Lords Sitting of 4 April 2000

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

Eurofighter
Viscount Waverleyasked Her Majesty's Government:
What progress in development and sales is being made with the Eurofighter.
The Minister of State, Ministry of Defence (Baroness Symons of Vernham Dean): My Lords, seven Eurofighter development aircraft have now completed more than 1,200 sorties, achieving some 1,000 flying hours. A number of notable milestones have been achieved, including supersonic flight, care-free handling, air-to-air refuelling and missile firings. Delivery of the first production aircraft for the United Kingdom is planned for mid-2002. Eurofighter export prospects are excellent. Greece has recently announced plans to purchase up to 90 aircraft. A number of other countries are showing significant interest.
Viscount Waverley: My Lords, the omens certainly appear encouraging. However, can the Minister tell the House what recommendation the MoD has made for the long-range weapons system? Speed of announcement is essential. On the sales front, do the Government support the industrial participation package being o offered to Norway? Further, have the Greek Opposition endorsed the intention to buy the Eurofighter, given the upcoming general election in that country? Indeed, does the Minister intend to visit Athens to secure this order and to address other pressing issues?
Baroness Symons of Vernham Dean: My Lords, the noble Viscount has most skilfully managed to ask quite a few supplementary questions. Of course, I agree with him that this is a very encouraging picture. The noble Viscount asked about the future of the beyond-visual range air-to-air missile. This programme is still in a pre-contract competition phase. We are in the final stages of assessing bids from two companies; namely, Matra BAe Dynamics (offering a new missile called Meteor), and Raytheon Systems Limited (offering a future medium-range air-to-air missile and an extended range air-to-air missile). These are very hard-fought competitions and many factors have to be borne in mind. Obviously, we are assessing not only the capability but also the cost, the value for money and the risks involved, as well as the industrial advantages and disadvantages, in both bids.
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The noble Viscount also asked about Norway. I can tell him that Norway is currently deciding what to do. As the noble Viscount implied, there are a number of different issues surrounding the package that Norway is considering. As regards Greece, there is, of course, a forthcoming general election. We have no reason to believe that an incoming Greek government will feel any differently from their predecessors. I very much hope to be visiting Greece in the near future.
Lord Pearson of Rannoch: My Lords, can the Minister confirm that this country has so far spent £16,000 million on this project? Can she also confirm that each unproven, comparatively untested Eurofighter costs about £60 million compared to an F16 which costs £15 million, and that, therefore, you get four F16s—proven and tested aircraft—for each unproven Eurofighter? In view of that and the Government's well-known commitment to NATO, as evidenced through the European defence initiative, why do we not simply buy Fl6s?
Baroness Symons of Vernham Dean: My Lords, I should point out to the noble Lord that that question would have been better put to his own Front Bench colleagues when they sat on the Government Benches, because those decisions were taken when the noble Lord's party was in a position to make such decisions. The noble Lord is quite right to say that the costs of this sort of project are very considerable—some £16·1 billion at 1999 prices. However, the noble Lord is a little off the mark as regards his assessment of the individual cost of these aircraft. They currently cost £40·9 million at 1999 prices. If the noble Lord is in any doubt about the efficacy of this aircraft, I suggest that he visits Farnborough to see it. Indeed, I suggest that all noble Lords come and see the aircraft in action at Farnborough. We would all then be able to see what a splendid aircraft it is and how much pride this country can take in it.
Lord Jenkins of Putney: My Lords, does my noble friend the Minister agree that the arms trade is inherently undesirable from another point of view? For example, is not much of our trade already too reliant on arms?
Baroness Symons of Vernham Dean: No, my Lords; I cannot agree with my noble friend on that point. Of course, the arms trade must be regulated. This Government have made it clear that we will not export arms when we believe that there is a realistic probability that the countries to which we are exporting arms will use those arms for internal repression or external aggression. My noble friend must remember how important defence exports are to this country. Currently some 355,000 jobs in the UK are dependent on the defence industry, and about 130,000 of those jobs are actually dependent on exports. My noble friend should look at this in the round and not just pick on individual aspects of the argument.
Lord Wallace of Saltaire: My Lords, can the Minister say whether the partners have yet agreed on the form of controls for arms sales outside the NATO area? If I understand the noble Baroness correctly, it is intended to pursue arms sales outside the NATO area fairly actively. In that case, some of us will have reservations about further arms sales to the Middle East and south-east Asia. Therefore, can the noble Baroness say whether there will at least be some agreed form of control among all the partners on how such decisions are taken?
Baroness Symons of Vernham Dean: My Lords, as the noble Lord will know, the four partner countries—namely, the United Kingdom, Germany, Italy and Spain—are party to the EU code, which this Government encouraged our partners to sign up to. I am happy to tell the House that they did so and that they are, therefore, parties to the same sort of code that we operate in this country when it comes to arms exports.
Lord Rotherwick: My Lords, are we not discussing a most outstanding plane about which the RAF is extremely pleased? Indeed, it should be compared with the F22 and not the F16, which is nearly five times more expensive?
Baroness Symons of Vernham Dean: My Lords, the Eurofighter is an aircraft which not only this Government support, but, as I reminded the noble Lord's noble friend, his own party also supported when in office. It is the aircraft that best meets the United Kingdom's needs both in terms of cost and operational effectiveness. It will be the backbone of the RAF's fast jet combat fleet for many years to come. We believe that it will offer a flexible capability necessary to meet the kind of uncertain environment in which the RAF is asked to operate these days.
Lord Burnham: My Lords, what progress is being made with the development of the Eurofighter for use at sea, bearing in mind that when the aircraft carriers come into service in 2012 it is likely that the Eurofighter with its strength and main frame will be required for those ships?
Baroness Symons of Vernham Dean: My Lords, the Eurofighter is still undergoing part of its developmental stage. These issues are, of course, still a matter for the integrated project team which operates out of Abbey Wood and which I had the great pleasure of meeting a couple of weeks ago. The flexibility in the development stage is likely to continue into the year 2002. All these issues are, therefore, very much at the front of the integrated project team's development analysis.
Lord Merlyn-Rees: My Lords, does the Eurofighter meet the operational requirements of the RAF in the light of the war in Kosovo?
Baroness Symons of Vernham Dean: My Lords, I believe that had we had the Eurofighter at that time—this is, of course, a speculative statement—we would have found that it met those operational needs. We must bear in mind the importance of developing this aeroplane in a way that allows for real operational flexibility into the future. At the time that it was originally conceived (when the party opposite was in power), the threats were, of course, very different from those of today. However, I am happy to say that the flexibility that is built into the developmental stages of this aircraft will allow us to have an exceptional aircraft for use into the future.

Euro Cash: Use in the UK
2.44 p.m.
Lord Lea of Crondallasked Her Majesty's Government:
Whether, given the publication on 9th March of the second Outline National Changeover Plan, they visualise use of euro notes and coins in the United Kingdom becoming increasingly common practice from 1st January 2002.
Lord McIntosh of Haringey: My Lords, unless the UK joins the single currency, sterling notes and coins will remain the legal tender of the United Kingdom. The introduction of euro cash in the euro zone will not affect this. Businesses and individuals will not need to accept euros, but some might decide to do so for commercial reasons, just as they now accept currencies such as the dollar or the deutschmark.
Lord Lea of Crondall: My Lords, I thank my noble friend for that reply. I welcome the modest stepping up of our euro preparations. I wish to ask my noble friend two questions. First, does he not agree that the real significance of the switch to euro notes and coins at the end of next year is the fact that 300 million fellow Europeans from Helsinki to Lisbon and from Rome to Dublin will use the euro not as a foreign currency nor even as a dual currency, but just as the Americans use the dollar; that is, as their only currency—the currency in which they price all their goods and services? Secondly, is not the implication for this country that there is a danger of complacency and of feeling that we do not need to do anything because we have not joined, or, as the Leader of the Conservative Party would have it, try to be King Canute and operate at a disadvantage in the single European market?
Lord McIntosh of Haringey: My Lords, my noble friend is certainly right to say that, at the beginning of 2002, 300 million people will use the euro on a daily basis. Any sensible business in this country which expects to do retail business, for example, with those 300 million people who may visit this country would do well to display the prices of its goods in euros, just

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as it may display them at present in dollars. That is the advice which the Government would give from now on, whether or not we ultimately join the euro.
Lord Lamont of Lerwick: My Lords, has the noble Lord noticed that the "one size cannot fit all" interest rate of the euro is causing financial divergences in the different economies of Europe? Has he noticed that the Irish rate of inflation has now reached over 4 per cent, measured by their own measurement, or over 5 per cent, measured as the British measure inflation? How high does he think British inflation would have risen if, for the past 12 months, we had had euro interest rates?
Lord McIntosh of Haringey: My Lords, as regards the final part of the noble Lord's question, he asks me to speculate on purely hypothetical circumstances. Certainly there have continued to be variations between the different countries in Euroland in interest rates and in many other economic measures. However, only those who thought that the introduction of the euro would bring about an economic superstate can be surprised at that.
Lord Taverne: My Lords, has it not become evident in retrospect that the most fundamental strategic mistake which the Government have made in their term of office, and which they must now secretly deeply regret, was the announcement on 27th October 1997 when they flanked the issue of the euro? Is it not clear that if they had been brave then they could easily have won a referendum, the pound would now be closely linked to the euro and the difficulties of manufacturing industry and the agriculture industry would not be as severe as they are now?
Lord McIntosh of Haringey: My Lords, the noble Lord is in another Cloud-cuckoo-land at the opposite end of the spectrum from the noble Lord, Lord Lamont of Lerwick. The announcement by the Chancellor of the Exchequer in October 1997, which was reaffirmed by the Prime Minister in February of last year, is, and remains, the policy of Her Majesty's Government. We have no regrets about that.
Lord Barnett: My Lords, does my noble friend agree that even those with the extremist views of the noble Lord, Lord Lamont, must surely accept that millions of British businessmen and holidaymakers will be using the euro every year? Having paid commission to change their money into euros, they will have to pay commission again to change it back. Would it not be sensible to allow the euro to be used here?
Lord McIntosh of Haringey: My Lords, I meant to bring my euro chequebook to demonstrate my devotion to the euro. Unfortunately I have left it at home.
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We have never claimed that transaction costs were the principal argument for the single currency, but of course they are significant.
Lord Saatchi: My Lords, why do the Government think it right to spend £26 million on preparations to change over to the euro when every poll shows that 70 per cent of the British public do not want to join it?
Lord McIntosh of Haringey: My Lords, the £26 million is an estimate of the total costs of preparation for the existence of the euro, whether or not we join. The amount of public money is of course much smaller; at present it stands at £6·3 million. But not even those opposite with the more extreme views would suggest that we should pretend that the euro will not exist in the 11 countries that have adopted it and that it will not have an effect on our business. The preparations for it are essential in order that we have a proper, practical choice when the time comes.
Lord Harrison: My Lords, does my noble friend accept that the superior design features of the euro—distinctive colours, sizes and embossments of notes—will be much preferred by the blind and visually impaired community of Britain? I speak as a committed "Eurofighter".
Lord McIntosh of Haringey: My Lords, it is a matter of aesthetic judgment. Simplicity has to be set against the complexity necessary to deter forgers. I am not terribly fond of the bridges which appear on so many of the euro notes.
Viscount Cranborne: My Lords, arising out of the reply given to my noble friend Lord Saatchi, can the Minister explain why he thinks that the views of 70 per cent of the British public are extreme?
Lord McIntosh of Haringey: My Lords, I was describing as extreme the views of noble Lords opposite. The views of the public have changed on the euro and may well change again as the issue gets closer to determination.

Bank Branch Closures
2.51 p.m.
Earl Peelasked Her Majesty's Government:
Whether they will take any action to protect the economic base of rural areas from the effects of the current programme of bank branch closures.
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Lord Whitty): My Lords, the Government are taking a wide range of steps to support rural economies, including funding for rural regeneration and development of rural transport. The Government recognise the importance of access to financial services in rural areas. They are fully committed to maintaining

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a nationwide network of post offices, which are increasingly giving bank customers convenient access to their accounts. The Government are investing £500 million in the Horizon programme to automate every post office in the country by 2001. That will enable the Post Office to extend its arrangements with the banks.
Earl Peel: My Lords, I thank the Minister for his reply. However, following the recent remarks in another place of his honourable friend Chris Mullin—which reflected, to put it mildly, a pessimistic view of the effect of bank closures on rural areas—and today's media report of his other honourable friend Alan Johnson, who is now predicting that over the next year between 400 and 500 rural post offices are likely to close, does the Minister accept that these developments will seriously threaten the Government's rural regeneration project? Will he, at the very least, assure the House that he will reconsider the Government's policy of removing benefit payments from post offices?
Lord Whitty: My Lords, the Government accept that there are parts of the Post Office rural network which are under social, economic and technological pressures. That is why modernisation is necessary in all 19,000 branches of the Post Office. That is why the Government have put the Horizon project—which is the major technological advance for the Post Office— back on track. It will enable the payment of benefits and other banking transactions, but those drawing benefits who wish to retain cash payments will be able to do so.
Lord Ackner: My Lords, does the Minister find anything objectionable in a Minister suggesting to a disgruntled customer of a rural bank that he always has the alternative to change banks?
Lord Whitty: My Lords, I do not regard that as objectionable. Those were almost exactly the terms used by my honourable friend Chris Mullin. Clearly where a bank has let down a rural community, it is open to its customers in that area, and to those in other areas who sympathise with them, to change their banker. That is understandable in those circumstances.
The Lord Bishop of Salisbury: My Lords, does the Minister accept that it is not only the economic but also the social base of rural communities that are affected by bank closures? Can he spell out, in more detail than he has, exactly what help he intends to encourage so that post offices can take over more of the banks' roles?
Lord Whitty: My Lords, it is certainly the case that the existence of the post office is vital to the continued social well-being of many rural areas. The steps that the Government and the Post Office have taken include: the major investment programmes to which I have referred; plans to install 3,000 cash machines in
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smaller towns and villages; and the possibility of having Post Office cash points outside the post offices themselves. The Post Office is already engaged in joint arrangements with some banks to cover their facilities. It has such arrangements with the Co-op Bank, with the Alliance and Leicester and with Lloyds Bank. The problem which gave rise to this Question is that, apart from an experiment in Cornwall, Barclays Bank has not made the same nationwide arrangement with the Post Office.
Baroness Miller of Chilthorne Domer: My Lords, it is all very well to have cash machines for taking money out, but does the Minister accept that, for many rural businessmen, paying money in is very important? They do not want to have to drive around the countryside with their takings. Does the Minister further accept that the Government's delay in acting on the White Paper is inducing a scattergun approach to a very important question of infrastructure?
Lord Whitty: My Lords, we accept the substance of what the noble Baroness said. I do not accept her criticism of the Government. In the White Paper on the Post Office, we indicated our intention to publish access criteria which the regulator and the Post Office Users National Council will have to follow in terms of the provision of financial services by the Post Office. This should ensure that in most rural areas there will be continued access to a post office. At the same time, the Post Office will be able to provide a wider range of financial facilities than at present.
Lord Clinton-Davis: My Lords, does the Minister agree with the attitude displayed by Mr Chris Mullin in relation to the programme of closures announced by Barclays Bank Limited?
Lord Whitty: My Lords, I support the position taken a week ago by Chris Mullin in another place. As I said in reply to an earlier question, he indicated that it is of course always open to customers of Barclays who are disgruntled by what seems to be its cavalier disregard of rural interests to change their bankers. That is what my honourable friend said, and that is all that he said. It is true that one of our national newspapers reported that as a call for a boycott. It is not. It is an indication that consumers within rural areas have a choice, and that they should exercise that choice.
Baroness Byford: My Lords, does the Minister accept that it will help in one way if cash machines are installed in post offices, but not in a second way? Some 40 per cent of a post office's income arises through the receiving and handing-out of benefits and welfare payments. If those benefit payments are not made, post offices will not be profitable; therefore there will not be a post office for people to go to.
Lord Whitty: My Lords, I accept that a substantial part of the transactions currently carried out by post offices involve the benefits system. We are making

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choice available to benefit recipients, as we are to other consumers. We believe that a significant number of benefit recipients will continue to use post office services. The point we are making is that by more extensive and sophisticated arrangements with the banks, the Post Office will be able to introduce a wider range of facilities to all consumers, within both rural and urban areas. In the future, the Post Office will take on and provide a much more widespread network of financial services than is currently available from even the largest clearing banks.

Income Tax: New Payers
2.59 p.m.
Lord Hardy of Wathasked Her Majesty's Government:
What is their estimate of the number of people who entered employment during the last two financial years and have become payers of income tax.
Lord McIntosh of Haringey: My Lords, the number of people in jobs is already at a record level—up by 800,000 since the election. The Government's longterm ambition is that by the end of the decade there will be a higher percentage of people in employment than ever before. Overall, in the year following spring 1998, 3·7 million people are estimated to have entered employment, compared with 3·5 million in the previous year. Whether they were income tax payers would have depended on their individual circumstances.
Lord Hardy of Wath: My Lords, I am grateful to my noble friend for that reply. But does he agree that there is continuing and sharp criticism about the levels and yield of national taxation and complete disdain for the point which his Answer demonstrates—that very large numbers of people who were entirely dependent on public resource are now contributing to it by way of income taxation and are therefore contributing to the prudent and wise improvement in services which we all need? Is it not time that the criticism I referred to ended and that there was greater applause for the taxation policies currently pursued?
Lord McIntosh of Haringey: My Lords, I hope we would all agree that more people in work is a good thing and more people getting pay is a good thing. If, as a result of that, despite lower rates of taxation and lower rates of marginal taxation, more people are paying tax, is that a bad thing?
Baroness Hogg: My Lords, as the Minister has the numbers at his fingertips, can he tell us by how much the total amount paid to the Inland Revenue by income tax payers has gone up over that period?
Lord McIntosh of Haringey: No, my Lords, I have no further information other than that which was
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published in the pre-Budget report, which is available to the noble Baroness and to all Members of the House.
Lord Taverne: My Lords, does the noble Lord agree that far more people would have been exempted from tax if the Government had concentrated on increasing personal allowances instead of introducing the 10p band? Does he not agree with the Institute of Fiscal Studies that that would also have been much more progressive in its effects?
Lord McIntosh of Haringey: No, my Lords, I completely disagree with that. The 10p rate halves the marginal rate of tax for 2·3 million people, of whom 1·9 million are low paid. If instead of that we had increased allowances, we would have been saving more money for those better off. In social justice terms, the 10p rate is more efficient.
Lord Stoddart of Swindon: My Lords, how many of those 800,000 jobs were created in manufacturing industry?
Lord McIntosh of Haringey: My Lords, I do not have the answer to that question but I can write to my noble friend. Clearly, jobs are being created and are disappearing both in manufacturing and in service industries. The balance between them can only be seen in aggregate rather than trying to convert from these 800,000 jobs alone.
Baroness Sharp of Guildford: My Lords, is the Minister aware that in spite of the prosperity of the South East there is a very high incidence of joblessness in inner London boroughs? Is he further aware that 19 out of 21 New Deal areas in London have the worst employment outcomes of anywhere in Britain? Nineteen per cent of these young people are not only not paying any income tax but they are not even claiming benefit because they are not eligible for benefit. Does the Minister agree that there is currently a real shortage of jobs in London and that the New Deal is not working in London as it should be but is actually adding to the incidence of social exclusion and pushing young people off the employment register?
Lord McIntosh of Haringey: My Lords, I certainly agree that a number of London boroughs are particularly badly off in employment terms. I live in one of them. But I do not draw the conclusion that the noble Baroness does about the effect of the New Deal. Youth unemployment is down by 40 per cent since the election. That applies in all parts of the country. The package of measures that we have introduced, which includes the working families' tax credit, the reforms to national insurance contributions, the 10p marginal rate of taxation and the national minimum wage, contributes to benefits which are felt in London boroughs—even hard-pressed London boroughs—as well as in other parts of the country.
Lord Northbourne: My Lords, can the Minister say how many of the 3·7 million people who entered employment in 1999 were men and how many were women?
Lord McIntosh of Haringey: My Lords, I could if I had at my fingertips the full tables from the Labour Force Survey, but I do not. Certainly, it is the case that in recent years a considerable part of the increase in employment has been the increased employment rate among women. But I shall gladly give the noble Lord the figure from the Labour Force Survey.
Lord Pearson of Rannoch: My Lords, does the noble Lord agree that the Government are to be congratulated on the 800,000 jobs that have been created in this country since the election? Does he further agree that not a single new job has been created in the European Union? Will he finally agree that, if the Government had been constrained by not being able to manage the interest rate and otherwise generally by the conditions of economic and monetary union, their performance might not have been quite so brilliant?
Lord McIntosh of Haringey: My Lords, I have learnt to listen to the end of the noble Lord's questions. He always starts off in friendly vein and always finds some way of bringing it round to Europe and to an attack not on this Government but on Europe. We and the many countries of the European Union have been on a different economic cycle over the period that we have been talking about. There were indeed job losses in Europe in earlier days. I am glad to say that those job losses have been cut and even eliminated and that employment is rising at the moment in many European countries.

Business
Lord Carter: My Lords, after the Third Reading of the Care Standards Bill, my noble friend Lord Whitty will, with the leave of the House, repeat a Statement which is being made in another place on the housing Green Paper.

Business of the House: Debates, 5th April
Lord Carter: My Lords, on behalf of my noble friend the Leader of the House, I beg to move the Motion standing in her name on the Order Paper.
Moved, That the debate on the Motion in the name of the Lord Peyton of Yeovil set down for tomorrow shall be limited to two hours and that in the name of the Earl Peel set down for the same day to three and a half hours.—(Lord Carter.)
On Question, Motion agreed to.

Care Standards Bill [H.L.]
3.6 p.m.
Read a third time.
Clause 4 [Other basic definitions]:
Baroness Masham of Iltonmoved Amendment No. 1:
Page 4, line 8, at end insert—
("( ) "Nursing and care staff agency" means any employment bureau supplying nurses in any part of the Register of the United Kingdom Central Council for Nursing, Midwifery and Health Visiting.").
The noble Baroness said: My Lords, first of all I must declare an interest as I have to use nurses agencies for my husband. These agencies differ considerably, with huge variations in standards. There is no doubt in my mind that minimum standards should be laid down in the Care Standards Bill for all these agencies providing nurses and carers.
We employ two people for my husband at the moment. One is a trained nurse and the other is a carer. Because my husband is large, he needs two people. They come through the same agency. It seems quite ridiculous to me that the agency which provides them would be in the Care Standards Bill for the carer but not for the nurse. Both these people live in our house and I expect the same standards from each of them, even though the nurse could undertake some procedures that the carer could not.
I have my name to Amendments Nos. 1 and 3, and 2 and 4. The Royal College of Nursing prefers Amendment No. 2 because nurses registered with the United Kingdom central councils are trained nurses. But both amendments are supported by Action on Elder Abuse, Age Concern, the Anchor Trust, the Association for Residential Care, the British Federation of Care Home Proprietors, the British Healthcare Trades Association, BUPA, the Care Forum (Wales), the Carers National Association, the Continuing Care Conference, Counsel and Care, the Hampshire Care Association, Help the Aged, the Independent Healthcare Association, Marie Curie Cancer Care, Mencap, the National Care Homes Association, the NESTA Healthcare Group, the Recruitment and Employment Federation, the Registered Nursing Home Association, the Relatives and Residents Association, the Royal College of Nursing, the United Kingdom Central Council for Nursing, Midwifery and Health Visiting, and the United Kingdom Home Care Association.
Clause 91 of the Bill repeals the Nurses Agencies Act 1957 and brings nurses agencies under the Employment Agencies Act 1973. That means that, instead of being licensed by local authorities, nurses agencies will become regulated in the same way as all other employment agencies, with the Department of Trade and Industry holding ultimate responsibility.
The Royal College of Nursing's Nursing and Care Agencies Managers' Forum has around 1,000 members who own or manage nursing agencies throughout the UK. The RCN has long argued for the

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need to update the Nurses Agencies Act 1957. However, the RCN is concerned that the proposals to repeal the Nurses Agencies Act and to regulate nurses agencies under the Employment Agencies Act 1973 will not provide sufficient protection for the public, including some of the most vulnerable members of society.
There are serious concerns that the move to give the DTI responsibility for regulating nursing agencies under the Employment Agencies Act will lead to an even weaker regime. The Employment Agencies Act does not rely on an inspection and monitoring regime, but rather relies on complaints to trading standards officers to trigger investigations. That seems inadequate when vulnerable people's lives are at stake.
It seems advisable and desirable that nurses should supervise the recruitment and placement of nurses. Nurses agencies should be required to register with a regulatory body and should be routinely inspected to ensure standards for all patients at risk. There should be a register of nurses agencies, so that performance can be monitored and operators can be traced, controlled and excluded where a practice falls below standard.
It seems to be the unanimous wish of all the associations concerned, including the Royal College of Nursing, that the national care standards commission should be the regulator for nurses agencies, and that to leave nurse agencies out of the Bill would be a big mistake. I hope that the Minister, representing the Government and your Lordships, will agree that the definition. "nursing and care staff agency", will be part of Clause 4 of the Bill. I shall be happy with whichever is the better amendment, so long as no agencies providing care to vulnerable people are left out. I ask the Minister to give an assurance that nurse assistants working in a hospital who come via an agency will be covered by the provisions of the Bill if Amendment No. 2 is preferred. I beg to move.
The Parliamentary Under-Secretary of State, Department of Health (Lord Hunt of Kings Heath): My Lords, with the leave of the House, it may be of assistance if I indicate that it is my intention to accept Amendment No. 2.
Earl Howe: My Lords, I should like to thank the Minister very much indeed for what he has just said. Perhaps I may speak to my Amendment No. 2. It may be helpful to the House if I add something to what the noble Baroness has said so ably. The difference between the noble Baroness's Amendment No. 1 and my amendment is merely technical in the light of drafting proposed by the Royal College of Nursing.
The noble Baroness has summarised the arguments very well. It seems extraordinary that we should have a Bill that regulates doctors' agencies and domiciliary care agencies but not nursing agencies. Nurses deliver care to people in all kinds of settings. That care can often be intimate; it can often involved dispensing medication and treatment; and not infrequently nurses
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are literally responsible for people's lives. Any agency that supplies nurses, whether to the NHS or direct to people's homes, must know what it is doing.
That means making sure, among other things, that the person responsible for the placements is accountable in a professional sense for the service given and is in a position to give proper support to the nurses. It is not satisfactory to have someone in charge of a nurses agency who knows nothing about the technical side of nursing or about issues such as medical confidentiality; yet that is what we could get if nurses agencies were to be regulated purely under the Employment Agencies Act.
I was particularly struck at Report stage by the intervention of my noble friend Lord Jenkin of Roding. The DTI, for all its many and varied talents, can hardly boast a great deal of expertise in the regulation of nurses agencies. That particular government department does not seem to be the right home in which to place this responsibility, especially because, when it comes to enforcement, its modus operandi is essentially reactive. Unless inspection and enforcement are regular and proactive, in a poorly run agency the damage might already have been done.
Like other noble Lords, I believe that this Bill—and in particular the commission—provides a much better vehicle for the regulation of nurses agencies. That is also the view of a great many providers and professional groups. Nothing in the amendment would prevent the DTI's employment agency protections from extending to nurses. Everyone is agreed that the Nurses Agencies Act 1957 has had its day. The question is what to put in its place. I am delighted that the Minister has taken the opportunity to reflect further on the matter and has seen fit to accept my amendment.
Lord Jenkin of Roding: My Lords, I should like to give my special thanks to the Minister for the promptness with which he has reflected on, and reacted to, the opinions expressed on all sides of the House. It is a wise move, and one which I hope the Front Bench opposite will imitate a great deal more often.
I was struck by one sentence in a letter I received. It said that people do not die of accountancy but they do die of inadequate nursing. That is the big difference. This decision is absolutely right and, again. I thank the Minister.
Baroness O'Cathain: My Lords, although I did not put my name to the amendment, I should have wanted to do so. I welcome what the Minister has said. However, I am slightly concerned that he has opted for Amendment No. 2 rather than Amendment No 1. I wonder whether "carers" employed by agencies will slip through the net. Many thousands of people employ not fully qualified nurses, but carers, in a domiciliary situation. Such people are often required to look after dysphasic patients—patients who do not need nursing as such, but who do need constant care because they are unable to do anything. Those employed are not necessarily nurses, but come through

