Lords Sitting of 10 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 Gloucester.

Prisons: Close Supervision Centres
The Earl of Longfordasked Her Majesty's Government:
What is their response to the report of the Chief Inspector of Prisons on inspection of close supervision centres.
The Parliamentary Under-Secretary of State, Home Office (Lord Bassam of Brighton): My Lords, the report makes 21 recommendations to the Director-General of the Prison Service and one to the Home Secretary. Of the recommendations, 14 have been accepted in principle and two rejected wholly or in part. The remaining seven recommendations are still under consideration.
Our response to this helpful report has been guided by the principle that any recommendation which has the potential to increase the risk to prison staff or other prisoners will simply not be accepted.
The Earl of Longford: My Lords, I apply limited enthusiasm to that guarded Answer from my noble and much esteemed friend the Minister. He is aware, of course, that the report is highly critical of the arrangements for looking after these very difficult prisoners. I wish to ask him two questions of which he has been given slight notice, although he may not have had time to consider them. First, does he realise that the chief inspector is calling for a totally new approach to supposedly dangerous prisoners? I turn to the particular. I am referring now to someone called
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Charlie Bronson. He is rather famous. He has been in solitary confinement for 22 years. He is possibly the strongest man in England, doing 3,000 press-ups a day, and is considered dangerous. But he is a gifted man. He has won four prizes for cartoons and he has written a book. This man is at present on a concrete bed and has no window in his cell. Is the Minister going to justify that?
Lord Bassam of Brighton: My Lords, we welcomed the report, which was both helpful and constructive. It is perhaps worth reminding your Lordships of the opening paragraph of the inspector's report. It states:
"The most difficult problem facing any prison system is that posed by the small number of really dangerous and disruptive prisoners who attack staff, take hostages, attack and murder other prisoners and refuse to conform to normal prison conditions".
In those circumstances we have to pay serious regard not only to the recommendations but also to the threat that is posed to prison officers and staff working in the prisons by these 40 or so most difficult prisoners within the entire prison system. The Prison Service is to conduct further research into the management of highly disruptive prisoners and a new advisory group will assist the Prison Service in that regard.
As to Charles Bronson, it is not the case that he is sleeping on a concrete bed. He is sleeping on a concrete plinth, but the fact is that it has normal bedding material, including a mattress and bed clothing, placed on it. His cell does have a window. He has a cardboard solid chair and table and a fixed notice board. He is allowed a number of personal items. The reason he lives in those very constrained circumstances is that he poses a profound risk to staff and there is a very long record of that. The Prison Service has to take pay careful regard to the danger he presents not just to other prisoners, and not just to prison officers, but also, on occasions, to himself.
Lord Dholakia: My Lords, is the Minister aware that there are high-security inmates in this establishment? Does he accept that the regime has been oppressive? Does he further accept that the test of a civilised prison

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regime is that the establishment is run in a civilised way? Will he consider the possibility of examining good practice in countries such as Holland and Denmark to see what lessons could be learnt and whether such good practice could be implemented in some of our prisons in this country?
Lord Bassam of Brighton: My Lords, the test of any civilised society is that it can contain its prison population in a highly civilised and humane way. However, as I said earlier, there are just 40 prisoners within this special category of supervision. The noble Lord suggests that we should undertake research into best practice internationally. I can advise your Lordships' House and the noble Lord that there is no established best practice. We are attempting to establish precisely the best possible practice. We intend to conduct further research into the issue because we realise that it is difficult, as the inspector recognised, to hold such prisoners in our prison system.
The Earl of Listowel: My Lords, does the Minister agree that many of the prisoners in this institution will have come from deprived families and will have very little education behind them? Does he not further agree that the Government's Sure Start programme, which seeks to intervene in order to help children and families by supporting them early, is welcome in terms of reducing the number of such institutions and the need for them in the future?
Lord Bassam of Brighton: My Lords, I cannot possibly comment on Sure Start; that is a different programme from a different department. Obviously, any contribution that it makes in the long term to eradicating the more severe forms of personality disorder of which these prisoners are a reflection is welcome. Such prisoners are at the extreme of personal behaviour. For that reason, great care has to be taken regarding how they are managed through the system and through the prison estate.
Lord Cope of Berkeley: My Lords, does the Minister appreciate that he has the support of these Benches in setting the safety of prison officers and staff as the first priority in the case of difficult and violent prisoners? On a detailed point, will the Minister comment on what I understand to be the case; namely, that the boards of visitors have been cut out of the decision-making process by the new set-up? I am not at all sure that that is desirable.
Lord Bassam of Brighton: My Lords, I am grateful to the noble Lord for his continued support for the measures that we take to deal with violent prisoners of this kind. As to boards of visitors, there are only two establishments involved as close supervision centres. It is our view that it is important to have a special advisory group; therefore, a new CSC advisory group is to be established. That indicates that the issue of accountability in the system is being seriously addressed. The group will advise the Prison Service,
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the inspectorate and the Home Office on the treatment of prisoners and on the way in which they are managed through the prisons system.

Combined Heat and Power Generation Targets
2.45 p.m.
Lord Ezraasked Her Majesty's Government:
What steps they will be taking to achieve the new target of 10 gigawatts of combined heat and power generation by 2010.
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Lord Whitty): My Lords, we shall shortly consult on the draft strategy, which will include policy, fiscal and regulatory measures. The forthcoming key measures already announced for good-quality CHP include exemption from the climate change levy, eligibility for enhanced capital allowances and de-rating of plant and machinery. We are implementing a CHP quality assurance programme to determine eligibility for these benefits. We are also launching a CHP club to provide integrated support to encourage new schemes.
Lord Ezra: My Lords, I thank the Minister for that informative response. Before asking my supplementary question, I should like to state that I am chairman of a combined heat and power company in Sheffield which generates what is known as "green" energy, or environmentally friendly energy, to many of the premises in that city. Naturally, for that and other reasons, I strongly support the Government's measures in favour of combined heat and power. However, will the Minister explain the anomaly arising from the climate change levy and the new electricity trading arrangements which would bear down on CHP? In regard to the climate change levy, why is it that if CHP electricity is supplied to users it does not bear the levy, but if it is supplied through electricity suppliers, it does? In line with the Government's strong support for combined heat and power, will they put right these anomalies, and in particular the anomaly to which I have referred?
Lord Whitty: My Lords, the noble Lord is correct in saying that good-quality CHP is exempt from the levy where the electricity is consumed on site, internally, and where it is sold direct to other customers. It is the treatment of CHP electricity in the grid, to use "old-speak", that is not exempt from the levy. That is consistent with all other electricity which is sold via licensed suppliers. The Government consider that the other support that we are providing for CHP among the measures to which I referred in my earlier Answer will be sufficient to allow CHP a significant advantage and will, therefore, contribute to the target that we set out in the climate change programme.

Scottish Parliament: Devolved Functions
2.47 p.m.
Lord Hogg of Cumbernauldasked Her Majesty's Government:
What arrangements have been made to monitor the effectiveness of functions devolved to the Scottish Parliament.
Baroness Ramsay of Cartvale: My Lords, under the Scotland Act 1998, the Secretary of State, the Advocate General and the Attorney-General have various powers designed to ensure that all primary and secondary legislation passed by the Scottish Parliament is within its legislative competence and that the Scottish Executive acts in a manner compatible with international obligations of the United Kingdom. The Scottish Executive is accountable to the Scottish Parliament for the way in which it exercises functions within devolved competence, and in the final analysis is answerable to the Scottish electorate through the ballot box.
Lord Hogg of Cumbernauld: My Lords, I thank my noble friend for that reply. She will accept that, so long as the Westminster Parliament votes the money that the Scottish Parliament spends, it would be responsible for the Westminster Parliament to retain a close interest in all that goes on. Will my noble friend assure the House that the central aim of our constitutional policy is to ensure the better governance of these islands? Will she give the further assurances that, were it to be shown that better government would be served by further devolving powers to the Scottish Parliament, the Westminster Parliament would not hesitate to do so; and, likewise, were it, to be shown that a function or a department of government should be repatriated to Westminster and Whitehall, the Government would not hesitate to do that in the interest of better government?
Baroness Ramsay of Cartvale: My Lords, under Section 63 of the Scotland Act 1998 Her Majesty the Queen may by Order in Council provide for functions exercisable by a Minister of the Crown to be exercised by Scottish Ministers instead of, or concurrently with, a Minister of the Crown. Similarly, Section 108 enables devolved functions to be undertaken by a Minister of the Crown instead of, or concurrently with, Scottish Ministers. Orders in Council can also be made under Section 30 to modify Schedules 4 and 5 which define reserve matters. That is a direct answer to the mechanism about which my noble friend asks. As some noble Lords will be aware, these orders require affirmative resolutions in both Houses and both Parliaments and, therefore, cannot be implemented without agreement between the two administrations.
Lord Thomson of Monifieth: My Lords, did the Minister note the observation by the Prime Minister in an interview in Wales the other day that,
"the Welsh experience had taught him the hard way that devolution is about allowing the devolved bits to find their own way"?
Is it not a good idea for those in either House of the Westminster Parliament to learn the same lesson and to allow those with heavy and difficult responsibilities within the new Scottish Parliament and Scottish Executive to carry out the duties that we have devolved to them?
Baroness Ramsay of Cartvale: My Lords, not for the first time I find myself in complete agreement with the noble Lord, Lord Thomson of Monifieth. To do things differently in different parts of the UK is not an accidental consequence of devolution; it was our express intention. This is not difference for difference's sake; local needs and circumstances justify such variations. I wholeheartedly agree with my right honourable friend the Prime Minister that we should allow the devolved assemblies, parliaments and administrations to continue their work.
Lord Monro of Langholm: My Lords, does the noble Baroness agree that, in view of the fact that the block grant emanates from the Westminster Parliament, we should take some interest in how it is spent and evaluated? Can the noble Baroness say why, at a time when council tax is racing way ahead of inflation and jobs are at risk in Scotland, Scotland's Labour Government, supported as ever by the Liberal Democrats, are prepared to spend £200 million on new parliamentary accommodation?
Baroness Ramsay of Cartvale: My Lords, the provision of the new parliamentary building is entirely a matter for the Scottish Parliament.
Baroness Blatch: My Lords, the noble Baroness will be aware that a new report about student fees in Scotland has just appeared. It was the case that the Scottish Parliament decided to treat Scottish students and European Union students more generously than English, Welsh and Northern Ireland students. Given that the United Kingdom is just one entity in the European Union, does the Minister agree that it is worth reconsidering treating United Kingdom students fairly and justly throughout the whole of the EU? Does the noble Baroness also agree that that is very much a matter for the Westminster Parliament, as it is for the Scottish Parliament?
Baroness Ramsay of Cartvale: My Lords, higher education is a devolved matter, and decisions as to student support in Scotland are a matter for the Scottish Executive. The purpose of devolution is to allow distinctly Scottish solutions in devolved areas. Scottish students who study in England will continue to make a contribution to tuition fees depending on their circumstances, in exactly the same way as non-Scottish students. That is a matter for the Student

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Awards Agency for Scotland and for the Scottish Executive. European Union students, but not other non Scottish residents, will have their fees paid because there is a requirement under EU law to treat EU and home students in the same way; but there can be differences within a nation state. The noble Baroness will be well aware that students from Wales, England and Northern Ireland who take four-year courses at Scottish universities will have their fees waived in the final year of their courses and the costs will be borne by the Scottish Executive. That decision, which was announced by Henry McLeish on 29th March, implemented a recommendation of the Quigley report.
Lord Campbell of Alloway: My Lords, in answer to a previous question the noble Baroness said that a sum of about £200 million had to be paid and that that was a matter for the Scottish Parliament. Can the noble Baroness explain how much of that must be paid by the Westminster Parliament?
Baroness Ramsay of Cartvale: My Lords, the noble Lord misquotes me. I did not provide any figures. I said that the question of the cost of the Scottish parliamentary building was a matter for the Scottish Parliament. It is expected that the money for that building will be found by the Scottish Parliament from its budget. If extra resources are needed for the building, that matter will be considered by the Scottish Executive and Scottish Parliament.
Lord Hooson: My Lords, if this line of questioning is pursued, is there not a danger that the Scottish Parliament may demand powers to monitor the effectiveness of the House of Lords?

