Page 16, line 2, after ("state") insert (", to the best of his knowledge and belief,").
21 Clause 37, page 19, line 1, leave out ("infringes") and insert ("has infringed").
22 Page 19, line 4, leave out ("infringes") and insert ("has infringed").
Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 11 to 22. These amendments have been spoken to with Amendments Nos. 6, 9 and 10.
Moved, That the House do agree with the Commons in their Amendments Nos. 11 to 22.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

COMMONS AMENDMENT
23 Clause 37, page 19, line 6, at end insert—
("(2A) The Director may impose a penalty on an undertaking under subsection (1) or (2) only if he is satisfied that the infringement has been committed intentionally or negligently by the undertaking.").
Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 23. I shall speak also to Amendments Nos. 24 and 25. This amendment responds to an amendment to Clause 37 tabled by the noble and learned Lord, Lord Fraser of Carmyllie, which would
1374
have required the director's guidance to cover the criteria to be used in deciding whether to impose a penalty. Concern was expressed that undertakings might be subject to a penalty, even though they might have acted anti-competitively without deliberate intent. I do not believe that penalties would be imposed by the director without very good reason.
However, the concern which the noble and learned Lord expressed is entirely proper and the Government indicated that an amendment might need to be made in another place. We had thought that this matter might well be covered by guidance under Clause 39, but on reflection it seems to us that the better course is to make it clear on the face of the Bill that penalties cannot be imposed unless the undertaking has committed the infringement intentionally or through negligence. This is what Amendment No. 23 achieves. I hope that it will be welcome to the House.
Turning to Amendments Nos. 24 and 25, Clause 39 of the Bill requires the director to prepare and publish guidance as to the appropriate level of a penalty which an undertaking may be required to pay where an agreement or conduct infringes either of the prohibitions. We have given the commitment that the ceiling of 10 per cent. of turnover will be limited to UK turnover. The purpose of Amendment No. 24 is to inform and guide business on the circumstances in which penalties are likely to be imposed and the magnitude of such penalties. Clause 39(8) underpins this by requiring the director to have regard to this guidance when setting the amount of a penalty. As at present drafted, the subsection also requires an appeal tribunal or court also to have regard to the director's guidance.
We believe that this latter provision could be argued to have limited the independence of the appeal process from the director. To put the matter beyond doubt, this amendment removes the obligation on a tribunal and the court to have regard to such guidance.
Amendment No. 25 is necessary as a consequential amendment to delete the cross-reference, in Clause 39(10) to subsection (8) of Clause 39, because this subsection will no longer refer to "the appropriate court".
Moved, That the House do agree with the Commons in their Amendment No. 23.—(Lord McIntosh of Haringey.)
Lord Borrie: My Lords, I wish to comment on Amendment No. 23, which may reduce the important deterrent effect of the penalties which the Government have much lauded as being among the purposes of the Competition Bill. As we have heard, it requires that the director may impose a penalty only if he is satisfied that the infringement of a prohibition has been committed intentionally or negligently by the undertaking. I stress the words "by the undertaking" because my concern is that that may mean only the directing mind of the company. I am concerned about what may happen if, for example, the management of an undertaking issues express instructions to employees not to put into effect a price-fixing agreement. Then let us suppose that a middle rank employee, if you like, acts against those instructions

1375
in the course of his employment because it is his job to make contracts. I am worried that because of the amendment the director may not be able to impose a penalty on the basis that the undertaking, or the directing mind of the undertaking, has not acted intentionally or negligently; indeed he has issued express instructions to try to ensure that does not happen.
I have not invented these facts out of thin air. I refer to an actual case that occurred in the earlier part of this decade when the House of Lords in its judicial capacity dealt with ready-mixed concrete companies which had been subjected to a court order many years before that they must not make price-fixing agreements. The court orders were, of course, directed at the companies concerned. The directors of a company issued instructions seeking to put into effect the court order and to try to ensure that everyone in the company obeyed it. Unfortunately the instructions were disobeyed and people of a certain rank within the company liaised with other people in other companies and made price-fixing contracts exactly of the kind that the Restrictive Practices Court had been concerned about.
The House of Lords overruled the Court of Appeal on this matter. The House of Lords said that even though the employees had acted outside their authority and contrary to instructions, as they acted in the course of their employment the contracts they had made were attributable to the companies and the companies were liable in contempt for breaching the court orders. In the judgments much was made of the fact that the companies were liable in contempt because the law of contempt does not require intention on the part of the employer. If the employer is supposed to be the one who has the intention or is negligent, would the director be able to impose penalties under the new wording in Amendment No. 23, which the House of Commons has passed and which we are now considering?
Lord Fraser of Carmyllie: My Lords, I leave it to the noble Lord to answer that series of complicated questions. For my part, I simply thank the Minister for introducing the amendment in another place. It certainly meets the concerns which we expressed in this House.
Lord McIntosh of Haringey: My Lords, I am grateful for the observations of the noble and learned Lord, Lord Fraser of Carmyllie. I am grateful to my noble friend Lord Borne for writing to us yesterday and giving us notice of his concerns. He is right to draw attention to the implications of this change to the Bill. When I started in business—far too long ago—we were taught that, if we signed a letter, it had to be "for and on behalf of the company. When I started my own business, in 1965, I was told by our legal advisers that that was no longer necessary because the law as it stood then meant that anything we wrote on the company's letterhead was tacitly "for and on behalf of" the company. It is not entirely clear to me whether the ready-mixed concrete case to which my noble friend referred overturns that position. As I understand what my noble friend said, the agreements that took place between the ready-mixed concrete companies were not necessarily in writing, so areas of doubt remain. However, I can assure the House
1376
that acceptance of Amendment No. 23 will not undermine the effectiveness of the new regime in deterring anti-competitive behaviour or tackling it vigorously when it does occur.
The amendment introduces an important new safeguard for undertakings, reflecting the concerns expressed in this House. Penalties cannot be applied unless the director is satisfied that the undertaking has infringed the prohibition intentionally or negligently. However, I must point out that this limitation is on the imposition of penalties, not on the application of the prohibition itself. If the director is satisfied that the prohibition has been infringed by an undertaking, then he will be able to take enforcement action under the Bill to bring that infringement to an end. Only if he is satisfied that the infringement is intentional or negligent will he he able to impose penalties.
The amendment is not a licence for cavalier behaviour—not that my noble friend suggested that it was. It is clear from the principles set out in the decision of your Lordships' House in the case of the Supply of Ready Mixed Concrete (No2) that an employee, acting for an undertaking within the scope of his employment, who makes a prohibited agreement will be doing so as the company. The company will therefore be in breach of the prohibition and be liable accordingly.
The test as to whether an infringement is "intentional or negligent" mirrors that in Regulation 17/62 under which the European Commission acts when imposing fines for breaches of Articles 85 and 86. The director, in applying the test, will therefore be bound to apply European Community jurisprudence in applying the test to the Bill. Clause 60, with its purpose clause, sets this out clearly. The director will have to identify the legal person who is responsible for operation of the undertaking which has breached the prohibition. That will usually mean the company carrying on the business in respect of which the breach has occurred.
In deciding whether the undertaking has acted intentionally or negligently, the director will have to consider the degree of culpability for the infringement. For example, in the case of Deutsche Phillips the company was held liable for negligent infringement for including in agreements an export ban in error after the parent company had ordered its removal. The Commission determined that the company had not taken sufficient care to remove the offending restriction from agreements. A compliance programme which is ineffective to prevent infringements may be a mitigating factor but will not relieve the company from the imposition of penalties.
I hope that what I have said reassures my noble friend to some extent.
On Question, Motion agreed to.

COMMONS AMENDMENTS
24 Clause 39, page 20, line 4, leave out ("an appeal tribunal or the appropriate court").
25 Page 20, line 12, leave out ("subsections (8) and") and insert ("subsection").
26 Clause 41, page 21, line 19, leave out ("it is likely that the conduct infringes") and insert ("the conduct is likely to infringe").
27 Clause 43, page 22, line 10, at end insert—
("() to provide information,").
28 Clause 47, page 24, line 5, leave out ("is") and insert ("has been").
29 Clause 47, page 24, line 6, leave out ("is") and insert ("has been").
Lord McIntosh of Haringey Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 24 to 29. These amendments were spoken to with Amendments Nos. 6, 9 and 23.
Moved, That the House do agree with the Commons in their Amendments Nos. 24 to 29.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.
7.15 p.m.

COMMONS AMENDMENT
30 Clause 50, page 25, leave out lines 32 and 33.
Lord Simon of Highbury: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 30. In doing so, I shall speak also to Amendments Nos. 31 to 33 and 62 to 73. These are all minor or technical amendments intended to enhance the efficient and effective operation of appeals under the Bill. The main substantive amendments are Amendments Nos. 64 and 71.
Amendment No. 64 replaces the power of the tribunal to "reverse" the decisions of the director with the power to "set aside" such decisions. We concluded that this change was merited in light of our consultations on the Bill.
Lord Fraser of Carmyllie: My Lords, perhaps I may interrupt the noble Lord and say that we are powerfully persuaded by the arguments that lay behind these amendments.
Lord Simon of Highbury: My Lords, I was about to say that the change was made in light also of the amendment tabled by the noble and learned Lord, Lord Fraser, and the noble Lord, Lord Kingsland, on Report which proposed that the tribunal should have the power to quash decisions.
Amendment No. 71 makes it an offence to fail. I should draw attention to Amendment No. 70, because it includes aspects of the appeals procedure. Amendments Nos. 63, 65 and 67 respond to points made by the noble and learned Lord, Lord Fraser, at Third Reading, and the noble Lord, Lord Kingsland, in Committee.
Moved, That the House do agree with the Commons in their Amendment No. 30.—(Lord Simon of Highbury.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
31 Page 25, line 39, after ("to") insert ("proceedings before a tribunal in").
32 Page 25, line 40, after ("to") insert ("proceedings before a tribunal in").
33 Page 25, line 41, after ("to") insert ("proceedings before a tribunal in").
Lord Simon of Highbury: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 31 to 33.
Moved, That the House do agree with the Commons in their Amendments Nos. 31 to 33.—(Lord Simon of Highbury.)
On Question, Motion agreed to.

COMMONS AMENDMENT
34 After Clause 50, insert the following new clause—
("Vertical agreements and land agreements

VERTICAL AGREEMENTS AND LAND AGREEMENTS
.—(1) The Secretary of State may by order provide for any provision of this Part to apply in relation to—

(a) vertical agreements, or

(b) land agreements,

with such modifications as may be prescribed.
(2) An order may, in particular, provide for exclusions or exemptions, or otherwise provide for prescribed provisions not to apply, in relation to—

(a) vertical agreements, or land agreements, in general; or

(b) vertical agreements, or land agreements, of any prescribed description.

(3) An order may empower the Director to give directions to the effect that in prescribed circumstances an exclusion, exemption or modification is not to apply (or is to apply in a particular way) in relation to an individual agreement.
(4) Subsections (2) and (3) are not to be read as limiting the powers conferred by section 70.
(5) In this section—

"land agreement" and "vertical agreement" have such meaning as may be prescribed; and

"prescribed" means prescribed by an order.").

Lord Simon of Highbury: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 34. This amendment is grouped with Amendment No. 45.
Noble Lords will recall that we spent a considerable time in Committee and on Report on the treatment of vertical agreements and, to a lesser extent, land agreements. This new clause allows the Government to provide special treatment including exclusion from the Chapter I prohibition of vertical agreements and land agreements. I should like to outline in some detail the Government's thinking in respect of these types of agreements and how we intend to use the power to be granted by this new provision.
I shall deal, first, with vertical agreements. We have said on a number of occasions that we believe that there is significant merit in granting exclusion or other special treatment for vertical agreements under the Chapter I prohibition. We believe that the new power proposed is

1379
important in ensuring that we are able to provide special treatment which is of real, practical value for business. We have discussed the approach in detail with representatives of the CBI and it has their support. There is already provision in the Bill to make exclusions, but we have considered whether additional flexibility is required. Working with the CBI, OFT and MMC on the vertical agreements task force, we concluded that the existing powers in the Bill to make exclusions may not be adequate to provide special treatment for vertical agreements which is legally sound while being of real, practical value to business. The new clause we are debating will enable special treatment or exclusion to be given specifically to vertical agreements.
We have already provided an initial draft of the order excluding vertical agreements to a few contacts, such as the CBI and the National Consumer Council, on an informal basis to see whether they agree that we are on the right track. We propose, in the light of these informal contacts, to issue formal consultation documents to a wider audience of business and other interested parties.
Finally, I should perhaps say a word on how the new power will be used after the consultation period. I am happy to explain now how we propose to define vertical agreements in the draft order to be made under the provision in the new clause. As many noble Lords may be aware, the European Commission has been conducting a review of the treatment of vertical restraints. The Commission has circulated a paper setting out its findings following its review. The paper contains possible descriptions of vertical agreements which could form the basis for a description of vertical agreements which would benefit from the special treatment under the Chapter I prohibition. The Commission is still working on these proposals. However, one definition used in the papers which we propose to adopt in our first draft is:
"agreements between two or more undertakings, each operating on a different level of the supply chain ... and in respect of the delivery and/or purchase or marketing of goods destined for resale or transformation or in respect of the marketing of services".
We see great merit in using the same language as that proposed by the Commission. Many UK businesses are already subject to EC competition law and it may be burdensome for them to apply two different tests at the EC and UK level when deciding whether they come within the scope of the UK and EC prohibitions.
The European Commission proposal for a new wide ranging block exemption is, however, still subject to numerous qualifications. We recognise that not all vertical agreements are benign and some can cause serious competition concerns. We do not intend to copy all the various qualifications and conditions that the EC propose. Nevertheless, we recognise that some vertical agreements can cause competition concerns which may not be readily dealt with by reliance on the Chapter II prohibition or the complex monopoly provisions of the Fair Trading Act.
Therefore, we need the consultation process and will continue with it. That the European Commission is still refining its proposal emphasises how right we are to deal with vertical agreements in secondary legislation.
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There is a powerful reason why the Bill should contain powers not only to define vertical agreements but to modify how the Bill should apply to them. I confirm, however, that we intend that the exclusions for both land and vertical agreements should be in place well before the prohibitions come into force, even if the European Commission has not concluded its review of vertical agreements by then. We are consulting now and we hope that the finalised orders will not be long delayed.
Moved, That the House do agree with the Commons in their Amendment No. 34.—(Lord Simon of Highbury.)
Lord Fraser of Carmyllie: My Lords, ordinarily the Opposition grumble if the approach taken is one of secondary rather than primary legislation. However, I believe that on this occasion there is sound reason underlying the thinking of the Government in allowing for much that has to be filled in to be done by way of secondary legislation. There must also be some force in what the Minister has said about drawing the provisions into line with what may emerge in a European context. The last thing we want is for British business to be required to observe two separate sets of rules. My only grumble is that, while this is a very reasonable approach to take, had it not been for the hesitancy of the previous President of the Board of Trade this is a conclusion to which the noble Lord would have come many months ago. We might have saved a good deal of time and effort with the matter ping-ponging around this Chamber or between this Chamber and another.
On Question, Motion agreed to.

COMMONS AMENDMENT
35 Clause 54, page 28. line 2, leave out ("exercised") and insert ("exercisable").
Lord Simon of Highbury: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 35. It is convenient to speak at the same time to Amendments Nos. 36, 81 to 89, 108, 110 to 113. and 115 and 116. These amendments enable the regulators to co-ordinate their activities under the Bill in a more effective manner. On a number of occasions during the passage of the Bill through this House, noble Lords raised matters which illustrated rigidities within the utility statute provisions as they would apply to the exercise of concurrent functions under the Bill. I said that the Government would reflect on those rigidities and whether a change was needed. These amendments are the result of that reflection and also respond to points made in Committee in another place. They disapply the present inflexible utility statute provisions from the exercise of Bill functions and provide a more flexible regulation-making power instead.
Moved, That the House do agree with the Commons in their Amendment No. 35.—(Lord Simon of Highbury.)
Lord Kingsland: My Lords, it appears that, while this Bill was passing through another place, the Secretary of State acquired, almost in a fit of absent-mindedness, the power to make regulations

1381
about the exercise of competition functions as between the Director General for Fair Trading on the one hand and the regulators on the other. Can the Minister assure me that this power will be used; and, if so, that a truly objective analysis will be made about which of the two sides of the equation—the regulator or director general—will be given the necessary authority?
Lord Simon of Highbury: My Lords, in arriving at a flexible solution, we shall need to consult very closely on how regulations are made. I very much hope that, as the regulation-making process takes place, the problems to which the noble Lord refers will be resolved.
On Question, Motion agreed to.