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nursing agencies. I speak as someone who has employed such people for over eight years. Some of the qualities required of carers need to be, as it were, supervised, particularly if they are dealing with dysphasic or aphasic patients. They can get away, not literally with murder, but with not providing a satisfactory service.
Carers should be subject to the same regulations as nurses, and "nursing and care staff agency" would fit the bill. In my experience, employing carers through a "nursing agency" which has not been subjected to regulation has not been satisfactory on every occasion. I put that point to the Minister and hope that he will accept it.
Lord Clement-Jones: My Lords, I do not wish to add to the debate. The noble Baroness, Lady Masham, and the noble Earl, Lord Howe, have put the points extremely well. I thank the Minister for responding to the weight of opinion on the matter, which was extremely strong; and, in doing so, demonstrating the good sense and flexibility which has been characteristic throughout the Bill.
Lord Rix: My Lords, I hesitate to appear as an extra in the final scene, having had star billing when the amendment was moved previously. However, I stress that I would have supported the amendment and wish that my name were attached to Amendments Nos. 1 and 3 tabled by my noble friend Lady Masham of Ilion. I recognise the important point raised by the noble Baroness, Lady O'Cathain, from the Opposition Benches. The inclusion of care staff may be an important adjunct to the clause.
Having said that, I, like other noble Lords, welcome the Government's acceptance of Amendment No. 2. I am most grateful for the alacrity with which it has been done.
Baroness Emerton: My Lords, as a nurse, I add my thanks to the Minister for accepting the amendment. I urge also that consideration be given to the issue of carers. Carers are becoming involved increasingly in closer contact with intimate care of patients, sometimes in an unsupervised way.
Baroness Gardner of Parkes: My Lords, I disagree with many of the points made, although I agree with a number of others.
It is excellent to hear that the Minister will accept Amendment No. 2, but I do not believe that that amendment is good enough. The points raised by the noble Baroness, Lady Masham, are sound. There needs to be provision for care assistants also. The nursing world is in chaos at present because of the desperate shortage of nurses. As time goes by we shall have to find some answer to that. The answer may well be more care assistants.
The fact that the Minister will accept Amendment No. 2—it covers only qualified nurses—indicates the great power of the Royal College of Nursing. I have
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nothing against that. It is a marvellous organisation which does a great deal of good. But the Minister overlooks the comments of 24 well-known, reputable, caring organisations, providing only for qualified nurses. The noble Lord divides nurses and those who do not have the full qualifications. As I have said previously in your Lordships' House, many people cannot become qualified nurses because the entry standards are too high. The only alternative for those people is to become care assistants. It would be wrong if those people were farmed out to the Department of Trade and Industry. That is not the right department. They need to be considered as responsible and caring for their patients as fully qualified nurses. Complete devotion to patients is a genuine dedication. One cannot simply say, "Because I have a few more letters after my name I am more capable of looking after you". One is more trained and more skilled but not necessarily more caring.
I have added my name to the amendment. If the Minister does not accept the addition of caring people, I press the noble Baroness, Lady Masham of Ilton, to seek the opinion of the House. I feel very strongly on the issue. To accept Amendment No. 2 but to leave out all carers is not good enough.
The Lord Bishop of Wakefield: My Lords, I shall not detain the House by repeating the helpful remarks made in the past few moments. Your Lordships will know that the Churches in many guises have a great deal to do with the pastoral welfare of those individuals about whom we speak. The points made in support of Amendment No. 1, as opposed to Amendment No. 2, would gain the support of my colleagues on these Benches, and represent the views of many people from many churches who have a great concern in this area.
3.15 p.m.
Lord Hunt of Kings Heath: My Lords, I thought that I was going well!
First, I thank noble Lords for their kind words. One of the characteristics of the debate is that due to the lateness of the hour we were unable to discuss the issue in Committee. Therefore it was only a week ago on Report that we first paid attention to these matters. For that reason, when I come to talk about care workers I assure noble Lords that we shall pay close attention to the remarks of the noble Baroness, Lady Masham, and others.
I agreed last week to reflect on the matter. In doing so, I emphasise to noble Lords that all along the Government have been committed to an effective system of regulation for nurses agencies. I acknowledge, as have other noble Lords, that there is almost universal agreement that the current regulatory system for nurse agencies is inadequate. The Nurses Agencies Act is widely agreed to be out of date and in need of reform. There has been a great deal of inconsistency in the way the Act has been policed (if that is the word) up and down the country. There is evidence that some local authorities have failed to carry out their duties effectively.

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We took that into account in first proposing that nurse agencies should be brought within the remit of the Employment Agencies Act. I listened with great interest to the suggestion that the Department of Trade and Industry is perhaps not as caring a government department as perhaps is the Department for Health. The fact is that the Employment Agencies Act provides a much tougher framework of protection for agency nurses and those for whom they care. For example, the Act's regulations require agencies to obtain sufficient information from workers and hirers for the purposes of selecting a suitable worker. Those checks will be further strengthened by the revised regulations currently out to consultation.
However, we want the system to be effective and to protect vulnerable people. I have concluded that a system that encompasses registration and routine inspection for nurses agencies will help to achieve those aims. The Government accept, therefore, that the national care standards commission should regulate nurses agencies.
Not surprisingly—I have learned that all Opposition amendments are always technically deficient—there is a slight deficiency in Amendment No. 2 which the Government intend to accept. In accepting the amendment, it would be our intention to propose in another place a slight redrafting to cover that technical amendment.
I should like to take this opportunity to say a few words about how the system will work. We shall be developing the necessary standards under which the commission will regulate nurses agencies. These standards will be developed in consultation with the agencies themselves and other key stakeholders. However, I wish to be clear about two areas. First, I fully expect qualified nurses to be involved in the commission's inspection work, which will be particularly apposite in inspecting nurses agencies. Secondly, I would expect the standards applied by the commission to encompass a requirement for a qualified nurse to be in charge of the placement of nurses. I hope that that meets a specific problem which noble Lords raised.
Our commitment to repeal the Nurses Agencies Act remains, and nurses agencies will also come within the remit of the Employment Agencies Act. This will ensure that nurses agencies will be on the same footing as domiciliary care agencies. Agencies which provide both care workers and nurses will be subject to broadly the same regulatory requirements across the whole of their business.
Essentially the commission will provide an additional tier of regulation. But we accept that this additional level of regulation by the commission is necessary. Although that means regulation by two systems, agencies will need to register under only one: the national care standards commission.
Of course, it will be a matter of concern to ensure that the impact of two separate regulatory systems does not create al unjustifiably heavy burden on the agencies themselves. Indeed, that has been the theme of some of the contributions made by noble Lords
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during the passage of the Bill. We shall look carefully at the scope for dovetailing the inspection role of the commission and the employment agencies standards inspectorate to ensure that the two organisations work together closely.
So far as concerns care workers, many care workers in the community will fall to be covered by the provisions in the Bill for the regulation of domiciliary care agencies. Of course, we would expect healthcare assistants (to use the correct terminology) within hospitals to be properly supervised and managed. The provision in the Bill allows for the commission to ensure that effective management and employment procedures are in place. However, I have taken note of the comments concerning a nursing agency which perhaps also hires care assistants to work in private sector hospitals. Rather than give a hard reply this afternoon, I say to noble Lords that it is a matter to which we shall give further consideration.
Baroness Gardner of Parkes: My Lords, before the noble Lord sits down, perhaps I may ask for some clarification. I did not understand the point that he made regarding whether or not care staff will come under the same regulatory system. It seemed to me that at one stage in his speech he indicated that they would. However, as he continued and said that he would look at the matter again, I believed that he said that they would not. Then he made the point about two different groups and two different regulatory authorities. Again, I find that very unsatisfactory. Perhaps he will clarify the point.
Lord Hunt of Kings Heath: My Lords, I believe that confusion has arisen because noble Lords have spoken about two different areas. They have talked about care workers in the community, and I believe that the noble Baroness, Lady Masham, also referred to care assistants working in private hospitals. There is a difference.
Baroness Masham of Ilton: My Lords, and National Health Service hospitals.
Lord Hunt of Kings Heath: Indeed, my Lords. I was endeavouring to say that staff who are employed by domiciliary care agencies come within the regulation of the Bill as it stands. With regard to healthcare assistants within hospitals, we would expect those staff to be properly supervised and managed by the hospitals concerned. That would be a matter for the national care standards commission to check and inspect. So far as concerns the question of a nursing agency which might hire healthcare assistants to those private hospitals and establishments, that is an issue to which the Government would wish to give further consideration in the light of the debate this afternoon.
Baroness Masham of Ilton: My Lords, I thank all noble Lords who have spoken and, particularly, the Minister and the Chief Whip for their negotiations. I should like to make it clear to the Minister that nurse

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assistants are also employed in National Health Service hospitals. I am glad that he will look at that matter.
Lord Hunt of Kings Heath: My Lords, if the House will give me leave, I should like to point out that we have commissioned de Montfort University to study the question of whether healthcare assistants who are employed within the National Health Service should be regulated in the future. That work is ongoing and, of course, is in parallel to the other provisions in the Bill concerning the regulation of social care workers.
Baroness Gardner of Parkes: My Lords, before the Minister sits down, perhaps I may ask whether he is giving an undertaking to look at the position of care assistants who are not covered in any other way in the Bill? Will he consider whether they will be covered by this Bill rather than by the Department of Trade and Industry?
Lord Hunt of Kings Heath: My Lords, I believe that I gave a commitment to look at the specific regulations in relation to nurse agencies and to consider the extent to which those regulations should cover care assistants.
Baroness Masham of Ilton: My Lords, many people outside your Lordships' House will be very pleased with the outcome of our debate. The matter arose only at Report stage. I thank the noble Baroness, Lady Gardner, for calling the meeting which enabled me to table the amendment. I believe that the Minister understands the point made by the right reverend Prelate and by many noble Lords with regard to care assistants, and I hope that something can be done in another place to make the amendment perfect. I know that we in this House want to make it perfect; that is our job. However, we must work together. Therefore, I thank everyone concerned and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
3.30 p.m.
Earl Howemoved Amendment No. 2:
Page 4, line 8, at end insert—
("( ) "Nurses agency" means, subject to subsection (5), an employment agency for the supply of nurses registered with the United Kingdom Central Council.").
On Question, amendment agreed to.
[Amendment No. 3 not moved.]
Earl Howemoved Amendment No. 4:
Page 4, line 31, after second ("agency,") insert ("a nurses' agency,").
On Question, amendment agreed to.
Clause 21 [Regulation of establishments and agencies]:
Lord Clement-Jonesmoved Amendment No. 5:
Page 13, line 25, after ("agency") insert ("which are independent of that person, establishment or agency and so far as possible in accordance with any common industry complaints scheme,").
The noble Lord said: My Lords, this amendment, which is similar but not the same as an amendment which I tabled on Report, concerns the requirement that care homes should have a properly independent system of complaints when they apply for registration.
At Report stage the Minister spoke helpfully at some length about how people envisaged that that system of registration would work and the kind of requirement that there would be for a complaints system. Indeed, to some extent the document Developing the Way Forward also expands on that. However, currently the Bill simply requires that there should be an internal system of complaints. Clearly, the department and the commission will try to ensure that for the care homes affected the internal system of complaints is satisfactory.
However, the purpose of my amendment at this and at Report stage is to secure an independent element in the complaints system. By that, I mean simply that there should be an external adjudicator for the complaints at the level of the care home. The Minister very helpfully explained the role that he saw the commission playing in terms of the independence of the complaints system at the higher level, but he did not quite give the assurance about the nature of the independent complaints system at the lower level.
Since then, the Minister has explained helpfully why currently there is no requirement in the Bill for an independent element. He wrote to me as follows:
"However, there were concerns at the practical difficulties this might pose for small homes and single-handed owner-managers, together with an additional burden of cost and as a result we decided against including this".
Therefore, clearly a policy decision has been made against ensuring that that independent system is in place. As mentioned in Developing the Way Forward, the Independent Healthcare Association has been preparing a code of practice which will include an independent adjudicator as part of its local system of hearing complaints. I very much welcome that.
Therefore, my question to the Minister is: if the Independent Healthcare Association believes that that is an appropriate way forward for its members—and it has members among the smaller care homes as well—why does the Minister not believe that it would be appropriate to include that in the Bill? If it is not in the Bill, how will he ensure that those care homes adopt the helpful code of practice drawn up by the Independent Healthcare Association? It seems to me that those are the two key questions in this matter. If the Minister can assure me that in practice an

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independent complaints system will be adopted by nearly all those care homes. I for one shall be perfectly satisfied. I beg to move.
Lord Hunt of Kings Heath: My Lords, on Report, I set out at length how complaints against registered providers will be dealt with. Perhaps at Third Reading I may give only a brief summary.
We shall use the power in what is now Clause 21(6)(j) to require all establishments and agencies to have a proper procedure for dealing with complaints. The detail of that internal complaints procedure will be spelt out in regulations and has not been finalised at this stage. However, it is likely to include a requirement that all complaints must be logged, dealt with in a certain time, the outcome recorded and so forth. That is a significant advance in relation to the circumstances which pertain in many of the establishments which are to be regulated as a result of the Bill being enacted.
The second big advance made by the Bill is that any person who is dissatisfied with the outcome of the internal procedure will be able to take his complaint to the commission. The commission will have the power to investigate complaints as an integral part of its regulatory function. Service users will also be able to take their complaint direct to the commission if they have a good reason for not wanting to use the internal complaints procedure. Where the commission finds that the complaint is justified, it will be able to use the full range of its enforcement powers to ensure that remedial action is taken by providers.
The Government are confident that this system will give service users all the protection they need. On Report, the noble Lord, Lord Clement-Jones, said that he wanted to see a genuinely independent complaints system for the benefit of people in care homes and users of private healthcare. That is precisely what the commission will provide. It will have the power to investigate any matter relating to a breach of regulations or standards and it will be entirely independent of the registered establishments and agencies as well as of the purchasers of the services. Therefore, its investigations will be entirely objective and impartial.
On Report, the noble Lord, Lord Clement-Jones, argued that the internal complaints procedure should have an independent element. However, the amendment that he has tabled is different because it would allow regulations to be made requiring providers to set up an entirely independent complaints procedure. That would be instead of the internal complaints procedure.
We considered that issue when we were developing the standards far older people in residential and nursing homes set out for consultation in Fit for the Future?. However, we decided against that because we felt that it would impose an unfair burden on providers. We must recognise that some of the providers who will be regulated by the commission will be small businesses. Sometimes, they will be single-handed owners and managers. There is an issue as to the degree of burden that can be placed upon them.
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I noted with great interest the remarks the noble Lord made about the views of the Independent Healthcare Association, but one must recognise that it does not speak for all the many agencies and establishments which fall to be regulated by the Bill. Of course, we want to encourage the Independent Healthcare Association to set up its own independent complaints system. It will be free to do so and there is nothing in the regulations preventing it doing so. In answer to the noble Lord's specific question, the commission will encourage providers to consider an independent element within a complaints procedure as a matter of good practice, but I cannot agree that it would be appropriate to make it compulsory for all providers.
The fact is that what is proposed in the Bill will lead to an appreciable improvement in the complaints system. It will ensure that every establishment has a proper complaints system which will be checked and inspected by the national care standards commission, which will then be able to investigate complaints made to it by users of services in those establishments. On that basis, I invite the noble Lord to withdraw his amendment.
Lord Clement-Jones: My Lords, I thank the Minister for his reply. Although at this late stage I shall not ambush him on the subject, I do not believe that he has moved far enough. I took encouragement from his comment that the commission would encourage care homes to adopt an independent element as a matter of good practice, but the industry is being more progressive than he gives it credit for. It is moving towards independent adjudication in a most helpful way.
I do not want to press the point unduly, but I believe that it will be a matter of practice for the commission rather than the drafting of the Bill. Therefore, I take some comfort from the fact that the industry is providing the independent element, which will make it straightforward for the commission to ensure that the vast majority of the care homes affected will adopt it in their complaints system. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
3.45 p.m.
Clause 22 [National minimum standards]:
Lord Hunt of Kings Heathmoved Amendment No. 6:
Page 14, line 5, at end insert—
("( ) Before issuing a statement, or an amended statement which in the opinion of the appropriate Minister effects a substantial change in the standards, the appropriate Minister shall consult any persons he considers appropriate.").
The noble Lord said: My Lords, I have always made it clear that the Government intend to consult on each set of national minimum standards as they are developed and before they are finalised. It is inconceivable that they would not do so. However, on Report, the noble Earl, Lord Howe, pressed for the

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reassurance of a mandatory requirement to consult. I am happy to bring forward this amendment today in response to his concerns.
The amendment requires Ministers to consult on the standards before publishing them and before making any substantial change to them. We have reserved the right to make minor changes without consultation as we shall want to keep the standards as up to date as possible and shall need to make minor adjustments from time to time in order to ensure this. Perhaps I may give an example. The draft standards for older people in residential and nursing homes, as set out in Fit for the Future?, include a standard which states that:
"Residents must have access to their personal records if they wish to in line with the Data Protection Act 1984".
In the next edition of the standards, that will need to be changed to refer to the Data Protection Act 1998, which came into force on 1st March this year at which point the 1984 Act was repealed. I am sure that noble Lords will accept that there is no need to consult on such minor changes to the standards, as in the example I have given. I believe that it is to the advantage of all concerned that from time to time the standards are developed and changed. One of the conclusions I draw from the current regulatory regime is that it was not able to keep pace with developments within the care industry. I beg to move.
Earl Howe: My Lords, I simply say to the Minister, "For this relief, much thanks". I entirely understand why the amendment has been framed in such a way. I am conscious that there is a need for flexibility and, as we have often said during proceedings on the Bill, it is a question of striking a balance between what we all want to see ideally and what is practicable in the day-to-day lives of Ministers and others in the real world. I thank the Minister again for the care he has taken in addressing my concerns.
On Question, amendment agreed to.
Clause 72 [Employment agencies and businesses: duty to refer]:
Lord Phillips of Sudburymoved Amendment No. 7:
Page 47, line 26, at end insert ("if it appears to him that, unless such a provisional listing is made, there is a risk that any person will suffer significant harm").
The noble Lord said: My Lords, this is the last opportunity that the House will have to consider even this limited amendment to a vitally important section of the Bill. Given the Government's majority in the other place, there is not the slightest chance that any amendment will be made to the listing procedure if it is not done here. Furthermore, although the Government have in this place given indications that they were considering sympathetically improvements to Clause 71—as it now is—nothing has emerged. Other bodies, such as the Royal College of Nursing, have been endeavouring to negotiate employee safeguards and had gained the impression that the Government themselves were going to bring forward improvements.
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Perhaps I may briefly recapitulate on key aspects of the blacklisting procedure. First, it potentially covers well over 1 million people, from charity workers through to doctors by way of orderlies and nurses. Secondly, it requires every employer of any such person to report him to the Secretary of State if the worker concerned has been dismissed, suspended or transferred,
"on the grounds of misconduct … which harmed or placed at risk of harm a vulnerable adult".
Noble Lords should note that the risk of harm does not have to be physical and certainly need not be intentional, let alone abusive. For example, as the Royal College of Nursing parliamentary briefing on the clause states,
"such misconduct could include situations such as a nurse accidentally giving the wrong drug or wrong dosage to a patient or failing to ensure that a frail older person has been fed or had their soiled sheets changed. These are some situations where the misconduct would be the result of an isolated incident, incompetence or genuine mistake".
It warns also,
"Such situations can arise as a result of management failings, such as poor procedures, or because of the huge pressures on nurses and other staff caused by staffing shortages. The RCN is concerned that individuals may find themselves scapegoated and referred to the list when the responsibility and accountability for failings in the case should actually be shared and addressed at a more systematic level".
Like me, the RCN is concerned also with malicious referrals. One speaker from the Government Benches last week—I believe that it was the noble Lord, Lord Warner—suggested that no one would do so because it would risk exposing the malice. However, as the Royal College notes,
"Malicious referrals are made to the United Kingdom Central Council every year, resulting in great stress and misery for nurses who are thus referred and often lose their careers".
It points out further—I hope that noble Lords will not mind my quoting, but it is an authoritative source— that,
"Bullying employers might also threaten to refer workers to the list as a means of keeping their staff under control"—
a point which I tried to make in previous debates. Particularly where a worker has stood up for vulnerable people, in residential care, for example, the employer might well threaten dismissal and/or referral if they do not shut up. The Royal College says that that is already occurring before the Bill provides the blacklist weapon—if I may call it that—to unscrupulous employers. What is more, outside the mainstream health institutions to which the RCN is mostly relevant, life is a good deal less internally well regulated.
"But", say the Government, "not to worry. We are going to produce extra statutory guidelines which will require employers to go through a proper internal procedure before they dismiss and so forth a worker for misconduct". That was a point of much solace to some noble Lords who were in two minds about the amendment.
However, that is an argument for doing away with employment tribunals altogether, because in most cases which come before them the worker will have

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been through disciplinary procedures comparable with those which the Government are no doubt contemplating for their guidelines. Virtually every organisation of any size these days has theoretically fair disciplinary procedures, often based on the ACAS Code of Disciplinary Practice.
At all events, upon dismissal, the employer must then refer the worker to the Secretary of State. Under Clause 71, all that the civil servant can then do is to consider the information submitted—and nothing else; to make no contact whatever with the worker concerned; and then to make up his own mind as to whether "it may be appropriate" for the worker to be provisionally listed.
One does not need to be a lawyer to realise that where one is considering only the self-justification of one side to a dispute—in this case, the ex-employer— and where the only criterion is whether it "may be appropriate" in due course for the worker to be permanently listed, it is difficult to imagine cases where provisional listing will not almost automatically follow.
I re-read in Hansard with near-surprise—nay, astonishment—the Minister's remarks last Tuesday, that the provisional listing procedure was a consideration of the case "on its merits". All I can say is, only the merits of one side. Yet at the moment that someone goes on the provisional list, his employment prospects—or, if he has another job, his actual employment—are shattered. The career and reputational effects are devastating; far more so than in many criminal prosecutions.
My amendment seeks to add but one requirement for provisional listing; namely, that the civil servant must be of the view,
"that, unless such a provisional listing is made, there is a risk that any person will suffer significant harm".
In the debate last week, I pointed out that in Clause 68 the Government are providing precisely that safeguard, and indeed more, in the provisional or emergency procedure to be followed where a child is to be removed front a registered childminder. The noble Lord, Lord Hunt of Kings Heath, failed to address that point, beyond saying that,
"It is not meaningful to imagine that the likelihood of harm can be assessed in those circumstances".— [Official Report, 28/3/2000; col. 775.]
and that,
"It could raise issues of interpretation".— [Official Report, 28/3/2000; col. 776.]
That is precisely what will be required of those who will deal with emergency procedures for childminders.
If protection of the public is the overriding consideration—many will believe that it is—one must contemplate just how matters will be left if the wording in Clause 71 is left as drafted. It is not fair, as was said on Second Reading, that the overriding need is protection for vulnerable people and that the considerations of fairness to workers with vulnerable people are secondary. That is not right. It does not
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strike a fair and proper balance. It is wholly contrary to the traditions of the balancing act which this House has undertaken since time immemorial.
If, for example, one was considering the basic freedoms and protections in criminal law according to the same test, one would receive a dusty answer. One may argue that that case is criminal and this is civil; but I put it to your Lordships that the boundary between civil and criminal is these days growing extremely blurred. As I have indicated, the consequences of a provisional and a permanent listing for an individual are more serious in many cases than would be a criminal conviction.
If the issues of the burden of proof in criminal matters; the right to trial by jury; and the right not to have one's previous convictions read before the case is heard were being considered in this House according to the measures and attitudes prevalent on the Government Front Bench in considering Clause 71, one would be in a rather dire position.
Your Lordships may recollect that on Second Reading I read the forceful opinion of Professor Jowell QC, the distinguished co-author, with the noble and learned Lord, Lord Woolf, the Master of the Rolls, of the standard text on the law in this area. He concluded by saying that,
"This Bill surely offends principles of English administrative law in respect of the Secretary of State's provisional decision to list in its failure to provide a fair hearing to those included in that list".
As I said, I can find nothing comparable with the provisional listing procedure anywhere in our legal system, nor have the Government been able to disabuse me. Doctors, lawyers, teachers and nurses all have protections that preserve the elusive balance in a way which Clause 71 pre-eminently fails to do. This procedure is out of balance with fairness. In the last resort it will harm the very groups which we seek to protect by this Bill, for over time it will deter, as in other areas of caring people are being deterred. It will deter some of the brightest and best from exposing themselves to a system which fails to afford them fair protection. I beg to move.
4 p.m.
Lord Warner: My Lords, I oppose this amendment. I admire the noble Lord's persistence on this matter although I take issue with his judgment as to whether a balance has been struck. As a former director of social services, I speak as someone who has had to adjudicate on claims of abuse by staff against children and vulnerable adults. In my own experience the current system is slanted strongly in favour of the alleged perpetrator rather than the victim. That is because of the problems of securing evidence.
The noble Lord has made much of the fact that these cases may be akin to criminal cases. That is simply not so: we are actually deciding these cases on a different standard of proof, which is the balance of probabilities. Even with that lower standard of proof, in these cases it is often extremely difficult to prove the case against the perpetrator, a member of staff.

