Lords Sitting of 9 December 1999

Preamble
The House met at three of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Derby.

South East: Regional Planning Guidance
Lord Bownessasked Her Majesty's Government:
When a response to the report by Stephen Crow and Rosamund Whittaker on ho use building in the South East is to be published.
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Lord Whitty): My Lords, the Government will issue for consultation the proposed changes to SERPLAN's draft regional planning guidance for the South East early in the new year.
Lord Bowness: My Lords, I thank the Minister for that Answer. However, do the Government accept that the Crow proposals cannot be implemented, even in part, without a serious effect on the existing green belt which, indeed, two years ago the Government pledged to maintain, and without serious consequences for the transport infrastructure in the region? Secondly, does the Minister believe that the two key questions which in their report the authors stated were central to their thinking on virtually every issue were in fact the right questions to be asked?
Whitty: My Lords, the panel asked a number of questions. I believe that there is a range of other questions to he asked, both about SERPLAN's original proposals and about those which come from the Crow report. It is a very complex area. It is certainly true that the higher figures which appear in the report would put some pressure on housing, to say the least. However, I believe that aspects of this issue, such as the density of housing and the balance between brownfield and greenfield sites, would mitigate the effect on the green belt to which the noble Lord refers. Because of the complexity, we need to consider the recommendations carefully and subject them to the widest consultation.
Lord Crickhowell: My Lords, does the Minister agree that it is not simply a question of complexity but that it would be socially, economically and environmentally extremely damaging to add to the enormous pressures that already exist on the South East when we should be encouraging urban regeneration and renewal in the cities in the rest of the country?
Lord Whitty: My Lords, I do not believe that this is entirely an either/or situation. Clearly, the Government's policy is to encourage regeneration in
1382
many of our industrial urban and rural areas away from the South East. Indeed, the whole structure of the regional development agencies is designed to enable that to happen. Nevertheless, there will also be development in the South East; there will be housing consequences for that development, and the ensuing pressures must be considered very carefully. That is what the Government are doing.
The Earl of Onslow: My Lords, I suppose that I must declare an interest in that if I were to have one or, peradventure, two acres of development land in the South East, I should be immensely rich. Perhaps I may ask the noble Lord why it appears that we need 4 million new houses, which are designed for single mothers, old age pensioners and divorced people, when the builders want to build four-bedroomed, two-garaged houses in the South East and to increase the housing stock by something like 20 per cent. I am not a genius, but even I find that very hard to comprehend.
Lord Whitty: My Lords, I am not sure that I accept that the noble Earl is not a genius! However, I agree that those are difficult problems. The change in household formation—in the structure of households—leads to the type of demand to which the noble Earl refers. It is highly probable that some of those pressures will be met by a higher density of housing within the South East. However, as the noble Earl says, the normal development pressures are to build larger houses within the South East. That balance must be reassessed in terms of the total development of the South East. As noble Lords have said, in addition to the pressures in the South East, we need to look at those which exist elsewhere. To a lesser extent, the same changes in demography and the same development pressures are also occurring elsewhere.
Lord Renton: My Lords, bearing in mind that population pressure is the principal problem with which the Government have to deal in this matter, will they take into account that if they can halt some of the drift from the North and the Midlands to the South East, that would help? Further, is the Minister aware that a few weeks ago we were told that over the next 12 months we must accept 80 people claiming immigration and asylum. It would be a great help if that number could be limited considerably because a high proportion of those people wish to settle in the South East.
Lord Whitty: My Lords, clearly, international immigration brings some pressures, more so to London than to the rest of the South East to which the figures refer. Contrary to general belief, the demographic or population pressures on the South East do not come primarily from people from the northern regions. Indeed, there is only 3 per cent migration from the North East, for example. into the rest of the South East. The primary pressure on the rest of the South East comes from people who move out of London into the rest of the South East. In addition, there are demographic pressures in terms of

1383
households to which I have already referred. Therefore, the first point made by the noble Lord is not the principal problem.
The Earl of Caithness: My Lords, if the report were to be implemented, can the noble Lord tell us how many acres of existing green belt would be lost?
Lord Whitty: My Lords, as the noble Earl knows, it is government policy that we should maintain the net value of the green belt. That would be our intention in these circumstances. We would wish to see as many houses as possible built within existing brownfield sites and those which already have development permission within the South East. Obviously, the Government are currently addressing the issue of the pressures which arise from that.

Ministerial Blind Trusts
3.13 p.m.
The Earl of Liverpoolasked Her Majesty's Government:
What purpose ministerial blind trusts serve.
The Minister of State, Cabinet Office (Lord Falconer of Thoroton): My Lords, the Ministerial Code makes it clear that Ministers must avoid any danger of an actual or apparent conflict of interest between their ministerial position and their private financial interests. Placing investments in a blind trust is one option available to Ministers to avoid any conflict of interest.
The Earl of Liverpool: My Lords, I am grateful, as I am sure is the whole House, to the noble and learned Lord for answering this Question. But I confess to being slightly disappointed that the noble Baroness the Lord Privy Seal, who I am pleased to see is in her place today, does not feel able to answer it because, after all, she was one of the three trustees of the Prime Minister's Office blind trust.
Does the noble and learned Lord consider it appropriate or, indeed, desirable that a past trustee member of the Prime Minister's Office trust fund should be on the Political Honours Scrutiny Committee which, among other things, will play a large part in deciding who shall become a Member of this House and sit and vote here?
Lord Falconer of Thoroton: My Lords, first, I apologise for not being my noble friend the Lord Privy Seal. As the Question was first drafted, it related to the Ministerial Code, which is a matter for which the Cabinet Office has particular responsibility. Therefore, it seemed appropriate for the Cabinet Office rather than my noble friend the Lord Privy Seal to deal with it. There is nothing odd about the fact that I am answering the Question rather than my noble friend the Lord Privy Seal.
1384
The noble Earl asked whether it is appropriate that a trustee of a blind trust should be on the Political Honours Scrutiny Committee. The person to whom the noble Earl refers is somebody of the highest integrity. There is nothing that that person knows that is not also known to every other member of the Political Honours Scrutiny Committee because, as the noble Earl will know, when a name is put forward to that committee, it is incumbent on the Chief Whip of the relevant party to describe in detail any contributions which have been made by the individual to any political party, including any contribution to such a trust.
Baroness Gardner of Parkes: My Lords, does the Minister agree that the general public has very little knowledge of trusts at all and even less knowledge of blind trusts which are part of quite a technical procedure. I cannot claim to be any authority on them myself. Will he tell the House how blind is a blind trust? I have read reports in the press that people can have their neighbours, close friends or family making decisions for them. How satisfied is the Minister that people putting their affairs into blind trusts are completely detached from those trusts?
Lord Falconer of Thoroton: My Lords, the Question relates to ministerial blind trusts. They mean that a Minister's interests are placed in the hands of trustees. The trustees then deal with the portfolio as they see fit without the Minister being informed about what happens in relation to the assets in the blind trust. The intention is that the Minister then does not know what is happening to his assets. A blind trust set up in that way shields the Minister from what is happening in relation to his assets. If set up appropriately, the trust is completely blind.
Earl Ferrers: My Lords, if one is a Minister and one is going to set up a blind trust, can one have one's wife, mother or son as trustees?
Lord Falconer of Thornton: My Lords, as the noble Earl will know, the arrangements must be such that they genuinely blind you from what is going on in relation to the trust.
Lord Mackay of Ardbrecknish: My Lords, does the Minister consider that his success with the Dome means that he may yet end up as Leader of the House? As he will know, the noble Baroness the Leader of the House, as a trustee of the Labour Leader's Office fund, which was a blind trust, I gather, broke the confidentiality of the fund to make it clear that Mr Geoffrey Robinson was not a contributor. Will the Minister go further and say whether any Member of either House was a contributor to that or any of the other blind trusts which existed before the election? Indeed, would it not be in the interests of openness and freedom of information for the names of all those who have contributed to blind trusts now to be made public?
Lord Falconer of Thoroton: My Lords, the reference which the noble Lord made is not to a ministerial blind

1385
trust but to the blind trust in relation to the then Leader of the Opposition's Office. The reason for the blind trust in that case is completely different from the reason which I identified previously; namely, that the contributors should not be known to the Leader of the Opposition. That has now been wound up. In exceptional circumstances, my noble friend the Lord Privy Seal identified one contributor. That seems to me entirely appropriate and it seems to me equally appropriate that any contributions which have been made to Conservative Party funds should be made fully and frankly available.

London Underground: Financing Methods
3.18 p.m.
Lord Ezraasked Her Majesty's Government:
Whether a scheme similar to the public bond issue for the New York subway should be introduced for the London Underground.
Lord Whitty: My Lords, I refer noble Lords to the excellent speech made by my right honourable friend the Deputy Prime Minister in another place yesterday. Our private public partnership proposals will bring over £8 billion investment into the Tube system. That is much better value for money than public bonds. The PricewaterhouseCoopers paper, a copy of which was placed in the Library yesterday, shows how the PPP could save £4.5 billion compared with the issue of public bonds.
Lord Ezra: My Lords, I thank the noble Lord for reminding us of the important speech made recently. None the less, is the Minister aware of the considerable success achieved by the New York subway. Since 1982, when the renovation plan was introduced, exactly £8 billion—the sum involved in our case—has been raised on the public bond market. The bulk of the lines and signalling has been improved, air-conditioned coaches have replaced former rolling stock, passenger mileage has increased by 40 per cent, and the reliability of the network h as doubled. In those circumstances, as it is important to consider all the alternatives for such an important venture, at this late stage will the Government look at the situation again, bearing in mind that raising bonds in such a way would certainly be cheaper than if the money were raised by the private sector.At the same time, the engineering work could be contracted out to the private sector.
Lord Whitty: My Lords, none or us would dispute that the New York system has improved significantly since the new system of financing has been in place. Nevertheless, that finance is guaranteed against future revenue in terms of both fares and tax subventions from public authorities. The benefit of the PPP is not only that we shall raise substantial funds of money, but also that we shall bring the application of the most up-to-date management techniques to the provision of the infrastructure for the London Underground. That analysis is underlined by the Pricewaterhouse report to
1386
which I referred, which shows a £4.5 billion advantage. I recognise that all forms of raising private sector money will be debated during the mayoral elections. However, I believe that the Pricewaterhouse report indicates that our scheme is probably the best way forward.
Lord Faulkner of Worcester: My Lords. does my noble friend agree that the PricewaterhouseCoopers report should be required reading for all candidates who aspire to be mayor of London, particularly in view of the misleading comments that some of them have made on the issue? This morning I had a brief opportunity to read the report. It is evident that the Jubilee Line extension would have cost £1.5 billion more had we gone down the bond route rather than down the public private partnership route. Will my noble friend comment on that?
Lord Whitty: Yes, my Lords. I trust that throughout the coming mayoral election, which is of such importance to the future of London, the facts will be addressed by all who aspire to be mayor and that this report will be part of their required reading. On the Jubilee Line extension, the benefit for any similar future undertaking would not only be the cost of borrowing, but also the fact that from the word go private sector management expertise could be brought to bear in a case that clearly was not well managed, such as the Jubilee Line extension.
Earl Russell: My Lords, I thank the Minister for placing the Pricewaterhouse report in the Library. I agree with the noble Lord, Lord Faulkner, on the importance of it being widely read. Is that report now not merely in the Library but also published? Has the Minister yet been quoted out of context enough times to realise how important that request is?
Lord Whitty: My Lords, I have spent most of my life being quoted out of context, like many other noble Lords. However, the report is published in the sense that it has been released to the press. Therefore, it probably meets the normal criteria and is available to Members of this House and another place.
Lord Brabazon of Tara: My Lords, now that the proposals for Railtrack to take over the subsurface lines have been shelved in rather humiliating fashion by the Government, apparently because neither of the two mayoral candidates of the Labour Party could put their names to them, and on a day when the Evening Standard reports,
"Tube 'at death's door' as delays rise to record rate",
can the Minister tell the House whether there is any chance that Londoners will see any improvement in the Tube before the next election or shall we go through the whole Parliament without seeing anything on the subject?
Lord Whitty: My Lords, I believe there are already benefits from the higher level of investment in which this Government have engaged for the London

1387
Underground than the last few years of the past regime. We have provided £800 billion. That will be built upon by the beginning of the private public partnership towards the end of this Parliament.
I want to reject the idea that the Railtrack proposition was rejected for the reasons suggested by the noble Lord. The fact is that the proposals from Railtrack at that point did not match up to what was required in terms of integration of the surface railway with the subsurface lines of the Underground. It was felt by all concerned—London Underground, Railtrack and the Government—that it was best to move to a PPP on the same basis as the rest of the London Underground.
Lord Wallace of Saltaire: My Lords, in the light of the conclusion reached by Pricewaterhouse that under all circumstances projects of this complexity would be 20 per cent cheaper if conducted by the private sector rather than by the public sector, does the Minister feel that the experience of the Channel Tunnel allows him to have that degree of confidence in such complex projects?
Lord Whitty: My Lords, every project needs to be assessed on its own terms. Clearly, there is benefit in applying private sector management in this context. That may not be the case in other contexts. The Channel Tunnel was different as the Government bear only a small proportion of the risk. However, I agree with Pricewaterhouse that the general approach we are taking will deliver efficiency as well as better finance.
Lord Elton: My Lords, as one who emerges, blinking, fairly often from the shabbier reaches of the Underground system into the magnificence which is now being revealed as the new Westminster station, will the Minister say whether priority can be given to providing greater comfort and capacity in the rolling stock and smoother track rather than glorifying the approaches to Westminster Palace?
Lord Whitty: My Lords, in relation to London Underground and other parts of the rail system, it is important that access to the railway is attractive, safe and efficient. So stations do matter. The rolling stock also matters. Part of the PPP will be the supply of the rolling stock that will be put on a more effective basis under this arrangement than has pertained in regard to rolling stock in the past. However, it is true that under the past regime, the orders for rolling stock in terms of surface railways and in terms of London Underground were seriously curtailed and we have to live with the consequences.
Lord Haskel: My Lords, is the Minister aware that recently I have visited most of the stations on the extension of the Jubilee Line? Will the Minister share with me the feeling that the architects and the builders ought to be congratulated, because truly the stations are quite magnificent?
Lord Whitty: My Lords, I was not totally aware of my noble friend's travelling propensities. I am glad
1388
that he has visited all the stations. I have visited two or three of them and I am deeply impressed. They give a whole new impression of the Underground to the travelling public. I believe that the Jubilee Line will be a great success.
Baroness Thomas of Walliswood: My Lords, in view—
Noble Lords: Reading!
Baroness Thomas of Walliswood: My Lords, I am not reading. In view of the Government's ill-judged effort to give Railtrack a single contract for the subsurface lines, will the Minister assure the House that in the next round of contracts he will obey the EU contract rules on such major contracts?
Lord Whitty: My Lords, as I have indicated on previous occasions, the tenders for such contracts will comply with the EU rules. The EU rules provided for a single contractor in the case of Railtrack. However, the situation now is that all three contracts will be let on the same basis and in compliance with the rules.
Lord Ampthill: My Lords, does the Minister recollect that the Channel Tunnel was in no way a PPP project? It was entirely privately financed, contrary to the belief that is apparently rampant on the Liberal Democrat Benches.
Lord Whitty: My Lords, with regard to the initial stages the noble Lord is correct. However, it was necessary for my right honourable friend the Deputy Prime Minister to step in during the early months of this Government to ensure that government backing was maintained for the project and therefore the Government were taking an element of the risk.
Lord Ampthill: My Lords, I was not talking of the line to St Pancras, but the Channel Tunnel itself.

European Union Regional Aid
3.30 p.m.
Lord Newbyasked Her Majesty's Government:
What steps they are taking to ensure that the United Kingdom does not lose European Union regional aid which is available until 31st December 1999.
The Minister for Science, Department of Trade and Industry (Lord Sainsbury of Turville): My Lords, current structural fund programmes have until the end of 2001 to spend the money allocated to them at the beginning of 1997. Structural funding will therefore not be lost, provided that programmes have contracted with final beneficiaries by 31st December 1999 and payments are made over the following two years.

1389
The Government share the concerns of some regional partners about the problems of identifying final beneficiaries by the end of this year. We discussed this with the European Commission. However, the Commission argued that the deadline was legally binding and well known. We have therefore issued instructions to partnerships through the government regional offices guiding them through the final phase of the current programme. We also agreed with the Commission that local partnerships can draw up reserve lists of beneficiaries to replace any which fall out.
Lord Newby: My Lords, I am grateful to the Minister for that reply. However, is he aware that regional development agencies are anxious not simply about identifying projects, but also, and more importantly, about receiving an assurance from the Government that the funds available to them over this year and next are not reduced? High quality projects, which are of great significance to these regions, will not then be put into jeopardy with regard to their funding because of government parsimony.
Lord Sainsbury of Turville: My Lords, I presume that the noble Lord is referring to "match funds", which have to be provided from other areas. The government regional offices are in a position to help with advice on sources of match funding, and that can include the Single Regeneration Budget, English Partnerships indeed, New Deal money. Match funding for 2001 and beyond is currently being considered as part of the overall spending review.
Lord Pearson of Rannoch: My Lords, bearing in mind that the United Kingdom pays the European Union many billions of pounds a year for this sort of purpose, of which the European Union is graciously pleased to give back only a part, does not the Minister agree that there is no such thing as "EU funding"? If he does not agree, does he not believe that the Government, in all their wisdom, could spend all those billions much more wisely than when they are passed through the corrupt and inefficient bureaucracy in Brussels?
Lord Sainsbury of Turville: My Lords, the term "EU funding" simply means funds which come from the EU. At the same time, we pay into those EU funds. There is nothing mysterious or difficult about that. Clearly, we could also fund this money ourselves through a different route. I have no evidence that there is any such corruption. It is an endlessly repeated point, but I do not see that there is any cause for alarm.
Baroness Williams of Crosby: My Lords, given the great effort that was made to include Cornwall in Objective 1,will the Minister consider indicating to the regional development agencies that they should do their best to try to help find matching funding? Otherwise, some of the poorest regions in the United
1390
Kingdom will not benefit as much as they might from obtaining the full amount of EU funding, as my noble friend pointed out.
Lord Sainsbury of Turville: My Lords, regional offices do everything they can to support RD As and other bodies in finding funds. As far as I am aware, the money goes to where the needs are greatest through local partnerships rather than simply from where the matching funds can be most easily found.
The Earl of Onslow: My Lords, if there is no information of corruption, why did the whole of the European Commission resign?
Lord Sainsbury of Turville: My Lords, I was simply making a point in relation to this programme. If noble Lords want to pursue the general question of the amount of corruption in the European Union, there are opportunities to do so. I was referring to this specific programme.
Lord Mackay of Ardbrecknish: My Lords, can the Minister tell the House how much regional aid funding has been lost to the UK by the levying of fines on the United Kingdom by the Commission for what it believes is irregular use of the money in various parts of the country?
Lord Sainsbury of Turville: My Lords, I am not aware of any fines, but I shall make inquiries and write to the noble Lord.
Baroness Miller of Chilthorne Domer: My Lords, is the Minister aware of the effect on rural areas where some of the crucial partners are local authorities which are still suffering from the Government's lack of recognition of what is known as the "sparcity" factor? The Government also brought in more targeted funding which particularly hit other services, including all of the projects which fall under some of the Objective 2 funding. Targeting specific areas which the Government wish to pursue is likely to prevent local authorities taking a full part in some of the partnerships.
Lord Sainsbury of Turville: My Lords, the funds are developed for regions or areas on the basis of local partnerships which involve, in most cases, all of the participants, whether they are local authorities, regional development agencies or other bodies. As I said, as far as I am aware, the funds are targeted by the groups on the areas of greatest and most urgent social need.
Lord Bowness: My Lords, can the Minister give the House an assurance that there is no danger at all of any European funds being lost because the Government do not provide matching funds by the appropriate date?
Lord Sainsbury of Turville: My Lords, it is up to the specific bodies concerned—that is, the local partnerships which are under the control of the

1391
programme monitoring committees—to raise the matching funds. The Government will give all possible help, but the responsibility for matching funds lies squarely with the local partnerships and the programme monitoring committees.
Lord Swinfen: My Lords, can the Minister tell the House what proportion of funds collected in the United Kingdom in the way of taxes and transferred to the EU actually comes back to the United Kingdom in the way of grants or other benevolent manner?
Lord Sainsbury of Turville: My Lords, that is slightly wide of the Question on the Order Paper, but I am happy to write to the noble Lord with the figures.

Business
Lord Carter: My Lords, after the debate on the Offices Committee Report, my noble friend Lady Hayman will repeat a Statement being made in another place on the French ban on British Beef.

House of Lords' Offices: Select Committee Report
3.37 p.m.
The Chairman of Committees (Lord Boston of Faversham)rose to move, That the First Report from the Select Committee be agreed to (HL Paper 9).
The noble Lord said: My Lords, it may be helpful if I explain that the usual practice of the House on these occasions is to debate together the Motion standing in my name and any amendment—in this case, the amendment standing in the name of the noble Lord, Lord Williams of Elvel. That means that the noble Lord, Lord Williams, will speak immediately after me and, at the end of the debate, I shall respond and the noble Lord will reply on his amendment. When he has replied, the Question will be put, first, on the amendment and then on the Motion without any further debate. That will avoid the need for two debates and a third speech from me—two will be quite enough, if not more than enough.
The Offices Committee considered carefully and thoroughly the question of privileges for former Members of the House, most recently at its meeting on 30th November. The committee's report records the decisions reached at that meeting, but it is based on work done by the usual channels with the Convenor of the Cross-Bench Peers. I express my thanks and those of the committee for the considerable amount of work and thought put into that. It is based also on the work of the committee's sub-committees. I refer to the noble Lord, Lord Colwyn, and his Refreshment Sub-Committee and to the noble Lord, Lord Renfrew of Kaimsthorn, and his Library and Computers Sub-Committee. I express the same thanks to them.
1392
As noble Lords will remember, the subject also received an extensive airing during the passage of the House of Lords Bill. It is fair to say that the usual channels and the committee were united in thinking that the House would wish to approach this matter in a forthcoming way, perhaps if anything, erring—if "erring" is the right word—in a relatively generous way. So the question is: what privileges should be granted, bearing in mind that the working of the House must not be impeded and that any privileges must not make a charge on public funds? I think the committee's recommendations represent a good balance.
The proposals are set out in the report, so I do not intend to outline them. However, I should point out that this is a complete list, as suggested. The House and, indeed, former Members should be clear that anything that is not expressly stated is not included. Former Members will not, for example—this is my only example—be entitled to use the car-parking facilities of the House. In view of that, the House may expect that many hereditary Peers will not wish to make extensive use of the proposed privileges. Finally, I should like to say a few words on the proposal to allow excluded hereditary Peers to sit on the Steps of the Throne. This was debated at length in the Offices Committee. In reaching its decision, the committee was mindful of the fact that other former Members have already been granted this privilege. Bishops who are no longer, or are yet to be Members—Bishops in waiting, as it were—are allowed to sit on the Steps of the Throne as are Peers of Ireland. This represents a total of around 150 people, yet I am not aware that it has ever caused any problems for the House.
As the report makes clear, the committee agreed that the use of the privilege should be watched closely, so that it could be withdrawn if it proved inconvenient to the House. We bear in mind, too, that this privilege would not apply to the heirs of former Members.
This is a practical set of proposals. It is a workable set of proposals. It is a civilised set of proposals. I commend it wholeheartedly to the House. I beg to move.
Moved, That the First Report from the Select Committee be agreed to (HL Paper 9).—(The Chairman of Committees.)
Following is the report referred to:
The Committee have met and been attended by the Clerk of the Parliaments and the Gentleman Usher of the Black Rod.
1. Appointment of Sub-Committees and the Advisory Panel on Works of Art
The Committee appointed the following Sub-Committees and Panel—
Finance and Staff Sub-Committee

L. Astor of Hever

L. Boston of Faversham (Chairman)

L. Colwyn

L. Gladwin of Clee

L. Harris of Greenwich

L. Harris of Haringey

1393

B. Jay of Paddington

L. Renfrew of Kaimsthorn

L. Rodgers of Quarry Bank

L. Strathclyde

L. Weatherill

L. Williams of Elvel

with the Clerk of the Parliaments.
Administration and Works Sub-Committee

L. Boston of Faversham (Chairman)

L. Carter

L. Colwyn

B. David

L. Evans of Parkside

L. Harris of Greenwich

L. Henley

B. Hilton of Eggardon

L. Methuen

L. Monson

B. Rawlings

L. Renfrew of Kaimsthorn

B. Richardson of Calow

L. Weatherill

with the Clerk of the Parliaments and the Gentleman Usher of the Black Rod.
Library and Computers Sub-Committee

