Lords Sitting of 25 January 1999

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

Tributes to Lord Denning
The Lord Chancellor (Lord Irvine of Lairg): My Lords, on behalf of the whole House I pay tribute to the noble and learned Lord, Lord Denning, who reached the great age of 100 last Saturday. Born on 23rd January 1899, he was educated at Andover Grammar School and Magdalen, Oxford. He saw service on the Western Front in France from 1917 to 1918. He was called to the Bar in 1921, took Silk in 1938, became a High Court judge in 1946 at the age of 45 and went to the Court of Appeal in 1949. He came to this House in 1957 and in 1962 became Master of the Rolls, an office that he occupied for 20 years until 1982 when he resigned in his 84th year.
He was appointed by Her Majesty to the Order of Merit in November 1997 in succession to Sir Isaiah Berlin. Only one other lawyer this century has been similarly honoured, my distinguished predecessor Lord Haldane.
The noble and learned Lord ranks in distinction with the greatest judges this century in the common law world: Lords Atkin, Reid and Devlin in the United Kingdom, Oliver Wendell Holmes, Benjamin Cardozo and Felix Frankfurter in the United States, and Owen Dixon in Australia. His contribution to the development of the law in this country has been vast. He is a lawyer of massive intellect, erudition and imagination. True, there were some maverick decisions, but when he adopted an unorthodox line, as he often did, he was frequently vindicated by later decisions or even statute.
Throughout his long public service as a judge he displayed an acute sense of justice as a moral value and of law as the protector of the rights of the little man. He was in the van in the post-war development of administrative law. Government's discretionary powers were to be exercised within the framework of the rule of law. The individual's rights were not to be overridden at the whim of those in authority.
He invented the concept of the deserted wife's equity in the matrimonial home. In commercial law he was ahead of the field in appreciating that the law should impose liability for negligent misstatements where the maker assumed responsibility for their accuracy. Whole new doctrines now accepted were developed by him. Almost single-handedly he invented the concept of a pre-judgment court order to prevent defendants dissipating their assets before judgment could be given against them.
Throughout most of his career he was probably the only judge of whom the mass of the population had ever heard. His judgments were models of lucidity. He wrote
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in simple pungent prose that anyone could understand. He humanised the law and freed it from anachronistic precedents. He was an evangelist without equal for the common law throughout the Commonwealth. He was also a model of how a judge should behave: unfailingly courteous, understanding and expressing counsel's arguments better than they could themselves.

I have an abiding memory of the noble and learned Lord's kindness to litigants in person in his Court of Appeal. Most of the time he had to turn them down but they always left feeling that they had had a fair hearing and therefore justice. The noble and learned Lord is one of the greatest living Englishmen. On behalf of the whole House I salute him today.
Noble Lords: Hear, hear!
Lord Ackner: My Lords, essentially on the basis of alphabetical merit, I rise to associate the judges with everything that my noble and learned friend said. The senior Law Lord and his colleagues are hard at work and accordingly they are not here to reply.
Having reached the age of anecdotage, perhaps your Lordships will allow me one short story about the noble and learned Lord, Lord Denning. The Canadian Bar Association used to invite a judge to its excellent get-together. I was one who was so invited. Some years later I was told that a number of very young Canadian lawyers were visiting the high spots of Europe and wanted, no doubt for good fiscal reasons, to have a serious party. I laid on a garden party in the Middle Temple. All of the judges who attended that party had been guests of the Canadian Bar Association. Tom Denning had been several times. One very young Canadian lawyer pulled me by the sleeve and asked, "Is that Lord Denning?" I said, "Yes, that's Lord Denning". "Gee", he confided in me, "Do you know we still read his father's judgments?". I repressed saying that perhaps the father is more reliable than the son.
I therefore join with all the judges who last Friday wished the noble and learned Lord, Lord Denning, many, many happy returns.

Rail Freight: Local Transport Plans
2.43 p.m.
Lord Cadman Lord Cadman asked Her Majesty's Government:
Why there was no mention made of rail freight in the draft guidance document issued to local authorities by the Department of the Environment, Transport and the Regions in respect of their obligation to produce a local transport plan by July 1999.
Baroness Farrington of Ribbleton: My Lords, we fully recognise the importance of ensuring that rail freight is given proper consideration within local transport plans. We acknowledge that the draft guidance was incomplete when we issued it. Our priority was to circulate interim advice sufficient to enable authorities to make a start on their plans.

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There are gaps in the draft guidance. Those will be covered in the revised version including advice on how local authorities can encourage rail freight transport.
Lord Cadman: My Lords, I am grateful for that reply. Does the Minister agree that it was a serious omission, given the investment presently being made in the rail freight industry with its consequential increase in tonnage carried? Can the noble Baroness enlighten the House further on the Government's plans to encourage and persuade local authorities to provide within their local transport plans facilities for rail freight as identified by the rail freight industry?
Baroness Farrington of Ribbleton: My Lords, the noble Lords' question allows me to state publicly how pleased we are that the doubling of expenditure on freight grants to £30 million in our first year in office has resulted in a very great increase in the use of rail freight.
We shall issue revised planning guidance to facilitate the moving of more freight by rail. Local authorities will be expected to consider and protect opportunities for rail connections to industrial sites. We are delighted to give the support that the noble Lord seeks.
Lord Berkeley: My Lords, I declare an interest as chairman of a rail freight group. I welcome the noble Lord's Question and the Minister's Answer.
When the revised guidance is issued, I hope that my noble friend and her colleagues will take into account the need for other types of freight transport, including road freight. There is little in the document about deliveries to shops, factories or offices. Much is written about re-allocation of road space and motorists responding in many ways. When the document is reissued, I hope that my noble friend will take into account that the number of people on buses, bicycles and walking need to be counted rather than the number of cars.
Baroness Farrington of Ribbleton: My Lords, as the guidance acknowledges, local authorities must consider measures to promote walking and cycling. They could include the reallocation of road space. I am delighted to say that the detailed guidance will draw attention to the importance of local transport plans, including the follow-through connections from road to rail to which my noble friend referred.
Lord Skelmersdale: My Lords, will the Minister be good enough to quantify her phrase "a very great increase in the use of rail freight" as a result of the increased grants to which she referred?
Baroness Farrington of Ribbleton: My Lords, I am sure the noble Lord will be pleased to know that government action coupled with the work of the freight companies—they provided their own ambitious targets—has reversed the previous decline. We saw a
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12 per cent. growth in freight tonne kilometres on the railways during 1997–98—the first such increase in many years.
Lord Monkswell: My Lords, bearing in mind that rail freight is likely to be used for medium or long distances, and the former government's destruction of the regional or metropolitan local authorities, will the regional development authorities be the lead authorities in terms of rail freight; and will they receive appropriate planning guidance from the Government?
Baroness Farrington of Ribbleton: My Lords, my noble friend is right to draw attention to the fragmentation which occurred in the recent past. The strategic framework for local plans will be provided by the regional transport strategy contained in regional planning guidance. Those strategies will ensure a coherent and complementary approach across and between regions.
The closest possible co-operation with the regional development agencies will ensure that the system is integrated.
Baroness Thomas of Walliswood: My Lords, I am delighted to hear the Minister's Answer which recognises that there was a gap in the guidance. Will the noble Baroness tell us when the revised version will be published and what its effect will be? The noble Baroness's experience in local government is similar to mine. Does she agree that the rational and excellent working relationship between officers in local government, in particular transport authorities, is of value and should not be wasted? Will the noble Baroness confirm that, as part of an integrated transport policy, local authorities must do the same as national authorities and sing to the same tune?
A noble Lord: Reading!
Baroness Thomas of Walliswood: No, my Lords, I am not reading.
Baroness Farrington of Ribbleton: My Lords, I am reading! I fully agree with the noble Baroness that it is extremely important to pay tribute to the work of officers. She asked when there would be final guidance on local transport plans. We intend to produce revised guidance early in the spring, and final guidance towards the end of the year once we have had a chance to look at the provisional plans submitted in the summer. We have listened carefully to local authority representations, made through the Local Government Association, about timing and authorities have been asked to produce provisional five-year plans by July 1999. Authorities will then roll their plans on by one year and submit full plans for the subsequent four years.
Lord Geddes: My Lords, I applaud the increase of 12 per cent., to which the Minister referred in answer to

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my noble friend Lord Skelmersdale, but can she advise the House of the percentage figure for rail in the overall carriage of freight?
Baroness Farrington of Ribbleton: My Lords, I am not able to give that percentage figure as a whole. I shall be delighted to write to the noble Lord giving such figures as are available. I assume that he refers to the whole of the UK and it will take time to collate information from Northern Ireland, Scotland and Wales as well as England.

Carbon Tax
2.51 p.m.
Lord Taverne Lord Taverne asked Her Majesty's Government:
Whether they have considered introducing a carbon tax.
Lord McIntosh of Haringey: My Lords, the Government are not in favour of introducing new taxes on domestic fuel and power. With regard to business, the Government are considering the recommendations of the report of the noble Lord, Lord Marshall, on The role of economic instruments and the business use of energy in the context of their wider strategy on climate change.
Lord Taverne: My Lords, in addition to considering the very valuable recommendations of the Marshall Report, will the Minister note the findings of an authoritative article in the November issue of Fiscal Studies, which I am sure he peruses avidly from cover to cover? It demonstrates that if the proceeds of a carbon tax, or other energy taxes, were used to reduce employment taxes there would be a significant increase in GDP, employment and the disposable income of all social groups. Will the Minister draw those findings to the attention of the Treasury?
Lord McIntosh of Haringey: My Lords, I believe that the noble Lord is hinting obliquely that carbon taxes as applied to domestic households are regressive in tax terms and that the Institute of Fiscal Studies is suggesting ways in which that regressive nature of such taxes could be reversed. It is a useful suggestion and I will indeed draw it to the attention of the Treasury.
The Countess of Mar: My Lords, perhaps I, too, may make a useful suggestion. If a carbon tax were levied could part of it be ring-fenced in order to make a contribution to the planting of trees on marginal land in this country? Trees are known to absorb carbon, they are beautiful and they serve a useful function.
Lord McIntosh of Haringey: My Lords, I agree that that is a useful suggestion. We are being most constructive this afternoon. However, I am not sure whether the question is intended to refer to carbon tax across the board; in other words, including domestic households. If, like us, the noble Countess is looking principally at the different taxes for business on fuel and
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power, the intention would be that the revenues would be recycled to business. However, that would include energy efficiency purposes. If the noble Countess can persuade the Government that planting trees is an energy efficient use of public money I have no doubt that she will go far.
Lord Dixon-Smith: My Lords, a carbon tax is a concept with which the House will instinctively have sympathy. Of course, it is a novel idea and still capable of a great deal of development. May I invite the Minister to explain clearly the distinction between a carbon tax and a fuel duty?
I understand the Minister's argument about the need to distinguish between taxing business and the domestic sector. Bearing in mind that about 30 per cent. of the nation's energy demand comes from the domestic sector, does he consider that the distinction is wholly appropriate? Does he also believe that a variation might have to be made bearing in mind the need for all sectors to make a contribution towards the most effective use of energy?
Lord McIntosh of Haringey: My Lords, in inviting me to give a definition, the noble Lord is inviting me to over-simplify. I must do so in order to follow his invitation. Broadly speaking, a fuel duty is intended primarily to raise money. On the other hand, presumably a carbon tax is intended to reduce emissions of carbon dioxide which are measured in millions of tonnes of carbon. It would be calculated on the basis of a million tonnes of carbon emitted into the atmosphere rather than on a fund-raising basis. I am sorry, I have forgotten the second part of the noble Lord's question.
Lord Dixon-Smith: My Lords, the second question related to the need for the most effective use of energy in the domestic sector.
Lord McIntosh of Haringey: My Lords, I do not entirely agree with the noble Lord's figures. Emissions from the domestic sector account for about 25 per cent. rather than 30 per cent. of the total. They are, on the whole, stable, whereas emissions from industry, which is 40 per cent. of the total, are declining. The area where emissions are rising is transport. If we are to meet the criteria as laid down, and our own obligations under the Kyoto protocol, it is clear that industry and transport will have to bear the brunt of the burden.
Lord Newby: My Lords, does the Minister agree that, given that six members of the EU already have a carbon tax and that if one were to introduce a carbon tax in this country it would be unfortunate if British industry were put at a disadvantage, this is one area in which the harmonisation of taxation across the EU could be helpful in achieving a major public policy goal; namely, achieving our targets under the Kyoto protocol.
Lord McIntosh of Haringey: My Lords, I do not accept the noble Lord's premise or his conclusion. Yes, it is true that six countries in the EU—mainly Scandinavian countries—have a carbon tax. However,

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I have made it clear that we would not accept a carbon tax for domestic households because of the regressive nature of such a tax. However, we believe that it is possible to meet our obligations under the Kyoto protocol partially by taxes on industry and transport and partly by increased efforts in energy efficiency. That is a very important target and includes combined heat and power. Furthermore, by 2008 there will be available the possibility of tradeable emission permits to which the noble Lord, Lord Marshall, referred in his report and which we are studying very carefully.
Viscount Mersey: My Lords, given that the Government are anti-global warming, how do they justify the moratorium on combined cycle gas turbine power stations and the continuation of coal-fired power stations, the latter of which emit more carbon?
Lord McIntosh of Haringey: My Lords, there is no single solution which will meet all possible objectives. The moratorium on the use of gas for non-premium uses, to which the noble Viscount is referring, cannot be continued for ever. The disruption of our sources of energy which has resulted from the precipitate rush to gas-fired power stations is dangerous. For that reason, we called for a moratorium and are thinking carefully about alternatives.
Lord Peston: My Lords, I accept my noble friend's argument that a carbon tax or a tax on energy used by households may well be regressive. However, is he convinced that that is a decisive argument? It would be true to say that all sorts of efficiency-raising measures may be regressive, but why do we have an income tax and a social security system and then worry about indirect taxes when it comes to regression? Surely we could offset this simply through income tax and the social security system if efficiency gains resulted as well.
Lord McIntosh of Haringey: My Lords, my noble friend uses the careful word "decisive". I do not say it is an overwhelming argument, but the Government's decision to reduce VAT on domestic use of fuel and power to 5 per cent. was a change which benefited all households and not just those who pay income tax. My noble friend's alternative would not apply to the poorest households, and for that reason I insist that we are against regressive taxation.
Lord McNair: My Lords, while the Minister is considering the helpful suggestion of my noble friend Lord Taverne, will he consider also the possibility of replacing all direct taxation with unified national indirect taxation based on primary energy at the point where it first comes into the system? That enables a basic income to be paid which would solve the problem of his noble friend.
Lord McIntosh of Haringey: My Lords, of course, we will consider anything. I believe that that suggestion first came forward in the 1950s in a book by
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I. M. D. Little called The Price of Fuel. My noble friend Lord Peston will confirm whether or not I am right on that. It is therefore a suggestion which has been around for a considerable time.

Ministerial Code: Paragraph 88
3.2 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
Whether paragraph 88, on contacts with the media, in the Ministerial Code issued on 31st July 1997 applies to unattributable briefings by Ministers' special advisers and their information officers.
The Minister of State, Cabinet Office (Lord Falconer of Thoroton): My Lords, in order to ensure the effective presentation of government policy, paragraph 88 of the Ministerial Code requires all major interviews and media appearances to be cleared with the No. 10 Press Office.
Lord Campbell of Croy: My Lords, I am grateful to the noble and learned Lord for that reply. However, as paragraph 88 requires all media contacts by both Ministers and officials to be recorded, have records been obtained for the information of the Cabinet Minister described as the "enforcer" of briefings alleged to be undermining the positions of other Ministers? Could such rival briefings have been avoided if the removal had not been secured of the chief information officers in six departments in the first six months in office of this Government?
Lord Falconer of Thoroton: My Lords, departments keep records of contacts with media for major interviews and media appearances. A record is also kept of occasions when officials provide background briefings to journalists. It would be impractical to keep a record of all contacts, whether on the record or off the record, since some would be informal. It is not appropriate for those records to be looked at in relation to the issues referred to by the noble Lord; they would deal with the sorts of records to which I have just referred. The issue concerning the six government information officers was looked into by a committee in another place and no criticism was made of the Government in relation to it.
Lord Campbell of Croy: My Lords, does that mean that the rigour of paragraph 88 has been relaxed since the debate initiated by me on 28th October 1997 to which the noble Lord, Lord McIntosh, replied most helpfully at that time? There does appear to have been a change.
Lord Falconer of Thoroton: My Lords, there has been no change to the terms of paragraph 88 in the Ministerial Code or to the extent to which it is enforced. The requirement in that paragraph is for major interviews and media to be cleared in advance by No. 10. By their nature those interviews will be on the

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record. As I indicated a moment ago, a record is also kept of occasions when officials provide background briefings to journalists. That is the scope of the rule and it is enforced.

Committee of Selection: Select Committee
3.5 p.m.
The Chairman of Committees (Lord Boston of Faversham): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the Lord Henley be appointed to serve as a member of the committee in the place of the Viscount Cranborne.—(The Chairman of Committees.)
On Question, Motion agreed to.

Social Security Contributions (Transfer of Functions, etc.) Bill [H.L.]
3.6 p.m.
Report received.
Lord Higgins Lord Higgins moved Amendment No. 1:
Before Clause 1, insert the following new clause—

COMMENCEMENT
(" .—(1) This Act (apart from this section) shall not come into force until the conditions set out in subsections (2) and (3) are satisfied.
(2) The first condition is—

(a) that the NIRS2 computer system on which national insurance contributions are to be held is fully operational; and

(b) that all such contributions records have been successfully installed on that computer system.

(3) The second condition is that, on the day on which an order to bring this Act (or any provision of it) into force is made, no social security benefit payments which depend on national insurance contributions records shall be outstanding for more than one month.").
The noble Lord said: My Lords, this amendment seeks to deal with matters we debated to some extent at the Committee stage of the Bill and also in the uprating order debates which we had last week. The amendment, together with Amendment No. 29 to which it is linked, relates to the problems which have arisen with regard to the National Insurance Contributions Agency's computer. In particular, it raises the question of whether or not it is appropriate, under the terms of the Bill, to transfer the responsibility for contribution matters from the Department of Social Security to the Inland Revenue.
At Committee stage I raised a number of points in this context and, as I mentioned, we debated this also last Thursday. The amendment seeks to impose conditions so that the transfer should not take place from one department to another until the department from which the computer is being transferred has sorted out the substantial problems which it now emerges exist in the department. It seems clearly inappropriate to
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switch it from one department to another and from one Minister to another without the situation having been rectified. The amendment therefore suggests that it should not be done until the national insurance computer system, which is concerned with contributions, is fully operational; until all contribution records are fully installed on the computer; and until the payments as a result of those contributions are not more than one month in arrears.
Amendment No. 29 is somewhat similar but in a simpler form. It simply seeks to delay the date when the transfer takes place in order to give the Government an opportunity to put right what is obviously a serious situation.
I should begin, as on many previous occasions, by declaring an interest since some of these matters are related to pensions and I am a chairman of a company pension fund. Furthermore, I want to express our thanks to the noble Baroness, Lady Hollis of Heigham, for the courtesy she has shown in replying in correspondence to a number of points raised at Committee stage. It may be helpful to get some of those points on the record. Two in particular are quite simple.
First, confusion arose—largely as a result of my misunderstanding of the situation—as to whether the responsibility for these matters would be transferred from Department of Social Security Ministers to Inland Revenue and Treasury officials. The noble Baroness rightly pointed out that that is not so. "Treasury" in this context means the Lord Commissioners of the Treasury, which includes the Chancellor of the Exchequer and other Treasury Ministers. Incidently, it also includes the Whips. Whether they are qualified to deal with these matters I have some doubt; nevertheless that is the situation.
Secondly, the Minister gave an assurance, which I think is important, that, because the laws affecting the Inland Revenue are different from those affecting the Department of Social Security, no one will be made a criminal retrospectively as a result of these changes.
We want to clarify a number of points. Last Thursday, in Committee, I posed a series of questions. With her customary expertise, the Minister was able to reply to some of them on the spot; others remain outstanding. First, what is the situation regarding this computer in relation to others? If I understand correctly the Minister's answers so far, she is saying that this particular computer has gone down but that that does not affect the Inland Revenue's computer, or that for social security benefits. The Minister pointed out that that affects only half of the total expenditure of the Department of Social Security. If I understand the situation correctly, it follows that the other half—that is, half the social security benefits being paid—is apparently affected by the breakdown of the computer. The Minister shakes her head. I based that point of view on what she said in Committee. No doubt she will want to clarify the matter. We need to be clear about the exact relationship between the various computers.
Secondly, we need to be clear about when the computer went wrong. I understand that it was last June. However, we are not in the least clear about when the