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We have to understand that the purpose of the provisions in the Bill is to protect the civil liberties of vulnerable adults not to be abused as well as the civil liberties of staff. In my judgment the noble Lord's amendment seems to get the balance wrong, given that there is protection for staff already in the Bill. I believe that the noble Lord has been too dismissive of the checks to be put in place against unfair treatment of an employee who is to be provisionally listed, including the guidelines that the Government are preparing.
An employer is under a duty to refer a worker for inclusion in the protection of vulnerable adults' list only when he is considering it; or has decided to terminate a worker's employment or change their duties as a result of believing that they harmed, or placed at risk of harm, a vulnerable adult.
When the Minister receives the referral, he may list the person on a provisional basis. He then writes to the worker and asks for comments on the information that the employer has provided. He may go back to the employer to get his views on the worker's comments. At that stage, and only at that stage, is he in a position to judge whether the worker is guilty of misconduct or unsuitable to work with vulnerable adults. If the answer is "yes", the worker is confirmed on the list. There is still a further right of appeal to the independent tribunal. It seems to me to be unreasonable to expect the Secretary of State to go through that process before provisional listing.
In my view, the noble Lord's amendment would make it much more likely that that would be the effect because it raises another hurdle for the Minister to jump before provisional listing. Provisional listing should be permissible on the employer's written referral. That of itself is prima facie evidence of risk of harm and therefore justification for provisional listing.
It is worth bearing in mind that many staff in social care are suspended from duty while a full investigation takes place in order to stop vulnerable people being at risk of harm. That is taking place day in and day out in this country as we debate this issue.
The noble Lord has tried to raise the spectre of unreasonable employers using any excuse to get rid of staff before the full protection of employment law bites at 12 months. In my view, that overlooks the existing checks in the system. Employers are subject to registration and have to have proper complaints and disciplinary processes. Employees will invariably have had the opportunity to put their case within these processes. As the care of vulnerable adults is hardly a sector where people are flocking to work, the idea that employers are going to rush to get rid of staff in a cavalier way seems highly improbable. If they do, they will come to the attention of the registration authorities provided for in the Bill, which can hardly be in the interests of the particular employers.
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It is already difficult enough to root out abuse of vulnerable adults even with the improvements contained in this Bill. Many abusers are deceitful and difficult to expose. Erecting a further barrier to provisional listing, which is the effect of the amendment, will work in their favour. I hope that this amendment will be withdrawn or rejected.
Lord Rix: My Lords, I intervene very briefly, and conscious that staff can be vulnerable in terms of their careers to false accusations, as service users are vulnerable in terms of their personal welfare to abuse by a small minority of staff. It is important that people should not be labelled as a potential risk without good reason. However, I believe that we have got this broadly right, and that the day-to-day experience of service users argues very strongly against further tipping the balance against them. I choke a little on the term "significant harm", whether in Clause 72, as suggested here, or, as the noble Lord, Lord Phillips of Sudbury, reminds us, in Clause 68 as at present.
I envisage an interview with a potential interviewee, who responds to a question about the effect he or she might have on the lives of customers by saying that there would not be very much harm. The risk of even a little harm seems to me to be too great a risk. Therefore, much as I have the highest regard for the noble Lord, Lord Phillips of Sudbury, for his work for Mencap, I cannot support this amendment.
Baroness Pitkeathley: My Lords, since our last debate on this subject I have reflected most seriously on the arguments brought to bear last week. I have also taken soundings of many people who work in social care and those who focus on the clients of social care agencies. The results of these discussions have reinforced the views that I expressed last time: that we must indeed aim for balance in our systems, but if perfect balance is not possible—I believe that we would all acknowledge that it may not be—we must err on the side of the vulnerable person.
I understand the arguments made by the noble Lord, Lord Phillips. If he will permit me to say so, they are lawyer's arguments and very valid ones. But I believe that it is not without significance that those of us who have spoken strongly against his views, and in favour of the rights of the vulnerable person, are largely those who have actually worked in delivering social care. We have seen at first hand the abuse suffered by vulnerable people and, more importantly, the problems not only of bringing to book the perpetrators of abuse but of ensuring that they are prevented from abusing again. It is my very firm opinion that sufficient safeguards exist in the proposed arrangements to mitigate against miscarriages of justice and, more importantly, that they will ensure that, as we have sadly failed hitherto to ensure that abusers do not abuse in one place, this time we shall be able to ensure that once found out or suspected, they will be unable to abuse in another institution or area (as happened in the past because the safeguards to prevent that have not been sufficiently strong).

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We owe it to vulnerable people to ensure that follow-up systems protect them and that this time we put in place systems which they can trust, as opposed to those which have failed them so frequently in the past.
Baroness Masham of Ilton: My Lords, I feel very strongly that there should be better protection for both vulnerable adults and staff. That could be achieved by more senior staff working at the level of patients and vulnerable people. Senior staff are so often tucked away in offices involved in administration or attending meetings. People are much more important than paper. If there were better management working among patients and staff, there would be less risk of problems arising. Can the Minister say whether there is any hope of getting better standards at ground level? Sisters should never have been removed from ward level.
Lord Jenkin of Roding: My Lords, as one who took part in both Committee and Report stage debates on this issue, perhaps I may make my own position clear. I believe that it will be within the recollection of the House that when the noble Lord, Lord Phillips of Sudbury, moved his amendment in Committee I was more than overwhelmed. He made an extremely strong case. However, by the time he moved a further amendment on Report, I was able to listen to many of the arguments that we have heard again this afternoon from the noble Lord, Lord Warner, the noble Baroness, Lady Pitkeathley, and the noble Lord, Lord Rix. I must confess that I think that I have moved on this matter. I had been leaning quite heavily in favour of shifting the balance back a little in order to protect employees against the threat of bullying employers, which is the serious threat that must be considered here. But as I have heard further arguments, in particular from those who have had much greater direct experience of dealing with vulnerable adults and children, I now believe that it is better to leave the balance where it is.
I say this with some sadness to the noble Lord, Lord Phillips, because he has made his case with great eloquence, not least again today at Third Reading. Nevertheless, I believe that he has lost the argument. If he decides to test the opinion of the House, I am afraid that I shall not be able to support him.
Earl Howe: My Lords, I added my name to an identical amendment in the name of the noble Lord, Lord Phillips, on Report. I have not done so today, not because I do not think that the noble Lord has a good point to make—I think he has—but because, in the light of the full reply then given by the Minister and contributions from other noble Lords, I am persuaded that we should tread carefully here.
The issue that has been raised by the noble Lord is not whether there should or should not be a system of blacklisting. I believe that we are all agreed that such a system should be in place. The issue here is whether some people's names should reach the provisional list and others should not. The point of the provisional list
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is clear. It is to ensure that workers who have caused harm to vulnerable adults, or have put them at the risk of harm, and have been dismissed for their actions should have an instant barrier placed in front of them while their cases are being considered so as to prevent them from moving on to do similar harm elsewhere.
To allow some people to pass through that barrier without hindrance is to take a risk. The amendment invites the Secretary of State to make a judgment. However, I believe that I must ask the noble Lord, Lord Phillips—in a friendly and constructive spirit—whether he believes that the Secretary of State, at such an early stage in the process, would be in a position to make a judgment of this kind fairly. The justice or injustice of a referral will emerge only later in the process, when the Secretary of State comes to consider all the supporting observations and information.
Furthermore, I wonder whether the noble Lord's amendment will address the other concern that he raised, perfectly properly; namely, that the referral may be malicious. Malicious referrals are of course a real issue, but I question whether the amendment as drafted would provide a safeguard to anyone whose name has been maliciously referred.
The House will understand that I find myself torn here. The choice for noble Lords is between erring on the side of caution in one of two directions: either, as the Government recommend, guarding against the possibility of anyone moving on to take up new employment where they may harm a vulnerable adult, even though this risks trapping the innocent; or by protecting the civil liberties of the accused, even though this risks temporarily allowing through the net a guilty person. The balance is very fine. I await with interest what the Minister has to say.
4.15 p.m.
Lord MacKenzie of Culkein: My Lords, I, too, rise to speak in opposition to the amendment. The noble Lord, Lord Phillips of Sudbury, undoubtedly has an arguable point here. It is a point with which I am familiar. On many occasions when representing staff employed in the National Health Service and in local government social services I have had to make a very similar point. I have represented staff appearing before some of the more notorious committees of inquiry set up under Section 84 of the National Health Service Act 1977. Given that background, why do my views diverge from those held by the noble Lord, Lord Phillips?
I have not spent all of my working life as a trade union official. I was a practising nurse; indeed, I am still a registered general nurse. In that capacity, I have seen bad practice and I find it difficult to justify such bad practice under any circumstances, however many excuses or rationalisations are brought forward. When representing staff as a trade union representative, it was my job to advocate such excuses and rationalisations and to seek to mitigate and deflect any blame. As I have said before in relation to the Bill, I justified those actions to myself by reasoning that the other side had failed to make its case and thus justice

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was done. However, I have also said that I have on occasion found that difficult to live with if, say, I got someone off whom I would not, under any circumstances, want working on a ward or in a department for which I had responsibility as a nurse.
I am still a trade union employee—for another 26 days or so. For that reason, I could easily declare an interest that would enable me to support this amendment, as does the Royal College of Nursing. The noble Lord, Lord Phillips, has mentioned that point. However, in considering the matter this afternoon, I must bring to bear both aspects of my working life. In the light of that, I shall speak in support of my nursing experience, which involved the work of protecting vulnerable people.
If the noble Lord's amendment were carried, it would put in place an additional hurdle in trying to reach an adequate definition of the word "significant". That would impose yet another subjective judgment and would place vulnerable people at a degree of additional risk. I accept that the matter is difficult, but in my judgment, my noble friend the Minister has the balance just right.
Baroness Greengross: My Lords, I have not yet spoken to any amendments to this Bill because I was not a Member of the House when it received its Second Reading and it was a little too early for me to contribute to the Committee stage.
I agree that this is a difficult balance to strike and that the noble Lord, Lord Phillips, has put forward a persuasive argument. However, I have spent many years looking at the issue of abuse of vulnerable adults, in particular as regards a group that is especially vulnerable to neglect and abuse of all kinds; namely, the growing sector of elderly people who are slowly descending into mental incapacity. Very often they fall between all the different aspects of our welfare services because they are not sufficiently mentally incompetent to be covered by the protections offered in mental health legislation. Such people are frequently abused in terms of financial loss and neglect—sometimes unintentionally—but always with devastating results.
For that reason, in the end I have had to make a decision in support of those vulnerable adults. Nevertheless, because the noble Lord, Lord Phillips, has made such a good case here, I ask the Minister if, in preparing the guidelines, he can ensure that the process of establishing the facts is carried out with the utmost speed in order both to protect vulnerable people and to close the remaining loopholes that have been mentioned by the noble Lord, Lord Phillips. I regret that I cannot support the noble Lord's amendment.
Lord Clement-Jones: My Lords, unlike many other noble Lords who have spoken today, I believe that my noble friend Lord Phillips has made a very good case here. If we do not accept that case, we shall come to regret it in the future.
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I do not believe that anyone sitting on these Benches is any less keen to root out the abuse of vulnerable adults. That is axiomatic in the way we have approached this legislation and is reflected by the seriousness with which we have addressed this particular issue. Of course appropriate methods must be found to tackle and eradicate the abuse of vulnerable people. However, I believe that the Bill provides so much discretion that, under certain circumstances, a malicious employer could cause substantial harm to an employee.
Let me explain. This is a complicated clause. It is a lawyer's paradise to some degree and it is no surprise, therefore, that it has taken a lawyer to look through it and understand what the problems associated with it are. Perhaps I can draw attention to the subsection which deals specifically with the conditions.
On Report, the Minister and other noble Lords, such as the noble Lord, Lord Warner, talked about the extra statutory guidelines which will apply to care homes and their employment practices. Certainly if the homes follow those guidelines there will be a degree of fairness surrounding the dismissal or otherwise of an employee. But the employer is entitled to refer in circumstances where he only "considered" dismissing the employee. That is extremely loose language. It means that the employer does not have to go through the full procedure of the extra statutory guidelines; he can simply consider dismissing the employee. That seems to drive a coach and horses through the argument.
We know that the outcome of listing is effectively to deprive an employee of his or her livelihood, so we have to take particular care, as my noble friend Lord Phillips said, as to how those conditions operate. Once those conditions have operated and the employer has referred an employee, then the Secretary of State,
"If it appears from the information submitted with a reference under subsection (1) that it may be appropriate for the worker to be included in the list … shall".
So we have two situations. First, the employer merely "considered" dismissing the employee; he did not dismiss, just "considered" dismissing. Secondly, all that the Secretary of State has to consider is,
"that it may be appropriate".
In those circumstances, there is a considerable gap in the Bill.
Our belief is therefore well founded that this clause could well rebound in future years. I do not believe that the "significant risk" test is a high hurdle when we consider the nature of the clause as currently drafted. If the words,
"or would have considered dismissing him",
were not in the Bill, there may well have been a case for not introducing those hurdles. But that particular hurdle does not seem to put the balance too high.
Lord Jenkin of Roding: My Lords, perhaps the noble Lord will give way. We had this same argument at Report stage and at that time I, too, was concerned about the words,
"or would have considered dismissing him".

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But one must read to the end of the paragraph which adds the proviso, "on such grounds" if he had not resigned or retired. That is bound to take account of the fact that there has been a discovery of abuse and mishandling and, before anyone could do anything about it, the worker left—resigned or retired. What else can we put in the Bill if one of the conditions has to be that the employer could say, "The matter is sufficiently serious so that if he had stayed I would have sacked him"? I follow the noble Lord's argument, but I still do not see what else we could put in.
Lord Clement-Jones: My Lords, that is precisely why we need the hurdle. If we could excise the words, "or would have considered", then perhaps one would not need the hurdle. But because of those words, one needs to accept the fact that the full procedures set out in the extra statutory guidelines were not followed. That is a considerable hole and diminishes the safeguards available for the worker in question.
We have had a considerable debate today. There is clearly an issue of principle involved here and I do not believe that we will resolve it easily. Suffice to say that we do not believe that the balance is correct. The noble Lord, Lord Witrner, may well be correct that the current system has the balance completely wrong. But we believe that the system proposed is tilted too far the other way and that the safeguard we propose should be included.
Lord Brightman: My Lords, having listened to the debate, it occurs to me that it may be worth considering one suggestion, which did not occur to me earlier. At the moment the Secretary of State has absolutely no discretion. Once subsection (4) is triggered,
"the Secretary of St ate shall— (a) determine the reference",
and shall,
"(b) pending that determination, provisionally include the worker in the list".
The second "shall" is not included in the provision, but it follows inevitably from the wording of the paragraph.
It may be wise for the Minister to give the Secretary of State a scintilla of discretion. All we would need is to add the word "may", so that, if the subsection is triggered, it would read,
"the Secretary of State shall— (a) determine the reference in accordance with subsections (5) to (7); and (b) pending that determination, [may] provisionally include the worker in the list".
Why should the Secretary of State be bound to include the worker in the list? Why should he not have a discretion when subsection (4) is triggered? It could not do any harm and may be worth considering as a possible amendment in the other place.
4.30 p.m.
Lord Hunt of Kings Heath: My Lords, this has been a sober and informed debate. I am grateful to all noble Lords who have taken part. It is a debate which essentially started at Second Reading and has followed through all the stages in your Lordships' House.
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Like other noble Lords, I want to pay tribute to the noble Lord, Lord Phillips, for the care and passion with which he brought these matters to our attention. But I remain convinced that the difficult balance which has had to be set between the rights of vulnerable people and the rights of the employer is right in the provisions of the Bill as they now stand. I believe also that the noble Lord, Lord Phillips, in bringing these arguments to us, perhaps ignored some of the other elements of the Bill which will raise standards in the care homes we are discussing. They will embrace the way in which the homes manage, support and train members of staff. That is a factor which needs to be taken into account when we come to the issue of potential malicious referrals.
It is worth returning to the work of the Home Office interdepartmental group on preventing unsuitable people from working with children and abuse of trust which met in 1998–99. That group recommended that certain people, including criminals convicted of specific offences, should be prevented from working with children. But the group also considered the protection of vulnerable adults and recommended that there should be a workforce ban for people who abused vulnerable adults. That is what the provisions of Part VI implement.
Much of the Bill in relation to the protection of vulnerable adults follows the same provisions contained in the Protection of Children Bill enacted through both Houses of Parliament last Session. It was during our debates on that Bill that the noble Lord, Lord Rix, raised in particular the need to ensure that the provisions of the Protection of Children Bill were extended to vulnerable adults. In essence, that is what the provisions in the Bill before the House propose.
The protection of vulnerable adults scheme requires the Secretary of State to keep a list of persons who are unsuitable to work with vulnerable adults and provides that those listed are prohibited from taking employment in a care position looking after vulnerable adults. Overall the system is similar to that provided for in the Protection of Children Act.
An individual has to be referred to the Secretary of State for possible inclusion in the list by an employer who has dismissed him on grounds of misconduct which harmed a vulnerable adult or placed him at risk of harm.
As the noble Lord, Lord Clement-Jones, has suggested—although I believe he is unhappy with the provision—to prevent avoidance of the scheme special provision is made to catch those who have resigned so as to avoid such disciplinary action or who have been suspended, transferred or provisionally transferred.
To the noble and learned Lord, Lord Brightman, who suggested a rewording of the word "shall" in the clause, the discretion lies in whether it appears to be appropriate. On referral, the Secretary of State will "provisionally list" the individual if it appears,
"that it may be appropriate for the worker to be included in the list".
That person will then be subject to the prohibition on working with vulnerable adults.

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The Secretary of State goes on to disclose the referral papers to the person and to invite observations from him and, if appropriate, further observations from him on any observations made by the referring employer before reaching an opinion as to whether the employer reasonably believed the person was guilty of the misconduct and whether the person is unsuitable to work with vulnerable adults. If both those tests are passed, the person's listing is confirmed. That is the point at which the person has the right to take his case to the independent tribunal.
The tribunal will remove the person from the list unless it is satisfied that he is guilty of the misconduct and that he is unsuitable to work with vulnerable adults. Therefore, the tribunal provides a full hearing of the underlying merits of the case, with a burden of proof that is favourable to the applicant. The applicant will have a right to make oral representations to the tribunal.
I want to emphasise the responsibilities that employers will have in order for the scheme to operate effectively. First, an employer proposing to offer employment in a care position must, before making the offer, check whether the person is on the list. If he or she is on the list, that person cannot be employed in a care position, as defined in Clause 70. Secondly, the employer has a duty to refer workers to the Secretary of State for inclusion on the list under the circumstances I mentioned earlier.
In our debates in your Lordships' House on this subject, the key matter has been the balance to be struck between protecting vulnerable adults and securing the rights of workers accused of harming them. I have given the matter a great deal of consideration, but at the end of the day I am taken back to the basic principle of these provisions which is to offer protection to those who cannot protect themselves. We want to identify workers who have harmed these people and ban them from the workforce so that they cannot be in a position to inflict such harm again.
We have based these provisions on referrals made when a worker's behaviour towards a vulnerable adult has been so bad as to result in their being moved from a care position. We are not dealing with minor incidents or infringements. We are looking at people in need of care and protection who have been harmed or placed at risk of harm by workers in positions of trust.
Whatever provisions are put in place we must ensure that they are fair and that workers accused of harming vulnerable adults are treated justly and fairly. We have safeguards in place to do just that. As I said, the misconduct must have resulted in the worker being removed from a care position, which in many cases will mean dismissal. Workers in employment for more than a year will have access to an employment tribunal if they believe that they have been dismissed unfairly.
All services in this scheme will be required to have proper disciplinary procedures in place. I believe that that will act against malicious referrals and poor
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procedures on the part of employers. Before permanent listing, the worker will have the opportunity to comment on the employer's referral.
Finally, there will be a right of appeal against the decision to list an individual. At that point the worker who is dissatisfied with the listing decision can elect to have his case heard by the independent tribunal. Of course, there is a balance to be struck. We believe that in constructing this scheme we have provided both for the rights of the worker involved and for the safety of the vulnerable adults to whom we owe a duty of protection.
I have carefully considered the specific amendment moved by the noble Lord, Lord Phillips. On Report, when we discussed the matter of restrictive provisional listing, I expressed concern that such a move would seriously weaken the scheme we have devised for protecting vulnerable adults. Of course, I am aware of the effect that provisional listing can have on an individual and his or her future. Provisional listing is not a matter that can ever be taken lightly.
I want to assure noble Lords that provisional listing will not happen in every case that is referred to the Secretary of State; it will not be a matter of an employer making a reference and the Secretary of State reacting by immediately listing an individual provisionally. Each case will be considered on its merits and the Secretary of State will have to be satisfied that provisional listing is right in each case. He will have to make a decision that the employer has made a proper reference and that provisional listing is warranted. If necessary, he can go back to the employer and seek additional information if the reference is unclear or incomplete.
We are concerned to ensure that in a referral the Secretary of State is able to take a broad view of everyone concerned when he considers whether it is appropriate to include a worker in the list provisionally. I believe that including such provisions on the face of the Bill would detract from the Secretary of State's ability to act in the best interests of all concerned.
On the specific issue of a "significant" test, I do not believe that there would be benefit from trying to limit provisional listing to only those cases where there was a risk of "significant" harm. Apart from introducing a loophole which might leave vulnerable adults ill-protected, the qualifier "significant" adds nothing. For an act of misconduct to result in a referral to the list, it must have been an act that resulted in the person being removed from a care position. Lesser acts of misconduct would not result in provisional listing.
Lord Phillips of Sudbury: My Lords, I am most grateful to the Minister for giving way. Can he explain why, in Clause 68, the test for child carers is "significant harm" when there is an emergency withdrawal of a child from a child carer. If it is good for the goose, why is it not good for the gander?
Lord Hunt of Kings Heath: My Lords, the noble Lord was not convinced by my argument on Report,

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so perhaps I can try again. Essentially we are not comparing like with like. In relation to the situation of a childminder, an Ofsted inspector undertakes an emergency deregistration to remove that childminder from children. Registered childminders do not have employers to dismiss them when they act inappropriately with children. That is why we seek to give that power to Ofsted inspectors. That deregistration is one stage back from a reference to the protection of vulnerable adults. It is the equivalent of a worker in a care position being dismissed by his employer for harming a vulnerable adult. I do not believe that it is fair to make a direct comparison.
Perhaps I may respond to some other points made by the noble Lord. I believe he suggested that the RCN had put forward the case of a professional worker who had been referred in relation to a specific incident where he had not received any training, for instance, in how to administer medicines or in the proper restraint of an individual. In my view, if a worker has not received appropriate training in such circumstances, or if there is no clear guidance as to how a staff member should handle a specific situation, it would not necessarily follow that that person would be listed.
The noble Lord, Lord Phillips, spoke about people who would be debarred from future employment in the industry. I accept the seriousness with which provisional listing must be viewed, but it is wrong to say that these people will be completely debarred from future employment in the industry. Anyone who is listed will be banned from working with vulnerable adults in the prescribed services, but he or she will be able to apply for jobs in the wider employment field. None the less, I do not disregard the impact that provisional listing will have on individuals, but I believe that this measure is a necessary part of the balance which the Bill seeks to achieve.
The noble Lord also questioned whether the impact of the provisions would deter people from working in this field. At Report stage he referred to voluntary workers, in particular the scout movement. It is my understanding that the scout movement welcomed the Protection of Children Act. The whole purpose of the Bill, not simply these clauses, is to raise standards and public confidence in the whole of the care industry. I believe that in the long term, if not the medium term, these measures, together with the establishment of a general social care council to improve the regulation of care workers and, in turn, public confidence in their work, will enhance our ability to attract into this field good quality people. My goodness, we need to do so, as the noble Baroness, Lady Masham, suggested.
We should remind ourselves of the manipulative and devious nature of the abusers that this scheme is designed to catch. Time and time again serious abuse has been uncovered and recommendations have been made. In his report People Like Us, Sir William Utting said:
"It is dismaying to find that employers are still allowing staff being investigated or disciplined to resign, thereby avoiding the consequences of their behaviour. Employers who take this easy way out are making it easier for … paedophiles in particular to continue their careers".
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I believe that those remarks can apply as much to people who abuse vulnerable adults as to those who abuse children.
We have had a very good debate, and all noble Lords who have spoken have contributed very important points. At the end of the day this is a difficult balance to strike, but I am convinced that we have got it right.
4.45 p.m.
Lord Phillips of Sudbury: My Lords, I am grateful to the Minister for his usual careful response to the debate. I am also grateful to all those who have contributed to the debate, despite the fact that most of them spoke against the amendment. It is particularly unusual for a mere solicitor to find three of his most esteemed clients, in the form of the noble Baronesses, Lady Pitkeathley and Lady Greengross, and the noble Lord, Lord Rix, ranged against him.
In response to one or two noble Lords who said that my arguments were those of a lawyer, occasionally such points are not bad ones. Sometimes lawyers see things that others do not see, and the commitment to a cause can undermine one's objectivity. That is still my view having heard the extremely careful, thoughtful and deeply-held views of noble Lords.
Having heard the noble Lord, Lord Jenkin of Roding, perhaps I should rename myself "Lord Phillips of Diminishing Returns". My small army has become more and more diluted as debates have proceeded. Even the noble Earl, Lord Howe, who put his name to the amendment at the previous stage, is not quite so sure about it this time. However, I believe that he still supports me at this juncture.
Many points have been raised in the debate. I do not propose to reply to all of them now, although they are worthy of response. I very much hope that, in taking this matter forward and considering their guidelines, the Government will consult widely, and with the greatest care, on the civil libertarian aspects that I have sought inadequately to place before noble Lords.
In seeking to prevent the appalling abuse of those who are totally helpless in the face of misconduct—one has the recent examples of the Waterhouse report on paedophilia in North Wales and the case of Dr Shipman and his extraordinary depredations—it is easy to forget that in the midst of it there are hurt, wounded and deranged people, including young people, who month by month can, and do, make allegations against wholly innocent care workers. Those allegations inflict terrible torment on those unjustly accused.
It was in an attempt to bring the position into slightly better balance that I tabled the amendment. That erected another hurdle, and that was the whole point of it. We believe that at the moment the series of tests and hurdles to be overcome before someone is provisionally, and then permanently, listed is too easy. We on these Benches are unimpressed by the fact t hat there is a right of appeal to a tribunal. That will occur six to nine months down the road, and in the interim the person will be deprived of his career. It is all very