L. Ahmed

L. Avebury

L. Butterworth

E. Erroll

L. Evans of Watford

L. Hoffmann

E. Listowel

L. McIntosh of Haringey

E. Northesk

B. Platt of Writtle

B. Rendell of Babergh

L. Renfrew of Kaimsthorn (Chairman)

with the Clerk of the Parliaments.
Refreshment Sub-Committee

L. Burnham

L. Carter

L. Colwyn (Chairman)

B. Darcy de Knayth

B. David

V. Falkland

L. Geddes

L. Graham of Edmonton

L. Harris of Greenwich

L. Stone of Blackheath

V. Tenby

with the Clerk of the Parliaments.
Advisory Panel on Works of Art

L. Freyberg

L. Gavron

B. Hilton of Eggardon (Chairman)

L. Jacobs

L. Lloyd-Webber

L. Mancroft

L. Palmer

B. Rawlings

Ly. Saltoun of Abernethy

with the Clerk of the Parliaments.
2. Privileges for Hereditary Peers Excluded from the House under the House of Lords Act
The Committee have considered the question of facilities for hereditary peers excluded from the House under the House of Lords Act, and recommend that the following privileges should be granted:
(a) Access to one of the galleries in the chamber.
(b) On an experimental basis, the right to sit on the Steps of the Throne. This right should be reviewed if it causes inconvenience to the House, and in any event should be reviewed before the end of the current Session.
(c) Access to the Library, except when the House is sitting, in order to consult Parliamentary papers. deposited papers, reference material, journals and periodicals held by the Library. This right would not extend to borrowing books, consulting material which would have to be brought from an outside library, using the PDVN or commissioning research by library staff.
(d) The right to host any pre-booked function up to the end of the current booking period (31st December 2000).
(e) A right to book a table for four people not more than once a month in the Peers' Guest Dining Room, to be reviewed shortly after the Summer recess 2000.
(f) Access to the Peers' Guest Room, in conjunction with a Guest Dining Room reservation only.
(g) The issue of a distinctive photographic pass.
(h) The right to use Peers' entrance.
(i) The Committee also recommend that excluded hereditary peers who were appointed by this House to be members of international assemblies should be permitted to make full use of the Library until the appointment of a successor (a maximum period of six months).
Lord Williams of Elvelrose to move, as an amendment to the above Motion, at end to insert "except for paragraph 2(b)".
The noble Lord said: My Lords, I beg to move the amendment standing in my name on the Order Paper. I shall keep my remarks as brief as I possibly can, but I should like to focus, if I may, on the question of the right of former Members of this House to sit on the Steps of the Throne—as set out in paragraph 2(b) of the Offices Committee report. My noble friend—if I can describe him as such—the Chairman of Committees has said that this is a "practical" matter. I will argue, as briefly as I can, that it is, first, inappropriate; secondly, impractical; and, thirdly, rather patronising. I begin with inappropriate. After the difficulties of the last Session of Parliament, which we all recognise created a rather bad atmosphere, I believe that it is time to draw the line below that and say that we should move on. After all, there are many legislatures where members come and go. If Parliament has decided—as it has in both Houses—that former Members of this House should no longer be Members of this House, that is something which should be respected. Further, I do not believe that one should try to amend that, as it were, through the backdoor. I rather regard this particular proposal as an amendment through the backdoor.
I believe that this measure will be impracticable. Perhaps I may guide your Lordships to the Steps of the Throne. The seating room there is not exactly extensive. As I understand it, there are some 600 former Members, perhaps more, who, if this proposal

1395
is carried by your Lordships, would be entitled to sit on the Steps of the Throne. No one believes that 600 or more people will come in, but perhaps I may give your Lordships a scenario.
Let us suppose that a Bill comes before your Lordships which is designed to ban hunting with hounds. Would any noble Lord expect former Members of this House who have an interest in the subject not to come and sit on the Steps of the Throne? Indeed, even if 30—that is, 5 per cent—of those who would have this entitlement came, the seating room would really prove to be very difficult. Further, those who are already entitled to sit there, such as Irish Peers, a sprinkling of Bishops, Privy Counsellors from another place and Members of this House, would probably be crowded out. I find this whole business to be impractical. I give way.
Lord Strathclyde: My Lords, I am much obliged. It is very interesting to watch the rather amusing style of the noble Lord, Lord Williams, but, in his excitement to amend paragraph 2(b), did he not take note of paragraph 2(a)? I believe that that deals with his problem rather effectively.
Lord Williams of Elvel: My Lords, I certainly read that in great detail, but I do not believe that it deals with the problem at all. All that paragraph 2(b) says in that respect is,
"if it causes inconvenience to the House"—
and I will come to that in a moment, if the noble Lord the Leader of the Opposition will allow me to do so.
I turn now to my third point, and I intend to be very brief. I regard this proposal as being rather patronising. After all, in my not very long experience in this House—almost 15 years—I have made many friends. Indeed, I am very sad to see that many of my colleagues and friends on the Opposition Benches and, indeed, many colleagues on my own Benches are not here now as participating Members of the House. Nevertheless, to say to them, "You are second-class citizens. You have a special pass that says you are second-class. You're allowed to come in and sit on the Steps of the Throne, as long as you don't make a nuisance of yourselves and cause"—in the words of the committee's report—"inconvenience to the House. If you do make a nuisance of yourselves, like jumping on to the Woolsack, or whatever, we will remove that right".
I find this very patronising and, to a certain extent, somewhat offensive. So my argument against this particular proposal is that it is inappropriate that we should draw a line under what happened in the last Session. We must start to get on and move into the transitional House and make it effective. It is impractical because, at some point in time—I do not know when it will be—the already overcrowded Steps of the Throne will be even more crowded by the return of former Members of the House. I believe that it is rather patronising to former colleagues and, if I may say so on a personal note, friends. Therefore, I shall be inviting your Lordships to support me in my amendment when the Question is put on the Motion.
Moved, as an amendment to the above Motion, at end to insert "except for paragraph 2(b)".—(Lord Williams of Elvel.)
Lord Shepherd: My Lords, I rise to support my noble friend but my approach will, I think, be slightly different, although the end product will be very much the same. A good deal of what I have to say centres around the drafting of the report. If noble Lords would care to look at paragraph 2(a), they will see that it refers to,
"one of the galleries in the chamber,"
but I am never terribly sure what constitutes the Chamber; for example, when the Lord Chancellor sits on the Woolsack, is he within the Chamber? He is certainly not within the House. So I do not know what that description means. The paragraph does not say that there should be a designated Gallery. In fact, one could be placed in the Public Gallery by one of the Attendants. Alternatively, if you are friendly with Black Rod, you may be placed in his rather important enclave.
We should be precise in this matter. If we are to give courtesies to the hereditary Peers who have been excluded, they should have the right to sit in a particular place as opposed to having to obtain permission with regard to the Gallery in which they are to sit. Therefore, I strongly recommend that the House asks the noble Lord the Chairman of Committees to undertake consultations with the House Offices to decide the most appropriate Gallery to be set aside as of right for the excluded hereditary Peers. That would give them a clearly recognised place in the Chamber.
I do not like the wording of the paragraph that we are discussing. If one gives a right, one should not say that it is provisional. Any right or privilege in this House is already subject to review. We can change anything we wish if circumstances so require. If we are to grant a privilege with regard to where Members may sit, I believe that it should be granted as a right, subject, of course, to a review, should circumstances so require. In this instance, I suggest that if a privilege were to be granted, we should leave any review to the end of the Session. Perhaps then the various subcommittees which have had oversight of those areas in which privileges have been granted could then be asked to report. The report would then be made available to Members of the House and any proposals for change could be made in the new Session.
As regards my objection to sitting on the Steps of the Throne, there are Irish Peers and Privy Counsellors from another place—and my son when he used to come here—who have never participated in the hurly-burly of political life in this House. However, many noble Lords who may claim the privileges that we are discussing have done so. They may look back on that experience with a degree of nostalgia. However, in my opinion, to allow them to sit on the Steps of the Throne within the Chamber—because I suspect that that would be within the Chamber—would bring them into too close a proximity to debates. We should allocate a suitable Gallery for the excluded hereditary Peers. I

1397
suggest that is a just acknowledgement of their status but would not cause difficulties with regard to debates of a particular nature that may take place.
I wonder about some of the drafting of the report which I consider to be imprecise. I recommend the noble Lord the Chairman of Committees to reconsider it, not necessarily to change the substance of what is in the report—unless my noble friend were to divide the House on his amendment—but to ensure that the drafting is precise. At the moment it is imprecise and that could lead to difficulties later. For example, paragraph 2(e) of the report states that a noble Lord could,
"book a table for four people not more than once a month in the Peers' Guest Dining Room".
However, the provision does not state that he has to attend the meal. He could book the table for a chairman and a managing director. I may be giving an exaggerated example but that is what the provision states, although I am sure that was not what was intended. If a privilege is to be granted in this respect, the wording should be precise. I do not know whether the noble Lord the Chairman of Committees is willing to reconsider some of the drafting of the measure, but if my noble friend were to divide on the major issue I would certainly support him.
Earl Ferrers: My Lords, during the passage of the Bill concern was expressed as regards what should happen to those hereditary Peers who would no longer attend the House I thank the Offices Committee and all those who contributed to the suggestions which I consider are kind, generous and respectable.
However, I was amused when the noble Lord, Lord Shepherd, said that the measure should be rewritten to state that if a noble Lord books a table he should partake of the meal. But if he does not like the food or feels sick, is Black Rod to turn him out? One can try to put too fine a point on these matters. Everyone knows what the measure intends.
I was sorry to note that the noble Lord, Lord Williams of Elvel, was a little ungenerous today. He has made many plausible arguments for bad cases, but today thought that he made rather a bad argument for a bad case.
Lord Williams of Elvel: My Lords, I thought that I was being rather generous. I accept that former Members of the House have made substantial contributions to this House. I was not trying to offend against that principle; I was trying to be generous.
Earl Ferrers: My Lords, the noble Lord and I have different ideas of generosity if he says that they should not sit on the Steps of the Throne.
In previous debates we were told that it was bad to be a hereditary Peer and that one should not sit in this House by virtue of heredity. One understands that argument. However, it is curious that the children of life Peers have the right to sit on the Steps of the Throne. I do not know whether the noble Lord, Lord Williams of Elvel, has a child. He probably has lots of
1398
them. I do not know whether the noble Baroness, Lady Jay, or the noble and learned Lord, Lord Williams of Mostyn, have children. All those who are violently against heredity nevertheless have the right for their hereditary sons, who are not Members of this place, to sit on the Steps of the Throne. Therefore, what is wrong with the suggestion of the Offices Committee that ex-Members of this House may sit on the Steps of the Throne? I believe that that is perfectly reasonable. If the noble Lord, Lord Williams of Elvel, says that if a Bill on fox-hunting is introduced in this House, the Chamber will be too crowded, I suggest that that is a good argument not to introduce a Bill on fox-hunting.
As I said, I believe that the present proposals are reasonable. However, the noble Lord the Chairman of Committees stated categorically that nothing which is not in the report should be included as a privilege. However, what would happen if noble Lords who wish to listen to a debate want to have a cup of tea? I suppose that they are probably not allowed to have a cup of tea. What would happen if they wish, in the vernacular, to go to the toilet, or, as your Lordships would say, go to the lavatory? Are they not allowed to do that because that is not mentioned in the provision? I presume that one takes that as read.
The Earl of Erroll: My Lords, with regard to sitting on the Steps of the Throne, we should not lose sight of how that tradition came into being. It was introduced to enable eldest sons to come to the House and learn about the tradition and the procedure of the House before they took up their seats. The noble Lord has said that they will no longer take up their seats. However, he has forgotten the by-election process and those 90 Peers who can be replaced. Therefore, it is right that those who show an interest in the place should come to the House to learn about its procedures. That was the reason eldest sons had the right to sit on the Steps of the Throne.
I realise that this courtesy has been extended to life Peers whose eldest sons will not necessarily sit in this House, although we understand that certain peerages have followed, as it were, a life peerage hereditary line. But leaving those aside, I see more logic as regards disbarring the eldest children of life Peers than as regards disbarring those possible future Members of this Chamber who happen to be excluded for the moment and for the interim.
Baroness Hooper: My Lords, I support the suggestions of the noble Lord the Chairman of Committees and the tone in which he made them. I disagree profoundly with the noble Lord, Lord Williams of Elvel. I do not believe that the suggestions are patronising, condescending or any such thing.
I remind your Lordships that there was a time when Members of the European Parliament were refused admission to the House of Commons on the grounds that they would swamp it. The House of Lords kindly allowed Members of the European Parliament admission rights and the use of certain facilities of the House. There was certainly no swamping in that case.

1399
I believe that there would be no swamping in the future. The suggestions of the committee should be fully supported by the whole House.
Lord McNally: My Lords, I am well aware that the two Front Bench members of the committee have gone along with these arrangements but, with characteristic generosity, the Leader of the Liberal Democrats said that if anyone felt impassioned about these decisions they should speak. I feel rather impassioned. I have listened to the speeches so far and it would seem that the best thing the committee can do is to remove the right of the eldest sons of life Peers to sit on the Steps of the Throne, because that is a clear anomaly.
The clearest statement I heard during the debates on the reform of the House was contained in the final speech of the Leader of the House, the noble Baroness, Lady Jay, who said, "Thank you and goodbye." I think that we are now slipping back from a commitment, not to reform a club, but to reform the second Chamber of Parliament. In these recommendations the committee is sending all the wrong signals to the outside watching world about how serious we are as regards truly reforming the second Chamber.
When the Conservative government abolished the GLC, there must have been members of that council who had given their lives to the governance of London and who felt deprived of the facilities of County Hall. But they went because that was the decision of the elected government. It would be far better for the hereditaries who have departed and, more importantly, far better for our commitment to a modernised, 21st-century second Chamber if we did not go down this slippery slope. I shall have few opportunities to vote today, but I can tell the noble Lord, Lord Williams, that I will be voting with him.
Lord Brooke of Alverthorpe: My Lords, I am one of those who feel that we should not simply express our gratitude to the departed Peers for the services they have given to the country but that we should do whatever we can in tangible terms to help them deal with the difficult transitional period through which they are going. I share the view that we should deal with them as best we can in a civilised fashion. Therefore, generally, I welcome the package before us.
However, I do not believe that the Offices Committee has got the balance quite right, particularly with the inclusion of paragraph 2(b). The qualifications that the committee has written into paragraph 2(b) are a fair indication that it is worried about the possible effect and consequences if paragraph 2(b) is put into practice. I think the committee has cause for some concern. A fair number of Peers are unhappy about the rest of the package. Being reasonable people, I suspect that they will live with it. However, I venture to suggest that they will not live with paragraph 2(b). If that is adopted, it will be a cause of continuing concern. I shall explain why.
There would be something of a case for former Peers to come in and sit on the Steps if we were not making any provisions whatever for them. I am speaking here
1400
to the Cross Benches. However, within the recommendations there is a provision that they will be permitted to go to a special place within the Gallery. I think that that is appropriate. That is also the place, I believe, for the eldest sons of life Peers. It is time that we moved to address that matter.
We should take note of the point made by the noble Lord, Lord McNally. We now have a new House. It is changing; it is moving broadly in accord with the wishes expressed by the people of this country who, in May 1997, opted for a quite significant change of direction. I do not wish to repeat many of the arguments we have had previously about the manifesto but, in so far as they affect this House, they were part of that change. If we are seeking to bring through the doors into the Chamber people who are neither life Peers nor exempted under the Act we have just passed, we are, in a sense, seeking to fly in the face of the will of that statute. We are trying to go backwards, as the noble Lord, Lord McNally, said. For those of us who want to make a success of this House, that is not the right thing to do.
Lord Campbell of Alloway: My Lords, I thank the noble Lord for giving way. Does he not realise that the House has been through a pretty rough time which has created a rather sad atmosphere? Does he really think, when we are trying to construct the new House—and have faith that we may be able to do so—that this kind of contribution is of any constructive value?
Lord Brooke of Alverthorpe: My Lords, I believe I am being constructive in my contribution. I have been here since we embarked upon the legislation and I have felt for those people who have been affected by it. I am seeking to ensure that we do our best by them, but, more particularly, that we do our best for the country also. I share the view that we are not necessarily representing the best interests of the people who have been asked to go. I have spent a lifetime dealing with people who have been made redundant. There is a balance to be struck in how we handle this matter. I hope that people will reflect on that. I look particularly to the Liberal Democrats to reflect on their position here. It is about moving to change the House. It is also about looking after, as far as we can, the best interests of those who have left. The balance at the moment is incorrect. I support the amendment to remove paragraph 2(b).
Baroness Darcy de Knayth: My Lords, I welcome what the Chairman of Committees said. I acknowledge also the thought and the work put into the report. The noble Lord, Lord Shepherd, spoke about clarity and the importance of having a designated Gallery so that one knows where one is going. Irrespective of whether the right of access to the Steps of the Throne is to be excluded now or at a later date, can some thought be given to guidance not only for excluded hereditaries who are wheelchair users—in a sense they are easier to see—but for those who are just too frail to get to the Gallery?
Lord Elton: My Lords, anyone would think that we were dealing with some sacred matter such as access to the steps to the sanctuary of a cathedral. We are talking about whether a number of people who used to work here should be allowed to sit in the Gallery and perhaps on the Steps of the Throne as well. That is the extent of the matter. It is not a great act of symbolism. In so far as it is, it does not show the grandeur of the history of the House; it shows our good manners towards those who used to work here.
Another matter on which your Lordships should perhaps reflect is that not all of those who have been dismissed from this House are particularly well off. Many of them live more than £100-worth of railway miles away from the House. They will not be paid to cover that ground because they will not be performing any public service by coming here. That will diminish the numbers coming to the House. I recognise too the acute sense of nostalgia and frustration they would feel were they to be sitting mute on those Steps on the edge of a debate they passionately wished to join. I do not think they would leap over the railings, as the noble Lord suggested. They might mutter. If so, they would be courteously removed by the attendant. We are straining after a gnat. This is a good report and it should be adopted.
Lord Randall of St Budeaux: My Lords, I support the noble Lord. Lord Elton. The first point is that I believe the committee has been very generous in putting the case. The second point is that I believe the comments of the Lord Privy Seal during Third Reading, recognising the contribution that the Peers had made, were right. Thirdly, as regards being patronising, that is a matter for the Peers who wish to attend to decide for themselves. Let us leave that matter to them. Fourthly, we do not want any elitist stances here. Everyone should be treated equally. That is what the word "peer" means. Finally, I shall be voting for the committee today.
Lord Monson: My Lords, I believe I am in order in changing the subject slightly and putting a practical question to the Chairman of Committees about paragraph 2(c) since there will be no other opportunity to do so. I know that I am not alone in being delighted that our excluded friends will be able to continue using the Library for research purposes. After all, many of them have served this House for several decades. I have one practical concern. If the phrase,
"except when the House is sitting"
is taken literally, it will mean that our friends will be spilling out of the Library at 2.29 p.m. on Mondays to Wednesdays and at 2.59 p.m. on Thursdays, getting tangled up in the Lord Chancellor's procession, and possibly accidentally impeding noble Lords in the Library who are putting the finishing touches to their speeches and so forth. From a practical point of view, would it not be wiser to request them to vacate the Library half an hour before the House sits?
Lord Swinfen: My Lords, I was very disturbed to hear on at least two occasions in this short debate that there should be differences between the treatment of the elder sons of life Peers and hereditary Peers. All Peers in this House are equal and should remain so. I would be extremely sorry if the right of elder sons of life Peers to sit on the Steps of the Throne was curtailed or done away with and it existed only for the elder sons of hereditary Peers. In my view, that would be quite wrong and utterly disgraceful.
I cannot agree with the noble Lord, Lord Williams of Elvel. It is very odd that the few Peers who are no longer in this House and who have served it well should not be allowed to sit on the Steps of the Throne whereas Irish Peers, who have not even had the right, in recent generations, to sit in this House, would still have the right to sit on the Steps of the Throne.
The Lord Bishop of Derby: My Lords, concern has been expressed about continued use of the Crypt Chapel by the excluded hereditary Peers. If I am not out of order, will the Chairman of Committees be able to clarify the position?
Lord Strathclyde: My Lords, I shall be very brief. I say at the outset that I wholly support the committee's report. I was a member of the committee and I endorse entirely the words of the Chairman of Committees.
As the House knows, we had an enormous amount of discussion on this matter during the passage of the Bill. The noble Baroness the Leader of the House quite rightly said at that time that it would be better for the issue to be dealt with by a committee of the new House, and that has been done. In that context, I thank and congratulate members of the Government Front Bench who were members of the committee for their very constructive and positive approach to this matter. That is one of the reasons why we have this report before us.
Many suggestions were made to the committee. Many wanted a far more generous package than is proposed and others wanted some restrictions. We have a very useful compromise. I put it to the noble Lord, Lord Shepherd, that the measure should be taken in a spirit of compromise.
As regards the amendment, the noble Lord, Lord Williams of Elvel, put three points. First, he said that the provision was inappropriate because too many people might wish to arrive at the same time. One of the effects of the House of Lords Act 1999 is that it has removed entirely the right of over 600 heirs to sit on the Steps of the Throne. When they had that right very few of them used it. I believe that the noble Lord would find, as my noble friend Lord Elton said, that very few Peers would take up the new right. If too many of them did so they would go to the Gallery that would be pointed out to them by the attendants.
The noble Lord said that this provision was impractical, and I have dealt with that point. He said that it was also patronising. I am not quite sure whether the noble Lord felt patronised or that the

1403
Peers would feel patronised. If Peers feel patronised by the decision of this House to allow them to sit on the Steps of the Throne then they do not need to take up that particular privilege.
I believe that paragraph 2(b) was extremely well drafted. It says that the measure is on an experimental basis only and that if any inconvenience is caused to the House the provision would be reviewed immediately. It also states that in any event the matter will be reviewed before the end of the current Session. The provision is not so much an act of generosity but one of courtesy.
Given the safeguards that are in place, I give my wholehearted support to the committee's report. I hope that the House will reject the amendment of the noble Lord, Lord Williams of Elvel.
Lord Rodgers of Quarry Bank: My Lords, my noble and rebellious friend Lord McNally very fairly pointed out that he was expressing his own opinion. I believe he made it clear to the House that it was not the view adopted by representatives from these Benches who served on the committee. Perhaps I should simply restate that view and say that those of us who supported the proposal then support it now.
Those of us who look back on the long debates on the Bill in Committee remember that there were those who believed that the departing Peers should have unlimited club rights and others who thought that they should have no access whatsoever. I believe that we have reached a fair and reasonable compromise, as the noble Lord, Lord Strathclyde, has said.
There is another matter. There are seven recommendations of substance. Recommendations (g) and (h) simply facilitate the others. Four of the recommendations are very clearly time-limited. As regards the remaining three, including the matter which has raised controversy today and the right to sit on the Throne, the position will be reviewed at the end of the current Session.
Noble Lords: Oh!
Lord Rodgers of Quarry Bank: My Lords, I ask noble Lords to forgive me. I do not believe that anyone aspires to that and I certainly do not myself. In those circumstances we can look at these matters again.
I say to the noble Lord, Lord Williams of Evil—
Noble Lords: Oh!
Lord Rodgers of Quarry Bank: My Lords, I call that a dyslectic mistake! There is an argument for saying that the sons of Peers should not sit on the Steps of the Throne. That is a reasonable argument. Were that the proposition before the House today I would find myself very tempted to support it. But that is not so. The proposition is a simple one that on an experimental basis there should be the right to sit on the Steps of the Throne. It is a reasonably fair
1404
proposition and I hope that Members on all sides of the House will be able to support the Motion moved by the Chairman of Committees.
The Chairman of Committees: My Lords, for the sake of brevity I hope that your Lordships agree that it is not necessary for me to reply to every contribution in this debate. Indeed, some of them do not call for a reply and speak for themselves.
Perhaps I may first thank noble Lords who have supported the committee's proposals, including the noble Lords, Lord Strathclyde, Lord Rodgers of Quarry Bank, and others in the House. Perhaps I may reply as briefly as possible to some of the specific points. I am grateful to the noble Lord, Lord Shepherd, for informing me beforehand that he was going to raise the question of a designated Gallery. That was considered by the committee. It was clarified when this proposal was decided on. It was indicated through the usual channels and the Convenor that the nature of the proposal was not for a designated Gallery. It was felt that it was better to put the matter in the way in which it appears in the report. However, I believe that I can offer a suggestion to noble Lords in response to the point made by the noble Lord, Lord Shepherd. If we find that there is any difficulty in administering the proposals—Black Rod has assured me that he should not have any difficulty in applying them—we can always look at the matter again and consider whether a designated Gallery would be a more appropriate course. If we were to leave the matter open in that way, we could, of course, feel free to return to it.
Lord Williams of Elvel: My Lords, I am sorry to intervene. Is the noble Lord the Chairman of Committees saying that, if there is to be a designated Gallery, my noble friend's suggestion that we could remove the right to sit on the Steps of the Throne is acceptable?
The Chairman of Committees: My Lords, I am afraid that I am not going so far as that. I am going only so far as the indication I have just given; namely, that if there was any difficulty about an unspecified Gallery, we could always give further consideration to the suggestion of the noble Lord, Lord Shepherd.
Lord Shepherd: My Lords, what I was trying to establish was a Gallery to which Members who have been removed from this House could go as a matter of right. They would not have to apply to Black Rod or to one of the attendants and say, "Where do I sit?" My suggestion to the House was that those Members should have a designated Gallery similar to the one we have, as Members of this House, in the Commons. I believe that that is what those Members are entitled to, and to come here on pain of behaviour is unacceptable.
The Chairman of Committees: My Lords, I think that the noble Lord, Lord Shepherd, expressed himself perfectly plainly on the previous occasion. I think that