COMMONS AMENDMENT
36 Page 28, line 4, at end insert—
("(4) The Secretary of State may make regulations for the purpose of co-ordinating the performance of functions under this Part ("Part I functions") which are exercisable concurrently by two or more competent persons as a result of any provision made by Part II or III of Schedule 10.
(5) The regulations may, in particular, make provision—

(a) as to the procedure to be followed by competent persons when determining who is to exercise Part I functions in a particular case;

(b) as to the steps which must be taken before a competent person exercises, in a particular case, such Part I functions as may be prescribed;

(c) as to the procedure for determining, in a particular case, questions arising as to which competent person is to exercise Part I functions in respect of the case;

(d) for Part I functions in a particular case to be exercised jointly—

(i) by the Director and one or more regulators, or

(ii) by two or more regulators,

and as to the procedure to be followed in such cases;

(e) as to the circumstances in which the exercise by a competent person of such Part I functions as may be prescribed is to preclude the exercise of such functions by another such person;

(f) for cases in respect of which Part I functions are being, or have been, exercised by a competent person to be transferred to another such person;

(g) for the person ("A") exercising Part I functions in a particular case—

(i) to appoint another competent person ("B") to exercise Part I functions on A's behalf in relation to the case; or

(ii) to appoint officers of B (with B's consent) to act as officers of A in relation to the case;

(h) for notification as to who is exercising Part I functions in respect of a particular case.

(6) Provision made by virtue of subsection (5)(c) may provide for questions to be referred to and determined by the Secretary of State or by such other person as may be prescribed.
(7) "Competent person" means the Director or any of the regulators.").

COMMONS AMENDMENT
37 Clause 59, page 31. line 17, at end insert—
("() The fact that to a limited extent the Chapter I prohibition does not apply to an agreement, because of an exclusion provided by or under this Part or any other enactment, does not require those provisions of the agreement to which the exclusion relates to be disregarded when considering whether the agreement infringes the prohibition for other reasons.").
Lord Simon of Highbury: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 36 and 37.
Moved, That the House do agree with the Commons in their Amendments Nos. 36 and 37.—(Lord Simon of Highbury.)
On Question, Motion agreed to.

COMMONS AMENDMENT
38 Clause 60, page 32, line 2, after ("to") insert ("— (a)").
Lord Simon of Highbury: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 38. In moving this amendment I should like to speak also to Amendment No. 39. The Bill as drafted is designed to confer rights for persons to take action directly in the UK courts in respect of breach of the prohibitions. We believe that such rights of action have an important role to play in the enforcement of the prohibitions. We wish to ensure that the extent of the right of action for breach of the UK prohibitions is the same as for breach of Articles 85 and 86. Rights of action for breach of Articles 85 and 86 have been clearly held to exist by the UK courts. However, Community law is still in the process of development, for example, in terms of the class of persons who are able to claim such rights.
We want to ensure that our courts can deal with third party rights of action for breach of the domestic provisions as they evolve in the context of Articles 85 and 86. The amendments confirm this. As I said at Third Reading:
"We would not want a situation where the extent of rights of private action depended on whether the agreement affected trade between member states, often a difficult line to draw".—[Official Report, 5/3/98; col. 1325.]
Moved, That the House do agree with the Commons in their Amendment No. 38.—(Lord Simon of Highbury.)
Lord Kingsland: My Lords, am I right in thinking that the amendments to which the Minister has spoken relate to Clause 60 of the Bill? Before I turn to the two questions that I wish to put to the Minister, I should like to make a general reflection on his approach to Clause 60. This clause caused us a good deal of heart-searching as well as mind-stretching during Committee and Report stages. There are a number of expressions in Clause 60 with which all your Lordships find great difficulty. The Minister will recall that, at the time, the noble and learned Lord, Lord Brightman, suggested to him that this was a Bill which pre-eminently should have an index of defined expressions. Noble Lords will have noted that in the course of this Session of Parliament no

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less than four important Bills have had such an index. I refer to the Data Protection Bill, the School Standards and Framework Bill, the Scotland Bill and the Government of Wales Bill. The Scotland Bill and the Data Protection Bill have 44 defined expressions; the Schools Standards and Framework Bill has 62; and the Government of Wales Bill 42.
Many noble Lords remain puzzled as to why it should be an appropriate approach in those Bills but not with regard to this Bill. When he was at the Bar, the noble and learned Lord, Lord Brightman, was regarded as the greatest draftsman of his generation. The Minister will recall that he actually did the Minister's work for him. I believe that in the application of Clause 60, it would have been of benefit to this House.
I have two questions on Clause 60. First, does the clause apply to Part I of the Act in its entirety? Secondly, on the definition of compatibility, am I right to conclude that compatibility here means that the jurisprudence of the European Court of Justice will prevail in all circumstances except those in which the court, having striven to make them prevail, finds that, in that particular set of circumstances, they cannot?
7.30 p.m.
Lord Simon of Highbury: My Lords, perhaps I may briefly reflect on the input into the debate of the noble and learned Lord, Lord Brightman. We discussed it closely. The decision was not to provide the index here. That issue has been well discussed and well argued in this case. However, as noble Lords know, many Bills do not include indexes. The decision was that there would not be an index in this Bill.
The answer to the first question as to whether it applies to Part I in the entirety is yes. On compatibility, we are satisfied that the drafting of Clause 60 accurately expresses the concept that Community jurisprudence is to be followed unless the court is driven to some different interpretation by some provision in that part of the Bill. In all other respects, Part I is not to be interpreted as an ordinary statute. For example, "products" is to be read as including services. An "effect on competition" is to be read as meaning an appreciable effect. That is not how those terms would be interpreted if used in an ordinary UK statute. Interpretation of the Bill is not a two stage process. One does not construe the prohibitions and then compare them with Community jurisprudence. One construes them from the outset on the basis of Clause 60.
On Question, Motion agreed to.

COMMONS AMENDMENTS
39 Clause 60, page 32, line 3, at end insert—
("(b) the civil liability of an undertaking for harm caused by its infringement of Community law.").
40 Clause 62, page 32, line 43, leave out from ("Director") to end of line 44.
41 Clause 63, page 34, line 3, leave out from ("Director") to end of line 4.
42 Clause 66, page 36, line 12, after ("estimates") insert ("forecasts").
43 Page 36, line 14, after ("estimates") insert ("forecasts").
Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 39 to 43 en bloc.
Moved, That the House do agree with the Commons in their Amendments Nos. 39 to 43—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

COMMONS AMENDMENT
44 After Clause 68, insert the following new clause—

REPORTS: MONOPOLY REFERENCES
(". In section 83 of the Fair Trading Act 1973—

(a) in subsection (1), omit "Subject to subsection (1A) below"; and

(b) omit subsection (1A) (reports on monopoly references to be transmitted to certain persons at least twenty-four hours before laying before Parliament).").

Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 44. I shall speak also to Amendments Nos. 103, 106 and 107. These amendments are intended to reduce the risk of leaks of market sensitive information, and to protect the interest of companies and their investors, including the many individual members of the public who are shareholders.
The amendments repeal Section 83(1A) of the Fair Trading Act 1973 which requires that copies of a Monopolies and Mergers Commission monopoly report must be sent to every person named in the report as a person in whose favour a monopoly situation exists at least 24 hours in advance of the report being laid before the House and published.
We believe that monopolists—the word is not intended necessarily as being derogatory; it is the way it is described in legislation—named in reports should have some prior warning of the publication of reports in order to prepare themselves to respond to press inquiries. For that reason we intend that named monopolists should be told the date and time of publication on the day before. In addition, immediately after publication of the report, they will receive a copy of the press notice announcing the Secretary of State's decision. They will also be able to collect a copy of the report from officials. Those steps will bring the practice for monopoly reports into line with that for merger reports which has worked perfectly satisfactorily.
By introducing these measures at the same time as repealing the duty in Section 83(1A) of the Fair Trading Act, we believe that we are striking the right balance between the needs of individual named monopolists and the needs of the market and investors regarding the security of price sensitive information.
Moved, That the House do agree with the Commons in their Amendment No. 44—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
45 Clause 70, page 39, line 4, leave out ("or") and insert
("() section (Vertical agreements and land agreements), or").
46 Clause 73, page 40, line 35, leave out ("Schedule 13") and insert ("Schedule (Transitional provisions and savings)").
47 Clause 75, page 41, line 11, leave out ("73(2)").
48 Page 41, line 11, after ("section") insert ("and paragraphs 1 to 7 and 35 of Schedule (Transitional provisions and savings)").
Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 45 to 48.
Moved, That the House do agree with the Commons in their Amendments Nos. 45 to 48.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

COMMONS AMENDMENT
49 Clause 75, page 41, leave out lines 17 to 20.
Lord McIntosh of Haringey: My Lords, this is the privilege amendment. I beg to move that the House do agree with the Commons in their Amendment No. 49.
Moved, That the House do agree with the Commons in their Amendment No. 49.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

COMMONS AMENDMENT
50 Schedule 1, page 43, line 10, leave out ("before") and insert ("at").
Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 50, and speak to Amendments Nos. 51 to 53, 60 and 61. These are minor drafting amendments which improve clarity of certain provisions in Schedules 1 and 3. The provisions relate to clawback in the exclusions from Chapter I prohibition for mergers, for agreements that have received directions under Section 21(2) of the RTPA, and for agreements relating to agricultural products.
The existing wording might be said to refer to a person failing before the end of the period in which information has been required by the director to comply with the requirement to provide information. The amendments make clear that the test is whether at the time the period ends he has failed to comply.
Moved, That the House do agree with the Commons in their Amendment No. 50.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
51 Schedule 1, page 43, line 11, leave out ("fails") and insert ("has failed").
52 Schedule 3, page 52, line 38, leave out ("before") and insert ("at").
53 Page 52, line 39, leave out ("fails") and insert ("has failed").
Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 51 to 53.
Moved, That the House do agree with the Commons in their Amendments Nos. 51 to 53.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

COMMONS AMENDMENT
54 Schedule 3, page 53, line 38, leave out ("which").
Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 54 and speak to Amendments Nos. 55 to 57. These are minor and tidying amendments. They tighten the definition of "trading practices" in relation to European Economic Area regulated markets: that is to say, investment markets set up in another European Economic Area member state which operate without requiring that the members be physically present in the territory where they are established. The amendments bring the definition into line with the definition of practices in relation to recognised investment exchanges in the Financial Services Act.
Moved, That the House do agree with the Commons in their Amendment No. 54.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
55 Schedule 3, page 53, line 39, after ("(a)") insert ("which").
56 Page 53, line 41, leave out ("(b)") and insert ("and which").
57 Page 53, line 43, after ("(c)") insert ("which").
58 Page 54, leave out lines 3 to 6 and insert ("an agreement to the extent to which it is made in order to comply with a legal requirement.").
59 Page 54, line 7, after ("conduct") insert ("to the extent to which it is").
60 Page 56, line 1, leave out ("before") and insert ("at").
61 Page 56, line 2, leave out ("fails") and insert ("has failed").
62 Schedule 7, page 64, line 31, after ("12") insert ("and paragraph 5 of Schedule 8").
63 Schedule 8, page 71, line 5, leave out from ("indicate") to end of line 14 and insert ("—

(a) under which provision of this Act the appeal is brought:

(b) to what extent (if any) the appellant contends that the decision against, or with respect to which, the appeal is brought was based on an error of fact or was wrong in law; and

(c) to what extent (if any) the appellant is appealing against the Director's exercise of his discretion in making the disputed decision.").

64 Page 71, line 20, leave out ("reverse") and insert ("set aside").
65 Page 71, line 21, after ("appeal") insert ("or any part of it").
66 Page 71, line 25, leave out ("or make") and insert—

("(d) give such directions, or take such other steps, as the Director could himself have given or taken, or

(e) make").

67 Page 71, line 28, at end insert—
("() If the tribunal confirms the decision which is the subject of the appeal it may nevertheless set aside any finding of fact on which the decision was based.").
68 Page 71, line 42, leave out ("Council") and insert ("Competition Commission").
69 Page 72, line 40, leave out ("also").
70 Page 72, line 47, at end insert—
("() as to the evidence which may be required or admitted in proceedings before the tribunal and the extent to which it should be oral or written;
() allowing the tribunal to fix time limits with respect to any aspect of the proceedings before it and to extend any time limit (whether or not it has expired);").
71 Page 73, line 15, at end insert—
("() A person who without reasonable excuse fails to comply with—

(a) any requirement imposed by virtue of sub-paragraph (1)(c), or

(b) any requirement with respect to the disclosure, production, recovery or inspection of documents which is imposed by virtue of sub-paragraph (1)(e),

is guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale.").
72 Page 73, line 32, at end insert—
("() Any sums received in consequence of rules under this paragraph are to be paid into the Consolidated Fund.").
73 Page 74, line 6, at end insert—
("() Rules may also make provision giving the tribunal powers similar to those given to the Director by section 36.").
74 Schedule 9, page 74. leave out lines 21 to 24.
75 Page 75, line 20, at end insert—
("() In this paragraph "decision" means a decision of the Director (whether or not made on an application)—

(a) as to whether or not an agreement has infringed the Chapter I prohibition, or

(b) as to whether or not conduct has infringed the Chapter II prohibition,

and, in the case of an application for a decision under section 14 which includes a request for an individual exemption, includes a decision as to whether or not to grant the exemption.").
76 Page 76, leave out lines 42 to 46.
Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 55 to 76 en bloc. They have been spoken to with Amendments Nos. I, 6, 30, 50 and 54.
Moved, That the House do agree with the Commons in their Amendments Nos. 55 to 76.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

COMMONS AMENDMENT
77 Schedule 10, page 77, line 32, after ("above") insert ("("a general matter")").
Lord Simon of Highbury: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 77 and speak to Amendments Nos. 78 to 80. It would be convenient also to consider Amendments Nos. 90 and 109.
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These are technical amendments to Schedule 10 with a related repeal in Schedule 14 modifying the textual amendments that Schedule 10 makes to the Telecommunications Act 1984.
Moved, That the House do agree with the Commons in their Amendment No. 77.—(Lord Simon of Highbury.)
Lord Kingsland: My Lords, the Minister said that Amendments Nos. 77 to 80 were technical amendments, and so, in a sense, they are. There is one matter there, however, which may or may not be a cause of concern, depending upon how the noble Lord answers my question.
The noble Lord will recall that in the Committee and Report stages of this Bill a great deal of energy and effort was devoted to the question of the bridge between the Bill and the regulatory regime, in particular in relation to telecommunications. On one construction of the amendments in another place it seems to me that it could be argued that the bridge had been reintroduced, this time not with the Bill itself but with the 1973 Act.
It is important to be clear about this. If the amendments are simply saying that the subject matter of the purposes of the regulatory regime can be dealt with in both jurisdictions, that seems to be quite acceptable; but what would not be acceptable, and indeed not consistent with what the noble Lord decided in relation to the Bill, would be for the regulatory purposes of the regulatory regime to be reintroduced into the competition regime. I would be very grateful it' the noble Lord would clarify that point.
Lord Simon of Highbury: My Lords, I understand that concerns have been raised that the wording that Amendments Nos. 77 and 78 add to the new subsection (3C), which the Bill already inserts in the Telecommunications Act, might in some way be interpreted as altering and extending the ability of the Director-General of Telecommunications to have regard to the subject matter of his statutory duties when exercising concurrent functions under the Fair Trading Act. I do not accept that this is the effect of the provision as drafted. Deliberately, there is nothing in the wording which imposes any duty in respect of or suggests that particular regard should he had to these general matters. Either would be a clear departure from the present position.
I am happy, however, to put on record that it is not the intention to alter the present ability of the Secretary of State or the Director-General of Telecommunications to have regard to the subject matter of the Telecommunications Act duties when, for example, the Director is exercising concurrent functions under the Fair Trading Act, and in particular not to alter that ability in a way which overrides or downplays any other relevant duty. It is the intention to make sure that both may continue to have regard to such subject matter, if it is relevant in the fulfilment of the function.
Moved, That the House do agree with the Commons in their Amendment No. 77.—(Lord Simon of Highbury.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
78 Schedule 10, Page 77, line 33, after ("function") insert ("; but that is not to be taken as implying that, in relation to any of the matters mentioned in subsection (3) or (3A) above, regard may not be had to any general matter.").
79 Page 77, line 33, at end insert—
("() Section 50 is amended as follows.").
80 Page 77, line 34, leave out ("In section 50").
81 Page 77, line 48, at end insert—
("() In subsection (4), omit paragraph (c) and the "and" immediately after it.").
82 Page 78, line 38, after ("(5)") insert ("—
(a)").
83 Page 78, line 39, at end insert—
("(b) after paragraph (b), insert "and";
(c) omit paragraph (d) and the "and" immediately before it.").
84 Page 79, line 38, at end insert—
("() In subsection (4), omit paragraph (c) and the "and" immediately after it.").
85 Page 80, line 33, at end insert—
("() In subsection (5), omit "or in subsection (3) above".
() In subsection (6), omit "or in subsection (3) above".").
86 Page 81, line 19, at end insert—
("() In subsection (4), omit paragraph (c) and the "and" immediately after it.").
87 Page 82, line 17, at end insert—
("() In paragraph (4), Omit sub-paragraph (c) and the "and" immediately after it.").
88 Page 83, line 5, after ("(4)") insert ("—
(a)").
89 Page 83, line 6. at end insert—
("(b) after sub-paragraph (b) insert "and";
(c) omit sub-paragraph (d) and the "and" immediately before it.").
90 Page 84, line 19, at end insert—
("() In section 95 (modification by orders under other enactments)—

(a) in subsection (1), omit "or section l0(2)(a) of the 1980 Act";

(b) in subsection (2)—

(i) after paragraph (a) insert "or";

(ii) omit paragraph (c) and the immediately before it;

(c) in subsection (3), omit "or the 1980 Act".").

Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 78 to 90.
These amendments were spoken to with Amendments Nos. 35 and 77.
Moved, That the House do agree with the Commons in their Amendments Nos. 78 to 90.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.
91 Schedule 10, page 89, leave out lines 9 and 10.
Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 91. I shall speak also to Amendments Nos. 92 and 94.
1390
Amendments Nos. 91 and 92 respond to a matter raised by the noble Lord, Lord McNally, on behalf of the noble Lord, Lord Ezra, at Report stage in this House. They deal with an interaction between the Bill and provisions in the Railways Act 1993. The amendments would preclude the Rail Regulator or the Director General of Fair Trading from requiring modifications to access agreements, to the extent that these are not already excluded as legal requirements, as a possible remedy for breach of the Chapter I prohibition.
This is a worthwhile clarification of the position and I am grateful to the noble Lord for raising this point. I should emphasise, however, that the amendment does not prevent action being taken against anti-competitive provisions in access agreements that are not the subject of a legal requirement. In such a case the parties would be in breach of a prohibition and would be exposed to penalties. Third parties would be able to seek damages and interim measures could also be applied.
Amendment No. 94 disapplies the Rail Regulator's statutory duties under the Channel Tunnel Rail Link Act 1996 when he is exercising concurrent functions under the Bill, in the same way that the utility regulators' statutory general duties have been disapplied from the exercise of the regulators' concurrent functions.
Moved, That the House do agree with the Commons in their Amendment No. 91.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
92 Schedule 10, page 89, leave out lines 12 to 24 and insert—
(""(6A) Neither the Director General of Fair Trading nor the Regulator may exercise, in respect of an access agreement, the powers given by section 33 (enforcement directions) or section 36(2) (interim directions) of the Competition Act 1998.
(6B) Subsection (6A) does not apply to the exercise of the powers given by section 36(2) in respect of conduct—

(a) which is connected with an access agreement; and

(b) in respect of which section 36(1)(b) of that Act applies.").

93 Page 89, line 33, at end insert—
("() Omit section 131 (modification of Restrictive Trade Practices Act 1976).").
94 Page 89, line 45, at end insert—
("() In section 21 (duties as to exercise of regulatory functions), in subsection (6), at the end of the paragraph about regulatory functions, insert "other than any functions assigned to him by virtue of section 67(3) of that Act ("Competition Act functions").
(7) The Regulator may, when exercising any Competition Act function, have regard to any matter to which he would have regard if—

(a) he were under the duty imposed by subsection (1) or (2) above in relation to that function; and

(b) the matter is one to which the DGFT could have regard if he were exercising that function.".").

Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 92 to 94.

1391
Moved, That the House do agree with the Commons in their Amendments Nos. 92 to 94.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

COMMONS AMENDMENT
95 Schedule 11, page 92, line 38, at end insert—
("or the Broadcasting Act 1996 (c.55.);").
Lord Simon of Highbury: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 95. I shall speak also to Amendments Nos. 96, 97 and 98.
These are straightforward amendments to correct omissions in Schedule 11 to the Bill. Schedule 11 lists persons to whom and functions for which information obtained under the Bill may be disclosed. Amendment No. 97 adds to Schedule 11 the Independent Television Commission, and Amendment No. 95 adds the Broadcasting Act 1996, which contains the ITC's relevant functions. Amendment No. 98 adds to the schedule the Director of Passenger Rail Franchising and the International Rail Regulator. Amendment No. 96 adds the International Rail Regulator's relevant functions under subordinate legislation made for the purpose of implementing three EC directives on the development of the Community railways.
Moved, That the House do agree with the Commons in their Amendment No. 95.—(Lord Simon of Highbury.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
96 Schedule 11, page 92, line 47, at end insert—
("() any subordinate legislation made (whether before or after the passing of this Act) for the purpose of implementing the Council Directive of 29th July 1991 (No 91/440/EEC) on the development of the Community's railways, the Council Directive of 19th June 1995 (No 95/18/EC) on the licensing of railway undertakings or the Council Directive of 19th June 1995 (No 95/19/EC) on the allocation of railway infrastructure capacity and the charging of infrastructure fees;").
97 Page 93, line 4, at end insert—
("() the Independent Television Commission;").
98 Page 93, line 11, at end insert—
("() the Director of Passenger Rail Franchising;
() the International Rail Regulator;").
99 Schedule 12, page 93, line 32, at end insert—
("() In sections 35 and 37 to 41, for "the Restrictive Practices Court", in each place, substitute "a relevant Court".
() After section 41 insert
"Meaning of "relevant Court".
41A. In this Part of this Act, "relevant Court", in relation to proceedings in respect of a course of conduct maintained in the course of a business, means any of the following courts in whose jurisdiction that business is carried on—

(a) in England and Wales or Northern Ireland, the High Court;

(b) in Scotland, the Court of Session.".

() In section 42 (appeals from decisions or orders of courts under Part III)—

(a) in subsection (1), at the end add "; but this subsection is subject to subsection (3) of this section";

(b) in subsection (2)(b), after "Scotland," insert "from the sheriff court"; and

(c) after subsection (2) add—

"(3) A decision or order of the Court of Session as the relevant Court may be reviewed, whether on a question of fact or on a question of law, by reclaiming to the Inner House." ").
100 Page 94, line 4, at end insert—
("() In section 85, in subsection (1)(c), after "estimates" (in both places) insert "forecasts".").
101 Page 95, line 21, after ("estimates") insert ("forecasts").
102 Page 95, line 25, after ("estimates") insert ("forecasts").
103 Page 96, line 4, at end insert—
("() Omit section 22 (which amends the Fair Trading Act 1973).").
104 After Schedule 12, insert the following new schedule—

SCHEDULE
  TRANSITIONAL PROVISIONS AND SAVINGS
    PART I

      GENERAL
      Interpretation
      1.—(1) In this Schedule—

      "RPA" means the Resale Prices Act 1976;

      "RTPA" means the Restrictive Trade Practices Act 1976;

      "continuing proceedings" has the meaning given by paragraph 15;

      "the Court" means the Restrictive Practices Court;

      "enactment date" means the date on which this Act is passed;

      "Director" means the Director General of Fair Trading;

      "document" includes information recorded in any form;

      "information" includes estimates and forecasts;

      "interim period" means the period beginning on the enactment date and ending immediately before the starting date;

      "prescribed" means prescribed by an order made by the Secretary of State;

      "regulator" means any person mentioned in paragraphs (a) to (g) of paragraph 1 of Schedule 10;

      "starting date" means the date on which section 2 comes into force;

      "transitional period" means the transitional period provided for in Chapters III and IV of Part IV of this Schedule.

      (2) Sections 31, 45, 51, 53, 55, 56, 57 and 59(2) and (3) and paragraph 12 of Schedule 9 ("the applied provisions") apply for the purposes of this Schedule as they apply for the purposes of Part I of this Act.
      (3) Section 2(5) applies for the purposes of any provisions of this Schedule which are concerned with the operation of the Chapter I prohibition as it applies for the purposes of Part I of this Act.
      (4) In relation to any of the matters in respect of which a regulator may exercise powers as a result of paragraph 35(l), the applied provisions are to have effect as if references to the Director included references to the regulator.
      (5) The fact that to a limited extent the Chapter I prohibition does not apply to an agreement because a transitional period is provided by virtue of this Schedule does not require those provisions of the agreement in respect of which there is a transitional period to be disregarded when considering whether the agreement infringes the prohibition for other reasons.
      General power to make transitional provision and savings
      2.—(1) Nothing in this Schedule affects the power of the Secretary of State under section 74 to make transitional provisions or savings.
      (2) An order under that section may modify any provision made by this Schedule.
      Advice and information
      3.—(1) The Director may publish advice and information explaining provisions of this Schedule to persons who are likely to be affected by them.
      (2) Any advice or information published by the Director under this paragraph is to be published in such form and manner as he considers appropriate.

    PART II

      DURING THE INTERIM PERIOD
      Block exemptions
      4.—(1) The Secretary of State may, at any time during the interim period, make one or more orders for the purpose of providing block exemptions which are effective on the starting date.
      (2) An order under this paragraph has effect as if properly made under section 6.
      Certain agreements to be non-notifiable agreements
      5. An agreement which—

      (a) is made during the interim period, and

      (b) satisfies the conditions set out in paragraphs (a), (c) and (d) of section 27A(1) of the RTPA,

      is to be treated as a non-notifiable agreement for the purposes of the RTPA.
      Application of RTPA during the interim period
      6. In relation to agreements made during the interim period—

      (a) the Director is no longer under the duty to take proceedings imposed by section 1(2)(c) of the RTPA but may continue to do so;

      (b) section 21 of that Act has effect as if subsections (1) and (2) were omitted; and

      (c) section 35(1) of that Act has effect as if the words "or within such further time as the Director may, upon application made within that time, allow" were omitted.

      Guidance
      7.—(1) Sub-paragraphs (2) to (4) apply in relation to agreements made during the interim period.
      (2) An application may be made to the Director in anticipation of the coming into force of section 13 in accordance with directions given by the Director and such an application is to have effect on and after the starting date as if properly made under section 13.
      (3) The Director may, in response to such an application—

      (a) give guidance in anticipation of the coming into force of section 2; or

      (b) on and after the starting date, give guidance under section 15 as if the application had been properly made under section 13.

      (4) Any guidance so given is to have effect on and after the starting date as if properly given under section 15.

    PART III

      ON THE STARTING DATE
      Applications which fall
      8.—(l) Proceedings in respect of an application which is made to the Court under any of the provisions mentioned in sub-paragraph (2), but which is not determined before the starting date, cease on that date.
      (2) The provisions are—

      (a) sections 2(2), 35(3), 37(1) and 40(1) of the RTPA and paragraph 5 of Schedule 4 to that Act;

      (b) section 4(1) of the RTPA so far as the application relates to an order under section 2(2) of that Act; and

      (c) section 25(2) of the RPA.

      (3) The power of the Court to make an order for costs in relation to any proceedings is not affected by anything in this paragraph or by the repeals made by section 1.
      Orders and approvals which fall
      9.—(1) An order in force immediately before the starting date under—

      (a) section 2(2), 29(1), 30(1), 33(4), 35(3) or 37(1) of the RTPA; or

      (b) section 25(2) of the RPA,

      ceases to have effect on that date.
      (2) An approval in force immediately before the starting date under section 32 of the RTPA ceases to have effect on that date.

PART IV
  ON AND AFTER THE STARTING DATE
    CHAPTER I

      GENERAL
      Duty of Director to maintain register etc.
      10.—(1) This paragraph applies even though the relevant provisions of the RTPA are repealed by this Act.
      (2) The Director is to continue on and after the starting date to be under the duty imposed by section 1(2)(a) of the RTPA to maintain a register in respect of agreements—

      (a) particulars of which arc, on the starting date, entered or filed on the register;

      (b) which fall within sub-paragraph (4);

      (c) which immediately before the starting date are the subject of proceedings under the RTPA which do not cease on that date by virtue of this Schedule; or

      (d) in relation to which a court gives directions to the Director after the starting date in the course of proceedings in which a question arises as to whether an agreement was, before that date—

      (i) one to which the RTPA applied;

      (ii) subject to registration under that Act;

      (iii) a non-notifiable agreement for the purposes of that Act.

      (3) The Director is to continue on and after the starting date to be under the duties imposed by section 1(2)(a) and (b) of the RTPA of compiling a register of agreements and entering or filing certain particulars in the register, but only in respect of agreements of a kind referred to in paragraph (b),(c)or(d) of sub-paragraph (2).
      (4) An agreement falls within this sub-paragraph if—

      (a) it is subject to registration under the RTPA but—

      (i) is not a non-notifiable agreement within the meaning of section 27A of the RTPA, or

      (ii) is not one to which paragraph 5 applies;

      (b) particulars of the agreement have been provided to the Director before the starting date; and

      (c) as at the starting date no entry or filing has been made in the register in respect of the agreement.

      (5) Sections 23 and 27 of the RTPA are to apply after the starting date in respect of the register subject to such modifications, if any, as may be prescribed.
      (6) In sub-paragraph (2)(d) "court" means—

      (a) the High Court;

      (b) the Court of Appeal;

      (c) the Court of Session;

      (d) the High Court or Court of Appeal in Northern Ireland; or

      (e) the House of Lords.

      RTPA section 3 applications
      11.—(1) Even though section 3 of the RTPA is repealed by this Act, its provisions (and so far as necessary that Act) are to continue to apply, with such modifications (if any) as may be prescribed—

      (a) in relation to a continuing application under that section; or

      (b) so as to allow an application to be made under that section on or after the starting date in respect of a continuing application under section 1(3) of the RTPA.

      (2) "Continuing application" means an application made, but not determined, before the starting date.
      RTPA section 26 applications
      12.—(1) Even though section 26 of the RTPA is repealed by this Act, its provisions (and so far as necessary that Act) are to continue to apply, with such modifications (if any) as may be prescribed, in relation to an application which is made under that section, but not determined, before the starting date.
      (2) If an application under section 26 is determined on or after the starting date, this Schedule has effect in relation to the agreement concerned as if the application had been determined immediately before that date.
      Right to bring civil proceedings
      13.—(1) Even though section 35 of the RTPA is repealed by this Act, its provisions (and so far as necessary that Act) are to continue to apply in respect of a person who, immediately before the starting date, has a right by virtue of section 27ZA or 35(2) of that Act to bring civil proceedings in respect of an agreement (but only so far as that right relates to any period before the starting date or, where there are continuing proceedings, the determination of the proceedings).
      (2) Even though section 25 of the RPA is repealed by this Act, the provisions of that section (and so far as necessary that Act) are to continue to apply in respect of a person who, immediately before the starting date, has a right by virtue of subsection (3) of that section to bring civil proceedings (but
      1396
      only so far as that right relates to any period before the starting date or, where there are continuing proceedings, the determination of the proceedings).

    CHAPTER II

      CONTINUING PROCEEDINGS
      The general rule
      14.—(l) The Chapter I prohibition does not apply to an agreement at any time when the agreement is the subject of continuing proceedings under the RTPA.
      (2) The Chapter I prohibition does not apply to an agreement relating to goods which are the subject of continuing proceedings under section 16 or 17 of the RPA to the extent to which the agreement consists of exempt provisions.
      (3) In sub-paragraph (2) "exempt provisions" means those provisions of the agreement which would, disregarding section 14 of the RPA, be—

      (a) void as a result of section 9(1) of the RPA; or

      (b) unlawful as a result of section 9(2) or 11 of the RPA.

      (4) If the Chapter I prohibition does not apply to an agreement because of this paragraph, the provisions of, or made under, the RTPA or the RPA are to continue to have effect in relation to the agreement.
      (5) The repeals made by section 1 do not affect—

      (a) continuing proceedings; or

      (b) proceedings of the kind referred to in paragraph 11 or 12 of this Schedule which are continuing after the starting date.