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well for the Minister to say that such an individual, who may be a highly trained physiotherapist, can do a back office job that does not get anywhere near patients. The reality is that anyone who gets onto this list will be devastated: his career will be blighted and his reputation held up to public ridicule and contempt.
None the less, all has now been said. Although I want to divide the House, in prudence I should not do so. I hope that when this matter leaves this House Members of another place will have a further go at it. It is still not too late for the Government to review where they are at.
Finally, I ask the Minister to reconsider the position of childminders and the case with which we are now dealing. The Minister said that the two cases were apples and pears. That is not correct. In circumstances where one goes to a magistrates' court, not a civil servant behind closed doors, to ask for the provisional removal of a person engaged in childminding, the test is a higher one; namely, whether the child would be "likely" to suffer "significant harm" if the provisional order was not made. What is more, in the case of a childminder, the person who makes the allegation is not the former employer, as in this case, who in some circumstances may have a very big axe to grind, but Ofsted which is an independent, objective and professional organisation. On all counts, I believe that the Government have applied completely different standards to very comparable circumstances. The Government have got it right in Clause 68 but wrong in Clause 71. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 87 [Boarding schools: national minimum standards]:
Earl Howemoved Amendment No. 8:
Page 57. line 28, at end insert (", and
( ) the quality of school nurses").
The noble Earl said: My Lords, I have tabled this very simple amendment because of an apparent gap, or at the very least an ambiguity, in this part of the Bill. In the Bill one has measures to regulate standards of care, including clinical and nursing care, in a variety of settings. In Part VII one has provisions to regulate the welfare of children in boarding schools. What we do not appear to have in that part are measures to square the circle; in other words, provisions to ensure the quality of nursing care for children in boarding schools.
The House is already aware that the Bill amends the Children Act 1989 so that independent boarding schools fall within the remit of the national care standards commission and the Welsh Assembly. Clause 87 makes provision for national minimum standards in relation to the welfare of children accommodated in schools and colleges. At present, most independent schools employ people who go by the name of school nurses but who are neither registered nor qualified as nurses. Yet those are the very people who have what one might term front-line responsibility for the health and welfare of the children under their charge.
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If we are serious about raising standards of care across the board, we should be clear about what is and is not appropriate in boarding schools. It seems to me that if, as a proprietor of a boarding school, you employ someone called a "school nurse", that person should be a registered nurse and you should be obliged to carry out checks on him or her.
The minimum standards should also specify that the school nurse has access to a named doctor at all times and that there is appropriate provision for record-keeping. I am told that in one case recently, a nurse went from the NHS to take up a job at an independent school and found that there were no medical records on the children at all.
Consultation on minimum standards in boarding schools is now under way. Will the Minister give an assurance that he will involve the Royal College of Nursing in that process? I hope that he can reassure me also that when defining the minimum standards of welfare, it will not simply be a matter of the number of wash basins in dormitories which will be uppermost in the minds of inspectors but also, principally, the actual health and wellbeing of children. I beg to move.
Baroness Masham of Ilton: My Lords, this amendment illustrates how easy it is for important matters to be forgotten or left out as people may feel that the responsibility lies elsewhere. This is a matter for joined-up government or people working in co-operation for the well-being of children.
Children go to boarding schools for many different reasons. They may have a special need due to disability, or a special skill such as dancing or music. Or their parents may work abroad or just want them to be in a boarding situation. Whatever the reason, children are away from their parents and guardians and their home environment. Children in close conditions may be at risk from infections and viruses. They can suffer eating disorders; be at risk from drug abuse or bullying; or be very unhappy.
Most parents would assume that there would be a trained school nurse on the staff to be responsible for the health needs of their children and a dedicated school doctor on whom the school could call. But the Royal College of Nursing is concerned that it is possible for independent schools to employ so-called school nurses who are neither registered nor qualified as nurses but are working in schools with responsibility for the health and welfare of children. As the noble Earl, Lord Howe, said, a nurse who went from the National Health Service to an independent school found that there were no records at all on the children.
This amendment would provide national minimum standards for school nurses who are in charge of children's health. That should not be confused with school matrons who are in charge of housekeeping matters and clothes as well as children's well-being. I hope that the Government will accept this amendment, which is supported by the Royal College of Nursing. I certainly support it.
Lord Hunt of Kings Heath: My Lords, we come to an issue we have not debated previously. I thank the noble Earl, Lord Howe, for providing me with an opportunity to clarify some of the points he raised.
First, I assure noble Lords that Part V of the Children Act and regulations published in 1991 set out the requirements on independent schools around the provision of health services to children accommodated in a school or college.
Although the manner in which healthcare is provided will vary according to local circumstances, the guidance sets out an expectation that all children should normally be registered with a general medical practitioner. The guidance also states that schools should, if possible, have suitably qualified staff, such as nurses, to deal with health matters.
The provision of an adequate school health service for children living in a school or college covers requirements relating to access to the full range of all primary healthcare services, including a GP, dentist and ophthalmologist.
In his review of safeguards for children living away from home, People Like Us, Sir William Utting considered healthcare in residential schools. His report states that the review received very few observations on the adequacy or otherwise of healthcare in schools or whether there were particular problems for children living away from home.
But the Royal College of Nursing did write expressing concern that independent and boarding schools did not provide the same healthcare programmes as state schools. I say to the noble Earl, Lord Howe, that I would very much welcome any input which the RCN can give to the deliberations on that important is sue. In considering that comment, Sir William Utting's review consulted inspection reports on independent boarding schools showing that arrangements usually cover arrangements for pupils' access to GPs, storage of medicines and related matters. Some refer to discussions between the doctor and the school staff about general healthcare issues.
As noble Lords will know, the Children Act 1989 applied to independent schools only. That was an unacceptable gap, and through this Bill we shall produce national minimum standards for all boarding schools, including state schools and FE colleges.
I accept very much the sentiment of the noble Earl's amendment but l do not believe that what he proposes is needed. The current power in Clause 87 allows us to draw up national minimum standards for boarding schools. I assure the noble Earl that in developing those minimum standards for safeguarding and promoting the welfare of children, we intend to include as a minimum requirement that any person employed as a school nurse should be registered with the UKCC and should have appropriate qualifications or experience for that role.
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On that basis, I hope that I have reassured the noble Earl that we consider this matter to be important, and I ask him to withdraw the amendment.
Earl Howe: My Lords, I am grateful for the Minister's reassurance and for his very full reply. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
In the Title:
Lord Hunt of Kings Heathmoved Amendment No. 9:
Line 4, after ("centres,") insert ("independent medical agencies,").
The noble Lord said: My Lords, on Report I introduced an amendment which your Lordships welcomed which requires the national care standards commission to regulate services provided by doctors to private patients in the patient's own home. As a consequence of that change, we need to add "independent medical agencies" to the Long Title of the Bill. I beg to move.
Baroness Masham of Ilton: My Lords, should we not add the words "nursing agencies" after the acceptance of the amendment today?
Lord Hunt of Kings Heath: My Lords, I am not sure that that is necessary because I believe that nursing agencies are covered. We must consider that, as we shall the amendment which will need to be moved in the other place because of a slight technical deficiency in the noble Earl's wording. We shall certainly look at that.
On Question, amendment agreed to.
An amendment (privilege) made.
Lord Hunt of Kings Heath: My Lords, I beg to move that the Bill do now pass.
Moved, That the Bill do now pass.—(Lord Hunt of Kings Heath.)
On Question, Bill passed, and sent to the Commons.

Housing Green Paper
4.59 p.m.
Lord Whitty: My Lords, with the leave of the House, I shall now repeat a Statement being made on housing in another place by my right honourable friend the Deputy Prime Minister. The documents referred to in the Statement as being available in the Vote Office are available in the Printed Paper Office of this House. The Statement is as follows:
"I am very pleased to announce to the House that, today, we are publishing a Housing Green Paper, Quality and Choice: A Decent Home for All. This is the first comprehensive review of housing for 23 years. Housing is a basic requirement for everyone. Every member of this House will know from his postbag just how much housing matters.

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"Decent housing gives people a stronger sense of security and identity. It strengthens communities, and provides a better setting in which to raise families. It improves health, educational achievement and employment opportunities. It provides a long-term asset that can be passed on to future generations. Despite the fact that the majority of people are satisfied with their housing, there are still too many problems. The last government's neglect made those problems worse.
"I inherited the worst repossessions crisis ever, with over 1 million homes repossessed or in negative equity, and a £19 billion backlog of repair and modernisation work in council housing. Despite Britain's mild winters, we have one of the worst records of winter deaths in Europe; whole communities have been abandoned in ghettos of deprivation; and homelessness and rough-sleeping doubled. And there is nothing in the Opposition's latest policies that suggests that they have learned lessons. Their proposals have little to do with solving problems and nothing to do with common sense.
"We have made an early start to put things right. We have released 5 billion pounds of capital receipts to renovate 2 million homes. We are implementing the Egan report on raising standards in construction, and are tackling the problem of cowboy builders. Our economic policies have delivered stability, so more people can afford their own home. We have announced measures to make it easier to buy and sell your home and our initiatives have reduced the number of rough sleepers by 10 per cent. These are just a few of the things we have done.
"From this week we are giving tenants a greater say in how their homes are managed. This week the Best Value regime starts to ensure better services to tenants. A new Housing Inspectorate will ensure high standards.
"This Green Paper on housing is a key part of our wider ambition to support sustainable communities. The Green Paper shows how our existing initiatives fit into an overall strategy. It also sets out a range of new proposals. Over the coming weeks and months I shall be launching the national strategy for neighbourhood renewal, the urban White Paper and the rural White Paper. The housing Green Paper, together with these documents, is a key part of our strategy to build sustainable communities in this country.
"The Green Paper is a consultation document. We are seeking responses by the end of July. But we would also welcome earlier reactions to inform decisions in the next three-year spending review. We shall be looking to press ahead with our housing agenda in the autumn, although clearly some of our proposals will require legislation.
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"This Green Paper is about quality and choice. We want to raise the quality of homes everywhere, whether they are owned by individuals or provided by landlords. And we want to extend choice: more choice for tenants, and more choice for those wanting to buy their own home.
"I will start with the greenest part of the Green Paper, that dealing with housing benefit and rents.
"Everyone recognises that housing benefit is in need of reform. It has helped distort the structure of rents and trap people in unemployment. It is difficult to understand and complex to administer. Most people who get housing benefit are of working age, although 41 per cent are over 60. We are already helping those moving into work by arranging to pay benefit automatically for the first four weeks in employment. But we want a more efficient service for all those who receive benefit. In the short term we propose to introduce improvements such as computerising mail between different benefits offices—saving 20 million pieces of paper in the post and speeding up the process. And we are tackling fraud and error. The Green Paper proposes further options such as a single national fraud hotline service.
"In the longer term we want to examine the case for reforming housing benefit to give tenants a greater choice over where they live. But this will require reform of rents. There is a consensus that council and housing association rents are in a mess. We want to build a new consensus on the way forward.
"The Green Paper offers a range of options for restructuring rents. We believe the key principles should be comparable rents for comparable properties and rents that take account of the size and quality of the homes on offer. But I can give a clear commitment that, whatever changes we introduce, we shall be maintaining rents in the social sector at affordable, below market levels. Perhaps I may also make it absolutely clear that pensioners on housing benefit will not be affected by any proposals for the reform of housing benefit.
"Home ownership has increased dramatically in the past few decades, due in part to the right to buy under which 1.3 million people have bought their own home. I have already referred to our initiative to make the home buying and selling process easier. We are also taking action to help first-time buyers.
"We are announcing a new starter home initiative to help key workers, such as nurses and teachers, and first-time buyers on modest incomes. The initiative will help them to buy their own homes in areas where housing is costly, in town or country. We will invite proposals from housing associations and others. These could involve interest free loans, development grants or other innovative approaches.
"We are also giving new help to unemployed homeowners moving back into work. We are helping them pay their mortgage interest for the first four weeks after they start a new job. Some

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homeowners, especially the elderly, are unable to maintain and modernise their properties. We are proposing a new range of options to help more people make essential repairs.
"The private rented sector provides homes for over 2 million households. Most private landlords are professional and responsible, but the minority of bad landlords give the whole sector a bad name. Our proposals include helping them to improve their expertise and standards. But we intend to make sure that unscrupulous landlords who neglect their responsibilities do not profit from housing benefit. We also intend to give local authorities a selective power to license private landlords where bad landlords and bad tenants—sometimes in collusion—are destabilising the local community.
"Social housing has been at the foundation of millions of people's lives for decades. The last government viewed council housing as little more than an embarrassment. Their neglect of investment in social housing created misery for millions of people and deprivation for whole communities. In the Tory vision there were two nations: on the one hand, home-owners, and, on the other, those who were left behind in areas of deprivation.
"We must ask ourselves the question why 25 per cent of crime is concentrated in 10 per cent of communities. This Government believe that we should have a greater mix of social housing and owner occupied housing. People should have a real choice between buying a home and renting without a sense of stigma or snobbery.
"In this Green Paper, we are proposing to improve the quality of social housing, housing management and lettings. Too often in the past social landlords have offered people a home on a take-it-or-leave-it basis. This has failed; and often concentrates the poorest people in the poorest properties.
"We must design a lettings system for the 21st century if we are to support sustainable communities. We propose giving new applicants and existing tenants more say in choosing where they live. In the Green Paper we propose pilot schemes across the country to test new approaches that put the tenant first.
"The growth of homelessness over the past two decades is completely unacceptable. The last government took away rights from homeless people and made it harder for local councils to help them. In our election manifesto we promised to improve the safety net for those who are homeless through no fault of their own.
"Our proposals will ensure that homeless people are given the support they need while they seek more permanent housing, along with others in housing need on the waiting list. In addition, we propose to extend the safety net to a wider group of homeless people—such as young people aged 16 and 17 and those who are vulnerable because they are leaving care and other institutions. These are the people
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most at risk of ending up on the streets, homeless and helpless. Our commitment is to end the scourge of people sleeping rough.
"We will also ensure local authorities work with other agencies to prevent people from becoming homeless in the future. This House should recognise the crucial role played by local authorities in the past. Over the past 100 years, councils have met the needs of millions of people who otherwise would have been left in slums. The private sector would not have met this need. Local authorities tackled the slums and the squalor, and rebuilt our communities. Local authorities are still well placed to play a dynamic role. In our Green Paper we are proposing a stronger, more forward-looking and strategic role for local authorities, identifying and addressing housing needs across all housing in their area, public and private.
"The past 20 years have seen massive disinvestment in council housing. In our Green Paper we set out a range of approaches to investment. We aim for a step change to ensure that all social housing is of a decent standard within 10 years—a decade to overcome the mountainous £19 billion backlog of repairs and modernisation left by the last government.
"Stock transfer began in 1988. Since then more than 400,000 homes have been transferred to registered social landlords, mainly housing associations. Stock transfer will continue to be the preferred option for many authorities and their tenants. We shall support the transfer of up to 200,000 homes each year from local authorities to registered social landlords. This is a matter of choice. This is not a target. This is what we shall make provision for, but only where local authorities propose it, and where tenants vote for it.
"A number of local authorities have asked to use the private finance initiative to increase private sector investment while maintaining ownership of their stock. We are piloting eight pathfinder schemes to find out how this approach can work best.
"Some have suggested that stock transfer means the end of the local authority as landlord—the end of the council house. We believe that there is a continuing role for council housing. Indeed, today I am announcing a new option for investment in the stock.
"Local authorities will be given new borrowing powers to invest in their housing and retain full ownership where they put their housing management in arm's length companies and demonstrate an excellent record of management through a best value inspection. There is a future for the council house.
"The housing system we inherited from the previous government was fraught with difficulties: stigmatised social housing; a £19 billion backlog of repairs and improvements; a housing benefit system spiralling out of control; record repossessions and a lack of choice and flexibility. The proposals in our

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Green Paper can set about repairing Britain's poorest quality homes, helping first-time buyers and key workers, moving towards a fairer balance in rents, and improving services. We are working hard for Britain's hard working families.
"We propose help for home-owners and the private sector; we are not ashamed of that. We propose investment and modernisation in social housing. A decent home is a measure of a civilised society. All in all, our proposals mean better quality, more choice and more opportunity; a system based not on stigma and snobbery but on social justice ensuring that everyone in Britain has the chance of a decent home".
My Lords, that concludes the Statement.
5.11 p.m.
Lord Dixon-Smith: My Lords, the whole House will thank the Minister for repeating the Statement made by his right honourable friend in another place. I am sure that the whole House will also welcome the fact that we have a Statement which concerns a sector which is vital to every community.
However, we are now almost three years into this Parliament. During that time what has happened in the housing sector is not quite as good as one might be led to suppose from the Statement of the noble Lord's right honourable friend. The fact is that from 1993–94 to 1996–97, £27 billion was spent on public sector housing. That includes Housing Corporation expenditure. From 1997–98 to the year 2000–01, the figure is £23.9 billion. That does not suggest an improvement. At the same time new social housing construction is also down. From 1994–96, 91,300 units were constructed. From 1997–99, 59,600 units were constructed. That does not suggest immediate improvement. At the same time across the public sector generally the number of housing vacancies has increased. That does not apply just to local authorities but also includes houses owned by the Government.
Now we have a Green Paper. All we know is that it is a consultation paper about options. The consultation lasts until 31st July. Will the Minister kindly indicate the timetable and timescale for action that might arise as a result of the Green Paper? The public might be inclined to view the matter in a slightly different light and infer that a whole Parliament will have been lost before action is taken.
There are two or three proposals which I welcome, although certain aspects cause concern. Helping key workers to purchase houses is an extension—if one wants to call it that—of moves such as the right-to-buy and of private sector housing. As such, it must be welcome in principle. People to benefit from this measure may include nurses, policemen, firemen and possibly teachers. People belonging to all those professions are not necessarily paid enough to enable them to find houses easily in more prosperous areas. I hope that the Minister will indicate more firmly and precisely the Government's views as to who would qualify for that benefit and the conditions that would
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apply. Some of these people—perhaps too many—earn a level of salary which makes it difficult for them to purchase their homes. However, what will happen if two individuals who qualify for the benefit decide to marry as their joint salaries would carry them over the limit? We may create an incentive for people—this has occurred before—not to marry. I am sure that we would not think that desirable. However, as I say, I welcome an interesting proposal.
I seek two further pieces of information from the Minister. First, will he say something about the tax implications of the proposals for the individuals concerned as we may provide a taxable benefit? Secondly, is this a market-oriented proposal, or a regionally-oriented proposal? Although the most acute housing problems probably exist in the southeast of the country, the need for social housing in rural areas can be as great in the northern region where, generally, there is a sufficient supply of good housing. The problems in rural areas differ from those which affect the south-east. People like to live in rural areas and will buy houses in such areas if they can.
We welcome the Government's continuing support for, and extension of, stock transfers from local authorities to registered social landlords. It is good to note that the Government recognise the value of a scheme that began back in the 1980s. It is interesting to note that the Government talk of creating arm's length management companies to manage local authority housing. That will make new borrowing powers available to those management companies. Do those powers come within existing Treasury limits or will the creation of arm's length management companies put the management outside the public sector? That would remove many of the problems which exist in this area from the dead hand of the Treasury—something I always welcome.
I am sad that the issue of the adjustment of the VAT rate on repairs and renovations is not mentioned in the Green Paper. It is a point that has been pressed on many occasions in the House; perhaps the Minister will be able to say something about it in his response. We have just passed a Budget and one might have thought that it would be discussed. It is noticeable that Her Majesty's Government have recently negotiated on behalf of the Isle of Man a concessionary rate of 5 per cent for repairs and renovations. When the Minister responds, I invite him to say something on this subject and to indicate when we can expect to see the Government negotiating to have that concession extended to the rest of the United Kingdom.
As I said, the Green Paper is welcome. It is welcome because it is a movement in the right direction where previously there had been no movement at all. But it is a discussion of possibilities, not a discussion of action to be taken. For action to be taken we shall require a White Paper, and presumably legislation in certain instances. The Green Paper itself is welcome.
5.21 p.m.
Baroness Miller of Chilthorne Domer: My Lords, we on these Benches also thank the Minister for the Statement. We welcome the opportunities that the consultation paper gives us. However, we find it a distinctly unambitious consultation paper. It sets few targets for the kinds of resources that should be pulled into housing; it seems to set no targets for ending homelessness in its entirety; and it gives no definition of what is "affordable".
Given the £20 million backlog in council housing repairs alone, and the lack of affordable housing, it is disappointing that no new money is being channelled through the Housing Corporation. We welcome the release of capital receipts. We notice that there is a change in allocation for the Housing Corporation, and I should be grateful if the Minister could define what that change is likely to mean in terms of increased value. But unless we have a definition of what is "affordable", we will be tinkering around the edges rather than getting to the heart of the issue.
It is of course desirable that key workers should be able to afford housing in the areas where they work. But the measure outlined in the Green Paper may be very divisive. Many other kinds of workers could be regarded as key workers. Would childcare workers in private nurseries, for example, be regarded as key workers? They certainly are to the parents who need to go out to work. Would bus drivers or agricultural workers be regarded as key workers? How do the Government propose to define those people who are truly useful to society—and thus key workers—and those who are not?
We certainly welcome measures to speed up house sales. We also welcome measures to help local authorities to lever-in private finance for home improvements. Given that in the recent Local Government Bill the Government had much to say about increasing the powers of local government over the social and economic well-being of their areas, this consultation paper seems to take a step backwards in that it very much defines what local authorities may or may not do. It states that they will be given more powers over renewal areas? In that case, why not give them the power to do anything they wish in housing terms within their area in line with the Local Government Bill? Why is it defined so closely what local authorities may or may not do in renewal areas?
The proposed measures for improving the private rented sector are unambitious, particularly for houses in multi-occupancy. The way in which local authorities license such housing and work with local landlords is crucial. The Green Paper does not suggest that they will have the necessary wide-ranging powers to bring the worst of the housing in the rented sector up to an acceptable level. If local authorities had wide licensing powers, they could provide a service to good landlords who have invested heavily to bring their bed-sits up to a decent standard.
We welcome the implementation of the Egan report and the moves toward further sustainability. The Green Paper does not define sufficiently how cutting
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energy costs could benefit communities by putting back into people's pockets the money which is currently escaping through their windows in the form of heat.
Like the noble Lord, Lord Dixon-Smith, we are particularly disappointed to find no equalisation of VAT on new build and refurbishment. A vast amount of housing is either empty, under-used or in a bad state. By the White Paper stage, the Government should have firm measures to turn such property into good quality housing.
My noble friend Lord Russell will ask the Government more searching questions about benefits than I can, but the Government's approach to this matter—that in the longer term they will wish to examine the case for reform—is too long term. Surely the Government understand the problem now. Could they not have brought forward proposals to tackle those issues which are keeping people in the poverty trap?
Housing is a basic right. This Green Paper states that it is a "requirement" for everyone. It underplays the role of housing. It states that housing improves health, educational achievement and employment opportunities. Those of us who have been involved in social housing understand that, for many people, it is the crucial factor between succeeding in life and not succeeding. I hope that, by the time the House has debated the issue further and the Government are in a position to publish a White Paper, we will have something considerably more ambitious.
5.26 p.m.
Lord Whitty: My Lords, I am grateful for the two speeches from the Opposition Benches. I think that I am correct in saying that they indicated no serious, deep-rooted opposition to our proposals. There were suggestions that we were unambitious and that we were perhaps following initiatives made by the previous government. I am never ashamed of doing that. If the initiatives were sensible, we shall certainly continue them.
As to the charge of being unambitious—which I think also lay behind the opening remarks of the noble Lord, Lord Dixon-Smith, about investment and expenditure—I refute that immediately. We are talking about a government which inherited a situation where investment in housing had been halved during the last six years of Conservative rule, and which is now on course to doubling that investment over the course of this Parliament, mainly by unlocking the £5 billion of capital receipts. That is an indication of our commitment to housing and to providing effective investment in this area. I would not describe that as unambitious.
I am grateful for the support from both Benches in relation to the provisions for key workers. I understand that there are a few queries about the details and about how we pursue stock transfers. The noble Lord, Lord Dixon-Smith, queried our timetable for action. Clearly this is a consultation paper and some consultative elements may take some time. We

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hope to complete the consultation in July and to introduce some measures—for example, starter home initiatives—immediately after that. At that point, such measures will be reflected in the spending review. Other measures may be introduced over the following two years; the rent changes, for example, will be spread over a number of years.
Other measures, such as the future of housing benefit, present profound problems. As indicated in the Green Paper, we can make some immediate administrative changes, but a fundamental change of housing benefit will require building up a new consensus. That will require a longer-term consultation than the immediate issues.
Both the noble Lord and the noble Baroness referred to the fact that there are vacant properties and there are houses in poor repair. The extra £5 billion will address the issue of houses in poor repair and will bring some of the empty properties onto the market. It is true that there has been a recent rise over last year in the number of empty properties, although that is the first rise for five years. The exact reasons for that are now being analysed and will be addressed. Clearly, all public sector authorities have a responsibility to minimise the amount of empty stock in their possession. We need to tackle the problem both in terms of the quality of the housing and analysing the reasons for it being unpopular. Some of that will be dealt with in the approach that we are pursuing in the urban and rural task forces, which will lead to White Papers very shortly.
A number of questions were asked about the starter home initiative. It was welcomed in principle and then all kinds of queries as to how it would operate were raised. The Green Paper sets out the basic aims and we will be seeking particular proposals on areas which will be appropriate for providing support. The challenge fund will be operating in this area and we are looking for innovative proposals. Therefore, there is no straight answer to the noble Lord as to which professions would qualify and which would not. It would depend on the area, the labour market and the quality of housing in a particular local authority and housing market. But we will look at those proposals with a view to encouraging all kinds of different ways in which we could help first-time starter home buyers. They may be variations of existing schemes—for example, there are existing schemes run by the Housing Corporation—or they may include repayable interest-free loans, cash incentives or development grants.
To answer one of the noble Lord's other points—probably he would think unsatisfactorily—the tax position in relation to each of those differs and there is therefore no overall answer on the question of the tax position. We will be looking to tackle the situation where many of our communities are short of key workers because of the housing anomalies and we cannot match supply to demand. If there is a way in which we can encourage key workers and others on low incomes to be able to have a foothold in the
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housing market not far from their work, we will encourage that and we will look at different schemes to meet those needs.
The noble Baroness, Lady Miller, asked about affordability. That will vary from housing market to housing market and from area to area. More work will need to be done on that. The noble Baroness also criticised the fact that there is apparently no new money for the Housing Corporation. But we are talking in a context. We are providing £5 billion for the housing market as a whole. The noble Baroness welcomed the fact that local authorities are to be given more powers but then suggested that they are not being given enough or total freedom in that area. The new best value regime, which will apply to housing management as well as other aspects, is a major opportunity for local authorities to engage in new innovative approaches to their housing stock and indeed to the housing stock in the community as a whole. There have to be some restrictions on this. We want clearly to separate out the strategic role of local authorities relating to the totality of housing and their role as housing managers.
The noble Baroness referred to the question of sustainable construction in social housing and in housing in general. Outside the White Paper we are encouraging other measures in that direction—the new HEES programme and the new approach on EESOPs will greatly improve the energy efficiency of homes, particularly the homes of the poorest and those in fuel poverty in our community. We are addressing that issue in a different context.
The details of the role of local authorities may differ from area to area depending on their own choices of whether they go for stock transfer, whether they wish to establish arm's length companies for the management of their own stock and therefore attract additional outside funds in that regard, or whether they continue to manage in the traditional form. But local authorities will have two main roles. They will have the strategic role of overseeing the totality of the housing market within their area and they will have a management role which may move into new territory. Clearly, there are some continuing constraints in relation to local authority finance that will apply to local authority housing stock. But by providing these alternative vehicles and providing additional powers for local authorities, the constraints that have been placed on local authorities, both directly by the way in which they have been constrained and indirectly by the lack of funding by the previous administration, should be overcome.
I repeat the message of the Statement. This is not the end of council housing, but it is a new era for council housing as part of a mixed range of options available to all incomes in all parts of the country.
5.34 p.m.
Lord Graham of Edmonton: My Lords, I rise heartily to congratulate my ministerial colleague on the Front Bench and others on this excellent initiative which I believe will be warmly welcomed by those who are

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engaged in the housing field. I am particularly taken by the part of the report relating to stock transfers. The Minister will recall the words of paragraph 7.13:
"Tenants should he involved in the process of making decisions about their homes, including proposals for renovation and improvement, and wider plans for the future of their neighbourhood".
Paragraph 7.14 states:
"We also aim to create a more diverse pattern of dynamic and competitive organisations to run social housing. Transfer presents an opportunity to move away from large monopoly providers of social housing to a greater number of smaller bodies that are based in or closer to the communities where the homes are transferred".
On the basis of that, will the Minister accept that an excellent method of diversifying housing choice for council tenants is to give them information concerning housing co-operatives, with opportunity for devolving responsibility for shaping their own communities? Will he also ensure that, in enlightening tenants of the choice they can have, the co-operative dimension and potential is given equal prominence alongside the many other excellent alternatives?
Lord Whitty: My Lords, I can certainly assure my noble friend that all forms of potential recipients of stock transfer—registered social landlords who operate on a co-operative basis—could play an important role in many parts of the country. I would hope therefore teat we would look favourably on any proposals from co-operative housing groups to take advantage of these powers.
Lord Jenkin of Roding: My Lords, is the noble Lord aware that one becomes conscious during Statements of this kind that they have been drafted to be read in another place? Does he accept that there is some sense of regret that the noble Lord from the Front Bench in this place has to repeat, to his, I think, embarrassment, some of the egregious statements about the previous government's policy on housing that were included in the Statement? Is it not a fact that between 1979 and 1997 the quality of housing throughout this country rose dramatically? While there were many things still to be done, it is really a travesty to describe the policy of the previous government in the way that his right honourable friend the Deputy Prime Minister described it.
One of the points I welcome in the Statement is that the Government have now gone the whole way to acknowledge the value of the right to buy. One can give that a total welcome. Is that not a very long way away from the experience one had as Secretary of State of dealing with Labour authorities where the councillors had exercised the right to buy and then did their best to prevent any of their tenants getting it and where one had to suspend a council for failing to obey the law about the right to buy? The conversion, although belated, is welcome.
Finally, as I do not think the noble Lord replied to the questions put from the two Front Benches, why was there such a flurry of rumour before the Budget that there would be a shift in VAT as between new building and refurbishment—so much so that most
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people expected a statement in the Budget? The Minister will be aware that it contained no such statement and that there is nothing in the Green Paper to suggest any change of heart. One is looking for the refurbishment of inner cities and for the use and conversion of old buildings as against building new property on greenfield sites. Is it not, therefore, absurd to preserve the distinction of full VAT on refurbishments and no VAT on new buildings, even though that approach may have been right many years ago?
Lord Whitty: My Lords, in his opening remarks the noble Lord overestimated my sensitivity. I have no embarrassment in repeating the words of my right honourable friend in another place. Indeed, I heartily endorse them. The noble Lord is seeing the past through slightly rose-coloured spectacles. I am not sure that we should re-open old battles. There were certainly some improvements in the quality of housing for a large number of people, particularly in the owner-occupied sector, including some benefits from right-to-buy. The Labour Party accepted right-to-buy many years ago when in Opposition, so it is no sudden Pauline conversion for me or for the party, or indeed for my right honourable friend.
In parallel to improvements for many people, there was substantial neglect of housing for the poorest in our community. That included a substantial and clear neglect of social housing over the period referred to. The figures indicate a backlog of £10 billion for repairs and £9 billion for modernisation. As a result, the conditions of many people in social housing have worsened over the past decade or so. That is true also for people in some of the private rented sectors and for some poorer people in older owner-occupied housing. Among my departmental responsibilities, for example, are warm homes and energy efficiency. Some of the most vulnerable people live in private sector housing as well as in significant parts of the social housing sector. So I do not accept the noble Lord's point that the years 1979–97 were a time of unmitigated improvement in the standard of housing in this country. Indeed, the stock probably deteriorated more significantly than it had in previous decades.
As to the noble Lord's point about VAT, there are judgments that the Chancellor has to make. He gave priority to reducing VAT on materials to improve the energy efficiency of homes rather than on any general repairs or refurbishment. That is the judgment he made and it seems to be the right priority in this area. The noble Lord may be more ambitious, but this was never done under the previous regime.
Earl Russell: My Lords, the Minister was perhaps a little more surprised than he need be to find no deep-seated opposition to his proposals from my noble friend Lady Miller. It is hard to find deep-rooted proposals, and very hard to oppose them until you can find them.
Does the Minister agree that in Chapter 11 of the Green Paper, dealing with housing benefit, we hear a debate between different schools within the