1405
noble Lords fully understood his proposal. I do not believe that I can take the matter any further this afternoon.
The noble Lord, Lord Shepherd, also questioned the use of the term `experimental basis." As was indicated by the noble Lord, Lord Strathclyde, those words were included as a means of reassuring the House. It also goes to the point that I made at the start of our debate— other noble Lords have referred to this—that if there is any difficulty, immediate steps will be taken by the Offices Committee to look at the matter. I shall invite the committee to address it immediately. Indeed, to move a little further than that, I would not hesitate to suggest to the Offices Committee that, if there were any real inconvenience to noble Lords, the privilege should be suspended pending immediate review. That course would always be open to us to recommend. I hope that that provides some reassurance.
I turn now to the point made about dinners in the absence of the sponsoring departed Peer. That simply would not be allowed. As your Lordships know, our staff always act with great discretion and appropriate steps would be taken to ensure that anyone without an accompanied, authorised host or hostess, would not, in those circumstances, be admitted. Our staff act with discretion and I believe that we can rely on their common sense.
I am grateful to the noble Earl, Lord Ferrers, for his remarks in support of the recommendations of the committee. Common sense and discretion also apply to any difficulty that might arise with visiting departed Peers and as far as concerns the use of our lavatories, I am sure that that matter would not inconvenience your Lordships too much.
The noble Lord, Lord McNally, referred to the question of looking backwards. I fully understand the noble Lord's point and I believe that there were one or two murmurings of support around the Chamber when he spoke. However, I do not think that he should be disconcerted on that matter. In the discussions and debates that took place in your Lordships' House, it was perfectly well forecast and clearly understood that this House would return to these matters in the new Session of Parliament. I would suggest therefore that it is not a matter of looking backwards, but rather of dealing with something which was foreseen. Indeed, we were looking forward in the previous Session of Parliament to the possibility of considering these matters.
The noble Baroness, Lady Darcy de Knayth, raised a practical point about possible difficulties for some of the more frail visitors gaining access to the Gallery. I shall look into that, but I am sure that a way will be found to deal satisfactorily with that point, again in accordance with the exercise of discretion. I can assure the noble Baroness that we will not overlook the point.
Again, the same considerations, although on a different matter, apply in relation to the point raised by the noble Lord, Lord Monson, about the timings. It will be made clear to departed Peers that what we are thinking of on days when the House is sitting is making
1406
use of facilities in the Library in the mornings. I am sure that discretion will be exercised to ensure that there are no collisions of the unfortunate kind envisaged by the noble Lord as possibilities.
The right reverend Prelate the Bishop of Derby raised the question of the Crypt Chapel. I am grateful to him for forewarning me that he proposed to raise that point. I am sure noble Lords will appreciate that this is not a matter that arises from the report before us. Furthermore, it is not a matter within the responsibilities of your Lordships' House, but rather concerns in part another place. There are also other considerations. It is one of those places in which a Royal peculiar applies—if that is the right term. I shall let the right reverend Prelate know in greater detail, as necessary. about any further considerations on the matter, I hope that that will provide him with some reassurance.
I believe that I have probably dealt with the specific points but I wish to say a few words on the amendment of the noble Lord, Lord Williams of Elvel. A good deal of consideration has been given this afternoon to this matter. First, I would remind noble Lords of the two categories of Peer who are granted this privilege, and have been for very many years: retired Bishops and Bishops who in due course will become Members of this House; and also Irish Peers, as has been mentioned by more than one noble Lord. I do not think that it is right— was in the mind of the Offices Committee and the usual channels—to create more anomalies than are necessary. If the amendment of the noble Lord, Lord Williams of Elvel, were to be agreed to, it would create a further anomaly.
The other side of the question which the Offices Committee considered was whether, if the committee did not recommend that departed Peers should have the right to sit on the Steps of the Throne, we should also abandon the anomaly of the right of the Irish Peers and retired Bishops to do so. It considered whether, in the circumstances, that would be a very harsh course to take. It was not a matter that was overlooked. It was carefully considered and the Offices Committee, with the assistance of others whom I have mentioned to noble Lords, came forward with this proposal.
As has been indicated, we can always return to any of these matters at any time if difficulties are found. My recommendation on behalf of the Offices Committee to your Lordships is simply this: we have before us a complete set of proposals. Why not see how it works out? My feeling is that it will not cause us bother. If it does, we shall deal with it.
Lord Williams of Elvel: My Lords—
A noble Lord: Withdraw!
Lord Williams of Elvel: My Lords, I am not going to withdraw. The noble Lord the Chairman of Committees says that he is against anomalies. I should have thought that paragraph 2(b) introduces another anomaly. I am not arguing about the rights of sons or grandsons of Peers, or of Irish Peers or retiring

1407
Bishops. I am arguing about the single anomaly that Members of this House who have been excluded by virtue of the House of Lords Act, which was passed by Parliament, should be given this privilege.
The noble Lord the Chairman of Committees said that the proposal is experimental. That, of course, is what William Pitt said about income tax. Imagine how, having granted this privilege and there is then inconvenience to the House, the Offices Committee meets and says, "We are now taking it away. You must surrender your passes—your second-class citizen passes—and you cannot come and sit on the already crowded Steps of the Throne". That is it; summary dismissal.
We are dealing with one of the great Houses of Parliament. This is not just a frivolous discussion about club rights. I believe that my noble friend Lord Shepherd made a serious point—that those who can sit on the Steps of the Throne, whoever they are, will mingle with Members of this House. I have heard all the arguments. I am grateful to the noble Lord, Lord McNally, for his support. It was unexpected but nevertheless welcome. I wish to test the opinion of the House.
4.31 p.m.
On Question, Whether the said amendment shall be agreed to?
Their Lordships divided: Contents, 76; Not-Contents, 122.

Division No. 1

CONTENTS

Annan, L.

Howells of St Davids, B.

Archer of Sandwell, L.

Hoyle, L.

Ashley of Stoke, L.

Hughes of Woodside, L.

Bach, L.

Hunt of Kings Heath, L.

Bassam of Brighton, L.

Hylton, L.

Brooke of Alverthorpe, L.

Irvine of Lairg, L. (Lord Chancellor)

Burlison. L.

Carter, L.

Jay of Paddington, B. (Lord Privy Seal

Cledwyn of Penrhos, L.

Clement-Jones, L.

Jenkins of Putney, L.

Cocks of Hartcliffe, L.

Laming, L.

Dahrendorf, L.

Levy, L.

Davies of Oldham, L.

Lipsey, L.

Dholakia. L.

Lockwood, B.

Donoughue, L.

McIntosh of Haringey. L.

Dormand of Easington, L.

McIntosh of Hudnall,B.

Dubs. L.

McNally, L.

Evans of Watford, L.

Massey of Darwen, B.

Farrington of Ribbleton, B.

Methuen, L.

Faulkner of Worcester, L.

Morris of Manchester, L.

Filkin, L.

Nicol, B.

Gavron, L.

Prys-Davies, L.

Gladwin of Clee, L.

Puttnam, L.

Goldsmith, L.

Ramsay of Cartvale, B.

Goudie, B.

Rendell of Babergh,B.

Gould of Potternewton, B.

Richard, L.

Graham of Edmonton, L.

Roll of Ipsden, L.

Hardy of Wath, L.

Sawyer, L.

Harris of Haringey, L.

Scotland of Asthal, B.

Harrison, L.

Serota, B.

Haskel, L.

Shepherd, L.[Teller]

Hayman, B.

Shore of Stepney, L.

1408

Simon, V.

Varley, L.

Stallard, L.

Wallace of Saltaire, L.

Stone of Blackheath, L.

Warner. L.

Strabolgi, L.

Wedderburn of Charlton, L

Thornton, B.

Whaddon, L.

Turner of Camden, B.

Williams of Elvel, L.[Teller]

Uddin,B.

Williams of Mostyn, L.

NOT-CONTENTS

Aberdare, L.

Lucas, L.

Ackner, L.

Luke, L.

Allenby of Megiddo, V.

McColl of Dulwich, L.

Anelay of St Johns, B.

Mackay of Ardbrecknish, L.

Astor of Hever, L.

Mackay of Drumadoon, L.

Avebury, L.

Mayhew of Twysden, L.

Baldwin of Bewdley, E.

Miller of Chilthorne Domer, B

Beaumont of Whitley, L.

Molloy, L.

Biffen, L.

Molyneaux of Killead, L.

Blaker, L.

Monson, L.

Blatch, B.

Montagu of Beaulieu, L.

Blood, B.

Montrose, D.

Bowness, L.

Moynihan, L.

Brabazon of Tara, L.

Murton of Lindisfarne, L.

Bradshaw, L.

Naseby, L.

Brightman, L.

Northbrook, L.

Buscombe, B.

Northesk, E.

Butterfield, L.

Norton of Louth, L.

Butterworth, L.

O'Neill of Bengarve.B.

Campbell of Alloway, L.

Onslow, E.

Chalfont, L.

Oxfuird, V.

Chichester, Bp.

Pearson of Rannoch, L.

Clark of Kempston, L.

Randall of St Budeaux, L.

Colville of Culross, V

Rawlings, B.

Colwyn, L.

Reay, L.

Cope of Berkeley, L.

Renton, L.

Courtown, E.

Rodgers of Quarry Bank, L.

Craig of Radley, L.

Rogan, L.

Crathorne, L.

Rosslyn, E.

Crickhowell, L.

Russell, E.

Cuckney, L.

Ryder of Wensum, L.

Darcy de Knayth,B.

St John of Fawsley, L.

Derby, Bp.

Sandberg, L.

Elliott of Morpeth.L.

Seccombe, B.

Elton, L.

Selborne, E.

Erroll, E.[Teller]

Sharman, L.

Falkland, V.

Shaw of Northstead, L.

Feldman, L.

Simon of Glaisdale, L.

Ferrers, E.

Skelmersdale, L.

Flather, B.

Soulsby of Swaffham Prior, L.

Gardner of Parkes, B.

Strange, B.

Geddes, L.

Strathclyde, L.

Geraint, L.

Swinfen, L.

Glentoran, L.

Taverne, L.

Goodhart, L.

Tenby, V.

Hanham, B

Thomas of Gwydir, L.

Harris of Greenwich, L.

Thomas of Swynnerton, L.

Henley, L.[Teller]

Thomas of Walliswood, B.

Higgins, L.

Thomson of Monifieth, L.

Hooper, B.

Tope, L.

Howe. E.

Tordoff, L.

Hunt of WirraL,L.

Trefgarne, L.

Hylton-Foster, B.

Walton of Detchant, L.

Jenkin of Roding, L.

Watson of Richmond, L.

Jenkins of Hillhead, L.

Weatherill, L.

Kimball, L.

Wigoder, L.

Kingsland, L.

Wilberforce, L.

Kirkham, L.

Wilcox, B.

Laird, L.

Williams of Crosby, B.

Listowel, E.

Windlesham, L.

Liverpool, E.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.
On Question, Motion agreed to.

French Ban on British Beef
4.41 p.m.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Baroness Hayman): My Lords, with the leave of the House, I should like to repeat a Statement which has been made in another place by my right honourable friend the Minister of Agriculture. The Statement is as follows:
"Although there has been no change in this Government's policy on beef exports, in view of the statement made by the French Government last night, I think it right to inform the House where matters now stand.
"Late last night, just after 11 o'clock in Paris, the French Prime Minister announced his Government's decision on how they intend to proceed in the light of the new advice from the French food safety agency, AFSSA, which they received on Monday, 6th December.
"The French statement said in effect that, even though the risk is no more than hypothetical, the French Government are not ready to lift their ban now, but wish instead to press for further work on testing for BSE, and on labelling of British beef and beef products, on the basis of EU regulations, so that consumers can make an informed choice.
"Her Majesty's Government are surprised and deeply disappointed that the French have chosen to take this position. It comes after many weeks of intensive talks from which we received the impression that we had answered all questions and met all the concerns from the French side.
"My right honourable friend the Prime Minister immediately spoke to M. Jospin last night and said that he believed the position the French were taking up was totally wrong, that it flew in the face of science, and was against the law. I wholly endorse that view.
"I have spoken to the Commissioner, David Byrne, and called on him now to proceed immediately with the court action against the French. Mr Byrne has confirmed that he will do so. He will ask next Tuesday's meeting of the full Commission to issue the legal opinion which is the last step before the court case commences. Mr Byrne has already stated publicly that he, too, finds the French Government's refusal to lift the ban deeply disappointing. The Commission have worked as hard as we have to resolve this matter through rational discussion. Mr Byrne sees no alternative now but court action.
"Some people are suggesting we were wrong to think we would make progress with the approach we adopted when this problem first arose in October. I profoundly disagree. I have no doubt we were right to engage in discussion as we did. I believe too that, through the clarification and assurances we gave about how we are operating the date-based export scheme, we responded in full to the points which the French Government raised with us, and gave them the basis they needed for lifting the ban.
1410
"I well understand the anger which British farmers feel at this impasse. It is a poor reward for the massive efforts which British beef farmers and traders have been making to rebuild their industry and rebuild public confidence in their product. British beef is as safe as beef from anywhere else in Europe. That is not just my view. It is the unanimous view of the Commission's senior scientific advisers.
"I can understand the frustration felt more widely around the country. The French action is astonishing. They have delivered a blow to the credibility of European law. But the French are on their own in taking this defiant approach. I assure the House that this Government are working by all means possible to ensure that the French Government honour their Community obligations and lift the ban".
My Lords, that concludes the Statement.
4.45 p.m.
Lord Luke: My Lords, I thank the Minister for repeating the Statement. If I were a farmer, I should be absolutely amazed at the total failure of the Government to persuade the French to obey European law. I should also be extremely unhappy at the way in which this whole matter has been handled by the Government. What comfort is it to a British farmer to hear the Minister say that France is isolated in Europe when he cannot sell his produce there?
The Statement says that the Minister telephoned Commissioner Byrne and asked him to proceed immediately with legal action against France. Why was that not done in parallel with the discussions and concessions made in the past few months? Legal action will take months, or even years. Then there is the strong likelihood of an appeal. It looks as though the French farmers will have a free run for quite a long time to come.
In another place, speaker after speaker said that the Opposition had no policy except to advocate a trade war with France. What absolute nonsense! A call to ban imports of French beef to this country on the grounds of the contamination caused by feeding animals human sewage is both legal in European law and is by no stretch of the imagination the commencement of a trade war.
Perhaps I may ask the noble Baroness some further questions concerning this matter. In parallel with agreeing to the commencement of legal proceedings by the EU, will the Prime Minister raise this whole matter at the summit at Helsinki? When did the Minister, Mr Nick Brown, last meet his opposite number in France, Mr Glavany? We know that he spoke with him on the telephone this morning. How could the Government be surprised, as described in the Statement, by this morning's French action when it was clearly flagged up by the French food safety agency's refusal on Monday to ratify the protocol of understanding between the French and British governments? Will the Minister consider how well the French Government look after, by fair means or foul,

1411
the interests of French farmers compared with the uncomprehending attitude of our own Government towards our beleaguered farmers?
Will the Minister of Agriculture, Fisheries and Food advise farmers on how to seek financial compensation from the European Court for the damage that French lawbreaking has caused them? Is France fit to take over the presidency of the European Union in July 2000 when it is likely to be under arraignment at that time for breaking EU law? I echo what my right honourable friend Michael Howard said in another place this morning. When will the Government start standing up for Britain in Europe?
4.48 p.m.
Baroness Miller of Chilthorne Domer: My Lords, we on these Benches are appalled by the French decision, which is clearly political and not based at all on science or on any legal position. It must be based on making sure that French farmers receive a present from their government for Christmas in a quite inappropriate way.
I agree with the noble Lord on the Conservative Front Bench that we must demand quick legal redress from the European Union. In this case, it is extremely fortunate that we have the EU on our side—as indeed it should be—to take such action on our behalf.
As to compensation, can the Minister inform the House what advice the Government will give farmers and whether they will address this matter on their behalf in a collective way? We believe that a trade war would be a disaster for the sheep and lamb industry and other sectors. As many farmers are involved in sheep, lamb and beef, we do not believe that it would be in their best interests to widen this dispute into a trade war. Although that might appear to be a nice knee-jerk reaction, it would not be in the best interest of our farmers in the long term.
It is clear that the French have no support for their action among other European countries. I echo the noble Lord's question: how can the French assume the presidency of the European Union in the second half of next year given their illegal stand in this case? Given today's dreadful news for farmers, can the Minister inform the House of the outcome of the beef summit hosted by the Prime Minister last week? What news is there about other countries which still do not take our beef but should be persuaded to do so?
Baroness Hayman: My Lords, the decision taken by the French Government is surprising because the science has been gone into, and studied in enormous detail again, at Community level. The concerns raised by the French food agency have been looked at by the scientific committee of the EU in great depth. The AFSSA judgment on the memorandum of understanding was in no way a clear-cut basis for this decision. The length of time taken by the French Government in debating it reflects that they had not received clear advice from their food standards agency. I also say to the noble Lord—it is important
1412
that he understands it—that no concessions have been made in this area. With the support of the Commission, we have tried to deal with the doubts raised about the date-based export scheme by explaining its provisions in great detail to the French.
A question was raised as to whether the Government had delayed in this area. The Commission has been extremely supportive. It is not a matter of initiating legal action now; it was initiated by the Commission on 17th November and has been proceeding in parallel with the discussions that have taken place. As I said in repeating the Statement, Commissioner Byrne asked on Tuesday that the last step be taken by the full Commission in terms of issuing the legal opinion. Some news has come in since my right honourable friend spoke in another place this morning. I understand that Commissioner Byrne has asked that the French be given only five days to respond before the case goes to court. As I am sure noble Lords are aware, that is a very short timeframe in this context.
I was asked whether this matter will be on the agenda at Helsinki. Certainly, it is not on the agenda in any formal sense. We are not now in a negotiating situation. Sadly, we are in a position where the law must take its course. This is not a bilateral dispute between us and the French but a matter where the French are isolated in Europe, and it is for Europe to take the appropriate action to ensure that the French obey the law.
The noble Lord asked me exactly when my right honourable friend had last seen, rather than spoken to, Mr Glavany, which was only a matter of hours ago. I believe that it was at the meeting of EU agricultural Ministers in the third week of November. A good deal of peripheral comment has been made to suggest that there has not been communication between Her Majesty's Government and the French Government over the past weeks in trying to resolve the situation. Throughout there has been a great deal of communication at all levels by my right honourable friends the Prime Minister and the Minister of Agriculture and officials.
We understand the deep disappointment that will be felt by farmers in this country. The question of compensation has been raised. It is possible for court action to be pursued, and those concerned must do that on an individual legal basis. But we are working from a position where we must rebuild the market for British beef abroad on a base that has not existed while the export ban has been in place. That task will take some time. There are 13 countries within Europe which accept our beef, and the Germans have today reiterated that they are putting in place the legislative process to do so.
The noble Baroness asked specifically about the Prime Minister's beef breakfast. At that meeting it was agreed that we would take several measures. One of them is to ease the cost of regulation on the meat industry by pegging charges by the Meat Hygiene Service this year and ensuring that they do not rise next year by more than the rate of inflation. We shall have

1413
a new drive through embassies abroad in all target countries. A senior member of the British embassy will co-ordinate the effort to get the ban lifted or to open up the market to British beef. My ministerial colleague Joyce Quin will lead a new team of MAFF veterinary experts and industry representatives to every country we regard as a priority for lifting the ban. We shall work with the Meat and Livestock Commission in this area. It is through that painstaking work, not by initiating a trade war within Europe, that we shall rebuild the market.
I was fascinated to hear the noble Lord's exposition of policy. He appeared to suggest that we should put ourselves in exactly the same position as the French: isolated in Europe and introducing a ban on French beef under Article 36 in a way that is completely illegal. As the president of the National Farmers' Union said when referring to the idea put forward by the Leader of the Opposition in another place, that idea is illegal. We export a good deal of food into Europe and to adopt tit-for-tat measures is not the answer.
This is a very unhappy situation and one against which we must work. Luckily, we have the full support of the Commission and our partners in Europe in so doing.
4.58 p.m.
Lord Marlesford: My Lords, first I declare an interest as a dairy farmer. I express some sympathy for the noble Baroness for having to repeat such a Statement. Surely, no one can have been surprised that the French should decide to do this. Equally, is it not astonishing that even now the Minister says that he profoundly disagrees with the suggestion made by some that the Government were wrong to believe that they could make progress with the approach that they adopted? It was quite obvious that they would not do so. Is it not time to face the basic fact of political life that the French Government have no more intention of allowing British beef into France than Sinn Fein/IRA has of handing over its stock of Semtex?
Baroness Hayman: My Lords, I believe that the noble Lord's last comment is singularly inappropriate in the circumstances. All of us hope and believe that the progress which has been made in Northern Ireland will continue and come to fruition. On the bona fides of the French Government, I believe that we have taken the appropriate and correct course in trying to rebuild confidence in the safety of British beef. Considering how much support we have had within Europe, both scientifically and in terms of the legal basis of the French action, it is surprising that they have not behaved as they should behave as members of the Community and obeyed Community law. Just because we have not been successful at this point in persuading them to act legally does not mean that it was not correct to try to do so.
Lord Hylton: My Lords, I was glad to hear the Minister refer to the urgency of rebuilding British beef exports. I declare my interest in farming matters. Does the noble Baroness agree that three things are now
1414
necessary? The first is to increase the number of slaughterhouses in this country which are licensed to export beef and other meat products. I believe that there are only two at present.
Secondly, will she facilitate the export of whole carcasses and of calves for rearing in other countries? Will the noble Baroness also do everything possible to encourage the export of British stock for breeding both in the European Union and the rest of the world?
Baroness Hayman: My Lords, the underlying tenor of the noble Lord's remarks is correct: that we have a narrow range of products available for export under the date-based export scheme. We want to make a start with those products, and then expand the scheme. There is a set process for going into a wider range of products which could be exported. I believe that we would all like to see progress along those lines.
The noble Lord is correct in saying that there are only two slaughterhouses licensed at present under the date-based export scheme. We would wish to see the number increased, but in response to an increasing market demand because of the success of marketing British beef abroad. That is why the initiative, since the meeting of my right honourable friend the Prime Minister with industry leaders, to seek to persuade other countries to lift their ban or, when they do not have a ban, to facilitate the export of goods is tremendously important.
Lord Haskel: My Lords, the noble Lords, Lord Luke, and Lord Marlesford, seem to be criticising the Government for entering into negotiations rather than banning immediately the sale of French goods in this country. That is ridiculous. If the Government had not entered into negotiations, noble Lords would be criticising the Government—in my view rightly—for not entering into negotiations. The Government are right to enter into those negotiations.
Baroness Hayman: My Lords, I am grateful for those comments. My noble friend is right. I do not believe that it would have reassured potential export markets throughout the world if we had not been willing to put forward for scrutiny and examination the safety of our beef and the strength of the date-based export scheme. To have that scheme open and transparent, and examined again and endorsed at a European level by scientific experts, can only be of advantage as regards the long term export market.
Lord Biffen: My Lords, does the Minister accept that a situation as fraught as this inevitably leads to recrimination? However, there comes a point when one seeks some solace from this miserable affair. Is the noble Baroness encouraged by the growing significance now given to the idea of origin marking in beef, and on a wider extension into other agricultural products generally? Are the French requests on origin marking significantly different from those which the British Government have in mind? Does she look forward to the day when there will be sufficiently