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Government expect it to be put right. Meanwhile, there are considerable problems. People who might otherwise have expected to be paid pensions or increases in their pensions do not know where they stand. One of the reasons why we on this side of the House believe that the matter should be sorted out before the computer is transferred—indeed, before the functions of the Contributions Agency are transferred—is that we are concerned not only about whether the computer is wrong but also about what is being done to tell people what is happening. When I raised that question in Committee, the Minister said, "Well, there's a problem there: we don't know who the people are because the computer has broken down". That becomes a circular argument.
Although, as I understand it, the department has a helpline and it is possible for people to ring in, nonetheless no proactive attempt has been made to tell those affected what is going on. If I am mistaken on that, no doubt the noble Baroness will correct me. Some people are told that if they have problems, they can go on income support. Apparently, that is on a different computer. At least they will have that fall-back position, but clearly it is not satisfactory.
That brings me to the question not only of the number of people affected and the amounts, but of the particular groups. If I understand correctly, people who are already receiving their pension are not affected. However, people who are about to receive their pension but are not yet in receipt of it are not affected. Those affected also include those who asked for their pension payment to be deferred from one year to another. They receive a somewhat higher pension if that happens. However, having asked for their pension to be paid (having earlier deferred it), they may find that it is not paid for some months.
That, in turn, raises other issues. If they have not been paid, do they receive the uprating which we debated last week? In particular, are they to be compensated? I understand that they will receive a degree of compensation. It would be helpful for those people and the public at large to know what the compensation will be. How much will it amount to? Will it be taxable? To what extent will the rate of interest which will apparently be paid by way of contribution, because people have not been paid the pension to which they are entitled, compare with the rate of interest which the Inland Revenue charges those who do not pay their tax on time?
One associated problem is that people will not know whether to include on this year's tax form the increase or pension they were expecting or whether to wait until next year to include that information. Given the stringent way in which the self-assessment system has been introduced, I do not think that it is fair for people to be penalised for simply not knowing. What information has been given to the public about that?
The situation overall gives cause for concern. As far as the pure mechanics of the issue are concerned, I understand that the Public Accounts Committee in another place will probably take evidence today on the matter. However, we are concerned with a broader issue.
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Given that this situation has arisen, to what extent are the Government taking appropriate action both to compensate those affected and to ensure that they know what is going on? Until this is sorted out, there seems to be a strong argument for saying that it was not appropriate to go ahead and switch the whole system from one department to another.
Broadly speaking, that outlines the purpose of the amendments. As I have said, the alternative amendment to Amendment No. 1 is Amendment No. 29, which says, "Let's give it a year or so, by which time things will, we hope, have been resolved". It is important that the matter should be put right rather than put right fast or not put right because of the hurry. For those reasons, I beg to move.
3.15 p.m.
Lord Goodhart: My Lords, I rise to support the noble Lord, Lord Higgins. According to reports on the "Today" programme on Radio 4 this morning, people are losing up to £100 per week in SERPS. If that is remotely true, it is extremely worrying. It is clear that people are losing at least some benefits to which they are entitled. It would be useful at this point to hear from the Minister what action the Government intend to take to put right the problems with the computer. How long is that expected to take? What compensation will be paid to those who have suffered as a result of the problems?
Without suggesting that the amendment is an appropriate way of dealing with the problem because as an amendment I would not support it, it seems to me to be a useful way of raising the issue for discussion. I hope that the Minister will be able to make a statement which will, as far as possible, satisfy our concerns.
Lord Skelmersdale: My Lords, surely one of the rationales for the Bill which the noble Baroness gave at Second Reading was that at last the two computers—namely, the Inland Revenue computer and the Department of Social Security computer—can talk to each other. If one of them is down, that blows the whole idea out of the water. Therefore, I support my noble friend's amendment.
The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, the noble Lord, Lord Higgins, seeks through his amendments to defer the transfer of the Contributions Agency to the Inland Revenue until the new NIRS system is fully operational. As the noble Lord said, we also discussed the issue during our debates last week on the social security uprating and rerating orders. Therefore, as both the noble Lord, Lord Higgins, and the noble Lord, Lord Goodhart, have invited me to do so, I take the opportunity to give the House an update on current performance.
For those who are unfamiliar with the department's computer systems, a few words of background may be appropriate. The Contributions Agency has recently introduced a new National Insurance Recording System, known as NIRS2. The old NIRS1 system had to be replaced because it was ageing. I understand parts of

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that system were originally built in the 1960s and could not support future operational and legislative changes, in particular those arising from the previous government's Pensions Act 1995. So NIRS2 is a system ordered and specified by the previous administration, and it is necessary because of actions by the previous administration. Perhaps I may add that NIRS1, like NIRS2, was provided by Andersen Consulting. There is no implication that that was not an appropriate method of proceeding. If we had been in the position of the previous government, we too would have had to extend the computer system.
The new system is designed to handle payment of NICs, hold over 65 million individual contributions records, calculate contributory benefits, provide data and pay age-related rebates to pension schemes and providers. It goes without saying that this is one of the biggest systems in Europe, with over 14 million lines of computer software.
My right honourable friend the Secretary of State for Social Security has informed the other place of progress with the system on a number of occasions. Those reports have not sought to underplay the difficulties that there have been with the system; nor have I tried to do so in responding to noble Lords' questions. Our task has been to stabilise the system to enable its full operation to be available at the earliest point. We are now starting to see more of the system working. I hope that I can reassure the noble Lord that, while not everything is working smoothly, we are now planning the recovery. If noble Lords are content, I shall spend a few moments explaining the current position.
First, I want to put the problems in perspective. The problems have caused difficulties for the individuals involved, and I certainly do not want to minimise them. We very much regret that; but we should not overemphasise the scale of the problems. They have only affected contributory benefits—that is to say, the difficulties have not affected payments of benefits such as child benefit, disability living allowance and income support. I said "only", but noble Lords will appreciate what I mean. Similarly, they have not affected contributory benefits in payment before the system went live; indeed, they have only affected new claims. So, for example, over 10 million existing pensioners have been entirely unaffected by the changes. The obvious reason is that the new system was not in place fully to record the 1997–98 payments into NICs. It means that we are trying to make calculations for retirement pensions and widows' pensions which are based on, say, 40 years or 45 years of payments without having the benefit of up-to-date information regarding the last year.
That is the scale of the problem. There is a one-year shortfall of NICs information going into the system. However, we clearly have the information for the rest of those years. That is the degree of error. That is why—and I shall return to this later—for the most part, but with one exception that I shall come to, the degree of error is about £1 to £2 a week for contributory benefits. That is the effect of not having such information. If, as a result, anyone comes below income support, then his or her income support will be manually adjusted to float him or her up to a proper level of income.
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If it is suggested that there have been subsequent overpayments, that can be adjusted slowly through the course of the year. In other words, the scale of the problem is the fact that we do not have accurate contributory information for what would be the last year before a claimant began to receive or sought to receive retirement or widows' benefits. Therefore, for the most part, that degree of lack of information, or the potential for error, is quite narrow. Without trying to talk down the problem, it is not that a computer has collapsed and people are not receiving their payments; indeed, that is not the issue. What has happened is that the new system has come on much more slowly than we expected and we have, therefore, not had full information at the point at which people's new claims have begun to be paid. So, in a number of cases, people may be receiving slightly less than they otherwise should and that is of the order of magnitude of £1 to £2 a week.
Perhaps I may put forward some statistics in respect of the above information. I shall start with the state retirement pension. Those affected were largely those who reached pension age after 5th April 1998—around 50,000 a month. In 97 per cent. of cases a pension calculation has been made based on the contributions record up to and including the 1996/97 tax year, and that rate is being paid. As I said, the problem is having secure information for that final year. That is when the computer was not really able to take on the information. All of those awards will be reviewed, without the need for the customer to ask, once NIRS2 is fully operational and 1997–98 contributions have been posted—that is say, put into—individuals' computer holdings.
Widows' benefits were similarly affected, although over 280,000 widows who formed the existing caseload in April have been unaffected. About 4,000 new claims a month were affected. In 90 per cent. of cases an initial award or emergency payment has been made using other information available. In cases where a full or interim payment has not been made and hardship exists, calculations can be done manually to provide the basis for correct payment. This has so far been done for 3,500 people.
I turn now to the current position. From 6th January of this year NIRS2 has been providing the necessary calculations for retirement pensions and widows benefits. So all new awards from that point should be made by the system in the normal way; in other words, the backlog problem runs from either March or June of last year through to January of this year. We are now discussing the best way of reviewing the cases of those who have been given interim awards of retirement pension over the past few months so that they can receive the correct rate of benefit, which, as I said, may have been, on average, an underpayment to them of £1 to £2 per week. If the retirement pension cannot be paid because the information is more volatile than that, or if it is paid at a reduced rate, the claimant is advised of the availability of income support.
The noble Lord asked last week, and again today, whether pensioners who have not yet received their pension and do not receive it until after April 1999 will get both the increase in pension for people who defer claiming and the uprated amount from April 1999. The

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answer is that where a claim is made but there is a delay in payment increments are not paid. However, when the award is finalised arrears are paid at the rates due for the relevant period. So someone who claimed benefit before April 1999 but does not receive it until after that date will get the uprated amount from April and be paid arrears at the applicable rate for the period before then. Therefore there will be no loss.
From 1st February we expect to be able to send claim packs to people approaching state pension age. Up to now we have been using data on the old NIRS2 system. That deals with retirement pensions, and widows' pensions where the problem relates to the last year of what may be a whole life's contributory record.
I now move on to contribution-based JSA and incapacity benefit. The problem here is much simpler because, for the most part, to be eligible one only has to have made two years' contributions and, therefore, the full array of records is not required. Moreover, there is usually an alternative source of information—namely the employer, because obviously at that point people are still in work.
I shall deal first with jobseeker's allowance. From 9th November we have had the electronic link between NIRS2 and the jobseeker's allowance computer system up and running. That has meant we have been able to pay all new and repeat claims to JSA. Before that, between 20th June and 9th November, about 1,063,000 JSA claims were disrupted by the problems with NIRS2. Ninety-five per cent. of those were paid using the contributions record from the Departmental Central Index, which is our back-up system, using information supplied by the customer, by emergency procedures such as the faxing of information, or by the award of an interim payment.
I turn now to the fourth and last of the contributory benefits; namely, incapacity benefit. Since 18th November NIRS2 has been providing information to Benefits Agency offices to enable them to make payments of incapacity benefit. Before this, as with JSA, 95 per cent. of claims were paid using contributions information from the Departmental Central Index, information supplied by the customer or by the Benefits Agency using faxed information available to the Contributions Agency from NIRS.
Those claiming retirement pensions, widows' benefits, incapacity benefit and jobseeker's allowance have been issued with an entitlement notice explaining the situation with initial payments and a letter where emergency payments are offered. Perhaps I may emphasise here that, if anyone seeks information about his or her situation, it is not handled by the NIRS2 computer, so we do not get into that "black hole" to which reference has been made. The information will come back to people in the usual way. I have checked on the situation and it is the case that we have made contact with CABs, Age Concern, Scottish CABs, local authorities and the pensions industry to ensure that the fullest possible information is sent out to people. As I said, any information that people seek will be handled in the usual way and does not depend on the functioning of NIRS2. So there should not be a problem with any correspondence in that situation. However, if there is,
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obviously I would be glad privately to receive information from the noble Lord to that effect and would of course look into the matter.
The noble Lord also asked what compensation is being made for delays. If one area of the computer is for contributory benefits, the other is to make payments of age-related rebates to pension providers. As at 1st January, £1.4 billion has been paid, which is approximately 60 per cent. of the payments made by this time last year. We expect most of the balance to be paid by March, although some payments in April and May are possible. Again, to keep the matter in proportion, age-related rebates represent between a 3 per cent. and a 9 per cent. age-related rebate in addition to the normal NICs. The normal NICs information would go through to NIRS—the normal rebate. The degree of discrepancy is between 2.5 per cent. and 9 per cent. and is age-related. Of course, that will be paid subsequently when we have the full information to which I referred.
The average loss, if I may put it this way, is about £2.50 a week. Again, I do not seek to minimise the situation. We are talking about a limited number of people; indeed, we are only talking in figures of up to £100 where people are considering whether they should be contracting back into SERPS out of a personal scheme by virtue of the age-related rebate. The potential loss there goes up to about £100 a week and affects only a tiny number of people. For the most part, it is simply that between 91 per cent. and 97 per cent. of the NICs rebates are being rebated to the employer. The area of the problem is that last little bit between the 2.5 per cent. and the 9 per cent., which is age-related. We expect all that to be fully in place by April or May.
3.30 p.m.
Lord Goodhart: My Lords, the noble Baroness has spoken about retirement pensions and an average drop of £1 or £2 a week. Does that include SERPS or is SERPS a different case?
Baroness Hollis of Heigham: My Lords, it is a different case. With retirement pensions, we are talking about newcomers into the system for the state basic old age pension. That is where the £1 to £2 figure I gave comes in. A SERPS problem would be in addition to that.
Lord Goodhart: My Lords, will the Minister tell us the figures for SERPS losses and how they will be made up?
Baroness Hollis of Heigham: My Lords, the average loss for a normal SERPS payment would be about £2.50 a week as opposed to the £1 or £2 per week for the basic old age pension. It can leap up to £100 in exceptional cases where there is a question of whether a person should be opting back into SERPS from a personal pension, or other movement. We are talking about a loss of about £1 or £2 from the retirement pension and an average of about £2.50 or thereabouts from the SERPS element. All of this will subsequently come back into payment and be made good. If, as a

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result, this brought someone on retirement pension to below income support figures—it would not of course apply to someone on SERPS—we would do our best to get information to ensure that they are floated up to the income support level and make any subsequent adjustment. Some 30,000 people have been assisted in that way.
The noble Lord, Lord Higgins, pressed me on what compensation is being made available in respect of delays. Starting with age-related rebates, compensation is being paid at the rate of 0.5 per cent. of each individual payment for each month of delay. That is based on advice from the Government Actuary on a reasonable rate of compensation given current market trends. It is being paid cumulatively, and will continue to be paid until the backlog of payment is cleared—in other words, in the first month it is 0.5 per cent., in the following month it is 1 per cent., in the next month it is 1.5 per cent., and so on.
The noble Lord pressed me on how this correlates with the amount of repayment for income tax. The Inland Revenue rate for overdue tax is 8.5 per cent.—that is what it charges the customer—which is calculated as the equivalent of a borrowing rate. Obviously the taxpayer who fails to pay effectively has that money on deposit for himself or avoids having to pay back a debt. For overpaid tax—that is money owed to the individual by the Inland Revenue—the current rate of interest is 4 per cent. That is a net interest rate when compared with the rate paid by a building society. The compensation figure that we are suggesting is 6 per cent., which is more generous than that charged by the Inland Revenue. It is up 0.5 per cent. per month cumulative.
Lord Higgins: My Lords, I am most grateful to the noble Baroness. The arithmetic is very complicated. The noble Baroness said that the compensation rate is 6 per cent. Off the top of my head, I have a little difficulty in relating that to 0.5 per cent. cumulatively. I wonder whether it is not only cumulative but compound interest. Presumably the noble Baroness is saying that the figure of 6 per cent. should be compared with the 8.5 per cent. of the Inland Revenue.
Baroness Hollis of Heigham: No, not at all.
Lord Higgins: My Lords, if we are agreed that 6 per cent. is the relevant figure for the compensation in terms of an annual rate—an APR, perhaps—then presumably it should be compared with the 8.5 per cent., which is the amount charged if late payment is made. But I am open to persuasion.
Baroness Hollis of Heigham: My Lords, for once I think I can say that the noble Lord is incorrect. For example, if you are a late taxpayer, you are deferring paying a debt. If you had to borrow money to pay that debt, you would be borrowing at 8.5 per cent in the markets, whether it be by way of a mortgage or other form of loan. That is why the Inland Revenue will charge 8.5 per cent. If the money is owed to you, had that money been paid on time and been in your building
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society account or a government bond, there would be a return of 4 per cent. net. I should emphasise that these figures are tax free; the compensation is ex gratia. I trust that the noble Lord is as satisfied as he can be with that explanation.
Compensation for those claiming benefits, as opposed to the age related rebate compensation, is covered by normal departmental rules. The rules state that there must be clear and unambiguous departmental error—NIRS2 delays would constitute such error; the delay must exceed an indicator period set for each benefit; arrears must be at least £100; and the amount of compensation due must be at least £10. Compensation will be paid when full national insurance information has been provided and each benefit has been reviewed, with arrears being assessed and paid. Claims for compensation will not need to be made; cases will be considered automatically.
Lord Higgins: My Lords, this subject is a little difficult to deal with across the Floor. If I understand the noble Baroness, the figures we were discussing a moment or two ago are in relation to age-related rebates and so on. Clearly the vast majority of these people are national insurance pensioners whose arrears, I hope, are not likely to amount to more than £100. On the basis of what the Minister is now saying, they will receive nothing at all.
Baroness Hollis of Heigham: My Lords, it is quite the contrary; they will certainly get their money. The question is whether they will get compensation, which is different. It depends whether they meet the criteria. They will certainly get their money, but the question is whether their losses are such that they are entitled to compensation over and above the arrears payment. They will be paid in the normal way according to normal DSS guidelines, and I have laid out those guidelines for the noble Lord. As it is a departmental matter, it is open to the Secretary of State to review those guidelines. Certainly there is no intention at the moment of which I am aware to depart from them.
The problem with letters arises in relation to the NIRS2 problem with correspondence. The machine needs to be working in order to answer problems as to why the machine is not working, if I can put it that way. As far as I am aware, it only applies to some of those NIRS age-related rebate issues, which traditionally have been generated by the computer. It does not apply to the vast field of contributory benefits. If the noble Lord is concerned about some cases, we shall be very happy to look into them.
I turn now to the way in which NIRS2 processes contributions. NIRS2 has processed more than 62 million contribution items submitted by employers for employees who have paid class 1 contributions in the 1997–98 tax year. As at 31st December, around 29 million items had been posted to account. We expect the great majority of this year's end of year returns to have been posted to individuals' accounts and be in use for benefit purposes by the end of March when the transfer takes place. The noble Lord will also recognise that there are always some contributions which, for one

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reason or another, are received after the end of the year to which they relate. So technically the noble Lord's amendment could defer the transfer indefinitely.
The normal quarterly and monthly billing and debiting arrangements for self-employed people are also working effectively now.
As I am sure your Lordships will agree, the task now is to catch up as much as possible of the outstanding work, particularly the remaining end-of-year returns and contracted-out pension rebates, and to roll out the remaining arrears of the system—in particular some of the functions which support the pensions industry, for example, in the winding up of pension schemes. The noble Lord asked both today and on a previous occasion, when we expect the whole system will be up and running with the problems resolved. Our current plans and those of Andersen Consulting are that the whole system will be available by the end of the financial year; that is, by the end of March. So in answer to the noble Lord's amendment, NIRS will be operational in any case by the time the Contributions Agency transfers to the Inland Revenue.
I hope that your Lordships will forgive me for going into this in some detail. I do not wish to belittle the problems but the message is very much that the system has not collapsed. It is not, as the noble Lord, Lord Higgins, said, a computer that has "gone down". That is not appropriate. Had NIRS1 gone down, that would have been the case and would have affected current payments. But we are talking about a new system that is being carefully piloted. Its introduction is now well under way but it is being introduced at a slower pace than the previous administration contemplated in their PFI contract with Andersen, and at a slower pace than we would have hoped because of the difficulties that we have been discussing today.
Turning to the amendments before us, the noble Lord has failed to make a case as to why the transfer of CA to IR should be dependent on NIRS2 being fully operational. The judgment we have to make is whether the risk of creating additional disruption to NIRS2 is sufficient to defer the whole transfer programme. Or, to put it the other way, we would want to be sure that deferral of the transfer significantly improved our chances of getting NIRS2 fully operational much more quickly. I do not see anything to suggest that that is the case.
The first reason, as I have said on a number of occasions, is simply that the transfer does not impose any significant additional burden on the system. The changes needed are relatively minor, largely to ensure that forms are correctly labelled and written; for example, changing an address at the top of a piece of paper. The second reason is that we have decided that those responsible for managing the system and managing the negotiations with Andersen Consulting will transfer to the Inland Revenue. It will be the same people doing the same work to get the system fully functional. Therefore there will be no loss of experience or knowledge. The recovery plans will continue across
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the Benefits and Contributions agencies and will be overseen by senior officials from both the Department of Social Security and the Inland Revenue, as now.
The third point is that it is not as if problems with the NIRS2 system have been identified only at this late stage. They were first identified last summer and we have therefore been able to plan the stabilisation and recovery arrangements for NIRS2 alongside the plans for the transfer. These are now well established alongside each other. Therefore we have been able to plan around any issues that the transfer had created. I am confident that the NIRS2 recovery programme has taken full account of the impact of the transfer.
The final point is that plans for the March changes to the system are well in hand. These involve changes other than those relating to the transfer but which need to be made at the same time. There could be additional risk and additional cost if some of the changes go ahead in March but not those relating to the transfer. I am sure that the noble Lord would not wish to add even more complexity to the problems we seek to resolve in partnership with Andersen's. Our judgment therefore has to be that proceeding with the transfer makes little difference to the NIRS2 recovery programme. Whatever occurs, the same issues must be addressed or be handled in the same way.
There is no question of our facing a choice between the transfer and paying money to those who need it. The solution proposed in the noble Lord's amendments carries its own risks. Bringing the Contributions Agency and the Inland Revenue together in one organisation has been welcomed by business as it will enable business and individuals to sort out their tax and contributions questions through a single government department. Business is anxious for us to go ahead and get the transfer up and running so we can start delivering those benefits. The Institute of Directors refers to this in a letter from which the noble Lord quoted the other day. Contributions Agency staff are keen to get on with working in a new organisation. Deferring the transfer would not only add to the complexity but would also be demoralising both for business and for staff.
I am therefore not convinced that the difficulties that have been outlined with NIRS2 are sufficient to justify a deferral or that deferral would have any effect on those difficulties. Indeed, the additional uncertainty would probably add to them and lead to a risk of even greater disruption. In the light of all that information—I apologise to the House for taking so long to reply—I urge the noble Lord to withdraw the amendment.
Lord Higgins: My Lords, far from apologising—
Lord Avebury: My Lords, I wish to ask the noble Baroness one question before she sits down. Will the fees paid to Andersen's enable the Government to recover any of the costs which are now being incurred in compensation payments to the victims of the delay? Will they be able to get this money back from the contractors?
Baroness Hollis of Heigham: My Lords, obviously some of this information is commercially sensitive, as