      Meaning of "continuing proceedings"
      15.—(l) For the purposes of this Schedule "continuing proceedings" means proceedings in respect of an application made to the Court under the RTPA or the RPA, but not determined, before the starting date.
      (2) But proceedings under section 3 or 26 of the RTPA to which paragraph 11 or 12 applies are not continuing proceedings.
      (3) The question whether (for the purposes of Part III, or this Part, of this Schedule) an application has been determined is to be decided in accordance with sub-paragraphs (4) and (5).
      (4) If an appeal against the decision on the application is brought, the application is not determined until—

      (a) the appeal is disposed of or withdrawn; or

      (b) if as a result of the appeal the case is referred back to the Court—

      (i) the expiry of the period within which an appeal ("the further appeal") in respect of the Court's decision on that reference could have been brought had this Act not been passed; or

      (ii) if later, the date on which the further appeal is disposed of or withdrawn.

      (5) Otherwise, the application is not determined until the expiry of the period within which any party to the application would have been able to bring an appeal against the decision on the application had this Act not been passed.
      RTPA section 4 proceedings
      16. Proceedings on an application for an order under section 4 of the RTPA are also continuing proceedings if—

      (a) leave to make the application is applied for before the starting date but the proceedings in respect of

      1397
      that application for leave are not determined before that date; or

      (b) leave to make an application for an order under that section is granted before the starting date but the application itself is not made before that date.

      RPA section 16 or 17 proceedings
      17. Proceedings on an application for an order under section 16 or 17 of the RPA are also continuing proceedings if—

      (a) leave to make the application is applied for before the starting date but the proceedings in respect of that application for leave are not determined before that date; or

      (b) leave to make an application for an order under section 16 or 17 of the RPA is granted before the starting date, but the application itself is not made before that date.

      Continuing proceedings which are discontinued
      18.—(1) On an application made jointly to the Court by all the parties to any continuing proceedings, the Court must, if it is satisfied that the parties wish it to do so, discontinue the proceedings.
      (2) If, on an application under sub-paragraph (1) or for any other reason, the Court orders the proceedings to be discontinued, this Schedule has effect (subject to paragraphs 21 and 22) from the date on which the proceedings are discontinued as if they had never been instituted.

    CHAPTER III

      THE TRANSITIONAL PERIOD
      The general rule
      19.—(1) Except where this Chapter or Chapter IV provides otherwise, there is a transitional period, beginning on the starting date and lasting for one year, for any agreement made before the starting date.
      (2) The Chapter I prohibition does not apply to an agreement to the extent to which there is a transitional period for the agreement.
      (3) The Secretary of State may by regulations provide for sections 13 to 16 and Schedule 5 to apply with such modifications (if any) as may be specified in the regulations, in respect of applications to the Director about agreements for which there is a transitional period.
      Cases for which there is no transitional period
      20.—(1) There is no transitional period for an agreement to the extent to which, immediately before the starting date, it is—

      (a) void under section 2(1) or 35(1)(a) of the RTPA;

      (b) the subject of an order under section 2(2) or 35(3) of the RTPA; or

      (c) unlawful under section I, 2 or 11 of the RPA or void under section 9 of that Act.

      (2) There is no transitional period for an agreement to the extent to which, before the starting date, a person has acted unlawfully for the purposes of section 27ZA(2) or (3) of the RTPA in respect of the agreement.
      (3) There is no transitional period for an agreement to which paragraph 25(4) applies.
      (4) There is no transitional period for—

      (a) an agreement in respect of which there are continuing proceedings, or

      (b) an agreement relating to goods in respect of which there are continuing proceedings,

      to the extent to which the agreement is, when the proceedings are determined, void or unlawful.
      Continuing proceedings under the RTPA
      21. In the case of an agreement which is the subject of continuing proceedings under the RTPA, the transitional period begins—

      (a) if the proceedings are discontinued, on the date of discontinuance;

      (b) otherwise, when the proceedings are determined.

      Continuing proceedings under the RPA
      22.—(1) In the case of an agreement relating to goods which are the subject of continuing proceedings under the RPA, the transitional period for the exempt provisions of the agreement begins—

      (a) if the proceedings are discontinued, on the date of discontinuance;

      (b) otherwise, when the proceedings are determined.

      (2) In sub-paragraph (I) "exempt provisions" has the meaning given by paragraph 14(3).
      Provisions not contrary to public interest
      23.—(1) To the extent to which an agreement contains provisions which, immediately before the starting date, are provisions which the Court has found not to be contrary to the public interest, the transitional period lasts for five years.
      (2) Sub-paragraph (1) is subject to paragraph 20(4).
      (3) To the extent to which an agreement which on the starting date is the subject of continuing proceedings is, when the proceedings are determined, found by the Court not to be contrary to the public interest, the transitional period lasts for five years.
      Goods
      24.—(1) In the case of an agreement relating to goods which, immediately before the starting date, are exempt under section 14 of the RPA, there is a transitional period for the agreement to the extent to which it consists of exempt provisions.
      (2) Sub-paragraph (1) is subject to paragraph 20(4).
      (3) In the case of an agreement relating to goods—

      (a) which on the starting date are the subject of continuing proceedings, and

      (b) which, when the proceedings are determined, are found to be exempt under section 14 of the RPA,

      there is a transitional period for the agreement, to the extent to which it consists of exempt provisions.
      (4) In each case, the transitional period lasts for five years.
      (5) In sub-paragraphs (1) and (3) "exempt provisions" means those provisions of the agreement which would, disregarding section 14 of the RPA, be—

      (a) void as a result of section 9(1) of the RPA; or

      (b) unlawful as a result of section 9(2) or 11 of the RPA.

      Transitional period for certain agreements
      25.—(1) This paragraph applies to agreements—

      (a) which are subject to registration under the RTPA but which—

      (i) are not non-notifiable agreements within the meaning of section 27A of the RTPA, or

      (ii) are not agreements to which paragraph 5 applies; and

      (b) in respect of which the time for furnishing relevant particulars as required by or under the RTPA expires on or after the starting date.

      (2) "Relevant particulars" means—

      (a) particulars which are required to be furnished by virtue of section 24 of the RTPA; or

      (b) particulars of any variation of an agreement which are required to be furnished by virtue of sections 24 and 27 of the RTPA.

      (3) There is a transitional period of one year for an agreement to which this paragraph applies if—

      (a) relevant particulars are furnished before the starting date; and

      (b) no person has acted unlawfully (for the purposes of section 27ZA(2) or (3) of the RTPA) in respect of the agreement.

      (4) If relevant particulars are not furnished by the starting date, section 35(1)(a) of the RTPA does not apply in relation to the agreement (unless sub-paragraph (5) applies).
      (5) This sub-paragraph applies if a person falling within section 27ZA(2) or (3) of the RTPA has acted unlawfully for the purposes of those subsections in respect of the agreement.
      Special cases
      26.—(1) In the case of an agreement in respect of which—

      (a) a direction under section 127(2) of the Financial Services Act 1986 ("the 1986 Act") is in force immediately before the starting date, or

      (b) a direction under section 194A(3) of the Broadcasting Act 1990 ("the 1990 Act") is in force immediately before the starting date,

      the transitional period lasts for five years.
      (2) To the extent to which an agreement is the subject of a declaration—

      (a) made by the Treasury under section 127(3) of the 1986 Act, and

      (b) in force immediately before the starting date,

      the transitional period lasts for five years.
      (3) Sub-paragraphs (1) and (2) do not affect the power of—

      (a) the Treasury to make a declaration under section 127(2) of the 1986 Act (as amended by Schedule 2 to this Act),

      (b) the Secretary of State to make a declaration under section 194A of the 1990 Act (as amended by Schedule 2 to this Act),

      in respect of an agreement for which there is a transitional period.

    CHAPTER IV

      THE UTILITIES
      General
      27. In this Chapter "the relevant period" means the period beginning with the starting date and ending immediately before the fifth anniversary of that date.
      Electricity
      28.—(1) For an agreement to which, immediately before the starting date, the RTPA does not apply by virtue of a section 100 order, there is a transitional period—

      (a) beginning on the starting date, and

      (b) ending at the end of the relevant period.

      (2) For an agreement which is made at any time after the starting date and to which, had the RTPA not been repealed, that Act would not at the time at which the agreement is made have applied by virtue of a section 100 order, there is a transitional period—

      (a) beginning on the date on which the agreement is made; and

      (b) ending at the end of the relevant period.

      (3) For an agreement (whether made before or after the starting date) which, during the relevant period, is varied at any time in such a way that it becomes an agreement which, had the RTPA not been repealed, would at that time have been one to which that Act did not apply by virtue of a section 100 order, there is a transitional period—

      (a) beginning on the date on which the variation is made; and

      (b) ending at the end of the relevant period.

      (4) If an agreement for which there is a transitional period as a result of sub-paragraph (1),(2)or(3) is varied during the relevant period, the transitional period for the agreement continues if, had the RTPA not been repealed. the agreement would have continued to be one to which that Act did not apply by virtue of a section 100 order.
      (5) But if an agreement for which there is a transitional period as a result of sub-paragraph(1),(2)or(3) ceases to be one to which, had it not been repealed, the RTPA would not have applied by virtue of a section 100 order, the transitional period ends on the date on which the agreement so ceases.
      (6) Sub-paragraph (3) is subject to paragraph 20.
      (7) In this paragraph and paragraph 29—
      "section 100 order" means an order made under section 100 of the Electricity Act 1989; and
      expressions which are also used in Part I of the Electricity Act 1989 have the same meaning as in that Part.
      Electricity: power to make transitional orders
      29.—(1) There is a transitional period for an agreement (whether made before or after the starting date) relating to the generation, transmission or supply of electricity which—

      (a) is specified, or is of a description specified, in an order ("a transitional order") made by the Secretary of State (whether before or after the making of the agreement but before the end of the relevant period); and

      (b) satisfies such conditions as may be specified in the order.

      (2) A transitional order may make provision as to when the transitional period in respect of such an agreement is to start or to be deemed to have started.
      (3) The transitional period for such an agreement ends at the end of the relevant period.
      (4) But if the agreement—

      (a) ceases to be one to which a transitional order applies, or

      (b) ceases to satisfy one or more of the conditions specified in the transitional order,

      the transitional period ends on the date on which the agreement so ceases.
      (5) Before making a transitional order, the Secretary of State must consult the Director General of Electricity Supply and the Director.
      (6) The conditions specified in a transitional order may include conditions which refer any matter to the Secretary of State for determination after such consultation as may be so specified.
      (7) In the application of this paragraph to Northern Ireland, the reference in sub-paragraph (5) to the Director General of Electricity Supply is to be read as a reference to the Director General of Electricity Supply for Northern Ireland.
      Gas
      30.—(1) For an agreement to which, immediately before the starting date, the RTPA does not apply by virtue of section 62 or a section 62 order, there is a transitional period—

      (a) beginning on the starting date, and

      (b) ending at the end of the relevant period.

      (2) For an agreement which is made at any time after the starting date and to which, had the RTPA not been repealed, that Act would not at the time at which the agreement is made have applied by virtue of section 62 or a section 62 order, there is a transitional period—

      (a) beginning on the date on which the agreement is made; and

      (b) ending at the end of the relevant period.

      (3) For an agreement (whether made before or after the starting date) which, during the relevant period, is varied at any time in such a way that it becomes an agreement which, had the RTPA not been repealed, would at that time have been one to which that Act did not apply by virtue of section 62 or a section 62 order, there is a transitional period—

      (a) beginning on the date on which the variation is made; and

      (b) ending at the end of the relevant period.

      (4) If an agreement for which there is a transitional period as a result of sub-paragraph (1), (2) or (3) is varied during the relevant period, the transitional period for the agreement continues if, had the RTPA not been repealed, the agreement would have continued to be one to which that Act did not apply by virtue of section 62 or a section 62 order.
      (5) But if an agreement for which there is a transitional period as a result of sub-paragraph (1), (2) or (3) ceases to be one to which, had it not been repealed, the RTPA would not have applied by virtue of section 62 or a section 62 order, the transitional period ends on the date on which the agreement so ceases.
      (6) Sub-paragraph (3) also applies in relation to a modification which is treated as an agreement made on or after 28th November 1985 by virtue of section 62(4).
      (7) Sub-paragraph (3) is subject to paragraph 20.
      (8) In this paragraph and paragraph 31—
      "section 62" means section 62 of the Gas Act 1986;
      "section 62 order" means an order made under section 62.
      Gas: power to make transitional orders
      31.—(1) There is a transitional period for an agreement of a description falling within section 62(2)(a) and (b) or section 62(2A)(a) and (b) which—

      (a) is specified, or is of a description specified, in an order ("a transitional order") made by the Secretary of State (whether before or after the making of the agreement but before the end of the relevant period); and

      (b) satisfies such conditions as may be specified in the order.

      (2) A transitional order may make provision as to when the transitional period in respect of such an agreement is to start or to be deemed to have started.
      (3) The transitional period for such an agreement ends at the end of the relevant period.
      (4) But if the agreement—

      (a) ceases to be one to which a transitional order applies, or

      (b) ceases to satisfy one or more of the conditions specified in the transitional order,

      the transitional period ends on the date when the agreement so ceases.
      (5) Before making a transitional order, the Secretary of State must consult the Director General of Gas Supply and the Director.
      (6) The conditions specified in a transitional order may include—

      (a) conditions which are to be satisfied in relation to a time before the coming into force of this paragraph;

      (b) conditions which refer any matter (which may be the general question whether the Chapter 1 prohibition should apply to a particular agreement) to the Secretary of State, the Director or the Director General of Gas Supply for determination after such consultation as may be so specified.

      Gas: Northern Ireland
      32.—(1) For an agreement to which, immediately before the starting date, the RTPA does not apply by virtue of an Article 41 order, there is a transitional period—

      (a) beginning on the starting date, and

      (b) ending at the end of the relevant period.

      (2) For an agreement which is made at any time after the starting dale and to which, had the RTPA not been repealed, that Act would not at the time at which the agreement is made have applied by virtue of an Article 41 order, there is a transitional period—

      (a) beginning on the date on which the agreement is made; and

      (b) ending at the end of the relevant period.

      (3) For an agreement (whether made before or after the starting date) which, during the relevant period, is varied at any time in such a way that it becomes an agreement which, had the RTPA not been repealed. would at that time have been one to which that Act did not apply by virtue of an Article 41 order. there is a transitional period—

      (a) beginning on the date on which the variation is made; and

      (b) ending at the end of the relevant period.

      (4) If an agreement for which there is a transitional period as a result of sub-paragraph (1),(2)or(3) is varied during the relevant period, the transitional period for the agreement continues if, had the RTPA not been repealed, the agreement would have continued to be one to which that Act did not apply by virtue of an Article 41 order.
      (5) But if an agreement for which there is a transitional period as a result of sub-paragraph(1),(2)or(3)ceases to be one to which, had it not been repealed, the RTPA would not have applied by virtue of an Article 41 order, the transitional period ends on the date on which the agreement so ceases.
      (6) Sub-paragraph (3) is subject to paragraph 20.
      (7) In this paragraph and paragraph 33—
      "Article 41 order" means an order under Article 41 of the Gas (Northern Ireland) Order 1996;
      "Department" means the Department of Economic Development.
      Gas: Northern Ireland - power to make transitional orders
      33.—(1) There is a transitional period for an agreement of a description falling within Article 41(1) which—

      (a) is specified, or is of a description specified, in an order ("a transitional order") made by the Department (whether before or after the making of the agreement but before the end of the relevant period); and

      (b) satisfies such conditions as may be specified in the order.

      (2) A transitional order may make provision as to when the transitional period in respect of such an agreement is to start or to be deemed to have started.
      (3) The transitional period for such an agreement ends at the end of the relevant period.
      (4) But if the agreement—

      (a) ceases to be one to which a transitional order applies, or

      (b) ceases to satisfy one or more of the conditions specified in the transitional order,

      the transitional period ends on the date when the agreement so ceases.
      (5) Before making a transitional order, the Department must consult the Director General of Gas for Northern Ireland and the Director.
      (6) The conditions specified in a transitional order may include conditions which refer any matter (which may be the general question whether the Chapter I prohibition should apply to a particular agreement) to the Department for determination after such consultation as may be so specified.
      Railways
      34.—(1) In this paragraph—
      "section 131" means section 131 of the Railways Act 1993 ("the 1993 Act");
      "section 131 agreement" means an agreement—

      (i) to which the RTPA does not apply immediately before the starting date by virtue of section 131(1); or

      (ii) in respect of which a direction under section 131(3) is in force immediately before that date;

      "non-exempt agreement" means an agreement relating to the provision of railway services (whether made before or after the starting date) which is not a section 131 agreement; and
      "railway services" has the meaning given by section 82 of the 1993 Act.
      (2) For a section 131 agreement there is a transitional period of five years.
      (3) There is a transitional period for a non-exempt agreement to the extent to which the agreement is at any time before the end of the relevant period required or approved—

      (a) by the Secretary of State or the Rail Regulator in pursuance of any function assigned or transferred to him under or by virtue of any provision of the 1993 Act;

      (b) by or under any agreement the making of which is required or approved by the Secretary of State or the Rail Regulator in the exercise of any such function; or

      (c) by or under a licence granted under Part I of the 1993 Act.