1415
widespread origin marking to enable people in this country to choose British goods on the basis of their judgment?
Baroness Hayman: My Lords, the noble Lord asks an interesting question. We have never wanted to export British beef by stealth. There is nothing that the British beef industry has to hide. We have no concerns about consumers anywhere in the world knowing what they are buying. We believe that such transparency is to everyone's benefit.
Interesting trade issues come into the labelling of country of origin. That has been discussed at an international and European level. Progress is being made within Europe in terms of a beef labelling regime which I believe would be in everyone's interest. Great concern has been expressed widely, and in your Lordships' House, about misleading labelling. It can sometimes mean British consumers buying pig meat products marked as produced in the United Kingdom which come from imported Danish or Dutch pigmeat. We are tightening up on that aspect of labelling. I agree with the noble Lord that, for a range of reasons, including the very enhanced animal welfare standards and the very high safety standards for meat we have in this country, many consumers want to know exactly what they are buying and where it is from.
Lord Walton of Detchant: My Lords, in sharing the concern expressed by many noble Lords, I first declare an interest. My son is a farmer and president of the Berwickshire branch of the National Farmers' Union; and I served on the Southwood working party on bovine spongiform encephalopathy which reported to government in 1989.
I make three scientific points. First, beef cattle from which beef for export is being derived are no more than three years old. There has not been a single case of bovine spongiform encephalopathy in cattle under three years of age reported in the past few years.
Secondly, since the regulations were introduced many years ago to ban human consumption of what are called the Southwood offals and, more recently, since regulations were introduced, to remove brain, spinal cord and other nervous tissue from beef, the chances of any transmission of an agent are negligible. In fact, transmission experiments carried out have demonstrated that there is no way in which muscle can transmit the agent of scrapie or of bovine spongiform encephalopathy.
Is this not a case where the French Government have been very badly advised by their scientists and food standards agency? One can only confirm that on all scientific grounds British beef is the safest in the world.
Perhaps I may follow that up by referring to the point made by the noble Lord, Lord Hylton. Will the Government take steps to increase the number of abattoirs capable of removing the spinal cord, brain and other nervous tissues from beef? Finally, is beef
1416
now being exported to many other countries across the world which originally banned British beef, other than those in Europe?
Baroness Hayman: My Lords, the Government are keen for more abattoirs to participate in the date-based export scheme. It is not for us to set up the abattoirs but to license them if they meet the conditions. We shall be happy to deal speedily with applications from a growing number of abattoirs.
Again, that leads to the issue of taking the argument forward—it is often best made by scientists and
veterinarians—to third country potential importers. We have nothing to hide in terms of the safety of our beef and its origins.
On the noble Lord's exposition on the scientific situation, he is right. The noble Lord is always listened to with great respect in your Lordships' House. I would hope that perhaps the French Government might listen to him as well.
Lord BorrieMy Lords, can the Minister say more about the legal proceedings now beginning? For example, will it be possible for the Commission—it is taking the proceedings on our behalf—through interim measures to force the French Government to lift their ban and ensure some amelioration of the present position, or to negotiate further towards a settlement of the legal proceedings? Awaiting a final decision and possible appeal will involve a much longer period of uncertainty for our farmers.
Baroness Hayman: My Lords, the fact that the proceedings could be drawn out for a long time has made us anxious to try and reassure the French, not by giving concessions and not by negotiations, but by explaining in detail exactly the provisions of the date-based export scheme. We want to resolve the problem without recourse to the courts.
We have been assured by the Commission that it is speedily proceeding through the different stages necessary in referring the case to the court. We are discussing the possibility of interim relief with the Commission, which is actively considering it. We are all looking at how the proceedings can be expedited, and the Commission is in no doubt of the need to obtain a speedy resolution.
Lord Soulsby of Swaffham Prior: My Lords, everyone must he disappointed about the news from the French Government, especially when all our efforts to control BSE and deal with the difficult problem have been open to detailed scrutiny for many months. I understand that the French Government made their decision on scientific grounds. Can the Minister identify the specific grounds and make them public? Where do the problems lie between the French scientists and ours who, together with others in the European Union, have judged our meat and its production to be entirely safe?
There must be an issue about why the French Government disagree with scientific opinion. I should like to know what is the hitch. What will they not

1417
accept that everyone else accepts? It may be that by examining that issue closely we can move towards agreement.
Baroness Hayman: My Lords, the communiqué which the French Government issued last night stated that they were not in a position to lift the embargo due to the lack of sufficient guarantees on the definition and implementation of the test programmes, which must be improved and enlarged. They state that to that end it appears necessary for the Commission to organise working meetings between scientific experts, notably British and French. Secondly, they mention the adoption of a Community legislative base ensuring traceability and compulsory labelling in Europe for British beef and British meat products. I do not know whether the noble Lord, Lord Soulsby, will consider those to be the scientific bases for which he asked, but those points were raised in the communiqué issued by the French Government.
Lord Monson: My Lords, I want to put two questions to the Minister. First, are the French continuing to prevent British lorries carrying British beef travelling across France to export markets in, say, Italy, Switzerland or Spain, as was the case earlier this year?
My second question has nothing to do with the noble Baroness's department. Would she, as a Member of this House, agree that the Refreshment Department—and I am pleased to see the noble Lord, Lord Colwyn, in his place—ought forthwith to cease buying French wine, French cheese and anything else French until this illegal ban is lifted? After all, plenty of excellent alternatives are available.
Baroness Hayman: My Lords, I am equally delighted that the noble Lord, Lord Colwyn, is in his place because he will have heard what was said by the noble Lord, Lord Monson, and will have taken cognizance of it. However, individual consumers will do as they will. We should not believe that this is a matter of supporting the exports of one country or another. It is much more important and wide-ranging; it is an issue of whether one member of the European Community obeys Community law. I do not believe that we should take the matter down to another level.
Secondly, I can reassure the noble Lord, Lord Monson, that the ban on transit through France was lifted some time ago.
Lord Pearson of Rannoch: My Lords, I join my noble friend Lord Marlesford in expressing regret that it is the noble Baroness the Minister who has had the unpleasant duty of reading out the Statement. I have one difficult question to ask her. 'We have heard so much about the Government's much vaunted charm offensive in the European Union, but does she agree that this episode proves that that charm offensive—at least with the French—has failed?
Furthermore, there are wider aspects to this unfortunate question in the background, in respect of which the Government's charm offensive is also failing. We have the saga of the withholding tax, which
1418
the Government have clearly failed to defuse. We also have the take-over directive, the droit de suite and the Corpus Juris all working their subtle way through the European system. Therefore, my second question to the Minister is: does not all that make the Government even more determined to stand up for legitimate British interests in the European Union when the time comes, continuing to use the veto on tax harmonisation, for instance, and invoking the Luxembourg compromise, which is at least legal, on the droit de suite, on the take-over directive and, if necessary, on Corpus Juris and on any other measures which are so damaging to the British national interest?
Baroness Hayman: My Lords, the Government will stand up for the British national interest and for legitimate British interests within Europe. As regards a charm offensive, I must say that the anti-charm offensive of the previous government left Britain isolated in Europe. Today, France is isolated and on this issue we have the support of all our fellow members and of the Commission.
Lord Graham of Edmonton: My Lords, will the Minister always bear in mind that the genesis of the problem lies in the failure of the previous government to take adequate action when BSE was discovered? The failure of the previous government has all along the line led to these difficulties. Will she take it from me that, speaking on behalf of no one in particular, I believe that the British people fully understand not only the frustration of the farmers and of the Government but also why we are in this mess? It is not the fault of this Government; it is the fault of the French Government. Ultimately, the genesis of the problem lies with the previous administration of the party opposite.
Baroness Hayman: My Lords, a previous speaker suggested that this was not the time for recrimination and, in general, that is my view. BSE has been a national tragedy. It has been a tragedy for our farming community and for 47 families and we still do not know how many others may have been affected. In those circumstances, and seeing the many ways in which the tragedy has manifested itself—and this is only one aspect of it—it behoves all of us to have a little humility in asserting that people are to blame for one particular episode.

Nuclear Safeguards Bill [H.L.]
15.18 p.m.
Lord McIntosh of Haringey: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the Order of Commitment of 30th November be discharged and that the Bill be committed to a Grand Committee.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

Limited Liability Partnerships Bill [H.L.]
5.19 p.m.
Lord McIntosh of Haringey: My Lords, I beg to move that this Bill be now read a second time. The concept of a Limited Liability Partnership Bill has received a great deal of close attention before being put to the House today. The measure was proposed by the previous administration, who set out the principles of a limited liability partnership in a consultation document at the end of their term in office. There was an overwhelming response to that document in favour of the introduction of limited liability partnerships in Britain.
This Government agreed with the inherent merit of the proposal, and in September 1998 a Limited Liability Partnerships Bill was published in draft for the first time. It received careful scrutiny from consultees, particularly professionals such as lawyers, accountants, architects, actuaries and surveyors, and also academics, trade associations and those representing the interests of potential investors, customers and suppliers.
The process was further refined in the new pre-legislative scrutiny process, which was undertaken by a committee of the other House. This proved to be a valuable contribution to the evolution of the Bill. A revised draft was published for information in July, and this is the version before the House today. There is little doubt from the consultations that this measure is something which would be warmly welcomed by the business community, but I also want to emphasise that we believe we have struck an appropriate balance between their interests and those of customers and suppliers who are potential creditors.
Perhaps it would be helpful to understand the evolution of the Bill if I briefly touch on the context in which it originally arose. In 1996 the Department of Trade and Industry published for consultation an authoritative investigation by the common law team of the Law Commission into the law of joint and several liability, a particularly complex area of common law. The report looked at the problems joint and several liability causes for professional defendants and in particular the fact that a particular defendant may be held liable for the whole amount of any damage suffered by the plaintiff, notwithstanding that other wrongdoers were also involved.
Overall the report concluded strongly against reform, the main reason being—I recognise that this is a very simplified summary of the report's detailed conclusions—that change towards a system of proportional liability would favour the wrongdoer at the expense of the plaintiff. Although the remit of that investigation did not extend to the joint and several responsibility within partnerships, the DTI took the opportunity to consult on the distinct but related question of whether to amend the law in Britain to allow limited liability partnerships.
The concept of limited liability partnerships was already well known in the United States of America and, closer to home, Jersey was working on the
1420
implementation of its own legislation. As a result of the consultation we concluded in 1998 against reform of the law of joint and several liability, but restated our commitment to introducing limited liability partnerships.
More generally, it is perhaps surprising to note that there has been no fundamental change to business entities in Great Britain since 1907, when the Limited Partnerships Act was introduced. And, of all the different forms of entity available, it is only the company which offers limited liability for all its members. Many people have remarked on the oddity that the only way to obtain limited liability is by organisation as a company. There is no doubt that limited liability is a privilege, but if appropriate safeguards are in place why should a business have to organise itself as a company?
I turn now to some of the detail of the Bill, and that will allow me to set out more of the detailed thinking behind it. The limited liability partnership would be a new corporate vehicle to which large portions of the Companies Act will apply, but it would retain certain aspects of a partnership. The LLP would be a separate legal entity from its members and ownership would rest with the members. Members would be free to agree between themselves their relationship with each other and they would be treated as agents of the firm.
However, unlike a partnership, the liability of individual members would be limited. Clearly that limitation of liability brings with it certain responsibilities: a need to ensure that the client is fully aware of the nature of the organisation with which they are dealing, and a need to ensure against abuse. As a result, although the LLP offers limited liability to its members, each member will owe a duty of care to his or her clients and, in the event that they are negligent, they will be fully liable to the extent of their personal assets, although fellow "innocent" members would have limited liability. Since members would be agents of the limited liability partnership, that partnership itself would also be liable for the actions of its members. Claims could be made against a limited liability partnership to the full extent of its assets.
The Bill also requires that the name of an LLP be followed by the words "limited liability partnership" or the acronym "LLP", so as to advertise its status. Also the Bill requires that the LLP be registered at Companies House, along with a list of its members, and that these records be kept up to date. The intention is to apply a further tier of creditor protection by means of secondary legislation. We plan to require financial disclosure equivalent to that required of companies and also to provide that members of a limited liability partnership could be sued for wrongful and fraudulent trading. We also plan to ensure that members could be disqualified from being members of an LLP and directors of a company.
Regulations would also provide for dealing with insolvency and the winding up of the entity, and would include provision to deter the siphoning off of funds by members, to the detriment of creditors. These proposed regulations have been published in draft for consultation twice, most recently in July this year.

1421
I recognise that a considerable weight of material will be left to regulations, but I am pleased that the Delegated Powers Committee has concluded that the provision for parliamentary control in the Bill is appropriate. It has, however, suggested that if the intention is to provide only for summary trial and a fine, such a limitation should appear in the Bill. But it is our intention to apply to LLPs the same offences as apply to companies under the Companies and Insolvency Acts, so as to ensure parity of treatment. It is important that members of an LLP are not treated more favourably than directors of a company. In some cases these offences are triable on indictment and punishable with imprisonment. For example, Section 458 of the Companies Act 1985 makes it an indictable offence to carry on the firm's business with the intent to defraud creditors.
The application of these offences in the first set of regulations will be subject to affirmative resolution. Were we at any stage to create new offences, these would also be subject to affirmative resolution.
An LLP will be treated for tax purposes as a partnership. This is because although it will be a body corporate, unlike a company where broadly, shareholders receive a dividend and directors receive a salary, the members of an LLP will receive a profit share. Partnerships have been exploited in the past for purposes of tax avoidance. We intend to amend the Bill to ensure that limited liability partnerships cannot be used for tax avoidance.
When we published the revised Bill in July, there were a number of comments from consultees, as a result of which we are considering some further minor amendments to the Bill. These would be intended to ensure that the legislation more effectively achieves the policy intentions. In particular, again in the context of taxation, we will be bringing forward amendments on the tax treatment to ensure that the transfer of a business between a partnership and an LLP is genuinely tax neutral.
I should like to turn to a couple of areas where no statutory provision is proposed, and to explain the reasons for this First, as regards the regulation of professionals, as I have said, the possibility of a limited liability partnership arose in the context of reviewing the law of joint and several liability and its particular effect on professionals. It is fair to say that the main interest in LLPs has come from the professional business community. We considered carefully, therefore, during the consultation process whether the LLP should be restricted to professionals and whether professionals in a limited liability partnership should be subject to particular regulation. We concluded against both these points.
Most professionals, for example, accountants, architects, surveyors and even solicitors, now have the option to incorporate, and the principle that they may operate with limited liability has been accepted for some years. However, few have chosen to become companies. That may be because it is considered that the structure of a company does not lend itself to successful professional/client relationships, because
1422
there may be a conflict between the need to act in the interests of shareholders and the need to act in the interests of a client. It may also be because the particular advantages of the partnerships structure have made firms reluctant to reorganise as a company. These are generally cited as being the benefits to be gained from common ownership and management together with the sense of fraternity that can exist between partners and the flexibility to determine the content of the agreement between partners.
In considering whether the Bill should provide for professional regulation of a limited liability partnership, we concluded that any regulation of the entity would be likely to add a new and additional layer of regulation over and above what was already being required. Why should, say, an auditor in an LLP be subject to a greater degree of regulation than an auditor in a partnership? Both would be fully liable for their own negligence and clients of an LLP would have the benefit of financial disclosure—a requirement not made of partnerships. Professional organisations such as the Law Society and the Institute of Chartered Accountants clearly will continue to regulate their members, regardless of whether business is being carried on through a partnership, a company or a limited liability partnership. We should be surprised and concerned if the introduction of LLPs were to cause any reduction in the regulation of the activity. The consultation process has not led us to believe that that will happen.
Secondly, it has been argued that the Bill should include added protection for creditors, perhaps through a statutory requirement for capital main-tenance or a guarantee from members. We have considered that point carefully and have decided not to include such a provision. An immediate reaction might be to think that that is rash. In particular, that might be felt by those who are familiar with the provisions of the Companies Act 1985 which regulate capital maintenance in companies. I do not want to go over the arguments now, but I note that an LLP will have no shareholders and we doubt very much whether a realistic level of capital maintenance exists to provide reasonable protection for creditors without there being a detrimental impact on the firm's ability to set up in and carry on business.
I hope it is clear from what I have said that the Bill has received much thought and attention from all-corners, including free advice from many highly paid professionals. Some of the issues are complex but I believe that the extensive consultation and, not least, the attention from Members of the other House have produced a balance which is practical and appropriate, taking account not only of the needs of business but also of its customers.
As I said at the start, the Bill represents one step, albeit an important one, in our commitment. to a modern legal framework. The LLP Bill is being taken forward at the same time as the review of company law. While the Bill is important enough to merit action now, we intend that amendments to company law ultimately arising from the review will be applied as appropriate to LLPs. We shall ensure that limited

1423
liability partnerships are not left behind as the legal framework for business is further refined. I commend the Bill to your Lordships.
Moved, That the Bill be now read a second time. (Lord McIntosh of Haringey.)
5.32 p.m.
Baroness Buscombe: My Lords, it gives me pleasure to respond to the Minister by saying that we are, in large part, very supportive of the Bill. It is clear from our consultations with numerous outside professional bodies that the Government have been very willing to work with them in developing this proposal to introduce LLPs, following on from the previous administration.
In essence, the Bill seeks to provide particularly the large professional partnerships with the ability to take greater control over the potential liabilities arising from the provision of services in the litigious environment of the present day, while at the same time protecting the interests of clients and creditors. However, there are a number of remaining issues which concern us and which have been raised during the consultation period. I shall endeavour to refer to them in some semblance of order. I express it in that way as something of a protest, given that I feel the proposed legislation has been drafted in an unnecessarily complex manner. My heart already goes out to anyone who might wish to form an LLP without the benefit of extensive advice.
I turn, first, to Clause 1. Although we are pleased that LLP status will be available to all businesses and not just to professional firms, we are concerned to the extent that Clause 1(4) disapplies the existing the law relating to partnerships, principally the Partnership Act 1890, from limited liability partnerships, except as otherwise provided by the Bill or any other enactment. That creates difficulties in so far as the Bill is silent on the issues which are central to partnership law, most notably the rights and duties of the members of a limited liability partnership and, equally important, the relations between the partners.
Flowing from that, a number of issues will need to be addressed: for example, the right to share in capital and profits; the right of a member to be indemnified by the LLP in respect of payments made by him or liabilities incurred by him on behalf of the LLP; the right to take part in the business of the LLP; the right of members to have access to the books and records of the LLP; the right or absence of right to receive payment for services rendered by a member to the LLP; the procedure for calling and holding meetings, including any rights to appoint proxies and corporate representatives to attend meetings of members; the right to vote at meetings on the basis of one-member one-vote; the expulsion of a member; and the right of a member to retire as a member of the LLP by giving notice. All those issues contribute collectively to the partnership ethos and should therefore, we believe, be clarified. We suggest that that is done in the regulations under Clause 14 of the Bill.
1424
I move on to Clause 4, which deals with membership. The Bill does not provide for a member who wishes to retire from the partnership. As currently drafted, a member can cease to be so only upon death, dissolution of the LLP or by agreement with the other members. We wonder whether that is an oversight and suggest that, in the event of a member wishing to retire, notice should be given to the LLP rather than to the other members of the LLP.
Clause 5 deals with the relationship of members. With the Bill as currently worded, the members of an LLP would be subject to company law or employment law if there were no specific provision to the contrary. We believe that that would alter radically the nature of the partnership in an unacceptable way.
Under Clause 6, in relation to members as agents, we believe that the Bill should make clear that a member of an LLP will not be an employee of the LLP unless there is express agreement to that effect between the member and the LLP. Further, we believe that it is regrettable that Clause 6(1)(c) as drafted in the September 1998 version of the Bill was removed, since no agreement between members can be entirely comprehensive. The absence of statutory guidance will create considerable uncertainty as to the relationship between members and between members of the LLP itself, especially where the members of an LLP have no members' agreement or the members' agreement fails to deal with the key issues, some of which I have already outlined with reference to Clause 1 of the Bill.
With regard to Clause 8, we question the provisions for service as a designated member of the partnership, given, we believe, that the provisions, as drafted, could be open to abuse; for example, as we understand it, an LLP could assume as partners one or more offshore companies and register them as designated members, thus making it difficult for the regulatory authorities in the UK to ensure compliance or impose penalties. We suggest that the concept of designated members be removed from the Bill, making all the partners equally responsible for the LLP's conduct, including compliance with the registers.
With reference to Clause 10 regarding taxation, I am pleased that this evening the Minister has referred to tax neutrality as that is a matter about which we are concerned. We understand that the proposed objective is that tax neutrality should be achieved. We should certainly seek reassurance that if, for example, a partnership wishes to convert to an LLP, that will be treated for tax purposes as a continuation of the old partnership and not the discontinuance of the old partnership and the commencement of a new LLP, provided that the necessary conditions are met.
With regard to Clause 12, we believe that there should be changes to the stamp duty and stamp duty reserve tax exemptions on the transfer of property from an existing partnership to an LLP. The present exemption assumes that the transferors will be all the existing partners and that the partners will have the same proportionate interest in the property transferred to the LLP. We believe that that is too restrictive as it may dissuade the conversion of a

1425
partnership to an LLP in a situation where, for example, only a majority of partners are the same before and after the transfer.
Further, I shall refer briefly to issues concerning insolvency and return to them in Committee. In particular, Clause 13, which deals with the insolvency and winding-up of limited liability partnerships, provides for regulations which will apply or incorporate parts of the Insolvency Act 1986, including a proposed new Section 214A. Section 214A of the Insolvency Act would take effect when a partner knew or had reasonable grounds to believe that the LLP was insolvent. That is a more onerous test than the comparable existing Section 214. We believe that Section 214A is likely to lead to unnecessary business closures and job losses. Therefore, in our view it should be dropped from the Bill.
With reference to merger and acquisition accounting, the regulations would apply the requirements of the Companies Act 1985. The merger accounting provisions set out in paragraphs 10 and 12 of Schedule 4A of the Companies Act 1985 deal with equity shares being purchased for equity consideration. A share-for-share exchange cannot exist in a partnership—as the Minister has already said this evening, there will be, we assume, no shareholders—and, therefore, we believe that the provisions are meaningless.
However, having said that, mergers of partnerships do take place and therefore merger accounting provisions for LLPs will be necessary. We suggest that the regulations should be framed to allow special provisions in respect of merger accounting of LLPs.
Finally, I turn to the matter of disclosure. Under the proposed regulations, the disclosure requirements relating to the emoluments of directors translate into equivalent disclosure requirements for members of LLPs. In addition to the aggregate of members' emoluments and the numbers of members falling within bands, the chairman or equivalent and the highest paid member of the LLP must be disclosed with their emoluments. Small LLPs are exempted from that requirement.
For the remaining LLPs, we feel that that disclosure requirement serves no useful purpose, is likely to deter overseas partnerships from taking LLP status in the UK, and should be dropped. We believe that the regulations should be amended accordingly.
In conclusion, we support the Bill in principle and look forward to the opportunity to return in Committee to the issues that I have outlined this evening.
5.40 p.m.
Lord Sharman: My Lords, it is with some trepidation that I address your Lordships for the first time. I begin by placing on record both my thanks and appreciation for the very many kindnesses and help extended to me by the staff, officials and Members of your Lordships' House.
1426
I must first declare an interest. For 33 years, until relatively recently, I was a partner without limitation of liability. I served in what is loosely called one of the big five. For the last six years of that time, I was its chairman. I was an active participant in lobbying both the previous administration and this Government for legislation of this nature. So it is clear that I have a considerable interest to declare.
Having declared that interest, it is little wonder that I welcome the Bill. In my view, it is sorely needed. As the Minister said, it updates some very aged legislation. Importantly, it provides an extremely appropriate form of corporation for certain types of business for which incorporation as a company may neither be desirable nor feasible in fiscal terms. It goes some way to providing a partial answer to the huge incidence of litigation within professional firms today. It only goes a partial way and I think that that is right. It reflects also the increasing specialisation that one sees in that type of organisation and the assembly of different professions within a single partnership.
Finally, it puts the UK on an equal footing with many of our competitor nations, most notably the United States and many areas of continental Europe. As such, it will help us to avoid the drift towards overseas registration in limited liability partnerships. We already see limited liability partnerships operating in the UK today.
I am very much aware that maiden speeches are supposed to be non-controversial, but I want to compliment this Government and the previous administration on the process of consultation which this Bill has undergone. The DTI in particular has been extremely assiduous in canvassing views from a wide range of interested parties and it has dealt with them openly and logically. While some of the features of the draft Bill and the consultative documents have changed, by no means all of the wishes of those consulted have been accommodated; and nor should they have been.
It is useful to reflect for a moment on how we reached the point at which we are today. The original form of partnership was based on the concept of up to 20 people sitting around a table, making decisions jointly, and jointly and severally benefiting from the results of that by way of profits or the risks that were carried. For many, many years, until 1967, many professions were held to a 20 partner limit. As a result there were chains of partnerships which were inter linked. The Companies Act 1967 took away that level for certain professions, but for certain professions only.
Since that time, there has been a growth of business, with increasing internationalisation and now globalisation. Therefore, there is a need for scale to respond to service business which itself is on an increased scale. Those enterprises have become extremely large. While a typical "Big 5", which I know about, in 1967 might have had three or four linked partnerships of 20 partners, today it would have over 600 and would employ something like 10,000 people in the UK. Its gross annual revenues might be something in the order of £1 billion.