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I am sure the noble Lord will understand. However, my understanding is that Andersen's has already paid some moneys to that effect. Basically, we get compensation from Andersen's if, first, there is a fault established; secondly, if there has been a loss, as opposed to a cost—which is rather different—and, thirdly, if Andersen's has failed to rectify that or has failed to use its best efforts. My understanding at the moment is that we are paying Andersen's about £39 million in total over seven years for the NIRS service. In addition we shall have costs of about £90 million over the seven-year period for training and other such matters. That brings us to a total cost of about £134 million. If Andersen's is established to be at fault, it would be liable for that. However, that is obviously a matter for commercial negotiation.
3.45 p.m.
Lord Higgins: My Lords, I was about to say that the noble Baroness certainly should not apologise to the House for giving what is obviously a pretty comprehensive reply. However, one feels bound to say that it has taken a long while—from Second Reading to Report stage—for the full scale of this problem to emerge. However, at least we have much of the information on the record.
It is rather surprising that there does not appear to have been any serious attempt by the department—other than to react to incoming telephone calls—to let people know what is happening. One would have thought that as there appear to be problems with the computer system, some kind of publicity campaign in the press or elsewhere might have been helpful. Indeed it might still be helpful in one respect; namely, with regard to what people should do in respect of their tax returns. As the matter we are discussing is about to be transferred to the Inland Revenue, perhaps it might be appropriate for that department to tackle this matter. Self-assessment forms could inform people what they are supposed to do in this regard. I believe that that was the only point which the noble Baroness did not cover.
I was a little puzzled when the noble Baroness said that people are being paid but not the right amount. I am not clear why it was not possible to tell them that. As regards compensation, we seem to be in an extraordinary position. The noble Lord, Lord Goodhart, pointed out that a particular group of people will get compensation. However, those at the lower end of the income scale who are not in a company scheme but receive the ordinary national insurance pension—although not as much as they are entitled to—appear to be caught by the normal rules which stipulate that one is not compensated if the amount involved is less than £100. Therefore there is the paradoxical situation where the better-off are compensated, but the less well off are not. That does not appear to be a sensible arrangement.
The rules may be appropriate in individual cases where the department makes a mistake but one would have thought that the Secretary of State in consultation with the Treasury, should consider whether the normal rules ought to apply, or whether some adjustment ought to be made. The reality is that the pensioners at the bottom end of the income scale have not been getting
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the money to which they are entitled. If I have understood the noble Baroness correctly, they will not be compensated in any way whatever.
Baroness Hollis of Heigham: My Lords, anyone who has been underpaid will have their payments fully made. The question is whether they get compensation in addition to the full payment of their arrears.
Lord Higgins: My Lords, they will get the amount to which they were entitled, but they will get it late and they will be out of pocket in the meantime. The Treasury has gained and the pensioners have lost. It is as simple as that. There is a problem here. At the risk of complicating the issue, I believe the noble Baroness said that the increments are also not being paid.
We have several different animals here. We have the increase from the uprating and we also have what I understood to be an increment; namely, the extra amount people get if they defer their pension by a certain time. Perhaps we should look at this matter in more detail to see whether we can clarify it. It now looks as if people will not get the increased amount which they should have got if they had deferred drawing their pension for as long as the actual delay in payment. I shall try to spell that out a little more clearly. If someone had asked for his pension to be paid last July, for example, but was not paid it, will it be increased as if he had volunteered to defer the payment of his pension? Leaving compensation and uprating on one side, I am not clear as to whether, because that person has been out of pocket meanwhile—this may be an alternative to compensation as regards people drawing deferred pensions—his permanent pension will be increased as if he had volunteered to delay the payment for a year, for example.
These are complicated matters. There is a strong reason for the Government making much clearer than they have to the public what is the situation. We had a problem, which the noble Baroness rightly did not seek to minimise, on a significant scale but there has been no serious attempt to tell people what actually happened. Nonetheless, in the light of the noble Baroness's reply—to which we may or may not wish to return on Third Reading—I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 2:
After Clause 3, insert the following new clause—

RECOVERY OF CONTRIBUTIONS WHERE INCOME TAX RECOVERY PROVISIONS NOT APPLICABLE
(" . The provisions of Schedule (Recovery of contributions where income tax provisions not applicable) shall have effect with respect to the recovery of—

(a) those Class 1, Class 1A, Class 1B and Class 2 contributions to which regulations under paragraph 6 of Schedule 1 to the Social Security Contributions and Benefits Act 1992 (power to combine collection of contributions with income tax) do not apply,

(b) Class 4 contributions payable by virtue of regulations under section 18 of that Act, and

(c) interest or penalties payable under regulations made under paragraph 7A or 7B of Schedule 1 to that Act.").

The noble Baroness said: My Lords, I shall speak also to Amendments Nos. 33, 38 and 43. These amendments concern the procedures available to enforce the collection of contributions that have not been paid at the right time. Let me make it clear that we are dealing here with NICs that are not the subject of any unresolved dispute between the contributor and the department over whether NICs are properly due. We are concerned here simply with unpaid debts.
The amendments give the Inland Revenue, from next April, access to exactly the same methods of enforcing the recovery of unpaid NICs as it currently has for tax. The amendments permit summary proceedings for the recovery of smaller NIC debts in magistrates' courts. They also give authorised officials who are not lawyers the right to take county court proceedings.
I shall set out the current position. Tax enforcement provisions currently apply for the recovery of unpaid contributions that are already collected by the Revenue—that is, 94 per cent. of total NICs. But the procedures available to the Contributions Agency to gather in the other 6 per cent. are currently not as comprehensive as they are for tax. We are talking principally here of flat-rate Class 2 NICs paid by the self-employed and that part of Class 1A NICs paid directly to the Contributions Agency.
Apart from the use of proceedings in the High Court for very large NIC debts, the only method the Contributions Agency has to enforce the recovery of unpaid NICs is having DSS lawyers take county court proceedings, or sheriff court proceedings in Scotland. In the Social Security Act 1988 those powers were supplemented to allow officials to recover contributions by distraining on the goods of debtors and by the equivalent process under Scottish law, thereby bringing recovery procedures for NICs a step closer to those which have long been available for tax.
We propose now to complete the alignment process begun last year in time for the transfer by extending NICs recovery powers in two ways. The first is to allow summary proceedings for the recovery of NIC debts under £2,000 to be taken in magistrates' courts in England, Wales and Northern Ireland. Again, that mirrors existing tax law. The Revenue's experience is that summary proceedings are an effective way of collecting small debts. They are likely to be the most effective way of collecting unpaid Class 2 NICs from the self-employed. Your Lordships will recall that the recently published report of the Comptroller and Auditor-General on the National Insurance Fund expresses concern about the high level of Class 2 arrears. This proposal directly addresses that concern, as well as being fully justified in its own right. No Scottish equivalent of the proposal is needed, as last year's Social Security Act has already made provision for equivalent recovery action to be taken there.
The other proposal is to give officials who are not lawyers the right to conduct proceedings in the county court, and in the sheriff's court in Scotland, to recover NICs. Collectors of Taxes already have that power for tax and indeed for the NICs that are recovered through the tax system.
That change will avoid the need for Revenue lawyers to scurry around the country at public expense to conduct proceedings that are normally of a quite routine character. That would be a waste of scarce and expensive resources and will be a greater waste when recovery proceedings, which currently have to be taken in the High Court, are devolved to county courts.
Those new provisions appear in the new clause and new schedule. The other amendments extend the new provisions to Northern Ireland and make a consequential amendment in the Social Security Contributions and Benefits Act 1992. I beg to move.
Lord Higgins: My Lords, the noble Baroness was rather surprised at the number of amendments that I put down for Committee stage. I am rather surprised at the number of amendments that the Government are tabling on Report. I understand of course that the situation in Northern Ireland may have changed in a relevant way and I am certainly not going to call for recommittal at this point. I merely say that the House has ahead of it in this Session a massive amount of social security legislation. One certainly hopes that government amendments will appear at least at Committee stage. It is not very satisfactory for amendments to be tabled on Report, when one can only intervene once, as against bandying matters back and forth. Given the extraordinarily heavy and complex legislative programme. we should get amendments as soon as possible.
I have one simple question for the noble Baroness. Under these new clauses, does the Inland Revenue obtain greater powers than the Department of Social Security and the IR have at present?
Baroness Hollis of Heigham: My Lords, the noble Lord should accept the difference between Bills introduced in this House and legislation that is introduced in the other place and then comes to us. The noble Lord knows that this is a highly technical Bill, which is why he put down a whole lot of amendments before the Committee stage. I am grateful that the noble Lord accepts the Northern Ireland difficulties.
When a Bill starts in this House, one expects far more government amendments as a result of the complexities of cross-drafting and so on than would be the case with the two other major pieces of social security legislation. I hope that Members of the other place will give that legislation the careful scrutiny and revision that is the customary practice of your Lordships.
In answer to the noble Lord's final question, no, they will have the same powers.
On Question, amendment agreed to.
Clause 4 [Powers relating to enforcement]:
Lord Higgins Lord Higgins moved Amendment No. 3:
Page 2, line 46, at end insert ("until 31st August 2001").
The noble Lord said: My Lords, on the point that the noble Baroness has just made, I am not sure that last year's Social Security Bill, which went through the other place first and to which we passed hundreds and hundreds of amendments, gives much cause for

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optimism. No doubt it will be easier, for the reasons she mentioned, to avoid amendments at Report stage to future legislation.
We have spent considerable time in Committee on the enforcement provisions and in particular on the relationship between the enforcement provisions available to the Inland Revenue and the Department of Social Security. The purpose of the amendment is to see how those changes work out. It has been suggested by the Institute of Directors that it would be appropriate that the matter be reviewed and that the powers ought not to be changed in the way proposed within a given timescale unless that review has reported. It might be worth having the noble Baroness's reaction.
We have debated that matter to some extent but the Institute of Directors raises some specific points. It seems that Inland Revenue inspectors will be able to enter business premises at any time without warning and question employees. I raised that issue on Second Reading. There is also the question of whether or not the employee can be seen alone. We have debated also whether the employee can insist on a professional adviser being present. Perhaps the noble Baroness will let us know what the position is.
The extent to which the Inland Revenue uses any additional powers is something that we shall have to see in practice. There is concern that with the combination of two sets of powers, because it is a cumulative process the dividing line between the powers of the IR as the tax-collecting authority and its powers as regards national insurance may become blurred.
The Institute of Directors makes a point that had not occurred to me but it may be one that the noble Lord, Lord Goodhart, will wish to raise. Will the fact that failure to supply information is being decriminalised alter the situation with regard to the right to refuse to incriminate oneself? It is somewhat of a backhanded argument as to whether the civil penalties may be imposed and people will be obliged to admit that they had erred. I hope that the Minister will consider that. In particular, does she feel it would be appropriate for these matters to be reviewed?
All of us have a history in relation to these matters. I well recall my attempt to steer through the original value added tax legislation. It was bad enough saying why all the various items should be taxed, but once the enforcement provisions, which the Inland Revenue had had for the past 700 years, were put into legislation, everyone was up in arms. I had the most terrible trouble with lots of lawyers. Often, it is only when matters are changed or codified that people become aware of the real powers of the revenue departments. Therefore, it would be helpful if the noble Baroness would respond to this point, which is causing some concern in the business community, even though, as she points out, business is basically in favour of the transfer.
4 p.m.
Lord Skelmersdale: My Lords, as a former managing director of a small business, I have had experience of visits by staff in what is now the social security Contributions Agency to the person who does
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the wages. I have also had experience of the Inland Revenue visiting for the same purpose; and also of not one, but two, inspections by the VAT man. So over a period of time I have become used to inspections by statutory bodies. I see no harm in that.
However, for the three departments that I just mentioned, we may now read two. We shall be told that the Inland Revenue wants to come and talk to the person who does the wages for the business. However, we shall not necessarily be told under what hat that person is coming—whether he or she wishes to examine the social security contributions part of the operation or the PAYE part. It is extremely important that when the initial contact is made regarding an inspection that is made absolutely clear. Otherwise, there could well be some confusion, and that is not right.
Baroness Hollis of Heigham: My Lords, I am in some difficulty and shall take your Lordships' guidance. Many of the detailed points raised were addressed to Amendment No. 39. As I am sure your Lordships will have noted, that amendment was tabled in response to most of the points raised by the noble Lord, Lord Higgins. I wonder whether it would be for the convenience of the House if I respond to Amendment No. 3 and speak also to government Amendment No. 39 so that effectively we group together the two issues. Perhaps that would be sensible. As many of the detailed points relate to Amendment No. 39 perhaps I may first address Amendment No. 3 and then turn to those detailed points.
Lord Goodhart: My Lords, if the Minister will excuse me, I do not wish to speak to Amendment No. 3; however, I do wish to raise a few questions in relation to Amendment No. 39.
Baroness Hollis of Heigham: My Lords, in that case, we shall have to proceed with the amendments separately. I must therefore ask your Lordships to wait for answers until we come to Amendment No. 39; otherwise, we shall be repeating ourselves.
I note that the noble Lord opposite looks surprised. Amendment No. 39 was designed to address the very issues that were raised by the noble Lords, Lord Higgins and Lord Skelmersdale, at our previous meeting and which they have raised again today. I am therefore rather baffled that the noble Lord has spoken to some 20 amendments before we come to them.
Lord Higgins: My Lords, I accept whatever is convenient for the House. If that is so, I am not quite clear why the Government did not ask for the amendment to be grouped. Perhaps the noble Baroness would deal with points that arise on this amendment but do not arise on Amendment No. 39, and then we may consider the remaining issues when we come to Amendment No. 39.
Baroness Hollis of Heigham: My Lords, Amendment No. 3 is a general amendment. It would time limit powers that successive governments have found acceptable for 50 years. Indeed, the party opposite

819
were instrumental in adding to powers of inspection as recently as the 1997 Fraud Act. So we can see no case for such a dilution of powers merely on account of the Contributions Agency transfer.
This Bill is not he occasion for substantial change of powers since the aim of the Bill is to transfer the CA as a "going concern". We have been clear from the outset that professional advisers would be nervous that there might be a levelling up of powers. This we have very deliberately not done.
Nevertheless, we accept that the statutory powers of enforcement under NICs legislation that the Inland Revenue will inherit will not be fully consistent with the existing powers in relation to tax. It is in no one's interests to have any lack of clarity or certainty about the state's powers to ask questions or ask to enter premises.
We anticipate that, after this legislation takes effect, the Inland Revenue will be consulting with a range of opinion about desirable harmonisations of tax and NICs. Indeed, those discussions have already started. Some areas for discussion would be on the details of the charging rules. Others would be on the administration powers and administrative processes to the extent that they impinge on employers and others.
So we see considerable merit in conducting a review of inspectors' powers, taking into account the rights of individual contributors as well as the interests of employers and the need to block fraud.
Such a review needs to be done properly, running well beyond the timescale of this Bill. Moreover, the review needs to look at the wider context. The Inland Revenue is being given other tasks such as policing the national minimum wage and student loan recovery, and handling the working families tax credit. All three involve employers, although we hope to burden them as little as possible.
It may be that, on close examination, different powers are indeed needed for different purposes. But our starting-point must be that a Revenue officer visiting an employer should have much the same powers, and limitations on those powers, whatever the purpose of the visit—in other words, as much congruence as possible.
I am conscious that the Committee on the Enforcement Powers of the Revenue Departments, set up in 1980 under the distinguished chairmanship of the noble and learned Lord, Lord Keith of Kinkel, took some four years to produce its reports. And enactment of its recommendations, in detailed consultation with representative bodies, took another five years.
That committee was exemplary in its thoroughness and very wide-ranging in its scope. While we want this review to be thorough, we do not intend to be so wide-ranging. That is, not least, because we want to see the outcome—which I do not pre-judge—on a much faster time-scale.
Nevertheless, that precedent leaves me cautious about accepting a particular timetable for replacement legislation to be in place. Hence I should not see it as responsible to time limit the current, indeed ancient, inspectors' powers. Unlike the matters covered by the
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Keith Committee, we shall not be able to make all the changes that may prove desirable in the annual Finance Bill. Instead, we may need to amend social security legislation or, perhaps, DTI legislation where the national minimum wage is concerned.
I hope that what I have said reassures the noble Lord, Lord Higgins, that we seek clear, workable and effective powers for inspectors, which balance privacy against protecting contributors' rights and blocking fraud. Our detailed proposals are set out in Amendment No. 39. Given the review I have announced, I hope that the noble Lord will withdraw his amendment. We share what we understand to be the noble Lord's concern. It is merely that we believe that a proper review, especially in the light of the Bath study, is a more appropriate and robust basis for achieving the same end as the one he proposes in his amendment, which would effectively mean a guillotine and would therefore cut across a decent and proper review of several sets of concurrent but not at present fully consistent powers. I hope that in the light of that explanation—namely, that we accept the noble Lord's concern but believe a better way of dealing with the matter is by a properly informed consultative review, as we are currently exploring—he will feel able to withdraw his amendment.
Lord Higgins: My Lords, the intention of the amendment was to introduce the idea that there might be a review. Therefore I can happily withdraw the amendment, although there may be some outstanding points on Amendment No. 39 to which we shall come in due course—although that amendment, as I understand it, is designed to deal with points I raised in Committee. I shall read the noble Baroness's reply carefully. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 7 [Decisions by officers of Board]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 4:
Page 3, line 40, after ("made") insert ("for the purposes of this paragraph").
The noble Baroness said: My Lords, perhaps I may speak also to Amendments Nos. 5 to 10. These are all technical amendments.
Amendments Nos. 4 and 5 deal with two technical points arising in Clause 7(1). The first ensures that the regulations referred to at the beginning of paragraph (f) mean only those made for the purposes of that paragraph rather than regulations governing entitlement generally to SSP or SMP. The second deals with the missing consequential amendment in paragraph (h) which was mentioned at Committee stage by the noble Lord, Lord Goodhart. We are most grateful to the noble Lord for pointing it out, however embarrassing it may be to the parliamentary draftsman. It is a case of "Bingo!" for the noble Lord, Lord Goodhart, He was absolutely right.
Amendments Nos. 6 and 7 make clear provision for the kinds of decisions that can be varied or superseded in accordance with regulations under Clause 9.
The effect of Amendment No. 6 is to make it clear that decisions that supersede earlier decisions can be varied. Amendment No. 7 ensures that a decision which

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has been confirmed or varied by the tax appeal commissioners can subsequently be superseded—but only where circumstances have changed since the decision in a way which justifies a different decision. Nothing in the amendments creates a general right for officials to overturn decisions of an independent tribunal.
There are a number of possible circumstances where decisions may need to be varied. Examples are where the original decision was incorrect for some reason, such as being based on incomplete or incorrect facts. Where circumstances change so that the continuing effect of an original decision is no longer appropriate, then a fresh decision can be made to supersede the original decision. For example, the employment status of an individual may be one such matter in which there may be a move between employment and self-employment.
The purpose of Amendment No. 8 is to ensure that a variation by an officer of an earlier decision, and a decision which supersedes an earlier decision, both carry a right of appeal to the tax appeal commissioners.
As it stands, Clause 10 expressly confers a right of appeal against decisions made under Clause 7 of the Bill. But without this amendment there would be no explicit right of appeal against the variation or superseding of a decision. Amendment No. 8 makes clear provision for appeals in both of those instances.
Amendments Nos. 9 and 10 are further technical amendments to ensure that regulations made by the board can cater for matters that arise pending or out of decisions.
As it stands, Clause 13 (1)(a) enables provisions to be made in regulations for matters arising pending a decision by an officer of the board, but we believe that we need to provide also for matters which arise pending the determination by the tax appeal commissioners of an appeal from such a decision.
The regulations may need to provide in particular for the arrangements to be made for the payment of contributions due under a decision of an officer while that decision is under appeal. Amendment No. 10 enables such provision to be made. These are all technical amendments. I beg to move.
Lord Goodhart: My Lords, I agree that these are all technical amendments. I can only say that, knowing the great skill of the parliamentary draftsmen, it is a rare occasion when one is able to score a goal against them.
Baroness Hollis of Heigham: My Lords, the House and we on the Government Benches in particular are grateful to the noble Lord for his perspicacity on his feet. I hope that your Lordships will accept the amendment.
On Question, amendment agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 5:
Page 4, line 5, leave out ("that Act") and insert ("the Social Security Administration Act 1992").
On Question, amendment agreed to.
Clause 9 [Decisions varying or superseding earlier decisions]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 6 and 7:
Page 5, line 17, after ("Act") insert ("(including a decision superseding an earlier decision)").
Page 5, line 21, at end insert (", and
( ) for any such decision as confirmed or varied by the tax appeal Commissioners on appeal to be superseded, in the event of a material change of circumstances since the decision was made, by a subsequent decision made by an officer of the Board.").
On Question, amendments agreed to.
Clause 10 [Appeals against decisions of Board]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 8:
Page 5, leave out lines 28 and 29 and insert—
("(A1) This section applies to any decision of an officer of the Board under section 7 of this Act or under regulations made by virtue of section 9(1)(b) of this Act (whether as originally made or as varied under regulations made by virtue of section 9(1)(a) of this Act).
(1) In the case of a decision to which this section applies—").
On Question, amendment agreed to.
Clause 13 [Matters arising as respects decisions]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 9 and 10:
Page 7, line 6, at end insert—
("( ) pending the determination by the tax appeal Commissioners of an appeal against any such decision,").
Page 7, line 10, at end insert—
("( ) Regulations under this section may, in particular—

(a) make provision making a person liable to pay contributions pending the determination by the tax appeal Commissioners of an appeal against a decision of an officer of the Board, and

(b) make provision as to the repayment in prescribed circumstances of contributions paid by virtue of the regulations.").