Young Offender Institutions: Education and Training
2.55 p.m.
Lord Quirkasked Her Majesty's Government:
Following the chief inspector's report on Portland, whether they will take steps to ensure a greater focus on education and training in all young offender institutions.
Lord Bassam of Brighton: My Lords, new regime standards have been in place from 1st April for prisoners under the age of 18 which place a particular and clear emphasis on education and training. An individual programme is to be introduced for each young person suited to his individual needs, ability and aptitude. For prisoners between the ages of 18 and 21, the Comprehensive Spending Review delivered £4.6 million for a welfare-to-work programme, as well as general improvements in educational provision.
Lord Quirk: My Lords, I thank the Minister for his response. Does the noble Lord agree that this matter depends very much on how the money is spent? In all conscience, Portland is far from the worst young offender institution. For example, Rochester beats it hollow in that respect. Does the Minister agree that Portland's rather good workshop and education provision shows just how much more could be done if better use was made of those facilities and, in particular, if they were integrated so that the splendid and often quite enthusiastic work carried out in the workshops was linked to the education system so as to provide youngsters with vocational qualifications? Further, does the Minister agree that we have both a duty and an enormously exciting opportunity to do something to remedy the deficiencies, whether through exclusion or otherwise, in the education of the 11,000 young offenders, 2,000 of whom are juveniles, and provide them with the necessary skills and training so that they lead productive and crime-free lives in future?
Lord Bassam of Brighton: My Lords, the short answer to the noble Lord's question is yes, but obviously there is much more to it than that. I am grateful to the noble Lord for his observations about the improved quality of the young offender regime at Portland. The noble Lord puts his finger on the key issue which is to ensure that young offenders generally emerge from the periods of detention that they endure better educated than when they went in. I must advise noble Lords that, as to BSA screening tests, the levels of educational attainment by young offenders on entering those institutions are extremely low. The figures demonstrate that only 41.6 per cent of young offenders are above level 1 in reading; only 14.4 per cent are above level 1 in writing; and only 24 per cent are above level 1 in numeracy. There has been welcome progress over the past three years, and today many young offenders achieve far higher levels. As to rates of recidivism, it is clear from the evidence that those who emerge with educational qualifications are much less likely to re-offend, and I believe that we should take great comfort from that.
Baroness Sharpies: My Lords, have any writers in residence been appointed to young offender institutions?
Lord Bassam of Brighton: My Lords, I cannot advise today. However, I am happy to undertake some inquiries and write to the noble Baroness. It seems something from which those institutions can benefit.
Lord Judd: My Lords, if rehabilitation is the main objective in order to turn young offenders into productive and responsible members of society, does the Minister agree that every penny spent on education and training within the present prison system is a penny well spent?
Lord Bassam of Brighton: My Lords, I agree entirely with the noble Lord. Over the current period of the Comprehensive Spending Review, £26 million is being spent specifically on education. We think that that is money well spent. It is a good investment and enables those young offenders in particular to get on to the welfare-to-work programme. We believe that that is one of the best and strongest contributions towards ensuring that those young people come out of the institution and lead a crime-free life.
Lord Dholakia: My Lords, does the Minister accept that the rise in the prison population, including those in the young offender institutions, creates a big problem? By the noble Lord's own reckoning, the figure is close to 70,000. Does the noble Lord accept that one way to promote education and training is to reduce the number of people in young offender institutions? The best way to do that is to make better use of community sentencing. Will the noble Lord consider the projects which NACRO has promoted? I declare an interest as chair of that body. It has worked effectively with a small number of people in such an institution. Does the Minister consider that he has an obligation to talk to other parts of the criminal justice system to ensure a reduction in numbers by better use of community sentencing? That is good for young people; it is good for young offender institutions; and, above all, it is good for the country.
Lord Bassam of Brighton: My Lords, it would be pleasant and desirable if the present prison population were to decline. However, we accept the sad truth: that while people commit serious offences, whatever their age, it is right to apply custodial sentences. We believe that prison works. We believe that prison can be a positive experience, and that we should pursue that objective. We want to get people into education and training to improve their opportunities when they come out of those institutions. One of the innovative schemes adopted is the detention and training order. It provides particularly for young people so that they receive training and education in the establishment to which they are located. When they come out that process of training and education will continue. We believe that that will provide more positive alternatives than a life of crime.
Lord Hoyle: My Lords, is there a wide disparity between the young offender institutions in the amount spent on education? What advice is given to governors in relation to that aspect?
Lord Bassam of Brighton: My Lords, there are disparities across the entire prison estate of which young offender institutions are a part. We want to bring all establishments to a higher level. That is why we have made bids against the next round of the CSR. We put money aside last year to achieve that beneficial objective.
Lord Cope of Berkeley: My Lords, does the Minister appreciate the gratitude on this side of the House for his support and reaffirmation of Mr Michael Howard's view that prison works?
Lord Bassam of Brighton: My Lords, I am always grateful to the noble Lord for his help and support in these matters.
The Earl of Listowel: My Lords, how much is spent per head on the education and training of young people in young offender institutions? Perhaps the Minister will write to me on that point.
Lord Bassam of Brighton: My Lords, I confess that mental arithmetic is not one of my strongest points. I have the global figures. I shall happily try to provide the noble Earl in writing with a breakdown of those figures.
Lord Addington: My Lords, many of the young offenders have educational problems resulting from dyslexia. Will the Minister assure the House that there will be sufficient specialist trainers to ensure that those young offenders receive the appropriate training? If they have further inappropriate lessons from which they are bound to fail, it will reinforce their previous bad experiences from education.
Lord Bassam of Brighton: My Lords, I am happy to give that assurance. The noble Lord makes an interesting point. Dyslexia is a problem experienced to some degree within the prison system. We are looking closely at good practice. I can advise the noble Lord that Pentonville has a very good dyslexia project, recently praised—dare I say it?—in a Guardian newspaper article on 28th March. Perhaps I may supply the noble Lord with a copy of the article. Simon Midgeley was extremely positive about the progress being made on behalf of prisoners who suffer from dyslexia.
Lord Avebury: My Lords, in answer to a Question for Written Answer last week, the Minister gave me figures of expenditure per head on education in the prison system over the past three years. Can the noble Lord break down that figure so that we can see how much per head has been spent in the past three years on young offenders and adult offenders respectively? It is vitally important that young offenders receive education which will be successful in preventing them from re-offending. Does the Minister agree, therefore, that more would be spent on young offenders than on adults?
Lord Bassam of Brighton: My Lords, the noble Lord's surmise is probably not too dissimilar from mine. It is sensible that we invest heavily in the education of young people. After all, they are the future, whether or not they are in prison. We need to pay close attention to that.

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I am grateful for the noble Lord's first question. We shall look again at the figures to see whether we can provide a breakdown to the noble Lord in the format he desires.
Lord Roberts of Conwy: My Lords, are specific targets of literacy and numeracy set in these institutions? If not, will the Minister consider that suggestion?
Lord Bassam of Brighton: My Lords, there are a number of key performance indicators. Some are of considerable value. The key one at present is to reduce by 15 per cent over the current period those who are on level 1. I shall consider the noble Lord's helpful suggestion against the other key performance indicators. Perhaps we can discuss the issue further.

Business
Lord Carter: My Lords, after the speech of the noble Lord, Lord Taverne, in the first debate today, my noble friend Lord Bassam will, with the leave of the House, repeat a Statement being made in another place on the licensing laws White Paper.

European Union: Select Committee
3.7 p.m.
The Chairman of Committees (Lord Boston of Faversham): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the Lord Jopling be appointed a Member of the Select Committee in the place of the Lord Trefgarne.—(The Chairman of Committees.)
On Question, Motion agreed to.

Government Resources and Accounts Bill
3.8 p.m.
Lord McIntosh of Haringey: My Lords, I beg to move that this Bill be now read a second time.
Resource accounting and budgeting is a vital part of the Government's modernising agenda. This Bill marks a major milestone on the way to full implementation of the biggest reform and modernisation of the management of the country's public finances since the time of Gladstone. It demonstrates this Government's commitment to introducing best-practice accounting methods in line with the code for fiscal stability. The Bill will deliver three major reforms. First, it introduces resource accounting and budgeting into government accounts and modernises the operation of other aspects of the Exchequer and Audit Departments Acts. This will improve the way Parliament votes and scrutinises public spending. Objectives and outputs will be costed through more effectively underpinning the public
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service agreements. There will also be better information on buying and using assets with improved comparisons between public finance initiative/public private partnership projects and government capital spending.
Secondly, it provides enabling legislation for the preparation and audit of consolidated accounts for the whole public sector. Thirdly, it enables us to set up Partnerships U.K—a new body designed to make the public sector a better client in PFI and public private partnership deals.
Work of resource accounting and budgeting began in 1994 under the previous government and has been taken forward with enthusiasm by this Government. I know that our proposals to move to resource accounting and budgeting will be welcomed on all sides of the House.
For those of us who have not followed the technicalities of the move to RAB, resource accounting applies accruals accounting techniques to central government by focusing on resources consumed rather than cash spent. When that was said in the House some time ago, my noble friend the Chief Whip said, rather scornfully, that we were simply introducing into government accounts double entry book-keeping, which was first invented in 1492. Perhaps a little less than 500 years later we are finally catching up.
The main change from the current system is in the treatment of fixed assets. Resource accounting will reflect the cost of consuming fixed assets and the cost of holding them through a charge for depreciation and the cost of capital, rather than just the cost of acquisition as under the present cash-based system of accounting.
Resource accounting is based on generally accepted accounting practice (GAAP) in the United Kingdom, covering the accounting and disclosure requirements of accounting standards, issued by the Accounting Standards Board and the Companies Act, to the extent that this is appropriate to central government. During its passage through another place, the Government amended the Bill to meet concerns that the Bill, as originally drafted, did not sufficiently commit departments to preparing accounts according to best practice.
Resource accounting will form the basis of resource budgeting so that we can plan and control central government expenditure on an accruals basis. Subject to parliamentary approval, supply will be voted on an accruals basis under resource accounting and budgeting and resource accounts will replace appropriation accounts.
Resource accounting and budgeting apply the best financial reporting practices of the private sector to central government. For the first time, we will produce the equivalent of the main financial statements from commercial accounts. That includes a balance sheet, an operating cost statement, a statement of recognised gains and losses, and a cash flow statement.

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But resource accounting and budgeting go even further. Under the new system, there will also be a summary of resource outturns, reflecting parliamentary control and, critically, a statement of resources by departmental aims and objectives under their public service agreements. This enables us to focus on outcomes not on inputs; the products of our spending, not just the size of our investment. In turn, we can ensure that future public spending is planned and controlled prudently.
The Government are moving forward with the implementation of resource accounting and budgeting. The spending review currently under way is being conducted on a resource basis. In the light of the results of the "dry run" of the review process carried out last year, the Government decided to bring new resource elements into the control framework in two stages. The new resource items, such as capital charges which did not feature in the cash system, are being included in AME—annually managed expenditure, which is not subject to firm multi-year limits—for this review, with a view to incorporating them into DEL—departmental expenditure limits, which are multi-year budget plans—for the next review in 2002.
If, during our debates on the Bill, we hear references to AME and DEL, their meaning will now be clearer. Incidentally, the third edition of the Government's paper, Resource Accounting and Budgeting, was published in December last year. Its glossary of terms has been invaluable to me and I recommend it to other noble Lords. Terms and acronyms are introduced perhaps more than some of us would have wanted.
Departments are proceeding with the implementation of resource accounting systems. I shall not pretend that this has been a trouble-free process, not least because "double running"—which is bringing in the new system while continuing to run the old one—is inevitably doubly demanding, doubly time-consuming and makes deadlines doubly difficult to meet.
In the circumstances, I pay tribute to departments, which have done a tremendous job in producing their resource accounts alongside their cash accounts, and to the National Audit Office for its support during the process. It is hardly surprising that there has been some slippage. Not all the accounts came in on time and not all were unqualified. But we believe that enough progress has been made to suggest that, fundamentally, we remain on course to deliver on time.
In the longer term, our aim is for resource accounting and budgeting to lead to "whole of government accounts" (WGA), which is the natural next step. Whole of government accounts will fulfil the commitment given in the code for fiscal stability to produce accounts for the whole public sector on a consolidated basis if possible. Audited whole of government accounts will improve the information available to support the conduct and monitoring of fiscal policy. The accounts will also improve accountability to Parliament and provide greater transparency for taxpayers.
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However, to produce full audited whole of government accounts we will need greater conformity of accounting policies, systems and procedures and these are major challenges. So the Government have decided to adopt a staged approach where we will first concentrate on delivering audited accounts covering central government, departments, agencies and non-departmental public bodies. A final decision to extend coverage to the whole public sector will be taken in due course when the outcomes of various possible developments in financial reporting and further development work is clearer.
The Bill also paves the way for Partnerships UK, which is central to our drive to modernise our key public services. Partnerships UK will be a new public/ private partnership, operating in the private sector, but with a clear public mission. It will offer a long-term home to the type of deal-making skills available to the public sector on a temporary basis in the Treasury task force.
Public/private partnerships are a cornerstone in building public services for the 21si century and we must maximise their contribution to our modernisation programme. In order to do so, we need to enlist the best possible skills and expertise, and the only way to do that is by drawing on the best of both public and private sectors. Public/private partnerships enable the Government to harness the disciplines of the private sector by introducing private sector investors who put their own capital at risk. In this way, public/private partnerships are helping to improve value for money, so enabling the Government to provide more public services and to a higher standard.
We have already had one step-change in the delivery of public services' infrastructure since this Government came to power. During the past two and a half years we have fundamentally reformed the PFI and put it on a more sustainable and successful basis. That has been achieved by prioritising projects, ending universal testing, offering a fairer deal to staff and standardising contracts. The flow of deals has risen rapidly as a result. In less than two years, contracts with a combined value approaching £5 billion have been signed, compared with £4 billion during the whole of the previous Parliament. The PFI will generate some £11 billion-worth of new investment over the period 1999–2000 to 2001–2002.
The next step is to use the PFI to drive forward our modernising programme. This means expanding the PFI and applying it to sectors where it has not been extensively used, enabling smaller projects to combine. Therefore, the PFI is a more cost-effective option.
We need to be a better and more intelligent and effective partner, client and procurer of private sector services. Delivering better partnerships will require bridging the gap between the skills base of the public sector and the private sector's understanding of public sector requirements. Partnerships UK is one of the mechanisms with which we expect to do this.
It will of course be a novel private/public partnership. Partnerships UK will fulfil a unique role—there is nothing to equal it in the private sector—