1427
So it is clear that the old business form of partnership, with the partners sitting around a table jointly agreeing, jointly benefiting and carrying the risk, is no longer appropriate. While the Companies Act 1989 allowed for incorporation of certain functions, that came really when the enterprises were already too large and it was a little late. The fiscal cost was just not affordable. We can argue also that the cultural cost of changing a partnership into a corporation might not be desirable for many of those professions.
There is a lesson to be learned here which we should bear in mind, and that is, that business moves so rapidly these days that legislation must keep up. We must be very nimble on our feet in relation to such legislation. When the e-commerce Bill comes before this House, we shall do well to bear that in mind.
So in welcoming the Bill, I do not see it as a let-off or a let-out in any way. As the Minister said, nothing that is contained within the Bill will relieve the individual from his personal responsibility for his actions to the full extent of his wealth. Nor should it.
In conclusion, I wish to make a comment on an issue which I regard as central to the limitation of liability; that is, disclosure of full financial information. I can speak with some experience in that regard because some five years ago, the firm of which I was a chairman went through that process voluntarily. I believe that it is absolutely fundamental that the price for limitation of liability is disclosure of financial affairs. It is not fair for customers to have to deal with a company or entity with limited liability about which they are unable to ascertain its financial wherewithal. Our disclosure included full details of my income. All that really happened was that we attracted a few extra column inches and I had to buy a few more drinks in the pub. And so I commend the Bill to your Lordships.
5.38 p.m.
Lord Haskel: My Lords, it is my pleasure and privilege to congratulate the noble Lord, Lord Sharman, on a wonderful maiden speech and to thank him very much on behalf of the whole House. I have come across the noble Lord on one or two occasions and I know of his important work on and commitment to the introduction of best practice in the management of British companies. He has played an extremely important role in that and it has been an important factor in increasing the competitiveness of British industry. I congratulate him on that too. He has great experience of British industry. I hope that we shall hear from him often in the future so that we can have the benefit of that experience in your Lordships' House.
Turning to the Bill, I confess that my initial reaction was fairly hostile: mobile capital seeking more user-friendly jurisdictions and large partnerships threatening to move their legal base out of British jurisdiction to reduce the risk to the partners. I had always assumed that limited liability was invented so that people could take business risks. Without limited liability people would be less willing to take those risks and so the economy would suffer.
1428
What risks do professional people take? As long as they meet the demands of their professional standards, the advice and service that they provide is surely without the same kind of risk that people take in the course of normal business. Professional people are obliged to take out professional indemnity insurance.
In recent years most professions have allowed their members to incorporate. I have often thought that that would take care of some of those anxieties. Professionals from different professions can in-corporate together. Frankly, I have never understood why large accountancy firms, and other professional firms do not incorporate instead of threatening to move their legal base offshore to a more welcoming jurisdiction. Perhaps they like the partnership ethos, but do not want the worry of unlimited liability.
However, on further thought, and with the benefit of the explanation of the noble Lord, Lord Sharman, I accept that my view is somewhat old-fashioned. In modern business, professional services are delivered on a kind of production line basis. Different specialists from different professions work together and are involved with each other. Accountants and engineers work in teams. Doctors and lawyers work together. They depend on each other. In large firms partners may not even know each other as they can work in different offices, in different professions or even in different countries. So there is a concern in regard to this matter and there is a point. Quite rightly the Government are listening to the concern—a listening government.
Recently we have heard another voice. Last week in Seattle we heard it quite loudly. Some citizens complain that the real beneficiaries of globalised big business are the big firms and their senior managers, while the consumer is left to carry the cost and to take the risk. As the noble Lord, Lord Sharman, has explained to us, the big accountancy and professional services firms are among the biggest globalised businesses. I ask the Minister to listen to their voice too.
Nobody wants the Bill to become a symbol of that growing dissatisfaction with big business. As the Minister said, and as the noble Lord, Lord Sharman, implied, our task is to see that there are adequate safeguards for the consumer and that the Bill does not become a means whereby wealthy professionals can avoid financial penalties for negligence. To that end the Bill must encourage an ethos of probity as well as an ethos of partnership as mentioned by the noble Baroness, Lady Buscombe.
Ethos is important. It will ensure that the public will perceive the professional services companies as having an ethical and vocational drive that will lead to confidence and respect. Otherwise, the limited liability partnerships will be seen as a dodge. The regulations and the professional partners need to bear that in mind. For reasons of probity, openness and transparency are important elements in the Bill.
For that reason I agree with the Trade and Industry Committee in another place, when it said that limited liability partnerships and their members should be

1429
required to disclose all the relevant financial information. I welcome the statement from the Minister that limited liability partnerships will be regulated similarly to companies. I also welcome the point made by the noble Lord, Lord Sharman, in this regard.
Of course, I understand that partnerships use their own money and riot shareholders' money. However, in many companies the shareholders and the directors are one and the same, so disclosure should be equivalent to that demanded by law from limited liability companies. I do not agree with the noble Baroness, Lady Buscombe, on her point about disclosure of partners' drawings. For the sake of openness, I believe that the disclosure of partners' drawings should also be made in the same way as those of company directors.
Perhaps I may say a word about management. The days when a director's duty of care was solely to the shareholders have passed. Directors now have a duty to inform themselves about all their company's activities. They have a duty of care to all the stakeholders. I hope that the regulations will oblige partners in limited liability partnerships to have the same broad duty to keep themselves informed, not only about their own professional activities, but also about the activities of the partnership as a whole and all the other stakeholders.
There is a strong "best practice" business case for that. Integrity and reputation are important. To that end, the duty of care in law that partners owe to third parties for acts of their colleagues or employees must be clear and not open to judicial review as claims arise. In the same way as directors can be banned for ignoring their duties of care, will partners be banned from entering into limited liability partnerships if they do likewise? How will the DTI monitor that? Perhaps it will be left to the professions to discipline their members.
The noble Baroness, Lady Buscombe, spoke of the complications. I do not believe that that is a big worry. The Bill will probably apply only to large partnerships. The disadvantage for small businesses being limited liability partnerships, compared with being limited liability companies, is that a limited liability partnership is a narrower form of limited liability. I presume that there will be a degree of personal liability to third parties for negligence which, in the main, does not apply to company directors. There is certainly more liability on insolvency resulting from the claw-back provisions mentioned by the Minister under which limited liability partnership members will be ordered to contribute to the assets on insolvency.
The Minister spoke of the major review of company law in the DTI. I suppose it is a pity that, owing to pressure from major partnerships, this legislation has come before the House before the review of company law has been carried out. I expect that that review will simplify greatly the regulations affecting businesses, especially small businesses.
I believe that the Minister indicated that the Bill is in keeping with the changes which are expected to emerge from the review, so that there will be little need for
1430
further changes in partnership law. I understand, for example, that the Law Commission is talking about the introduction of proportionate liability, instead of joint and several liability, where partnerships are concerned. I presume that that is the direction that the review will take.
I have stated my concerns about the Bill, but in spite of that I welcome the Bill because, as my noble friend said, it achieves an appropriate balance. I also believe it is important because it sets out to modernise business practice, which is the point made by the noble Lord, Lord Sharman. With the proviso that I have mentioned, it should contribute to the encouragement of best practice and high standards in the delivery of professional services. It will put us on an even footing with our competitors. Our economy can only benefit from that.
5.58 p.m.
Lord Lucas: My Lords, I, too, welcome the Bill, as I welcome the noble Lord, Lord Sharman, to our company. It is always good to have another accountant in the House. As a rather less distinguished accountant myself, I agree that the Bill is thoroughly deserved by the accountancy profession. It will greatly benefit the profession and, therefore, the country.
In Committee, I shall pursue some of the more detailed aspects of the Bill. Much is to be left to regulation. The noble Lord, Lord McIntosh, has already given us some comfort about the way in which regulation will be applied to disqualification of directors, the necessity of keeping accounts on file and other such matters.
We shall also need to look at the way in which these regulations are to be promulgated. They will be an equivalent of company law, but all that is provided for in the Bill is that they should be subject to affirmative resolution. At least for the first set of regulations, there should be a requirement that they are consulted upon before they are subjected to the affirmative resolution procedure. It is difficult, if not impossible, to amend regulations. These will be extensive and detailed and we should not allow them simply to appear for a one-and-a-half-hour debate in this House, and then "whoosh". I am sure the Government intend to consult anyway, but it ought to be on the face of the Bill.
Changes to the regulations will have equivalent status to changes in company law and therefore a reasonable amount of notice and publicity should be given to them. Perhaps a prior period of consultation, if it appears appropriate tothe Minister, could be given. And there should be a requirement on the face of the Bill that the Minister considers the need for consultation. We will not then get into the pattern that the regulations can be amended in the same way as food safety regulations—at the last minute whenever something new appears. We are dealing with a rather more serious entity affecting (quite quickly I imagine), a large number of people who will come to live and work under the regulations that will be promulgated under the Bill.

1431
We also need to look at the consequences for the Companies Act of having this structure in place. Clearly, some companies will have subsidiaries. If we are restricted in naming a limited liability partnership if there is a company of the same name, then there needs to be a mirror restriction running the other way. I may have missed it in the Bill, but I did not see it. We need also to consider the way in which the insolvency legislation will impact on the funding of limited liability partnerships. I imagine they will often be funded by way of loans and guarantees from partners. They ought not to be allowed to rank alongside ordinary creditors. I do not believe there is any provision in companies legislation to say that directors' loans rank behind creditors, but directors' loans are rarely the principal source of funding of Companies Act companies.
We will take part in some interesting discussions on the detail of the Bill and how it works as it goes through Committee. But my principal interest will be the other uses to which this structure will be put. It will not just affect the major accountancy firms. There are already considerable uses of limited liability partnerships in this country, often overseas—Denver, Luxembourg and other jurisdictions—by the venture capital industry and the property industry. This Bill meets, in principle, the very real needs in structuring the relationships between the people participating in venture capital funding and in the funding of major buildings or major property portfolios where there can be real difficulties. At the moment they lack either limited liability or tax transparency.
The Bill will provide a great deal of potential, but in its present form there are some insuperable obstacles to it being used efficiently. In particular, Clause 6 does not allow for flexibility in the status of individual partners in any obvious way. Clearly, if one is running a venture capital fund the people taking the decisions are the fund managers, and the individuals participating are doing so more or less as sleeping partners. There has to be a mechanism acknowledged under Clause 6 whereby someone dealing with a sleeping partner in such a venture cannot think that they are dealing with somebody who is authorised to deal on behalf of the partnership.
Also, if we are looking at that sort of use of the structure, we shall need to consider the way in which the Financial Services Act and restrictions on marketing and dealing in securities will impact on the way in which people are encouraged to take up or dispose of participations in limited partnerships. That is not an aspect I found to be covered in the Bill, though it could easily be added by giving the Government power to make regulations under the Financial Services Act in the same way as they will have power in this Bill to make regulations under the Companies Act.
I look forward to the Committee stage. I hope the noble Lord, Lord McIntosh, will grant me audience before then so that I might see him, perhaps in the company of one or two people from the industries concerned, to see if we might question him and his
1432
officials on various aspects of the Bill. It may shorten the time we have to spend on these matters at Committee stage and, with luck, we will arrive at a Bill which is not only good for a profession to which I have the pride and privilege to pay £150 a year to keep the letters after my name, but also for the venture capital and property industries. They will benefit greatly in terms of their ability to do business and fund their activities if the Bill can be made just a little more flexible.
6.5 p.m.
Lord Phillips of Sudbury: My Lords, it is a particular pleasure to be the first from these Benches to speak after the maiden speech of my noble friend Lord Sharman. Those of us who were aware of his coming here were knowledgeable of the fact that he has immense experience and authority within the accountancy profession. What he said today is but a harbinger, I am sure, of the contributions he will make to the deliberations of this House in years to come.
As my noble friend made clear, he spoke from his vantage point and I shall speak from mine. I am a practising solicitor of 36 years' continuance, every hour of that time having been spent in private practice. I am happy to remain a practitioner in a 40-solicitor firm, which is a tiny outfit compared to the one from which my noble friend comes. I also have a certain diffidence in speaking against the line of the Law Society, which has been one of the major proponents of this measure, and indeed against the line of my noble friend. But so be it. I am unconvinced of the need and sense of this measure.
Since no one has mentioned it and it has some philosophical reference to what is an important Bill, perhaps I may be allowed the liberty of taking a few seconds to look at the history of this matter. The bubble Act of 1719 was the start of this long march to limited liability. It was not until 1855 that limited liability was granted to companies other than those incorporated by Royal Charter. The reason for that was simple: the bestowal of limited liability upon those seeking to trade for profit is an immense public privilege, not a minor one.
In 1890 we had the Partnership Act—according to many solicitors, one of the most lucid, brief and effective measures ever passed in this House. If we go back to the record of the time, we may be more amazed to see how brief was the discussion upon it in this House. The great Law Lords of the day carved it up between them and it got the nod in the other place. There were 46 short sections, no schedules, and certainly no subsidiary legislation dependent upon it. If I may say so, with due deference to the noble Lord, Lord McIntosh, the balance that has been struck between matters contained in the main Bill and matters left for subsidiary legislation is a particularly unhappy one. But that is now water under the bridge.
I referred to the great privilege of limited liability. Today it is looked upon almost as a right. Yet if one can step back from the overwhelming commercialism of today's culture, why in principle should anyone

1433
pursuing a trade for gain expect to be protected from loss and damage they inflict on third parties? Why should they not bear the consequences of their incompetence, geed or negligence—I say nothing of fraud? We all know the conventional answer, but in my view it badly needs to be re-examined in the light of the steady undermining of public trust and probity, quite apart from the encouragement that the present law gives to ill-prepared and ill-executed speculation.
If I am playing devil's advocate in a somewhat provocative way, it is not merely to provide a counterpoint to the majority of the speakers in this debate, who will give, and have given, the Bill a loud "Hurrah!". There is need for cool reassessment as to what limited liability generally has done and is doing. Certain it is—and here I speak with only too much hands-on experience—that the protections for the public against unscrupulous corporate behaviour are, in reality, largely ineffectual.
The theoretical remedies against wrongful trading, or even fraud—I note that "wrongful trading" is likely to be incorporated into this measure—are very rarely accessible to those who are left holding the losses when a company founders. It is too easy for those of us in this House, enjoying, as we mostly do, a fairly elevated lifestyle, to underestimate the degree of public anger and almost disbelief at the incompetence of the law in protecting against serious fraud.
The Bill allows solicitors to use its limitation provisions alongside the traditional benefits of partnership. As the Explanatory Notes say, the limited liability partnership enjoys,
"the organisational flexibility and tax status of a partnership with [nonetheless] limited liability for its members".
I shall refer in later stages of the Bill to what I believe are serious particular shortcomings.
As a practising solicitor for all this time, I must confess that I have sometimes wished for limited liability; but never for long. On really careful reflection, I have to say that I think it is right that solicitors have to practise without personal limited liability. In the first place, being jointly and severally liable is the very best incentive to exercise careful selection of one's partners; careful oversight of staff; extreme care with clients' funds, large quantities of which are regularly entrusted to us; a prudential approach to management of the practice and its resources, whether one is a junior or a senior partner, and whether or not many of those functions—as they are these days—have been delegated to committees; and an interest which extends across the whole of the partnership's a [fairs in an age where solicitors, and other professionals, are retreating into ever narrower and deeper ruts of specialism.
In terms of deserving and maintaining public trust, which I would maintain is a principle of overriding importance, the unlimited responsibility of all partners for the debts of their partnership is the most striking and effective manifestation and guarantor of that virtue. Of course, even with unlimited liability, terrible things happen. But nothing will achieve perfection.
1434
Certainly not—experience now tells us—an ever-burgeoning external regulation, which can even end up compounding the very problems it seeks to address. No, the one unavoidable, ever-present organic pressure for solicitors, and other professionals, to be virtuous is that if they fail the consequences will end up at their door, literally.
The big firms are driving this Bill. Although there has been consultation, and although the Law Commission did a good job, I have to say that very few of them have given considered response from the point of view of the consumer. The overwhelming advice tendered has come from those who have an interest in this Bill being passed. I should like to suggest that the big firms, earning as they do—no doubt fairly—big fees for their work, which can lead to large claims for negligence, have thriven in that environment. Where is the evidence to show that any of them needs the protection of this Bill in order for them to do their work effectively, competitively and profitably? There is no evidence. When did we ever hear of one of the big City solicitors losing his trousers? I have never heard of it, and I should like to hear from any noble Lord who has.
The classic justification of limited liability is that it strikes a fair balance as regards those who put at risk their capital for a venture which, through no fault of their own, then fails. To encourage that risk it is reasonable to afford a limit against further losses. But solicitors are not capitalists; we venture very little in the way of capital. We are supposed to be professionals. Even in the present age where commercialism has bit deep into the ethos of many firms, gravely to their and the public's disadvantage, we are still professionals.
I believe that the Bill is wholly unnecessary. All firms take out insurance. Those who find that inadequate are at liberty—and many of them exercise that liberty—to agree an upper limit on liability with the clients for whom they do the work.
Finally, I have to say that to extend the unique public privilege of limited personal liability primarily for the benefit of the largest, most lucrative and successful partnerships, which, in turn, act for the largest and most lucrative companies, strikes me as perverse, verging on the bizarre. Of course it will also protect smaller firms, but my impression and experience is that that is not a major issue for them. On no account, in any event, should we substitute limited liability for adequate insurance. Although the Government may say that measures will be incorporated in the Bill to prevent this. I have to tell them that I do not believe it. I think that one could, and will, end up with an extremely complex, clever piece of legislation that will in the event prove to be too clever by half. Therefore, while I would much prefer to agree with other noble Lords, I have to disagree with them wholeheartedly.
6.16 p.m.
Lord Goldsmith: My Lords, while I admire, as always, the passion of the noble Lord in expressing his

1435
reservations and the reasons for them, I, for my part, will join those who have expressed a loud "Hurrah!" for this Bill. However, I have only two cheers at this stage. The first because, in my view, the Government are demonstrating a concern about the opportunities for enterprise. There is no doubt at all that the professionals in this country are extremely important earners of foreign currency and, most important, in the engine of the growth of wealth. The second cheer is because the Government are also dealing with a real problem. Here I speak as a barrister who has spent a substantial part—sometimes too much—of my professional life acting for or against professional firms that are accused of professional negligence.
My noble friend Lord Haskel said that he had come across the noble Lord, Lord Sharman, in the past. So have I: sometimes, though he may not have known it, he has been my client. However, more frequently, he has been the defendant I have been suing on someone else's behalf. I should say here that I pay tribute to the noble Lord's maiden speech. I suppose, therefore, that I am a paid-up member of the litigious environment to which the noble Baroness, Lady Buscombe, referred.
I can tell your Lordships what has happened over the past few years. Because of the growth of big money claims, because of the principle of joint and several liability—about which I shall say a few words in a moment—and because of the need to find a deep pocket, professionals, especially architects and accountants, have faced ever-larger claims. Why does joint and several liability achieve that? It does so because the law says that if you are in part responsible for damage you can be sued for all the damage. Never mind the fact that as between you and an evil director he bears 90 per cent of the moral blame; you, as the deep pocket, can be held liable for 100 per cent of the damages. That is what has been happening. That is the way that litigation has been conducted.
Although I wholeheartedly agree with the noble Lord, Lord Phillips of Sudbury, about the importance of the professionalism of someone who recognises that his own assets are at stake, the fact is that some of these claims really put at risk not merely the personal wealth of partners but also that of their families.
There have been attempts to review the law of joint and several liability. The United States found a way of dealing with the problem by effecting a law. The Common Law Team of the Law Commission in this country found that that was not a way of dealing with the matter.
This Bill seems to me to be an appropriate way of providing an opportunity to limit liability for those who want it. However, as my noble friend the Minister has said, it is important to ensure that the safeguards are in place. I refer to the safeguards for the public. There are measures which might have been taken from the Jersey equivalent of this law. There is, for example, a provision, relating to a certain amount of money, that requires a bond to be deposited as a condition of liability being limited. I can well understand why that is not necessarily the right way to deal with issues.
1436
However, it is important that the public are safeguarded. That is the reason that I reserve one cheer for the time being.
It is necessary also to sound a warning. The reason that under the present law partners are liable down to their shirt buttons is because each is agent for the other. Each is agent for the other because that is what partnership is. The Partnership Act, to which reference has already been made, defines partnership as people who are carrying on a business in common. This Bill does not state that everyone who is a member of a limited liability partnership shall not have liability. What it states, and what it will enact in Clause 1(4), is that the law relating to partnerships does not apply to a limited liability partnership.
If people choose to incorporate as a limited liability partnership, but carry on business as if they were still a partnership of the kind that people are used to—a partnership where the assets and integrity of the individuals are at stake—I predict that they will find that the courts may say, "Though you have incorporated a body, you are carrying on business in common together". I suggest that the courts need to be vigilant to make sure that the great privilege of limited liability—which is what this Bill will give—continues to carry with it the great responsibility, which includes the provision that members of the public know with whom they are dealing. They should have—I was glad to hear the noble Lord, Lord Sharman, make this point—full financial disclosure. They should have the full safeguards which the regulations are intended to provide.
I believe that some points in the Bill would benefit from further consideration in Committee—I shall not mention them at this stage—and there could be some fine tuning of the balance. But for my part I reserve my final cheer for that moment when I see that not only will the courts be vigilant, as I suggest, but that the Government are vigilant in making sure that the Bill goes no further than is necessary to maintain the proper balance between the interests of the public and the interests of professionals to which I have referred. In those terms I support this Bill.
Lord Phillips of Sudbury: My Lords, before the noble Lord sits down, with his great experience of litigation in this field, has he come across many cases of solicitors actually, as he put it, losing their shirt buttons, because I do not know of any?
Lord Goldsmith: My Lords, not solicitors, but I know of accountants who have come close to that. Outside the Chamber I could tell the noble Lord of one such case where the people concerned came close to having to hand in their shirts.
6.23 p.m.
Lord Goodhart: My Lords, I start by asking the Minister whether there is any truth in the rumour that the reason the Government have brought this Bill forward is that they are so concerned about the future of their public private partnership that they wish to incorporate it as a partnership of limited liability. But,