On Question, amendments agreed to.
4.15 p.m.
Clause 19 [Payments in respect of money purchase contracted-out pension schemes to be made out of National Insurance Fund]:
Lord Higgins Lord Higgins moved Amendment No. 11:
Leave out Clause 19.
The noble Lord said: My Lords, this amendment proposes to leave out Clause 19. I raised the amendment because I am not clear as to the principle of the clause. The clause affects payments in respect of money purchase contracted-out pension schemes to be made out of the National Insurance Fund. Again, I should declare an interest, although the fund of which I am chairman is a final salary scheme and not a money purchase one.
There has been a long history, following the original Budget of the Chancellor of the Exchequer in which the changes in advance corporation tax deprived many pension funds of about £5 billion. Subsequently, a series of changes were recommended by the Government Actuary with regard to how the rebates should be

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adjusted between money purchase and final salary schemes and personal pensions. However, alas, the recommendations of the Government Actuary were not accepted. The overall effect was to push people back into SERPS and, I imagine, in turn to generate more public expenditure of about £500,000.
This is all in the context of the explanatory note which appears at the right hand margin, but I am still not clear as to the purpose of the clause. The problems I have just mentioned have been serious. Much of the clause refers to Northern Ireland and we understand why those changes may be necessary. Even if the situation in Northern Ireland continues as the Government and everyone hope, there are other amendments which reflect the possible change in the situation there.
Leaving Northern Ireland to one side, if the helpful Explanatory Notes are to be believed, what is happening is that the national insurance rebates will be funded from the National Insurance Fund. There are arrangements for paying in and paying out from the Consolidated Fund to the National Insurance Fund, but I am not clear as to the purpose of the merry-go-round. Earlier, we discussed the role of the National Insurance Fund and there were discussions between the noble Lord, Lord Goodhart, and myself as to whether it is a pipe or a tank, with flows inwards or outwards.
However, the function of the fund becomes increasingly uncertain with respect to why particular amounts of money—on a substantial scale presumably—should be paid in one direction or another. I wish to ask the Minister whether it has anything to do with the other problems I mentioned which still have severe repercussions. Alternatively, is there some object to the clause which I have been unable to discern? I beg to move.
Baroness Hollis of Heigham: My Lords, the noble Lord asked what was the purpose of the clause. Since we are not now in the Committee stage, I can give an answer and if he has more detailed questions I may have to respond to him in correspondence.
Clause 19 corrects a defect in the legislation which governs the financing of national insurance rebates for COMPS (contracted-out occupational money purchase pension schemes). It represents a technical amendment in relation to government accounting mechanisms and does not affect individuals in or employers running occupational pension schemes.
The Pension Schemes Act 1993 should provide for COMP rebates to be funded from the National Insurance Fund and for any rebate-associated recoveries to be paid into that fund.
However, through inadvertence—possibly because the noble Lord, Lord Goodhart, was not a Member of your Lordships' House at the time—no such provisions have been made. Instead, the legislation only provides for the age-related element of COMP rebates to be paid out of money provided by Parliament. Therefore, rebates have been paid from the Consolidated Fund.
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The clause corrects Section 177 of the Pension Schemes Act 1993, the section which governs the general financing arrangements for that Act, to allow COMP rebates to be funded from the National Insurance Fund and for recoveries to be made direct to the fund. It also provides for the fund to reimburse the Consolidated Fund the moneys paid out during the current tax year in respect of such rebates. For completeness, the Northern Ireland legislation is also amended correspondingly.
I hope that that answers the noble Lord's question as to the purpose of Clause 19. It is to correct the Pension Schemes Act 1993. Because this is Report stage and we therefore do not engage in debate, I should be happy to follow up in writing any queries the noble Lord may have.
Lord Skelmersdale: My Lords, before the noble Baroness sits down, perhaps in her ultimate response, which must surely be by letter at this stage, she could answer a question from me. Subsections (3) and (4) of Clause 19 make it clear that repayment from the National Insurance Fund into the Consolidated Fund for the purposes mentioned by the Minister will be a short-term operation. The provision states:
"during the period beginning with 1st April 1998 and ending with the passing of this Act".
There is no need for the Minister to respond now; I would not dream of putting her under even more pressure.
Lord Higgins: My Lords, I am not sure that I am clearer than I was at the outset. Leaving to one side the broad political issues, if I understand the matter correctly, the noble Baroness does not suggest that the provision corrects something which results from the failure of the Government to agree to what was recommended by the Government Actuary. It all dates back to 1993. I am not clear what has been happening in the meantime and why the terms of the clause as it stands are so restricted in time. What has been going on between 1993 and now? If it has been all right since 1993, presumably people have not been paying out the sums without proper parliamentary authorisation. Why is it now necessary to make the change? The whole thing is a merry-go-round anyway and at the end of the day it makes no difference whether the money is paid out of the Consolidated Fund or the National Insurance Fund.
The money all comes from you and me and everyone else in the country, either by way of contributions or by way of tax. Obviously there is some case to be made for it being paid out of one fund or another and the noble Baroness would know about that. I should like to continue with the idea that there is a contributory principle, and so on, and to that extent it is best that it comes out of the National Insurance Fund. However, I really do not understand now, for one moment, what the situation is. No doubt the noble Baroness could perhaps write to us and, if necessary, we can put it on the record at Third Reading. Subject to that, I would not

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wish to press the amendment, even though I am not the least bit clear as to what the consequences will be. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 21 [Special provision for certain contracts]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 12:
Page 10, line 25, leave out subsection (1) and insert—
("(1) This section applies to—

(a) any contract for the supply of goods or services to the Secretary of State which relates partly to functions transferred by virtue of this Act to the Board (in this section referred to as "transferred functions") and partly to functions retained by the Secretary of State (in this section referred to as "retained functions"), and

(b) any contract for the supply of goods or services to the Secretary of State which relates only to transferred functions or only to retained functions, but whose terms are wholly or partly determined in accordance with a contract falling within paragraph (a) above.").

The noble Baroness said: My Lords, in moving Amendment No. 12, I should like to speak also to Amendments Nos. 13 and 14. This is another group of technical amendments which I hope will not detain us long. I explained in Committee some of the complex contractual relationships with which we are dealing as part of the transfer of the CA to the IR. The amendments in this group deal with subsidiary contracts made under a framework agreement. Perhaps the best way of illustrating this is by an example. The department has a framework agreement with a supplier to provide desk-top computers at a set price. The department then places orders for individual computers under that agreement. This amendment simply allows those subsidiary contracts to be transferred or not, as the case may be, so that the same department, either the DSS or the Inland Revenue, holds the contracts for the whole lot. This is a straightforward and technical provision. I beg to move.
On Question, amendment agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 13 and 14:
Page 10, line 34, leave out ("functions transferred to them by virtue of this Act") and insert ("transferred functions").
Page 10, line 46, leave out ("functions transferred to them by virtue of this Act") and insert ("transferred functions").
The noble Baroness said: My Lords, I beg to move these two amendments formally.
On Question, amendments agreed to.
Clause 22 [Power to transfer functions by Order in Council]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 15:
Page 11, line 25, at end insert—
("(bb) any function under section 7 of the Social Security Act 1986 (occupational pension schemes becoming contracted-out between 1986 and 1993), so far as that section remains in force by virtue of paragraph 22 of Schedule 6 to the Pension Schemes Act 1993,").
The noble Baroness said: My Lords, I beg to move Amendment No. 15 and at the same time speak to Amendments Nos. 16 and 17. As I said in Committee, Clause 22 is intended to allow us the flexibility in the light of operational experience to make adjustments by Order
826
in Council at the edges of the boundary drawn between the DSS and the Inland Revenue. If your Lordships remember, this was particularly pressed on us by the noble Lord, Lord Goodhart, who was worried as to whether it was right to replace the appeal decision with a unified appeal tribunal rather than with the Special General Commissioners of Tax.
These amendments add one small area to the scope of the clause so that it covers all the areas of contracted-out pension business. In addition to its functions under Part III of the Pension Schemes Act 1993, the contracted-out employment group of the Contributions Agency also carries out some functions under Section 7 of the Social Security Act 1986, which covers incentive payments made by the Secretary of State to pension schemes becoming contracted out between 1st January 1986 and 5th April 1993.
As drafted, Clause 22 does not cover this work and so Amendment No. 15 includes these functions in the clause and Amendment No. 17 add references to equivalent Northern Ireland legislation. Amendment No. 16 makes good the omission of Northern Ireland provisions which correspond with provisions referred to in subsection (2). I beg to move.
On Question, amendment agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 16:
Page 12, line 27, after ("Fund.") insert—
("( ) references to section 1(1) of the Social Security Contributions and Benefits Act 1992 and section 161(1) of the Social Security Administration Act 1992 have effect as references to section 1(1) of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 and section 141(1) of the Social Security Administration (Northern Ireland) Act 1992,").
The noble Baroness said: My Lords, I beg to move Amendment No. 16 formally.
On Question, amendment agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 17:
Page 12, line 27, after ("Fund,") insert—
("( ) references to section 7 of the Social Security Act 1986 and paragraph 22 of Schedule 6 to the Pension Schemes Act 1993 have effect as references to Article 9 of the Social Security (Northern Ireland) Order 1986 and paragraph 21 of Schedule 5 to the Pension Schemes (Northern Ireland) Act 1993,").
The noble Baroness said: My Lords, I have already spoken to this. I beg to move the amendment formally.
On Question, amendment agreed to.
Clause 23 [Corresponding provision for Northern Ireland]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 18:
Page 12, line 35, at end insert ("do any of the following")
The noble Baroness said: My Lords, I beg to move Amendment No. 18 and to speak also to Amendments Nos. 19 to 28 and also to Amendment No. 45. This group of amendments would change the mechanism by which functions in respect of Northern Ireland would transfer. While they provide greater flexibility, they would not affect the policy intention or the eventual result. They are about form rather than substance.
At Second Reading, I said that national insurance contributions operations are managed by the Contributions Unit, which is part of the Northern Ireland Social Security Agency. As in Great Britain, the bulk of NICs are collected by the Inland Revenue alongside tax. Further, centralised functions, such as maintaining the records of contributors in Northern Ireland, are done by the Contributions Agency in Great Britain on behalf of the Northern Ireland Social Security Agency. Accordingly, we intend that the Contributions Unit should transfer to the Inland Revenue at the same time as the Contributions Agency.
As currently drafted, Clause 23 provides for a two-stage transfer via the DSS. The first stage from the Northern Ireland Department to DSS would be done by Order in Council under Section 86 of the Northern Ireland Act 1998. The second transfer, from DSS to the Inland Revenue, would be done by Order in Council under this clause. That was consistent with the aim that the Northern Ireland Assembly should start work on 1st February.
It is now clear that, despite all the efforts that have been made, the Assembly will not start work that early. So we now think it makes more sense to provide in this Bill for a direct transfer of the operational functions from the Northern Ireland Department to the Inland Revenue. That will ensure that a seamless transfer of operational functions can happen for the whole of the United Kingdom in April.
Amendment No. 21 provides the flexibility to perform a direct transfer of policy functions to Treasury and Inland Revenue, if that looks the best way of securing the policy intention of a simultaneous policy transfer to the Chancellor's departments across the United Kingdom. Amendment No. 22 retains the option of a two-stage transfer.
So the clause as amended would facilitate a simultaneous operational and policy transfer on 1st April across the whole of the UK. Or it could be used to transfer operational functions to the Inland Revenue, and policy functions to DSS, on 1st April, with a subsequent onward transfer of GB and Northern Ireland policy functions on the same day.
Amendments Nos. 19, 21, and 28 allow for the restructuring and renaming of Northern Ireland departments that is proposed to happen before the Assembly starts work. These amendments retain our policy intention of a single operational transfer across the UK on 1st April—I understand that there is a question mark in relation to that, given the speed of the Northern Ireland developments—and a single date for the policy transfers to Treasury and Inland Revenue. I beg to move.
Lord Higgins: My Lords, I can understand the reason for flexibility. If it can be short-circuited in the way which has just been described, why was it not done that way in the first place?
Baroness Hollis of Heigham: My Lords, I am not sure what the noble Lord means by "the first place".
Lord Higgins: My Lords, we are changing the system, as I understand it, and doing it directly from the
828
department without going into, so to speak, a holding pattern meanwhile. I just was not quite clear why, if this can be done now to give flexibility, the Government did not make this arrangement in any case.
Baroness Hollis of Heigham: My Lords, I think the most useful thing I can say to the noble Lord is that we expected all this to have happened by 1st February and that the Northern Ireland Assembly would be up and running by 1st February, so that this would then have followed conventional practice in other departments. If I can help the noble Lord further on this as to whether there is some technical reason, I will come back to him, but that is my understanding.
On Question, amendment agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 19 to 28:
Page 12, line 36, leave out ("Secretary of State") and insert ("relevant Northern Ireland authority").
Page 12, line 38, leave out ("or 2").
Page 12, leave out lines 40 to 43 and insert—
("(b) make provision for transferring from the relevant Northern Ireland authority to the Secretary of State any other function in relation to Northern Ireland which relates to any of the matters specified in paragraph 10 of Schedule 2 to the Northern Ireland Act 1998 (excepted matters),
(bb) make provision for transferring from the relevant Northern Ireland authority to the Board or the Treasury any function in relation to Northern Ireland corresponding to a function transferred to the Board or, as the case may be, the Treasury by virtue of section 2 of this Act, and").
Page 12, line 46, at end insert—
("(1A) If an Order in Council made under this section by virtue of subsection (1)(b) above has transferred to the Secretary of State any function in relation to Northern Ireland which corresponds to a function transferred to the Board or the Treasury by virtue of section 2 of this Act, Her Majesty may by a further Order in Council under this section make provision for transferring that function from the Secretary of State to the Board or, as the case may be, the Treasury.").
Page 12, line 47, leave out from ("may,") to end of line 2 on page 13 and insert ("for the purposes of the Order").
Page 13, line 8, leave out from first ("provision") to ("as") in line 11.
Page 13, line 11, at end insert (", including—

(i) provision modifying references in any enactment to the Northern Ireland Assembly, to statutory rules for the purposes of the Statutory Rules (Northern Ireland) Order 1979 or to the Comptroller and Auditor General for Northern Ireland,

(ii) provision for the transfer of property, rights and liabilities, and

(iii) provision for the transfer to Her Majesty's Home Civil Service of persons employed in the Northern Ireland Civil Service.").

Page 13, line 12, leave out subsection (3) and insert—
("(3) A certificate issued by the Board, the Secretary of State or the Treasury that any property vested in a Northern Ireland department immediately before an Order under this section takes effect has been transferred by virtue of the Order to the Board, the Secretary of State or the Treasury, as the case may be, shall be conclusive evidence of the transfer.
(4) A certificate issued by the Board or the Treasury that any property vested in the Secretary of State immediately before an Order under this section takes effect has been transferred by virtue of the Order to the Board or the Treasury, as the case may be, shall be conclusive evidence of the transfer.").

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Page 13, line 16, at end insert—
("( ) Subsection (1A) above does not limit the powers conferred by section 22 of this Act in relation to Northern Ireland.").
Page 13, line 16, at end insert—
("( ) In this section "the relevant Northern Ireland authority", in relation to any function, means the Northern Ireland department by which the function is exercisable.").
The noble Baroness said: My Lords, I beg to move these amendments formally.
On Question, amendments agreed to.
Clause 27 [Short title, commencement and extent]:
[Amendment No. 29 not moved.]
Lord Higgins Lord Higgins had given notice of his intention to move Amendment No. 30:
Page 14, line 30, leave out ("the passing of this Act") and insert ("such day after 30th November 1999 as the Secretary of State may, by order, appoint").
The noble Lord said: My Lords, I had indicated that I would move Amendment No. 30 but as we have already debated its substance, I shall not move the amendment.
[Amendment No. 30 not moved.]
[Amendment No. 31 not moved.]
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 32:
Page 15, line 3, at end insert—
("( ) section 2 and Schedule 3 so far as they amend section 177 of the Social Security Administration Act 1992 or section 88 of the Northern Ireland Act 1998,").
The noble Baroness said: My Lords, I beg to move Amendment No. 32 and to speak also to Amendments Nos. 36 and 37. If I may deal with this slightly back to front, Amendment No. 36 is a technical amendment, which extends slightly the powers of the existing joint authority, comprising the Secretary of State for Social Security and the Departments of Health and Social Services for Northern Ireland, that co-ordinates the social security system across the United Kingdom. It ensures that the joint authority will continue to be able to make adjustments between the Great Britain and Northern Ireland National Insurance Funds once those funds have been transferred to the control and management of the Inland Revenue.
Amendment No. 37 makes the same changes to the powers of the new joint authority, which will include also the Chancellor, to be set up under the 1998 Northern Ireland Act when the Northern Ireland Assembly starts work. Finally, Amendment No. 32 makes a consequential adjustment in Clause 27 so that these amendments apply in Northern Ireland. I beg to move.
On Question, amendment agreed to.
4.30 p.m.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 33:
Page 15, line 4, at end insert—
("( ) section (Recovery of contributions where income tax recovery provisions not applicable) and Schedule (Recovery of contributions where income tax recovery provisions not applicable),").
On Question, amendment agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 34:
Page 15, line 15, leave out from ("any") to ("and") in line 16 and insert ("enactment which extends to Northern Ireland,").
The noble Baroness said: My Lords, I believe that this wins the record for being the briefest amendment-moving speech this evening. Amendment No. 34 is a technical amendment to the subsection of Clause 27 which extends to Northern Ireland the repeals schedule to the Bill. In the light of additional material now in that schedule, that provision is now too restrictive and needs to be drawn in more general terms. I beg to move.
On Question, amendment agreed to.
Schedule 2 [Transfer of functions under subordinate legislation]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 35:
Page 27, line 31, at end insert—

("S.I. 1996/1245.

The Social Security (Additional Pension) (Contributions Paid in Error) Regulations 1996.

All the regulations.")

The noble Baroness said: My Lords, following my exchanges with the noble Lord, Lord Skelmersdale, in Committee, we have given further thought to the functions conferred on the Secretary of State in statutory instruments. As a result, this technical amendment adds to the list in the schedule a further instrument which confers functions on the Secretary of State in cases where contributions have been paid in error. I hope that the amendment will receive the full support of the noble Lord, Lord Skelmersdale. I beg to move.
Lord Skelmersdale: My Lords, I was delighted to see the amendment because obviously the object behind my probing amendments to Schedule 2 in Committee persuaded the Government and their advisers to have another look at the schedule. Clearly they have done that. They had a tiny look immediately before Committee stage which was possibly prompted by me, possibly not; I do not know. They made one small alteration at that stage. Now a fairly significant alternation has been made. Another statutory instrument has been introduced into the list in Schedule 2. In welcoming the amendment, I am especially pleased that column 3 refers to, "All the regulations".
On Question, amendment agreed to.
Schedule 3 [Transfer of other functions to Treasury or Board]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 36 and 37:
Page 36, line 8, at end insert—
(".—(1) In section 177 of the Social Security Administration Act 1992 (co-ordination with Northern Ireland), in subsection (3)(a), for "to make" there is substituted "to require the making by the Inland Revenue of".
(2) This paragraph shall cease to have effect on the commencement of the repeal by the Northern Ireland Act 1998 of section 177 of the Social Security Administration Act 1992.").