      (4) The transitional period conferred by sub-paragraph (3)—

      (a) is to be taken to have begun on the starting date; and

      (b) ends at the end of the relevant period.

      (5) Sub-paragraph(3)is subject to paragraph 20.
      (6) Any variation of a section 131 agreement on or after the starting date is to be treated, for the purposes of this paragraph, as a separate non-exempt agreement.
      The regulators
      35.—(1) Subject to sub-paragraph (3), each of the regulators may exercise, in respect of sectoral matters and concurrently with the Director, the functions of the Director under paragraph 3. 7. 19(3), 36, 37, 38 or 39.
      (2) In sub-paragraph(1)"sectoral matters" means—

      (a) in the case of the Director General of Telecommunications, the matters referred to in section 50(3) of the Telecommunications Act 1984;

      (b) in the case of the Director General of Gas Supply, the matters referred to in section 36A(3) and (4) of the Gas Act 1986;

      (c) in the case of the Director General of Electricity Supply, the matters referred to in section 43(3) of the Electricity Act 1989;

      (d) in the case of the Director General of Electricity Supply for Northern Ireland, the matters referred to in Article 46(3) of the Electricity (Northern Ireland) Order 1992;

      (e) in the case of the Director General of Water Services, the matters referred to in section 31(3) of the Water Industry Act 1991;

      (f) in the case of the Rail Regulator, the matters referred to in section 67(3) of the Railways Act 1993;

      (g) in the case of the Director General of Gas for Northern Ireland, the matters referred to in Article 23(3) of the Gas (Northern Ireland) Order 1996.

      (3) The power to give directions in paragraph 7(2) is exercisable by the Director only but if the Director is preparing directions which relate to a matter in respect of which a regulator exercises concurrent jurisdiction, he must consult that regulator.
      (4) Consultations conducted by the Director before the enactment date, with a view to preparing directions which have effect on or after that date, are to be taken to satisfy sub-paragraph (3).
      (5) References to enactments in sub-paragraph (2) are to the enactments as amended by or under this Act.

    CHAPTER V

      EXTENDING THE TRANSITIONAL PERIOD
      36.—(1) A party to an agreement for which there is a transitional period may apply to the Director, not less than three months before the end of the period, for the period to be extended.
      (2) The Director may (on his own initiative or on an application under sub-paragraph (1))—

      (a) extend a one-year transitional period by not more than twelve months;

      (b) extend a transitional period of any period other than one year by not more than six months.

      (3) An application under sub-paragraph (1) must—

      (a) be in such form as may be specified; and

      (b) include such documents and information as may be specified.

      (4) If the Director extends the transitional period under this paragraph, he must give notice in such form, and to such persons, as may be specified.
      (5) The Director may not extend a transitional period more than once.
      (6) In this paragraph—
      "person" has the same meaning as in Part I; and
      "specified" means specified in rules made by the Director under section 51.

    CHAPTER VI

      TERMINATING THE TRANSITIONAL PERIOD
      General
      37.—(1) Subject to sub-paragraph (2), the Director may by a direction in writing terminate the transitional period for an agreement, but only in accordance with paragraph 38.
      (2) The Director may not terminate the transitional period, nor exercise any of the powers in paragraph 38, in respect of an agreement which is excluded from the Chapter I prohibition by virtue of any of the provisions of Part I of this Act other than paragraph 1 of Schedule 1 or paragraph 2 or 9 of Schedule 3.
      Circumstances in which the Director may terminate the transitional period
      38.—(1) If the Director is considering whether to give a direction under paragraph 37 ("a direction"), he may in writing require any party to the agreement concerned to give him such information in connection with that agreement as he may require.
      (2) If at the end of such period as may be specified in rules made under section 51, a person has failed, without reasonable excuse, to comply with a requirement imposed under sub-paragraph (1), the Director may give a direction.
      (3) The Director may also give a direction if he considers—

      (a) that the agreement would, but for the transitional period or a relevant exclusion, infringe the Chapter I prohibition; and

      (b) that he would not be likely to grant the agreement an unconditional individual exemption.

      (4) For the purposes of sub-paragraph (3) an individual exemption is unconditional if no conditions or obligations are imposed in respect of it under section 4(3)(a).
      (5) In this paragraph—
      "person" has the same meaning as in Part I;
      "relevant exclusion" means an exclusion under paragraph 1 of Schedule 1 or paragraph 2 or 9 of Schedule 3.
      Procedural requirements on giving a paragraph 37 direction
      39.—(1) The Director must specify in a direction under paragraph 37 ("a direction") the date on which it is to have effect (which must not be less than 28 days after the direction is given).
      (2) Copies of the direction must be given to—

      (a) each of the parties concerned, and

      (b) the Secretary of State,

      not less than 28 days before the date on which the direction is to have effect.
      (3) In relation to an agreement to which a direction applies, the transitional period (if it has not already ended) ends on the date specified in the direction unless, before that date, the direction is revoked by the Director or the Secretary of State.
      (4) If a direction is revoked, the Director may give a further direction in respect of the same agreement only if he is satisfied that there has been a material change of circumstance since the revocation.
      (5) If, as a result of paragraph 24(1)or(3), there is a transitional period in respect of provisions of an agreement relating to goods—

      (a) which immediately before the starting date are exempt under section 14 of the RPA, or

      1406

      (b) which, when continuing proceedings are determined, are found to be exempt under section 14 of the RPA,

      the period is not affected by paragraph 37 or 38.

    PART V

      THE FAIR TRADING ACT 1973 (c. 41.)
      References to the Monopolies and Mergers Commission
      40.—(1) If, on the date on which the repeal by this Act of a provision mentioned in sub-paragraph (2) comes into force, the Monopolies and Mergers Commission has not completed a reference which was made to it before that date, continued consideration of the reference may include consideration of a question which could not have been considered if the provision had not been repealed.
      (2) The provisions are—

      (a) sections 10(2), 54(5) and 78(3) and paragraph 3(1) and (2) of Schedule 8 to the Fair Trading Act 1973 (c. 41),

      (b) section 11(8)(b) of the Competition Act 1980 (c. 21),

      (c) section 14(2) of the Telecommunications Act 1984 (c. 12),

      (d) section 45(3) of the Airports Act 1986 (c. 31),

      (e) section 25(2) of the Gas Act 1986 (c. 44),

      (f) section 13(2) of the Electricity Act 1989 (c. 29),

      (g) section 15(2) of the Water Industry Act 1991 (c. 56),

      (h) article 16(2) of the Electricity (Northern Ireland) Order 1992,

      (i) section 14(2) of the Railways Act 1993 (c. 43),

      (j) article 36(3) of the Airports (Northern Ireland) Order 1994;

      (k) article 16(2) of the Gas (Northern Ireland) Order 1996.

      Orders under Schedule 8
      41.—(1) In this paragraph—
      "the 1973 Act" means the Fair Trading Act 1973;
      "agreement" means an agreement entered into before the date on which the repeal of the limiting provisions comes into force;
      "the order" means an order under section 56 or 73 of the 1973 Act;
      "the limiting provisions" means sub-paragraph (1) or (2) of paragraph 3 of Schedule 8 to the 1973 Act (limit on power to make orders under paragraph I or 2 of that Schedule) and includes any provision of the order included because of either of those sub-paragraphs; and
      "transitional period" means the period which—

      (a) begins on the day on which the repeal of the limiting provisions comes into force; and

      (b) ends on the first anniversary of the starting date.

      (2) Sub-paragraph (3) applies to any agreement to the extent to which it would have been unlawful (in accordance with the provisions of the order) but for the limiting provisions.
      (3) As from the end of the transitional period, the order is to have effect in relation to the agreement as if the limiting provisions had never had effect.
      Part III of the Act
      42.—(1) The repeals made by section 1 do not affect any proceedings in respect of an application which is made to the Court under Part III of the Fair Trading Act 1973, but is not determined, before the starting date.
      (2) The question whether (for the purposes of sub-paragraph (1)) an application has been determined is to be decided in accordance with sub-paragraphs (3) and (4).
      (3) If an appeal against the decision on the application is brought, the application is not determined until—

      (a) the appeal is disposed of or withdrawn; or

      (b) if as a result of the appeal the case is referred back to the Court—

      (i) the expiry of the period within which an appeal ("the further appeal") in respect of the Court's decision on that reference could have been brought had this Act not been passed; or

      (ii) if later, the date on which the further appeal is disposed of or withdrawn.

      (4) Otherwise, the application is not determined until the expiry of the period within which any party to the application would have been able to bring an appeal against the decision on the application had this Act not been passed.
      (5) Any amendment made by Schedule 12 to this Act which substitutes references to a relevant Court for references to the Court is not to affect proceedings of the kind referred to in sub-paragraph(1).

    PART VI

      THE COMPETITION ACT 1980 (C. 21.)
      Undertakings
      43.—(1) Subject to sub-paragraph (2), an undertaking accepted by the Director under section 4 or 9 of the Competition Act 1980 ceases to have effect on the coming into force of the repeal by this Act of that section.
      (2) If the undertaking relates to an agreement which on the starting date is the subject of continuing proceedings, the undertaking continues to have effect for the purposes of section 29 of the Competition Act 1980 until the proceedings are determined.
      Application of sections 25 and 26
      44. The repeals made by section 1 do not affect—

      (a) the operation of section 25 of the Competition Act 1980 in relation to an application under section 1(3) of the RTPA which is made before the starting date;

      (b) an application under section 26 of the Competition Act 1980 which is made before the starting date.

    PART VII

      MISCELLANEOUS
      Disclosure of information
      45.—(1) Section 55 of this Act applies in relation to information which, immediately before the starting date, is subject to section 41 of the RTPA as it applies in relation to information obtained under or as a result of Part I.
      (2) But section 55 does not apply to any disclosure of information of the kind referred to in sub-paragraph (1) if the disclosure is made—

      (a) for the purpose of facilitating the performance of functions of a designated person under the Control of Misleading Advertisements Regulations 1988; or

      (b) for the purposes of any proceedings before the Court or of any other legal proceedings under the RTPA or the Fair Trading Act 1973 or the Control of Misleading Advertisements Regulations 1988.

      (3) Section 56 applies in relation to information of the kind referred to in sub-paragraph (1) if particulars containing the information have been entered or filed on the special section of the register maintained by the Director under, or as a result of, section 27 of the RTPA or paragraph 10 of this Schedule.
      (4) Section 55 has effect, in relation to the matters as to which section 41(2) of the RTPA had effect, as if it contained a provision similar to section 41(2).
      The Court
      46. If it appears to the Lord Chancellor that a person who ceases to be a non-judicial member of the Court as a result of this Act should receive compensation for loss of office, he may pay to him out of moneys provided by Parliament such sum as he may with the approval of the Treasury determine.").
      105 Leave out Schedule 13.
      106 Schedule 14, page 105, line 37, at end insert—
      ("In section 83, in subsection(1)"Subject to subsection (1A) below" and subsection (1A).").
      107 Page 106, line 32 at end insert—
      ("Section 22.").
      108 Page 106, line 40, at end insert—
      ("In section 50(4), paragraph (c) and the "and" immediately after it.").
      109 Page 106, line 43, at end insert—
      ("In section 95(1), "or section 10(2)(a) of the 1980 Act."
      In section 95(2), paragraph (c) and the "or" immediately before it.
      In section 95(3), "or the 1980 Act".").
      110 Page 107, line 12, at end insert—
      ("In section 36A(5), paragraph (d) and the "and" immediately before it.").
      111 Page 107, line 45, at end insert—
      ("In section 43(4), paragraph (c) and the "and" immediately after it.").
      112 Page 108, line 17, at end insert—
      ("In section 31(5), "or in subsection (3) above". In section 31(6), "or in subsection (3) above".").
      113 Page 108, line 44, at end insert—
      ("In section 67(4), paragraph (c) and the "and" immediately after it.").
      114 Page 108, line 47, at end insert—
      ("Section 131.").
      115 Page 109, line 45, at end insert—
      (") in paragraph (4), sub-paragraph (c) and the "and" immediately after it.".
      116 Page 110, line 35, at end insert—
      ("() in paragraph (4), sub-paragraph (d) and the "and" immediately before it.".
      Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 96 to 116 which have been spoken to with Amendments Nos. 1, 9, 35, 44, 77 and 95.
      Moved, That the House do agree with the Commons in their Amendments Nos. 96 to 116.—(Lord McIntosh of Haringey.)
      On Question, Motion agreed to.

      Prison Expenditure
      7.47 p.m.
      The Earl of Longford The Earl of Longford rose to ask Her Majesty's Government whether they are continuing a policy of cutting expenditure in real terms per prisoner and of cutting the total expenditure in real terms on the probation service and on prisoner education.
      The noble Lord said: My Lords, people sometimes ask questions in order to attack the Government, occasionally in order to defend them. This time I raise the question in the spirit of interrogation.
      I am grateful to the noble Lords who have stayed for this debate, particularly to the two maiden speakers. I hope that on future occasions they will have a larger audience. They must not be discouraged; having got this off their chest, they may feel happier and they can speak very controversially next time.
      My Lords, I will speak crudely and I will not take up the full time I am allowed. Mr. Michael Howard, when he was Home Secretary, introduced a completely new approach to penal policy, backed up by the Cabinet. It was based on the idea that prison works. In practice it led to an enormous increase in the prison population, from something over 40,000 to 66,000. That was as a result of government policy. At the same time, resources were cut. That belongs to the past, however. What has happened since Labour came into power? I go into prisons once or twice a week. I have not yet found anybody who thinks that anything has got any better under my own Government. Some will say it has got worse, because the Conservative policies of cutting the amount of money spent per prisoner, the education service and the probation service, have been working their way through.
      Now we are hopeful. We may have arrived at an historic moment. Mr. Straw has given indications that he is at heart a penal reformer. We know he is a Christian socialist and therefore I should say he must be penal reformer. He has not shown it previously, but with a recent important event he has begun to demonstrate it now. This is the publication of the report of the Home Affairs Select Committee of the House of Commons. It comes out drastically for the end of "Howardism". I do not wish to speak personally against Mr. Howard; I have no personal animosity against him. On the only occasion I met him he was quite charming. However, Howardism was an evil message and it is being repudiated by that all-important Select Committee of the House of Commons.
      The question arises: does the Home Secretary intend to repudiate Howardism or continue with it? Speaking broadly, it has been continued since Labour came into power. The crucial question is: will the Home Secretary repudiate it now? I hope so. Today I heard him speak and answer questions for an hour and a quarter in the House of Commons. He said more than once that he welcomed the report. What does that mean? Does "welcome" mean anything in practice or is it just a word? I heard only the first hour and a quarter of his comments; something drastic may have happened later, but I doubt it. I understood him to say that it was a matter for the judges. He would be the first to agree that it depends on the level of crime, and I accept that, on balance, the level of crime has increased in the past five years.
      The dramatic and horrible increase in the prison population cannot, therefore, be due to an increase in crime. As the Select Committee was quick to point out, that, coupled with the restrictions on expenditure, has made rehabilitation much more difficult. One is bound to ask the question: is the Home Secretary going to repudiate Howardism or is he going to repudiate the Select Committee? The Minister is a great lawyer; in other words, he knows how to deal with difficult questions. I hope that he will be able to provide an answer, but I do not expect a dramatic statement. I did not expect a dramatic statement from Mr. Straw today, but the time will come when he has to make one.
      I do not intend to detain the House long at this time of night. The question is simple. I totally share the Government's ideals and I have great regard for Mr. Straw as a Christian socialist, although I hardly know him. Is he going to come out as a genuine penal reformer or will he carry on the doctrine of the former Home Secretary?
      Those doctrines were totally opposed to the policies pursued by earlier Conservative Home Secretaries. We have one very enlightened former Home Office Minister with us tonight, but there were several. Their policies were totally different from those pursued by Mr. Michael Howard. I do not suppose anyone in this country has contributed more to the study of penal reform than the noble Lord, Lord Windlesham, and it will be particularly interesting to hear from him.
      The question is perfectly plain. Will the Government pursue the fatal policies of Mr. Michael Howard, backed by the Cabinet, or will they return to the older tradition pursued by all the best Home Secretaries, whether Conservative or Labour?
      7.54 p.m.
      Lord Bach: My Lords, I rise to make my maiden speech with more than the usual trepidation. Not only is there the fear of the maiden itself, but I am very conscious that by choosing to speak in this debate I am daring to trespass on what is without doubt the territory of the noble Earl, Lord Longford, who has asked a Question of my noble friend the Minister. His reputation as the champion of those incarcerated in Her Majesty's prisons, and as the leading advocate for penal reform, is unrivalled. I have for years admired him—not always