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of addressing the weaknesses, particularly in terms of skills and commercial experience within government. It will be a co-venturer, strengthening the public sector client in a transaction. PUK will help the public sector to raise its game, in the same way the Treasury task force has done. Together with PUK, the public sector can become a more effective client, which should mean more opportunities for everyone; more deals, lower costs and greater clarity and speed in PPP deals.
In addition to its role in the PFI, we expect Partnerships UK to help us to supplement transactions in our wider markets policy to use public sector assets. Not only will it improve deal flow in existing PFI sectors, but it will open up new sectors and develop new models of public/private co-operation. The Bill paves the way for Partnerships UK. It provides the statutory authority for the Treasury to incur the expenditure and make the necessary financial provision to establish Partnerships UK's businesses.
It may have been noted that debate on the Bill in another place was focused largely on whether the Bill gives sufficient powers to the Comptroller and Auditor General. This Government fully support the work of the Comptroller and Auditor General and recognise the importance of his being independent of government and the need for him to have wide-ranging powers to report to the House of Commons. The Government listened to the concerns raised and made a number of amendments to their original proposals as the Bill progressed through another place.
The issues involved are wide ranging—perhaps more so than some of the interested parties in this debate would have us believe. They concern not only the issues raised by members of the Public Accounts Committee of the House of Commons, such as the rights of access, the validation of performance information and the audit of non-departmental public bodies, but also issues such as the role of audit in modernising government, including the audit of joined-up activities and the impact of risk-taking and innovation.
Those are matters for serious reflection and debate and they need to be examined together. That is why the Chief Secretary to the Treasury has decided to set up a study of all aspects of central government audit. That study will cover not only the issues of concern to the Public Accounts Committee, but also issues such as how central government audit links in with the modernising government agenda, and particularly the question of how audit impacts on risk-taking and innovation. Other important issues include the quality of audit, the links with other auditors, the duplication of the work of inspectors and regulators, and overseas experience. It would pre-empt the outcome of the study if we used the Bill to extend the Comptroller and Auditor General's power more than we have done already.
I am pleased to say that the chairman of the Public Accounts Committee has agreed to take part in the study. The appointment of a steering group to oversee the study is currently under way, and it is hoped that
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it will include representatives from government, Parliament and independent experts in audit and accountancy. In particular, I am pleased to say that the noble Lord, Lord Sharman, has agreed to lead the project team which will carry out the study which, it is intended, should be completed by the end of this year. I hope that the House will join me in welcoming this study which will ensure that central government in this country has strong and independent audit and accountability arrangements suitable for the modern world.
The Bill will make major steps towards the full implementation of important aspects of our modernisation agenda for our public services. I commend the Bill to the House.
Moved, That the Bill be now read a second time. (Lord McIntosh of Haringey.)
3.22 p.m.
Lord Higgins: My Lords, we on this side of the House do not dissent from the view expressed by the Minister that this Bill represents probably the most important change in our financial arrangements since the time of Gladstone. I believe that it is true to say that since 1866 there have been only two occasions when we have had primary legislation of this kind. There have, of course, been various improvements, for example, with regard to the introduction of cash limits, and other reforms which resulted from implementation of recommendations of the Select Committee on Procedure, which I chaired in the other place some years ago.
None the less, this is a most important occasion. Indeed, I believe that it would be true to say that it is an opportunity for a generation to get things right. It is extremely important that we should get it right because, given the pressure of other measures which the government of the day may feel are more important, we know only too well the difficulties of getting Bills of this kind into a legislative programme. Therefore, during the passage of the Bill through your Lordships' House, we on this side of the House intend to do everything that we can to ensure that it is as satisfactory as possible.
Although we certainly welcome the move to resource accounting—indeed, over the years I and my noble friends have been involved in this matter—one has only to look at the first few pages of the report of the debate in another place at the Second Reading of the Bill to realise that considerable doubts have been expressed in another place. I believe that those doubts are reflected also in your Lordships' House. Indeed, those who laboured in this particular field over many years were remarkably apparent in the course of that debate. It had not been going for more than a moment or two before Mr Dale Campbell-Savours expressed doubts. Before we knew where we were, other Members intervened, not least Mr Robert Sheldon, who succeeded me as the chairman of the Liaison Committee and for many years was chairman of the Public Accounts Committee, and the present chairman of the Public Accounts Committee, and so

17
on. Therefore, while we all welcome the proposal to move towards resource accounting, we have considerable reservations about some aspects of the matter.
Having waited so long, I believe that it is unfortunate that there have been criticisms about the lack of consultation that took place immediately before the Bill was introduced. I understand that the PAC was not consulted on the draft Bill and the National Audit Office received the Bill in draft form only three weeks before its publication in its present form. Therefore, those matters of concern exist and make it more difficult to get matters right. However, I very much hope that in the course of the Committee, Report and Third Reading stages we can make a considerable contribution in that respect, which, of course, is the duty of your Lordships' House.
In its ninth report on the Bill, published only recently, the PAC expressed concern over some matters and the Minister responsible appeared before the committee to discuss some of them. None the less, in its report the PAC said that,
"the Minister's solutions are discretionary. These are matters which affect Parliament's ability to hold the Executive accountable, and it should not be for any government, or any individual government department, to have discretionary rights over Parliament's powers".
It is important that the matters that are in dispute should be dealt with in primary legislation and not left to the discretion of government, which in effect would be given the analogy with the private sector. That would mean that individual companies can decide the rules regarding how their accounts should be presented. Clearly, that is not true. I am glad to see that have some support from noble Lords opposite.
Another important matter is the question of timing. It is most important that we do not introduce the new system until we are sure that it works. Again, in its report the PAC states strongly that the existing cash-based system should not be discontinued until Parliament, through its relevant Select Committees, is satisfied that the new system provides the same level of accountability assurances as does the existing system. Therefore, I do not believe that it is true, as has been suggested in some quarters, that we shall simply rubber-stamp what was true otherwise.
Perhaps I may spend a moment or two summarising our concerns before I turn to matters in more detail. First, I refer to the way in which the accounting definitions are produced. In our view, the Bill as it stands gives far too much discretion to the Treasury in this regard, particularly, for example, in relation to Clause 7. We shall wish to pursue that point and I shall comment on it again in a moment. Secondly, there is concern about the extent to which the Comptroller and Auditor General at the National Audit Office has the requisite powers to extend his inquiries wherever he may feel it appropriate and in sufficient depth. Thirdly, in relation to the government accounts provision, I believe that there are concerns regarding the format of the elaborate manual with which we have been provided. Fourthly, I mention the important question of balance sheets.
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The Minister spent much time dealing with the issue of the public/private sector and the proposed new body. I shall leave my noble friend Lord Bridgeman to deal with that rather than concentrate on it myself. However, all those matters are important. I also believe that it is extremely important to distinguish between the measures which Parliament provides for the control and authorisation of expenditure and I hose which are available so far as concerns the economic analysis of what the Government are doing. There is a slight danger that those two are confused. The existing cash system is largely concerned with the first. There is little by way of analysis of the second. That is one of the main reasons that we welcome what is now proposed.
As regards the second, I ask the Minister: who takes what decisions on the basis of the new accounts? Secondly, how are the new accounts to be debated by Parliament? As I say, the Public Accounts Committee is concerned that the two should be run side by side, but obviously the intention is that eventually we should have only resource accounts.
Those matters do not generally attract a great deal of attention, even in another place. Indeed, it is quite difficult to discover what the existing system is—I notice the noble Lord smiles—so much so that I found the best source was in the National Westminster Bank Review of August 1978 written by someone called Higgins. That is the only summary that I have ever been able to find about how the existing system actually works.
That is a matter which we should be worried about in relation to the authorisation of the accounts. As I understand it, instead of the existing appropriation accounts, which are deadly dull but cash-related, it is proposed that we should have accounts which are on a resources basis. So if I understand it correctly—and the Minister will no doubt put me right if I do not—the appropriation accounts in the new format will consist not only of the cash arrangements but also, for example, an allowance for depreciation. That will mean that the accounts are based more on assumptions than has previously been the case.
Having looked in some depth at the resource accounting manual, I feel bound to say that it would have been very helpful indeed had there been some form of pro forma accounts so that we could see what they look like in practice. It surprised me that that was not so. Perhaps in Committee we may have that sort of material provided for us. It would be helpful to have in particular some idea of the timetable of the approval procedures in the House of Commons on the new basis.
I return to the various concerns which we have expressed and, I am afraid, introduce a slightly partisan note into the proceedings, but only for a moment or two. We are concerned that the definitions used in those new accounts should be determined by an independent body and not, as the Bill is presently drafted, by the Treasury. In the course of debates last year on the welfare Bill, I drew attention to the way in which the presentation of the working families' tax

19
credit for amounts involving some £5 billion meant that there was a switch out of social security spending and the change was regarded as a tax cut, thereby making it much easier for the Government to say that they had cut social security spending as they promised.
I quote from a statement made by a spokesman for the OECD on Radio 4 on 16th November. He said that,
"we have clear guidelines on how we treat tax credits that were established in the early 1970s. If the tax credit is given to a family that have not to pay any tax because it is a low income family, we treat this tax credit as a social expenditure".
That is quite contrary to what the Government are now doing and have been doing in order to improve their presentation. That is an example—but it relates to £5 billion—of the way in which, if the definitions are not determined impartially, the government of the day, whoever they may be, can alter the way in which their accounts are presented.
I turn next to the second point I made with regard to the extent to which the Comptroller and Auditor General and the NAO can investigate those matters. I quote from a comment made at col. 595 of Hansard. I may be rather biased because it was made by my Pair of some 25 years' standing, Mr Alan Williams, a longterm Member of the Public Accounts Committee. He said:
"We find that we have eroded the democratic duty of the House to scrutinise the Executive, especially on the financial front. It is not only the growing sums of money that are moving outside the net of NAO scrutiny with the altering of the structure of government, with agencies and so on. It is not only the volume but the percentage"—[Official Report, 6/12/99; col. 599.]
which is increasing. Again, we shall need to consider that matter very carefully.
Thirdly, the Government are to produce accounts which are broadly in line with the private sector, both with regard to the profit and loss account and with regard to balance sheets. Perhaps I may say a few words about that.
My understanding is that as regards the profit and loss account, many items will not be included. In particular, as I understand it, the whole of local government will not be included and important items like schools, hospitals and so on will not be included. Moreover, surprisingly, the other side of the equation will be far from complete. No doubt the Minister will correct me if I am wrong but my understanding is that on the income side of this account, equivalent to a profit and loss account, income tax will not appear. That seems to be an extraordinary way to set about things. It may be simply that I have misunderstood the matter but no doubt the Minister will tell me whether that is so.
There are other areas which are omitted but in a different sense. I see nowhere in this any proposals for the House appraising what in the private sector one would call "capital budgeting"—the approval of individual investment projects. Perhaps the Minister will tell us how that is to be done and, similarly, what
20
is to be done about the performance measures about which the chairman of the Public Accounts Committee in particular has been very concerned.
Drawing the analogy between the private and public sectors, the Government have said that they are going to adopt something closer to the private sector approach. But their approach to balance sheets is rather strange. I am 100 per cent in favour of producing government balance sheets. Indeed, I am strongly in favour of trying, as far as possible, to produce national balance sheets. Those could be very useful indeed. We have an enormous document here—the National Assets Register. That is one side of the balance sheet. But one looks in vain for a national liabilities register. How is the balance sheet to be constructed?
It is absolutely clear that some important items will be missing; in particular, the long-term liabilities of the national insurance pension, which clearly should be included if one were going to try to create a national balance sheet. Some estimate of that needs to be made. And so the balance sheet side of the matter, which I greatly welcome, does not appear, as yet, to be in a very comprehensible and certainly not a comprehensive form.
Perhaps I may just run one hobby horse for a moment. In the whole of the post-war period, we have said that the economic objectives are high economic growth, low inflation, a high level of employment and a balance of payments more or less in equilibrium. In many respects, if we can get the balance sheet going, there is a strong argument for having a balance sheet where you can see what is happening in relation to inter-generational transfers. A government may seem to be doing well for a long time but in fact, all they are merely doing is robbing the future to pay the present, or vice versa. So I welcome the balance sheet aspect but am sorry that it is not, as yet, in a form which would seem to be either comprehensible or comprehensive.
I have already said that my noble friend Lord Bridgeman will deal with some of the aspects with regard to the public and private sector. I conclude by saying that one of the great innovations of the past 20 or more years has been the introduction of departmentally-related Select Committees. Alas, while they are responsible for the monitoring of policy and administration of the expenditure of the various government departments, they have not been terribly good at monitoring the expenditure. I very much hope that that situation will improve in the future.
In that context, I refer to the latest report of the Liaison Committee under the chairmanship of Mr Robert Sheldon which puts forward some strong proposals for increasing the degree of government accountability by using the Select Committee system more effectively. It is a beautifully produced and well argued report which deserves congratulation.
However, the provisions in the Bill will need to be refined—in particular, in the respects which I have mentioned—if the matter is to proceed as we should like in increasing the level of government accountability in what is otherwise a rather dull area.