831
Page 37, line 9, at end insert—
("Northern Ireland Act 1998 (c. 47)
. In section 88 of the Northern Ireland Act 1998 (the Joint Authority), in subsection (3), for the words from "power" onwards there is substituted "power—

(a) to require the making by the Commissioners of Inland Revenue of any necessary adjustments between the National Insurance Fund and the Northern Ireland National Insurance Fund, and

(b) to make any other necessary financial adjustments."").

On Question, amendments agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 38:
After Schedule 3, insert the following new schedule—

SCHEDULE

  RECOVERY OF CONTRIBUTIONS WHERE INCOME TAX RECOVERY PROVISIONS NOT APPLICABLE
  Interpretation
  1. In any provision of this Schedule "authorised officer" means an officer of the Board authorised by them for the purposes of that provision.
  Magistrates' courts
  2.—(1) Any amount which—

  (a) is due by way of contributions or by way of interest or penalty in respect of contributions, and

  (b) does not exceed the prescribed sum,

  shall, without prejudice to any other remedy, be recoverable summarily as a civil debt in proceedings commenced in the name of an authorised officer.
  (2) All or any of the sums due from any one person in respect of contributions, or interest or penalties in respect of contributions, (being sums which are by law recoverable summarily) may be included in the same complaint, summons, order, warrant or other document required by law to be laid before justices or to be issued by justices, and every such document shall, as respects each such sum, be construed as a separate document and its invalidity as respects any one such sum shall not affect its validity as respects any other such sum.
  (3) Proceedings under this paragraph in England and Wales may be brought—

  (a) in the case of Class 2 contributions or interest or penalties in respect of such contributions, at any time before the end of the year following the tax year in which the contributor becomes liable to pay the contributions, and

  (b) in any other case, not later than the first anniversary of the day on which the contributions became due.

  (4) In sub-paragraph (1) above, the expression "recoverable summarily as a civil debt" in respect of proceedings in Northern Ireland means recoverable in proceedings under Article 62 of the Magistrates' Courts (Northern Ireland) Order 1981.
  (5) In this paragraph—
  "the prescribed sum" means the sum for the time being specified in section 65(1) of the Taxes Management Act 1970 (recovery of income tax, etc. in magistrates' courts);
  "tax year" means the twelve months beginning with 6th April in any year.
  County courts
  3.—(1) Without prejudice to any other remedy, any sum which is due by way of contributions or by way of interest or penalty in respect of contributions may—

  (a) in England and Wales, and

  (b) in Northern Ireland, where the amount does not exceed the limit specified in Article 10(1) of the County Courts (Northern Ireland) Order 1980,

  be sued for and recovered from the person liable as a debt due to the Crown by proceedings in a county court commenced in the name of an authorised officer.
  (2) An authorised officer may conduct any proceedings under this paragraph before a county court in England and Wales, although not a barrister or solicitor.
  (3) In this paragraph as it applies in Northern Ireland, "county court" means a county court held for a division under the County Courts (Northern Ireland) Order 1980.
  (4) Sections 21 and 42(2) of the Interpretation Act (Northern Ireland) 1954 shall apply as if any reference in those provisions to any enactment included a reference to this paragraph, and Part III of the County Courts (Northern Ireland) Order 1980 (general civil jurisdiction) shall apply for the purposes of this paragraph in Northern Ireland.
  Sheriff courts in Scotland
  4.—(1) In Scotland, any sum which is due by way of contributions or by way of interest or penalty in respect of contributions may, without prejudice to any other remedy, be sued for and recovered from the person liable as a debt due to the Crown by proceedings commenced in the sheriff court in the name of an authorised officer.
  (2) An authorised officer may conduct any proceedings under this paragraph, although not an advocate or solicitor.
  (3) Paragraphs 2 and 3 above shall not apply in Scotland.
  General
  5.—(1) Proceedings may be brought for the recovery of the total amount of Class 1 or Class 1A contributions which an employer has become liable to pay on a particular date and any sum due by way of interest or penalty in respect of those contributions without distinguishing the amounts which the employer is liable to pay in respect of each employee and without specifying the employees in question; and for the purposes of proceedings under any of paragraphs 2 to 4 above that total amount shall be one cause of action or one matter of complaint.
  (2) Nothing in sub-paragraph (1) shall prevent the bringing of separate proceedings for the recovery of each of the several amounts of Class 1 or Class 1A contributions which the employer is liable to pay.").
  On Question, amendment agreed to.
  Schedule 4 [Enforcement]:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 39:
  Page 38, leave out lines 14 to 23 and insert—
  ("(3) Premises are liable to inspection under this section if an officer has reasonable grounds for believing that—

  (a) any persons are employed there;

  (b) a trade or business is being carried on from there;

  (c) any records relating to a trade or business are kept there; or

  (d) a personal or occupational pension scheme is being administered there,

  but a private dwelling-house is not liable to inspection under this section unless an officer has reasonable grounds for believing that a trade or business is being carried on from the dwelling-house and that the trade or business is not also being carried on from premises other than a dwelling-house.").
  The noble Baroness said: My Lords, on Second Reading and in Committee some concerns were expressed by the noble Lord, Lord Higgins, and the

  833
  noble Earl, Lord Russell, concerning the meaning of two subsections of the new Section 110ZA which sets out the powers under which Inland Revenue officers will operate when carrying out inspections in relation to NICs. I undertook to consult lawyers as to whether it was possible to redraft those subsections in such a way as to clarify the policy intentions behind them. The noble Lord and the noble Earl, who have a great deal of experience, were somewhat baffled by the wording and that seemed to me to make such action highly necessary. I have done that, and the amendment is the result. I hope that it meets the concerns which were expressed.
  Subsection (2)(c) states that an authorised officer shall have the power,
  "to examine, either alone or in the presence of any other person, as he thinks fit … every person whom he finds in any such premises or whom he has reasonable cause to believe to be or have been a person liable to pay … contributions".
  Your Lordships were concerned that, on the face of it, this could lead in extremis to an inspector being accompanied by a business competitor or a representative of the media. An important point here is that if an inspector acted in that way he would almost certainly be in breach of his duty to keep the affairs of contributors confidential. That would in itself be a criminal offence. In other words, there is a legal protection to check the inspector from doing what the noble Earl, Lord Russell, feared. However, that is not covered in the new section but is covered by the inspector's duty of confidentiality.
  As I explained in Committee, we see the main justification for this power as a protection for an employee who might otherwise be subjected to pressure by an unscrupulous employer attempting to cover up fraudulent actions. As I said, if the employee "may" have the employer present, then we fear he "must" in that situation of possible duress. That is a valuable protection for contributors. But as a further safeguard, I shall also ask officials to consider the guidance given to inspectors to ensure that it reflects that intention and makes clear that if the inspector feels that it is sensible to be accompanied on an inspection visit, it must only be by an appropriate person such as, for example, a Benefits Agency officer; for example, in the case of suspected collusive employment or benefit fraud. I hope that your Lordships will accept those reassurances about subsection (2)(c).
  The other wording which was queried was in subsection (3) which details the premises liable to be inspected. On this count we have decided to substitute the wording in Section 110B(5) of the Social Security Administration Act 1992 which was inserted by Section 12 of the Social Security Administration (Fraud) Act 1997 with the necessary addition of a line to include premises from which a personal or occupational pensions scheme is being administered. The revised wording, for which we may thank the previous Administration, so we hope it will be appropriately received today, makes clear that if business records are
  834
  kept both at home and in the office, the inspector's visit must be to the office. I hope that clarifies that point.
  I suggest that what is proposed substantially meets the point made by the noble Lord, Lord Higgins, about an Englishman's house being his castle. If he did not say that, I am sure that is what he meant to say. I am sure that he will agree with me that it should not be possible to drop down the portcullis if the house holds the only records relating to employees' national insurance or occupational pension records. But I hope these words reflect more clearly the principle that an inspector would only go to a dwelling house if it was absolutely necessary; in other words, if it was being used to divert information.
  I emphasise again that there are no powers in Section 110ZA which give right to enter by force. Entry into any premises can only happen with the co-operation of the owner or occupier. Failure to allow access to the relevant records can lead to proceedings before the tax appeal commissioners being instituted and the imposition by them of monetary penalties. Continued failure can lead to further penalties imposed by the inspector but appealable to the commissioners.
  I believe this strikes a fair balance between the need for the Revenue to carry out inspections which ensure that the NICs scheme is being operated as required by statute and the right to privacy. The amendment is in direct response to concerns raised in Committee so I hope that your Lordships will find it helpful. I beg to move.
  Lord Higgins: My Lords, certainly in the light of the comments which the noble Baroness made when we were debating Amendment No. 3, I am grateful for what she has said on this amendment and for the fact that it appears on the Marshalled List. It provides some reassurance, subject to anything which the noble Lord, Lord Goodhart, may wish to say in relation to it. If I did not actually say that it was an "Englishman's home is his castle" amendment, that is certainly what it was intended to be. I take the point made about the portcullis. I am slightly surprised by the wording which seems extremely ingenious but it meets the point and I am grateful to the noble Baroness.
  Lord Goodhart: My Lords, first, I am grateful for the noble Baroness's explanation about the use of the words:
  "either alone or in the presence of any other person, as he thinks fit",
  in relation to subsection (2)(c) of the new Section 110ZA. It certainly helps our view as to whether or not that is justified. I understand why no amendment has been proposed and I accept that.
  Amendment No. 39 widens the range of premises which are subject to inspection by substituting paragraphs (b) and (c) for the previous paragraph (b) which referred only to the premises where the trade of an employment agency was carried on. That certainly seems to make sense. I am somewhat concerned about

  835
  the effectiveness of the closing words of the amendment which state that,
  "a private dwelling-house is not liable to inspection under this section unless an officer has reasonable grounds for believing that a trade or business is being carried on from the dwelling-house and that the trade or business is not also being carried on from premises other than a dwelling-house".
  That seems to me to mean that if a trade is being carried on at more than one set of premises, you can only inspect the premises which are not a dwelling house even though the records are in fact being kept at the dwelling house. The obvious example is a farm. A farm consists of a farmhouse and probably also barns, milking parlours and cowsheds. The effect of this provision appears to be that the officer is allowed to inspect the cowsheds but not the farmhouse. I am not aware that farmers are in the habit of keeping records in their cowsheds. This renders ineffective the whole power of inspection in a case of that kind. I wonder whether this draft needs further amendment if it is to cover the situation and make it effective. Clearly, we regard it as proper that there should be an effective power to inspect records.
  Lord Skelmersdale: My Lords, in response to Amendment No. 3 tabled by my noble friend Lord Higgins the noble Baroness spoke about the possibility in the longer term of different powers for different purposes; namely, those of the Inland Revenue and those of the Contributions Agency. In the short term those powers will be different. Does she agree that when the letter is written it is even more important that the business should be told under what auspices the inspector is inspecting? Otherwise, it will be much more difficult for a solicitor or another legal adviser to give the appropriate advice should matters go awry.
  Baroness Hollis of Heigham: My Lords, I should like to respond first to the observation of the noble Lord, Lord Skelmersdale. Basically, he asks whether employers will be aware if the inspection will be about PAYE or NICs. The aim is to move towards a single visit that covers both tax and NICs. This may involve more than one officer until training in both skills is given. In the interim we want to ensure that the letter from the Inland Revenue to the employer makes clear the purpose of the visit.
  In response to the noble Lord, Lord Goodhart, I considered the syntax of this provision and wondered whether the "and" was conjunctive or disjunctive. I am advised that this wording is drawn from the Fraud Act and therefore has a well-established understanding associated with it. It is particularly helpful when it comes to the self-employed. The interpretation that is offered of the disjunctive "and" in the words
  "and that the trade or business is not also being carried on from premises other than a dwellinghouse",
  is that there is a presumption that one goes first to the business premises to see the records. If the business premises did not hold those records one would then have the right to inspect the home address—in this example the farmhouse—to see if they were there. I believe that that is a way of avoiding going first to the domestic premises
  836
  when there are also business premises at which there is a reasonable expectation that the records will be held. That is the intent and the understanding that is attached to the Fraud Act.
  Lord Goodhart: My Lords, that may be the understanding. However, is the noble Baroness prepared to look again at the wording? That understanding does not appear to bear much relationship to the wording.
  Baroness Hollis of Heigham: My Lords, all I can claim in my defence is that the previous government used this wording in two or three other pieces of legislation presumably with the approval, support and scrutiny of the majority of your Lordships' House. But time has moved on and perhaps what we accepted five or 10 years ago we do not accept now. I shall review the wording and try to reassure the noble Lord that it does what we believe it to do. If it does not do so clearly we must return to it. With that undertaking, I beg to move this amendment.
  On Question, amendment agreed to.
  Schedule 6 [Decisions and appeals]:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 40:
  Page 47, line 30, at end insert—
  ("19A. After section 171 of the Pension Schemes Act 1993 there is inserted—
  "Reports by Inland Revenue.
  171A.—(1) The Inland Revenue shall prepare, either annually or at such times or intervals as may be prescribed, a report on the standards achieved by their officers in the making of decisions against which, by virtue of section 170(6), an appeal lies to an appeal tribunal constituted under Chapter I of Part I of the Social Security Act 1998.
  (2) Any report under this section—

  (a) may be included in any annual report by the Inland Revenue of which a copy is laid before each House of Parliament, or

  (b) may be annexed to any report of the Secretary of State under section 81 of the Social Security Act 1998.

  (3) A copy of every report under this section shall be laid before each House of Parliament. unless the report is included in, or annexed to, a report of which a copy is so laid."").
  The noble Baroness said: My Lords, in moving Amendment No. 40 I wish to speak at the same time to Amendment No. 42. As noble Lords will be aware from earlier exchanges at Second Reading and in Committee, responsibility for policy and legislation on contracting-out of SERPS will remain with social security Ministers. But the Contracted-out Employments Group (COEG), the unit in the Contributions Agency that administers the system of contracting-out on a day-to-day basis, will transfer to the Inland Revenue with the rest of the agency. Officers of the Inland Revenue will therefore take on responsibility for making decisions and managing any disputes on those decisions. They will follow the procedures set out in the Social Security Act 1998 and the supporting regulations.
  Section 81 of the 1998 Act places a requirement on the Secretary of State to produce a report on the standards achieved in the making of decisions against which an appeal lies to a unified appeal tribunal. Schedule 6 to this

  837
  Bill amends Section 81 to require the Secretary of State to report also on the standards achieved by Inland Revenue officers in making decisions on contracting-out matters. On reflection we have decided that it is more appropriate for the Inland Revenue to produce the report as it will be for it rather than the Secretary of State to monitor the standards. The first of these amendments inserts a new Section 171A into the Pension Schemes Act 1993 to require the Inland Revenue to produce and lay before Parliament a report covering the standards achieved by its officers in making decisions on contracting-out matters. That report could be included in the Inland Revenue's annual report or annexed to the Secretary of State's report under the 1998 Act.
  The second amendment is consequential on the first and removes the now unnecessary paragraph from Schedule 6 to this Bill which requires the Secretary of State to produce the report. We believe that this will clarify the lines of accountability.
  Lord Goodhart: My Lords, I rise to welcome the amendment. I very much regret that the noble Baroness did not see fit to accept the amendment that I tabled at Committee stage to transfer the appeal functions relating to contracting-out appeals to the tax tribunals rather than the social security tribunals. Since that appeared to be a lost cause I did not believe it right to table another amendment at Report stage. This is at least a minor step in the same direction. It is obvious that where decisions are taken by Inland Revenue officers it should be for the Inland Revenue to report upon them. Therefore, I am happy to support the amendment.
  Baroness Hollis of Heigham: My Lords, I am pleased about that. The noble Lord will recall that at Committee stage we suggested that if his concerns proved to be valid, as they might be, and appeals should be to the general and special tax commissioners rather than the unified appeal tribunal system under the Social Security Act 1998, we could rectify the matter by virtue of the Order in Council procedure in Clause 22 and did not need to return to Parliament for further scrutiny. In the light of that the noble Lord was content not to press his amendment to a further round. The matter can be remedied if his forebodings turn out to be valid. However, given the fact that the noble Lord welcomes this amendment and it appears to have the consent of the House, I beg to move.
  On Question, amendment agreed to.
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 41:
  Page 48, line 7, after ("decisions)") insert—
  ("(a) in subsection (1), for "subsections (3) and (4)" there is substituted "subsection (3)", and
  (b)")
  The noble Baroness said: My Lords, in moving Amendment No. 41 I wish to speak at the same time to Amendment No. 44. These are both technical amendments to remove references to provisions of the Social Security Act 1998 repealed by the Bill. Schedule 9 to the Bill repeals subsection (4) in Section 10 of the Social Security Act 1998 in consequence of the removal to the jurisdiction of Inland
  838
  Revenue officers of decisions about the personal liability of company directors for contributions owed by their companies. Amendment No. 44 removes a reference to Section 14(3) of the Social Security Act 1998 which is being repealed on the transfer of responsibility for decisions about SSP and SMP. I beg to move.
  On Question, amendment agreed to.
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 42.
  Page 50, leave out lines 11 to 20.
  On Question, amendment agreed to.
  Schedule 8 [Further consequential amendments]:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 43:
  Page 52, line 1, at end insert—
  ("2A. In section 12 of the Social Security Contributions and Benefits Act 1992 (late paid Class 2 contributions), in subsection (7), after "commences" there is inserted—
  "(aa) civil proceedings in a magistrates' court commence when a complaint is made;".").
  On Question, amendment agreed to.
  Schedule 9 [Repeals and revocations]:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 44:
  Page 54, line 39, column 3, at end insert ("and in subsection (6) the word "(2),".").
  On Question, amendment agreed to.
  In the Title:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 45:
  Line 6, after ("benefits;") insert ("to enable functions relating to any of those matters in respect of Northern Ireland to be transferred to the Secretary of State, the Commissioners of Inland Revenue or the Treasury;").
  On Question, amendment agreed to.