      1411
      uncritically—and to follow him in your Lordships' House is a huge privilege. Indeed, a few weeks ago he was good enough to give me a piece of advice on the subject of my maiden speech. He said, "Get two friends to sit either side of you so that they can say how well you have done."! I have the two friends either side of me, but the second part has not yet been fulfilled.
      Over the past 25 years or so, I have been inside more prisons that your average recidivist—not, at least yet, as a guest of Her Majesty, but in the course of my profession as a junior barrister in criminal cases, particularly in the East Midlands and Leicester, mostly defending—not always successfully—as can be shown by my frequent visits to prison!
      However, I must confess to your Lordships that many years ago a close relative of mine was sent to prison by the courts and, moreover, I confess that I am immensely proud of her. My grandmother was a younger sister of Emmeline Pankhurst and, as a suffragette, was sent to Holloway Prison for three weeks. Your Lordships will understand why I am so proud of her.
      One of the descriptions given of me on my elevation was as a barrister who defended pop stars and footballers, with the clear implication—or so I read it— that I was a sort of legal fat cat who did not rely on legal aid to make my living. To coin a phrase used by my noble friend the Minister in our debate last Thursday, I wish. The truth is that I have tended to represent those at the bottom of society whose chances of riding higher are remote and who have committed some crime ranging from being minor nuisances to serious villains, but always leaving behind them distress, unhappiness and, of course, victims who themselves are invariably less privileged than most of us.
      It is in this context that the Prison Service and the Probation Service must do their work and it is to the immense credit of both services that they do it so positively and optimistically. To them, no case is hopeless, no individual not worth bothering with. They need and deserve the support of government and this they receive. The recent Home Office consultation paper setting out plans for the two services to work much more closely together, and the increased spending promised in the Comprehensive Spending Review, announced in July, are to be warmly welcomed.
      Without doubt, the most depressing part of my work is representing young people. Here are kids, nearly always male, who often have little sense of what is right and what is wrong; who often have not enjoyed the love and security that should be the right of every child; and these kids, frankly, make the lives of others hell. When you meet them, they often seem on the surface as normal and lively as other youngsters, but beneath the bravado and cockiness there is an emptiness and sadness about their lives that could make you weep. Few are "lost souls"; the majority grow out of crime. But while it lasts, they literally cause mayhem and chaos to the lives of those whom they have wronged.
      What is to be done with them? I am delighted that the Government are making youth crime their priority. I warmly welcome the proposals in the Crime and
      1412
      Disorder Act. The delays in youth justice have been scandalous and parents have been allowed to shirk their responsibilities.
      One of the most frightening figures to be found in the latest prison statistics is that in the space of one year, 1996 to 1997, the number of male offenders aged between 15 and 17 sent to custody grew by no less than 32 per cent. and in 1997 was double the figure only three years earlier.
      Experience has taught me two things. The first is so obvious that it is sometimes forgotten in these debates. All offenders—young and old, male and female—fear the prospect of prison more than anything else. So there is a case for saying that the threat of custody can act as a deterrent. On the other hand, prison, whether for the young or the old, seldom works. I am on the side, on balance, of those who say that prisons make bad people worse—may be prison makes sad people worse—rather than those who say that prison works.
      Reconviction figures, particularly for young people, are frightening. Between 1990 and 1995, the percentage of 14 to 16 year-olds recommitted to prison within two years of discharge ranged between 88 and 89 per cent; for 17 year-olds, it ranged between 77 and 86 per cent. Those figures in themselves are the reason why the Government are so right to make youth offending their number one target. Custody is, of course, essential in many of those cases, but the figures tell a depressing story.
      I end by paying tribute to both the prison and probation services. In particular, I have worked very closely over many years, in the court setting, with the Leicestershire probation service. I pay tribute to the way in which its often hard-pressed officers perform their duties—with realism, with humanity and, above all, with optimism. Realism, humanity and optimism are not a bad way of approaching these difficult issues.
      8.2 p.m.
      Lord Addington: My Lords, it is my first and very happy duty to congratulate the noble Lord, Lord Bach, on an excellent maiden speech. It was on a subject he knows about and which he has studied with great care. I think it was Shakespeare who said "The first thing we do, let's kill all the lawyers." I have no doubt that the noble Lord, Lord Bach, will be towards the end of the queue.
      The noble Lord spoke about a problem that exists predominantly among young men between the ages of 15 and 35 who find themselves stuck in a cycle of offending and re-offending. The problem came to my notice primarily because of my work as a counsellor and fund-raiser for Apex Trust some years ago. I noticed the incredibly high number of its client base who had literacy problems. I am severely dyslexic, but I found that I was giving correct spellings to something like half the group with which I was associated. I am someone—I have told this story before and I may as well tell it again—who was congratulated for having good handwriting on his 30th birthday invitation.
      I went to the head of the organisation and said, "Do you think you might have a look at the dyslexics in your group?" He said, "Why do you think so?" I told him,

      1413
      "Because 10 per cent. of the population have this problem, predominantly male. We also have the situation that your client base tends to be male and tends to be educationally under-achieving." He said, "Good idea. Look into it further." I then discovered that I was about number 403 on the list of people who had actually made the connection.
      Surveys in Sweden, in New York, and more recently in London by a group called Dyspel have all come up with the same figure. Approximately 50 per cent. of the prison population have dyslexia or dyslexia-related difficulties. That must have some effect on the way you are recruiting your criminals, but it must also have some effect on the way you deal with them. At the moment we are patently failing in both departments.
      The first part of the problem has something to do with the education system. I shall not burden the Minister with having to answer for a department other than his own because I shall pose, I hope, some unpleasant questions for him in relation to his. If a group has been taught from school, which will be their main influence at this time—it has to be remembered that they are very young when they get involved in the cycle of offending—that they are under achievers, that they are lazy and that they are stupid, then they have no self-esteem. Dyslexia is often said to be a middle-class disease because middle-class parents ask why their children are not achieving. Working-class parents tell them to stop annoying the teacher and stop annoying them very often because, unfortunately, traditionally in our society, the working class do not regard academic attainment as something which is primarily their concern. There are of course exceptions.
      If this recruitment ground is giving us the number of offenders who are known about, something must be done after the schools have failed. We must start to give ourselves a second chance. A justice system that has a probation service and a prison service where you can sit a person down and discuss their problems offers that opportunity. Furthermore, if it succeeds in identifying problems, it will have a chance to do something about them. However, this requires at least initial training for staff in both services on how to identify the problem. I speak as somebody who has gone through this and has seen many other young people go through it. One characteristic of virtually all undiscovered dyslexics is very low self-esteem. The effect on adult dyslexics who discover that they have a problem but that they are not stupid, that they are not in some way abnormal—they can think naturally, they can hold a discussion, but they cannot put a few symbols on a piece of paper in an accepted format to convey information—is amazing. It is as if a great weight is taken off their shoulders.
      We have the opportunities within the Probation Service to make an assessment when people come up for sentencing. If this is done, there will be a chance for them, in the sentencing processes, to have further counselling and, one hopes, some form of lessons. Dyslexics tend to respond terribly well to a computerised medium for learning. Unfortunately, it is a little too late for me to benefit from that at school, but it is something which is coming along. Voice
      1414
      recognition may also help, but that is something for the boffins to work out. We must get a process of recognition going.
      Anyone who has dealt with people in prison at any level knows that prisoners attend classes because, first, they want a reduction in sentence, any that is going, and, secondly, they are bored. It is a wonderful opportunity at least for people to understand their own difficulty and then to open up the way to help. It means that those people will stand a chance of getting some form of qualification or acquiring, shall we say, a more user friendly attitude to the workplace outside. Work placement is said to cut down the re-offending rate by something like a third. I think 35 per cent. is the exact figure.
      The opportunity to deal with this type of problem will be with us for a very long time. If we really want to make prison work—I hate using that expression but it may be appropriate in terms of the legal system and the reduction of crime—we must tackle the matter head on. There will be initial costs. It will mean a programme of training. But some form of investment, in time and money, and a little restructuring might well produce a real cut in re-offending rates and the overall amount of crime in our society.
      This is too good an opportunity to miss. The study is out; it is available. I suggest that the Government get on and do something with it.
      I hope that I have helped stir up a little bit of thought. I hope that the next maiden speaker takes the opportunity to make as big an impact as the noble Lord, Lord Bach.
      8.8 p.m.
      Lord Ahmed: My Lords, I rise to make my maiden speech. I begin with the name of God Almighty, most gracious, most merciful. I express my gratitude to the staff and noble Lords for the warm welcome they have given me since my introduction.
      When I came to England, I attended Spurley Hey comprehensive school in Rotherham. The local authority decided to close it down. I was elected to the Rotherham town hall in 1990. Four years later the local authority decided to abolish it. Well, my Lords, I was introduced into your Lordships' House last Tuesday and on Wednesday the reform debate started. I have decided not to buy a house in London and I am staying in a hotel!
      I welcome Her Majesty's Government's commitment to modernise the Probation Service and improve prison regimes so that they are constructive and help prevent reoffending. While I accept that the great majority of prison and probation staff are hard-working and committed professionals who do their best to serve the public in difficult and often dangerous circumstances, I believe that, at a time when the police and other organisations accept the existence of institutional racism, the Prison Service too should acknowledge that there is a serious problem of racism within the Prison Service.
      In the past five years the prison population has risen by 50 per cent., from 43,000 to 65,000, and it is expected to rise to over 82,000 within the next seven

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      years. Much to my dismay there has been an increase of almost 100 per cent. in Muslim inmates between 1990 and 1997. There are many explanations for the sharp increase in the number of prisoners from the ethnic minorities. Some would explain that it is perhaps due to the high unemployment, poverty and deprivation. Others argue that it is due to institutional racism and stereotyping. Whatever is the case, the figures are alarmingly gloomy.
      The Government's commitment to being tough on crime and its causes, with measures backed by an extra £3 billion over the next three years, will be of benefit to thousands of young people, ethnic minorities included. Statistics from the Policy Studies Institute report show that the chance of obtaining employment for a graduate Muslim youth is equal to that of an unqualified white youth. I believe that black and Asian youth should be targeted to reduce the high unemployment levels within these communities.
      I now turn to the allegations of institutional racism in the police forces and prisons. I am pleased to learn that many chief police officers have accepted that there is a problem and that they have to grasp the nettle and take immediate action. Ministers have announced targeting recruitment from the ethnic minority communities to reflect the population. There is a serious problem within the Prison Service. The proportion of prison officers' grade who are Asian is 0.68 per cent. and 0.73 per cent. Afro-Caribbean, compared with 6 per cent. Asian and 12 per cent. black inmates. HMP Winson Green, Birmingham, has a total of 995 inmates, with 131 Muslims and not one single Muslim staff member. HMP Long Lartin has 380 officers with no Muslim staff but a 15 per cent. ethnic minority inmate population.
      Lack of understanding has caused enormous problems in relation to the religious, spiritual and dietary requirements of minority prisoners. For example, inmates suffering from racist attacks inside prison are normally moved to another wing, or the protection unit, or the punishment block, where they are kept locked up for 23 hours a day for their own protection. A further example is that in many prisons the Friday prayer is held on a Thursday, due to lack of understanding of the importance of a holy day for the Muslim community.
      The Home Office has recently decided to appoint a special adviser on the spiritual needs of Muslim prisoners but it has said that organisations which nominate candidates to fill the post have to fund it themselves. Many Church of England ministers are employed full-time as chaplains and they have a special role under the Prisons Act 1952. It is really time that we had at least one full-time adviser on the needs of Muslim prisoners paid for out of public funds. I also suggest that when the time comes to reform the 1952 Act there should be statutory recognition of the fact that Britain is now a multi-religious society.
      I was glad to hear the noble Lord the Minister reiterate yesterday that the Government accepted the recommendations of the Chief Inspector of Prisons that Immigration Act detainees should not be held in the prisons. Unfortunately, we have a record number in the
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      prisons. I hope that the Government will soon implement arrangements for reducing the need for detention and will find alternatives.
      I now turn to the case of two Kashmiri prisoners held at HMP Long Lartin. Qayum Raja and Mohammed Riaz were convicted in 1984 and sentenced to 14 and 10 years respectively. In 1988 the Home Secretary increased their sentences by 10 years each. which later in 1994 were quashed by the High Court, London. Two years later, the then Home Secretary, Michael Howard, reinstated the increased sentences. To date, these sentences stand, but I am aware that the cases are currently under review by my noble friend Lord Williams' office and the Home Secretary. The Kashmiri community has expressed to me its growing lack of faith in the legal process. I hope my noble friend can take this on board and bring about a speedy review.
      The prisons-probation consultation document talks about partnership and responsiveness. Perhaps I may end by urging Her Majesty's Government to respond to the needs of the ethnic minorities and build partnerships within the ethnic minority communities to ensure that both community penalties and prison sentences are effective and break the ever rising cycle of reoffending.
      8.16 p.m.
      Lord Windlesham: My Lords, it is a great pleasure to follow the noble Lord, Lord Ahmed, and to be the first to congratulate him on his maiden speech. The noble Lord is a leading figure in the British Muslim community, is chairman, and I believe founder, of the Muslim Councillors' Forum, and is a distinguished representative of the entire community in South Yorkshire, from which he comes. In joining the House he helps to broaden the diversity of interests which are represented and which is one of its contemporary functions. His speech was informative and was sharp in places—I am sure that the noble Lord who is due to reply from the Front Bench will have taken note of what he said. Both the noble Lord and the previous maiden speaker conveyed that they have quickly got the knack, when their party is in power, of combining loyalty to their party, which is proper and understandable, while at the same time not avoiding the necessity to make criticisms of some aspects of the administrative policies for which the Government have to take responsibility.
      It is a tightrope that the noble Earl, Lord Longford, has walked with immense skill for half a century. He has remained a loyal member of his party, and at the same time has been one of the most noted and effective penal reformers of the day. We are grateful to him for initiating this debate and for giving us another opportunity to debate matters of such importance and topicality. I say to the noble Earl that it may not be very often that he has had three relatively new Members of the House on his own side speaking in a debate of this kind initiated by him.
      I want to confine my remarks to one issue only. It touches on what the noble Lord, Lord Addington, said. I refer to the provision of, and accessibility to, education in prison. In doing so, I declare an interest because I have had the privilege of being a patron of the Prisoners