21
The introduction of departmental reports certainly helped in that respect, but we need the right financial framework in which those matters can be dealt with. I hope that during the course of the Bill's passage through your Lordships' House it will be possible to meet the various criticisms made of it as it now stands and, in particular, to ensure that we have a firm basis, if not for the next century then at least for some considerable time to come.
3.40 p.m.
Lord Taverne: My Lords, I am in two minds about the Bill. The first says what a good Bill it is. What it proposes seems to make sense; more than that, it should be an extremely important measure. What can be more important than that the Government know what they are doing when they propose to spend our public money? They must know not only how much cash they spend but the resources they use and how the use of resources relates to the aims of the various departments. To achieve effective government, it clearly makes sense to treat capital investment differently from current expenditure and, in dealing with fixed assets, to know how we use them. It makes obvious sense to make a charge for the cost of capital and a charge for depreciation. In so far as those provisions are innovations, they are sensible measures. Therefore, three cheers for giving us a proper balance sheet and a statement about operating costs, profit and loss, and cash flows.
The Bill is important also for the proper functioning of Parliament. It gives us better information about spending plans and how money is spent. In fact, one of the basic questions which concerns Parliament is how we control the executive, with which the Bill is after all concerned. It never ceases to fascinate me how little Parliament is interested in some of its basic functions, such as the control of the executive. The excitement of debates seems sometimes to be in inverse proportion to their importance. Many years ago, I was chairman of the House of Commons committee which was one of the first of the Select Committees considering public spending as a whole. It was called the General Sub-Committee of the Public Expenditure Committee. It was an important and key committee because it looked at the whole of government spending; yet although we were concerned with the principles of spending and with the best way of presenting the spending, often we could not obtain a quorum.
I remember one occasion in one of our meetings when we were looking at billions of pounds of government expenditure. We did not have a quorum because something far more exciting was happening on the Floor of the House: the affair was being discussed of an MP who had gone for a swim, or apparently gone for a swim—he had not really gone for a swim—and what the House should do in the circumstances. That was important and exciting; our task was relatively unimportant and dull and we did not have a quorum. If one looks at the number of noble Lords taking part in this debate, which is not an unimportant debate, one feels that excitement is perhaps again in inverse proportion to the importance
22
of the subject matter. On the other hand, looking at the list of speakers, one can expect that the quality of contributions will no doubt make up for the lack of quantity.
Perhaps when we come to amendments in Committee there will be a great stampede and rush to take part in our deliberations, or perhaps not. I have no doubt that there will be important matters to discuss. A number have been raised by the noble Lord, Lord Higgins. A number were raised in Committee in the House below. The question of an independent body to look at the presentation of accounts is obviously an important one. Many questions were raised about the relationship with the National Audit Office; what the range of its powers should be and what rights of access the Comptroller and Auditor General should have. It may well be that we do not actually have to discuss those matters because they will be considered by the committee of my noble friend Lord Sharman, in which case no doubt the House will be greatly relieved.
I regard this as a generally good Bill. I am afraid that I have little to add to the excellent points made by many speakers in the debate in another place. I shall break with all tradition in this House by not repeating them.
I turn to the second part of my approach to the Bill: my doubts. I approach the Bill with a certain amount of scepticism and even cynicism. New approaches to the presentation of accounts and, indeed, the control of public spending, have a long history Like the management tools of the private sector, they are subject to fashion. I have a long memory on the subject. I remember that when I was in the Treasury in the late 1960s we had the latest tool: PPBS —I believe that it stood for "Public Programme Budgeting Systems"—which was to give government far more effective control over public spending. Then there was a change of government. I believe it was when the noble Lord, Lord Higgins, was Minister of State at the Treasury that we had a brand new tool: PAR—"Policy, Analysis and Review"—which was to give Parliament and government a choice between different measures and to make it far more clear how parliamentary control could be exercised and how governments could manage matters.
In the 1980s there was yet another measure, for which I have forgotten the acronym.It was a measure with which Mr Michael Heseltine was much associated. He was the only member of government actually interested in those matters. I believe that he was in the Ministry of Defence at the time. He was determined to see that the management tools of government expenditure would be infinitely more efficient than anything which had ever happened before in history. I cannot remember exactly what happened to that initiative.
The trouble is that Treasury Ministers read out their briefs, but most of the time they do not understand them. The noble Lord, Lord Higgins, was an exception. I have no doubt that the Chancellor understands everything; that he understands this

23
particular measure; and that he probably devised it with his advisers. Of course, the noble Lord, Lord McIntosh of Haringey, always understands all these measures. He is an absolute polymath in the many areas on which he speaks in the House. But generally speaking, it is a matter of rather more interest, concern and understanding on the part of the Civil Service than it is on the part of Ministers or parliamentarians.
Such new measures do not always work out; for example, the wonderful new weapon which we were recently given: public service agreements. There was an article today on the subject in the Financial Times. They were to give us value for money and performance measurements. It was obviously sensible to see how effective government measures for spending money actually were. The only snag is that they do not work, at least according to the learned author of the article in the Financial Times. There are too many targets and they are not sufficiently focused. The targets which are set can be disturbing, such as reducing the waiting lists in the National Health Service. They can have the opposite effect from the efficiency they are supposed to promote. Furthermore, the three-year timetables for the public service agreements do not fit the Government's spending plans, where the Government's programmes begin to be reviewed within a period of one year.
I hope that the Bill is not merely a legislative enactment of another passing fashion. On the face of it, it makes sense. It should produce improvements. We shall have to wait and see. Meanwhile, we on this side of the House wish it well.

Licensing Laws White Paper
3.48 p.m.
Lord Bassam of Brighton: My Lords, with the leave of the House I shall now repeat a Statement made by my right honourable friend the Home Secretary in another place. The Statement is as follows:
"Madam Speaker, with permission I should like to make a Statement about licensing reform. I am today laying before the House a White Paper setting out proposals for the comprehensive modernisation of the alcohol, public entertainment and night refreshment licensing laws in England and Wales.
"The present laws are complex and no longer match the expectations of the public nor the industries concerned, nor the needs of community safety. For example, the liquor Licensing Act 1964 provides for over 40 different kinds of licence or permission. The present system hinders business development and investment. Anyone wanting to change a licence in any way has to follow bureaucratic procedures which generate unnecessary costs and court hearings. There is often considerable duplication with planning controls and health and safety procedures. Many premises serving alcohol also require public entertainment
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licences, and so their operations have to satisfy an entirely separate and parallel licensing procedure run by local authorities.
"There have been no substantive changes to these laws for almost 40 years, while some aspects of the law have changed little in more than a century.
"In many ways, the law as it stands makes more difficult the problems of policing and public order. Fixed closing times may encourage binge drinking around last orders, with people hitting the streets—and sometimes each other—at the same time.
"The law concerning the sale and consumption of alcohol by children and young people is profoundly confusing. Few people know what the law requires and those who do see little sense in it. A person aged 17 may enter a bar but may not purchase an alcoholic drink. An 18 year-old standing next to him may purchase a drink, take it into a pub garden and lawfully give it to a five year-old.
"Venues providing hospitality and leisure are changing. It is becoming much more difficult to differentiate between a pub, a café, a wine bar or a restaurant. The old licensing categories are no longer keeping up with these changes. The effect is to force businesses to obtain multiple permissions at significant additional cost without delivering sufficient benefits or protections to the public.
"The White Paper proposes a single new licensing system which will give people more choice about where and when they eat, drink and enjoy themselves, while providing much better protection against the misuse of alcohol, especially in relation to sales to children; and stronger powers where licensed premises cause crime and disorder, or place the safety of the public at risk or lead to unreasonable nuisance for local residents.
"Thus the White Paper envisages that more flexible opening hours should be balanced by clearer licensing criteria and more effective remedies against businesses which fall down on their social responsibilities. The proposals will significantly reduce the regulatory burden on business.
"Current responsibility for the existing licensing systems is split between the local authorities and magistrates. The magistrates deal with alcohol licensing, while local authorities deal with the licensing of public entertainment, theatres, cinemas, late night refreshment as well as with planning and development control. We have considered very carefully who should have responsibility for running the new streamlined and integrated arrangements. We have concluded that it should be the local authority.
"Following the Crime and Disorder Act, local authorities now have important duties for tackling crime and disorder in their area and are best placed to make judgments about local impact. They are also properly accountable to the people affected by their decisions. We therefore believe that it is they who should decide which premises should be licensed and what operating conditions should apply within a national framework of clear criteria

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and fair and consistent local procedures defined in statutory rules and guidance. Offences against licensing laws will continue to be dealt with by the criminal courts. Local magistrates will therefore continue to have an important part to play in ensuring that licensing laws work properly for the benefit of free and safe communities. The local authorities' licensing decisions will be subject to review by the courts on appeal. Our proposal is for the Crown Court. We recognise that there are other alternatives, magistrates or special tribunals, and we are of course ready to consider representations here as we are on any other issue.
"In summary, therefore, the White Paper proposals will include: a single integrated scheme for licensing premises which sell alcohol, provide public entertainment or provide late night refreshment. Those will set out operating conditions which will relate to the impact on crime and disorder, public safety and public disturbance. Licence conditions should protect against those threats, but not interfere in other ways with how premises are run; the conditions attached to such licences are to be set locally on the basis of the balance of the operator's requirements, residents' views, and police and fire authority assessments; a new system of personal licences will allow holders to sell or serve alcohol for consumption on or off any premises; and new measures will back up restrictions on underage drinking.
"To counter and minimise public disorder resulting from fixed closing times, flexible opening hours may be introduced as a condition of the premises' licence, with the potential for some venues—I emphasise "some" venues—to operate up to 24-hour opening seven days a week, subject to consideration of the impact on local residents; there will be tough and uncompromising new powers for the police to deal quickly with violence and disorderly behaviour by closing premises which licence holders have allowed to become the focus of such behaviour; the age for the consumption of alcohol in licensed premises and for its purchase is to remain at 18 with better powers for the enforcement of this provision, while 16 and 17 year-olds will be able to consume beer or wine served with a meal.
"Children are to be allowed access to any part of suitable licensed premises at the personal licence holder's discretion, but licensing authorities are to have powers to restrict or deny access for children to unsuitable licensed venues; the new personal and premises licences are to be issued by local authorities; an avenue of appeal for parties (including the police and local residents) is to be available to the courts; licences are to be supported by a flexible range of sanctions—including temporary closure and temporary reduction in opening hours—instead of present single all-or-nothing sanction of loss of licence; there are to be new requirements in the wake of the "Marchioness" Thames Safety Inquiry for licensing the sale of alcohol on boats travelling within England and
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Wales; and there will be new arrangements for nonprofit-making clubs—working men's, political, ex-services, sports and social clubs—supplying alcohol to their members, which preserve their special status.
"This is a radical package of measures which I am convinced strikes an important and necessary balance between the needs of business and the concerns of local residents.
"The new measures will be good for the police, because they should help them cope with late-night disorder and reduce crime; good for business because they will sweep away red tape and offer them real flexibility; good for consumers—citizens and visitors to this country alike—by creating a safer environment in which they can have greater choice; good for families, by creating more opportunities for them to spend leisure time together without fear of intimidation or disorder and by providing better protection against underage drinking; and good for local residents, who will acquire a bigger say in the licensing process which will be properly accountable to them.
"In preparing legislation to bring before proposals to Parliament we shall welcome and take account of any suggestions for improving the way in which licensing decisions are dealt with or other aspects of the proposals which are received by the end of July. We shall of course be consulting the Welsh Assembly on the proposals as they may apply to Wales, including whether or not there remains a demand for Sunday opening polls.
"I commend the proposals to the House".
My Lords, that concludes the Statement.
3.57 p.m.
Lord Cope of Berkeley: My Lords, I thank the Minister for repeating the Statement to your Lordships' House and for the opportunity he afforded me for a quick glance at the White Paper. However, I emphasise I have not had time to study it properly. Before reaching firm conclusions, we shall obviously want to study it carefully and discuss it with other interested parties. However, we welcome the general ideas which lie behind the reform of licensing legislation. It is right that it should be thought out.
This is described as a White Paper in traditional terms. However, it sounded pretty "Green" in the way it was described by the Home Secretary and the Minister in that it is still open for ideas to be put forward and for differing views to be expressed before final decisions are made. I welcome that.
I am concerned about the proposal that personal licences should be granted by the local authority, and not by the magistrates, with an appeal from the decision of the local authority to the Crown Court if the licensee or proposed licensee disagrees with the decision of the local authority.
The Home Secretary and the Home Office seem to think that it should be automatic for only one body to grant personal and premises licences and that the only

27
decision to be made is whether both licences should be granted by the local authority, the licensing justices or by some new body. I do not think that that is necessarily the right way to go. It may be perfectly acceptable for the personal licence to be granted to the licensee through the licensing justices—the magistrates—but will it be right to allow decisions concerning premises to be under the control of the local authority? No one has suggested that driving licences should be issued by the local authority simply because roads are controlled by that body. I do not believe that there is an automatic link here.
Furthermore, in the system outlined in the White Paper, personal licences will not be the sole responsibility of the local authority. If things go wrong, it will be for the magistrates to decide whether the licence is taken away, either temporarily or permanently, or whether one of the other penalties available is applied. On that point, I think that it is quite right that the magistrates should be able to use a variety of sanctions rather than only taking away a licence. In that sense, magistrates will in any case continue to be involved in personal licences. The split will come between the granting of the licence in the first place and later, if it proves to be necessary, applying sanctions.
The wishes of local residents deserve to be considered here. It is stated that residents will be able to complain to councillors if trouble breaks out in a pub close to them. However, in particular when it is late at night, it is much more effective to complain at once to the police. Officers can then go along and sort out the trouble, or, if necessary, close the pub. In some cases, it is only right that they should do that. Provided that sufficient policemen are available, it is better for them to take responsibility for dealing with these matters, with the supporting powers of the magistrates.
As regards premises licences, I was a little concerned, after a swift reading of the White Paper, to note the proposal that in cases of premises licences to be granted indefinitely by the local authority, there should be a presumption in favour of granting such a licence without a hearing if no one has objected. That licence would then be in force for the life of the business. According to the White Paper, if there is an objection the entire burden of proof will lie with the objectors. The local authority will not need to take a decision after looking at both sides of the case. Where a new or very different licence is to be granted for a premises, that appears to place a heavy burden on the local residents.
Finally, can the Minister clarify the responsibilities for legislation as far as Wales is concerned? In the Statement the Minister said that of course the Secretary of State and the Home Office will consult the Welsh Assembly, but I am not clear where the responsibilities lie as regards Wales. I should be grateful for such clarification.
It will be clear that we have reservations about some aspects of the proposals which will require careful study. However, on the whole we certainly agree that
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it is right to look again at the whole gamut of our licensing laws and to re-examine the restrictions to see how they can be improved for the future.
4.23 p.m.
Lord McNally: My Lords, I, too, thank the Minister for repeating the Statement. When speaking in the House which has given the English language the term, "Drunk as a lord", perhaps we should all declare an interest! After having glanced briefly through the White Paper, perhaps I may also say that the First World War officially comes to an end today. Most noble Lords know that during that war, as a fig-leaf to solve the problem of low munitions production, the Liberal Government of the day brought in licensing laws. Our Chief Whip has quickly covered himself by reminding me that the measures were introduced by a coalition administration!
Like the noble Lord, Lord Cope, I, too, welcome the "Green" tinge indicated by the Minister in the Statement on the White Paper. Although the Minister made a number of claims for the new measures, I believe that we shall have to examine them in detail. For example, will the new measures properly deal with late-night disorder and help to reduce crime? Many other societies seem to cope well with liberal licensing laws, but whether it is our licensing restrictions or something deeper in our national psyche, a certain section of our community, whether at home or abroad, seems to associate drinking not with social pleasure but rather with excessive consumption that leads to aggression. I shall be interested to hear the police assessments of these proposals. The Minister's assurance that these measures will be "good for local residents" will also need further probing.
On a first brief reading, some of the proposals seem sensible. In particular, the cutting out of bureaucracy and of unnecessary costs are all to the good. The Statement gives a welcome recognition of changes in our lifestyles, leisure preferences and, indeed, our disposable incomes. Furthermore, the tone of the document suggests that any idea that people's behaviour can be legislated into conforming to what government deem to be "good" has been abandoned. That is apparent not only in our licensing laws, but also in how we treat gambling and other essentially leisure preferences. Nevertheless, I shall be interested to hear the views of the police on how they see the new proposals working in practice—which may be reflected in the White Paper. I should like also to consider the reactions of bodies such as Alcohol Concern and the Portman Group. The latter is a body financed by the drinks industry to promote greater responsibility as regards alcohol. I should like to see measures that promote a higher level of personal responsibility go hand in hand with these liberalising measures. People need to be informed of the health hazards and social damage that can occur through excessive use of alcohol.
In this country we have a problem with youth drinking which needs to be addressed. Again, although I appreciate that this may be covered in the White Paper, we must confront the growing menace of street