  Registration of Political Parties (Prohibited Words and Expressions) Order 1998
  4.49 p.m.
  The Earl of Onslow The Earl of Onslow rose to move, That an humble Address be presented to Her Majesty praying that the order, laid before the House on 23rd November, be annulled (S.I. 1998/2873).
  The noble Earl said: My Lords, when I see "prohibited words and expressions" on an Order Paper, I blanch with horror. I hope that when we have stage 1 of the Lords' reform, your Lordships will feel emboldened enough to sling out this little piece of legislation. The present arrangements are that we do not vote against statutory instruments. I was tempted to break that arrangement. Then the noble Lord, Lord Carter, met me in the corridor and I succumbed effortlessly to his charm. I shall not vote against this order or ask your Lordships to do so.
  The matter is simple: it is whether people should call themselves Independent Labour, Independent Conservative or Literal Liberal. Ever since the brothers Gracchi in Ancient Rome, there have been arguments about factions in politics. I have been reading a book on George III. He always hoped that factions could come out of politics. Unfortunately, factions have now become entrenched in state, started, as almost all bad things started, by the Conservative Party in the form of Disraeli who invented the modern political party. Others have not been slow to follow that example.
  The Independent Labour Party has a long, well-established and historical founding. There was Jimmy Maxton; and a great friend of my father, Andrew Maclaren, who represented the Clydeside constituency in the 1920s, hated private property but managed to make sure that the club of which I am a member bought its own freehold against the advice of the Duke of Devonshire. So one can see how the marvellous, some would say corrupting—others would call it English social mobility—manages to work in this country.
  My objection to the order is simple. Should we stop parties being registered as Independent Labour, Independent Conservative, and so on? People should be able to register a party in whatever name they choose. I am sure that the noble Lord, Lord Williams of Mostyn, will say that it will cause confusion; that it will be unfair. It will be the most wonderful apparatchik's answer because he will have been briefed by the department. I promise the noble Lord that I should say exactly the same to my own Front Bench which would have given exactly the same answer had it been in power. So there is an element of plague upon both your houses.
  Individuals can stand at national elections as Independent Labour or Independent Conservative. Why should we stop them from standing in this new form of proportional representation for the various new assemblies which have been conjured up for our benefit? The British people are grown up, intelligent and mature enough to understand the difference between the official and unofficial—some would say between the real and unreal.
  As one edge of the social spectrum which is not liked by the new First Lord of the Treasury, as an hereditary Peer I pray in aid the old independent Labour working class member. Therefore I beg to move the Motion standing in my name on the Order Paper.
  Moved, That an Humble Address be presented to Her Majesty praying that the Order, laid before the House on 23rd November, be annulled (S.I. 1998/2873).—(The Earl of Onslow.)
  4.53 p.m.
  Lord Cocks of Hartcliffe: My Lords, I support the noble Earl. The order epitomises the fact that it is not good legislation. At Second Reading I said that we have to be very careful when the major parties together produce conditions under which people can stand for Parliament. There is great danger of a carve up.
  840
  At Second Reading, the noble Lord, Lord Goodhart, drew attention to the fact that between 1948 and 1969 party affiliation was not on the ballot paper. I canvassed in 1955, and during local elections collected 2,000 marks on the register in the Cabot Ward of Bristol, West. It was hard work. It was a bind that one had to din in the candidate's name because there was no indication on the ballot paper. However, this order has been brought in to help the parties and to reduce the work to which they are subjected. It has nothing to do with greater democracy. It is to help the parties.
  When there was no party affiliation indicated on the ballot party, there was no diminution in turn out at elections. In 1951 Labour polled the highest political vote of any party until that time. I know that that is seized on now by the noble Lord, Lord Jenkins of Hillhead, as a reason why PR should be brought in. However, I am sure most Members will appreciate that it was the Conservative organisation of the postal vote which brought it to power in 1951.
  I do not think that the order is proper. At Second Reading, my noble friend Lady Gould expressed concern that there was no appeal structure; that no proper appeals were possible. The Speaker's Committee is appointed to deal with points raised. However, by definition the Speaker's Committee consists of Members of Parliament who are members of the major parties. Therefore they are interested parties, and there is no clean, independent, procedure.
  The legislation is rather rough. In Committee, at col. 409 of the Official Report on 5th November 1998, the Minister, for whom I have the greatest admiration, said that undertakings had been given by the Labour Party, the Liberal Democrats, the Conservative Party and Plaid Cymru and it was his understanding that the Scottish National Party had also said that it will not seek to deceive the voters in that way. Why bother to legislate if we rely on goodwill and people saying, "I'll behave myself'. It is farcical. The Minister continued:
  "Voters are not simple-minded. They are perfectly able to know when deceit is being practised on them".
  In that case one wonders why we have the legislation brought in. Such is my regard for the Minister and his control of language that I shall not point out that on the following page he was guilty of repetition when he used the phrase "true factual". However, we shall leave that matter aside. It is not right to draw attention to it now.
  I hope that my fears are misguided. I should very much like to be proved wrong. We often think that we are tidying up matters but end up in a worse position. An individual with many resources and an unscrupulous aim could almost bring the system to a standstill by abusing the legislation.
  4.57 p.m.
  Lord Monson: My Lords, I, too, support the noble Earl. It is perfectly true that people will still be able to stand as Independent Labour, Independent Conservative, Independent Liberal candidates, and so on. But they will not be allowed the party political broadcasts, should their numbers be large enough, which would otherwise

  841
  be justified in the absence of this legislation. To that extent the dice are loaded against the smaller parties which I think is wrong.
  4.58 p.m.
  Lord Goodhart: My Lords, the noble Earl, Lord Onslow, raises an interesting point of discussion which is worth consideration. I am interested to note that among the words and expressions which may not be included, except where Article 2(2)(a) applies, are "Duke" but not "Earl". While the "Duke of Omnium's party" would be a forbidden name, the "Earl of Onslow party" would be allowed. I look forward to an election in which the "Earl of Onslow party" is a registered party.
  I have some sympathy with the Motion. At one time the Independent Labour Party was a well known political party which was represented in another place. As I recall history, when the Independent Labour Party was formed no body was known as the Labour Party; the Labour Representational Committee was a different animal. Therefore, there was no possibility of the ILP being confused at that stage with the Labour Party. The ILP was a constituent part of what later became the Labour Party.
  Today, the question is whether a party can be registered with the word of "independent" coupled with the name of another party. That does not directly affect the right of somebody to stand in an election under the description of, say, Independent Conservative, Independent Liberal Democrat or Independent Labour. The rule is that someone can stand as a candidate under whatever label he likes unless the returning officer believes that the name is likely to lead voters to associate the candidate with an already registered political party. On the other hand, it is also true that if someone were able to register a party—and, rightly, registration is an extremely simple business—as, say, Independent Conservative, it would be extremely difficult for the returning officer to refuse registration.
  In those circumstances, reluctantly one must conclude that in this case the order is correct. As a representative of a party which has suffered more than any other from confusing labels—it is well known that we lost a seat in the European elections because of a confusing name—I must support the order. I do so with regret because there is a good deal in what the noble Earl has said. I wish that I felt able to support him, but it is important to ensure that the voters are not fooled, as experience has shown possible, by accepting candidates standing under misleading names. If one were free to stand as a member of an Independent Conservative Party there would be no necessity for having any connection with the Conservative Party or agreeing with any of its policies. The name could be adopted simply as a spoiling name. Therefore, I am afraid that if the noble Earl had been willing to put the matter to a vote I would not have been able to support him.
  Lord Monson: My Lords, before the noble Lord sits down, perhaps I may put a point to him. He and his party are justly entitled to object to misleading names such as Literal Democrat. That designation was
  842
  designed especially to deceive the electorate, which it did to the great disadvantage of his party. It is perfectly understandable that he should object to that name. However, can he really object to Independent Liberal Democrat? Can he really imagine that anyone would be fooled by such a designation?
  Lord Goodhart: My Lords, I sometimes think that all of us in this party are independent Liberal Democrats! Yes, I can object because I do not think of someone standing under that label in an election but of someone registering a party under that name. It would not be correct to allow any party to be registered as "independent" coupled with the name of a political party. After all, in practice, "independent" tends to be used to describe an individual who for some reason or another decided to leave his party and wished to stand as an independent candidate. That may be legitimate. Indeed, I am aware that, for example, a Member of the other place calls himself an independent Labour Member of Parliament. However, it would not be appropriate for him to start a new party called the Independent Labour Party. That would be misleading.
  5.4 p.m.
  Lord Cope of Berkeley: My Lords, this has been an interesting short debate. The House will be grateful to my noble friend Lord Onslow for tabling the Motion. I shall try to avoid making a bureaucratic point in response.
  The noble Lord, Lord Goodhart, said that his party more than others had suffered from confusing labels. Perhaps I may respectfully suggest that if it wished to avoid that it should avoid changing its name so frequently. That might make life easier for it.
  The debate has shown the difficulty of trying to lay down statutory rules for defining political parties. Indeed, the difficulty is so great that it demonstrates the folly of the Government, by the use of a particular type of proportional representation, in putting themselves and the country into a position where definitions are essential. But having gone that far, definitions are essential. My noble friends and others have concentrated on the use of the word "independent" when allied to the name of an existing political party. We all understand that candidates can stand as individuals—independent Conservative, Labour, or whatever—provided that they can persuade the returning officer that the designation is not misleading. Indeed, there have been independent candidates from all parties. However, a group will no longer be allowed to register itself as a political party using the word "independent"; in particular Independent Labour Party.
  It is astonishing that a Labour Party should seek to abolish the words "Independent Labour Party", given its history. The noble Lord, Lord Goodhart, was right to say that the Labour Party did not exist when the Independent Labour Party was founded in 1893 by Keir Hardie, the year after he was first elected to Parliament as an independent. But it was one of the precursors to the Independent Labour Party of 1900 which subsequently evolved into the Labour Party. The Independent Labour Party continued to fight elections under that name right

  843
  up to and including the 1945 election when the Labour Party not merely existed but was an extremely effective political force. Indeed, the ILP won four seats in that election.
  The present Government are New Labour, which, we are constantly told, is different from Labour. Today, New Labour is rejecting its past in making illegal the words "Independent Labour Party". A government who do not value the lessons of their own history do not value the wider lessons of history. However, I understand why the Labour Party are putting the order before us. I have seen the pamphlet from Ken Coates, the Member of the European Parliament, and his colleagues. Of course, under the new system, we are all having trouble with unselected Members of the European Parliament.
  It is a surprising order to come before us, particularly at a time when so much encouragement is being given from the highest level to a so-called realignment of British politics. It is through independent individuals and independent parties that realignments come about. There is no doubt that this order is intended to inhibit realignments in its specific way. So it is a sorry day for independent spirits, but perhaps a good day for control freaks.
  5.10 p.m.
  The Minister of State, Home Office (Lord Williams of Mostyn): My Lords, speaking of which—
  The Earl of Onslow: My Lords, did the Minister say "of" or "as"?
  Lord Williams of Mostyn: My Lords, I said "of". Having had the benefit of a state education I am always perfect in my grammatical construction.
  The order is a little complicated and so perhaps it will help if I explain briefly how it will work. There are opportunities for people to stand—as the noble Lord, Lord Goodhart, said—under various individual designations if the returning officer accepts them under the criterion of the Act passed by your Lordships. For instance, there is no reason why someone who is presently a Member for Yeovil should not stand as the Liberal Democrat (Retired) Party or something of that sort. Indeed, there are prohibitions in the Act itself.
  The noble Earl pointed out his horror at an order being tabled in these terms, particularly under the rubric of a prohibited words and expressions order. However, one sees in Section 3 that the registrar may grant an application unless the designation of the registered party is obscene or offensive. So, if it were to be a case of the Earl of Onslow Independent Party, it would certainly not be obscene, but I am sure the noble Earl would be the first to agree that it might well be extremely offensive—at least when its manifesto was produced because that is one of the characteristics of the noble Earl that we all love and relish so much.
  It is really quite simple. Section 3 of the Registration of Political Parties Act 1998 sets out a number of tests to be applied by the registrar when deciding whether or
  844
  not to grant an application for registration. It is well worth bearing in mind what the noble Lord, Lord Goodhart, said in that regard. That section deals with registration of a political party. The first critical test is whether the name which the party wishes to register,
  "would be likely to result in the party's being confused by voters with a party which is already registered"—
  Section 3(1)(a). A further test—Section 3(1)(f)—is whether the proposed name,
  "includes any word or expression prohibited by order made by the Secretary of State".
  That is the order at which we are looking today.
  I must acknowledge that even for "anoraks" in this field, the order is not an easy read. That is partly because Section 3(2) of the Act provides that this order "may" except a word or an expression from the prohibition in certain circumstances. The order therefore restricts the circumstances in which certain words or expressions may be used, but it does not completely prohibit them.
  I turn briefly to look at the groups of words. Perhaps I should look at them distinctly, though the focus has been on one aspect only. Part I relates to royal words. We do not believe it to be right for parties to adopt names which would imply a connection with royalty where no such connection exists. But Article 2(2)(a) makes it possible to have an organisation registered, for instance, as the "King's Road Residents' Association" or "Friends of the Royal Marsden Hospital". There is therefore flexibility within the order to deal with that sort of situation.
  Part II goes to a number of listed geographical words. That is because we know that in different parts of the United Kingdom candidates from different parties often want to describe themselves, for instance, as the "Scottish Labour" candidate, "Welsh Liberal Democrat" and so forth. That would not be possible if another party had already applied to register as the "Scottish Labour Party" and the Registrar had accepted that application. So the purpose of Part II, taken with Article 2(2)(b) is to prevent that application being accepted. However, it would allow, for instance, the "Welsh Farmers' Party" to register. The Scottish National Party and Plaid Cymru have already been included on the register.
  I turn to Part III, which has been the focus of this debate. It is simply there to prevent the words "independent", "official" or "unofficial" being registered on their own or in conjunction with the name of a party which is already registered. We know that individual non-party candidates choose to describe themselves as "Independent", "Independent Labour" and "Unofficial Conservative". Candidates from registered parties may, on the other hand, want to include the word "Official" in their descriptions. If a party had already registered itself as the "Independent Party", the "Independent Labour Party", the "Unofficial Conservative Party" or the "Official Liberal Democrat Party" and the registrar had accepted those applications, then there would be a limit on individuals standing in the cause of independence which is so dear to the heart of the noble Earl who criticised this matter.

  845
  Therefore Part III prevents those applications being accepted. Prevention of registration of those words has the beneficial consequence that they remain available for the individual candidates. What we have done in this apparatchik approach to politics is to retain the possibility for individual candidates who want to stand as "Independent", "Independent Labour" or "Unofficial Conservative" to have that designation on the ballot paper. That is a completely different concept from the registration of the party. We have therefore safeguarded the individual's opportunity to stand as an "Independent", "Independent Labour" or "Unofficial Conservative".
  For completeness, Part IV ensures that certain generic words or phrases cannot be registered by a single party. One cannot register as the "Ratepayers' Party" but one could, for instance, register as the "East Ham Residents' Association".
  Far from being a conspiracy of those in power to prevent the usurpation of that power through the ballot box, we have protected the individual. Following that explanation I am sure that all noble Lords will be abundantly and comprehensively satisfied.
  Lord Davies of Oldham: My Lords, before the Minister sits down, perhaps he will take this opportunity to clear up one misconception in the debate; that is, that the Independent Labour Party never took the title of "Independent" to be independent from the Labour Party which did not exist, but sought to be independent from the Liberal Party and others and therefore set a very good precedent for Labour Party operations today.
  Lord Williams of Mostyn: My Lords, yes. It was all a development of the organisations which became the Labour Representation Committee started by H. M. Hindemann—if I remember O-level history correctly—at the end of the 19th century. My noble friend therefore is quite correct.
  5.17 p.m.
  The Earl of Onslow: My Lords, I wish the noble Lord, Lord Carter, did not have so much charm. I have never heard a better apparatchik answer than that of the noble Lord, Lord Williams of Mostyn. He would have been a senior mandarin at an ancient Chinese court; he would have done excellently as a eunuch at the court of Constantine.
  Lord Williams of Mostyn: My Lords, senior mandarin, yes; but "eunuch" no.
  The Earl of Onslow: My Lords, I use it in its official capacity rather than in its literal capacity.
  I can understand where the noble Lord is coming from, but it seems to me that the whole of that speech—as with the speech of the noble Lord, Lord Goodhart—is based on the premise that the British people are too stupid or are not intelligent enough to understand the difference. I happen to think that my fellow citizens form part of the most mature, sophisticated democracy in the western world. Ever since decent elections have
  846
  been fought in 1832 they have almost invariably got exactly the right answer. They may have gone slightly over the top in 1997, but let us leave it at that.
  Having said that, I hope—I suppose there is no hope of this—that perhaps the matter can be looked at again at some stage because a deeply illiberal bureaucratic streak goes through that order. However, as our traditions say that we do not yet vote against standing orders and slightly because of the charm of the noble Lord, Lord Carter, I beg leave to withdraw the Motion standing in my name on the Order Paper.
  Motion, by leave, withdrawn.

  Open-Ended Investment Companies (Investment Companies with Variable Capital) (Fees) Regulations 1998
  5.19 p.m.
  Lord McIntosh of Haringey Lord McIntosh of Haringey rose to move, That the regulations laid before the House on 10th December 1998 be approved (S.1. 1998/3087) [Fourth Report from the Joint Committee].
  The noble Lord said: My Lords, with the leave of the House, I shall speak also to the Companies (Fees) (Amendment) Regulations 1998.
  The main effect of the Companies (Fees) (Amendment) regulations is to increase fees for microfiche-based products, including the basic company search, as well as the fees for a number of labour-intensive services. The basic company search currently costs £3.50. The effect of these regulations would be to raise it to £5. The price of searches made by post would rise correspondingly. Currently, about 1.5 million microfiche searches are made each year. The numbers involved in the labour-intensive services are much smaller, closer to 15,000 a year.
  The increase in prices of microfiche products arises because the costs of running these services are substantial and essentially fixed. As customers increasingly use better and more modern ways of accessing information, demand for microfiche falls. That leads to a rise in unit costs. The alternatives to which customers turn are mostly electronic, and Companies House is providing an increasing range of information electronically. The charges for these are not being increased.
  The last increase in microfiche services fees was in 1996. Despite a continuing fall in demand since then, it has been possible to postpone any increase until now. The new fees will allow Companies House to break even on provision of microfiche services. It is obliged to ensure, so far as practicable, that there is no cross-subsidisation of costs by revenue from other areas of activity.
  A fee of £10 for registration of a charge has also been introduced in order to eliminate an element of cross-subsidisation from the fee charged each year for registration of a company's annual return. Some 10 per cent. of the 1.25 million companies on the company register have a registrable charge to be entered each year.
  The Open-Ended Investment Companies (Investment Companies with Variable Capital)(Fees) Regulations introduce equivalent fees for similar services provided by Companies House to those provided for companies.
  The overall aim of these fee changes is to prevent Companies House going into deficit in the next few years. During that period, Companies House will be investing heavily to complete the transition to electronic information collection and dissemination. Its progress can be seen and experienced at first hand at its new information centre at 21 Bloomsbury Street, which I am pleased to say opened for business today. At the end of the current period of investment, there is likely to be little demand remaining for microfiche. In the meantime, it is to be expected that there will be further increases in years to come in fees for microfiche services, but reductions elsewhere as demand for newer services increases. I commend the regulations to the House.
  Moved, That the regulations laid before the House on 10th December 1998 be approved (S.I. 1998/3087) [Fourth Report from the Joint Committee].—(Lord McIntosh of Haringey.)
  Baroness Denton of Wakefield: My Lords, I thank the Minister for presenting the two statutory instruments. Perhaps I may join with him in speaking to both on this occasion.
  I imagine that not many in your Lordships' House know what an open-ended investment company is. I would have been one of those people a week ago. However, having investigated the matter, I am delighted to say that they are an area of growth and they offer flexibility, simplicity and transparency, all of which seem to me to be key issues in financial matters.
  The microfiche service is required at the moment but I share the Minister's hopes that it will not be needed for long. I worry that every time prices increase, they do so largely to the detriment of small firms. It seems to me that Companies House may be going backwards. I suspect that the Minister will say that that is due to investment costs. However, I am pleased to say that under our administration in 1994 to 1996, costs fell by 12 per cent. I would be interested to know the benchmark of cost reduction that is looked for now. Because of that fall in costs, fees were able to be decreased. I imagine that there was some consternation in industry to receive a statement from the Government that fees were decreasing. That probably happens rarely.
  Do these regulations apply also to Scotland, Wales and Northern Ireland? It is bureaucratic to go all through this process each time to increase fees by the percentage that we are doing. Is it not possible to increase fees by a percentage unless it is voted against? I believe this is the sort of saving for which Mr. Milburn may be looking.
  What is being done to benchmark and control the costs of Companies House? I find it strange that one can ask for costs to decrease and to be managed without targets, objectives or benchmarks. Unless this is managed well, costs will rise. We have seen something
  848
  of much greater importance today concerning national insurance where a change in the systems management has really increased costs which will, in the end, be paid by taxpayers.
  I have no objection to this Motion being passed. However, as the Minister said, there must be no cross-subsidisation. I hope that the Minister will give a positive answer in relation to Scotland, Northern Ireland and Wales.
  Lord Razzall: My Lords, I do not claim to be an expert on open-ended investment trusts. However, I would claim to be somebody who comes from a generation of solicitors who, when in training, spent a considerable amount of time, in the pre-electronic age, poring through documents with the Registrar of Companies at Companies House. I am sorry that the noble Lord, Lord Mishcon, who I am sure did exactly the same, has just left his place.
  The world has progressed significantly since those days of non-electronic searches. However, I believe that the most significant point about these regulations is that, notwithstanding the development of the electronic search and the other sophisticated search mechanisms now available, the two fundamental principles remain the same. This is not just a question of companies having to undergo an obligation to file documents for which they are charged a fee; there is also the public service element of company searches, to which the noble Baroness referred.
  Before we pass these regulations today, as undoubtedly we will, can the Minister confirm that that public service element is dealt with in this pricing structure on the basis that a profit is not being made by the Registrar of Companies, by Companies House, as regards these fees? In particular, the second regulations represent a significant increase in fees. The Minister indicated that that was on the basis that the Registrar of Companies would be able to use the money to invest in new processes. I think I heard him say that that would not be effected at a profit.
  However, bearing in mind the importance to the public, and in particular to small businesses and creditors who need to use the services frequently, can the Minister confirm that this is not being done to increase profit for the Treasury but simply to cover the cost of the service?
  5.30 p.m.
  Lord McIntosh of Haringey: My Lords, I am grateful to both the noble Lord, Lord Razzall, and the noble Baroness, Lady Denton of Wakefield, for their reception of the regulations. In response to the noble Baroness, perhaps I may advise her that an open-ended investment company with variable capital is an investment vehicle in corporate form which can buy and sell its own shares. It is quite rare. Usually, it is a way of investing in this country from abroad. I believe that the noble Baroness identified it correctly.
  The noble Baroness is also right that the use of microfiche is declining. For those of us who, like the noble Lord, Lord Razzall, have had the misfortune of

  849
  having to use such things and to set little metal arrows skittering across sheets of glass in order to find the pages of an annual report, annual return, memorandum or articles, which have been photographed and which have dust around the edges, the sooner that microfiche goes, the better for all concerned. However, some people—notably the London agents—find microfiche more convenient than electronic searches. Therefore, it is not possible for us, without withdrawing a public service, to withdraw microfiche searches altogether.
  I said in opening that this is the first increase in fees since 1996. That was accompanied by a decrease in the cost of electronic searches. So, for most people, there is no particular loss.
  The noble Baroness asked whether in a sense Companies House was not going backwards. That is certainly not the case. The noble Baroness applauded the efficiency of Companies House under the previous administration. That efficiency has continued and, indeed, increased. For several years, Companies House has had a target unit cost reduction of 3 per cent. per annum. In the past two years, it has achieved a unit cost reduction of between 5 and 6 per cent. per annum. Therefore, there is no question but that Companies House is continuing its efforts to provide an economical as well as an effective service to the community.
  The noble Lord, Lord Razzall, asked me for an assurance that the public service element is still dominant at Companies House. I can give that assurance without any qualification. The intention of Companies House and the basis on which it was set up as a trading fund is that it should break even; in other words, it should not make a profit out of its activities. At the same time—this is the reason for the change—it is not supposed to cross-subsidise one service from the profits of another because that would raise questions as to favouritism for one type of customer as against another. Indeed, it would probably be against European Community regulations as it would involve an illegitimate subsidy.
  The only qualification to what I have just said is that, as I said in opening, Companies House has a substantial capital investment programme at present for both electronic services on its own intranet, for which customers pay an entrance fee and a monthly fee and are then billed at the end of the month for their use of it, and for the much more limited internet facilities which it provides. At the moment, very limited facilities are available on the internet, including access to the register of disqualified directors and guidance to Companies House services. So investment is included in the calculation of the break-even provisions which Companies House is obliged to obey.
  Lord Razzall: My Lords, without wishing to labour the point, I am sure that the noble Lord appreciates that cross-subsidies become complicated when the allocation of capital and of central overhead come into question. I am certain that the principle adopted is exactly as the
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  noble Lord indicates; I merely wanted him to re-confirm the principle that this will be done on a break-even basis.
  Lord McIntosh of Haringey: My Lords, I hope that I have done that adequately. I believe that the assurances for which the noble Lord asked are contained in government policy and in the accounting procedures of Companies House. On that basis—
  Baroness Denton of Wakefield: My Lords, before the noble Lord sits down, he has not yet replied to my question about whether the provisions cover Scotland, Northern Ireland and Wales. With a Scottish DTI Minister sitting on the Bench next to him, I imagine that we know the answer.
  Lord McIntosh of Haringey: My Lords, I thought that I had got away with that. The provisions certainly cover Wales. As the noble Baroness knows, Companies House is based in Cardiff. I do not think that the provisions cover Scotland and Northern Ireland, but, if I am wrong, I shall write to the noble Baroness. That is my fail-safe procedure. I commend the regulations to the House.
  On Question, Motion agreed to.