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      Education Trust since its inception about nine years ago. At times it has been a struggle to keep going, but with the indomitable leadership of Elizabeth Andrew and the generous financial support of several national charitable foundations and other donors, it has been possible to persevere and, indeed, make steady progress.
      The trust is a small organisation confronted by a large need. Its function is to act as an independent pressure group, as a source of original research and expertise, and as a provider of specialist educational services within prison establishments. Like many others, it is concerned with the use that is made of the time spent in prison. The Prisoners Education Trust has a simple message which cannot be repeated too often or too vehemently. It is that the purpose of imprisonment is not simply to punish offenders, relevant though that is, but to use the time spent in custody in a constructive way so as to reduce the prospects of reoffending in the future.
      In that process, education, along with learning craft skills and obtaining some insight into the causes and consequences of offending behaviour, are the essential ingredients. Some mild encouragement can be found in the references made in the 1997–98 annual report of the Prison Service to developing constructive regimes. That was followed by the establishment of a new directorate of regimes on 1st January 1998.
      Perhaps I may pause here to say to the House, and in particular to the noble Lord, Lord Williams of Mostyn, how greatly I admire the work of Richard Tilt who has recently announced that for personal reasons—as I understand it, nothing to do with policy—he has found it necessary to retire early from his post as Director General of the Prison Service. His inheritance was the most difficult in our modern penal history, and the way in which he has carried out his duties over the past few years has been the subject of widespread admiration. Perhaps the noble Lord, Lord Williams, will pass on this commendation to Mr. Tilt.
      I return to the less happy side of things. I am unable to dissent from what the noble Earl, Lord Longford, said about the origins of the present crisis and the numbers in prison. The resulting financial and population pressures mean that education has taken a low priority in most establishments. The trend, as measured by the somewhat crude measurement—it is the only one which has been used until now—of average hours spent in education per prisoner per week, appears to be downwards over the past two years or so.
      While it is true that not all prisoners need or are suitable for education, even so, the statistic is shattering: it is one hour and a half, 1.5 down from 1.7 hours. The most recent annual report of the Prison Service did not quote a figure, and perhaps it was right not to do so. The statistic relates to the prison population as a whole, and not simply to those who wish to take advantage of such educational facilities as there are.
      But as regards more specifically targeted programmes in which the Prisoners Education Trust has specialised—open and distance-learning programmes in particular—there are numerous hurdles to be overcome. The trust commissioned a three-year research study by
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      a noted criminologist from Cardiff, Professor Mike Maguire. That study found that in many prisons, library access is limited to once a week. Difficulties are experienced in obtaining books, other materials and quiet places to study. A major problem was identified of which governors are aware, but perhaps they are not fully aware of all the consequences. The abrupt transfer of prisoners from one establishment to another is made necessary by overcrowding. This is not hearsay, but is the basis of a three-year study. The restrictions on what inmates may take with them frequently excludes their books or study packs and these may or may not be sent on to whichever establishment the prisoner moves, which may be a considerable distance away. It also may take place some time after the prisoners have been transferred.
      Finally, I wonder what justification the Minister can possibly give for those prisoners who undertake education—and I accept that by no means all are suitable—generally receiving considerably lower wages than those who are working. That can only encourage the message that education is less important than work. The sums of money are small, but the impact is large.
      I conclude by saying that I believe—as do most other noble Lords taking part in the debate—in providing adequate educational facilities in prisons and encouraging the inmates to make use of them; indeed, it is an effective way of changing behaviour and building self-respect. Contrary to what was said earlier in the debate, I believe that the prison population is stabilising. It has risen sharply in the past five years. I was one of those noble Lords and Members of another place who was present earlier this evening to receive a briefing from the Director of Research and Statistics at the Home Office. One cannot be too hopeful, but I judge that there are some grounds for hoping that, albeit at a very high level, stabilisation may have been reached. Therefore, now is surely the moment for a determined effort, backed by adequate resources, to raise the standards of educational provision throughout the Prison Service. The general public are the potential victims of renewed offending, and they will suffer if nothing is done.
      8.28 p.m.
      Lord Mackenzie of Framwellgate: My Lords, I begin by saying what a pleasure it is to follow the noble Lord, Lord Windlesham, a man of immense knowledge and experience. Also, I thank my noble friend Lord Longford for coining a new word in my dictionary; namely, "Howardism". That is an interesting term. I am a firm advocate of "Strawism".
      This evening I feel that I am something of an ugly duckling in the pond but what I have to say must be said and it is important. I fully support the comments of the noble Lord, Lord Windlesham, about education and the Prisoners Education Trust. It is absolutely essential and I support everything that he said. While I have great sympathy with the underlying basis of the Question tabled by my noble friend Lord Longford, I have little doubt that I shall be coming at it from a different direction. I also warmly welcome the report of the Select Committee on Home Affairs on alternatives to prison,

      1419
      which contains a lot of useful information and recommendations. I hope that the Home Secretary considers it carefully.
      I have some 35 years' experience as a police officer, in every rank up to chief superintendent, and, in my judgment, the general public of this country are, quite frankly, fed up to the back teeth with the blight caused by crime. Communities are plagued with burglaries, car theft and wanton damage. We see evidence of that daily. New tube carriages are defaced by mindless scratching of windows, cars are broken into and homes violated. To continue looking at the problem from the point of view of the offender as opposed to that of the victim quite honestly upsets many people.
      At the end of the day, prisoners are volunteers. It is fully accepted that prisons should be decent, humane places and I would not demur at that. However, continual calls for better and more resources for prisoners probably offend people outside who have led deprived lives for many years and have not resorted to committing crime.
      I think your Lordships would agree that an important purpose of a prison sentence is deterrence—not just for the offender but for other like-minded persons. Over the years I have interrogated many prisoners, from murderers to shoplifters. Those whom I would class as professional criminals—and I accept that they are a relatively small minority—were quite prepared to take the risk of being caught if they knew that their sentence would be lenient.
      I was a detective when corrective training and preventive detention were on the statute book. Crime was much less prevalent then. Relatively severe sentencing went out of fashion in the '60s and '70s under both governments—it is not a party point—and crime rose significantly. In my judgment, it is only since we started to give realistic sentences that crime has begun to fall quite dramatically—almost a million fewer crimes reported in the past few years. That is a million fewer victims.
      Obviously I welcome the fact that criminals are being rehabilitated, although I have doubts about the willingness of some child molesters, for example, to undergo voluntarily what are considered to be helpful programmes. Similarly, I fully accept the need for better training to equip offenders to lead productive lives outside. It goes without argument that that is in everyone's interest.
      The difficulty I have is with the myriad of prisoner welfare organisations. That sends a signal which suggests that prison welfare is more important than the welfare of victims. I think it should be made clear more often that the responsibility for crime lies with those who commit it and not with society.
      I recently read a book by Charles Murray, the American authority on the growth of the underclass, on the effectiveness of prison as part of a crime reduction strategy. A small number of persistent criminals commit a large volume of serious crime. I include in that definition burglary, robbery and professional theft. It follows that if these "career" criminals can be taken out of circulation, crime—against the public, that is—will
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      diminish. That is precisely what has happened in the United States over the past few years, where crime has dropped dramatically alongside, I have to say, an increasing prison population. Janet Reno, the left of centre US Attorney-General, is quoted as saying:
      "Heavier sentences have turned things around".
      I think that your Lordships need to take note of that. Indeed, only last week, a Department of Justice report showed that in the 15 years up to 1995, assault, burglary and car theft were more common in this country than in the United States. That is a rather surprising statistic.
      In this country the police strategy of targeting known criminals, the sensible tightening of bail laws and the elimination of the nonsense of being able to remain silent without prejudice, together with the introduction by this Government of the Crime (Sentences) Act, have resulted in reported crime reducing—a fact now supported by the recently published British Crime Survey.
      I often hear it said that it is not the prison sentence that deters; it is the fear of being caught. The noble Lord, Lord Bach, in his excellent maiden speech, touched on this point. That is not true, in my experience. In the area that I policed, in the north east of England, juvenile crime was rampant in the early 1990s. Time after time we arrested the same youngsters and took them before the courts: they were released time after time to continue reoffending time after time. If anything was proof that the fear of being caught but with no proper sentence was not a deterrent, that was it.
      That is why juvenile crime is such an important part of this Government's priorities. It has also been argued that there is little difference between the deterrent value of a prison sentence on the one hand and of a community based sentence on the other. Apart from the obvious fact that at least in prison the offender cannot continue to prey on the public, the argument loses sight of the fact that like is not being compared with like. Offenders are sent to prison, in the main, as a last resort. They have invariably been through all the community based sentences already, so to compare the recidivism rate with that of first offenders is a nonsense.
      Finally, there is the question of cost. The quite reasonable point has been made that prison is expensive. Of course it is, but so is crime. Research by Northumbria police in relation, for example, to juvenile offending, showed that the true costs of police, probation, social services, courts and the costs—both financial and emotional—to victims, when taken into account, are so high that it is cheaper to impose custodial sentences.
      In conclusion, I would simply say that financial decision making is about choices. If the choice is between the welfare of prisoners as opposed to the support and welfare of those who do not have a choice—the victims—I know where my vote would go.
      8.38 p.m.
      Lord Judd: My Lords, I think that we would all agree that this has been an interesting short debate. We

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      are deeply grateful to my noble friend Lord Longford for giving us the opportunity to look at this important issue.
      I was particularly struck by the two maiden speeches in this debate. It seems to me that it is unquestionable that we are now a multicultural society and therefore our civil institutions must reflect that reality in their make-up. If they are to have a credibility and to be effective, they must be seen to be part of the society of which they are theoretically institutionally a part. They must be felt to be. I understood clearly, therefore, what my noble friend Lord Ahmed said.
      I recognise clearly from my noble friend Lord Bach's graphic speech the description of the young people with whom he found himself confronted in the course of his work. I declare an interest, as I have before when we have discussed these matters, in that I have the privilege of being the president of the YMCA in England. We are doing some interesting work with young offenders in prisons and in young offenders' institutions. What my noble friend Lord Bach described is certainly what we encountered. Also, the reality of the absence of a multicultural dimension is familiar to us.
      It is also tremendously important and has been a challenging experience to have among us my noble friend Lord Mackenzie of Framwellgate. The police come in for a great deal of criticism these days, much of it valid and serious—indeed, grave—but countless policemen do a tireless, demanding and sometimes dangerous job on behalf of the community. We would be foolish therefore not to listen to the experience and the perspective of one who found himself in the front line of that task.
      I recognise in what he says something of which we must all be cautious. He speaks with the voice of realism about many of the communities most acutely affected. They are not the middle-class communities or the rural homes to which we can retreat at weekends; they are the people in the deprived, disadvantaged estates of our country. In recent years I have come to live in one of the most beautiful valleys of north-west Cumbria. I shall never forget being taken by community workers around one of the most horrific, deprived estates of Carlisle on a clear winter day and seeing the reality of the problems with which those people lived. On that same clear winter day I looked out at the blue sky and bright sunlight and saw the hills where I lived. There is a great need for a sense of realism in how we approach these issues and I believe that my noble friend Lord Mackenzie of Framwellgate brings that realism to our consideration.
      However, tonight I crave the indulgence of the House because I want to concentrate on a point that I have made before but intend to go on making. If we have learnt anything in our work at the YMCA, it is that often—as my noble friend Lord Bach described—young people lack any sense of personality, personal significance or dignity. One of our first tasks therefore must be to enable them to discover themselves so that they can begin to develop their sense of responsibility, and we must then help them forward.
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      I often describe our work as a realisation that it is necessary for someone to take the hand of the offender and walk with the offender back into a full, creative, positive life. That is not to deny the importance of punishment; but it is in the context of the punishment that we immediately need to begin the job of rehabilitation. That is what the Probation Service, in one way or another, has been doing so outstandingly well throughout its tradition. It is a service for which I have unlimited respect and which, in my view, cannot have too many resources for what it is endeavouring to do.
      Also, in that process, if we are to be successful in our endeavour, it is important for resources to be spent on education. I was cheered to hear my noble friend Lord Mackenzie make the point that education is crucial in the prison process. We know that with the shortages and other difficulties faced by the Prison Service in trying to perform its task, too often it has been the educational services that have been cut.
      I want to make a point about which I feel increasingly strongly. In some parts of the media it is portrayed that there is a tough-headed approach to crime and a soft approach to crime. My view is that the situation is quite the reverse of how it is sometimes portrayed in the downmarket media. The hard-headed approach to crime relates to how we enable the offender to become a positive, responsible citizen who will not offend again; who will become somebody who contributes to the future of society. That is the tough-headed approach and that is why the emphasis must be on rehabilitation, on education, on working with the prisoners and helping them back into society. It is not only what happens in prison that is important, but also what happens when the person comes out of prison in terms of how they can be helped back into a full and confident life. It is that simple.
      We must also recognise that if we do not spend the resources in those areas, the cost to society in the future—in reoffending, in future disruption and future mayhem for those least able to cope with it in their already stretched communities—will be great. The cost to the police and to the Prison Service itself will be immense as we try to cope with the problem being regenerated. It therefore makes economic sense as well as sense in terms of penal policy to rehabilitate; it is an investment in less expenditure in the future. The Government therefore deserve all the encouragement possible in that direction.
      Perhaps I can conclude with this observation. I believe it is good that the Government emphasise the need for a clearer understanding of what is right and wrong and, in the midst of it all, for people to take personal responsibility. I applaud that. But I make the observation—perhaps in this House of all places we should recognise this—that it is not simply a question of "Do as we say"; it is, "Do as we do". If the messages which are being sent out to the young about what is acceptable behaviour, what is clever behaviour, what is the successful way to the top in society; if naked greed is too great an element in the upper echelons of society, where is our moral authority in appealing to the young? Where is the consistency? Where is the credibility? Therefore it is not only a question of what we do within

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      the prison and probation services; it is the whole way we tackle the debate about the values which should operate in our society as a whole.
      8.47 p.m.
      Lord Dholakia: My Lords, the noble Earl, Lord Longford, has repeatedly drawn attention to prisons in this country and I am grateful to him for giving us this further opportunity to debate the matter today. I have followed him on a number of occasions in this House on issues concerning prisons, whether through Starred Questions or debate. The problem with following the noble Earl is that I now receive copies of letters from inmates which are normally addressed to him—and there are a remarkably high number.
      Perhaps I can also take the opportunity to thank the two noble Lords who made maiden speeches. If it is any consolation to them, I made my maiden speech around one year ago and there were only four Members in the Chamber at the time.
      It is difficult to overstate the damage done by the last government's expenditure cuts since the mid-1990s to the work of the prison and probation services. I look forward to hearing what the noble Lord, Lord Henley, says in regard to some of the cuts in the Prison Service generally. Those cuts, including the reduction in prison staff, saw a change in the number of prisoners to staff members from 1.7 in 1993 to 1.47 in June 1998.
      Prisoners now spend increasing time in their cells. The percentage of prisoners held in prisons which unlock inmates for 12 or more hours per weekday fell from 40 per cent. in 1994–95 to 37.5 per cent. in 1995–96. In 1996–97, the Prison Service changed its key performance indicator for the time unlocked and now measures the percentage of prisoners held in prisons which unlock those on standard and enhanced regimes for 10 or more hours per weekday, not 12 hours as previously. The percentage fell from 65 per cent. in 1996–97 to 62 per cent. in 1997–98. The Prison Service target for 1998–99 is 60 per cent.
      There was also a reduction in the level of purposeful activity in prisons from an average of 26.2 hours per prisoner per week in 1994–95 to 23.3 hours in 1997–98. The Prison Service aims to increase that to 24 hours per week in 1998–99.
      There was a fall in the number of probation officers working in prisons from 645 to 560 between mid-1995 and December 1997. There has been a postponement in the repair and refurbishment programme. The problems were clearly identified by Her Majesty's Chief Inspector of Prisons.
      There are easy ways of raising money for prisons. I applaud the former Home Secretary for spending a day in Brixton prison, which raised over £100,000. Let us imagine the amount that would have been raised had we kept him there for four years! It would have met all the deficits and cuts that we are talking about.
      Turning to more serious matters, to many of us the impact of the cuts in prison education has been the most distressing element of all. According to a Written Answer by the noble Lord, Lord Williams, to my noble friend Lord Harris of Greenwich, on 3rd September
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      1998, 84 per cent. of prisons cut the number of education hours in 1996–97; 56 per cent. did so in 1997–98; and 71 per cent. have done so in 1998–99. According to the same Written Answer, the average number of education hours per prisoner fell from 4.9 hours in 1995–96 to 3.8 hours in the first quarter of this year. That is very sad. The sooner the trend is reversed, the better.
      Prison education is crucial to cutting crime. Everyone who has worked with offenders knows ex-prisoners for whom education has been an essential part of their rehabilitation. Many prison inmates have problems with literacy and numeracy, and basic education can greatly increase their chances of employment.
      Prison education is not a soft option. It is a vital means of reducing risk to society by diverting prisoners from re-offending. The more prison education is cut back, the greater the risk that prisons will educate their inmates in nothing but the tricks of the criminal trade.
      I welcome the Home Secretary's statement on 21st July on the comprehensive spending review settlement in which he said that the settlement would provide an additional £660 million for the Prison Service over the next three years. According to the statement some of the money will be used for additional prison places and to clear the urgent backlog of repairs and maintenance. But it also provides for a significant increase in purposeful activity over the next three years, including improvements in education for juveniles and adults and an increase in the number of probation officers providing through-care support.
      A Written Answer in the House of Commons from Mr. George Howarth to Mr. Alan Beith on 31st July stated that there will be an extra £72 million for rehabilitation and other programmes in prison in 1999–2000; £60 million in 2000–01; and £70 million in 2001–02 in real terms at 1998–99 prices. However, after an increase next year of 1.7 per cent., there will be a 0.2 per cent. reduction in the second year, (2000–01) and a 0.6 per cent. reduction in the third year. So in real terms we are not talking of additional money being available but a genuine cut.
      Perhaps I may touch briefly on the Probation Service. It has also suffered significant cuts in expenditure and staffing. Before the review settlement, the Association of Chief Officers of Probation estimated that in real terms the Probation Service in England and Wales was facing a cut of around 25 per cent. over a four-year period, equating to an expenditure reduction of approximately £1,000 million. That was at a time when the number of offenders supervised by the service—on community sentences, in prison and on post-release supervision—had increased from 136,000 in 1992 to 184,700 in 1997.
      I welcome the Home Secretary's Statement on the comprehensive spending review settlement. He said that there would be an additional £18 million of grant for the Probation Service next year instead of the £6 million cut planned by the previous government. A Home Office circular to the Probation Service issued on the same day stated that the Home Office grant to the Probation Service would rise from £329 million in 1998–99 to £396 million in 2001–02.