29
drinking where groups buy their alcohol in supermarkets and then consume it in public places, often forming rather threatening crowds.
Although the phrase is becoming a little overworked, we need to see "joined-up government" in this area. We need stricter controls over drink driving. It must be remembered that if licensing laws are liberalised, it is likely that people will be leaving establishments where they will have been drinking at times when public transport is no longer available. Measures must be taken to ensure that people have access to adequate public transport during unsocial hours. Recently we have seen reports that taxi drivers are increasingly reluctant to ply for trade late at night. They have little incentive to try to cope with late-night revellers. Problems will arise if more people stay out drinking late at night, but there is less public transport and fewer taxis available to get them home again. That is a problem in the making.
In the main, this sensible clarification and simplification is welcome but we must think ahead to avoid building up social problems. Crime, violence (including domestic violence), child neglect and a variety of driving offences are all related to alcohol abuse. All must be put into the mix. Against that, the proposals will allow the tourist and leisure industries to meet the demands of the British public and visitors from overseas who want to enjoy themselves at times of their choosing rather than when the law dictates. As such, we welcome the Minister's approach and the proposals, but we shall want to study them.
4.10 p.m.
Lord Bassam of Brighton: My Lords, I welcome the welcomes. We shall have another opportunity at a later stage to discuss the proposals further. The noble Lords, Lord Cope and Lord McNally, posed some useful questions. The noble Lord, Lord Cope, knocked a bit of a hole in his welcome by suggesting that he is not overly keen on local authorities taking responsibility for the issuing of personal licences. Five-sixths of licensing matters are dealt with by local authorities and it is rather "unjoined up" to separate personal and premises licensing. It would be strange to go part way to solving the problem, but then leave personal licensing with magistrates.
Magistrates have done a tremendous job of managing the licensing process for the sale of alcohol, premises control and so on, but it is time to modernise and move on. The administration of justice is the proper role and responsibility of magistrates. They will continue to have some input when people fall foul of the law, and when acting in support of judges who hear appeals.
The noble Lord, Lord Cope, made an important point about the views of residents, whose position will be greatly strengthened by the proposals. They will be able to make representations, perhaps in person or through a councillor, direct to those councillors who will make the decisions. When your Lordships have had an opportunity to study the White Paper, you will
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see that we make a virtue of that strengthened position. Local accountability is an important part of the new system.
The noble Lord, Lord Cope, referred to objections and objectors. Perhaps we shall have time, with this "greenish" White Paper, to consider the burden of proof and the way in which objections should be considered. The noble Lord asked whether the legislation will apply to Wales; it will. We shall legislate and it will be for the Welsh Assembly to consider the application of that legislation. We have made a clear commitment in the White Paper to continuing consultation. We have a slightly anomalous situation in Wales, where, if things stay as they are, there will have to be a fresh round of polls in 2003. The most sensible arrangement would be a uniform system for England and Wales. We shall need to resolve the issue of polls in 2003. The White Paper will deal with that.
The noble Lord, Lord McNally, displayed as usual his fine sense of history, reminding us that your Lordships' House had given us the expression, "Drunk as a lord." I am not sure that many of us fall into that category these days. Being as sober as a judge is the opposite, and judges may play a part in the final determination.
The noble Lord was correct to focus on the concerns of local residents and he asked whether the new scheme will tackle late-night disorder. We think that it will. A telling table in the White Paper, on page 14, traces public order incidents. It is no accident that they shoot up in the hour after closing time, between 11 p.m. and 12 p.m. The number goes higher between midnight and 1 a.m. and higher still between 3 a.m. and 4 a.m. Thereafter, incidents tail away. There is a concentration of public disorder associated with the closing times of public houses and clubs. If a more flexible approach to closing hours is taken, it may be that the police will be better able to distribute their manpower and to control public disorder. We believe also that the scheme will discourage binge drinking, which causes particular problems all to rush along at once.
The concerns of local residents will have to be carefully considered. We have consulted the police and other groups and shall continue to do so. Three months will be allowed to consider further views.
The White Paper tries to tackle the thorny issue of off-licence sales and under-age drinking and, by and large, it has got it right. That aspect will no longer be the responsibility of one person, but also of those who sell alcohol at off-licence premises.
Public transport is an important aspect. The problem relates to a sudden rush of people leaving pubs, some the worse for wear, trying to cram into public transport and taxis in particular, thus causing difficulties for operators and drivers in the early hours of the morning. If the numbers of people leaving pubs and clubs is more evenly spread, more taxis will be available and queues will be easier to control. I suspect that the market will determine where transport is available. That is no bad thing. We believe that changes in transportation patterns will follow as the White Paper becomes legislation.

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The proposals take a sensible, flexible and modernising approach to licensing and will make a contribution to joined-up government. We have received welcoming comments from the Local Government Association, innkeeper associations and the Association of Licensed Premises. There are good opportunities to consult further, to perfect an excellent and flexible White Paper. I commend it to your Lordships.
4.18 p.m.
Lord Alexander of Weedon: My Lords, while warmly welcoming the Statement, I want to say a word from the perspective of the Select Committee on Delegated Powers and Deregulation. Over the past few years, we have had to consider candidates for deregulation orders and, with one exception, have accepted individual relaxation of licensing legislation. We long ago reached the view that that form of salami slicing is no longer appropriate. If there is to be a new scheme and further relaxation of the licensing laws, it should take place as part of a general pattern.
I particularly welcome the suggestion that more responsibility should be given to local authorities. In our most recent report on the Government's draft proposal to relax the Sunday dancing and licensing laws, we made that exact suggestion; namely, that local authorities should be given the responsibility, as well as the opportunity, to opt-in to the more relaxed legislation. One factor that influenced us in that view was that, inevitably, local magistrates are not always drawn from the area of the local authority in respect of which the decision has to be taken. Another factor that influenced us was that, as the Minister said, it places the responsibility four square and unambiguously on the local authority to take the decisions for its area.
I also very much welcome the view that the interests of local residents are to be taken into account. There is always a danger that the interests of consumer choice, which are admirable, and those of business, which are very important both to the freedom of business and the economy, might somewhat drown out the voice and anxieties of individual residents. It was reassuring to hear the Minister say that that will not happen.
The Minister may not have had a chance to form a fixed view on this matter, but I should like to ask the following question. Is not this an area of such importance and delicacy that when consultation has taken place any Bill should come forward in draft and be subject to pre-legislative scrutiny? Moreover, with any Bill that comes forward, does the noble Lord agree that the regulatory impact assessment that will have been made should be published for the benefit of any committee and for the House as a whole, which has to consider the legislation?
Lord Bassam of Brighton: My Lords, again, I welcome the welcome for this Statement. The noble Lord's comments about "salami slicing" as regards approaches to licensing are well thought through. Indeed, the noble Lord reiterated the point I made
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about the importance and validity of placing special emphasis on the concerns of local residents. The noble Lord is right to say that we need to balance the interests of local residents against those of consumers and businesses.
I was particularly taken by the noble Lord's notion that we might wish to publish a Bill in draft form so that it could go through a process of pre-legislative scrutiny. That would be a useful contribution. It has helped considerably in respect of other pieces of legislation that have come before this House and another place. I shall take that point away and reflect upon it. The noble Lord has a wealth of experience in this field. Therefore, his point about having regulatory impact assessments published and made clear is most sensible. I shall also consider that matter most carefully.
Lord Campbell of Alloway: My Lords, I have two questions for the Minister. First, without repeating the reasons, will the noble Lord take quite seriously the proposals put forward by my noble friend Lord Cope as regards magistrates continuing to grant personal licences? Secondly, I welcome the broad thrust of the proposals; indeed, there is no question about that. However, if the decision is to be made by the local authorities for the reasons given, can the Minister say whether the Crown Court hearing an appeal will sit with a jury? I should like to have a specific answer to that question.
Lord Bassam of Brighton: My Lords, I am grateful to the noble Lord for his questions. As I said earlier, we believe that it is right that both personal and premise licences should be considered together. We believe that to be rational and logical; indeed, they are interconnected. After all, the whole purpose behind these proposals is to create an integrated approach.
I turn now to the noble Lord's second question. When appeals are heard by the Crown Court, they will, I imagine, be considered by a judge sitting with at least two magistrates drawn from the local magistrates' bench, not with a jury. As I understand it, that is the usual approach for the consideration of appeals and it is the one that we favour.
Baroness Sharpies: My Lords, as the owner and licensee of a pub a few years ago, I welcome this report. It is a great step forward. Most noble Lords are probably aware that in the 1980s, along with Viscount Montgomery and others, we had a great battle to make the authorities take any steps forward in this respect. As I said, I welcome the report but I am concerned that the cost will be borne by small businesses and owners of free houses who will have to take on a number of extra staff. However, that is perhaps a matter that can be dealt with at a later date.
Lord Bassam of Brighton: My Lords, under our flexible approach it will be for the operator or manager to determine how best to make use of his premises, and how best to make provision to match the demand from people who want to take advantage of this flexibility.

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That is part of the beauty of the whole approach. I should also point out that the approach adopted here has been endorsed by the Better Regulation Task Force, which sees the measures as being strongly deregulatory and as removing red tape. The approach is very much to the benefit and interest of small-scale licensees and licensed premises. There is much benefit here, especially for small businesses. No doubt that will be broadly welcomed across the country.
Baroness Hanham: My Lords, my noble friend Lord Alexander was kind enough to invite me, as a representative of my local authority, to appear in front of the deregulation committee on licensing. It is important to draw attention to a few of the points that we made; they reflect what the Minister said about residents.
For the following reasons, I welcome the proposal that this responsibility should come within the ambit of local authorities. On the whole, residents find it difficult to go to magistrates' courts to object in such circumstances. It is easier to approach a local authority with which they are more familiar. It is easier to organise a group of people for this purpose, but it is much more daunting to go to a magistrates' court.
I appeared in front of the deregulation committee because of the Sunday licences and the restaurant licences. I have not yet had an opportunity to study the White Paper, but I remain concerned about the hours of closure of such establishments. The borough that I represent has the greatest number of licences in any part of the country. It would be fair to say that every restaurant lies cheek-by-jowl with residents—they live above such establishments, beside them, or behind them. Therefore, what happens at the end of the day when restaurants and pubs shut matters a good deal to residents.
I should like to raise just one further point; it is one to which I shall return and I look forward to taking part in the debate on the White Paper. I have in mind the effect that closure time has on the peaceful life of residents in the surrounding area. There must be ways of ensuring that that peace is maintained. If I may say so, I am not sure that the police are able to cope with the problems and rowdiness that arise at closure times. It is the noise level as people leave such premises that causes the difficulties. I believe that point will need further consideration.
Lord Bassam of Brighton: My Lords, the noble Baroness speaks with great local government experience. Like her, I have shared the pain and pleasure of being in local government. I have had to put up with legitimate and quite understandable complaints from local residents who were concerned about licensing matters as regards entertainment licences. However, as leader of the council, I was also approached by local people complaining that there were too many of these establishments; that they were open for too long; that they wished they closed earlier; and, indeed, asking me why they could not trade somewhere else. I received the usual range of complaints.
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However, the flexibility established by this White Paper, the benefits that it will confer on local residents by enabling them to put forward their views, and the fact that people with local knowledge will be accountable for such decisions, are all strong points. The noble Baroness is right to see this as an important debate for the future.
Lord Roberts of Conwy: My Lords, when the Minister consults the Welsh Assembly, will he bear in mind that the history of licensing in Wales since the 1880s has not been a happy one? The tourist trade still complains about the divergence that occurred then when Sunday closing was introduced in Wales. It was introduced as a blessing which would shortly be extended to England, although of course it never was. Does the Minister agree that, whatever happens as regards the consultation, he should endeavour to secure a uniform system of licensing with a uniform system of appeals where necessary throughout England and Wales?
Lord Bassam of Brighton: My Lords, the noble Lord with his distinguished record of service in Wales is knowledgeable in these matters. I am not sure whether he is a "wet" or a "dry", but he is absolutely right to say that we should have a uniform system and a uniform system of appeals. That has emerged so far from the consultations. I should be extremely surprised if that is not reinforced in the processes as they unroll. We seek to make the system uniform for England and Wales, subject, of course, to the careful consideration that we shall have to give to the views of the Welsh Assembly, Welsh local authorities and others across the communities of Wales.
Lord Gladwin of Clee: My Lords, I, too, welcome the White Paper and declare a former interest as a member of what came to be known as the Erroll committee on liquor licensing. I have not yet had the opportunity to read the White Paper but I believe that some of the recommendations of the Errol] committee have finally come to fruition. I speak also as a former member of a licensing Bench. I support the idea that the licensing of premises should be transferred to local authorities and the sooner we dispense with the idea of magistrates poring over maps on a magistrates' Bench to try to determine whether a property should be granted a licence, the better.
However, I question the wisdom of transferring the granting of the personal licence from magistrates. In my experience, the interrogation of applicants for licences has been carried out effectively by magistrates. It impresses upon applicants the importance of keeping a proper house, as does the practice of visiting premises to ensure that they are being looked after properly and are servicing the public. .A public house exists to service the public. I wonder whether the task that I have mentioned is not better left to licensing