  Companies (Fees) (Amendment) Regulations 1998
  5.34 p.m.
  Lord McIntosh of Haringey: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
  Moved, That the regulations laid before the House on 10th December 1998 be approved (S.I. 1998/3088) [Fourth Report from the Joint Committee].—(Lord McIntosh of Haringey.)
  On Question, Motion agreed to.

  Advice and Assistance (Assistance by Way of Representation) (Scotland) Amendment (No. 2) Regulations 1998
  5.35 p.m.
  The Minister of State, Scottish Office (Lord Macdonald of Tradeston)The Minister of State, Scottish Office (Lord Macdonald of Tradeston) rose to move, That the draft regulations laid before the House on 1st December 1998 be approved [Second Report from the Joint Committee].
  The noble Lord said: My Lords, I beg to move the first statutory instrument standing in my name. It may be convenient if I give a brief explanation of each legal aid regulation we are considering. I shall deal first with the regulations which concern assistance by way of representation.
  These regulations extend the availability of assistance by way of representation, which is a form of advice and assistance, as a consequence of the introduction of restriction of liberty orders and drug treatment and

  851
  testing orders through the Crime and Punishment (Scotland) Act 1997 and the Crime and Disorder Act 1998 respectively.
  First, we propose that assistance by way of representation should be available to cover all proceedings in relation to the variation or revocation of the restriction of liberty order or, as the case may be, the failure to comply with any of the requirements of the restriction of liberty order under the Criminal Procedure (Scotland) Act 1995.
  Secondly, we propose that assistance by way of representation should be available to cover all proceedings in relation to the variation or revocation or review of a drug treatment and testing order or the failure to comply with any requirement of a drug treatment and testing order under the Criminal Procedure (Scotland) Act 1995. Assistance by way of representation is the most straightforward means to ensure that legal aid is available in relation to such proceedings.
  The Criminal Legal Aid (Scotland) (Prescribed Proceedings) Amendment (No. 2) Regulations are entirely consequential on the extension of assistance by way of representation. The proposed changes remove the availability of criminal legal aid for proceedings in relation to the variation or revocation of a restriction of liberty order or the failure to comply with any of the requirements of a restriction of liberty order. Similarly, criminal legal aid will no longer be available for proceedings in relation to the variation or revocation or review of a drug treatment and testing order or the failure to comply with any requirement of a drug treatment and testing order. These changes will ensure that there is no duplication in the system and that no administrative inefficiencies are introduced.
  The regulations make provision for useful improvements to the system of legal aid in Scotland. I commend the instruments standing in my name to the House.
  Moved, That the draft regulations laid before the House on 1st December 1998 be approved [Second Report from the Joint Committee].—(Lord Macdonald of Tradeston.)
  Viscount Bridgeman: My Lords, we have no comments on the regulations and agree to the Motion.
  On Question, Motion agreed to.

  Criminal Legal Aid (Scotland) (Prescribed Proceedings) Amendment (No. 2) Regulations 1998
  Lord Macdonald of Tradeston: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
  Moved, That the draft regulations laid before the House on 1st December 1998 be approved [Second Report from the Joint Committee].—(Lord Macdonald of Tradeston.)
  On Question, Motion agreed to.

  Legal Aid (Prescribed Panels) Regulations 1998
  5.39 p.m.
  Lord Falconer of Thoroton Lord Falconer of Thoroton rose to move, That the draft regulations laid before the House on 16th December 1998 be approved [Fourth Report from the Joint Committee].
  The noble and learned Lord said: My Lords, the purpose of the draft Legal Aid (Prescribed Panels) Regulations 1998 is to establish the Clinical Negligence Franchise Panel as a prescribed panel for the purposes of Section 32(7) of the Legal Aid Act 1988.
  Section 32(1) of the Legal Aid Act 1988 creates a general right for a person receiving advice or assistance or representation, to select the legal representative to advise, assist or act for him from among the legal representatives willing to provide advice assistance or representation under the Act. That right may be qualified under regulations made under Section 32(7), so that the person receiving assistance may only select from legal representatives who are for the time being members of a prescribed panel. These regulations give effect to the decision announced by my noble and learned friend the Lord Chancellor on 16th July 1998 in his written reply to the noble Lord, Lord Burlison, following the response to his consultation paper Access to Justice with Conditional Fees.
  I turn now to the regulations. Regulation 1 provides for the way in which the regulations are to be described and the date on which, subject to parliamentary approval, they are to come into force; namely, 1st February 1999. Regulation 2 provides interpretation of important terms used in the regulations. I do not wish to go through them, but it may at this point be convenient if I briefly mention that the term "clinical negligence" has been used in preference to the more usual "medical negligence", because the word "clinical" encompasses all members of the medical and clinical services, including other health professionals such as radiographers, dentists and nurses. It is, therefore, more accurately descriptive of negligence claims brought against health professionals.
  Regulation 3 establishes a panel of authorised litigators, which is to be called the clinical negligence franchise panel. This will be comprised of those litigators who hold a franchise contract with the Legal Aid Board. A condition of holding a franchise contract will be that the firm contains a solicitor who is a member of the Law Society's medical negligence panel of the Association of Victims of Medical Accidents' panel.
  Regulation 4 sets out the scope of the regulations in relation to particular types of claim; it limits the right of an assisted person to select a representative under Section 32(1) of the 1988 Act, which I have already mentioned; and makes clear that other powers enjoyed by the board to limit representation for civil legal aid pursuant to a contract are not affected by these regulations.
  The establishment of the clinical negligence franchise panel continues the Government's reforms of legal aid. An essential element of the reforms is to direct legal aid funding to those who need it most and to do this through providers of legal services who have demonstrated a recognisable standard of administrative efficiency and specialist expertise. All firms which wish to obtain a clinical negligence franchise must, therefore, satisfy the Legal Aid Board's franchise quality assurance standard and have, as a member of that firm, a solicitor who is also a member of one of the two accredited panels that I have already mentioned.
  I think that there is almost universal agreement in the profession that medical negligence cases require a particular expertise. Success in clinical negligence cases rests on specialist expertise. Specialist expertise is achieved through experience. Experience is gained by practice. Firms which take on only one or two clinical negligence claims a year are unlikely to have the same levels of experience and skill as a firm which takes a number of cases per week. That is perhaps demonstrated by the fact that the results obtained in cases funded by legal aid demonstrate conclusively that lawyers who are members of the Law Society or the AVMA panel (the Association of Victims of Medical Accidents) achieve better results. They not only win more cases, but they also obtain better results; for example, in 1996–97 cases run by panel members achieved an average sum of damages of £48,500 compared with only £21,800 for non-panel member lawyers.
  Directing clinical negligence claims to only those franchised firms with a contract will not reduce access. There will be an adequate number of contracts granted to enough firms to ensure that the expected number of clinical negligence claims (around 6,000 a year) can be dealt with. In areas of the country where there may be few franchised firms with contracts, it will be a condition of the contract that, where necessary, solicitors will travel to meet and take instructions from their clients.
  I should point out that the establishment of this panel will not mean that no new lawyers can enter this field of litigation. The requirement is that the firm holding the franchise must have a panel member as the supervisor of the franchise. Lawyers joining that firm will be able to gain experience in a contracted firm, and achieve accreditation to one of the panels. Subject to meeting the franchise standards, they will be able to obtain contracts and be included in the prescribed panel.
  There will be a comprehensive publicity campaign to bring to the public's attention the new category of clinical negligence and where and how they can obtain the advice and assistance that they need. Posters and leaflets are being produced to explain to the public the need to see a solicitor who is a member of the panel. That information will be made available in libraries and other public places as well as in citizens advice bureaux, law centres and other legal advice agencies. The leaflets will also inform people about the Legal Aid Board's "phone in" service, which is being provided free of charge and will provide information on which solicitors' firms have clinical negligence contracts. In addition,
  854
  solicitors themselves are being informed of which firms have gained contracts so that they can refer potentially new cases to them.
  From 1st February those on the panel will be granted contracts to undertake work on behalf of assisted persons with clinical negligence cases. After that date, and subject to an exception that I will come to, only firms on the panel will be able to conduct these cases. The exception is in respect of the 2,000 firms which currently have a franchise contract to conduct personal injury cases, which has until now included clinical negligence work. They will be entitled to continue to work on new clinical negligence claims but only until 31st July, by which time they will have needed to qualify for a clinical negligence franchise.
  Moved, That the draft regulations laid before the House on 16th December 1998 be approved [Fourth Report from the Joint Committee].—(Lord Falconer of Thoroton.)
  Lord Renton: My Lords, the noble and learned Lord has given us a fairly full explanation of the regulations and I am sure that we are all grateful for that fact. However, perhaps he will enlighten us on two matters. First, we need to know more about the nature of the membership of the panel. If it were to consist largely of lawyers that would not help. Those appointed need to be people who have clinical expertise—that is to say, medical, dental and nursing expertise. I say that because the decisions they will have to take will, I believe, require such expertise. Therefore, can the noble and learned Lord give us some idea of the sort of people who will be chosen to serve on the panel? Secondly—and I only infer this from what he said—but will the noble and learned Lord be more specific and say how long it will be before the panel is appointed?
  Lord Kingsland: My Lords, the Opposition give a qualified welcome to these regulations. We entirely accept that it is important for the country that cases of the complexity of clinical negligence cases receive the best possible specialist advice available.
  In drafting the regulations, I note that the Government have relied heavily on two statistics. The first is that in 1996–97 the average claim litigated by specialist solicitors, who belong to one or other of the two specialist associations, yielded £48,000; and the second is that two-fifths of the cases which were begun by solicitors operating under legal aid did not conclude either in settlement or in a successful outcome as a consequence of litigation.
  I ask the noble and learned Lord to look at those statistics very carefully if he is to use them as a basis for developing the system set out under the regulations. As far as concerns the average figure of £48,000, one would expect specialist solicitors to deal with the more complicated and higher-yielding cases. Therefore, I am not at all surprised to learn that specialist solicitors litigating in clinical negligence cases obtain a much higher return for their clients than solicitors who litigate negligence cases, in general. One would expect ordinary personal injury solicitors to be instructed in clinical negligence cases of less importance.

  855
  As regards the figure of two-fifths, one of the reasons why a large number of clinical negligence cases do not end either in settlement or in court actions is that, in many instances, there has to be a big initial investment of money before a legal adviser is in a position to assess risk. In my judgment, the figure of two-fifths is not at all out of the ordinary. I hope that the Government are not reading too much into it.
  Having said that, your Lordships' House should support the intention behind the regulation. I express concern only about the fact that there seem to be so few specialist solicitors available at the moment to deal with clinical negligence cases. I also express concern that the geographical distribution of these solicitors is so uneven. I understand that there are only 20 properly qualified solicitors in Wales and hardly any in the East Anglian area. Either the experts will have to travel a long distance to meet the victims or the victims will have to travel a long distance to meet the experts. I am sure that the noble and learned Lord has given this due consideration. I hope that he will be able to reflect further upon this matter before the end of this debate.
  Lord Falconer of Thoroton: I am grateful for the support from the noble Lord, Lord Kingsland.
  Let me first deal with the point made by the noble Lord, Lord Renton. In effect, these regulations limit the firms of solicitors who can obtain legal aid for the purpose of medical negligence cases. They do not set up any sort of adjudicatory panel; they simply identify that you can get legal aid for a clinical negligence case only if you are on the panel that the regulations set up. The suggestion by the noble Lord, Lord Renton, about having non-lawyers on the panel is not quite the point of the regulations. The date on which the panel comes into force is 1st February 1999.
  The noble Lord, Lord Kingsland, made the point that we should not set too much store by the two statistics that were relied on—namely, the result or success rate as between those who will become the panel and those not on the panel—and we should not set too much store by the size of the damages because you would expect the more experienced lawyers to be doing the bigger cases.
  One should not look at any statistic in isolation; one should look at the whole picture. Applying the existing panel as a guideline for the firms that will be on the panel, they achieve success in 28 per cent. of the cases they are involved in; those not on the panel achieve a rate of success in either 17 or 18 per cent. That is quite a significant statistic. I take the point of the noble Lord, Lord Kingsland, that one should not be too influenced by the amount of damages recovered, but again it is of significance.
  The statistics support one's own instincts. Medical negligence cases are very difficult and involve great sensitivity both in the assessment of evidence and in dealings with clients. It would be much better if people of experience conducted these sort of cases. It is not surprising that the statistics tend to support the view that those who have experience tend to get better results.
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  One's instincts and also statistics tend to support these regulations. In those circumstances, I commend the regulations to the House.
  On Question, Motion agreed to.

  Business
  Lord McIntosh of Haringey: My Lords, before the Clerk calls the next business, may I remind the House that the police inquiries referred to in the Question could result in court proceedings some time in the future. Noble Lords taking part in the debate should be aware of the relationship that exists between Parliament and the courts and should be restrained in what they say.

  Horse Racing
  5.53 p.m.
  Viscount Falkland Viscount Falkland rose to ask Her Majesty's Government whether they are satisfied with the way in which the current inquiry into possible criminal activities in horse racing is proceeding and, in particular, whether they consider that damage could be done to the reputation of jockeys who are arrested and subsequently released without charge in the course of the inquiry.
  The noble Viscount said: My Lords, I fear that we have been caught somewhat on the hop—if that is the right expression in a debate dealing with horse racing—because the expected business in your Lordships' House is as unpredictable as the running of the horses which are so close to the subject of this debate.
  Let me say straightaway that, although I am the spokesman for culture, media and sport on these Benches, sport is something that I usually leave to one of my younger colleagues. On this occasion I have, on my own initiative, decided to ask this Question. I am very grateful to those Peers who have put their names down to speak in this debate. I notice that the noble Lord, Lord Burnham, is not in his place, but we are almost up to strength. Those who miss listening to this debate will have the opportunity to read what was said in tomorrow's newspapers.
  I have been a passionate racegoer since my early childhood—I might say even my pre-teen years—and this resulted in something of a misspent youth. I have become a reformed reprobate in that I hardly ever bet these days—I cannot afford to do so. I do not own horses—although I have owned bits of horses in the past—and I have even given up tipping horses. Last year I tipped the winner of the Derby at 33–1 to quite a large group of friends at Sunningdale Golf Club. I have retired because, like my right honourable friend in another place, I wish to leave at the top—and I cannot beat that.
  I wish to question the Government, through the noble Lord, Lord Williams of Mostyn, about the unprecedented situation that exists at the moment. Racing, like politics, has always abounded with rumours. There have always been rumours of scandals in racing. That happens wherever there are large sums of money—and gambling, after all, is one of the motives