1437
more seriously, I congratulate my noble friend Lord Sharman on a maiden speech which was not only remarkably well delivered but based on an enormous depth of experience. It makes it easy to see why he rose to the very top of his profession.
As we have been told, work on this Bill started at the end of 1996 under the previous government and has been taken forward by the present Government. On behalf of my party I am happy to give this Bill tripartisan support—with the exception, of course, of my noble friend Lord Phillips of Sudbury.
I should perhaps begin with a declaration of a lack of interest. I am a member of the Bar. Barristers, of course, do not form partnerships. We cannot be liable for the negligence of other barristers, even if they are members of the same chambers. Therefore, I, like the noble Lord, Lord Goldsmith, am not affected by the Bill.
Looking at the matter from this semi-independent position we certainly accept the need for a Bill of this kind. There has been an enormous increase in litigation over allegations of professional negligence. That is not in itself a bad thing. People who suffer loss as a result of professional negligence are in principle as entitled to compensation as anyone who has been physically injured by a negligent driver. But the consequences can, and are now threatening to, get out of hand. We are now in a situation where the partners in a large international accountants firm can be made personally bankrupt because of the negligence of a colleague many of them may never have met. The people who are at risk are—I say this with all respect to my noble friend—not necessarily either incompetent, greedy or negligent.
This is not a hypothetical issue. In the ADT case—this is a matter of public knowledge—damages of £65 million were awarded against a leading firm of accountants for the negligence of one partner. That was well above the indemnity insurance cover of that firm, and the individual partners were threatened very actively with personal bankruptcy. An appeal was in the end settled for a smaller, but still large, sum.
The risk of bankruptcy has seriously damaging effects. People will not join partnerships, or partnerships will go offshore to places where they can limit their liability. Many other jurisdictions do now allow partnerships to convert into corporate bodies. Limited liability has for 150 years been an essential cornerstone of commerce and industry throughout the world. The reasons why we now have limited liability for business organisations apply equally to professional ones. Limited liability is not just a privilege; it is now an essential tool in the whole organisation of commerce.
I wish to discuss the genesis and content of this Bill in a little more detail. I recognise that the Government have consulted widely on the terms of the Bill. We have had an excellent report from the Select Committee on Trade and Industry in another place. The Government originally proposed that the Bill should apply only to members of regulated professions such as solicitors and chartered accountants. That limitation was
1438
criticised in the course of the consultation. The Government accepted that criticism and I believe that they were right to do so. There is now no limitation on the type of business that can be carried on by an LLP.
However, it seems to me that some issues of importance remain. I agree very much with the points made by the noble Lord, Lord Goldsmith, in that regard. It seems to me that the first issue here is whether too much of the Bill has been left to regulations. Much of the meat of the Bill, particularly in the accounting requirements and the insolvency provisions, is to be contained in regulations. The Trade and Industry Committee said that it would prefer these provisions to be in schedules to the Bill rather than in regulations. The Delegated Powers and Deregulation Committee in your Lordships' House, of which I am a member, accepted the Government's proposals to put these provisions in regulations. But it seems to me that this comes close to the borderline and the more I look at some aspects of this Bill the more doubtful I am whether the Delegated Powers Committee was not rather too lenient.
Most of the regulations will simply apply to LLPs the existing statutory rules which apply to companies incorporated under the Companies Act, but there will be power to modify that application. One particular modification contained in the draft regulations has been the subject of considerable debate in the course of discussions. The noble Baroness, Lady Buscombe, has already touched on this. Regulations will apply to LLPs Section 214 of the Insolvency Act 1986. That section makes company directors liable for wrongful trading; that is, the carrying on of business by people who know that the company is hopelessly insolvent. So far so good.
But Section 214 will be extended by the new Section 214A which will be created by the regulations and will apply only to LLPs. The result of that will be that members of LLPs will be liable for the debts of the LLP in circumstances where directors of an ordinary limited company would not be liable for the debts of that company. That may or may not be right. The Trade and Industry Committee agreed with that proposal; the Institute of Chartered Accountants strongly objects to it. Speaking for myself, I have not yet reached a final view on the issue.
But it is clearly an important issue which requires a proper debate in your Lordships' House. Regulations cannot be amended and therefore are not suitable for debate on detailed provisions such as Section 214A. I therefore ask the Government whether they are prepared to put the proposed Section 214A on to the face of the Bill. We could introduce an amendment to do that—we will do so if necessary—but it would be much better if the Government were prepared to do so.
The next issue—again this has been touched on by the noble Baroness—concerns the application of existing partnership law. The title of the Bill is misleading. The Bill does not allow partnerships to limit liability while continuing as partnerships. The Bill creates a new kind of corporate body into which some existing partnerships will convert.

1439
Partnership law—on this point I very much agree with my noble friend Lord Phillips of Sudbury—has proved a flexible and effective way of carrying on certain kinds of business, particularly in the professions. It has two defects which will be cured by the Bill: one is unlimited liability and the other, which applies in England but not in Scotland, is the lack of separate legal personality.
The earlier draft of the Bill contained a provision that the neutral rights and duties of the members of an LLP should be governed, subject to the provisions of any agreement between the members, by the rules and principles which would apply if the law relating to partnerships applied to them. No such provision appears in the present Bill. I ask the Minister, why not?
Partnership law provides a useful and necessary default code on many matters not covered by an agreement. The noble Baroness gave a list of the issues which are covered by partnership law and would need to be covered in the case of LLPs. I would add the principle of the duty of partners to act with good faith towards each other, which is perhaps the central principle of the whole of partnership law. I very much hope that will continue to apply to LLPs. It seems to me that the relevant provisions in partnership law are much more appropriate for LLPs than the equivalent provisions in company law.
The Law Society and the Institute of Chartered Accountants are both concerned about the removal from the draft Bill of the provision to which I earlier referred. Unless the Government can produce a convincing reason to the contrary, I believe that the provision of the previous draft should be brought back.
I have two final points, both relating to the consequences of insolvency. The first concerns the importance of professional indemnity insurance, which provides an indemnity against liability for professional negligence. This means that the firm and its partners—other than the one or ones guilty of negligence—are not at risk of insolvency for liability within the cover provided by the insurance. A number of professions, including solicitors and chartered accountants, require indemnity insurance under their professional rules. But not all LLPs providing services will be covered by the rules. Of course, professional indemnity insurance can be very expensive and there may be a temptation to say, "Now that we have limited liability, let us save money by cutting back on insurance". That would be extremely unfortunate.
Self-regulation is best, but the Government should give themselves a reserve power to impose a professional indemnity insurance requirement on classes of LLPs which are not required to do so by a professional body or where the professional body's requirements are insufficient.
There is another problem. Professional indemnity insurance does not help the ordinary creditors of the
1440
LLP or the partnership. At paragraph 45, the Trade and Industry Committee said:
"We are none the less uneasy at the prospect of introduction of this new vehicle destitute of either minimum capital requirements or guarantees from members, and dependent on the perceived likelihood—or hope—that there will be some LLP assets available to creditors".
I share the unease of the committee, particularly because insolvent LLPs will have, in most cases, very few realisable assets. As usual, the banks will be okay because they will insist on secured personal guarantees from the members of the LLP. But, again as usual, unsecured creditors will get little or nothing.
I am particularly concerned about the position of employees of LLPs. It is more difficult to state the problem than to provide the answer. I wonder whether, for example, the Government have considered the possibility that if the assets of an LLP are insufficient to meet in full debts due to or in respect of employees—which are preferential debts in insolvency law, and that includes four months' salary or wages—the members of the LLP should continue to be personally liable for that balance, even though their liability for other debts is limited. That is put forward merely as a suggestion, not as a firm proposal. The Government should look at such issues during the course of the Bill.
Having said that, I am happy to conclude by repeating our general welcome for this Bill in principle.
6.36 p.m.
Lord McIntosh of Haringey: My Lords, I am grateful to all noble Lords who have taken part in the debate. I am particularly happy to join in the congratulations given to the noble Lord, Lord Sharman, for an excellent maiden speech. It was not only well informed but delivered with almost no notes. That is the true test of a maiden speech. His speech was very largely in support of the Government. All maiden speeches should follow that rule.
I was slightly taken aback by the noble Lord, Lord Goodhart, saying that the title of the Bill was misleading. It depends on how one reads it. He read it as being a "Limited Liability for Partnerships Bill", whereas we read it as being a "Limited Liability Partnerships Bill"—in other words, a description of an entity which will be created as a result of the Bill. If we take our interpretation, on the whole it would be agreed that the short title of the Bill properly describes that new entity and, therefore, is not misleading.
The noble Baroness, Lady Buscombe, started by describing the Bill as unnecessarily complex. She then went on to list a whole range of things which she thought ought to be in the Bill because they were included in partnership law and appeared to be being dropped from partnership law. The noble Lord, Lord Goodhart, made the same point with a rather different emphasis.
There is no diminution of the responsibilities of partners in partnerships. We are attempting to create a new business entity which, in effect, combines the best of both worlds. It gives what everyone has acknowledged is the enormous privilege of limited

1441
liability, but it demands in return many of the obligations—indeed almost all of the obligations—required of companies. It does so in such a way that everyone who has been consulted—and they have been not only professional firms and still less only large ones—believes it appropriate. If we were to include all the obligations of partnership as the noble Baroness, Lady Buscombe, would wish us to d o, the Bill would be very much longer and more complex than it is now. I am not sure that we would achieve her objective—
Lord Goodhart: My Lords, I am grateful to the noble Lord for giving way. Could not that result be achieved by reinserting the one short subsection that appears in Clause 6 of the previous draft?
Lord McIntosh of Haringey: My Lords, we could certainly consider that matter. As regards the drafting of the Bill and the fact that in my opening speech I referred to a number of government amendments, as it is known, and as I said, we have carried out intensive consultation and taken the views of the Trade and Industry Committee in another place. We published in July a draft Bill and regulations. We thought that the right thing to do, even though our thinking had moved on to a certain extent, was to bring before your Lordships the draft Bill on which consultation had taken place so that people were not looking for differences between the July 1999 version and anything which might subsequently come to mind. That means that we have had further thoughts to which I have referred. It also means that we are open to discussion about other matters which noble Lords may wish to raise.
Baroness Buscombe: My Lords, I thank the Minister for giving way. Perhaps I did not make myself clear. I was referring to understanding what the Bill meant. So much of the material is not on the face of the Bill but in the regulations. To understand them one has to refer to the Companies Act and the Insolvency Act. So understanding the Bill has become rather complex.
Lord McIntosh of Haringey: My Lords, I cannot accept that criticism for two reasons. The first, simple reason is that the Delegated Powers and Deregulation Committee has accepted that the balance between secondary and primary legislation is appropriate. That has always been a matter of prime importance in this House. Basically, if it does not like it, the Government will not get away with it. The second reason is that the regulations are intended to do something rather different from most regulations. They apply, where appropriate and with appropriate modification, the Companies Act and the Insolvency Act to this new business entitity. It is right that they should refer to that legislation. It is right that the provisions should be subject to regulation because the Companies Act and the Insolvency Act are themselves subject to change. If we were to bring all these matters onto the face of the Bill, in the context of the review of company law which is taking place and of the insolvency Bill, which is to
1442
come before Parliament this Session, we would risk enacting legislation which would have to be amended very rapidly. That is not a good idea.
Lord Phillips of Sudbury: My Lords, does not the Minister agree that the Title of this Bill is Limited Liability Partnerships. It does not contain a definition of limited liability, which misses the heart of the matter.
Lord McIntosh of Haringey: My Lords, I do not agree. Limited liability is defined by analogy with the limited liability available to directors and shareholders of a company.
Lord Phillips of Sudbury: My Lords, but where is that in the Bill?
Lord McIntosh of Haringey: My Lords, the noble Lord is a brave and solitary voice on these matters. I respect and admire him for it. Clause 1(3) of the Bill states,
"with such liability on the part of its members to contribute to its assets in the event of its being wound up as is provided for by virtue of this Act".
It has always been our intention that if a member of a limited liability partnership is negligent—rather like a professional person who gives negligent advice to his client—then both the limited liability partnership and the member who gives negligent advice would be liable. That is the restriction on limited liability that is at the heart of this Bill.
Lord Phillips of Sudbury: My Lords, once again I am grateful to the Minister for giving way. The noble Lord said,
"by virtue of this Act".
That is in subsidiary legislation and not on the face of the Bill.
Lord McIntosh of Haringey: My Lords, that is because the subsidiary legislation is the adaptation of company and insolvency legislation to this new business entity. That is why it is in the form of regulation.
I was asked by other noble Lords whether the changes in regulations would be subject to consultation. As it is known, we had very full consultation on the regulations which were finally published in July. We shall be consulting on any changes to that legislation and, as always, they will be subject to parliamentary approval. There is no attempt to sneak anything past Parliament or the business community. That is the last accusation that can be made to this Government.
The noble Baroness, Lady Buscombe, suggested, as did some of the consultees, that we should require an agreement between members before registration or provide a default agreement. We are sympathetic to the idea of a safety net by way of short provisions such as Section 24 of the Partnership Act 1890. With the representatives of those who have been consulted, we have been looking at how that can be achieved through

1443
secondary legislation. The power in Clause 14 would be wide enough. That would deal with all the areas that the noble Baroness mentioned such as share capital, profits, access to the books and so on.
She said that Clause 4 does not deal with the retirement of members. Indeed not. It is important that members should not be able to walk out on a partnership which they suspect may be in difficulties. They may be part of those difficulties. It would not be an attractive proposition if they were able to walk out without the agreement of other members.
The noble Baroness was concerned that Clause 6 should not mean that members are treated as employees. She is quite right. It is our intention to make sure that members should not be regarded as employees because they are members. We shall look to see whether it is necessary to amend the Bill in that way. Broadly, the noble Baroness approved of the provisions in Clause 10 as regards tax neutrality. I am grateful for that.
As regards Clause 8, the noble Baroness was afraid of the role of the designated member. That is very specific and similar to the role of the company secretary. It includes a number of the powers placed on a company secretary under the 1985 Act such as the signing and filing of the annual return, the approval and signing of the annual accounts and filing them with Companies House besides other accountancy and audit functions. It is desirable to keep the concept of a designated member for those purposes so that the authorities know who to approach. There are also provisions in the Companies Act 1985 concerning what happens if there is a breach of obligations.
Both the noble Baroness and the noble Lord, Lord Goodhart, referred to Section 214A of the Insolvency Act. The noble Baroness thought that it was onerous and should be removed, but the noble Lord, Lord Goodhart, believed that it should be on the face of the Bill. I do not know that I can reconcile those two positions. There has been a great deal of controversy about the claw back provision if members leave within two years of the winding up or if they siphon off funds within that time. Again, we shall consider the results of the consultation. We are certainly not going to be able to satisfy both the noble Lord and the noble Baroness—probably neither of them.
Disagreement was expressed by the noble Baroness, Lady Buscombe, about disclosure of the remuneration of the members. However, the noble Lord, Lord Sharman, and other noble Lords expressed their welcome for that. I shall take the consensus of the House that our provisions are appropriate. The noble Baroness also asked for provision for merger accounting to be made in the regulations. However, the Government and the consultees felt that the Bill adequately achieves that purpose.
I was interested to hear the views of the noble Lord, Lord Sharman, on joint and several liability. However, as he knows, the view of the Law Commission was against a fundamental review of joint and several liability, mainly on the basis that if any change were
1444
made it would be bound to benefit the potential wrongdoer rather than the punters—as I always call them. For that reason, we turned against such a solution.
My noble friend Lord Haskel queried the issue of the liability of members. A member of an LLP who is a professional will owe a duty of care to his clients. If he gives bad advice to his clients he will be potentially liable for the whole extent of his assets. I believe that there is some confusion about the degree of protection that exists even for directors of limited companies. Any limited company that requires working capital of any size has to go to the bank for finance. The bank will not provide loans, overdraft facilities or any service of that kind without personal guarantees from the directors who are seeking it. I know this from personal experience because on many occasions I have had my house in hock to the bank—potentially in hock: I have never actually lost it—simply as a director of a limited company. I do not believe that members of limited liability partnerships will be any better off.
Perhaps I may summarise my response to the noble Lord, Lord Lucas, by saying that we would of course be delighted to meet him to address his concerns. I tried to address a number of them—as I understood them—earlier today in a letter. However, we shall certainly wish to talk to the noble Lord about the important issues he has raised on the applicability of this entity to venture capital and to property. Those are the other uses of the LLP structure which is being created by the Bill. I believe that I have dealt as best I can with the issues of primary and secondary legislation, with consultation on the revised regulations, and with the reasons why so much of the Bill must be implemented by regulation.
As I said earlier, the noble Lord, Lord Phillips, was a brave and lone voice and I respect him for that. However, I shall be interested to see in what way he intends to express his point of view by amendment to the Bill. I suspect that if he really wanted to pursue the matter, he should have put down an amendment that the Bill be given its Second Reading in six months' time. I think that the noble Lord has such a fundamental objection that there is little I can do to reassure him. However, I can say—from a personal point of view—that when I first saw the Bill and read the arguments for it, my immediate reaction was to say that this is an enormous privilege. It is the punters—the potential creditors; that is, the suppliers and customers—who must be protected. All my questions to officials on the meaning of the Bill were directed to that end rather than in thinking that the professions and their members were likely to suffer in any way from the provisions of the Bill.
My noble friend Lord Goldsmith also raised the wider issue of joint and several liability. I believe that I have already explained why the Government will not pursue that more general point. However, I very much agree with him that we shall need the vigilance of the courts in order to ensure that the public know with whom they are dealing. I very much welcome the support given by my noble friend to financial disclosure, not only of remuneration, but much more

1445
importantly, the publication of the accounts of the LLP. That is a fundamental issue. I agree with my noble friend and all noble Lords who spoke on this matter that nothing in the Bill must be interpreted as being tolerant of reduced professional obligations by any of the professions who choose to take up this new entity.
Many noble Lords have pointed out—as have I ad nauseam—that the Bill provides an enormous privilege and it must be used responsibly. The Bill has been drafted to ensure that it can only be used responsibly and not for tax avoidance purposes or to avoid transparency in business relationships. However, if there is any way that noble Lords can show us that the measure has been framed wrongly for that purpose, then we shall be sympathetic to appropriate amendments at later stages.
The Government's intentions in putting the Bill forward are entirely transparent. I believe that we have achieved the right balance, but we shall be happy to listen to the kind of informed comment and criticism that we have heard today as the Bill proceeds through the House. I commend the Bill to your Lordships.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Dental Auxiliaries (Amendment) Regulations 1999
6.56 p.m.
Lord Burlisonrose to move, That the draft regulations laid before the House on 2nd November be approved [30th Report from the Joint Committee, Session 1998–99].
The noble Lord said: My Lords, on behalf of my noble friend Lord Hunt of Kings Heath, I beg to move the Motion standing in his name on the Order Paper. These measures, which have the support of both dental auxiliaries and dentists, should be seen in the context of two key elements of government policy: improving the quality of public service, including the National Health Service; and deregulation where it can be carried out without compromising the protection of the public.
The dental auxiliaries concerned are dental hygienists and dental therapists. While working under the direction of a registered dentist, dental hygienists may scale and polish teeth and dental therapists may, in addition, extract deciduous teeth from children and undertake simple fillings.
The amendments have been requested by the General Dental Council, which is required to maintain rolls of registered dental hygienists and dental therapists under Section 45 of the Dentists Act 1984. The amendment to regulation 2 of the primary regulations would enable dentists and any members of the public who choose to consult the rolls for dental hygienists or therapists to identify those who have additional qualifications. It could help dentists recruit auxiliary staff to their practices or enable patients to select practices with any special expertise they require.
1446
The amendment to regulation 4 simplifies the procedure by which the hygienists and therapists apply to remain on the rolls. The primary regulations require them to complete an application form to submit with the retention fee. With the increased use of standing orders and direct debit mandates for paying regularly recurring charges, the form has become redundant. Receipt of the payment gives the General Dental Council sufficient notice that the hygienist or therapist wishes to remain on the roll.
The amendment to regulation 6 provides for increases in the fee for retention on the roll from £20 to £25 and for restoration to the roll from £5 to £10. The fees were last increased in 1996. Even with the increases, the fees are less than a quarter of those paid by dentists. The amendments to regulations 23 and 27 provide for both dental hygienists and therapists to insert temporary dressings. The reason for this minor extension in their permitted duties is that, while treating patients, both hygienists and therapists sometimes find broken or missing fillings. If all the registered dentists in the practice are engaged in treating other patients, they can only advise the patient to return as soon as the dentist is next free. With a temporary dressing inserted, the patient can make a new appointment to see the dentist at a mutually convenient time.
I hope that my explanation has been helpful and that the House will support the regulations.
Moved, That the draft regulations laid before the House on 2nd November be approved [30th Report from the Joint Committee, Session 1998–99].—(Lord Burlison.)
7 p.m.
Lord Colwyn: My Lords, when dental matters are discussed in your Lordships' House one can always rely on the noble Baroness, Lady Gardner of Parkes, to say a few words. However, she was on the Woolsack and she has no doubt just left the Chamber for a well-earned rest.
I welcome the regulations. I am delighted that the word "denturism" was not in the Minister's speech. It was discussed in the First Standing Committee on Delegated Legislation in the other place, but I do not think it is relevant to the regulations. However, I am slightly concerned about the 25 per cent increase in the General Dental Council retention fee. I am about to pay my own retention fee for next year, which I know has increased. I am not sure by exactly how much, but I do not think it is 25per cent. However, in view of the Government's demand for efficiency and savings, I hope that they will keep an eye on any similar increases which might affect the dental profession.
I am delighted to see regulations 6 and 7. They legalise something which most caring hygienists and therapists have been doing for many years. If a filling was knocked out while the teeth were being cleaned it would be ridiculous if a temporary dressing could not be put in place. That has been done for many years and it is now to be legal.

1447
Perhaps I may conclude by asking the Minister two questions. First, can he confirm that with the new regulations all patients who are treated by therapists and hygienists still have to be seen by a general practitioner and have that course of treatment prescribed? Secondly—I should know the answer to this question as chairman of Dental Protection—in view of the fact that the Health Act now makes indemnity compulsory for doctors and dentists, can he say what is the status of therapists and hygienists? Do they have to have indemnity in order to carry out their treatments? I welcome the regulations.
Lord Burlison: My Lords, I thank the noble Lord for his helpful remarks. I know that he is a practising dentist and therefore has much greater knowledge than I in this area. It is helpful both to myself and to the industry generally that he should comment on the regulations.
The noble Lord asked about the annual retention fee for dentists. There has been a 50 per cent rise. The noble Lord is probably not too happy about that. If he does not already know, it rises from £90 to £135. The noble Lord also asked about dental auxiliaries and whether the dentist will still oversee their work. That will be the position because they work under the supervision of the dentist or a dental practice. It is for the dentist and the dental auxiliary to agree the detailed working arrangements.
The noble Lord asked about indemnity. I can confirm that it is the Government's intention to put general dental practitioners under a statutory obligation to have personal indemnity insurance. The insurance would cover the actions of the dental auxiliaries as they would be working under the supervision of the dentist.
On Question, Motion agreed to.