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Government—incompatible propositions and aspirations which are no more resolved today than they were at the beginning of this Parliament?
I congratulate the Government on what they have done as regards extended payments for housing benefit. Perhaps I may extend those congratulations to Janet Albeson, of the National Association of Citizens Advice Bureaux, whose research she has put into effect; and I suspect also to the Minister's noble friend Lady Hollis of Heigham. On the other hand, will he Minister note our deep disappointment on these Benches at the weakness of paragraph 11.47 on the single room rent, which says absolutely nothing? Will the Minister pay attention to the findings of the department's own research, with which we on these Benches have no argument? Further, I ask him to note that he will find on these Benches an adamant opposition to moves towards a flat rate of housing benefit, for reasons many of which are well set out in paragraphs 11.68 and 11.69 of the Green Paper. Will the Minister follow his noble friend Lady Hollis of Heigham, who in 1997 committed herself to continuing the principle of the 1986 Act that income support is not intended to meet rent?
All these measures—42 action plans to improve administration, a somewhat paradoxical proposal—look increasingly like the Chinese building up sandbags to stop the flood of the Yangtze. Are the Government looking at the problem of housing benefit the wrong way round? Instead of trying to curb demand for rented property, should they be looking at improving the supply and changing the terms of finance for landlords so that they can provide affordable housing at a rather lower cost? The Minister may say that that is very difficult. I am well aware that no government since the First World War have arrested the decline of the private rented market. But if this Government cannot, there will not be very much left, and we shall be in considerable trouble.
Lord Whitty: My Lords, I accept that a number of the aspects of housing benefit mentioned in the document will require considerable further analysis and discussion and, it is to be hoped, the creation of some consensus on the long-term future of housing benefit. I do not, however, accept that the proposals in the document will make no difference. The noble Earl refers to "42 action plans", but there is a great deal of administrative improvement that can be made in regard to the delivery of housing benefit, the identification of recipients, the matching of those recipients to appropriate properties, the avoidance of fraud and mistakes within the system. All those matters need to be addressed in relation to the present broad basis of housing benefit.
My right honourable friend the Deputy Prime Minister gave an assurance that, whatever we do in relation to housing benefit, pensioners will not be any worse off as a result of any proposals made. That will also, so far as possible, apply to people in other low-income groups who are particularly vulnerable. The noble Earl is nevertheless right that some overall
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assessment of housing benefit, its distortion of the housing market and rent levels and the way in which we effectively subsidise housing by identifying people by income need to be addressed. Before that fundamental approach can be pursued fully, we need some reform of rents, which the Green Paper proposes; we need some reform of housing management, which it includes; and we need reforms in the housing benefit system, proposals for which are also included.
I accept the noble Earl's thanks for the changes that we are making in terms of rolling over benefit in to work. In that context it is appropriate to refer to the activities of my noble friend Lady Hollis in that regard and to the work done by the CAB.
I note the noble Earl's concern about the single room rent. We state in the Green Paper that we are looking at extending the definition of premises to which that approach applies, therefore giving greater freedom of choice to young people. The matter will be addressed through the consultation and beyond.
I also note the noble Earl's view that we could not introduce a flat rate element in to housing benefit over the medium term, and his request for housing benefit to cover effectively the full rent and for there to be no reliance on income support. However, all those issues have to be addressed in the longer-term review of how housing benefit works, whether the money is going to the households which need it and whether we can get over the distorting effect it has on rents and the housing market more generally. I cannot provide answers today. We shall probably not have answers by July. But we are starting the process of that fundamental analysis.
Lord Smith of Leigh: My Lords, I welcome the Statement on the Green Paper. First, I welcome the recognition that a housing policy does not encompass merely provision of adequate and affordable homes. It is crucial to envisage housing as part of a wider social agenda.
My noble friend asked why some areas of housing are more difficult to let than others. My authority undertook a survey which ranked estates into difficult-to-let areas. The only significant factor distinguishing the estates was the rate of crime; so perhaps people were making sensible choices about where to live.
Secondly, housing must reflect local circumstances. One looks at what is happening in the housing market in the south-east, and in London particularly, and in northern cities where houses are being abandoned. Housing strategies need to reflect factors which relate to the economic circumstances and community problems in different areas.
I agree with the noble Lord, Lord Dixon-Smith, that action is required on housing if only to put right some of the problems created by the previous government. I refer to the unfair funding of many authorities, and those who find themselves in negative subsidy. In simple terms that means that some council tenants in some parts of the country are paying for the problems in other areas. Despite the increase in funding from the

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Government which we welcome, we are in fact simply keeping pace with the backlog of repairs to ensure that the situation does not worsen.
I was pleased to note the use of the word "choice" in relation to stock transfer. The issue needs to be dealt with cautiously to ensure that we do not overlook the needs of the tenants. Tenant choice is important.
I welcome, too, the increased and enhanced role of local authorities.
Baroness Farrington of Ribbleton: My Lords, there is a little unease in the House. I remind all noble Lords that it is brief comments or questions at this stage.
Lord Whitty: My Lords, I welcome my noble friend's indication that housing issues need to be seen in a broader social context. They underline the importance of choice for tenants who at present do not seem to have any choice. They also underline local authorities' role in housing as part of their general responsibilities for the well-being of their community.
Lord Marlesford: My Lords, first, I declare an interest. I have experience as a Suffolk farmer with some surplus agricultural houses, now let.
I congratulate the Government on paragraph 5.2 which states:
"Landlords can be assured that we intend no change in the present structure of assured and assured shorthold tenancies, which is working well. Nor is there any question of re-introducing rent controls in the deregulated market".
Will the Government at least admit that those were major changes introduced by the last government which have had a huge long-term effect, and the Government's conversion to them is extremely welcome?
Are the Government aware that there is a problem as regards social housing in rural areas? All too often planning guidelines encourage local authorities to give consent to luxury and executive housing in a quite unbalanced way—unbalanced in social terms for the village; and often damaging the countryside which we all love.
Lord Whitty: My Lords, it is not so much planning guidelines as the actions of individual local planning authorities which allow the building of relatively large low density housing in areas which should not take it and where there is infringement of the green belt and agricultural land. It is perhaps the great dilemma which is being faced in the south-east debate to which we referred recently. The priority for housing in the south-east is to provide more high density housing for single person households rather than to continue to develop estates across the south-east of England.
Lord Williams of Elvel: My Lords, I understand that this is a Statement about a Green Paper. In my experience in this House—I have no experience in another place—I have never heard of a Statement introducing a Green Paper. Statements may introduce a White Paper. If the Minister can give me any
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precedents, I shall be interested. When a Statement is produced it gives rise to a mini-debate. The noble Earl, Lord Russell, and the noble Lord, Lord Marlesford, have taken the opportunity to have a mini-debate. That is not the object of the exercise. Perhaps my noble friend can assure me that in future Green Papers—consultation papers—are for consultation and not for debate in this House.
Lord Whitty: My Lords, no, I cannot give that assurance. Whether the Government decide to make a Statement in another place depends on the importance of the issue. In some cases there will be no White Paper; it will be a reaction to events. In other cases, it will be a White Paper, or another form of government policy statement. In other cases it will be the start of a consultation paper.
Housing is of supreme importance to many millions of our citizens. It seems sensible, therefore, that the first major Green Paper in this Parliament—the Government's position on housing—and the first for over two decades should receive a Statement in another place. Whether it is then debated in this House is in part a matter for the usual channels rather than for me, but I defend the right of the Government to use another place as the basis for announcing major policy initiatives, whether consultative or definitive.

Insolvency Bill [H.L.]
5.57 p.m.
Lord McIntosh of Haringey: My Lords, I beg to move that the Bill be now read a second time.
This is a Bill which, while modest in terms of what it seeks to achieve, will make several important changes in the area of insolvency law. If we are to increase business confidence, it is essential that those entering and operating in the market-place have certainty about what will happen when a firm gets into financial difficulties. We need effective procedures to deal with the failures that will inevitably occur in a market economy. We must also deal appropriately with those who bring about business failures by misconduct. Finally, the risk of losing all, due to unfortunate circumstances, could also discourage enterprise. So mechanisms for saving businesses which are suffering short-term financial difficulties are also needed.
Both the Insolvency Act 1986 and the Company Directors Disqualification Act 1986 already go a long way to providing such a regime. This Bill builds upon those Acts and introduces important amendments and improvements to the existing procedures.
In a market economy it is inevitable that some businesses will fail. Where companies do fail the collapses are inevitably bad for the company, its customers and its suppliers—the creditors. But if those companies could be rescued, the probability is that creditors would receive a better dividend on their claims than they would have otherwise received; jobs would be saved; and where a business is fundamentally viable, it will continue to make a positive contribution to the economy.

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The Insolvency Act 1986 introduced the company voluntary arrangement procedure into our law as a means of rescuing companies. The numbers of such arrangements have risen from 21 in 1987 to 475 in 1999. At the time the procedure was introduced it marked a significant change in thinking because it focused on rescue. However, the recession of the early 1990s showed that it was not particularly useful to the smaller company when it encountered financial difficulty. That is because of a lack of a short breathing space in the procedure—that is, a temporary stay on creditors' rights—so that management can put a rescue plan to creditors.
While the administration order procedure offers such a stay, the problem for the smaller company is that the procedure is generally too costly. There is also a natural reluctance on the part of management, particularly owner/managers, to use it because they know that they will be displaced by the administrator. Therefore, the only practical option open to such companies which try to achieve a rescue is to agree a voluntary arrangement with their creditors. Such an arrangement allows a financially troubled company to reach a binding agreement with its creditors, usually to pay its debts either in full or in part over a period of time. However, because there is currently no stay on creditors' actions, creditors remain able to take individual recovery action prior to the arrangement being agreed. That is the real problem. As a result, the company may, say, lose its stock in trade and be unable to continue in business. That renders the proposal unworkable and the rescue attempt a failure.
Therefore, the Bill will give a company's management the option of a short breathing space within which to put a rescue plan to creditors and will stop creditors enforcing their rights. It will do that by offering the option of a short moratorium within the existing voluntary arrangement procedure.
We propose that the directors should remain in control of the company and its business during the moratorium. To obtain a moratorium, first, the directors would have to obtain a statement from the insolvency practitioner to the effect that he was of the view that the proposed voluntary arrangement stood a reasonable prospect of being agreed and implemented. The insolvency practitioner will be the nominee and he will oversee the moratorium. Subject to the agreement of the creditors, he will also become the supervisor and will oversee the implementation of the voluntary arrangement if one is agreed.
Once obtained, the moratorium will last up to 28 days. However, with the agreement of creditors, it could be extended by up to a further two months. It will also be binding on all parties. During the moratorium the nominee will monitor the company's activities. If it appears to him that, because of new developments, the proposal is no longer likely to be acceptable to the creditors, he will have to withdraw. That will bring the moratorium to an immediate end. There will be penalties for directors who seek, for example, to abuse the moratorium, whether by making
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false representations to the nominee or by spiriting away assets or business records. There will also be restrictions on the exceptional disposal of assets.
Before I move on, I should indicate that we shall bring forward a small number of amendments to this part of the Bill. Both the Select Committee on Delegated Powers and Deregulation and the Trade and Industry Committee recommended that the exercise of the power for the Secretary of State to modify the eligibility criteria for a moratorium should be subject to the affirmative resolution procedure. The Government accept that recommendation and will bring forward appropriate amendments.
We are also concerned that the stay on creditors' rights contained in the Bill may not be fully effective against possible action by the holder of a floating charge. A floating charge is a form of security often taken by banks to secure their lending. Therefore, we shall bring forward amendments to ensure that the provisions that might be included in charge documents—perhaps to crystallise the charge into a fixed charge or to impose restrictions on the company's ability to deal with assets covered by a floating charge—cannot be triggered during a moratorium or because of a moratorium. In that way, we shall ensure an effective stay on creditors' rights and give the company the breathing space that it needs to put its rescue plan to creditors.
The Bill will also modify the current company and individual voluntary arrangement procedures in the Insolvency Act. One difficulty with the current schemes is that they do not bind creditors who were not notified of the meeting to consider the proposal for a voluntary arrangement. That can mean that when a previously unknown creditor comes to light—for example, someone who takes action against the company for a supply of faulty goods—he has the ability to pursue the company for the full amount of his claim. If that were to happen, the voluntary arrangement would probably collapse with disastrous consequences for both the company and its other creditors. Therefore, we have provided that unknown creditors will be bound by a company or individual voluntary arrangement. However, appropriate safeguards will, of course, be in place to prevent unfair prejudice.
Recent organisational changes in the insolvency profession show that there may be others in the market-place who could have the skills necessary to facilitate rescues. Time will tell whether such a body of people will emerge in the field of voluntary arrangements. However, having recognised that as a possibility, we have included a provision in the Bill which will allow the Secretary of State to recognise bodies whose members could act on a limited basis as nominees and supervisors in relation to voluntary arrangements.
I turn to disqualification. The power to disqualify unfit directors is an important safeguard for business and the public. In the past two years we have disqualified over 2,800 unfit directors. If confidence in the market is to be maintained, it is essential that we

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disqualify those who cheat their creditors and abuse the protection of limited liability. We believe that where both an unfit director and the Secretary of State are agreed that disqualification is appropriate, it is in everyone's interest to achieve a disqualification quickly and cheaply. The Bill will permit that.
At present, only the courts can issue disqualification orders. The majority of the orders are made on the application of the Secretary of State under Section 6 of the Company Directors Disqualification Act 1986. The process can take a long time and is expensive for all those involved, even where the director concerned is prepared to agree to being disqualified. The courts have been helpful in devising a procedure—the Carecraft procedure—whereby, effectively, an individual can consent to a period of disqualification. However, a disqualification achieved in that way still means that court proceedings must be instituted, resulting in delay and costs for all involved.
Therefore, the Bill provides that where there is agreement between the Secretary of State and an unfit director, disqualification can be achieved without legal proceedings. W hen the Secretary of State considers that an individual should be disqualified, he will be able to accept an undertaking from that individual not to act as a director for a specified period. Breach of the terms of an undertaking will have the same criminal and civil consequences for the individual as the breach of a disqualification order.
That will mean that the undertakings will provide the same protection for business and the public as a disqualification order. They will apply in relation to Section 6 of the Act, based on unfitted conduct in relation to an insolvent company, and to Section 8 following an investigation into a company. Currently, only 10 per cent of disqualification proceedings are contested and go to a full hearing. Of the remainder, 60 per cent are unopposed. That figure includes directors who simply ignore the proceedings. Directors agree to the making of the order in the other 30 per cent of cases. That suggests that a significant number of directors are likely to agree to give undertakings. As a consequence, this measure should result in earlier protection for both business and public at reduced cost by cutting down on the number of cases which need to go to the courts.
Of course, not all company directors will agree that they should be disqualified. Therefore, the existing procedure is to remain in place. The Secretary of State will then, as now, make application to the court to disqualify such persons where he considers it appropriate and they will be able to defend those disqualification proceedings in court.
Experience of the operation of the Company Directors Disqualification Act has shown that it is capable of improvement. Therefore, we are taking this opportunity to make some technical amendments to improve its clarity, effectiveness and efficiency.
With regard to the reporting of offences, in certain circumstances Section 218 of the Insolvency Act requires a liquidator of a company wound up in England or Wales to report to the Director of Public
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Prosecutions suspicions of criminal misconduct by company officers or shareholders. The director may then refer such reports to the Secretary of State for investigation. However, we believe that it would be far more sensible for those reports to be made directly to the Secretary of State. Therefore, that is what we have provided for in the Bill. That will streamline the reporting process and, where appropriate, ensure that cases come before the courts earlier so that the misconduct is dealt with sooner.
In addition, Section 219 of the Insolvency Act currently allows answers obtained by use of compulsory power to be used in evidence. That is contrary to the decision of the European Court of Human Rights in the case of Saunders v. the United Kingdom. Therefore, we are taking the opportunity to put right that situation.
When the Administration of Insolvent Estates of Deceased Persons Order was brought into effect at the end of 1986, it was generally believed that all the assets that a debtor owned immediately before his death would be available to his creditors in any insolvency proceedings which took place after his death. It was also believed that that would include his share in any jointly-owned property. That would have provided a level playing field for the treatment of the estates of all insolvents, whether living or deceased; otherwise, the assets available to creditors would have differed, depending on whether the debtor was alive or dead.
However, a decision in the Court Appeal in the case of Palmer (deceased) has established that the order-making power contained in Section 421 of the Insolvency Act is not sufficient to bring about that result. The consequence is that the provisions in the 1986 order are ineffective. As a result, in some cases what may appear to be the main, if not the only, asset—namely, the deceased debtor's interest in the matrimonial home—passes under the survivorship rules to the joint owner and is therefore beyond the reach of his creditors.
We are taking this opportunity to amend the order-making power in Section 421 and by so doing we will, as far as is possible, restore a level playing field and give a certainty of outcome for creditors irrespective of whether the insolvent is living or deceased.
It is a requirement that in England and Wales the trustees of bankrupts' estates and liquidators of company estates pay funds from the realisation of assets into the Insolvency Service's account. For many years there has been legislative provision that the funds of an insolvent company held in that account can be invested in government securities. That means that the company, and consequently those who have claims against it, receive the benefit of that investment. Additionally, any funds left in the Insolvency Service's account over £2,000 automatically attract interest at the rate of 3.5 per cent per annum.
For reasons which are not now clear, similar provisions have never applied to bankruptcy estate funds. This is clearly unfair and the Bill provides us with the opportunity to put that right.

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Another important measure in this Bill is the order-making power to enable the Secretary of State to implement, by secondary legislation, relevant aspects of the United Nations Commission on International Trade Law model law on cross-border insolvency. It will also permit us to amend, where appropriate, our existing legislative provisions on such matters.
These days many companies operate across national borders. This can cause complications when a business fails because other countries are not always willing to recognise foreign insolvency proceedings. As a consequence, it can be difficult, if not impossible, to recover assets from abroad where a company has failed here.
The United Nations has recently adopted a model law on cross-border insolvency and the United Kingdom played a part in agreeing that model. A concerted push to implement this law by some of our trading partners such as the USA, Canada, Australia, South Africa and New Zealand is under way. But there is also a degree of reluctance to act until the intentions of other countries become clear.
Taking this order-making power now will enable us to implement the relevant part of the model law here. It will also mean that it can be done at a more measured pace than could be achieved by seeking to include the full provisions in this Bill. Also, and perhaps more importantly, it will allow proper consideration of what should be done and for appropriate consultation to take place before we actually adopt such parts of the model law as may be thought apt.
Finally, the taking of such a power would also send encouraging signals both to other countries which are reluctant to proceed unilaterally and to UK insolvency practitioners whose services are much in demand internationally.
I should mention one further point before leaving this subject. It may be that the exercise of this power will touch on issues which have been devolved to the Scottish Parliament. We have not yet come to a definite view but, if amendments to the Bill are considered necessary, they will be brought forward at the appropriate time.
All the measures in the Bill are aimed at improving confidence in the market-place. That increased confidence should create an environment which will further encourage enterprise, and I am very pleased to commend the measure to the House.
Moved, That the Bill be now read a second time.—(Lord McIntosh of Haringey.)
6.13 p.m.
Baroness Buscombe: My Lords, while we on these Benches support the Bill in principle, we do however question both its timing and handling by the Government. In its second report on the draft
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Insolvency Bill dated 14th December 1999, the Trade and Industry Select Committee expressed deep concern at the lack of opportunity for proper consultation, stating:
"We have the impression that the department would have been more content if we had not examined this piece of draft legislation. The partial consultation was not only brief, but inevitably left some of those affected excluded".
Indeed, the committee had to procure a copy of the clauses and sought copies of the responses from those consulted. That is not a good start.
In essence—and I quote from the same report as I could not put it better myself—
"If the Government is serious about exposing draft legislation for parliamentary scrutiny, it is time that it recognised that such scrutiny is likely to be more useful the more time and notice is given; and that committee scrutiny can assist the process of legislation at later stages".
What is the hurry, anyway? Throughout our consultation process on these Benches, the question has been asked time and again: why introduce the Bill now in advance of the results of the consultation, known as "A Review of Company Rescue and Business Reconstruction Mechanisms"? Would it not have made sense to defer legislation until the results of a wider review were known?
Perhaps the Government are impatient to show their willingness to stimulate a "rescue culture". That is no bad thing. However, in its current form the Bill is not necessarily the panacea for small companies because it omits at least one vital element—that is, the provision for a funding mechanism to enable companies to continue trading. Who is going to underwrite the orders placed in the interim?
There is little doubt that the greatest hurdle for any company to overcome in trying to establish a viable voluntary arrangement is not the absence of the moratorium period, but the lack of funds to keep its head above the water and carry on its business.
Turning to the Bill, it is like the curate's egg; it is good in parts. It is good in parts because much of it will enact proposals previously put forward by the previous administration. As I have said, in principle, we on this side of the House support the Bill but are concerned about the detail of some parts. Perhaps I may begin with one part of the Bill with which we agree.
Clause 6 amends the Company Directors Disqualification Act 1986 and confers a power to accept undertakings on the Secretary of State with the consequence that if such undertakings are accepted, disqualification can be achieved without any significant involvement of the courts. That will plainly save considerable court time and we support that new procedure.
It should also result in a saving of costs to the director concerned, who may well have been impoverished by the collapse of the company of which he was director and beyond legal aid. Clause 6 will save the director from having to contest disqualification proceedings or going through the Carecraft procedure if he accepts that he ought to be disqualified.

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That procedure involves the agreeing of a fairly lengthy Carecraft statement which the court considers before disqualifying him from acting as a director.
The negotiation and preparation of that Carecraft statement is a significant expense in what would otherwise be a fairly straightforward and cheap procedure where a director effectively pleads guilty, albeit that disqualification proceedings are not criminal in nature. If the procedure, whereby undertakings are accepted instead, does not involve the preparation and negotiation of a similar statement, considerable expense will be saved. It is important that this expense is saved because we must encourage directors to take advantage of the new procedure.
If there is nothing in it for them, they might as well contest the proceedings and there will be no saving in court time. It is therefore important that the new procedure does not become unduly cluttered with detailed preconditions and requirements, such as a Carecraft statement. We hope that the Lord Chancellor will not use his rule-making powers to introduce the necessity for such a statement in this new streamlined procedure. Subject to that one point, we support the new procedure for giving undertakings proposed in Clause 6.
I turn to a part of the Bill which is not so good. It is to be found in subsections (3) and (4) of Clause 4. Those subsections create a new type of insolvency practitioner—a new animal—who can act as a nominee or supervisor of a voluntary arrangement. Subsection (4) envisages such a person being authorised by a body recognised by the Secretary of State, satisfying certain security requirements and not being ineligible on certain specified grounds. Those authorised persons need not be licensed insolvency practitioners. We find that worrying.
The Trade and Industry Select Committee, in its second report, referred to,
"the growing complexity of insolvency law and practice".
In the light of that, is it sensible to be introducing this new animal who is very possibly less qualified and competent to undertake and execute the role of nominee instead of a licensed insolvency practitioner? As in all professions, some licensed insolvency practitioners are better than others.
It is vital that there should be public confidence in such authorised persons, but an authorised person as envisaged in subsection (4) could be less well qualified to maintain public confidence than the least capable licensed insolvency practitioner. Indeed, it is inherently likely that an authorised person will be someone who ha; not qualified as a licensed insolvency practitioner and has therefore become an authorised person instead. There would be no need for him to become an authorised person if he was already a licensed insolvency practitioner. The result will be that an authorised person could be more undesirable than the least capable licensed insolvency practitioner. I shudder at the thought.
It gets worse. The new procedure for a moratorium cuts out the role of the court. Under the existing law, a company can obtain a moratorium if it petitions the
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court for an administration order. The petition is usually heard within five days. The court can then continue the moratorium by making an administration order. An individual can obtain a moratorium if an interim order is granted by the court. Again, the court is closely involved at an early stage. That is an important safeguard, because a moratorium imposes extreme conditions on creditors. The courts therefore police such moratoria carefully.
The new proposals dispense with that important safeguard. A company or an individual will be able to obtain a moratorium without any involvement by a court. That is dangerous enough, but to allow authorised persons who may not even be licensed insolvency practitioners to be the only real safeguard is, in our view, unacceptable. It is essential that there should be public confidence in the integrity and competence of those who will exercise such power to impose a moratorium on creditors.
The moratorium to which I have referred is to he found in paragraph 12 of the new Schedule A1, which is clearly based on Section 11 of the Insolvency Act 1986. There is therefore little new in the moratorium introduced in paragraph 12, but there is an important difference. The moratorium which comes into effect once an administration order has been granted is subject to the court's control within five days of the presentation of the petition. The moratorium under paragraph 12 comes into effect on the say so of an authorised person who may not be competent to qualify as a licensed insolvency practitioner.
Furthermore, the court can be involved only for the purposes of, first, calling a meeting of the company; secondly, taking steps to enforce any security over the company's property or repossessing goods in the company's possession under any hire-purchase agreement; thirdly, commencing or continuing other proceedings; fourthly, execution or any other legal process; and, fifthly, levying distress. In any of those circumstances a member or creditor can apply to the court for leave to carry out an act which would otherwise be prohibited from the moratorium.
It is legitimate to ask why there is no right to apply for the leave of the court, first, to present a winding up petition; secondly, to pass a resolution for the winding up of the company; thirdly, to seek an order for the winding up of the company; fourthly, to present a petition for an administration order; or fifthly, to appoint an administrative receiver. In all those circumstances, no one has the right even to apply to the court for leave. That is unacceptable given the fact that the court will not be involved in that new procedure. In essence, we believe that it would be an obvious and appropriate safeguard if members and creditors could apply to the court for leave to carry out any of the acts otherwise prohibited by the moratorium.
That point is particularly significant as regards the appointment of administrative receivers. One of the sad facts of business life is that when the appointment of an administrative receiver is imminent, small but valuable items of equipment tend to disappear. Laptops have no chance. The position is even worse