35
magistrates. I agree that there should be uniformity in the system, but the task of ensuring that proper behaviour is maintained both inside and outside licensed premises is best left to licensing magistrates. However, as the White Paper is "greenish", perhaps we can continue to discuss this matter.
Lord Bassam of Brighton: My Lords, I am grateful for the noble Lord's contribution. As a former member of a Bench he obviously speaks with much knowledge. I was grateful for his observation as regards the importance of visiting premises to make an assessment. We all like visiting premises, not least for the odd pint or two! The point that the noble Lord made about interrogation is a valid one. However, with my knowledge of local government, I am aware that local councillors are good at asking awkward questions. Many local councillors have, of course, served as distinguished members of Benches. Although I may take issue with the noble Lord's observations about personal licences, I reinforce the point I made earlier in paying great tribute to magistrates who have performed a difficult task for a long time. We must make good use of their experience and build on it in creating a more modern system for modern times. I believe that that strong message emanates from the White Paper. However, as I said, we shall continue to seek views and actively consider them. No doubt we shall reach a final view at the end of the consultation period.
Lord Cope of Berkeley: My Lords, if no other Member of your Lordships' House wishes to ask a question in the few minutes that are left, I hope that I may ask a detailed question about Sundays. The noble Lord may prefer to answer this question in writing. Paragraph 86 of the White Paper—which concerns Sundays—states that the Government's approach is to treat each day equally for the purpose of licensing law. Does that mean that the same hours will apply on Sundays in every case as on the other days of the week?
Lord Bassam of Brighton: My Lords, there are 24 hours in every day. The flexibility that we envisage would in theory enable people to open for 24 hours a day. However, obviously that will be a matter for local determination. I believe that the noble Lord asks whether Sundays will be subject to a separate opening hours regime, as at present. Local authorities may decide to adopt such a regime. It will be for them to make local determinations. It is right for them to do so as that provides local flexibility. In my home area it may be appropriate to have rather longer opening hours in some of the sea front bars, pubs and clubs and rather shorter opening hours in the residential areas away from the tourist "hot spots" behind the sea front. The beauty of the White Paper is that it provides useful flexibility which we can, no doubt, discuss. I sense that the noble Lord, Lord Higgins, may take a similar view as regards Worthing.

Government Resources and Accounts Bill
4.36 p.m.
Second Reading debate resumed.
Lord Lipsey: My Lords, not many weeks ago the House was full to the rafters for the debate on Section 28; an enactment of Parliament which, as I recall noble Lords on both sides of the argument said, had never resulted in a single prosecution. One cannot help but contrast that with this afternoon's debate. We are a happy few, a band of brothers, but we are not present or speaking in vast numbers. One might say that perhaps the Treasury did not encourage us to be present in vast numbers as its own brief on the subject states that the Bill is "technical". I am sure that few noble Lords would quarrel with that description.
However, I do not think that we should for one second underestimate the importance of the measure before us. My noble friend the Minister referred to double-entry bookkeeping, although I think that some historians could charge him with taking a rather Eurocentric view in attributing that to this Continent in 1492. Some evidence dates it back to Ancient Egypt in the years before Christ. Nevertheless, without double-entry bookkeeping, it is hard to envisage the development of modern capitalism with all that that has brought.
In a way I think that the Bill may turn out to be the double-entry bookkeeping of modern government in that it will lead to important changes. I believe that even more strongly as a result of the various other changes, which are not often seen as a whole, which have arisen with it. I refer to the new emphasis on evidence-based policy; the end of strict annuality in the control of public expenditure; the increased use of performance indicators and of targets through public service agreements and—this may be about to arise, and it is certainly not a moment too soon—the possibility of cross-departmental budgeting to deal with cross-departmental problems. When you consider that array of modernising measures as a whole, of which this is one of the cornerstones, you see the true measure of the importance of the Bill that is before your Lordships' House this afternoon.
This is a non-partisan Bill. Work on it started in 1993 under the chancellorship of Kenneth Clarke. I should like to pay credit to Andrew Likierman, without whom it is hard to see how we would have had this Bill today. He is the head of the Government Accountancy Service and Chief Accountancy Adviser to Her Majesty's Government.
The concept of the Bill is perfectly easy to understand. No one goes out and buys a house out of this year's income. If we do so, we certainly do not then say that we shall not be able to spend anything on food this year because we have just bought a house. That would be a daft way to proceed; but, in principle, that is the way in which governments have proceeded in this country. The Bill heralds the end of that principle.
So, conceptually, the Bill is perfectly simple. But, as one goes into the fine detail, one sees the difficulty of convincing the whole of Whitehall to abandon the

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tried and tested methods, as some might have seen them, of dealing with government accounts. Some might have seen them as methods which had been tried and tested unto failure, but never mind. To get out there and to convince Whitehall to make the wholesale changes required was an awesome task. The whole House is indebted not only to the Minister who saw it through but to the official team under Andrew Likierman and to the departments which have done the work.
I heard the wise words of the noble Lord, Lord Taverne, that we should be careful with all such systems which appear to be instant solutions to all our difficulties. He referred to PPBRs and PARs. There was also MINIS, the system brought forward under Michael Heseltine, which I think was the other system that the noble Lord, Lord Taverne, was seeking to remember. The system in the Bill has a quality which separates it from those other systems. They were imposed on departments from the centre in an attempt to get departments to behave differently. Because they were imposed in that way, they were not successful in modifying behaviour. Departments were asked to look at their whole budgets—it sounds a brilliant idea—but when they actually came to do so they found—surprise, surprise—that every item in their budgets was absolutely justified.
The difference with this scheme is that it does not attempt to do all the work from the centre, but tries to give t he departments the tools to do the work themselves and to see matters rationally. It tries to give them incentives to behave in a rational manner as a result of what they see That is why I am much more optimistic about the potential of this reform—as I say, it is not a partisan point—to achieve what the other reforms failed to achieve: a more rational and systematic allocation of scarce resources—scarce resources which, I hardly need remind your Lordships' House, are paid for ultimately from the pockets of the taxpayer.
I should like to raise a point slightly outwith this subject—I am sure that it will be debated in Committee—that is, my concern as to whether Parliament, taken as a whole, is moving with the same speed and flexibility in this matter as are the Government and the executive. Perhaps strikingly, the two Acts replaced by this Bill date respectively from 1866 and 1921: the Exchequer and Audit Departments Acts of those two years are the ones we are getting rid of. Even 1921 seems a long time ago in terms of a modern system of financial control.
I recognise that I am in the presence of a number of noble Lords who have deep experience of the way in which financial matters are handled in another place—I pay deference to them—nevertheless, I trespass as an outsider who has looked at these matters in much less detail but who perhaps has a perspective lent by distance. I do not believe that this Parliament is at its best in its scrutiny of expenditure.
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I am not the only person who does not believe this. Perhaps the greatest recent book on British government, Aaron Wildaysky and Hugh Heclo's The Private Government of Public Money, made that its theme. I looked at its conclusions again the other day. It stated:
"Don't muck around with the Treasury…do muck around with Parliament.
The analytic staff capabilities of Parliament cry out for improvement…Cosy clientelism can develop between…legislative committees, executive bureaux and outside interests…Parliament needs a budget committee cutting across departmental lines…The staff available to MPs should be increased…as should the institutional staff serving Parliament and its committees".
Every word of that is absolutely true. Unfortunately, it was written in 1974. Although there has been much progress since, it would be hard to say that a word of what was written then would not apply equally today.
Perhaps I may very briefly identify one or two points. I am not sure that the apparatus of the Public Accounts Committee, of the Comptroller and Auditor General, and of the National Audit Office is of the most modern. As I watch those bodies, I compare them with the actions of the Audit Commission, responsible for local government and health authorities. It seems to me that the Audit Commission has a strong edge and that its practices should be adopted.
A second point, which was referred to by Heclo and Wildaysky, concerns the lack of overall scrutiny of public expenditure. Individual departmental committees look at individual departmental expenditure—and often at log-rolling on behalf of particular interests—but no one looks at public expenditure across the piece on behalf of Parliament and comments on priorities. There are bits and pieces—the Treasury Committee sometimes has little goes at it from time to time, but it has a lot of other work to do—but there is not one single parliamentary committee dedicated to doing that.
My third point—I know that I am now trespassing in a dangerous area—is that it seems strange that your Lordships' House has no role in public expenditure scrutiny. I know that there is a constitutional propriety that says that only elected representatives of the people should decide where their money goes—I have some sympathy with that—but, in practical terms, this House is at its best where it complements the work of another place. In this field, there are shortcomings in the work of another place and there is scope for considering, particularly on cross-cutting issues, whether this House could not perform a useful role in regard to public expenditure. It should not be a question of Lords against Commons but a question of Parliament and the executive, and of how best Parliament as a whole holds the executive to account for the enormous sums it spends on behalf of the public. How that is done in practice is not a matter of constitutional doctrine but of practicability. The goal must be better scrutiny of public expenditure in the interests of the nation as a whole.
4.47 p.m.
Lord Freeman: My Lords, I declare an interest as a former partner with PricewaterhouseCoopers. I am now an adviser to that firm, which has provided advice on resource accounting to a number of government departments.
It is a pleasure to follow the noble Lord, Lord Lipsey, that scourge of imprecise economic and political thought. I disagree with his historical memory. It may well have been more than 2,000 years ago before the first elements of double entry bookkeeping were discovered but, in defence of the noble Lord, Lord McIntosh, the doge of the ministerial Benches, he was quite right to say that it was the Venetians who developed the system. In the preparation of the accounts with which they used to control their trade with the world, the merchants of Venice used, literally, a system which is now proposed for government in the 21st century in the United Kingdom.
All sides of the House welcome this move to resource or accrual accounting—that is to say, including not only the movement of cash but the movement of obligations, both for accrued liabilities and advance prepayments—as a sensible substitute for cash accounting. For those interested in the subject, I am sure noble Lords will appreciate that it is important to recognise liabilities that have not yet resulted in terms of a cash obligation; to depreciate one's assets, as does every other private enterprise in this country; to measure the consumption of stock; and to take account of the timing of revenue obligations and not simply the movement of cash.
I thought that the noble Lord, Lord Taverne, was a tad cautious—even slightly gloomy—in the second part of his speech in terms of showing concerns about the application of the principle of resource accounting. I believe very strongly that Peers on all sides of the House will welcome this initiative.
I should also like to pay a tribute to Andrew Likierman—and for the benefit of the noble Lord, Lord McIntosh, who is making a special study of acronyms, Andrew Likierman is known within government as "Hot Gas"—as the head of the Government Accountancy Service. I pay tribute to "Hot Gas", and indeed to some of his predecessors who have worked on the development of resource accounting. I should also like to pay a particular tribute to my former colleague in another place, Ken Clarke. In introducing this new initiative he may not have read every single word of the Bill or of the relevant papers but, by Jove, he understood the implications. It was he who, with the typical determination that we associate with him, pushed through departments the preparation of resource accounting.
The noble Lord, Lord Taverne, was struggling to remember the initiative introduced by my former colleague, Michael Heseltine. It was called MINIS, the Ministerial Information System. It had nothing to do with accrual accounting; it was concerned with who was doing what to whom within departments. I am
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glad to say that he introduced it in the early 1980s in the Ministry of Defence and it was still going strong in the Cabinet Office when I served with him in the late 1990s—and long may it remain a tool for Ministers.
I have five brief points to make to the Minister and would much appreciate any comment he can make now, or perhaps later by way of writing to me. The first concerns the timing of this change. My noble friend Lord Higgins was quite right in reminding us of the concerns of the Public Accounts Committee, about making sure that resource accounting was actually working properly before we abandoned the traditional cash accounting method of control. However—and this is very important—dual running of this system in anything but the shortest period of time will only seek to sow confusion, expense and muddle: muddle in Parliament, let alone in the departments.
While I recognise that we cannot dash ahead too quickly with a system which at the moment operates with some ragged edges, I implore the Minister who will answer this debate not to have a dual system of control running for too long. My noble friend Lord Higgins made a most valuable suggestion, and perhaps I could put some specifics on it. He suggested that it might be possible to look at some specific examples. Well, with 30th November being the cut-off date for the submission of accounts for audit, perhaps we could look at the fiscal year 1998–99. The resource accounts and the cash accounts have been running together—certainly the resource accounts have been in draft—and I am sure that many of your Lordships would appreciate the chance to look at the historical accounts. The committees in the House of Commons have been looking at estimates in the former resource accounts, but looking at historical figures is sometimes easier.
My second point is scope. The Minister referred to the extension of the principle of resource accounts to the rest of the public sector—for example, the National Health Service, schools and so on. I have difficulty with the concept of exempting the National Health Service from the preparation of resource accounts on the ground that the department itself, the sponsoring Ministry, will have to prepare accounts.
I do not think that that is a valid enough reason. I am certainly anxious not to place greater burdens upon the management of the National Health Service, but I would have thought that it would help its administration to have full resource accounts for hospital trusts. Therefore, perhaps the Minister would be bold enough at least to make a declaration of intent that the principle of resource accounting could be extended to the whole of the public sector within, say, three years—by April 2004. That seems to be a realistic aim. We cannot have a hybrid system: we cannot have one part of the public sector operating cash accounts and another part operating proper accrual/resource accounts. Either we all do it or we do not do it, and I should have thought that a fairly short time period was both sensible and acceptable.
My third point relates to the basis of depreciation. This is not an arcane point, because, if we are to begin depreciating the assets in the public sector, it is crucial