Maternity & Parental Leave etc. Regulations 1999
7.4 p.m.
Lord Sainsbury of Turvillerose to move, That the draft regulations laid before the House on 22nd November be approved [1st Report from the Joint Committee].
The noble Lord said: My Lords, we are here to debate the maternity and parental leave regulations which will fulfil our manifesto commitment to help working parents balance their work and family responsibilities.
Last year, the Fairness at Work White Paper set out our industrial relations agenda of minimum standards underpinned in law, based on partnership. This agenda encourages employers and employees to work together towards a better climate of employment relations. The White Paper set out our agenda for a family friendly future—a package of decent standards and rights at work to help people balance their work
1448
and family commitments; to lay down a simple bottom line in law, but to promote a partnership approach for better standards.
The White Paper set out our proposals to introduce parental leave and to simplify and improve maternity rights. We set our sights on a coherent package of rights embodied in a single set of regulations. In the White Paper, we gave a commitment to consult further where necessary. In August this year, we published a consultation document on our draft maternity and parental leave plans, followed up by draft regulations in September. We received more than 300 responses. Not surprisingly, the consultation on our draft regulations revealed different priorities between employers and employees. Employers want the flexibility to plan parental leave around the operation of the business; employees want the flexibility necessary to fit in with the demands of their caring responsibilities.
What was clear was that we faced a challenge in implementing parental leave in a way that would satisfy the concerns of business and the needs of parents. We believe our parental leave scheme meets this challenge and achieves a fair and sensible balance between the needs of the business and of the workforce. We are also implementing the regulations with a light touch, as we said we would. We are guaranteeing minimum standards, but we are enabling employers and employees to make their own arrangements as far as possible through collective, workforce or individual agreements on how to introduce parental leave best suited to the requirements of all concerned.
The regulations guarantee minimum standards which every parental leave scheme will need to meet. Both parents, mothers and fathers, will be able to take 13 weeks' parental leave to spend with their child until the child's fifth birthday. Adoptive parents will be able to take leave to spend time with their adopted child over a five-year period from the date of placement for adoption. In addition, we are providing increased flexibility for parents of disabled children to help them cope with the extra demands they face. Parents of children who receive disability living allowance will be able to take parental leave up until their child's 18th birthday.
Individual workplaces can come to their own arrangements about practical matters such as how much notice the employer should give, the circumstances when postponement may be acceptable and whether leave can be taken in single days or longer periods, or a mixture of these. This approach has been welcomed by both sides of industry.
Where agreements are not reached, then the fallback scheme will automatically apply, setting out a simple formula so employees will know how to exercise their rights. Under the fallback scheme, most parents will be able to take leave in blocks or multiples of one week, up to four weeks a year. Parents will need to give their employer three weeks' notice when they want to take the leave, and employers can postpone leave for no more than six months if the employee's absence would

1449
unduly disrupt the business. We have recognised, however, that there are times when postponement may be unacceptable. Fathers can take leave immediately after the birth of their child, and adoptive parents on the placement of a child in their family home, with the assurance that their employer will not be able to postpone this leave.
In addition, under the fallback scheme, parents of disabled children can take leave in blocks of less than one week, which will mean that they can take the occasional day off work to accompany their child to medical appointments. The link to disability living allowance provides clear evidence of a child's disability and covers children who have learning disabilities or physical impairments.
In implementing parental leave, we are putting in place minimum standards, but we want employers to go beyond those standards where they can. Let me be clear. Minimum standards are essential, but they are only the start. We are laying down a baseline on which I hope employers will build.
These regulations are ground-breaking. They mean that parents will not have to face the dilemma of being a good parent or holding down a job. Parents can take leave, safe in the knowledge that they are protected from dismissal or less favourable treatment for taking the leave, and that they will be able to return to their same job. In some cases, where the leave lasts for more than four weeks and it is not practicable for an employer to hold open the employee's job, the employee will be able to return to a similar job, with terms and conditions at least equivalent to the previous one.
In our Fairness at Work White Paper, we gave a commitment to improve and simplify maternity rights. The Maternity and Parental Leave etc. Regulations will increase the length of ordinary maternity leave from 14 to 18 weeks, in line with statutory maternity pay. They will reduce the qualifying period for additional maternity leave from two years to one year, which will mean that more women will be able to spend up to 40 weeks at home with their new baby.
At the same time, we have tackled the complexity of existing maternity rights, bringing clarification to such issues as the employment contract, and simplifying the notice requirements. That has been almost universally welcomed and I am pleased to report that our efforts have been greeted with enthusiasm. Perhaps I may briefly quote from the Incomes Data Services journal, the IDS brief, which said that the first thing to be noted about the new rules is that,
"they will put in place a maternity rights scheme that is substantially clearer and easier to operate in practice than the one that currently exists".
The regulations set down a landmark for working parents across the country. They will help parents balance the conflict between their work and family commitments, and give them the security they need at work. I hope that noble Lords will support the Government today in turning these regulations into a meaningful reality for millions of working parents in this country. I beg to move.
1450
Moved, That the draft regulations laid before the House on 22nd November be approved [1st Report from the Joint Committee]. —(Lord Sainsbury of Turville.)
Baroness Buscombe: My Lords, I thank the Minister for explaining the regulations. There is one matter upon which I should like to question him. When he says that the regulations mean that parents will not have to choose between being a good parent and holding down a job, does he mean that someone who does not choose to take parental leave is not a good parent?
Lord Sainsbury of Turville: No, my Lords, we are not making judgments. The nature of all this legislation is to give people the choice. If they do not want to take the leave, it is not for us to comment. We want to make certain that people have the opportunity if they so desire. I think we can all unite in that approach.
We live in a changing society. The traditional image of the breadwinner husband and the home-making wife will become an outdated concept as we move into the 21st century. More women are entering the labour market, and more men want to play a role in caring for their children. Family friendly employment practices can help people care for their family without risk to their jobs.
Taken with the new rights in regard to time off for family emergencies, these rights will foster a culture change in the workplace. We shall be working with the business community over the coming months to promote good practice in balancing work and home commitments among employers; and we shall encourage business to go beyond the legal minimum in its own interests. The maternity and parental leave regulations represent a significant step forward towards a family friendly culture. I commend the regulations to the House.
On Question, Motion agreed to.

Pesticides (Maximum Residue Levels in Crops, Food and Feeding Stuffs) (England and Wales) Regulations 2000
7.13 p.m.
Baroness Haymanrose to move, That the draft regulations laid before the House on 17th November be approved [1st Report from the Joint Committee].
The noble Baroness said: My Lords, these regulations are essentially a consolidation of regulations specifying maximum residue levels (MRLs) introduced in 1994 and five subsequent sets of amending regulations. They also introduce MRLs for one new pesticide.
The regulations are something of a hybrid. They include 9,000 MRLs adopted by the European Community implemented through powers in the European Communities Act 1972. There are also

1451
approximately 2,000 national MRLs which have been adopted under the Food and Environment Protection Act 1985.
As I have indicated, virtually all the MRLs have been carried forward from earlier statutory instruments, but there are also 160 new MRLs for a recently approved pesticide—a fungicide called azoxystrobrin.
In the case of the more numerous EC MRLs, the regulations essentially make it an offence to market produce with residues above the appropriate MRL. The fine for such an offence is £5,000 on summary conviction or an unlimited fine on indictment. Similar penalties for breaches of the national MRLs are prescribed by the Food and Environment Protection Act 1985. The regulations also provide powers to seize produce which exceeds any EC or national MRL.
The regulations extend to England and Wales only. The Welsh Assembly approved them in draft on 10th November. Separate regulations which will be identical in substance are planned in Scotland and Northern Ireland.
I should briefly mention that MRLs for pesticide residues are sometimes represented in the media as safety levels. It is important to stress that that is not strictly the case. They are based on the maximum residue occurring in a crop when a pesticide is used as approved. To understand their significance it is helpful to consider briefly how MRLs are derived.
The starting-point is crop trials for a particular pesticide to establish the maximum residue level which will occur in a crop. The next stage involves a scientific risk assessment. The final stage in the process is for a decision to be taken on the safety of a particular pesticide use and the corresponding MRL.
I shall next describe the practical purposes served by MRLs and their link with the pesticide residues surveillance programme undertaken by government. First, MRLs provide a check that pesticide approvals have been soundly based and that the scientific assessment reflects what is actually happening in the field. Secondly, as I have indicated, MRLs are designed to reflect the approved use of a compound. They thus provide a check that farmers and growers are using pesticides in accordance with their instructions for use. Finally, they provide a standard for trade, particularly with other member states of the European Community, but also more generally. That is also a standard against which we can judge the acceptability of imported produce. MRLs apply equally to UK produce and to imports.
Those points are monitored through the pesticide residues surveillance undertaken by government. The programme, organised through the Working Party on Pesticide Residues, involves the collection of 2,000 to 3,000 samples of food each year, mainly from retail outlets around the United Kingdom. The current cost of the programme is £1.7 million per year. A substantial amount of monitoring is also conducted by the food and farming industries.
1452
MRL exceedances are around 1 per cent each year. Most of those are sporadic, occurring at a very low frequency in any particular crop. However, occasionally there have been repeated breaches of a particular MRL. In that particular case we can take, and have taken, enforcement action and collect samples direct from growers, importers or retailers with a view to bringing prosecutions.
In conclusion, regulations on maximum residue levels represent a key part of our pesticide controls. The consolidation of the existing instruments into a single set of regulations maintains those controls and will clearly be helpful to all those who work with the regulations. I commend them to the House. I beg to move.
Moved, That the draft regulations laid before the House on 17th November be approved [1st Report from the Joint Committee]. —(Baroness Hayman.)
Lord Luke: My Lords, I thank the Minister for introducing the regulations. Clearly there is a need to lay down maximum residue levels in relation to the food that we eat. The Minister is right to say that the regulations are a key part of the regulatory process for approval of the use of pesticides in this country.
We on this side of the House support any measures that will contribute to food safety. The agri-chemical industry should be congratulated on the fact that more than 98 per cent of tested samples had low MRLs and 73 per cent had MRLs at zero. That indicates that, practically speaking, all food produced in this country is safe. It follows that the vast majority of British farmers and producers are using pesticides in a wise and sensible way. That is a good reason why the proposed pesticides tax makes no sense at all.
I am sure that the Minister is aware of the widespread public concern about the level and quality of inspection of imported foods. Most of it is perfectly wholesome and meets all our requirements. However, the current disquiet over inadequate labelling of imported food, together with doubts about the stringency of tests for residuals in both EU countries and the wider world, has contributed considerably to that concern. Can the Minister tell us what proportion of imported food is physically tested? Can she assure us that no foods imported from abroad have been grown with substances whose use is banned in this country? Having said that, we welcome the regulations.
Baroness Miller of Chilthorne Domer: My Lords, we welcome regulations that make clearer the level of pesticides in foods. I echo the concern just raised by the noble Lord. A number of well publicised cases have arisen over the past year involving lettuces imported from abroad. Often the amounts of pesticides in imported food do not match up to the very low levels found in British food. As to these regulations, in a couple of cases the levels of permitted pesticides have

1453
been raised compared with the previous position. Can the Minister tell the House why that is so? The Minister referred to the scientific risk assessment related to pesticides. The long-term effect of these pesticides is unknown. Most of these pesticides have been in use for a maximum of 40 or 50 years, whereas the scientific risk assessments look at a very short timespan. I should be interested to know what kind of research is going on into the cumulative and long-term effect of pesticides. In the meantime, we welcome the clarity of the regulations.
Baroness Hayman: My Lords, I am grateful for the fact that both speakers have welcomed the clarity of the regulations which essentially consolidate the position rather than change anything, except in respect of one particular pesticide whose name I did not pronounce very well. A question was asked about produce from other member states that contains levels of residues which exceed those in UK produce. It is difficult to make exact comparisons because different crops may be grown in different climates and be treated with different pesticides. The percentage of imported produce that exceeds MRLs tends to be a little higher than for UK produce but it is difficult to draw absolute conclusions. It is important that when those excess levels are identified action is taken. That action may be against domestic producers, if appropriate. Certainly, in the case of chlormequat in pears, which was a matter of concern, we took immediate action with the governments concerned. Following that, the Belgian Government withdrew the use of chlormequat. I believe that that proves that the monitoring process works effectively.
As to the issue of raised residues, the MRLs reflect use. Therefore, some will be raised with new usage. Essentially, these regulations do not make a major change but consolidate the position. The noble Lord, Lord Luke, referred to slightly broader issues; for example, the labelling of country of origin. We have dealt with that under various headings at different stages, for example earlier today. There is concern about that. The noble Baroness, Lady Miller, asked about research into long-term effects. The risk assessment process for pesticides takes account of possible long-term or cumulative effects, but the noble Baroness is right to point out that we need to look at interactions and effects over long timescales. Some leading edge research takes place in this country. Last week I visited the Central Science Laboratory in York and saw for myself some of its work on pesticide residue testing. That work has altered the scientific assessment process internationally. Therefore, we are leading the field here.
The noble Lord, Lord Luke, tempted me to enter into the arguments about the pesticide tax. In view of the time and the fact that we have been reminded of family responsibilities, I must tell the noble Lord that that is a matter For the Chancellor of the Exchequer.
On Question, Motion agreed to.

Scotland Act 1998 (Transfer of Functions to the Scottish Ministers etc.) (No. 2) Order 1999
7.25 p.m.
Baroness Ramsay of Cartvalerose to move, That the draft order laid before the House on 24th November be approved [2nd Report from the Joint Committee].
The noble Baroness said: My Lords, the draft Scotland Act 1998 (Transfer of Functions to the Scottish Ministers etc.) (No.2) Order 1999 provides for the transfer of two regulation-making powers from a Minister of the Crown to Scottish Executive Ministers. Earlier this year both Houses approved a Private Member's Bill tabled first in another place by the honourable Member James Clappison and then, in this House, by the noble Lord, Lord Soulsby of Swaffham Prior, with able support from the noble Baroness, Lady Wharton, and other noble Lords from all Benches. Understandably, none of them is in his place tonight. However, I believe that it is appropriate to congratulate all of them on a very worthwhile and worthy piece of legislation.
The Breeding and Sale of Dogs (Welfare) Act 1999, which primarily aims to improve the welfare of dogs at licensed breeding establishments, received Royal Assent on 30th June and will come into effect on 30th December 1999. This is a valuable animal welfare measure which received all-party support in its passage through both Houses. It may be helpful if I briefly remind noble Lords of its main provisions. The Act introduces additional requirements for the licensing and inspection of dog-breeding and rearing businesses. It makes it a condition of the licence that bitches are not mated if they are less than one year old, that they do not give birth to more than six litters of pups each and that pups are not born before the end of a period of 12 months from when the bitch last gave birth.
The Act also requires the licence holder to keep accurate breeding records in a form prescribed by regulations which must be made available on inspection. It provides for more severe penalties for breaches of the legislation. It restricts the places where puppies can be sold to licensed premises or pet shops, and it requires dogs sold by licensed breeding establishments to licensed rearing establishments or pet shops to wear identification tags or badges containing information, in addition to where they were born, as is specified in regulations.
Two of the provisions that I have mentioned involve conferring regulation-making powers on the Secretary of State to be exercised by statutory instrument. These relate to the breeding records which must be kept and made available for inspection by the licensed breeder and the information, in addition to the place where the dog was born, that must be shown on the identification tag or badge of certain dogs sold by such establishments.
These regulations are currently subject to negative resolution procedure in the UK Parliament. However, in terms of the Scotland Act 1998 matters relating to

1455
dogs and their welfare fall within the devolved competence of the Scottish Parliament. It should, therefore, be for the Scottish Executive Ministers to make the regulations relating to Scotland, subject to the scrutiny of the Scottish Parliament. Such powers contained in enactments made before the Scotland Act have already been passed to the Scottish Executive Ministers by the transfer arrangements contained in that Act. However, the Breeding and Sale of Dogs (Welfare) Act was enacted after the Scotland Act but did not provide Scottish Executive Ministers with the necessary powers.
Subject to approval, the draft Order in Council will address that anomaly by transferring the regulation-making powers to the Scottish Executive Ministers. The draft order does not transfer any additional legislative powers to the Scottish Parliament; it merely transfers regulatory powers to Scottish Executive Ministers for a subject that Parliament has already agreed should fall within the competence of Scottish Executive Ministers and the Scottish Parliament. On that basis, I hope that noble Lords will feel able to support the order.
Moved, That the draft order laid before the House on 24th November be approved [2nd Report from the Joint Committee].—(Baroness Ramsay of Cartvale.)
The Earl of Courtown: My Lords, I thank the Minister for her clear explanation of the order. I congratulate also my noble friend Lord Soulsby of Swaffham Prior—unfortunately he is not in his place—and my honourable friend in another place on steering the measure through both Houses of Parliament. We support the order.
On Question, Motion agreed to.

Producer Responsibility Obligations (Packaging Waste) (Amendment) (No. 2) Regulations 1999
7.30 p.m.
Baroness Farrington of Ribbletonrose to move, That the draft regulations laid before the House on 25th November be approved [2nd Report from the Joint Committee].
The noble Baroness said: My Lords, I beg to move the first Motion standing in the name of my noble friend Lord Whitty.
Your Lordships have before you today changes that the Government propose to make to packing regulations. These changes complete the review of the regulations, although we are keeping under review the recovery and recycling targets for 2001 so that we can assess what these should be in the light of returns for 1999.
The regulations set target levels of recovery and recycling of packaging waste designed to help the UK to meet the mandatory targets in the EC directive on
1456
packaging and packaging waste—that is 50 per cent recovery, 25 per cent recycling—to be met by 2001. The Government want to see as simple a regulatory system as is compatible with delivering the directive targets, but this system must also be fair and equitable and place a minimum burden on business. We therefore want to avoid introducing unnecessary regulation provisions and take whatever decisions are necessary to create a system which will be capable of delivering the UK targets.
The changes under discussion today stem from a review of the regulations and their operation carried out by the Advisory Committee on Packaging. They have been consulted on extensively and reflect the wishes of business. They are intended to simplify and improve the original regulations and ensure that they are as equitable as possible.
Most of the changes reflect specific requests from business as well as seeking to ensure that the packaging regime is as equitable as possible. A strong deregulatory theme runs through these proposals: that is, the removal of wholesaler obligation, of the data forming the regulations to allow greater flexibility and more detailed guidance and of the special competition scrutiny regime for compliance schemes; and the exclusion from the regulations of approximately 9,000 businesses as a result of the proposed change in the turnover threshold from £1 million to £2 million in the year 2000.
The increased agency registration fee in 2000 is designed to ensure that the problem of free riding is addressed. In addition, businesses with a turnover of over £5 million will be required to provide a compliance plan to the Environment Agency or SEPA in Scotland showing that they have a convincing plan for discharging their legal obligations. It is also proposed that the agencies should publish their monitoring programmes and have greater power to monitor possible free riders.
We are proposing to reduce the percentage activity obligation used by converters to calculate their recovery and recycling obligations and increase by one point each the obligation of packfillers and sellers. We believe that the proposals before the House will ensure maximum recycling, provide a fair and equitable system which minimises the burden on businesses and simplify the regulations. We believe that this framework should provide the greatest chance that the UK can meet its mandatory directive targets in 2001.
Moved, That the draft regulations laid before the House on 25th November be approved [2nd Report from the Joint Committee].—(Baroness Farrington of Ribbleton.)
Baroness Miller of Chilthorne Domer: My Lords, we welcome the regulations and the placing of more responsibility on producers to move further towards recycling and waste minimisation. There seems to be a move from landfill to incinerators rather than improved waste minimisation. Therefore in general we welcome the regulations and the exemption of smaller businesses from too onerous a burden.

1457
We have one concern as regards the infrastructure in place to help businesses fulfil that requirement. I have some experience of the infrastructure required to implement higher household waste recycling targets. We are concerned that the infrastructure might not be in place in industry to implement such increased targets. With that reservation, we welcome the regulations.
Baroness Farrington of Ribbleton: My Lords, I can assure the noble Baroness. I apologise. Did the noble Earl wish to speak?
The Earl of Courtown: My Lords, I thank the Minister for giving way. I was simply going to congratulate the noble Baroness on explaining the order. It is a complex area. The noble Baroness, Lady Miller of Chilthorne Dourer, is right to ask a number of important questions. I shall be interested to hear the answers.
Baroness Farrington of Ribbleton: My Lords, the only specific question following from the knowledgeable comments of the noble Baroness related to the concern to ensure that the infrastructure is in place. I can assure her that we shall continue to work closely with industry and with local government to ensure that our targets which are mandatory can be met.
On Question, Motion agreed to.

Non-Domestic Rating (Chargeable Amounts) (England) Regulations 1999
7.36 p.m.
Baroness Farrington of Ribbletonrose to move, That the draft regulations laid before the House on 25th November be approved [2nd Report from the Joint Committee].
The noble Baroness said: My Lords, I beg to move the second Motion standing in the name of my noble friend Lord Whitty.
On 1st April 2000 there will be a general revaluation of all non-domestic property. These regulations will phase in the impact of the revaluation on individual ratepayers through a transitional relief scheme.
Under the Local Government Finance Act 1988 revaluations must be carried out every five years. The purpose is not to increase the amount of rates paid nationally but to adjust the individual bills in line with relative movements in the property market. This means that at revaluation many ratepayers benefit with their rate bills being reduced but others will see their bills increased.
The transitional relief scheme will give businesses, in particular small businesses, time to adjust to the effects of the revaluation by limiting the size of annual increases in rate bills for the five-year life of the new rating list. Next year a small property—that is, one with a rateable value of less than £12,000, or in Greater London less than, £18,000—will at most be faced with
1458
an increase of 5 per cent in real terms. For large properties the maximum possible increase next year will be 12.5 per cent in real terms.
In later years larger maximum annual increases will be allowed in bills which are still less than the full bill based on new rateable values. For small properties the annual limits will be 7.5 per cent in real terms, but for larger properties they will rise to 15 per cent in the second year and thereafter will be 17.5 per cent a year in real terms. However, most properties will have either decreases in their bills or increases below these maximum levels.
The loss of rate revenue caused by phasing in increases will be made good by phasing in decreases of the bills for those who are benefiting from the revaluation. As their bills are falling they are best able to help meet the cost of the scheme. In the early years the reductions allowed will be less than in the later years, given that transitional relief costs most in the early years when the greater number of properties needing relief is present.
Next year the maximum reduction in the bill of a small property will be 5 per cent in real terms. For a large property it will be 2.5 per cent. But by 2004–05 any small property still having reductions in bills phased in will pay 25 per cent less in real terms than they were paying the year before. The equivalent figure for large properties will be 15 per cent.
I am pleased to say that this scheme has, in the words of the Financial Times, been praised by the business community as fair. As the Financial Times suggests, such praise is unusual in this area. We have consulted widely with the CBI and the chambers of commerce, which are satisfied that good consultation has taken place. I commend the regulations to the House.
Moved, That the draft regulations laid before the House on 25th November be approved [2nd Report from the Joint Committee].—(Baroness Farrington of Ribbleton.)
On Question, Motion agreed to.

Financial Statement and Budget Report
7.40 p.m.
Lord McIntosh of Haringeyrose to move, That this House approves the Government's assessment as set out in the Financial Statement and Budget Report 1999–2000, the Economic and Fiscal Strategy Report 1999–2000, and the Pre-Budget Report 1999 for the purposes of Section 5 of the European Communities (Amendment) Act 1993.
The noble Lord said: My Lords, as part of the process for multilateral surveillance in the European Union, the Government are required to send a report to the European Commission setting out our main economic policy measures. The purpose of the procedure is to help ensure member states' economic policies are consistent with the goals of the treaty. These include non-inflationary economic growth respecting the environment, a high level of employment and social protection, and raising the

1459
standard of living and quality of life. Section 5 of the European Communities (Amendment) Act 1993, usually known as the Maastricht Act, requires Parliament to approve the government report sent to the Commission for the purposes of multilateral surveillance.
The Government's strategy for economic policy is set out in the Economic and Fiscal Strategy Report and the Financial Statement and Budget Report, brought together in the government report, Budget 99. This House had the opportunity to debate these documents for the purposes of Section 5 of the European Communities (Amendment) Act 1993 on 26th May 1999. However, as noble Lords will be aware, it chose not to do so other than formally. The intention today is to debate the Pre-Budget Report published on 9th November 1999 which completes the material that forms the basis of the information we send to the Commission.
The Pre-Budget Report, which I shall call PBR, describes the Government's strategy to raise Britain's national economic potential and deliver the Government's central objective of high and stable levels of growth and employment and ensuring that the benefits of economic success can be shared by everyone.
The key elements of the Government's strategy, in categories matching the requirements of the Act, are delivering macro-economic stability, meeting the productivity challenge; increasing employment opportunity for all; ensuring fairness for families and communities; and protecting the environment. I shall deal with each of those in turn.
As regards delivering macro-economic stability, the Government's first priority is to secure economic stability and avoid a return to the boom and bust cycles that have been a feature of the British economy for the past 30 years. The Government dealt successfully with the problems of an economy in 1997 characterised by rising inflationary pressures, unsustainable consumer spending, a large structural deficit in the public finances and the global financial turbulence of last year, and are delivering economic stability.
The new monetary and fiscal policy frameworks are based on clear objectives, procedural rules and a greater degree of openness and transparency than has been seen in the past. By rigorously adhering to these new frameworks, early and decisive action has been taken which has enabled the Government to steer a course of economic stability. The challenge now is to lock in that stability and—by pressing ahead with our economic reforms to promote enterprise and fairness—secure rising living standards for all.
During the past year, inflation has remained around or at our target, and expectations of inflation 10 years on are now at 2.5 per cent compared with 4.3 per cent when the Government came to power. Having come this far, we will not relax our discipline. The PBR is based on meeting the inflation target of 2.5 per cent per year, not just this year, but next year, and the year after that.
1460
At the time of the last Budget, there were predictions of recession from experts and others, including the Opposition, with the Government forecasting much stronger growth than most independent forecasts of 1 to 1.5 per cent for 1999. But as economic prospects have brightened since March, independent forecasts for GDP growth in the UK have risen, coming closely into line with the Government's Budget forecast, making the Budget forecast among the most accurate.
The PBR forecasts GDP growth to be 1.75 per cent this year, 2.5 to 3 per cent next year and 2.25 to 2.75 per cent in 2001 and 2002—at all times consistent with meeting the inflation target. The forecasts for 2001 and 2002 are centred around the Government's neutral view of our economic prospects, based on a trend growth assumption of 2.5 per cent per year. But, taking a deliberately cautious approach which is supported by the National Audit Office, the projections for the public finances will continue to be based at the low end of the growth range at 2.25 per cent.
The Government will continue to lock in the structural improvement in the public finances they have achieved and avoid the mistakes of the past. In line with the Code for Fiscal Stability, the fiscal projections published in November 1999 in the Pre-Budget Report take into account the decision to take a more prudent and flexible Budget-by-Budget approach to the real increases on fuel and tobacco duty.
These interim projections of the public finances show that the current budget is expected to be in surplus by £9.5 billion this year. In subsequent years, the surplus is forecast to be £11 billion, £13 billion, £13 billion, £12 billion and £11 billion. Cyclically-adjusted public sector net borrowing projections show, however, that the fiscal stance is broadly unchanged from the last Budget.
Public sector net investment is set to almost double to 1 per cent of GDP by 2001 to 2002 and to reach 1.5 per cent of GDP by 2003 to 2004, beginning to address the years of neglect in public sector infrastructure. This remains consistent with a failing debt/GDP ratio. The PBR shows that public sector net debt is set to fall below 40 per cent GDP by March next year and remain below 40 per cent GDP over the economic cycle.
Based on prudent and cautious assumptions, audited by the National Audit Office, the Government are on course to balance the current budget over the cycle and meet our tough fiscal rules.
I turn to raising productivity. For too long, British investment has been too low and productivity increases too slow. This has meant that Britain's productivity performance lags behind that of other major economies. The Government have a strategy for closing this gap based on strengthening competition, promoting innovation and enterprise, improving skills, promoting investment and improving public sector productivity.