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with companies in the building trade because not only small items of equipment disappear, but large items of plant, machinery and raw materials. It is to minimise such shrinkage that debentureholders often appoint administrative receivers with little or no notice and have them move straight into the company's premises to secure their contents against theft.
However, notwithstanding the palpable risk of small items of equipment disappearing, the moratorium in paragraph 12 could prevent a debentureholder from appointing an administrative receiver for nearly three months. That is quite unacceptable. Experience teaches us that during such a period almost every item of equipment which can be carried out by one person will disappear. Indeed, with nearly three months at their disposal, those responsible will be able to hire the ubiquitous white van and remove more substantial items of equipment. The debentureholders do not stand a chance.
The Bill grows worse when one looks at paragraph 39 of Schedule A1, which creates certain offences where a moratorium has been obtained. Under that paragraph, it is an offence for any officer of the company fraudulently to remove,
"any part of the company's property to the value of £500 or more".
The limit of £500 is quite extraordinary. If an officer of the company fraudulently removes an item of equipment worth £500 or less, it appears under paragraph 39 that he does not commit an offence. That limitation is quite unacceptable and we cannot see the rationale for it. Whatever happened to theft? Is it no longer a criminal offence for some people to steal some of the time, so long as the value of the goods stolen is restricted by law? I wonder whether the Government are trying to create a second-hand market in stolen laptops.
When we consider the terms of the moratorium in more detail in Committee, we must consider also whether it is appropriate for a landlord to be able to forfeit a lease under which the company is a tenant. At present, it appears to be the case that every kind of creditor except for landlords forfeiting leases is restricted from taking any steps to obtain payment. That is an odd omission. We can see no policy reasons why a landlord should be put in such a privileged position. Indeed, we can see no grounds for restricting a landlord more than any other creditors, because in many cases the company's business will come to an immediate end if the lease for the property from which it carries on business is forfeited. The whole point of a moratorium and the proposal for a voluntary arrangement would be defeated.
If the Government believe that landlords should be in a privileged position, we should be grateful for the reason. Could it be because a landlord may find himself in an involuntary position because of assignment? That is doubtful, as commercial leases tend to be extremely short these days and, in any event, that must surely be a risk which comes with that usually highly profitable territory. If, on the other hand, there are no policy reasons why landlords
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should be in such a privileged position, we believe that the terms should be amended and we shall return to the matter in Committee. At the same time, similar amendments should be made to Sections 10, 11 and 252 of the Insolvency Act 1986 so that they are in line with paragraph 12 in its ultimate form.
I turn now to two provisions which apply while the moratorium is in force. The first is to be found in paragraph 13 to Schedule A1, which provides that any security granted,
"at a time when a moratorium is in force … may only be enforced if, at that time, there were reasonable grounds for believing that it"—
I presume that "it" refers to the security—
"would benefit the company".
I must confess to being unaware of any security that would be likely to benefit a company. Perhaps the Minister will give an example of such a security. I can, of course, envisage transactions of which a security is a part which might benefit the company, such as a loan on terms that the company must grant a charge. I cannot think of any security which on its own would be for the benefit of a company.
Furthermore, lenders are in the business of lending for their own benefit and not for the benefit of borrowers. The directors of the corporate lender must act honestly in the best interests of the lender and not of the borrower. The paragraph means that they must have regard to the benefit of the borrower, even though the directors of the borrower are under a duty to act honestly in the best interests of the borrower and their acts are overseen by an unlicensed insolvency practitioner, albeit an authorised person. If the directors of the lender get the balance wrong, the security cannot be enforced and, indeed, it looks as if it can never be enforced however prosperous the company may be in the future. If the Government believe that any lender will lend money with that kind of risk, it must be said that they are living on another planet.
Paragraph 17 of Schedule A1 is equally objectionable. It provides that a company can dispose of its property only if, inter alia,
"there are reasonable grounds for believing that the disposal will benefit the company".
It is not entirely clear what happens to the disposal if there are no reasonable grounds for believing that the disposal will benefit the company. That must be clarified during the passage of this Bill. During that process mature thought must be given to whether or not the test that the disposal must be for the benefit of the company is a sensible one. The Minister will be aware that businessmen are in business for their own or their company's benefit, not for the benefit of the people with whom they do business. I appreciate that the position might be different with certain local authorities, but in business the idea of trying to benefit the party with whom one is doing business is not one that has instant appeal to most businessmen.
Let us consider the position of a purchaser of plant and equipment from the company to which paragraph 17 applies. It is not very clear when it does apply. Such

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a purchaser will bargain for a low price. The company's directors will bargain for a higher price. A balance must be struck, but during the course of these negotiations the purchaser will inevitably say, if properly advised, that he must be satisfied that the disposal will benefit the company and will insist on a lower price because of the chance of that disposal being set aside. If he is to be satisfied that the disposal will benefit the company, the company will have to disclose its weak financial position which the purchaser will, no doubt, exploit to his advantage thereby lowering the price even more. The result will be that the company will only be able to dispose of its assets at a substantially lower price than it might otherwise achieve. That cannot be right. It interferes with the whole notion of arm's length negotiations. I therefore suggest that we must look carefully at the provisions of paragraph 17 in Committee.
There are a number of other less important points which we shall be raising in Committee, where we believe the drafting has not been properly thought through. At this stage we wish only to give the House the flavour of things to come by referring to Schedule 1, paragraph 6 which amends Section 122(1) of the Insolvency Act 1986. That section sets out the grounds on which a company may be wound up by a court and already includes the grounds that the company is unable to pay its debts.
Paragraph 6 adds an additional ground giving the right to a creditor to petition the court for a winding up order on the ground that a moratorium has come to an end and no voluntary arrangement has been approved. That is a curious addition because, if a company is unable to pay its debts, a creditor can already present a petition on that ground. So the proposed new ground is only of assistance where the company is able to pay its debts. We cannot see why it should be appropriate for a creditor to seek a winding up order when the company is able to pay its debts, but a moratorium has come to an end without a voluntary arrangement having been approved. We shall be grateful if the Minister can explain the rationale for this additional ground for a winding up order.
In conclusion, in general we are supportive of the Bill. However, the devil is in the detail. Given its somewhat hurried early life and the lack of consultation with interested bodies, we very much hope that the Government are not intending, in the words of the Select Committee for Trade and Industry in its second report,
"to use it as a vehicle to tag on other bits of insolvency reform as it passes through Parliament".
6.33 p.m.
Lord Sharman: My Lords, I must first declare an interest as a paid adviser to a firm which has a division practising in insolvency.
I give a cautious welcome to the objectives which this Bill seeks to achieve. The reason for my caution is that I have some reservations as to whether the Bill will achieve its aims as regards moratoria for small companies. I share many of the concerns that the noble Baroness, Lady Buscombe, has outlined about the
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qualification of nominees. In particular I share her concern that the recommendation in the report of the Trade and Industry Select Committee of another place that only insolvency practitioners should be enabled to act as nominees should have seen the light of day in this Bill. However, I am pleased that the recommendation of the Delegated Powers and Deregulation Committee of this House to adopt the affirmative procedure for changes in moratoria was accepted.
In my research I noticed that the original consultation on this matter on a moratorium for small companies took place in October 1993, which is some considerable time ago. This sort of provision is long overdue. But I have problems with the qualification of nominees and supervisors, as I said earlier. At present persons who are authorised to act as insolvency practitioners are authorised to take all types of appointments under the 1986 Act. They have to be judged to be fit and proper persons to undertake such appointments by their authorising body. Their examination regime requires candidates to demonstrate a knowledge of all types of insolvency.
The provision in Clause 4, which enables the Secretary of State to recognise bodies solely for the purposes of acting as nominees or supervisors, but not otherwise to take appointments, has the potential to create some very difficult problems. That is particularly important because a moratorium may not be the only alternative that a company is considering. One is faced with a situation where there could be a number of alternatives that the directors could choose. They will need advice on that. They will need advice from people who have experience of that position. I see potential difficulty in first taking advice from an insolvency practitioner about the options available and then perhaps shopping around for someone who is prepared to sign the necessary statement. That leaves me with a residual worry as to whether the directors we would want to take advantage of this procedure, and potential nominees, will regard it as too risky to bother with and opt for other alternatives. I shall return to the role of the nominee in a moment.
I turn to some of the other detailed provisions in the Bill. Both the Minister and the noble Baroness, Lady Buscombe, have remarked on the changes in director disqualification allowing the Secretary of State to accept undertakings, which would have the same effect as a disqualification order. I believe that, quite rightly, there has been concern in the past that the Company Directors Disqualification Act 1986 was not as effective as it could have been because of the time needed to progress disqualifications through the courts. We believe that the provisions of Clause 6 are a welcome initiative to reduce court time and to increase the efficacy of the Company Directors Disqualification Act.
I refer now to deceased insolvents' estates, which the Minister dealt with. The order made under Section 421 of the Insolvency Act 1986 does, as he says, cause problems. Part of that was the definition of the estates of deceased persons without any further explanation at the time. As the Minister rightly said, in the case of re Palmer Deceased, the Court of Appeal held that

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where a debtor had died before a bankruptcy order was made against him, that interest in the joint tenancy passed to his wife by survivorship and so there was no severable interest remaining for the benefit of his creditors.
Clause 11 would rightly provide that an interest in such circumstances would form part of the debtor's estate. We believe that to be a sensible provision, but we shall need to be satisfied at Committee that there can be no retrospective aspects to the provision outlined in the Bill.
Interest on sums held in bankrupt estates is clearly an anomaly at the present time. The fact that liquidators could earn interest whereas those exercising the role of trustees in bankruptcy on the funds could not, was wrong. We are pleased that Clause 12 will put that right. It is a very welcome development.
We view the UNCITRAL model law on cross-border insolvency with interest. We are pleased that Clause 13 contains the enabling power for the implementation of that model law. As the Minister said, the model law was developed by the United Nations Commission on International Trade Law and adopted by the UN in 1997. I think the Minister would agree that it is still early days for this. For that reason, we would encourage the Government to push hard for its adoption by as many states as possible.
The Bill deals with a number of matters relating to creditors' voluntary arrangements and the status of moratorium period creditors. It is not at all clear from the Bill as it stands at what date it is intended that claims will be taken for the purposes of participating in arrangements. Under existing creditors' voluntary arrangements, claims are taken as at the date of the meeting held to consider the arrangement.
The relevant date for calculating preferential claims for existing voluntary arrangements which were not preceded by some other insolvency process is also the date of approval. While paragraph 35(2) of Schedule A1 is drafted in terms which suggest that creditors will be bound as at that date of approval, paragraph 69 of the Explanatory Notes talks about binding creditors who are owed money at the start of the moratorium. Paragraph 9 of Schedule 1 provides that the relevant date for preferential claims is to be the date of filing; that is, the date the moratorium comes into effect.
As the noble Baroness, Lady Buscombe, has already pointed out, there are no provisions in the Bill for how expenses arising during the moratorium are to be dealt with. Incidentally, this was also pointed out by the Trade and Industry Select Committee of another place. For that reason there remains some doubt about the status of debts arising during the moratorium period and how they are to be disposed of. We shall wish to return to this matter in Committee.
As regards voluntary arrangements generally and the issue of binding unknown creditors—if I may use that form of shorthand—the Bill provides that, in every type of voluntary arrangement, approval binds not only all creditors who are entitled to vote at the
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meeting but all creditors who would have been so entitled if they had had notice of it. At present, only creditors who have received a notice of the meeting are bound. This change raises a number of potential difficulties. In particular I should like to ask the Minister to consider the effect of these provisions on those who have made claims under the Third Parties (Rights Against Insurers) Act 1930, where I believe that there is a difficulty. Again, we shall need to return to this in Committee.
In conclusion, I should like to return to the issue of the nominee and his duties during the moratorium. Paragraphs 24 and 25 of Schedule A1 allow the company or other affected parties to challenge the nominee's actions by application to the court. We see a contradiction in the Bill between two views of the role of the nominee: that of an independent office holder with a duty to the general body of the creditors; and that of a professional adviser with a duty of care to his client. Those two roles clearly can be in conflict. The nominee has a duty to monitor the affairs of the company, and in the earlier draft clauses there were provisions which could have made the nominee liable for the defaults of the directors.
The report of the Trade and Industry Select Committee, to which I referred previously, suggested that the balance of duties and liabilities envisaged for the nominee required some revision to ensure both a light touch and protection of the legitimate interests of creditors. It added that no more duties or sanctions should be laid on the nominee than are strictly necessary in the unique circumstances of a moratorium.
The provisions making the nominee liable for directors' defaults have now been removed from the Bill and a new provision has been added at the end of paragraph 25(3) of Schedule A1, allowing the court to excuse the nominee if it is satisfied that his acts, omissions or decisions were reasonable in the circumstances. Although these amendments are undoubtedly of assistance, the new provision does not address the fundamental issue of where the nominee's duty lies. This issue definitely needs to be resolved in Committee.
In summary, we welcome the Bill, which seeks to move forward in an appropriate fashion the whole issue of dealing with insolvencies. However, we feel that the Bill needs considerably more work to give it a fair chance of achieving its objectives.
6.45 p.m.
Lord Gavron: My Lords, as some noble Lords may already know, I am well qualified to speak on insolvency, having narrowly escaped it many years ago at the beginning of my career. I was an entrepreneur who was not well versed in the mysteries of cash flow. The company that so nearly went down is now flourishing and employs some 5,000 well-paid people. I hasten to add that today it is being run by people a good deal more numerate than I was all those years ago. But I did run it for 30 years and I was frequently a creditor. I think I can fairly describe myself as a very

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experienced creditor. Furthermore, I frequently lost my money, and yet I am an enthusiastic supporter of this Bill.
Contrary to some people's belief, most of those who start small businesses are hardworking and honest. I have learnt that there are people who think that usually they are fundamentally untrustworthy. I do not share that view. Most of them create wealth and employment and a few manage to build large and significant businesses. It is very easy for them to trip up during the early years and the most common cause of failure is running out of money through not understanding the intricacies of cash flow.
After a long career in business, I still do not fully understand the intricacies of cash flow. What I have learnt, however, is that I need to have someone at my side who does. Many entrepreneurs starting new ventures have most certainly not fully mastered cash flow. Quite often, a hiccup or two early on can sink a promising new business.
Of course it must be said that many bankruptcies are deserved and the philosophy of the survival of the fittest must prevail in business. It is not good for the employees or for the economy to keep weak and struggling businesses alive indefinitely. But the moratorium proposed in this Bill—described by Stephen Byers and by the Minister in this House as a "breathing space"—is a mere 28 days, extendable by arrangement to possibly three months. That may well be enough to save some businesses which deserve to survive.
In real life, the initiative to put a small business into receivership almost always comes from a clearing bank. Trade creditors are often patient with slow payers. If they believe that the principal is honest and if they are convinced by the rescue plan, they often continue to extend credit. Of course they may have little to lose: on the one hand they may get 10p in the pound; on the other hand they may secure a continuing and loyal customer. That is not a difficult choice.
Banks, however, are almost always secured creditors and therefore are likely to be paid in full or nearly in full in an insolvency. Their first floating charge on assets is frequently additionally backed by a personal guarantee. Perhaps I may stray for a moment in order to express my strong disapproval of banks almost invariably demanding personal guarantees, giving them both belt and braces. The typical profile of a promising entrepreneur—for that is what the Bill is about—if often of a person with a mortgage and a family or other dependants acquired after, say, 10 years' valuable experience working for someone else. When such a person contemplates a business start-up, the mandatory personal guarantee means that failure could put not only the entrepreneur but also the dependants into the street. Good entrepreneurs may take risks, but they are fundamentally cautious people. The biggest disincentive to a start-up by exactly the right sort of candidate, someone who is likely to succeed, is often the prospect of a personal guarantee.
The Insolvency Bill serves to provide a counter to the banks, which are sometimes—frequently, in my experience—too quick on the trigger. A four-week
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freeze can give the principal time to get together with the creditors and perhaps give the business a chance of survival. A further reason to try to save a business is that a common consequence of insolvency is the domino effect. One small business fails and cannot pay a large debt to another small business, which in turn fails, and so forth. So one small failure can cost quite a number of jobs.
This is a good Bill. I listened with surprise, or even amazement, to criticisms suggesting that it would impose disadvantages on the creditor. As an experienced creditor I believe that the reverse is true. The moratorium is likely to ensure that all the creditors are listened to, not just the major creditor with full security. The Bill will help small companies to an enormous degree, and the small companies which may be their creditors. It is an important element in this Government's determination to foster entrepreneurship. While large companies seem to be downsizing or merging and thereby shedding jobs, many small companies are expanding and creating employment. This Bill will help small companies and I support it.
6.52 p.m.
Lord Razzall: My Lords, in winding up from these Benches I shall try not to repeat the detailed points made by other noble Lords. First, I share the puzzlement expressed by the noble Baroness, Lady Buscombe, and my noble friend Lord Sharman as to why this Bill is being introduced today. As my noble friend said, the consultation on the Bill started in 1993. Seven years later it is brought in as a relatively small Bill but only a few months after the Insolvency Service in September launched its consultation document, A Review of Company Rescue and Business Reconstruction Mechanisms, which, presumably, after the consultation process is concluded, will result in a detailed Bill setting out a significant reform of insolvency law, as the noble Baroness, Lady Buscombe, said. I wonder also why the Bill is being brought forward after a Queen's Speech that produced 32 or 33 Bills and rumours that, as a result, in order to get their legislative programme through, the Government will not be able to have another Queen's Speech this side of the election. Indeed, if there were in place, as many of us would like, a "Moratorium on Legislation Act", this would be a provision that could well fall within it.
Having said that, when we come to Committee a number of points of detail will need to be resolved. I shall not rehearse in detail those already mentioned; I shall run through one or two in outline. First, both the noble Baroness, Lady Buscombe, and my noble friend Lord Sharman mentioned an issue that caused considerable concern—it may be said, "It would, wouldn't it?"—among representative bodies of the various organisations practising in this field; that is, the qualification of nominees. It will clearly be the subject of significant debate in Committee and on Report and we look forward to seeing whether or not the Government propose to table any amendments to deal with the concerns expressed.

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Secondly—a point which has not yet been touched on in relation to the nominees—is the question under the proposed Schedule A1, paragraph 6; that is, the nominee's statement. A number of anxieties were expressed as to the provision that requires the nominee not to have to give any reasons for his opinions as to the viability of the proposals being brought forward. Under paragraph 6(3), the nominee is allowed to rely on information submitted by the directors,
"unless he has reason to doubt its accuracy".
A number of the comments made on the Bill suggest that that does not go far enough and that the nominee should be required to make such checks as are reasonable in the circumstances. We look forward to discussing that point in Committee and seeing whether it is a point on which the Government propose to move.
My third point relates to Clause 11 and the insolvent estates of deceased persons. The point that needs to be considered by the Minister, if not now, certainly when we come to Committee, is whether or not the situation as currently reflected in the Bill prejudices the marketability of title of the relevant property. The Law Society made significant comments which have not yet been taken on board by the Government. We would welcome the Minister's comments in that regard, and also on the point made by my noble friend Lord Sharman in relation to the risk that the provisions will have a retrospective effect, which also goes to the point on the marketability of the title to property.
There has been no comment so far on Schedule A1, paragraphs 17 to 19, concerning disposals of charged property. A number of points arise in the context of paragraphs 12, 13, 24 and 38. The obvious anxiety is that third parties proposing to deal with the directors, even with a strong likelihood that the dealing will benefit the company's creditors, will be inhibited from doing so by the lack of an express statement in the proposed legislation that the directors have the power to effect that dealing and, most particularly, by the fact that the third party will be protected from any subsequent failure of the moratorium or non-approval of the voluntary arrangement. Considerable concern was raised about the effect of third parties dealing with the disposal of charged property under the moratorium. Again, that is something the House will need to look at in Committee.
Another point which has not been mentioned today is the effect on creditors of paragraph 12, in particular the right of peaceable entry. Under the Bill as drafted, it seems an anomaly that a landlord cannot distrain for rent or issue a writ for forfeiture but is entitled to use the self-help remedy of peaceable re-entry and so deprive the company of its premises. Clearly, that is not the intention of the Bill and would defeat the purposes of it. We feel that the Government need to look at that in Committee.
The noble Baroness, Lady Buscombe, and my noble friend Lord Sharman raised the issue of disqualification of directors. I agree with the noble Baroness that the effective adoption of the Carecraft
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procedure in the section under which an individual can come to the department and agree to be disqualified for an agreed period needs to be handled with significant subtlety by the department if it is to have the appropriate effect. Of course, if that subtlety, as the noble Baroness indicated, is not exhibited, the director will be forced to go into court because he or she is not prepared to agree the appropriate statement that normally accompanies a Carecraft order.
More particularly, if the operation of this section is not administered by the department in a sensitive way, the director will be tempted to try his or her luck with the court proceedings rather than take the appropriate step of accepting the disqualification with reasonable undertakings in order to return, after the period of qualification, to the entrepreneurial activity that presumably lies behind the rationale for the section.
Finally, I endorse the point made by my noble friend with regard to the fundamental flaw in the relevant section regarding the role of the nominee. It is not clear on the face of the Bill whether the nominee has a duty to the general body of creditors or whether the nominee is a professional adviser with a duty of care to his client. In Committee that anomaly needs to be resolved if the moratorium procedure is to work.
7.2 p.m.
Lord Kingsland: My Lords, I shall be extremely telegraphic. The Minister said that this is a modest Bill. It is indeed modest. It has, unlike the great man about whom the remark was once made, much to be modest about.
It is modest because it deals with a small part of the problem that confronts companies that are in financial difficulties. The Minister referred to some 500 cases a year. If the Government wanted to do something about the situation of companies that would be suited to a moratorium procedure, why is there not some flanking financial help for them in the Bill?
At an earlier stage, there was a discussion about the provision of statutory-super priority. We see nothing of that in the Bill. There was discussion about the switch of debt for equity in companies during the moratorium. We see nothing of that in the Bill. There was even speculation about the likelihood that public bodies may be prepared to reduce in size, or allow better payment terms of debts owed, not only to local authorities, but also to electricity, gas and water companies. We see nothing of that in the Bill.
If the noble Lord the Minister is to achieve his objective of being a real help to companies during the moratorium period, in my submission he needs to do much more than is on the face of the Bill.
I also believe that the Government were wrong to seek to establish a class of nominees outside the profession of licensed insolvency practitioners. I have two reasons for saying that. First, when a company is in difficulties it needs the advice of a practitioner who can look at the whole range of options in an objective way. That is the task of a licensed insolvency practitioner—with experience of full-scale company liquidations and the introduction of administrative

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receivers at one end of the scale; and of suggesting means by which difficulties can be solved without any formal application of the law at the other end.
By contrast, a nominee who comes from a single profession is likely to look at the problem in an extremely narrow way. Indeed, he or she may find some self-interest in recommending the amended CDDA procedure because, dare I say, that would provide work that he or she would not otherwise have had. At least for the early stages of the application of this legislation, I would strongly urge the Minister to think again about the new status of a nominee, perhaps for a period of five years, and rely on the established profession. It may be wise of the established profession to add some extra training in the area covered by the Bill; but, in my submission, companies would benefit from someone who could look objectively at the whole range of solutions, rather than simply at a single solution.
I have two final observations to make about the Bill, both of which refer to directors' disqualification. Of course, I share the views of roost noble Lords who have spoken that the introduction of the undertaking procedure is a good thing. However, we know from Carecraft that a number of directors, who are probably innocent, have felt it necessary to go for that procedure, simply because, if they fought the case and lost, they would be faced with paying, as is anyone in a so-called civil case, not only their own costs but also the costs of the other side. Is the Minister prepared to consider in future CDDA cases a different cost regime, more in line with the cost regime that applies in criminal cases rather than civil cases?
Secondly, I raise the point with which the Minister is now intimately familiar as the result of the progress of the Financial Services Bill through the House; that is whether, in full-scale directors' disqualifications proceedings, the real character of the trial is not really civil but criminal. If that is so, the Saunders-proofing that has been provided in Clause 10 ought to be extended to the CDDA.
Perhaps the Minister will reflect on what occurs in directors' disqualification proceedings. The proceedings are brought for the protection of the public and, at the end of the day, a director suffers disqualification. They are initiated after a long period of investigation by a team with special powers. The penalty of disqualification is severe: not only does it lead to the loss of a job, but it also leads to the loss of social status and a heavy cost burden.
These procedures are criminal in character and, therefore, should attract all the protections laid down in the European Convention on Human Rights. The Minister has certified that this Bill conforms with that convention; but, in my submission, Clause 10 does not go nearly far enough to make that so.
7.10 p.m.
Lord McIntosh of Haringey: My Lords, since I can now use my own words, instead of the speech written for me, very properly, by officials in introducing the Second Reading, I sympathise with my noble friend
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Lord Gavron. I also spent 30 years running my own company, although with considerably less success. Many times in the course of my business life I was threatened by banks. I had to provide personal guarantees based on my house and possessions in return for the possibility of the provision of working capital, even when I did not need that facility at any particular time.
Like my noble friend, I was also affected on many occasions by the domino effect; in other words, the possibility that my small business would be brought down, not because of the way that it was being run, but simply the fact that business done with others was in danger of being written off as bad debts in my accounts. That gives one a very clear view of what should be the order of priority.
Although I recognise that some contributions this evening have been critical on major points of detail—I do not walk away from that—in almost all cases, with the exception of the closing remarks of the noble Lord, Lord Kingsland, there was prejudice on the side of creditors. I hope to demonstrate that this Bill seeks to assist those businesses that are in difficulties to survive, which is fundamentally in the interests of creditors.
The Government were criticised by a number of noble Lords—in particular, the noble Baroness, Lady Buscombe, made a very powerful speech—for the short period of time allowed for consultation. I thought that that criticism was answered rather well by the noble Lord, Lord Sharman, who reminded us that the original consultation had taken place in 1993 under the previous administration. The noble Baroness, Lady Buscombe, believes that everything done up to 1997 was all right and everything thereafter is no good. One should read the speech of the noble Baroness, which was good in parts. According to the noble Baroness, the good parts occurred before 1997 and the bad parts afterwards.
I remind the noble Lord, Lord Razzall, that his noble friend said that the Bill was long overdue and drew the conclusion that it was worth proceeding with this part of the whole range of necessary solutions. I am rather surprised by the approach that has been adopted. When in opposition we frequently urged the government to get on with it. The government would say that they were carrying out a review and consultation and nothing could be done to remedy the problems until that process was completed, which would be in many years' time. Here we are today: we are carrying out a review to deal with the very important questions dealt with by noble Lords this evening—funding, debt for equity, super-statutory priority and so on. All of those issues raise fundamental difficulties and will take a considerable time to resolve. We have a moratorium which everybody to whom we have spoken agrees is necessary and can be proceeded with in a relatively small Bill, yet we are criticised for proceeding with what we can do and not waiting for what we could do in due course. Sometimes the best is the enemy of the good. If we can convince noble Lords that this Bill is the good and it is not invalidated by the pursuit of the best, we shall have done something worth while.