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      I have paid tribute on more than one occasion to the Home Office's recent willingness to provide improved financial support. I wish to highlight my own interest in the matter as chairman designate of NACRO. I must draw attention to one result of the cuts in the Probation Service which has caused us particular concern; namely, the dramatic reduction in the service's voluntary work with many prisoners released from short-term sentences who are not subject to compulsory post-release supervision. NACRO is keen to work in partnership with the Probation Service to improve the level of help and support given to such ex-prisoners. That will help increase the prospect of steering them away from crime and further offending.
      I associate myself and this side of the House with the remarks offered about Mr. Tilt by the noble Lord, Lord Windlesham. Perhaps they can be conveyed to him.
      8.57 p.m.
      Lord Henley: My Lords, I am grateful to the noble Lord, Lord Dholakia, for making his remarks with such brevity. That allows me my eight minutes before I must sit down to allow the noble Lord, Lord Williams, his full 12 minutes to wind up the debate—which I dare say will not nearly be enough to cover the number of points addressed.
      I also wish to express my thanks to the noble Earl, Lord Longford, for introducing the debate. It is six months since our last major debate on prisons. It is a subject that many of us in this House would like to see addressed with greater frequency.
      I also offer my congratulations to the noble Lords, Lord Bach and Lord Ahmed, on their maiden speeches. Like the noble Lord, Lord Bach, I received advice from the noble Earl, Lord Longford, many years ago when I made my maiden speech. I imagine that many noble Lords have over the past 50 years, and many more will in the ensuing years. I pay particular welcome to the noble Lord, Lord Ahmed. It is gratifying to see another northerner taking his seat in this House. The noble Lord is from Yorkshire; I am from Cumberland. It is also gratifying to see someone somewhat younger than myself taking his seat as a life Peer. It was always said in defence of the hereditary principle that it brought younger people into the House. Speaking as a youngish middle-aged hereditary Peer, I am now finding that many of the new life Peers are considerably younger than myself.
      Perhaps I may also take the opportunity of welcoming the noble Lord, Lord Mackenzie of Framwellgate, to such debates. I have not had the opportunity of congratulating him on his maiden speech, which he made during an education debate some days ago. I imagine that we shall have much to say to each other in the future on debates such as this. I dare say that there is much on which the noble Lord and myself might agree when it comes to prison matters.
      The noble Lord, Lord Dholakia, asked me to comment on the previous government's record. I do not want to take up too much of my time; however, I should like to remind the House, as I did in the debate on
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      25th March, which, in the absence of the noble Lord, Lord Williams, was wound up by the noble Lord, Lord Hoyle, that between 1979 and 1997 the prison budget almost doubled in real terms. That is a considerable figure.
      I went on to put to the noble Lord, Lord Hoyle, a question relating to the cuts in the prison budget. I referred to a Written Answer produced by the Minister responsible for prisons, Joyce Quin—I believe on 31st July last year—when she stated that the planned expenditure for prisons for 1997–98 was £1,774.5 million and would be reducing to £1,733.3 million in 1998–99. That would follow a planned expenditure increase under the previous government.
      On that occasion, I asked for an answer but I did not receive one. Since then we have had the fundamental expenditure review. Therefore, I hope that on this occasion the noble Lord, Lord Williams of Mostyn, will be able to give me an answer to those questions. I hope that he will be able to tell me by how much the Government are planning to increase expenditure on prisons. In the light of the remarks that I am about to make, I am sure that he realises that it is important that in certain circumstances expenditure on prisons should be increased. This debate is about funding.
      The one issue that I want to address in the four minutes that I have left follows on from what the noble Lord, Lord Windlesham, said about the importance of education in prison. My remarks relate to the report on prisons and drugs misuse produced in July of this year by the All Party Parliamentary Drug Misuse Group. It is important in terms of expenditure on prisons.
      The noble Lord will remember well the White Paper that we produced in 1995 on drugs misuse. It related to drugs misuse throughout society, taking the situation much wider than just prisons. That White Paper had general support from all parties—and quite rightly so. Following that White Paper this year, the new Government produced a successor paper known as Tackling Drugs to Build a Better Britain. I hope that the noble Lord will accept that that White Paper built on what we had already started, which was something that had all-party support.
      It was regrettable that that report made virtually no mention of the problems of drug misuse in prisons other than a rather brief reference to how the Prison Service should direct its resources. I am grateful for the fact that the Prison Service then produced a supplement—its response—entitled Tackling Drugs in Prison.
      It is also important that we should look at the report from the all-party group, a group that we all support and recognise as carrying out a valuable job. I would be grateful if the Minister could address himself to a number of its recommendations. I appreciate that in the 12 minutes that he has to respond to my remarks he may not be able to respond to those particular points. However, I would be grateful if he could tell me when the Government intend to respond formally to that report, or perhaps he could write to me on the subject.
      Two of the principal demands made by the all-party group related to reducing supply and reducing demand. In relation to reducing supply, the group talked strongly

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      about the need to make sure that drugs did not get into prisons. Obviously, if drugs cannot get into prisons, there is less likely to be a problem. It talked firmly about the need for every prison to have a sniffer dog. That involves resource problems. It is also important that visitor centres should provide a relaxed environment for bona fide visits while managing to deter drug deliveries. I would be grateful to hear from the Government exactly how they intend that the Prison Service should take that forward.
      The all-party group also talked firmly about the importance of doing everything possible to reduce demand. Having taken evidence from a number of people who had been in prison, it referred to the problems of boredom in prison and the fact that many people are locked up for possibly too long and it recognised the importance, therefore, of them having other things to occupy their minds in order to try to prevent the use of drugs. Therefore, I would be grateful to hear from the noble Lord what the Government intend to do to encourage the Prison Service to improve education, training and work as a means of occupying the time of as many prisoners as possible so that such problems as I have discussed, and those to which the all-party group referred, do not become more serious.
      9.5 p.m.
      Lord Williams of Mostyn: My Lords, we are all grateful to the noble Earl, Lord Longford, for introducing this matter yet again. I also thank the noble Lord, Lord Windlesham, for his customary courtesy in his references, echoed by the noble Lord, Lord Dholakia, and others, about the quality of Richard Tilt, who is, on any view, a considerable public servant. He has done extremely well. Jack Straw said publicly that he wanted him to continue in post but, for his own personal reasons, which I perfectly understand, Mr. Tilt felt that the time had come for a change. However, he has generously offered to stay on until his successor is appointed.
      We have heard two excellent maiden speeches. This is not the usual pack that one brings out on these occasions. Both noble Lords were listened to with great care. Their speeches were wholly different, one from another, and each contained extremely stimulating thoughts from new Members.
      The noble Earl, Lord Longford, asked me two questions. One was: Is "Howardism" still the policy of the Home Office? Perhaps I may give a citation.
      "It was a mistake of the previous government to believe that just one phrase 'prison works' was necessary. The phrase has a spurious and superficial logic. It is superficial because if the criminal is in prison clearly he cannot be committing crime outside. It is spurious because it does not take into account the effect of over crowded prisons on the criminal and the fact that 99.9 per cent. of all criminals will one day be released. Society will then find that prisons do not work".
      The citation has a double provenance. It comes from the admirable report of the Select Committee on Home Affairs, to which the noble Earl referred, and it is, of course, a verbatim quotation from the noble Lord, Lord Baker of Dorking, who, as Kenneth Baker, was Home Secretary.
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      If the noble Earl refers to "Howardism" as being that spurious and superficial logic of "prison works", added to a denial that other social causes have something to do with crime, added to a lack of early intervention, added to an under-funded Probation Service, added to a lack of flexible remedies, and added to a lack of sensible prompt intervention, I repudiate it. For once the noble Earl and I are in full agreement. He also asked whether or not Jack Straw was a penal reformer. There are no two ways about that. He wanted to be Home Secretary, and if I may modestly say so, although the post was in his disposal and not mine, I am a prison and probation Minister because I wanted that. He is a penal reformer and he has made a good stab at it so far.
      The noble Earl asked in his Question whether we shall continue the former policy of cutting expenditure in real terms on the Probation Service and on prisoner education. The answer is an unequivocal, unambiguous no. How have we started? We have gone about it on a co-operative basis because we believe that we cannot succeed—I echo entirely what the noble Lord, Lord Mackenzie of Framwellgate, said—without public co-operation and public confidence. Therefore, for the first time statistics are now being published on an automatic basis, whether they are comfortable or not. For the first time the reports of the Chief Inspector of Prisons are being published without delay. Subject to factual correction, which does not take a long time, I sign them off immediately.
      We are working towards the Prisons-Probation Review. It is a genuine consultative document. I was extremely heartened by the warm welcome for it from the Probation Service. I think that is a recognition that in the past efforts have been fragmented and there has not been sufficient common purpose between the police, the criminal justice system, the Probation Service and the Prison Service. All of these different organisations and persons are working towards what ought to be common cause. For the past nine to 12 months I have been working with the Prison Service and the coroners to reach the agreed conclusion that investigation statements relating to deaths in prison custody should, as a matter of assumption, be available to family members unless there are good, demonstrable reasons why they should not be. That is a significant advance. Your Lordships will know that my colleague who deals with police, Mr. Michael, echoed that only this week in the context of deaths in police custody.
      The question of racism was raised. This is a problem endemic to our society and there is no point in pretending otherwise. What has Jack Straw done? He has set up the inquiry into the monstrous, wicked murder of Stephen Lawrence. He has directed that there must be proper representation not a mechanical quota. Proper targets are to be set for the Prison Service, the Probation Service and the police service. He reiterated that only this week. Whatever criticism might be levelled against him, it simply cannot be suggested that he will tolerate racism even for a single moment.
      We have commissioned the Effective Practice Initiative, which we are publishing this week. That is not simply jargon. It is an extremely impressive document about what works in the context of the

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      Probation Service. Curiously, it is the first time for 90 years that national guidelines of that kind have been set out. As far as I am aware, it is unique in the whole world as a document which sets targets, sets down best practice and gives targets to work towards. The noble Lord, Lord Dholakia, asked me about figures. New money for the Prison Service over the next three years will be £660 million. The Prison Service will make efficiency savings over the same period of £109 million. Therefore, there will be more than £200 million of new money for regimes. I shall discuss regimes in a moment.
      I hope I do not say this in a presumptuous way but the noble Lord, Lord Windlesham, made a most important point about the disincentive relating to the earnings prisoners receive for education as opposed to work. In some prisons I have visited there is no differential, but in others there is. We are reviewing the wages paid to prisoners to ensure that they do not suffer financially by attending education rather than going to work. I know the noble Lord will recognise from his own personal experience that the emphasis will be particularly to encourage those prisoners who need to improve their basic skills.
      I mentioned regimes. We appointed a new directorate this year. We cannot manage this deeply intractable problem without structure, without discipline and without targets, and therefore accountability. The director, Martin Narey, is supported by assistant directors. This is an important management decision which will have enormous consequences. The assistant director for young offenders is Felicity Clarkson; for women, Linda Jones—she is a former chief probation officer. That is important; she was not appointed by chance—for adult males, lifers and parole, Peter Dawson; and for prisoner employment (I return to that matter because it is so important) Kevan Brewer. Penny Robson is the service's chief education officer.
      The noble Lord, Lord Addington, mentioned dyslexia. We shall introduce dyslexia screening. This will form part of the induction programmes in the dispersal estate. Advice will go to governors about educational programmes being made accessible—I echo the noble Lord's point because it is a valid one—to prisoners with dyslexia. The language and literacy unit based at South Bank University, as the noble Lord knows better than I, did the Dyspel work and is advising education services on the way forward. I can assure the noble Lord that the problem is being taken seriously. I agree with him that historically dyslexia has been overlooked and has been regarded as a sign of dullness rather than as a problem which needs to be addressed.
      Literacy and numeracy are serious, continuing problems—even more serious than those described by the noble Lord, Lord Addington. Nearly 60 per cent. of prisoners are at Level 1 or below for literacy, which is equivalent to 13 or 14 years of age. Seventy-five per cent. are at Level 1 or below for numeracy. That means that those prisoners will not be eligible for 96 out of every 100 jobs available. Prison education will therefore be increasingly focused on basic educational skills, life and social skills and IT skills. I say in parenthesis, though it is extremely relevant, that the work that David
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      Blunkett is doing in what I call mainstream education is absolutely invaluable. We need to bear in mind that this is the deeply depressing position after 50 years of compulsory public education for children up to the age of 15 and, more lately, 16. I appreciate that education was compulsory and free, but up to a lower age, over the century, as the noble Lord is indicating to me.
      My point is that, since the education Act at about the time of the Second World War, children have been educated compulsorily and at public expense from the age of five, now to the age of 16, and are leaving enormously expensive full-time education without basic skills. It is important to look not just at the Home Office's contribution but also at the contribution which David Blunkett is so admirably making elsewhere.
      The director-general is considering bids from governors for funds to be invested in education. We are talking about £250 million over three years to deliver our manifesto commitment on constructive regimes.
      I have been speaking for 11 minutes. It is a shame, first, that there are so few of us here and, secondly, that I have so short a time in which to deal with these matters of deep and enduring concern.
      There will be an additional £127 million for the Probation Service. Next year there will be not the cut of £6 million referred to by the noble Lord, Lord Dholakia, but an increase of £18 million. The Probation Service say to me that that is not enough. It is a good start. I attended the NAPO conference in York on Friday and was enormously pleased and impressed to see their energy and commitment to improve the situation and make things work. They recognise that the resource is not open-ended, but they are, I think, pleased that their work is recognised and that the Home Office is now reversing the underfunding that the service would otherwise have suffered.
      The noble Lord, Lord Henley, spoke about drugs. I will deal with that subject with reference to supply and demand. I think I have partly addressed demand. I entirely agree with what the noble Lord said. If prisoners who come from a drug culture, which an alarmingly high number do, are hanging around in prison doing nothing productive, they will want drugs to pass the time. One of the answers is to have focused, intensive programmes. I have to admit that before I knew anything about these topics I had the same prejudices as the man in the street: "What is an anger management programme? Just a bit of silly, sociological jargon." It is not. It is infinitely more difficult to go on such a course to address one's own problems, deficiencies and possible optimistic outcomes than to sit about all day doing nothing and trying to obtain illegal drugs. There are detoxification units and drug-free wings. One of the key performance indicators is related to positive drug tests. The key performance indicator for the future is to ensure that the rate of positive drug tests is lower than 20 per cent. Some of your Lordships and many of the public would say that that is not a very high aim. Look around the streets of any large city or any rural area and see the size of the problem.
      The other question—which the Home Secretary is addressing, as I know from personal experience, having attended a meeting with him on this point—is how drugs

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      get into prisons. There has to be decent humanity with regard to family visits, but we must not be naïve. Within the past fortnight I attended a meeting with Richard Tilt, the Home Secretary and colleagues in the Home Office to view videos from one prison to see how hard drugs were being taken in, secreted in the baby's clothes, in the wife's or the girlfriend's clothing or in the friend's trousers. Very determined efforts are made to get the drugs in. I want to maintain a decent balance of civilization, family connection and decency about visits,
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      but equally we have to recognise that, if people abuse these privileges, they will not remain as they are for ever. I would not be surprised if an announcement on these matters were not made shortly by the Home Secretary.
      I have spoken for 14 minutes, and I do not apologise for that. I believe that 14 minutes on this topic may well be time better spent than for example on the European Parliamentary Elections Bill.
      House adjourned at twenty minutes past nine o'clock.