1461
The British economy needs high levels of investment and entrepreneurship. The Government have introduced a series of measures to promote investment and enterprise. For example, we have already cut mainstream corporation tax from 33p to its lowest ever level of 30p, introduced a starting rate of small business tax at 10 pence in the pound and cut small business tax from 23p, and introduced first year investment incentives which are of particular help to manufacturing.
On employment, the Government want a higher percentage of men and women employed than ever before. There are 700,000 more jobs in the economy than in 1997 and unemployment is now lower than at any time in the last 20 years. The Government's priorities are to move people from welfare to work, to make work pay and to ease the transition into work. The Government announced in the Pre-Budget Report that they were extending the New Deal for the under 25s to those over 25 in every part of the country. This would include offers of work, self-employment or training, backed up by advice counselling and mentoring. The Government are also introducing a national jobs phone-line so that the employment service can continually update unemployed men and women about new vacancies suitable for their skills and will be enhancing the New Deal for lone parents by inviting parents with children from the age of three to participate.
The Government are continuing to reform the tax and benefit system to make work pay. The new 10p rate, combined with the working families' tax credit increases, means a minimum income guarantee of £200 a week for a family with a full-time earner. No working family with earnings of less than £235 a week—that is about £12,000 a year—will pay net income tax from October 1999.
In order to build a stronger economic future, society needs to invest in today's children and give a better deal to families. The Government are pursuing an extensive programme to tackle the causes of poverty, especially child poverty, which they wish to halve by the end of the next decade and eliminate within 20 years.
The Government have already supported children through the largest ever increases in child benefit to £15 a week for the first child arid £10 a week for subsequent children. Targeted increases have also been made to allowances in income support and the new working families' tax credit and, from April 2001, the new children's tax credit, which replaced the married couple's allowance.
As a result of measures introduced in the last two Budgets, seven million families will be on average £740 a year better off and 800,000 children will be lifted out of poverty. The Government are also meeting their manifesto pledge that pensioners should share fairly in the nation's prosperity with a £100 winter fuel allowance this year. Over three million households will benefit from free TV licences for pensioners over 75 years old.
1462
The Government are committed to meeting their environmental objectives and will continue to explore the scope for using the tax system to meet their environmental objectives, building on the significant progress already made. The Pre-Budget Report announced further details of the new climate change levy, which will encourage energy efficiency m business and help to meet the United Kingdom's legally binding Kyoto targets for reducing greenhouse gas emissions.
The Government have reviewed the way that any increases in fuel duty are determined, and the Chancellor has decided that the appropriate level of fuel duties will be set on a Budget-by-Budget basis, taking into account the Government's economic, social and environmental objectives. Revenues from any increases in fuel duties, over and above inflation, will in future go straight to a ring-fenced fund for improving public transport and modernising the road network.
This Government are building a stronger economic future for Britain. This will give a better deal for the people of Britain; it will help us to meet our objectives of high and stable levels of growth and employment and to achieve a fairer society for all. These are the right economic policies for Britain. They are also in line with the objectives of the European Union. Approving this Motion tonight will enable the United Kingdom to meet its treaty obligations, to provide information and to participate fully in the important process of multilateral surveillance and economic co-operation, as provided for in Articles 99 and 104 of the treaty. I beg to move.
Moved, That this House approves the Government's assessment as set out in the Financial Statement and Budget Report 1999–2000, the Economic and Fiscal Strategy Report 1999–2000, and the Pre-Budget Report 1999 for the purposes of Section 5 of the European Communities (Amendment) Act 1993.—(Lord McIntosh of. Haringey.)
7.53 p.m.
Lord Newby: My Lords, this is an essentially pointless debate. We are being called upon to approve documents which were dealt with in some cases many months ago and which, in some cases at least, have already led to legislation in the shape of this year's Finance Bill. We are now asked to approve them. I had a mischievous thought earlier in the day of sidling up to the noble Lord, Lord Saatchi, and suggesting that we should spring an ambush on the Government and "disapprove" the Motion, just to see what happened. Looking at the numbers in your Lordships' House, perhaps it is not too late to contemplate that even now.
Frankly, there would be no purpose in doing that but it illustrates the futility of this exercise. The Motion does not even present a sensible basis for a broad economic debate, as we see from the number of noble Lords who are now in the Chamber. This typifies, I think, the problems that we have in this House in discussing economic and fiscal matters. Last year, for example, when we were going through the same process, one of these documents was considered

1463
in April; the other was considered in July and, exactly on the following day, we had virtually a replica debate on the Finance Bill. I would like to begin with a plea, therefore, that the House should give further consideration to the way in which we discuss in future economic, financial and fiscal affairs.
I have three suggestions to make. First, given that there is a legal requirement for this House to approve these documents, would it not be more sensible to combine approval of them with a more general economic debate at a time of the week and the year when we are more likely to get a sensible number of noble Lords wishing to participate?
Secondly, as my noble colleague Lord Jacobs suggested at Question Time earlier this week, would it not be sensible to discuss the Finance Bill at an earlier stage than at a time when it has gone through all its stages in the other place and we are about to break up for the summer? Again, at present it is not subject to serious consideration in a House which has among its Members many noble Lords who have wide experience of the issues raised by the Bill.
Thirdly, I wish to refer to another proposal, which has come in the past from noble Lords on all sides of the Chamber: would it not be worth considering having each year a separate taxes management Act, which could look at the technical nature of the Budget and separate out from it those matters requiring detailed technical scrutiny as compared simply to tax rates, which are properly and understandably a priority and responsibility of another place? Those are preliminary thoughts on the Motion before us this evening, but I believe that we need to give more urgency to the issues that lie behind it.
As to the substance of these documents, the truth is that the economy is doing pretty well—better, if I may say so, than I and my colleagues on this side of the House would have thought a year ago. There are a number of reasons for this. Some of them are of the Government's doing; some of them are not. Some of them, arguably, are the result of the previous government's actions. Suddenly, the adoption of the golden rule and the creation of an independent Bank of England has laid a framework for stability in the way that we conduct these affairs which has been sadly lacking in the past.
Equally, if the Government are to claim credit, as they will and should, for those matters, then matters across the Atlantic have arguably had at least as beneficial an effect upon our economy as any specific proactive activity by the Government. The strength of the American economy continues to surprise the world and, for our sake as well as the Americans', long may that continue.
The big remaining macro-economic question on which there is considerable dispute and on which the Government sound a less than clarion note, relates to the exchange rate and the related issue of British membership of EMU. Our view remains that Britain loses out by not being a member of the euro zone and
1464
that we now need leadership from the Government on this issue. As to the exchange rate, clearly there is no current proactive Government policy. The rate fluctuates as the markets dictate.
We understand only too well the difficulties of attempting to control the exchange rate, but we believe that if we were committed to a timetable for a referendum on joining the euro it would be possible for the Government, some months before any referendum was due to take place, to indicate the level at which they thought it appropriate for sterling to join. We believe there is a very good chance that the markets would give effect in large measure to the wish of the Government in that respect.
The effect of the strength of the economy on public finances is of course extremely strong. We have talked for a significant amount of time about the "war chest" which the Government have been gathering, and what should be done with it. It will come as no surprise to your Lordships that we on this side of the House believe that priority should not be given to further tax cuts. Instead, further consideration should be given to making good deficits in expenditure on the principal areas of health, education and transport. On all these matters the Government are now spending significantly more than in the past and they plan to continue to do so. In our view, this is often too little too late.
Their track record in the first half of this Parliament would have done credit to Philip Snowden, and their loosening of the purse strings now is being done as a result of an even greater problem of under-investment than the one which they inherited.
Your Lordships will be relieved to know that I do not propose to detain the House further. I simply hope that by the time we come to discuss these matters further we will be doing so within a more sensible framework for considering economic matters more generally in this House.
7.58 p.m.
Lord Saatchi: My Lords, let me first thank the Minister for his very clear opening remarks. Then may I particularly support the three proposals of the noble Lord, Lord Newby, which reflect on the fact that the House has changed and that it may be time to look again at some of the conventions that have previously applied to the way in which the House looks at financial and economic matters.
I should like nothing more than to be able to accommodate the noble Lord by saying right away that we approve the Government's assessment of the economy as set out in these three documents. He can reasonably have had every expectation that this would indeed be our position, as I gather that this debate has in the past been regarded as a formality.
I am sorry to say that on this occasion we take a different view. It is not a formality: it is at the root of one of the fundamental problems of our society, which is cynicism about politics and politicians. That is not because politicians famously make promises which

1465
they do not keep. To fail is human. It is because politicians who self-evidently have not kept promises sometimes claim that they have, and always seem able to present statistics to support their claim. People find that practice quite irritating. That undisciplined use of statistics presumably is how politicians the world over gained a reputation for manipulating figures to avoid too close a comparison between the promise and the outcome.
There is an uncomfortable comparison to be drawn here with what happens in the private sector. Over the years, the accounting profession has made strenuous efforts to make company accounts more consistent and reliable so that management can be objectively called to account for raising expectations beyond what it can deliver. Thus, various aspects of so-called "creative accounting" steadily have been eliminated. Differential treatments of good will, reorganisation provisions, different merger accounting procedures, exceptional items and extraordinary items have all been addressed and standardised in a search for a more transparent presentation of company accounts which cart be relied on by investors, staff and shareholders.
With the best will in the world, it is hard to say that we should be proud to send those three documents to our European partners as ambassadors for Britain. On the contrary, I have to tell the Minister—and the noble Lord, Lord Newby, may be particularly interested in this in light of his remarks earlier—that we have given serious consideration to voting against the dispatch of these documents to Brussels. It would be fair for me to give notice that we may still do so in the future. However, I hope that the Government feel able to give a sympathetic hearing to some of the issues that I shall raise.
I had planned to set out three reasons for dissatisfaction with the government accounts, and then suggest how we may yet find a way to avoid a party political disagreement on this in the future. First, the accounts format is too complicated. The Government have not attached enough importance to the need for simplification. There is no intellectual merit in complexity. On the contrary, simplicity is the outcome of technical subtlety; it is the goal, not the starting point.
I believe that Winston Churchill liked to quote Mark Twain's letter to a friend, which started:
"I wanted to write you a short letter, but I didn't have time".
Churchill understood that simplicity is all, but he also knew that to achieve it is very hard. He knew that to achieve simplicity required what Bertrand Russell called "the painful necessity of thought". That is why it took longer. This is not in any way to downplay the work of those who have toiled long and hard to compile the documents. On the contrary, they are to be congratulated on their diligence and professionalism. My complaint is addressed to Ministers for failing to see the enormous demand for much greater clarity of presentation.
1466
I draw your Lordships' attention to some important statements made in a recent article. First:
"Financial reporting in the public sector is a key element in the accountability of public sector bodies".
The Minister and I would certainly agree on that, as I am sure would the noble Lord, Lord Newby. Secondly:
"While it is recognised that financial reports should be readable and intelligible, improved reader understanding is sometimes felt by those who compile them to be a disadvantage".
I hope that that is not true. Thirdly:
"A number of steps can be taken to help the process. For example, the report should … minimise jargon … have a logical structure … [and] not be unduly distorted by"—
I draw your Lordships' attention to this—
"public relations considerations".
The importance of those comments lies in the fact that they were made by none other than the current Chief Adviser to the Chief Secretary to the Treasury, Professor Likierman, on the financial reporting systems. He also said in a report:
"Those who wish to find out what is going on are faced with major hurdles".
That will not do. Therefore, complexity is the first of the three problems which we hope the Government may want to consider in future presentation of those accounts. The second concerns the too wide scope given to the Treasury in deciding on the definitions used in compiling the accounts.
I accept that the Government's intention is to apply generally accepted accounting principles to public accounts. That is a splendid aim, shared by all, to give the public sector a proper balance sheet and proper accounts. But how seriously can we take that when the Government's new Bill on public accounting methods, just introduced, tells us in Clause 5(2) that accounts under subsection (1):
"shall be prepared in accordance with directions issued by"—
yes, you have guessed it—
"the Treasury"?
Then, when it comes to the so-called "whole of Government" accounts described in Clause 10(2), we are told:
"The accounts shall—

(a) contain such information in such form as the Treasury thinks fit, and

(b) be designed to conform to generally accepted accounting practice subject to"—

our old friend—
"such adaptations as are necessary",
as determined by, yes, the Treasury.
Perhaps I may draw your Lordships' attention to one particular example of what I am driving at. I refer to the working families tax credit. That is at the root of the arguments about the UK tax burden with which the Minister and I have tried the patience of your Lordships' House on many occasions. These accounts clearly show that the Government attempted to reduce public spending levels by up to £5 billion per annum by treating the working families' tax credit as part of the income tax system and not as social security

1467
expenditure. The system which the working families' tax credit replaced—family credit—was classified as DSS expenditure.
The change in treatment of this one item alone accounts for a miraculous reduction in the burden of tax in Britain of 0.5 per cent in both 2000–01 and 2001–02. That inconsistent treatment is not a generally accepted accounting principle. It is a generally atrocious accounting practice.
Some of your Lordships who are here this evening may believe that this is all just special pleading and that the Conservative Party was just as manipulative in office, as all politicians are thought likely to be. However, I am rescued from that charge by an interview on "The World at One" on 16th November given by Sir Peter Kemp, previously the most senior civil servant in the Treasury. He was asked straight out if one could trust the figures given by this Government less than one could those of previous governments. He replied:
"Yes. I won't say there weren't the odd heresies in the past. but I think there were fewer of them".
On the working families' tax credit itself, one of the chief statisticians at the OECD, Filip de Kan, has said:
"We have had clear guidelines on how we treat tax credits since the 1970s. If the tax credit is given to a family that does not pay any tax because it is a low income family, we treat this tax credit as a social expenditure".
The heart of the problem is that the presentation of these documents allows too many hiding places in the presentation of tax. For example, in the Treasury document on this year's Budget, changes to income tax rates—the 10p starting rate and the new 22p band—are dealt with in two lines, whereas another 62 lines are taken to describe changes to a mass of complicated allowances, reliefs and exemptions.
Thus, the documents which we are considering tonight have given the Chancellor of the Exchequer the ability to increase tax without ever announcing a tax increase, and they have given the Government the means to implement what it no doubt thought was the brilliant strategy of cutting visible taxes on voters while raising invisible taxes elsewhere. It was precisely that practice which led the Treasury Select Committee to ask the Government to display greater transparency in the presentation of tax statistics so that the Government could not hide from the political consequences of their tax actions.
This week the Government published a White Paper encouragingly entitled, Building Trust in Statistics. This has already been criticised by the Royal Statistical Society for failing to deliver Labour's manifesto promise of a fully independent statistics service. The Royal Statistical Society finds it:
"strange that a continuation of the loose legislative position is considered acceptable".
It strikes at the heart of a representative democracy if the public get the idea that they cannot trust the figures produced by their own government, especially perhaps if that concerns what is happening to their own money in taxation. The public is entitled to expect
1468
a cross-party consensus on this matter, and I believe that none of the parties should stand in the way of achieving that.
Therefore, my first two points—lack of simplicity and lack of consistency—would lose their power were it not for the fact (this is my final point) that the new Government Resources and Accounts Bill will not, in its present form, solve the two problems I have described. That is why in another place we have tabled a reasoned amendment to the Bill. It is true that the Bill seeks to apply to the public finances generally accepted accounting principles that currently apply to the private sector. That is welcome. The Bill speeds up the process already under way to replace the historic and outdated cash accounting system with a resource accounting system that more accurately reflects the true nature of income, expenditure, assets and liabilities. That is welcome, too. But while we support the principle of resource accounting and other measures which improve the authenticity, transparency and accountability of the public accounts—and I must briefly remind your Lordships that it was the previous Conservative government who began the process of changing to resource accounting—Nye believe that the Bill is deficient.
Our main area of anxiety is not the parts which are included within resource accounting but those parts which are not. There are vast areas of government income and expenditure to which resource accounting apparently will not apply. It is arguable that those include such significant sums that it negates the whole point of resource accounting in facilitating a clearer set of government accounts.
For example, much of the country's expenditure on schools, hospitals and roads seems to be excluded, as are the public sector's liabilities for future state pension payments, as well as such trivial items as all of taxation and national insurance.
The Bill gives the Treasury carte blanche to include or exclude items in the accounts as it sees fit and there is nothing in the Bill to prevent actions such as the reclassification of the working families' tax credit from benefit expenditure to tax reduction.
Company accounts in the private sector have the great advantage of consistency and relative simplicity. The combination of those two advantages means that people who are skilled with such accounts and the notes accompanying them, because they are composed by independent auditors under standards of accounting practice, are able to find out what is really happening. Because the new Bill contains no such provisions in the public sector, there will still be no such ability in the public accounts.
I have raised three complaints this evening but perhaps I may end on a constructive note. We wish to bind ourselves with the Government once and for all, arm in arm, for all to see, to produce a clear, complete and comprehensible set of public accounts. That is democratically proper and a matter of what my right honourable friend William Hague would call common sense.

1469
As proof of our serious purpose, we have asked Sir Bryan Carsberg—the chairman of the International Accounting Standards Committee and one of Britain's most distinguished accountants—to head a new shadow accounts commission. It will set out standards of national accounting practice, clear definitions and clear systems of presentation which mirror the statements of standard accounting practice in the private sector so that no future Chancellor—Labour or Conservative—will ever have the temptation or the opportunity to misrepresent the accounts and mislead the public. If we could achieve that together, I believe that that would be one of the great advances in the evolution of fair, open and accountable government in this country.
I opened with a mild threat, so let me end with a firm promise. We shall support the Government entirely if they will accept that offer: take our shadow accounts commission; set it up as an independent body; imbue it with the authority of cross-party consensus; and thus let the world see that at least in that basic area we can co-operate to end the lamentable lack of trust in politicians and start to restore faith in data on which our Parliament and our country rely.
8.12 p.m.
Lord McIntosh of Haringey: My Lords, we have heard two splendid speeches, both of which deserved a much wider audience than they have achieved, unless the noble Lord, Lord Saatchi, is going to publish his as a pamphlet. I rather think he is, based on past experience, and it will be very interesting to see it. I enjoyed enormously the one about levels of taxation and I shall enjoy reading his remarks at leisure, other than in Hansard.
I have a great deal of sympathy with both noble Lords who criticised the way in which we debate economic matters in this House. It certainly is true that we tend to have debates on serious subjects late at night, with very few people around, which are triggered by such mechanisms as the Section 5 requirement which do not seem to attract the notice of a very large number of noble Lords who have serious and important contributions to make on those subjects.
When we were in opposition we overcame that by giving a day of opposition time—Wednesday debate day—several years running immediately after the Budget to a debate on the Budget and economic policy generally. We had a five-hour debate with a very good range of speakers. I commend that to the usual channels opposite as a way of achieving a better debate than we have achieved at present. That would certainly meet the requirement of the noble Lord, Lord Newby, that we should be able to deal with important documents in prime time.
I am much less sympathetic to the idea of debating the Finance Bill concurrently with the House of Commons. Not only would that be very much in conflict with the Parliament Act 1911—and I hope we are not going back on that—but also, what would we be debating? We should be debating the Finance Bill as
1470
presented to Committee before the hundreds, or even thousands, of amendments are inserted into it. We should be debating something that was constantly in flux and we should not be able to take any sensible decisions nor make any sensible recommendations.
There are no easy solutions to concurrent debate of the Finance Bill. Certainly there are huge calendar objections to consecutive debate. The Finance Bill does not come out of the Commons until late in July. It must be enacted, for taxation purposes, very soon after that. I am sure that we do not want to repeat the debates which took place on Lloyd George's people's Budget of 1909. I am sure that I need not remind the noble Lord, Lord Skidelsky, of this, but that was the year in which the House of Commons sat all night, every night, right the way through August and September. Cabinet Ministers took turns to sit up all night for those debates. I do not think that that would be very acceptable to government or opposition in either House. If we are to have better debate on economic, fiscal and financial matters, as the noble Lord, Lord Newby, wants, it will have to be in a form other than a debate on the Finance Bill. We could, of course, as he asks, have a debate on the technical aspects of taxation, but that again is something which the usual channels should support. But I suspect that, on past experience, it would be more likely to be in opposition time—certainly in the summer—than in government time.
I am grateful to the noble Lord, Lord Newby, for his comments on the substantive issues. He is right to say that there are influences other than the remarkable success of this Government's policies. Of course, we live in a global economy and in an economy which has developed from previous years. That is always the case. But was it Napoleon who said that the one requirement he had of his marshals was to be lucky? Even if it were only that we were lucky—and I do not accept that—that is a good qualification for a Chancellor as well.
I hear what the noble Lord, Lord Newby, says about exchange rates. I do not think it is possible for us to set the Bank of England exchange rate targets in addition to price stability targets. That means that there is a certain degree to which the timing of decisions about entering EMU are still imponderable because, clearly, the right exchange rate is one of the elements that we shall have to consider.
The noble Lord, Lord Saatchi, made the same points about debating time. I return the challenge to him, as I did to the noble Lord, Lord Newby. But he made some very interesting points, to which I am quite sympathetic, about statistics. I do not know whether he heard the "Today" programme this morning when exactly that issue was debated. A professor of social statistics was commenting on what is undoubtedly the case that when we talk about economic statistics or any kind of statistics—and I earned my living from figures for 40 years—we tend to talk at cross purposes because we have different definitions.
He accused our accounts format of being too complicated and inconsistent. He has spent time with figures, as I have. There is no absolute God-given best

1471
way in which statistics can be produced for all purposes. The Government produce statistics for one purpose. We have given the Office for National Statistics sufficient independence that it produces the national accounts on the basis that the Office for National Statistics itself determines and which is itself consistent with European statistics.
In the Red Book and in the pre-Budget report we make sure that the assumptions we use and the national accounts basis from the ONS can be compared and that calculations can be made to see what the differences are; and we make sure that we understand those differences. That is transparency. It may not be consistency, but it is transparency and it is better than what has gone before.
I accept the criticism that these documents are too long. I accept that they are too complicated. Every time we try to cut something out of them someone protests and says, "Oh, well, you gave these figures last year so there must be some sinister motive in depriving us of them this year". It is not as easy as the noble Lord believes. He and I would like to believe, as we would in business, that if there is a problem of definition or a problem of objectives one simply has to put the decision-makers around the table, lock the door and
1472
not let them out until they have reached a conclusion. Politics is not like that. It will be a continual battle. We shall never reach agreement because of the wide variety of purposes for which statistics have to be used and not because we choose to conceal the facts.
On many of these matters I look forward to debating the issues with the noble Lord at great length—at moderate length anyway—when we consider the Government Resources and Accounts Bill which he has "pre-launched" from the Opposition Dispatch Box this evening. The Bill is complicated. I do not know in what form it will come to us after Commons consideration. But we shall have plenty of opportunity to consider it then.
The offer from an opposition to bind itself, with government, to a set of principles is an offer that always comes from oppositions and never from governments. I recall similar temptations myself. I have actually seen it happen with legislation in the United States. However high and admirable the motives and however good much of the argument may be, it does not work. I am grateful to noble Lords for what they have said.
On Question, Motion agreed to.
House adjourned at twenty-three minutes past eight o'clock.