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A number of noble Lords referred to the Select Committee on Trade and Industry. Clearly, that committee gave the Bill serious consideration. However, very significant changes have been made since the draft Bill went before that Select Committee, and a large number of its comments, including some of those quoted this evening, referred to parts of the Bill which have been altered or even removed. If we look at the Bill as it is before us, rather than as it appeared before the Select Committee, the difficulties are perhaps rather less than envisaged.
It is generally agreed that the most important aspect of the moratorium debated this evening is the balance of safeguards between shareholders and creditors. It is true that we have had to strike a delicate balance in developing the proposal. Our desire has been to give directors the breathing space that they need to put rescue plans to creditors. At the same time, there is a need to provide creditors with reassurance. Creditors are concerned that the company is in financial trouble and they are unable to take action against it while the moratorium is in place. We cannot have a moratorium without safeguards because that gives the unscrupulous director an unlimited opportunity to spirit away assets free from the threat of immediate enforcement action.
I look forward to debating in Committee with the noble Baroness, Lady Buscombe, the spiriting away of various assets from laptops to rather larger items of equipment. Incidentally, I was amused to learn that the diplomatic bag with which Zimbabwe had interfered weighed 6½ tonnes. That gives a new meaning to the word "bag". But the noble Baroness raises a legitimate fear which must be assuaged. We must find ways to ensure that there is not a spiriting away of assets. However, I believe that the noble Baroness's more important point is her suggestion that the safeguard must be involvement by the court at an earlier stage, or at more stages, than is provided for in the Bill.
I believe that the fundamental safeguard—to which I shall return when I deal with the qualifications of the nominee and supervisor—is that the insolvency practitioner must be involved at the beginning. Somebody experienced in the whole range of options must be there to give objective advice. The Bill provides that initially a nominee is appointed by the directors of the company. However, the implementation of the moratorium is the responsibility of the supervisor and it is the creditors who have to approve his appointment. That is the safeguard for creditors. This is a new provision which does not exist in the Insolvency Act. In all these matters the view of the creditors prevails, which is a very important guarantee. Reading the Bill over the weekend, it took me a long time to work out that that was so, but I promise noble Lords that the guarantee exists and makes a great deal of difference. I believe that that is more important than the right to apply to the court for a winding-up order and the various other matters that noble Lords have suggested. Therefore, I hope that as we deal with the Bill in Committee we
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shall look at the structure a bit more closely than it has been possible to do in the course of a Second Reading debate. I hope that it will be seen that the structure is rational.
The noble Lords, Lord Sharman and Lord Razzall, in particular raised what they described as the fundamental issue of where the nominee's duty lies. The noble Lord, Lord Sharman, described the potential conflict as regards whether the nominee owes his duty to the general body of shareholders or to his particular client. The nominee is appointed by the directors but, as I said, the supervisor must be approved by the creditors. The nominee's duty is to perform the duties placed on him by the Bill. Those are his responsibilities, whoever he is appointed by, rather than owing a duty to any particular person. Again, if that is not clear, let us explore that in Committee and make sure that the Bill is unambiguous in that respect.
I turn now to the issue of whether creditors should be able to override shareholders, which lies behind some of the points which have been raised. The current company voluntary arrangement required that both the creditors and the shareholders must agree to a voluntary arrangement. That sounds all right but it can prove difficult. That is why, even now, nearly 15 years after the Act was passed, we still have only approximately 500 cases per year.
In most cases, the financial situation of a company is such that if it is to be liquidated, only the creditors have an asset in the business because the company is insolvent. Therefore, we have provided that in the event of a disagreement on major specified issues, decisions of creditors' meetings will prevail over those of shareholders. I realise that I am repeating myself but I am repeating myself in a different context. Again, that is part of the structure of the moratorium, which is extremely difficult to tease out of a 20-page schedule to the Bill. It will avoid the risk of losing what may otherwise be a workable rescue simply because the shareholders cannot or will not agree to it. But by way of a safeguard for shareholders, we have given them the right to apply to the court in such circumstances and the court may order the decision of the company meeting to have effect in place of that of the creditors' meeting; or it may make such other orders as it thinks fit.
The noble Baroness, Lady Buscombe, asked why we have introduced an extra ground to wind up a company following the failure of a moratorium. Where the company fails to agree a CVA following a moratorium, it will probably be in serious trouble. For that reason, that fact alone should support a petition to wind up a company. It will save a creditor who wants to take that step the expense of the delay necessarily involved in showing that the company is insolvent according to the test laid down in Section 123 of the Insolvency Act.
The noble Baroness, Lady Buscombe, and the noble Lord, Lord Razzall, both referred to the position of a landlord and said that be should be restricted, along with other creditors. Clearly, there is a point about right of access which we shall have to pursue. But that

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is not a point which is raised by this Bill. It exists already in other types of rescue, not just in a CVA. It is part of the review of company rescue mechanisms. It is too complex for us to deal with in the context of this Bill.
The noble Baroness, Lady Buscombe, asked what sort of security would benefit a company during a moratorium. The company might need to borrow money to finance its operations. The only way it might get it—because, of course, it is weakened—is by offering security to potential lenders. That is a matter which the nominee and the supervisor will have to take into consideration.
The noble Baroness asked why creditors cannot seek leave of the court to put a company into liquidation or receivership. If the court were able to grant leave for those purposes, the situation would arise where there would be two conflicting insolvency proceedings afoot—one a CVA moratorium and the other a liquidation. If there are concerns about the conduct of the directors in a moratorium, there are remedies in the Bill: the nominee must be notified and he then may consider withdrawing the moratorium; or there may be an application to the court to challenge the directors' actions.
I was asked from which date creditors' claims will be calculated for voluntary arrangements. At present, the dates from which claims are calculated are determined in the Insolvency Rules of 1986 and we shall make provision for the new procedures in the rules which we propose to he amended; that is, to reflect the amendments in the existing procedure to tidy up the position.
A major issue was the question of the qualification or authorisation of nominees and supervisors. I certainly agree that insolvency practitioner advice is required at the outset when the company is in difficulty and it needs to have the whole range of options assessed. But the appointment of supervisors provides that there is somebody who is more expert in rescue mechanisms than in the details of administration and insolvency. Indeed, the Society of Practitioners of Insolvency, now called the Association of Business Recovery Professionals, has recognised that by voting to allow those who have business rescue experience to join their organisation. It may be that this is experience in running businesses rather than the legal and accountancy aspects of not running them—in other words, running them out.
We do not know how it will work out. We do not know how that role, which is perhaps more akin to that of a company doctor, will work out. We do not know whether a body will arise or be encouraged to arise which will look for those skills alongside the skills of insolvency practitioners.
The noble Lord, Lord Kingsland, asked that we should delay this for five years. We are certainly not in a hurry to introduce it. We shall not introduce it until there is a body which recognises business rescue skills and is prepared to impose them, and we should not recognise anybody as a nominee or a supervisor unless he had agreed to abide by the rules of such a body.
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It may or may not be that such a person will be a qualified insolvency practitioner. But we should never allow the case which the noble Baroness, Lady Buscombe, fears; namely, that we shall get failed insolvency practitioners. Rather, it will be somebody with different parallel skills.
I can cut short what I say about disqualification undertakings because the provision was generally welcomed. I should say to the noble Baroness, Lady Buscombe, that certainly I understand the need not to have too many preconditions, and I say to the noble Lord, Lord Razzall, that I understand the need for subtlety by the department. He thinks that too many directors will be tempted to try their luck with the courts. That happens in only 10 per cent of cases now. It is unlikely that that will be a real difficulty.
I have less sympathy with the concerns expressed by the noble Lord, Lord Kingsland. I do not believe that there is anything here which takes away existing rights to contest a disqualification order in the court. Providing for something which, on past history, is likely to be agreed in a large number of cases will be beneficial. I cannot see any down-side to that.
I hear what the noble Lord says about criminal trials and I shall think about that. It does not seem entirely likely to me since we are not taking away any existing rights.
Lord Kingsland: My Lords, I am most grateful to the Minister for giving way. I was not in any way criticising the introduction of the undertaking. I think that is a good thing. But at the moment, in a full trial, the loser pays all. It is my view that a number of directors accept a Carecraft solution, or will accept an undertaking, even though they are innocent, because they fear that at the end of the day they may be disqualified and have to pay very large sums in costs. They are simply not prepared to take the risk.
I do not suggest that the noble Lord should remove the undertaking from the legislation. I suggest that he should go further and consider renewing costs awards in the disqualification proceedings themselves.
Lord McIntosh of Haringey: My Lords, of course I consider seriously everything that the noble Lord says: I just do not have any instinctive sympathy with it.
I shall deal quickly with the question of insolvent estates of deceased persons. I understand the need to be satisfied that there is no retrospective aspect involved. I can write to the noble Lord to reassure him in that respect or we can debate the matter in Committee. However, generally speaking, I believe that noble Lords have welcomed this part of the Bill. Indeed, I am grateful for that welcome. In the case of UNCITRAL, I certainly agree that we should be pressing for adoption by other countries. This is our contribution to it: we could not have pressed for adoption unless we provided for it, as we have in t his Bill.
I believe that I have dealt with as many points as your Lordships would wish me to do within the space of 20 minutes. I do not want to overemphasise the

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importance of the Bill, but we are responding to legitimate pressure to do something that seems pretty universally agreed to be desirable. We shall be happy to debate the details in Committee. But if we can make these moderate changes—I still say that they are both modest and moderate—to existing insolvency law, pending the major review that has already been started, we shall be benefiting business and enterprise in this country.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Child Poverty
7.31 p.m.
Baroness Crawleyrose to ask Her Majesty's Government whether they are satisfied with the operation of the Sure Start programme with its aim of improving outcomes for disadvantaged children.
The noble Baroness said: My Lords, I wish to thank my noble friend the Minister for her time in this debate, as well as noble Lords from all sides of the House who will be participating in our debate this evening on Sure Start. I wish to see this debate placed in the context of the Government's determination to eradicate child poverty in a generation and to halve it within the next 10 years.
The Government's own report published last year, Opportunity For All, along with the Rowntree Report and the latest report from the Institute of Policy Studies, which is based on 1997 figures, all paint a grim picture of child poverty in Britain that is truly shameful to own. The IPS study concludes that Britain, in terms of child poverty, is the worst place in Europe to grow up. It suffers from the worst child poverty rates; it has the highest number of households where no parent works and where 2 million, and more, children live; and has substantially more teenage pregnancies than any other European Union country. The study found that nearly one-third of children live in poor households in Britain, compared with only 13 per cent in Germany, 12 per cent in France and 24 per cent in Italy—figures that must be particularly hard for those noble Lords to swallow who spend so much time in this very Chamber decrying the economic and social efforts of our European partners.
The IPS study also tells us that in the 1980s and 1990s the number of children living in poverty increased by an extraordinary 40 per cent. Along with the rise in that time of worklessness and single-parent families, the previous government failed to do anything properly to address the problem of child poverty that has led to the current situation.
As my right honourable friend Mr Darling, the Secretary of State for Social Security, put it in another place during a debate on child poverty in January:
"The previous government spent considerable time denying that poverty even existed, which damned a whole generation of children from the start, because they happened to be born in the wrong place, at the wrong time—under a Tory Government".
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There is no doubt that lifting children out of poverty and powerlessness has to be this Government's greatest challenge. The study from the Centre for Analysis of Social Exclusion, published two weeks ago, underlines this huge challenge when it acknowledges that, although existing government policies to tackle poverty through tax benefits and work incentives would reduce the number of children living in poor families by 1 million, we would still be left with a further 2 million to be dealt with.
The Prime Minister has said that he wants,
"ours to be the first generation to end child poverty and that is a 20-year mission".
How the Government go about that mission is through a very large number of specific measures, including: the biggest ever increase in child benefit from £11.05 in April 1997 to £15 in April 2000 for the first child; by ensuring that more people are obtaining work through the New Deal; by the introduction of the working families' tax credit and the New Deal for lone parents; by an extra £19 billion on education; and, of course, through the £540 million Sure Start programme to help give vulnerable children the best start in life. We shall be hearing a lot more about that from my noble friend the Minister later in the debate.
We all know that poverty has many faces—the face of poor housing, poor education, poor employment prospects and poor health. As every doctor knows, poverty is a major determinant of health. That is why Sure Start is designed to deliver help to those children who need extra help from birth to formal education.
With the first of the Sure Start programmes having been rolled out around the country in the past 15 months, there will, of course, quite rightly be questions as to the geographic criteria used; the most effective use of measures of deprivation and the ways in which outcomes will be judged and monitored; and how those outcomes are interwoven with other government policies, such as maternity and parental leave. But suffice it to say—in the words of my right honourable friend the Secretary of State for Education, Mr David Blunkett:
"The goal of Sure Start is simple—to provide the support needed to parents, through help in nurturing and developing the health, well-being and learning capability of youngsters from the very moment they are born".
In conclusion, the strategy to defeat child poverty in the next 20 years has to be a four-pronged strategy. First, it must promote work—employment has to be the main route out of poverty. The number of people in employment has increased by 400,000 since 1997, giving us the highest number of people in employment in British history. The second part of the strategy is to direct more money to children in greatest need. The Government aim to spend £6 billion more on children by the end of this Parliament, through a combination of increased benefits and tax credits. The third prong of the strategy is to improve services and, in particular, education for all children. The final prong of the strategy is to revitalise voluntary help and consolidate grass roots community action, because no purely top-down policy can meet the ambitious aims of poverty elimination that the Government have set themselves.

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We have come a long way in the past 100 years in our present belief that the poor will not always be with us: from the fulminations of people like Herbert Spencer who, in 1884, and in an attempt to prevent their maiming or death, cited the Chimney-Sweepers Act (which prescribed the size of chimneys up which sweeps could send young children), as being against the liberty of contract and the system of laissez-faire, to the formal abolition of the Poor Laws in 1948, with its distinction between the deserving and the undeserving poor, and then to our own times. We must now commit ourselves to abolishing child poverty as a leftover of the 20th century. I look forward to hearing my noble friend's reply this evening on the current development of Sure Start.
7.39 p.m.
Baroness Blood: My Lords, I thank my noble friend Lady Crawley for initiating this debate on the Sure Start programme which has as its aim improving children's healt17, social development and the ability to learn.
Sure Start is about a long-term investment in the future of our children. In the summer of 1998 the Government announced the national programme. The programme was made flexible to reflect the differing needs of each region within the United Kingdom. This was a tremendous idea as what could prove to be successful in one area might not prove to be so successful in another, as each area has its own set of priorities.
It was an innovative way of thinking on the part of the Government and indeed novel in some ways as it reflected the fact that during the consultation period the Government had listened to what local people involved in early years provision had told them and had responded. Thus, while holding to the overall aim of the programme, best practice and value for money could be used as each region decided. This appeared to be well received by both the Government and local groups. The Government also deserve praise for supporting the implementation of the programme through an investment of £540 million over a period of three years.
The ethos of the programme is to co-ordinate, streamline and aid value to existing services for young families in local communities. That fits in well with the overall aim of the Health and Personal Social Services for Children and Families—Regional Strategy for Healthy Well Be:ng into the Next Millennium 1996. We shall hear tonight how the programme is working in the different regions. We in Northern Ireland are delighted to hear of this progress. During the consultation period some of those involved in projects in the United Kingdom visited Northern Ireland to see and learn of the work that groups were attempting to carry out. I should be pleased to hear positive feedback about the programme and to hear that it is moving forward. However, I am sorry to say that that is not the case in Northern Ireland. As I speak, no progress has been made; in fact, the programme has not even started. As a remit, Northern Ireland is almost two years behind the rest of the United Kingdom.
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When Northern Ireland is mentioned, noble Lords within the House and indeed those within the communities and regions of the United Kingdom could be forgiven for thinking that the only problem faced in Northern Ireland is that of the peace process. I agree that that is the most significant problem faced by the Province and as such we have many people working towards a resolution right across the community. However, that problem cannot be viewed in isolation.
We have many other major problems within our region. Like many of our mainland neighbours we have areas of extreme poverty, high levels of unemployment, poor health and low educational attainment, to name but a few. In many respects we are no different from any inner city area within mainland UK. However, unlike the rest of the United Kingdom, our problems are compounded by the effects of the Troubles. But, again, many people are working hard to address those problems.
The need for Sure Start in Northern Ireland is indisputable. One in three children live in poverty; 30 per cent of our children receive free school meals; 21 per cent of household income in Northern Ireland is benefit-based, compared with 13 per cent in the U K. The area within Belfast where I live and work has the highest percentage of teenage pregnancies in western Europe. It also has a high rate of suicide, particularly among young men. However, as I said, many people are working hard to find solutions to these local problems.
I wish to give some examples of the work that is carried out and to indicate how it could fit naturally into the Sure Start programme. Within the Greater Shankill area of Belfast the need for local people to form partnerships with education authorities, health trusts and government departments is evident, as all these sectors have a part to play in the regeneration of the area. Research was carried out to assist with the work and a number of initiatives emerged from the research which would allow the community to work in partnership to help solve its own problems. The Greater Shankill Partnership was formed to coordinate a number of projects which would eventually lead to the regeneration of the area.
The partnership approach worked well. But it was soon realised that to effect real change a major investment had to be made in the young people within the area. There was need to concentrate on work with young parents and children, preferably from birth, or, ideally, before the baby was born. The partnership applied to, and received, major funding from Europe to set up an early years project. The project focused on employing parents and training them to go into homes in the area to befriend other parents, to provide support and guidance on parenting and to raise the awareness of early years education through quality play, interaction and learning. Through this support network, it was hoped that parents would be encouraged back into community life and hack into education and training. Not only were the parents gaining new skills but these were filtered down to their children and, in turn, helped to raise the confidence of

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the whole family—a family that could actively contribute to its own community life. As I am sure noble Lords can imagine, the project was widely acknowledged as a huge success. Indeed, it could have been the forerunner to the Sure Start programme.
In Coleraine, in the north-west of the Province, an area renowned for its outstanding beauty and a natural resource for tourism, the same needs and disadvantage can be found on the housing estates. A dedicated group of people have developed a similar programme to the example I have just given. Indeed, the excellent work of groups in Harpers Hill has been widely acknowledged in the good practice guide.
However, both those programmes are in real danger of closing down. Both depended on continuing support from the Northern Ireland Sure Start programme. I could give many more examples of cases where good practice is being carried out by a host of projects and organisations: the Northern Ireland Pre-Play School Association, Barnardo's, Save the Children, NSPCC, and so on. Again, the Sure Start programme has so far failed these groups. Can noble Lords imagine the disappointment felt by these groups when they learn that the Sure Start programme has not even begun in our region some two years after its implementation in mainland UK?
In early 1999 almost £16 million was set aside by the Government to implement the Sure Start programme in Northern Ireland. Groups were informed a few months later that as there had been no demand for Sure Start in the Province the money would be used for another purpose. There was no consultation and no explanation. This unexplained statement caused outrage among groups involved in early years provision. Representation was made to the Minister to re-think this strange decision. After several weeks of consultation the Minister announced in September 1999 that £9.8 million would be available from April 2000, £4 million in the year 2000–2001 and £5.8 million in the year 2001–2002.
While there was certain dismay at the loss of almost £6 million and a year of the programme, at least groups could now rely on Sure Start money to sustain their projects. However, this confidence was again shattered when the projects were informed that the £4 million promised was to be reduced to £2 million and that it would not be available until September 2000 and for six months only. The department dealing with the Sure Start programme in Northern Ireland told us that it would seek to ensure that the £5.8 million that was promised would be in place for 2001–2002. However, there is no guarantee as regards the sum of £5.8 million. The problem seems to be that there is a lack of ring-fencing to allow money to be protected within block grant allocation for a particular purpose. Many doubt that the £5.8 million in total will ever be made available.
The kind of work and the problems that we are discussing today cannot be solved on a short-term basis. Sustained funding and support are required if real changes are to be achieved in our children's lives and futures. Northern Ireland's youngest children
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have been seriously disadvantaged by this range of decisions. To date, Northern Ireland under three year-olds have lost almost £7 million of funding which was intended specifically to address their needs. I should be grateful if the Minister will explain why Northern Ireland has been treated in such a manner as compared with other regions within the UK. Can she give the projects in Northern Ireland some assurance that future funding will be guaranteed in order to enable them to make long-term plans and commitments for the future of children in Northern Ireland in regard to early years provision?
Finally, the Chancellor of the Exchequer, Gordon Brown, announced in his Budget the creation of a children's fund to fund work by community and voluntary organisations with children living in poverty. It forms a central plank of the Government's anti-poverty programme, a point referred to by the noble Baroness, Lady Crawley. There is concern among organisations in Northern Ireland that the money coming in for this scheme will also be part of a block grant and that once again the losers will be the children of Northern Ireland.
7.50 p.m.
Baroness Thornton: My Lords, I thank my noble friend Lady Crawley for initiating the debate and for raising an issue which is of fundamental importance to the future and well-being of the most vulnerable children in our society.
Why is it that in one of the richest and best educated countries in the world there are children who do not have enough to eat? Why are there children who are never cuddled, children to whom no one ever reads, children who do not know how to play, when everyone knows that these kinds of stimulation help them grow into whole and happy people? We all know that there are babies who do not know how to laugh and smile because no one has ever laughed and smiled at them; we know there are thousands of children who know cold and damp, and violence and uncertainty in their lives. We know that, thankfully, such children are in a minority; we know that the vast majority of parents—even those on the lowest incomes and in the poorest circumstances—try to do their best for their children.
They may not always succeed in providing everything that they want for their children. There may be many reasons for parents finding it difficult to give their children the life they know they deserve. It may be because they do not know how; because they are themselves the inheritors of ignorance and poverty; or because they find life too difficult to cope with because they have too much debt, no work, few life chances, too little help and too many problems. We all bear a responsibility for such children and for what happens to them.
I feel fortunate to be associated with a charity which has fully embraced its responsibility for these children, a charity that has worked to improve life for the most vulnerable children in this country since 1869: I am talking about the NCH Action for Children. I am

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declaring an interest because of my close association with that organisation, and I make no apology for again in your Lordships' House talking about its work.
It is important to mention NCH Action for Children in this debate because it is an organisation which is working with the most vulnerable children in our communities, some 70,000 a year, in its 400 local projects. I am pleased to report that it is a partner in running one of t he Government's Sure Start projects. Some of what I intend to say tonight is based on its experience in that project. I should like to thank the head of the project for sparing the time to discuss her important work with me in preparation for the debate in your Lordships' House.
Two things distinguish Sure Start as an innovative idea. The first is its recognition that the early years are incredibly important in determining the life chances of a young person. How a baby thrives even before its birth can influence how as a small child it learns and grows. That, in turn, can make an enormous difference to how an older child achieves in school. Sure Start is a recognition that resources invested early reap huge benefits later in life. Secondly, the Government have recognised that to make real and meaningful changes they have to deliver support and services from the bottom up.
Sure Start projects are based on consumers' needs and specifically not on the delivery of services which professional people think might be good for them. I was very impressed with the process involved in the NCH Action for Children Sure Start project. NCH began by finding; out what support the parents felt they needed—for example, what kind of help people such as health visitors could offer, and when they needed to be offered that help. The job of a Sure Start project is to streamline and add value to existing services, and health visitors are very important in the whole process.
The Sure Start project works alongside health visitors and offers consistent top-up work to their important advice and support to a parent. The key word is "consistent". Consistency is important, for obvious reasons—but how often, for perfectly understandable reasons, do statutory agencies sometimes fail to provide that consistency and, because they are stretched, fail to meet the needs of the most needy? Sure Start helps to ensure that that consistency is present at an early and crucial time.
The lack of take-up of support is often because parents are ignorant of what is available and of their rights to support. Often the starting point of working with parents and families is the provision of information.
So parents are getting the input and support that they feel they need, when they need it. That support is offered over a long term—five years—and it is of a high quality. I should emphasise the high quality of Sure Start projects. I am informed that many parents have been motivated by the principles of partnership and quality that lie at the heart of Sure Start; by the idea that they are working in partnership with the project to enhance the life chances of their babies, their children and themselves.
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Many of the things provided by Sure Start seem simple and basic. They concern issues such as flexible childcare; the availability of rooms in which to socialise and to offer mutual support; and the provision of information and friendship. It is certainly the case that many parents feel that they are valued because the facilities and services of Sure Start are of a high quality and because they have a say in how these are accessed. This in itself creates self-worth and self-confidence. A parent with a feeling of self-worth and with self-confidence will be a better parent. We are attempting to create a virtuous circle, one which will create better parents who, in turn, will bring up better children.
All of the Sure Start projects and the other programmes which are being rolled out are not "quick fix" solutions. They seek to deal with what have seemed to be intractable problems, and so a long-term commitment is required. I should like an assurance from the Government that they recognise that they have embarked on a scheme which is unlikely to deliver in three years. I plead with them that their spending priorities should reflect the long-term nature of these projects.
One of the issues which arises out of the NCH projects with which I am familiar, and out of other projects, is that of mothers, babies and childcare. This is linked to the Government's commitment to childcare, to maternity leave and to pay. It would be an obvious piece of joined-up government to make it a priority that a mother can spend with her baby the first year of its life, and that high quality, flexible childcare is available when she returns to work. Better mothers are more likely to produce happy and fulfilled children.
The Government are to be congratulated on their commitment to delivering for women on the issue of most concern to them—that is, the balance between home and work. They are to be congratulated on the progress that has been made to eliminate child poverty. They are also to be congratulated on the Sure Start projects which address the issue of the importance of the early years of a child's life.
It does not take a genius to put these things together and to come to the conclusion that we need to look now at the possibilities of extending maternity leave so that mothers can spend more time at home. They do not want to give up jobs and should not have to; nor do they want to spend the crucial first year living in poverty because they have chosen to stay at home. We have already established the crucial importance of the first year. Poverty in the first 12 months of a baby's life make it more likely to suffer from long-term health problems. I urge the Government to carry out a review of this issue as part of the coherent drive to improve the life chances of the very young.
7.59 p.m.
Baroness Massey of Darwen: My Lords, I am grateful to my noble friend Lady Crawley for instigating this debate and for introducing it with her usual thoroughness. The Sure Start programme is in its