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to know the basis of depreciation. I believe that we are in danger of having too complicated a system. As I understand it, we are likely to be using a modified historic costs depreciation basis. It is important that all departments, as well as Parliament, understand the clear basis by which we are depreciating: that is to say, charging the annual resource accounts for the consumption and use of our assets.
In the past, investment in assets, once made, created a free good for departments to use. The public sector was not necessarily disinterested, but paid little account to the annual cost of consuming a building, an asset, a road, or whatever, over its useful economic life. Now, for the first time, we shall have that. We are not going to do away with annuality, as the noble Lord, Lord Lipsey, quite rightly reminded us. We are still saddled with that, although I much regret it. I believe that, beginning with the commitment to fund the rail franchises between 1995 and 1997, we began for the first time to break the vicious cycle of 12-month annuality rules which limited the commitment that the Treasury was prepared to make. So I regret that we have not made any move in that direction, but at least we will maintain investment appraisals for new investment and at least the accumulated depreciation of past assets which need replacing will be some form of protection for investment commitment.
My penultimate point is to emphasise once again the point that was made by my noble friend Lord Higgins and by the noble Lord, Lord Lipsey. We are moving the focus in controlling the public sector towards output—what a department achieves in terms of its goals—and we are measuring inputs in terms of resources committed, and not simply cash, which represents a much fairer measure to contrast with output. It is a little noted achievement of this Bill, which I very much welcome, that it requires departments to produce not only what we call a set of accounts but a statement, for the 'first time, which relates costs to the outputs of the department. I very much welcome that.
My question to the Minister is: does he foresee any possibility that Select Committees both in the other place and in your Lordships' House could not take additional responsibilities for not only examining the accounts but controlling them by voting upon them? We know that Select Committees effectively, in most cases, have a governmental majority control, certainly in terms of much of their procedure and also in terms of some of their deliberations. I do not mean to be disrespectful but merely to repeat the obvious. To give Select Committees power, as in the United States Congress, for instance, to approve almost line by line the resource accounts—the resource estimates in this case—seems to me to be sensible.
Finally, I come to what I think is the most important point: that is the independence of the authorities which will supervise the generally accepted accounting principles and also the form of accounts. No one doubts that in most cases GAAP—generally accepted accounting principles—for the United Kingdom will be employed by the public sector, but if one studies the small print one finds that Her Majesty's Treasury will
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be determining the form of accounts, following GAAP principles, and that indeed the principles themselves will be,
"amended as necessary in the context of departmental accounts".
So I believe that some degree of unease will be expressed from the Front Bench and from both sides on the Back Benches as to the independence of the monitoring of this new initiative.
Cash accounting is a science: cash is spent or it is not spent. Resource accounting is an art, and because it is an art there is always disagreement about interpretation. For that reason, it is very important to have a clear and independent body of experts and of principals outside government controlling the preparation of accounts. I urge the Minister to accept not only the spirit of my comments but also my specific suggestions. I very much welcome the Bill and would appreciate any comments the Minister is able to make.
4.59 p.m.
Lord Desai: My Lords, I join other noble Lords in welcoming the Bill. I, too, remember that many Christmases ago at a party, despite several drinks, Andrew Likierman, was able to be enthusiastic about the forthcoming revolution in government budgeting. I have been waiting and waiting and now, after several years, we are seeing the fruits of it. At last, after 800 years, the Treasury is to have decent accounting. Thank God for that! So far it has been cheese-paring with cash—"pinching the penny and clipping the pound" is the right expression—but now we shall probably have better accounts.
For a long time I have not understood a lot of Treasury orthodoxy. It seemed to have no basis in economic theory. When cash is involved, anyone who says, "You cannot have extra money", always seems to be much wiser than some one who says, "No. I want to spend it on a good cause". Even with resource accounting, we shall be some distance from genuinely good economic accounting because, as far as I can see, we shall be considering only monetary resources. There are all kinds of other resources for which we may not be able to account. I have in mind the saving of time, the saving or lengthening of lives, and so on. Therefore, I give a cautious welcome to this revolutionary proposal.
There is an interesting parallel here between the way national income accounting has continuously improved itself by getting closer to the economic as opposed to the accounting basis of income definitions. We still do not use those broader definitions of national income in our macro-economic policy making. But, leaving that aside, there is still a lot further to go in writing accounts so that they will make economic sense.
I agree with the noble Lord, Lord Freeman, that cash accounting is a science. But "science" is too big a word for it. In cash accounting "arithmetic" is more appropriate. We add numbers and everyone agrees what the numbers are. As resource accounting will be something of an art, what is important is not whether or not there is transparency; but that there should be

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the widest public debate. And not just debate in Parliament. Our arcane rules of depreciation are important in the taking of decisions from which the public may suffer. We ought to be able to tell the public what it is that is being adopted.
I agree with the noble Lord that those who lay down the rules should be independent. We do not want to have further suspicion that the Treasury is up to its old tricks and, in another language, once again hiding things, as it always does. I regret that the Red Book, which is now white and much more glossy, stopped publishing the cost of taxes not collected. Once upon a time there was a column in the Red Book which set out the cost of zero-rating VAT. That was the cause of my downfall many years ago. I took it rather seriously and thought, "Why can't we have all that money?". It was useful to have transparent accounts of sums that are not collected or sums that are put under expenditure rather than income. It would not matter if there were two separate tables—one for the way the Government want to treat it and an alternative way of looking at the matter. The proposals in the Bill ought to make it possible for us to do that.
Eventually we shall have to move to much broader social resource accounting. After all, we are not just about spending money; we are about well being. I remember the classic case of the cost benefit study of the Victoria Line by Christopher Foster and Michael Beasley. The whole basis of the financing of the Victoria Line was in terms of the value of time saved for the traveller. We had a good deal of debate about whether or not to finance the Underground. Underground. But no one costed the amount of time a decent Underground system would save commuters. That, by itself, would save a lot of the money that would have to be borrowed. But we have not yet moved to social resource accounting. Even if we do not do it for financial accounts, we should move towards a broader social resource accounting. I am sure that what we are doing now is just a step towards that kind of change. In the meantime, I welcome the Bill and wish it God speed.
5.5 p.m.
Baroness Hogg: My Lords, I join the chorus of welcome for the Bill. Whether it is a 3,000-year milestone, an 800-year milestone, a 500-year milestone or, as the noble Lord, Lord Taverne, suggested, perhaps something more short-term, I leave to better historians. But I am convinced that it has its heart in the right place. As the Minister said, it is the legislative expression of work that began under the previous government with respect to RAB and PFI. I join the chorus of compliments to Andrew Likierman and his team, not merely for the work of the team, but also for the persistence with which he kept Ministers' attention focused on this matter. Perhaps I may tell my obligatory Andrew Likierman story for this debate. I remember an occasion of him coming to see me at my office in Downing Street in 1994 and, by sheer force
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of personality, he persuaded me to agree that this was by far the most urgent issue on the Prime Minister's agenda.
There has been some complaint that the Bill is a rather unhappy marriage of two issues and that the legislative backing for PUK has been grafted on, as it were, to a totally different set of issues. However, there is some connection in that even enthusiasts for PFI (or PPP as I must now call it)—and as one involved in some of the initiation of PFI, I certainly count myself as an enthusiast—must acknowledge that through PFI the Government are building up a whole series of liabilities. As my noble friend Lord Higgins pointed out, it will be one of the benefits of a full balance sheet that we would see those fully represented.
Having expressed my support for the Bill, perhaps I may signal some initial concerns. The noble Lord, Lord Higgins, made the important point that this reform must be both comprehensive and comprehensible. The trouble with such complex changes is that, while one is bringing them through, one tends to congratulate oneself on how far one has got and forget that when they are revealed to an astonished world what has been omitted and is incomplete will seem rather more important. That leads to mystification, irritation, suspicion and the creation of a whole new set of barriers to entry to the understanding of government accounts. Therefore, I endorse what other noble Lords have said; that is, that it is important to try to introduce this in a way that is comprehensive and comprehensible. I endorse the comments of my noble friend Lord Freeman on the subject of depreciation.
In the same vein, I ask the Minister to take seriously the suggestion for oversight by an independent body. That is not just because of certain controversy over the presentation of public expenditure numbers recently; nor because of criticism of the manipulation of the Red Book. That document is clearly reaching a size and a level of complexity that is beginning to tax even the understanding of the noble Lord the Minister. It is more because all governments—all Treasury Ministers—like to change definitions and presentations for both good reasons and bad far too frequently. The trend to independent oversight of such developments has been seen in relation to, for example, national statistics. It is a trend that we should move towards for national accounts as well in the Government's own interests. I ask the Minister to take that point seriously. It is not just a Treasury tease. It is important for the successful launch of this reform.
My second set of concerns relate to Partnerships UK. Some of them may be a touch "Committee-ish", but perhaps I may signal them at this point. An important purpose of our debate on the Bill in this House must be to clarify the role of Partnerships UK. I share the concerns expressed in another place about the distinction between upstream and downstream activities of Partnerships UK. I endorse the decision to give PUK a wide remit with respect to upstream activities, to make it effectively a facilitator; indeed, I warmly support that development. The build-up of the PFI has been seriously hampered by the lack of the

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kind of expertise which I hope Partnerships UK will provide within the public sector. However, a downstream role is much more questionable. If Partnerships UK is to act in effect as another private sector investor, there are conflicts of interest to be explored. I welcome the introduction in another place of the £400 million limit on outstanding expenditure by Partnerships UK, but it does not deal with the principle that causes me concern.
The Minister will have given much thought to these issues since the Bill emerged from another place. I look forward to having them illuminated in his response.
5.11 p.m.
Baroness Sharp of Guildford: My Lords, we on these Benches broadly welcome the Bill. It is important in terms of updating the basis of public accounts— possibly dating back 800 or even 3,000 years, as we have heard—and of bringing them into line with best practice in the private sector. In future we shall see a balance sheet, an operating costs statement, a statement of gains and losses, and a cashflow statement.
Another important addition is that under the new system there will be a statement of how resources are used according to departmental aims. I have been fairly well used to that in terms of R&D statistics. As they are presently drawn up, there is a variation in their presentation. One of the ways in which they are presented is against the degree to which they are used to promote the discovery of knowledge: to promote strategic applied research technology transfer. It is useful to be able to see how resources are being used. I take it that such a practice will apply more widely across departments. In addition, the accounts are to be set side by side with performance indicators for departments. Here too, there are lessons to be learnt and I shall refer to that. So far as the general public are concerned we are to have better accounts: accounts that are more comprehensible, more transparent. Those in themselves will open the way to better scrutiny, so that both the public and Parliament are better able to hold the executive to account for what is happening.
Like the noble Lord, Lord Freeman, I welcome the degree to which we are linking inputs to outputs. An issue about which I have long been concerned—I am delighted that at long last we are catching up on it—is the treatment of capital expenditure within the public accounts. To the man and woman in the street it has been incomprehensible that there has made no differentiation whatsoever in the treatment of capital and current expenditure in the public accounts. As the noble Lord, Lord Lipsey, said, the matter is treated in exactly the same way whether one is buying a house or a tin of baked beans.
I was a young assistant principal in the Treasury in the early 1960s when the Plowden report was implemented. In those days, we were moving away from what used to be termed "below the line" expenditure and were introducing what was then termed "resource-based accounting". The argument
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was that in regard to inflation whether it was a matter of a tin of baked beans for school dinners or bricks and mortar for schools, it was a call on resources, and any call on resources might have an inflationary impact and therefore we should treat all alike.
Over the course of time, we have treated all alike. A problem has arisen in that, if it is a question of money for a schoolteacher's salary or money for bricks and mortar for a school, one can put off building the new school but one cannot lay off teachers and increase class sizes. Therefore, over the course of time in the public accounts we have seen a bias against capital expenditure. The result in this country has been a great crisis in terms of building the social infrastructure. Whether we are looking at roads, schools, hospitals, the Tube or anything else, we have failed to put money into public sector infrastructure. If we examine the interesting historical tables that appear at the end of the Red Book, we find that in the 1970s we were spending 5 or 6 per cent of GDP on public sector net investment. We are now spending 0.6 per cent.
I know that back in the bad old days of the 1970s all the nationalised industries were added into the public sector accounts. We have got rid of all those industries, partly because of the problem they caused in terms of investment. When British Telecom needed £20 billion in order to invest for the digital revolution, it said, "We cannot possibly do this within the public sector because it would inflate the public sector borrowing requirement far too much". That problem has led to distortion in all kinds of decisions for a long time. We are now spending far too little in terms of net investment in the public sector. We should be spending far more than 0.6 per cent.
Perhaps I ought to pay tribute to what the Government are doing in terms of the extra expenditure on public sector investment. But the money is going through the private finance initiative. Why? Because essentially it is "off the books"; it is not included in the public sector borrowing requirement. So we have increasingly seen heavy capital expenditure on schools, hospitals, roads and railways, all now going into the public finance initiative. I understand why it is going there; however, I have long argued that it is illogical. Why borrow more expensively through the private sector when the public sector can borrow more cheaply?
I understand that there a risk factor: historically, the public sector has been extremely bad at managing large capital construction projects. Nevertheless, I still fail to understand why the PFI—or the PPP, and now Partnerships UK, as the facilitating organisation for developing the skills and manpower to run, from here forward, a cornerstone of 21st century management of public resources, to use the Minister's expression—is seen largely as the way forward. From these Benches, I continue to register a somewhat sceptical view of whether this really will be the cornerstone of the management of public resources in future. Nevertheless, I accept that this will go forward; I realise that there is now bipartisan support (on the part of both the Opposition and the Government) for the public/private partnerships initiative.