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  of racing. Some people might like to deny that, but nevertheless gambling is a strong and important part of the world of racing.
  I cannot remember there ever being a situation where, out of the blue, a number of prominent racing personalities—most of them jockeys—have been arrested and taken for questioning in the full glare of publicity. The noble Lord, Lord Williams of Mostyn, when answering the debate, may like to deal with that point. It seems to me that in any judicial practice it is extremely unsatisfactory for arrests to be made in the early hours of the morning in the full glare of publicity. Who told the newspapers and television companies that those arrests would take place in the early hours of the morning?
  I have been driven to ask this Question by my concern for the people—most of them jockeys—who were arrested and charged. They were then bailed. They assisted the police with their inquiries and were then discharged. I am fully aware of the warning that was given before the start of this debate, I do not wish to address any individual case.
  To my certain knowledge, the result has been that the family life of a number of the jockeys—perhaps all of them—has suffered a good deal. They have been fully aware—as sportsmen with a short earning life are always aware—that anything which impinges on their integrity in the public arena in which they perform will inevitably affect their careers in one way or another—mud sticks. I would like to ask the noble Lord a fundamental question. Is it not at least unsatisfactory that these inquiries should have gone on for so long? It seems to me with my knowledge of racing—other noble Lords may know more about this than I do—that the sport has been governed admirably over centuries by the Jockey Club. In these modern times the Jockey Club employs experienced and expert security officers who are always alert and on the look out for irregular occurrences in the world of racing. Vigilance is the key. I would never say that racing is whiter than white, but nor would I say that it is irredeemably corrupt. My view is that it tends to be nearer white than corrupt. Nevertheless, in every field the unexpected happens.
  It seems to me that something must have been going on because undoubtedly the Jockey Club's security services must have seen something which led them to report to the stewards of the Jockey Club events which needed to be investigated and which were likely to lead to criminal proceedings. So good so far. However, why should there be this spate of arrests of jockeys and these investigations which have now gone on for well over a year with full press coverage, some of which is extremely helpful and accurate but some of which is ludicrous? On the ludicrous side, I read suggestions that jockeys may knowingly have ridden horses that had been doped. Anyone who has any knowledge of horses, particularly thoroughbred horses, realises that knowingly to ride a horse which has been doped, particularly with a sedative as opposed to a stimulant, would be suicidal. It is the same as driving a Formula One motor car knowing that the wheel nuts are not
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  tightened. Therefore I discount that theory and I dare say that during the inquiries that has already been discounted.
  In the normal course of events, when allegations of this kind are put to the police by the Jockey Club—quite correctly as it has no statutory right to take an inquiry any further—would the police normally interview people who might be involved in activities of the kind we are discussing? Surely these people would not normally be arrested without being interviewed. Has there been a difficulty in interviewing people the police thought could be helpful in their inquiries?
  Jockeys have suffered most from these events. As I understand the position, these jockeys have mostly been arrested in the full glare of publicity and they have helped the police with their inquiries. This is a way of trawling through the complicated world of racing in order to get a better picture of what is going on. One cannot expect police officers to be experts on racing. Racing is a part of our leisure activities and an important business. It is also part of our heritage. It is a complicated area of activity. One would not expect the police to have any profound knowledge of racing. It seems that the police have gathered their information by means of arrests.
  I do not particularly sing the praises of the judicial systems of other European countries. However, it seems to me that under our adversarial system the police gather facts. In a country with an inquisitorial system such as France, it is likely that if the Societe d'Encouragement—which is the relevant body in France—felt that a case needed to be answered, presumably an examining judge or magistrate would conduct an inquiry and complete a dossier. Witnesses would be called—one could call 80 jockeys if one wished—and a stigma would not be attached to a jockey going through that procedure. I and many others believe that the prolonged procedure in this country, with no charges of race fixing or anything of that kind being laid, indicates that the police have experienced great difficulty in confirming the charges that were alleged.
  I do not criticise the system or the police inquiries. The inquiries have been prolonged, but that is the way the police have seen fit to conduct them. However, the effect on the families and professional careers of those who have been arrested and released pending further action has been devastating. In my more than 50 years' experience of racing I have never encountered so much concern among the people involved in racing. My early childhood hero was the late Lord Mildmay. As a small boy I used to follow him round, watching him ride his own horses wearing a brace, as his neck had been broken. I am afraid that he was largely responsible for my misspent career! I mentioned that today to the noble Lord, Lord Oaksey, who probably represents the same kind of public figure. I hope that he will write about this matter. I note that he is not present tonight. I should have liked to hear him speak on this matter. I hope that the Minister will agree that I am right to be anxious about the way these proceedings have been carried out and the effect on those who have been arrested and who have had their lives disrupted.
  6.7 p.m.
  Lord Sandberg: My Lords, there is an old adage which says that where there is money, there are crooks. I believe that is an adage which still holds true these days. Many years ago a well-known US conman—I believe his name was Willie Sutton—when asked by his arresting officer why he always tried to work his scams on banks, famously replied that that was where the money was. As an ex-banker I am glad to say that he spent more time inside prison than outside. However, he might have added racecourses to his schemes, as increasingly that is where the money is.
  As a former bank chairman and a previous chairman of the stewards of the Royal Hong Kong Jockey Club, I have seen all too many attempts to defraud. In the case of racing it is generally the poor old public who are the victims. There are, of course, many ways of fixing a race. Doping horses is, I suggest, the most heinous but probably the most crude. It is by no means the only way to fix a race. As we all know, a clever jockey can achieve victory by superlative riding, as we have seen in this country. All of us who are interested in horse racing become excited when we see a jockey almost carry his mount over the line when people thought there was no hope. Of course a clever jockey can also fix a race by contriving to be slow out of the stalls, by giving his horse too much to do at the finish or perhaps by apparently getting his horse unluckily boxed in and thereby unable to obtain a real run when it is needed. The possibilities are almost endless.
  My noble friend Lord Falkland said that gambling is an integral part of racing, and of course it is. The punter, always thinking that he is right, will blame something for his own mistakes—the jockey has pulled the horse, the going is bad. It is always somebody else's fault, not the punter's. The time taken over this case only tends to reinforce those who feel that they have lost money not from their own fault but from that of the people who ride.
  I do not condone any of the tricks, however clever, that may be perpetrated; but equally, like my noble friend, I cannot condone the tactics sometimes employed in apprehending persons suspected of foul play. It may be necessary to arrest suspects at dawn, but it is not for the press and TV cameras to be present. It can only be by inspired leaks from the authorities that they so fortuitously turn up when arrests are made.
  As an occasional but not very successful follower of horse racing, I heartily applaud when culprits are brought to justice, whether by the police or stewards on the course. The duty stewards of the day initiate inquiries and although they are in my experience meticulously fair to the jockey, trainer or, even occasionally, owner, they are not subject to the constraints of a court of law and can generally come quickly to a decision. As an aside, when the noble Lord, Lord Oaksey, came to Hong Kong to help with an inquiry, he thought the methods there were about as thorough as he had ever come across in the world of horse racing and far better than court proceedings. In the noble Lord, Lord Oaksey, we have someone who knows a thing or three about racing.
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  I fully realise that the police may be required to become involved from time to time and we can only welcome attempts to keep horse racing as clean as possible. I like to think that we will not in future have the unedifying sight of the media's lights flashing at supposedly surprise raids on the houses of jockeys and trainers. That is manifestly unfair on persons who are subsequently released without charge or who are exonerated after a trial. Sometimes, such behaviour smacks of the exact opposite of one of the fundamentals of English justice, which is that a person is deemed innocent until proven guilty.
  I do not know what undertakings the Minister can give, but I hope that he will assure us that the privacy that all citizens in this country should unquestionably enjoy before full police investigations or a trial will be preserved in future dawn police raids.
  6.13 p.m.
  Lord Lloyd-Webber: My Lords, we are all grateful to the noble Viscount, Lord Falkland, for introducing this debate. I am fully aware that the matter is sub judice and that a number of issues cannot be discussed. When I put my name down to speak, I wanted to share with your Lordships a number of matters surrounding one investigation but I have been told that they too are sub judice.
  I can do no more than endorse the remarks of the noble Viscount and noble Lord. We must remember that one is dealing with young people at the height of their careers—not only jockeys but others who have been implicated. The consequences of wrongful arrest and the possible damages that could be commanded should be looked at seriously. It is strange that so many people should have known of particular cases almost in advance. We should celebrate the good humour that many young people have shown in what have been extremely difficult times for them.
  This debate has taken place at a quicker pace than we might have thought. I urge the Minister to move the inquiry along as soon as possible. If he wishes to have any of the information that I know, I shall be happy to share it with him.
  6.14 p.m.
  Lord Rowallan: My Lords, I thank the noble Viscount, Lord Falkland, for introducing this debate and I declare an interest as a race-horse owner, albeit that I am without a horse as we speak.
  Many, including the noble Earl, Lord Carnarvon, have stated outside your Lordships' House that we should not be having this debate as the whole matter is sub judice. The noble Lord, Lord McIntosh of Haringey, wants us to be careful for the same reason. I find it hard to go along with that. First, no one has been charged. Secondly, the inquiry has been dragging on for two years and nothing has been proved. I am told, albeit it unofficially, that the Jockey Club is fed up because the situation is not doing the sport any good and it wants to give up the whole matter. I hope that happens soon.

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  I hope that this debate will increase pressure on the Fraud Squad to put up or shut up. The whole racing fraternity is fed up to the back teeth with the whole saga. They ask how can there be dirty tricks with TV monitors in every bookies, trackside cameras all around the course and a mobile camera following the action.
  Horses are not machines. They have their off days just like us. They have strains and bellyache just like us. They get toothache and backache just like us. The difference is that horses cannot speak and all too often their aches and pains go unnoticed on the day. My daughter showjumps for Great Britain, to my immense pride. Last year, she went to the European Young Rider Championships in Lisbon. The horse went extremely well but on coming back to Scotland, then down to London for the Horse of the Year Show it went dreadfully—knocking down fences everywhere. One does not get in a British team with horses that knock down fences. That performance was unusual, to say the least. It turned out that the horse had a blood cell imbalance. As I said, horses are not machines, but animals that need to be looked after carefully.
  We all acknowledge that racing is a gambling sport. The money is huge at the top and dreadful at the bottom. Racing is in a mess and the industry needs a shot in the arm of adrenaline, not distrust and skull-duggery—especially where there is no evidence of any wrong-doing. The other day yet more jockeys were arrested.
  If a horse has a wind problem and the jockey sees a mammoth fence coming up, the sensible thing is to stop; otherwise, the jockey is likely to hurt himself or his horse. All too often, the horse—which the jockey will not own but is worth a lot of money—is not insured. Equally, if the horse is not particularly brilliant and enters a race with a small field, one hopes that the others will make a mistake, so that the horse can come through and win a share of the prize money.
  The main problem is that the racing game is all about money. The bookies are not putting enough into the sport. The whole industry, except for the bookmakers, agrees that is so. We need a stronger Tote and a more cohesive racing world in Britain. Sheikh Mohammed's withdrawal of 100 of his horses is just the tip of the iceberg. The question is being asked more and more around racehorses and stables today whether the bookies started the inquiry as a means of diverting attention from the lack of their contribution to racing. This at a time when there is a crisis in the labour market. We are not begetting, to use that marvellous biblical word, enough small people these days. Everybody is too tall to become a jockey.
  The modern labour force does not want to work seven days a week and our Government do not want to let it do so. Another problem is that trainers are not rich enough to have sufficient tied cottages to house their staff. So there is a problem of where to put everyone.
  I am forced to ask: do members of the Fraud Squad, based in London as they are, understand the world of racing? I gather that they are asking some weird questions of those whom they are so publicly arresting and in relation to whom they are subsequently dropping
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  charges. Have they perhaps read too many Dick Francis novels—excellent works of fiction as they are—and believe that fiction is necessarily interfaced with fact? Too many people have now been arrested and let go. Their reputations suffer. There is a stain on the character, as anyone who has been falsely accused of an offence can testify. It is not a nice thing to have against your name. People's lives are being turned upside down in the full glare of the media for transparently no reason at all. It is giving the wrong impression about the sport to the general public.
  People in horse racing are there for the love of the horse and the love of the sport, whether it is myself in the world of showjumping, my noble friend in the world of eventing, or those in racing. It does not matter. We are all there for one reason, and one reason only. Racing and the equestrian world as a whole provide a fantastic sport. It is one where the working man meets the aristocracy; where the rich and the poor meet on equal terms; where the horse becomes part of the human jockey on its back and suffers from all the foibles of such a marriage. We are followers of the sport of equestrianism because of the uncertainty of that marriage between horse and rider, whether jockey, trainer, owner, or humble stable-hand.
  Where there is money, there are of course occasionally dodgy deals. But no more true in our industry than it is in the City, the big world of finance, or the local shop. We merely have to visit any stable around Britain to feel the palpable excitement that exists. As Jamie Osborne, the jockey, and one of those accused and later released without charge, has said:
  "Nobody is going to betray this sport in the way the police believe it has been betrayed".
  I say to the police, the Fraud Squad and the Minister: before any more damage is done, let us put this matter to bed once and for all. The police must stop wasting public money looking for something that is simply not there. They must stop messing with people's lives. They must either bring a case to court now or go away and let us horse lovers try to resurrect our sport to its proper standing in this country. It is a great sport, offering so much to so many. We must not let this nonsense denigrate it any more.
  6.22 p.m.
  Viscount Astor: My Lords, I, too, thank the noble Viscount, Lord Falkland, for introducing this debate. As the speeches have indicated, such a debate is useful. It is neither ridiculous nor ludicrous, as it was described by one noble Lord in this morning's Racing Post. Indeed, I believe that the noble Lord, Lord Oaksey, is present.
  I must declare an interest too. In my time I have been a punter and an owner. I have trained point-to-pointers; I have even ridden in point-to-points. I hesitate to use the word "jockey". A jockey is usually someone who helps the horse round the course. I was a burden on the horses that I rode, as a cursory look at my riding record would show. However, after a great many circuits of various point-to-points, I finally managed to win the local members' race.

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  We must remind ourselves that the British racing industry is a major employer and generator of revenue for the Government and the betting industry. Racing and breeding support some 60,000 jobs in this country. A further 40,000 people are employed in the betting industry. Over 70 per cent. of that industry's business is concerned with horse racing. Racing and breeding exports are worth over £90 million a year. Income generated by racing and breeding exceeds £600 million annually. Racing and breeding raises around £150 million a year in tax, and in excess of a further £300 million a year in betting duty through betting on horse racing. And, most important, some 5 million people attend race meetings annually. That places in context the importance of the sport and to how many people the sport matters.
  Turning to the Question asked by the noble Viscount, Lord Falkland, when the Jockey Club security department uncovers any prima facie evidence of criminal activity, as a non-statutory body it has a duty to present such evidence to the police. In this investigation evidence was first presented to the police in February 1997, and since then the responsibility for the matter has lain clearly and properly with the police. The Metropolitan Police has sole responsibility for the criminal investigation, including the arresting and charging of individuals.
  There are concerns, and one should note the timetables. In February 1997, the Jockey Club security department passed evidence to the police. The first arrest took place on 27th January 1998. The last arrest took place on 13th January 1999. This investigation has been going on for nearly two years. That is a long time. Progress has been slow. Fifteen people have been arrested but, as has been pointed out, no one has yet been charged.
  Rather than commenting on the matter, perhaps it is best to quote some of the comments in the racing press. First, perhaps I may quote from an article in the Racing Post for Thursday, 21st January, which stated:
  "the racing industry's frustration was further fuelled by news from Scotland Yard that the probe is to have its third change of leader within four months".
  On 24th January an article in Sunday Business stated:
  "The direction of the police investigation has certainly looked confused at times and, according to one of those interviewed by the police, their knowledge of racing is limited".
  It is not surprising that their knowledge of racing is limited. My point, however, is that there are concerns within the racing industry.
  Perhaps the best quotation that I can offer to your Lordships is from an article by Brough Scott, a distinguished racing commentator. He wrote:
  "Pursuit is one thing, but how close are the hunters to actually bringing down their quarry? Dawn arrests of leading figures who are then released without charge—and in some cases … without interview—does not give the impression that the hunt is on the scent. It looks more like a pack galloping around heedless of who it harms".
  That is the impression in the racing industry. I am sure that the Minister will take note of it. There have been dawn raids, arrests, bail, re-bail; in some cases there have been arrests and it has taken 10 months for those arrested to be cleared.
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  The British Horseracing Board is aware that the length of the police investigation has been a source of concern and that last week's arrests have fuelled anxiety in some quarters about the impact of the investigation on the image of racing. I understand that it is the board's view that,
  "the overwhelming priority is that such investigations should be both independent and thorough, thereby ensuring that everything possible is done to safeguard British racing as a sport with a reputation for integrity which is second to none".
  I fully endorse that statement.
  The British Horseracing Board goes on to state that,
  "while recognising that such cases are intrinsically complex and can, inevitably, be time-consuming, the Board shares the view that it is in the best interests of racing, and of those directly involved, that the investigation should be brought to a conclusion as speedily as possible".
  On 12th January the board wrote to the Crown Prosecution Service to that effect. That is the view of those in racing. It is not our view on this side of the House; I merely point it out to the Minister. I am sure that he will take on board those concerns.
  This is a difficult situation. No one has been charged, but the industry is affected. One commentator has said:
  "the mud is beginning to stick to the sport of racing as comprehensively as it would in a three-mile chase at Plumpton in heavy going".
  Anyone who has been to Plumpton in heavy going will understand how the mud sticks there. Jockeys are being looked at. Rightly or wrongly, a jockey is often presumed by the public to be the most obvious accomplice because he has the best opportunity to affect the result in any coup. Anyone who knows about racing knows that most of the time that is not true.
  None of us can pretend that racing is completely clean, but nor is it bent, as are some other sports which are racked by drugs and gambling scams. I believe that the majority of racing is a clean sport; there are distinguished people in it; and the punter is extremely well protected, by and large, by the Jockey Club, the British Horseracing Board and the others involved.
  I cannot leave the matter without taking the opportunity to ask the Government whether they are still seriously considering the proposals of the British Horseracing Board with regard to transferring the Tote to the board and the replacement of the levy system with a single system. That should enable the Government to concentrate on gambling regulation and deregulation and leave racing and the betting industry to enter into commercial agreements which will be for the benefit of racing and betting as well as the Government. I realise that the Minister will probably not give me an answer on the future of racing tonight, but I am sure he understands that I must use the occasion to make the point.
  I shall wind up by saying that most of us have to accept that when our horses do not win, whether we are owner, trainer, jockey or punter, it is not because the industry is bent. It is because we have picked the wrong horse and another horse has run a better race. Alternatively it may have been better trained or better ridden. But there can only be one winner in a horse

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  race. In every race there are bound to be those who are disappointed. I look forward to the Minister's reply. I realise that while he is restricted in what he can say this evening, he will undoubtedly have listened carefully to all the points which have been made.
  6.31 p.m.
  Lord Williams of Mostyn: My Lords, the noble Viscount was trying to lead me astray but I shall not get bogged down in the question of the Tote or the betting levy. As I have said on past occasions, I have had many years' experience of acting for and against all the major bookmakers, including the Tote; so I have a certain knowledge of the background.
  There is little I can offer by way of specific detail. The police investigation of the allegations which were made by the Jockey Club is active and continuing. One should bear in mind what the Jockey Club has said:
  "This investigation has generated adverse publicity. The last thing the Jockey Club wants is for the sport it regulates to be damaged. However, if public confidence is to be maintained, it is vital that allegations of malpractice arc thoroughly investigated and where such allegations are proved, appropriate action is taken against the perpetrators".
  It seems to me that in that citation the Jockey Club has put its finger on the point. After all, it has the interests of the sport very much at heart since it regulates it in many important ways.
  I take the point made by the noble Lord, Lord Sandberg: the right of individuals to a decent respect for their privacy. In the context of what a number of noble Lords said, if it is suggested—and these are allegations and counter-allegations in the nature of things—that there was wrong police behaviour in any context at any time, there is, of course, the avenue of complaint which any aggrieved citizen in this country has: namely, the Police Complaints Authority. Alternatively, if there has been unlawful behaviour by any police officer, the opportunity to sue for damages is available to a jockey, trainer or anyone involved in racing in exactly the same way as it is open to any other citizen of our country.
  There is a balance between the public interest in demonstrating that such an enormously successful and important industry is cleanly run and the protection of the private individual: he is entitled to his privacy, even though he earns his living in the public arena.
  A number of points were made by the noble Viscount, Lord Falkland. He asked whether it was normal to arrest before interview. That is a matter within the discretion of the investigating officers. It is not abnormal, in my experience. He mentioned some continental jurisdictions and the way they do things there. I would not be enormously happy in introducing continental methods of inquisition into our system. Often they take longer, notoriously, and people are kept in custody for a long time. Without being unduly chauvinistic, I think by and large we do things better here, having a proper balance between the public interest and private rights.
  Some investigations take a long time. I speak from personal experience at the Bar; for example,
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  investigations into the arcane problems of local government corruption. They take a long time because they are difficult to investigate. A number of noble Lords rightly said that investigating racing or allegations of malpractice in the racing context is not easy.
  I reiterate what the noble Viscount, Lord Astor, said: racing is a very successful industry, it has a good tradition, it has proved itself to be adaptable and responsible to challenge. I hope its inherent strength and popularity will continue. But if one wants strength, it depends on public confidence. Any allegations of wrongdoing must be thoroughly investigated. That applies in the racing context, as it applies in local government and in business, in any kind of allegedly criminal activity. I stress the word "allegedly". It would be quite wrong of me to indicate anything about whether the police investigation is being properly carried out, whether the timescale has been right or what my private views might be about the guilt or innocence of those involved in the investigation. It would be utterly wrong.
  The noble Lord, Lord Lloyd-Webber, was courteous, helpful and scrupulous in the way that he confined his remarks. I am grateful for that. With his domestic background he will be able to confirm that in the breeding of thoroughbreds anyway the hereditary principle has some demonstrable virtue!
  I do not believe that anyone has been prejudging the outcome. I understand the force and vigour with which the noble Lord, Lord Rowallan, expressed himself. I must be more cautious because it is quite wrong either to prejudice a prospective defendant or to prejudice a prospective prosecution. I emphasise the single adjective "prospective".
  It is not for the Government in a free society to interfere in operational policing or investigative matters. There are other continental jurisdictions where we have seen too often that state interference with police investigations has been extremely dangerous.
  I am sorry that one or two noble Lords made adverse references—indeed sometimes rather harsh references—to the noble Earl, Lord Carnarvon. I do not think there is anyone who is a more honourable, dedicated and committed supporter of clean racing in this country. I am bound to say that I personally found any criticism of him disagreeable and it would have been better left unsaid. He was expressing a personal view, honourably held. I suggest that he was perfectly entitled to have his own views and to express them.
  The history briefly is the following: a serious complaint was made to the Metropolitan Police by the Jockey Club in March 1997. The club's view is that if it has serious allegations, it has a duty, as any other citizen does, to bring it to the attention of the police. It discharged that duty. I suggest that had it not done so it would have been criticised as being in dereliction of its duty.
  The organised crime group of the Metropolitan Police was given the inquiry and it has been carrying

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  on its investigations since May 1997. The allegations focus on a conspiracy to defraud. They are being undertaken by a team of officers led by a detective superintendent. I can assure your Lordships that the case continues to be the subject of reporting between the Metropolitan Police Service and the Crown Prosecution Service and there has been close and extensive consultation between the Crown Prosecution Service and Crown Counsel. To date 16 arrests have been made, six have been eliminated from the inquiry, the remaining 10 are on police bail, nine are due to return on 10th March this year and the other one on 17th March.
  That is the up-to-date material that I can put before your Lordships. It will not satisfy your Lordships because, in the nature of these debates, we are all
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  treading on extremely thin ice and I have reminded myself of the advice given by my noble friend Lord McIntosh of Haringey to all of us:
  "It is quite wrong to prejudice either a possible prosecution or possible defendants".
  I do recognise the concerns that have been expressed. They have been fully ventilated, not just in the racing press but in the press generally, and I can assure your Lordships that the Metropolitan Police want an appropriately prompt outcome, as does the CPS; but you cannot always prosecute every case on the basis that it is simply "shoplifting a banana from Tesco's". This is quite difficult territory; it is quite difficult to investigate. I take note of the concerns which have been expressed by your Lordships. I fully understand the spirit of them and I can assure the House that the CPS and the Metropolitan Police are alert to them.
  House adjourned at twenty minutes before seven o'clock.