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early days but has great potential. It is one measure which responds to concerns about child health and education expressed in major reports such as All our Futures, Inequalities in Health and, more recently, the British Medical Association's Growing up in Britain.
I shall not describe the Sure Start programme in detail. That has been ably done and those noble Lords here today will he familiar with its broad aims of promoting the physical, intellectual and emotional development of young children, particularly those who are disadvantaged. What I would like to do today is refer to some of the concerns of Growing up in Britain and link these to the aims of the Sure Start programme, and in particular to the importance of parenting.
I became interested in the under-fives when I had three children under five and helped to organise a preschool playgroup. I realised then that I was dealing with a special species. We know, as parents and educators, that all children need security, love, attention to health needs and intellectual stimulation if they are to function well, as my noble friend Lady Thornton well described. The British Medical Association report to which I referred concluded that focusing on the early years of life would be of most benefit as that would influence childhood and adolescence. The Black report on inequalities in health insisted that a holistic approach was needed to overcome health problems that is to say, that increases in well-being rather than a reduction in disease was crucial and that social and emotional health were as important as physical health.
Another report, The State They're In, from the Trust for the Study of Adolescence—I declare an interest as a trustee—the Prince's Trust, and the National Youth Agency also makes interesting reading as it is concerned with adolescents growing up in Britain today. It looks at issues facing young people with regard to education, employment, health, identity and behaviour, all of which need to be given attention early in life if young people are to be enabled to overcome disadvantage, such as that described so graphically by the noble Baroness, Lady Blood. The report emphasises,
"the necessity for coherent national and local planning so that there is a greater co-ordination of services at all levels".
A combination of policies, aims, targets, implementation strategies and monitoring to benefit children's physical, social, intellectual and emotional health is what Sure Start aims to achieve, and it will be interesting to examine its impact in several years' time.
Child health has undergone changes during the last century with respect to the fall in deaths and morbidity from infections such as TB, measles and whooping cough. This is due to improved hygiene, living conditions, antibiotics and immunisation programmes. However, there are new problems, with increased prevalence of mental and emotional difficulties, asthma and obesity. A number of children, particularly, but not exclusively, those from disadvantaged backgrounds, are not succeeding at school. We have not yet broken what Sir Keith Joseph called many years ago the "cycle of deprivation".
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Of course, material wealth does not guarantee the well-being of a child. If a child is unwanted, neglected or subject to physical or emotional abuse, then the child will almost inevitably be scarred. If parents are poor, unemployed, isolated or homeless, they may well be rendered less capable of providing the attention their children need. It is therefore parental needs and the improvement of the quality of childcare which need to be addressed in any intervention aiming to enhance children's well-being. The BMA report defines good childcare as,
"a mutually affectionate relationship based on respect, empathy and genuineness with one or preferably more adults, consistent discipline based on positive reward for good behaviour rather than punishment for bad, and intellectual stimulation appropriate to the child's level of development".
It emphasises that good parenting depends not only on how the parent was parented but on the circumstances of their everyday lives, with pressures which may or may not be permanent. Supportive interventions can enable parents to feel competent and confident.
Let me now look at what seems to work in relation to reducing inequalities in health and education. Lessons from the Sure Start programme will be invaluable in adding to this body of knowledge. Studies suggest that interventions can have an impact on both the cognitive/intellectual and emotional wellbeing of children and that interventions designed to have an impact on one particular aspect of a child's life, such as health, are also likely to have an impact on other aspects, such as educational achievement.
Some of your Lordships may be familiar with the book Emotional Intelligence by Daniel Goldman. The author argues that emotional intelligence is as important, if not more so, than IQ. Emotional intelligence includes self-awareness and esteem, social skills and motivation. School success,
"is not predicted by a child's fund of facts or a precocious ability to read so much as by emotional and social measures: being self assured and interested; knowing what kind of behaviour is expected; being able to wait, to follow directions and to turn to [people] for help: and expressing needs while getting along with other children".
Goldman argues that such intelligence can be fostered in early life and that,
"the emotional abilities children acquire in later life build on those of the earliest years".
Studies have shown, in relation to educational achievement, that parental involvement is essential for success and that children who were well parented were more likely to he able to help their own children. The American project Head Start was funded for 20 years in an attempt to improve the achievement of poorer children. The results were interesting, finding that there was considerable wash-out of intellectual gains made during pre-school years once a child entered school and that other gains such as those in self-esteem and social behaviour also tended to disappear in the short term but to show a positive effect during late teenage years in relation to ambitions.
Another intervention in the US has been followed up until the child participants were 29 years of age. It was shown that those who benefited from the preschool programme were more likely to finish high

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school, were three times more likely to own their own home, four times more likely to earn well and five times less likely to have had trouble with the law. It was estimated that every dollar employed in nursery education led to savings of seven dollars on prison, police and probation services and payment of taxes by those employed.
Another programme in the US was targeted at low income, unmarred or teenage mothers. Nurse visiting was carried out to 400 women from pregnancy until the child was two years old. The mothers were supported and encouraged to parent in a positive way. They were also offered healthcare facilities and screening. A number of positive effects were found, including lower rates of child abuse and neglect, fewer accident and emergency visits and home environments where the children were given greater intellectual stimulation and emotional support than in the control group.
In the UK, the child development programme, offering monthly support visits to new parents before birth and for the first year of life, proved successful in raising the standards of parenting. Other support programmes in the UK have been shown to improve uptake and c Dntinuation of breastfeeding and immunisation, better nutrition and better interactions between parent and child. The noble Baroness, Lady Blood, described other good practice.
The Sure St art programme builds on existing provision in education, health and social services. It enables and facilitates good parenting. I quote from last year's annual report:
"Parents are their child's first educators. Sure Start programmes must provide them with support in this crucial role. By enabling parents to promote children's learning in enjoyable ways they can also help ensure that children become positive about their education".
The programme has outcome measures such as increased immunisation or breastfeeding rates and output measures such as more children with access to stimulating play opportunities. I understand that there will be a long-term national evaluation of Sure Start to be launched this spring. I should like the Minister to describe this evaluation in as much detail as possible. I feel that this is a unique opportunity to learn from what works and what does not work and why, and to set down evidence-based future good practice for the well-being of children.
Much constructive work has been done focusing on the under-fives both in the UK and abroad. Sure Start pulls together a number of positive initiatives. Evaluations in the United States have concentrated not only on improvements in quality of life as a result of intervention programmes but on cost implications. It was estimated by one programme that savings added up to three times the amount spent on intervention as a result of reducing the need for foster care or institutional care alone. The American Committee on Economic Development has stated:
"Improving the prospects for disadvantaged children is not an expense but an excellent investment, one that can be postponed only at much greater cost to society".
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It will be important to assess whether Sure Start has economic as well as social and educational benefits.
I conclude by stating my belief that attention to the well-being and development of the under-fives should be a priority for any government, for they are the foundation for the future well-being and development of society. I look forward to the Minister's response.
8.10 p.m.
Earl Russell: My Lords, I, too, should like to thank the noble Baroness, Lady Crawley, for introducing the Question. Before getting down to business, perhaps I may begin with a story about Herbert Spencer which may offer the noble Baroness some consolation. Herbert Spencer was playing billiards with an undergraduate, and was absolutely thrashed. He turned to the undergraduate and said, "Sir, to play billiards as badly as you do argues a mis-spent youth". The undergraduate raised an eyebrow and replied, "Sir, to play billiards as badly as you do argues a misspent old age".
That brings us to a subject of some magnitude. I remember the Head Start figures offered by the noble Baroness, Lady Massey of Darwen. They are indeed startling. If any benefit of that kind is remotely in prospect, such programmes need to be taken very seriously. What I have not heard, and the Minister probably knows, is how the Head Start figures were calculated, and in what ways the programme that we are discussing either resembles or differs from Head Start.
I warmly welcome the concern about many questions—about poverty, and about the status of women with families and work that has led to this programme. However, I have a certain number of misgivings which I shall try to put in balance.
First, the scheme is still at the early pilot stage. I should have thought that the only possible answer as yet to the question, "Is the Minister satisfied?", is the answer given by Mao Tse Tung when asked what were the effects of the French Revolution: "It is too early to say".
The programme is also being applied selectively. In a recent Written Answer to Frank Field, Yvette Cooper said that by 2002 it was expected to affect 18 per cent of children under four. It is in effect being applied in particular deprived pockets. We know about those pockets; we discussed them on 16th February, and I am sure that we shall return to them. I understand the case for that approach. But of course the programme is a complement, not an alternative, to raising the overall levels of provision. People suffering deprivation do not all come from deprived areas. However, the Treasury being what it is, it is often a great deal easier to get money out of it for very small projects than it is for raising the overall level of provision.
I remember a remark by a newspaper correspondent who was following President Clinton around during the last presidential election. He said that the President continually offered very vague statements of general aspiration, followed by a number of very small

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initiatives. I am sure the Minister will understand why that gave me misgivings, and why, in a world where the Treasury is what it is, those misgivings may occasionally be justified. I am sure that she will bear these questions in mind.
An aspect of the programme that struck me as particularly good is its application to all local families in the selected locality, so there is no possibility of any stigma attaching to those who are included in it. A great deal of the programme appears to be an extension in effect of what is presently done on a more selective scale by health visitors. That may do much good. I was particularly struck by the objective of early detection in cases of post-natal depression. When one can do that, it may save an immense amount of suffering and an immense amount of public money. If one can do both of those things at once, one really has hit the jackpot.
On the other hand, there are anxieties. I can well remember my first day as a new parent, having just brought the baby back from hospital. We do not sufficiently allow for just how nervous new parents usually are. If they are surrounded by young people just out of college with a thorough training who think they know all about how to do it, it can have the effect of undermining confidence rather than creating it. If history proves anything, it proves that the upbringing of a child can be done with success in a vast variety of cultures and a vast variety of different fashions, and according to a vast number of different theories of childcare. One method will not necessarily suit all parents. So the method that the young professional coming in to the house has read about and thinks everyone ought to be using may not always be right for that parent with that child. Indeed, if one has brought up more than one child, one cannot always say that exactly the same methods are appropriate to all of one's own children. I hope that that point will be borne in mind.
There is an immense problem with targets. The Minister knows that I have a problem with targets anyway. A great deal of what is most important is not quantifiable, and the search for the quantifier often results in a loss of the important things that are unquantifiable. I have noted some of the targets that are proposed. I can see the point of them, but they may be measuring outside matters, not internal ones. The target for reducing cases of gastro-enteritis may be one such example. Gastro-enteritis may be a crude measure of poverty and disadvantage. However, I remember that when my elder son went down with the illness, it was not the result of poverty or deprivation; it was the result of a French holiday. Such cases may significantly distort statistics. As to the target for the numbers involved in breast-feeding, I can see that there may be something in that as a broad brush indicator. But it may measure maternal health influenced by matters quite different from any social circumstance or even anything to do with the birth of the child.
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Beyond that, I found a certain lack of specifics in regard to what will be done in Sure Start programmes. I should be glad if the Minister would fill us in. As to the outcomes, it may still be too early to say. I understand from watching last Friday's "Newsnight" that there is also a good deal of debate going on in academic circles about how far early learning, as distinct from early play and early encouragement, is necessarily to the advantage of children. It was alleged on "Newsnight" that the Government are not quite up to date with the latest research. That is a reproach that I would never make against the Minister herself, but it should be borne in mind. All latest research is necessarily to some extent the slave of fashion. It is not usually until 10 years later that one knows which research was the slave of a momentary fashion and which was not—and sometimes a good deal longer.
There is also a risk of failing to identify some disadvantaged children. During the "Newsnight" programme, Mrs Hodge expressed herself strongly and clearly in regard to the importance of toys as part of a child's learning process. I agree entirely with what she said. But I wish the Minister would ask Mrs Hodge to communicate her views on the matter to her right honourable friend Mr Straw, who does not seem to have heard the point. Toys are among the items that children of asylum seekers are not allowed since the Home Secretary appears to have decided that they are not necessary. The Minister can check that in Statutory Instrument No. 704/2000—we shall discuss it in a little while—which states in Regulation 9(3) that,
"None of the items and expenses mentioned in paragraph (4) is to be treated as an essential living need of a person for the purposes of Part VI of the Act".
Those items and expenses are toys and other recreational items. That means that if anyone else provides toys the support available to the asylum seeker is reduced in proportion. I wonder whether the Home Secretary is pickling a rod for his own and the Treasury's backs. I know that we believe nowadays in joined-up government, but could the Home Office possibly be joined up together with the rest; or is that really asking for the moon?
8.20 p.m.
Lord Higgins: My Lords, it has been a complaint from this side of the House against the Government that the Treasury is consistently taking over the Department of Social Security. Today we seem to be in a somewhat different situation. The Department of Social Security seems to be taking over the Department for Education. None the less I am sure that we could have no better or more expert Minister to reply than the noble Baroness, Lady Hollis.
The Sure Start programme originated as a consequence of the comprehensive spending review, and in particular a review of services for children aged up to seven. It struck me as a superb innovation. I have always been in favour of Treasury Ministers advocating people's spending on certain projects. But one of the bad aspects of our system is that Treasury Ministers can only say "no" and never "yes". The

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innovation seemed a good idea. However, I was somewhat disillusioned. It transpires from the Chancellor's 1998 Budget speech that these measures will enable hint to reduce the £11.5 billion that is currently spent on children after things have gone wrong. I am not sure of the basis for that £11.5 billion. However, the project has much to be said for it provided that it operates efficiently. I shall turn to that point in a moment.
I welcome this debate. It is perhaps a little unfortunate that in initiating it the noble Baroness, Lady Crawley, stated in throw-away lines that the previous government denied that anyone was in poverty. I do not think such statements greatly improve the level of debate. In contrast, the noble Baroness, Lady Blood, made a moving speech in relation to Northern Ireland. I must have led a somewhat sheltered life in the south of England. However, when I began my national service I was sent within a week or two on escort duty to Northern Ireland to bring back a deserter who had had family problems. I was struck not only by the problems he faced but also by the level of poverty in Belfast at that time. No doubt there are still pockets of very considerable deprivation. I had never previously seen children without shoes. It brought forcibly home to me the differences which exist between the regions and which are exemplified in the approach the Government now take to this issue.
However, there are some problems. The size of the area is relevant. I noted today a distinction made between the levels of deprivation in Spitalfields and the City of London. It is difficult to define the size of the area on which one should concentrate when engaging upon an exercise such as Sure Start. As the noble Baroness, Lady Crawley, said, the Prime Minister stated that it is the intention to halve the level of child poverty in 10 years and to eliminate it in a generation.
That brings us to the important question of the definition of poverty. In debates on social security Bills last year, one distinguished between the poverty that exists, for example, in sub-Saharan Africa and poverty in this country. In a sense, poverty is relative. Can the Minister tell us what definition of poverty is being used as regards the Prime Minister's declaration? On some definitions it will not be true, as the noble Baroness said in opening the debate, that the poor will no longer always be with us. The level of poverty can be defined in such a way that it rises with the general standard of living. It would De helpful if the Minister could clarify that point.
The noble Earl, Lord Russell, was against quantification. I tend to quantify. We are told that £542 million will be spent on the projects between 1999 and 2002 of which £452 million is to be concentrated on 250 projects. I understand that the projects cover only about 5 per cent of the children in the country. How wide is it proposed to extend the figure? The noble Baroness says that these are not large amounts compared with some other government expenditures. But if the figure is to be 20 times that £452 million, it
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is a considerable sum. Even if one makes it more restrictive, the expenditure will be by no means small. It must be clear that the exercise is effective.
I turn to monitoring, targets and local milestones. I refer to two targets. The first target relates to "improving social and emotional development". That is difficult to ascertain. The noble Earl, Lord Russell, referred to post-natal depression. But some targets are quantified—for example, the 10 per cent reduction in children re-registered on a child protection register. It will be interesting to see to what extent one can quantify such a target with any degree of accuracy.
Some targets are more vague and state:
"All local Sure Start programmes to have agreed and implemented, in a culturally sensitive way, ways of identifying, caring for and supporting mothers with post-natal depression".
Clearly it depends on the area selected.
I turn to another aspect of the targets under the heading of improving health. There is reference to.
"5 per cent reduction in proportion of low birth-weight babies.".
The noble Baroness, Lady Massey of Darwen, referred to a forthcoming evaluation. It would be helpful to know more about that. I am somewhat worried by an Answer to a Question in another place on 10th January, at col. 38WA of the Official Report. In reply to Mr Field, Yvette Cooper produced a table giving the start point of data for low birth-weight babies of less than 2,500 grammes. From time to time I congratulate friends on the birth of their baby and always ask the baby's weight. It is usually about eight pounds, and quite heavy. I do not have the remotest idea what 2,500 grammes is in pounds and ounces; I imagine that it is much less than eight pounds. The figure seems excessively metric. Perhaps a more easily understandable figure could be produced. I do not ask the Minister to say off the top of her head what 2,500 grammes is in pounds and ounces.
However, what is more worrying about the figures for the 15 Sure Start programmes which have been approved so far is, on the one hand, the wide variation between regions—this really makes the Government's point; there are big variations in birth weights—and, on the other hand, the inadequacy of the figures. In some places, the figures are expressed in percentage terms; for example, in Birmingham 11 per cent of babies are said to be under 2,500 grammes. In other places, they are expressed by the number of babies.
There is no point in producing in an Answer to a parliamentary Question tables which compare percentages in one place with the number of babies in the other. We have no idea how many babies are covered in the Birmingham figure or what percentage of the total are the 62 babies in Derby. That is the point which I believe should be made this evening. Although in general this programme is considered to be admirable, it is important that we monitor it on a proper basis. For reasons which are totally obscure, in Leicester a baby is underweight at 1,500 grammes, whereas everywhere else a baby is underweight at 2,500 grammes. I do not understand why that should be so. Therefore, it is important that we sort out the matter.

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Similarly, referring to a point made by the noble Earl and others, at present we do not have figures relating to emergency admissions to hospital of babies with gastro-enteritis in their first year of life. I gather that those figures are being collected this month. However, again, it is very difficult to draw any conclusions from the figures which have been provided to Mr Field. Therefore, I believe that it is important that we have real yardsticks which enable us to tell whether or not the programme is effective.
Generally speaking, the Government are spending substantial sums of money. However worthwhile that may be, there is no point if it is not effective. I believe that we on this side of the House wish to see the programme carried out in an efficient way. That will satisfy not only the Treasury but, it is hoped, the Department of Social Security, the Department for Education and Employment and the other departments which, rightly, are involved in this matter. Having said that, I believe that this has been a helpful debate, and I look forward to the Minister's reply.
8.31 p.m.
The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, I thank my noble friend Lady Crawley for giving us the opportunity to discuss this important initiative. It is fundamental to our efforts to eradicate child poverty and the consequences of child poverty for children, their families and society. I thank my noble friend for offering us and introducing for us such a thoughtful debate.
The poor in this country are children. One-third of all children are poor. As several of my noble friends said, the Prime Minister has made it his mission to eradicate child poverty in 20 years because it is, indeed, a stain on our society.
There is a clear moral drive and a moral case behind the Government's determination to end child poverty. However, as the noble Lord, Lord Higgins, suspected, there is also an economic and social one. He asked what our definition of poverty is. The Government's own report, Opportunity for All, makes clear that poverty is multi-faceted, not only in terms of deprivation of housing, health and educational opportunity, but also in terms of income. Obviously, he is right to make the distinction between absolute and relative income. The European definition is 60 per cent of median income, which equates approximately to 50 per cent of mean income. As noble Lords know, the difference between the two is that mean income is rather more sensitive to the distortions of the few very high earners at the top end; median is perhaps the more accurate reflection of where people stand.
There is evidence from the US High Scope programme for black children that integrating family support and early education can make a big difference to the outcomes for children later on. High Scope children did better at school, avoided early pregnancy, stayed out of trouble with the law, drew less social
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security and obtained jobs with better pay. As my noble friend Lady Massey described, estimates over 23 years showed that for every 1 dollar invested, 7 dollars were saved to society. Our own Early Excellence Centres in the UK show similar results.
Sure Start is one part of the Government's investment in young children. As my noble friend Lady Crawley described, that waterfront approach of the Government has been to include the New Deal for Lone Parents, the working families' tax credit and the National Childcare Strategy. Those are all efforts to help the child's parents back into work.
However, we also recognised that people in disadvantaged areas face still more acute problems. Services are often poor, transport links are bad, the baby clinic and the play group may be out of reach and the community may have lost confidence in society and in themselves. Through programmes such as the New Deal for Communities we hope that we are building the capacity of those communities to start to tackle those problems for themselves.
That is where Sure Start comes in. We want to improve significantly the outcomes for poor children and break the cycle of deprivation which is transmitted across the generations, as described so eloquently by my noble friend Lady Massey. Tackling such deep-seated problems requires a concerted approach, both at local level and in national policy-making. Therefore, for example, while I speak on Sure Start in the Lords as a Social Security Minister, the lead Minister is Yvette Cooper in the Department of Health, and David Blunkett at the Department for Education and Employment is the Cabinet Minister responsible for the programme.
How did Sure Start begin? When we came into power in 1997, we found that child poverty in the UK had been increasing rapidly since 1979 and, with it, alarming disparities between the life chances of children living in poverty and those living in more affluent circumstances. Those differences could be observed in children as young as 22 months. The differences widened and did not narrow as children grew older.
The need was clear. Therefore, we looked at how existing services were meeting that need. We found that services were patchy, uncoordinated and of mixed quality, especially for very young children in disadvantaged areas. There were no incentives for one government department to spend money that would save another department more money later on. That is the classic problem of government departments and chimneys!
All the evidence suggested that services needed to offer comprehensive, early and sustained support for children and families. We found that successful programmes share key features, all of which we have tried to build into Sure Start: they work with parents as well as with children; they offer support at an early stage before difficulties build up and become too much for the family to deal with; and, as far as possible, the focus is on prevention rather than cure.

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They also offer sustained help and support over many years. They look at the whole child, working on health, learning and social development in an integrated way They are firmly rooted in local communities and encourage local people to share in their design and delivery. They are non-stigmatising. Therefore, people are not put off using them by the thought that they will be branded as "bad parents". Finally, and importantly, they offer culturally appropriate services to all local families. Those are all considerations that were described by my noble friend Lady Thornton.
Sure Start takes that evidence and seeks to put it to work. Yes, it i aimed at families in poverty, but targeted by area rather than by individual families to avoid stigma. It requires agencies to work together, and local partnerships must involve local parents in designing and running services.
Therefore, what are we seeking to achieve? Sure Start aims to improve the health and well-being of families and children—if one likes, to address the outcomes of poverty in the same way as social security departments seek to address the basic issue of income poverty. It starts before birth and works with children and their parents up to the child's fourth birthday. We have invested £452 million over three years to set up local Sure Start programmes in 250 disadvantaged areas throughout England.
The selection of areas is based on local poverty indicators. There is no bidding process and no competition. Therefore, scarce community resources are not tied up in drawing up bids that never receive the go-ahead. In that way, our resources are targeted on areas of need and not on areas which make the best writers of bids.
The programmes are based in disadvantaged areas throughout the country: from Dover to Durham, from Penzance to Preston. I was reassured when I saw yesterday's study in the press of the 20 most disadvantaged areas in England. All are either in the first wave or invited to join the second wave of Sure Start trailblazer programmes. Over the 250 programmes, we expect to reach 8 per cent of children aged under four at any one time and 20 per cent of the age group of those living in poverty. Most, but not all, of the current programmes are based in the cities and larger towns where we find the biggest concentrations of deprivation. The noble Earl, Lord Russell, is right in saying that half of all poor children do not live in poor areas. The problems of outreach work for those who live in rural areas and the like is extremely difficult to make cost-effective without stigmatising by so overtargeting that the parents recoil.
The noble Baroness, Lady Blood, raised the problems of Northern Ireland and its failure to be included in the programme. I was grateful that she was able to give me notice of her concerns so that I could follow them up. I regret the delays in getting Sure Start up and running in Northern Ireland. We look forward to seeing Sure Start under way throughout the UK, but so far it has been an England-based programme.
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Officials from the Sure Start unit in England have been to Northern Ireland to advise their counterparts on planning guidance and funding mechanisms because they have ring-fenced funding for those purposes. There remain some issues which need careful thinking through. Sure Start as constituted in England would not necessarily work in Northern Ireland. The local programmes in England are concentrated mainly in larger cities. The catchment area is typically 500 to 1,000 children under four. In Northern Ireland, the programme will need to take account of the rural character of poverty, with smaller pockets of deprivation.
In a devolved system of government, responsibilities for decisions in Northern Ireland remain with people in institutions based in the Province, including at present my ministerial colleague in the Northern Ireland Office. They must make decisions on priorities based on local needs and circumstances which I should not like to second guess and it would be inappropriate for me to do so. Certainly, I shall ensure that my colleagues in Northern Ireland receive a copy of the noble Baroness's speech and seek to reassure her that her concerns are being addressed there. She was right to raise them for us tonight.
The Sure Start programme will, we hope, also have a wider demonstration effect that reaches more children over time. Our aim is to find out what works and how, and then to make sure that we spread good practice to everyone involved in delivering services for children and families.
By influencing and improving mainstream services, we will obtain best value out of the substantial resources, which could be as much as £11.5 billion every year, that already goes into services for children and families; ranging from health to social services and the like.
Sure Start will provide high quality experiences for young children with first-rate services, well-trained staff and premises that are attractive and welcoming. The aim is better outcomes for disadvantaged young children, improved social and emotional development, better health and a stronger capacity for learning. Central to that is childcare. I am happy to reassure my noble friend Lady Thornton that more than 7,000 new places are within the 60 trailblazer programmes, which will be a useful and significant addition to our childcare provision in England.
Each local Sure Start programme works to nationally set objectives and 12 challenging targets to be met over three years, remarked upon by the noble Earl, Lord Russell. How those targets are achieved is up to local people to decide, drawing on the evidence of what works. This supports local enthusiasm and ownership. It allows a variety of approaches to be tested, based on local circumstances. It will be different in different areas and many of the benefits will not be apparent for several years.
However, I hope that some of the examples—one of which was referred to by the noble Earl, Lord Russell—indicate what we are seeking to do. For example, we are looking for a 5 per cent reduction in

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the number of babies born with a birth weight under five and a half pounds, or 2.5 kilograms. Two or three of my noble friends, who are more "Eurospeed" than some of us, were able to do those sums more quickly than me or the noble Lord, Lord Higgins. That was rather disgraceful, given that his family base is a high-profile, highly responsible position of concern within the European Community and the European Court.
However, one of the reasons for targeting underweight babies is that they have less well-developed muscles in their mouths affecting their ability to suckle and take in food. They need to feed more often, which affects their sleeping patterns. We know that low birth weight is also associated with health problems in later life, such as coronary heart disease, diabetes and hypertension.
We also have a target to try to identify and care for mothers with post-natal depression. That is one of the best predictors of whether mothers and children bond with each other. We also know that the effects of a failure to bond can be long lasting. Researchers have found a correlation between mothers' post-natal depression and low IQ scores among boys at the age of 11. We hope to be able to work in that area.
We are also aiming for a 10 per cent reduction in the number of children admitted to hospital in the first year of life with gastro-enteritis. We shall exclude all those babies taken to France during the course of parental holidays who suffer infection or severe injury! We know—and this is the serious point that the noble Lord will respect—that poor children are five times more likely to suffer accidental, as opposed to non-accidental, serious injury or to die as a result of accidents than children in socio-economic classes 1 and 2. That measurement is a powerful proxy for the health and well-being of very young children.
At 18 months, we want to ensure that at least 90 per cent of children have normal speech and language development—otherwise at school far from catching up they progressively fall behind.
Some things will be common to all programmes. For example, all families will receive a visit within two months of a new birth to introduce them to what is available locally. Outreach and home visiting are a core part of the Sure Start approach so that we engage with all parents including those who might not otherwise come forward.
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The first trailblazer programmes are under way in 60 areas—57 have now been approved—and a second wave of 69 areas are building partnerships. We already believe that that is making a difference. We are seeing new partnerships between agencies which rarely worked together in the past. We are seeing public sector services and professionals working much more closely and with much greater respect for parents and responding to their needs.
We are beginning to see services developing in new ways. Health visitors and midwives, for example, have been enlarging what they are able to do. Parents are being offered more ante-natal advice and more work in depression is being undertaken. Help is being provided with baby sleep clinics and there are sessions for parents on dealing with the behavioural problems of their children.
In conclusion, Sure Start is an investment in faith and hope for children living in poverty. Some of the outcomes we are seeking to achieve will not be measurable until 15 to 20 years' time. However, we will be starting careful evaluation from this summer onwards. There will be some technical problems with evaluation, given the overlapping effects of other agencies, the health action zones, education action zones and the like. However, a large-scale, long-term national evaluation of Sure Start will begin in summer 2000.
As well as looking at short- and medium-term results, it will also include a major longitudinal study of outcomes using a significant sample of Sure Start children. It will also look at more qualitative assessments of small group work. We shall be looking at whether children have achieved their potential at school; whether they have a job; whether they have avoided becoming pregnant as teenagers; and whether they have steered clear of entanglement with the law.
Sure Start is a cornerstone of our drive to end child poverty and to tackle social exclusion by seeking to overcome the disadvantages that flow from child poverty. It is early days, but it is working and it is popular. We are releasing the powers of energy and innovation in deprived neighbourhoods across the country. It is ambitious, but our children are entitled to nothing less. I hope that as a result we will all work together in meeting those objectives and addressing the problems for our deprived children.
House adjourned at twelve minutes before nine o'clock.