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This illustrates one of the problems that is faced up to in the Bill; namely, the question of the limitations of parliamentary scrutiny. Clauses 9 and 10 of the Bill extend the powers of the National Audit Office to investigate non-departmental public bodies. But the Bill leaves out of account a number of new kinds of public sector organisations, such as the private finance initiative where a great deal of money is going, and it is not clear how they will be audited. I join other speakers in feeling that this aspect of the Bill needs further consideration.
We are also unhappy about Clause 5 and the whole question of who should define public sector accounting procedures and standards. As it stands, the Treasury still plays a considerable role in setting those definitions. We worry about that and believe that it is far more satisfactory to have an independent body to set standards and definitions.
I return finally to performance measures and monitoring procedures. My honourable friends in another place are extremely enthusiastic about performance indicators and would like to see even more established for the public services. I have always had reservations about them, in part because, coming as I do from the education sector, admittedly HE, I have seen the degree to which performance indicators have distorted the allocation of resources. Looking at it slightly more widely, as the governor of a school I also witness the degree to which the need constantly to fill out forms, and the bureaucracy associated with performance indicators, detracts from the delivery of mainline services. That should not be forgotten.
Over the years I have also taught the economics of the Soviet Union. I have read at length, as I am sure has the noble Lord, Lord Lipsey, the work of Professor Alex Nove on this matter. The Treasury has the whole of local government under its thumb and, in terms of expenditure, has it precisely where it wants it. It is a highly centralised system of control over expenditure. Stalin would have been proud of such a system had he been able to exercise such control in the Soviet Union. When one establishes a control system of that kind in the public sector and cannot measure outputs by profits, one establishes performance indicators. We all know what happened to performance indicators in the Soviet Union and the degree to which they distorted the delivery of real goods and services.
I have been delighted to read in the past week that the Treasury has decided that there are too many performance indicators for most departments. That certainly appears to be the case. We need perhaps a few, but we must give this very careful consideration. Just think how hospital waiting lists have distorted the whole delivery of health services. I have some reservations about the degree to which we want to go along the route of performance indicators.
We on these Benches broadly welcome the changes that the Bill brings into effect, particularly if it succeeds in bringing a little more sense to the management and use of capital assets in the public sector. We have some
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scepticism as to how much will be achieved and fear that in some sense it may be another case of Plus Ça change, plus c'est la même chose.
5.23 p.m.
Viscount Bridgeman: My Lords, I repeat the observations of my noble friend Lord Higgins. We on this side of the House broadly welcome the Bill. I associate the Front Bench with the tribute to Mr Andrew Likierman and his interesting acronym. I am also grateful to my noble friend Lord Freeman for reminding your Lordships that so much of the initial stages of this work was done by my right honourable friend Mr Kenneth Clarke.
The expertise which has been available in this debate comes as no surprise. In that connection, I am interested in the suggestion of my noble friend Lord Freeman and the noble Lord, Lord Lipsey, that this House should take a greater role in the scrutiny, not of the Budget or expenditure, but certainly of the accounting of it. The Bill still has some serious deficiencies, the remedies to which were not accepted by the Government in another place. We are concerned not so much by what the Bill covers but, as my right honourable friend Mr Francis Maude said in another place, what it fails to cover.
With a broad brush, perhaps I may summarise our three concerns. First, the Bill gives the Treasury enormous powers to determine what is or is not to be included in the accounts. Secondly, it establishes no clear principles for the accounting of income and expenditure. Thirdly, it continues to permit the Treasury to omit large public assets and liabilities from the national balance sheet, to which my noble friend Lord Higgins referred. In particular, the state pension liabilities are omitted from the accounts. There is nothing to prevent any government from re-classifying expenditure. One glaring example of that is the reclassification of the working families' tax credit, to which my noble friend referred. We continue to be concerned about the vagueness of the Bill in valuing the assets of the Ministry of Defence and the definition of private/public partnership, about which I shall say more.
One of the key objections to the Bill as currently drafted is that there is no independent body to set the accounting standards by which the government accounts will be presented. My noble friends Lady Hogg and Lord Freeman also referred to this matter. The problem is that the Treasury will determine the accounting standards and the form in which the accounts are presented. No fewer than six clauses of the Bill give the Treasury power to issue directions to departments about the preparation of accounts, to determine which items of income or expenditure are included and even as to how income, expenditure and liabilities should be defined.
In essence, this Bill trusts the Treasury at all times to adopt proper accounting standards. We are being asked to trust this Government, and all future governments, not to massage the figures in order to paint their stewardship of the economy in the most

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favourable light. Time and again during the passage of this Bill in another place the Government were asked to explain why, if they were genuine in their desire to see proper accounting standards for the public sector enshrined in legislation, they would not establish a body independent of the Treasury to ensure that the published accounts represented a true and fair view of the public finances. In our view, no satisfactory answer has been provided by the Government.
When it was suggested that a new national accounts commission should he established to ensure fair play, the Government replied that there were already many accountancy bodies in existence and that the creation of a further one would be superfluous and cause confusion within the profession. If that is the case—although I have my doubts—there are no insurmountable barriers to empowering one of the existing bodies to perform that role. We on this side of the House do not seek to be prescriptive about how the rules are properly policed; we merely attempt to set out in legislation the principle that it is wrong for the Treasury both to prepare the accounts and to determine the manner in which they are created.
In the private sector no company can create its accounts in any way that it sees fit; each must conform to the accounting standards and have its accounts independently audited. The private sector analogy is that of a company which sets its own accounting standards and goal posts which it moves from year to year to suit its own requirements. I see no reason why the public finances should be treated any differently from the disciplines imposed on the private sector. The Government provided a perfect example of that in the treatment of working families' tax credit, which costs around £5 billion per annum. There is a consensus among experts that this credit, which replaced family credit, should be treated as an item of social security expenditure. It is, after all, a scheme designed to give some financial incentive to low income working families. Family credit was treated as social security expenditure. In that connection my noble friend referred to the OECD, and it may be worth reading its comment in full:
"We have clear guidelines on how we treat tax credits that were established in the early 1970s. If the tax credit is given to a family that have not to pay any tax because it is a low income family, we treat this tax credit as social expenditure".
It is clear to those on this side of the House that the Treasury wishes to treat this matter as a tax credit because it shows that government spending, and therefore the tax burden, is lower than is the case. In our view, that is a blatantly political decision by the Government.
The problem is that under the provisions of the Bill the Treasury would be within its rights to make such decisions and have them cloaked in the respectability that resource accounting should give to the public accounts. Other public liabilities include state pensions and other benefits to which my noble friend Lord Higgins referred. Will the whole of the Government's accounts include full liabilities for those amounts? We simply do not know how the Treasury will account for
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them. We believe that it is far more desirable to have an independent set of standards to which all governments must conform.
The Government have yet to come forward with a logical explanation as to why that should not be the case; and I give notice that we shall bring forward amendments in Committee to ensure that this vital independent safeguard is included.
I turn to supervision and monitoring. Here the Bill appears to fall between two stools. Not only does it fail to make provision to use the services of a number of suitable accountancy bodies in the private sector, but it also restricts the scope and, therefore, the effectiveness of the Comptroller and Auditor General's office.
We believe that it is wrong that the CAG does not have universal scope of access and audit across the public and quasi-public sector. This is a concern which was raised by the chairman of the Public Accounts Committee in another place, and amendments tabled by PAC members to rectify the deficiency were supported by both Conservative and Liberal Democrat Members in another place.
I acknowledge that the Government have made some concessions on the issue, including the announcement of a study of the issues to be conducted by the Chief Secretary to the Treasury. We welcome the Minister's appointment of the noble Lord, Lord Sharman, to chair the body to look into the issue. The speed of working of the noble Lord, Lord Sharman, is legendary in the profession; but even he cannot produce a report until the end of the year and we on these Benches are seriously concerned that such a report will not be enshrined in the primary legislation.
If it is the Government's genuine wish to put the public accounts on the same footing, why do they not accept that it is right for all financial accounts of the public and quasi-public sector to be subject to audit by the CAG and that the CAG has proper rights of access to appropriate persons and papers? At present, the audit arrangements for executive non-departmental bodies (quangos) are arbitrary and illogical. A substantial minority is audited by auditors other than the CAG. The decision as to who will audit each newly-established body is made by the individual sponsoring department when the body is established. As a result, there is a lack of consistency in the information provided to Parliament and an unnecessary waste and duplication of audit effort. Let us contrast that with what happens when the government of the day choose to reorganise or create a new department of state. The Exchequer and Audit Departments Act 1866 currently provides automatically for the CAG to audit the new department.
We believe that it is desirable to allow the CAG the right of access and audit across the whole of the public accounts. Not only would that provide a consistency of audit which would reinforce the accuracy and probity of the public accounts we wish to see, but we must also remember that audits by the CAG have the advantage over those made by other auditors in that

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the CAG is genuinely independent and not employed by the body which is being audited. The CAG is indeed genuinely distanced from the executive.
The Government have not come forward with any satisfactory reason why the CAG should not have full rights of access and audit. I do not, of course, insinuate that the absence of such provision means that the Government are attempting to cover up any deficiencies in existing audit arrangements. However, it fuels suspicion that the Bill falls short of the high ideals of resource accounting which it purports to enact. By leaving out cast iron audit arrangements the Bill is not as good as it should be. It is a golden opportunity missed, and we shall be bringing forward amendments in Committee to rectify those deficiencies.
I refer briefly to the private initiative which the Government support in the tradition of the enterprise culture established by my noble friend Lady Thatcher in the early 1980s. I refer noble Lords to the recently published Treasury Committee's report on the private finance initiative. It makes many good points. It points to the value for money test, comparisons wherever possible and the subsequent evaluation and monitoring of projects. My noble friend Lady Hogg referred to the difference between upstream and downstream. I quote the last paragraph of the report which has a bearing on this issue. It states:
"There is a danger of conflict of interest if [Partnerships UK] provides financial assistance in PFI projects on which it has advised; and there is also the risk that financial support for some projects and not others would discriminate unfairly".
It continues:
"We therefore recommend that [Partnerships UK] should not have power to provide financial assistance to PFI projects, whether by taking equity shares or otherwise".
We are concerned that the definition of a public-private partnership is so wide as effectively to give the Treasury the power to give money to any project. As such it is a further dimension to the Treasury powers to set the format of the public accounts in whatever way it chooses.
Finally, I refer to the valuation of the Ministry of Defence assets. The resource accounting manual states:
"The normal basis of valuation may not be appropriate if a modern substitute is markedly different in its cost, life or output, or where technological advances have resulted in likely replacements having significantly improved quality or quantity of outputs. Under such circumstances, it will be necessary to undertake a 'modern equivalent asset' calculation to arrive at a replacement cost for the asset".
My noble friend Lord Freeman referred to depreciation. While that is an acceptable accounting treatment, the problem with Ministry of Defence assets is that "modern substitutes" for many items of military equipment have the potential to vary enormously in nature and costs depending on the particular defence needs of the country at the time and the military capabilities of potential aggressors. It is not clear either from the Bill or the resource
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accounting manual how such massive changes in the value of assets, which theoretically change the financial viability of the ministry, should be treated.
The wide powers which the Bill gives the Treasury to determine the form of accounts mean that the treatment of such items does not need to appear on the face of the Bill. However, the view of this side of the House is that the Government should be probed to explain how they intend to account for such items. The fact that it is a difficult issue does not mean that it should be swept under the carpet.
This is in essence a good Bill. We look forward to the points we have raised being addressed by the Government in the later stages of the Bill.
5.38 p.m.
Lord McIntosh of Haringey: My Lords, I am grateful to all noble Lords who have taken part in the debate. As so often in this House, it has been an exceptionally well informed debate. I do not refer simply to two former Financial Secretaries to the Treasury, but also head of the Policy Unit at No. 10, a distinguished professor of economics, the author of the best book on the Treasury in the past 15 years, and the former chief financial officer of Conservative Central Office, 1984–86, the noble Lord, Lord Freeman. I have been doing my homework!
As I said to officials when I first met them to discuss the Bill, I have always understood that the way Treasury looked at money was that one took £1 of revenue and £1 of capital and made £2. They were not familiar with that formulation, but it has haunted me during my time in public life. I still believe that it is the way in which it has been treated. However, I am happy to refrain from making any party political point about the changes which are taking place and which were started under the previous government.
From the outside, I was inclined to say, "Well, the previous government made noises about all this. They were prepared to talk about it, but we have actually done it". I do not believe that that is true or fair. The more I have learnt about the subject, the more I realise that the continuing process was seriously begun in the early 1990s. Many of the changes which had to be made, in particular the preparation of a national asset register and the nurturing of expertise within the public sector, were inevitably long-term projects. The previous government pursued the matter with all due diligence and I say that we took it over with enthusiasm without criticism of what went before.
The welcome for the principles of the Bill is such that I have little to say from my prepared remarks. I shall try to answer the questions which were raised and shall not need to give a sermon about public expenditure and the improvements in it. Like Lord Whitelaw, I shall comment on what was said by each speaker in turn. He used to make a good joke about it, which I cannot do, but perhaps that course would be the most helpful.
I am grateful that the approach of the noble Lord, Lord Higgins, is to make the Bill more satisfactory. That view was echoed in all parts of the House. He

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complained about the lack of consultation with the Public Accounts Committee and the National Audit Office. We have apologised to the Public Accounts Committee and to the Treasury Select Committee for the fact that the Bill was produced with a shorter interval than normal between publication and introduction in the House. I repeat that apology on behalf of the Government.
Even so, in March last year the Public Accounts Committee and the Treasury Select Committee received a memorandum on our legislative intentions. Continuous memoranda have been sent and those bodies have been continuously consulted. The National Audit Office saw and commented on instructions to parliamentary counsel, a privilege I have never had during my dealings with various Bills. Although I accept that there was too short a time, I believe that there has been a considerable amount of consultation.
The noble Lord then raised an important point which was echoed throughout the debate. It was in relation to what he described as "discretionary rights" for the Treasury over the powers of Parliament. That lead to discussion of the investigatory role of the National Audit Office and the Comptroller and Auditor General. Such criticisms dominated debate in another place and therefore the Chief Secretary to the Treasury, Andrew Smith, set up the review which I described in opening. Although it is legitimate and right for noble Lords to seek to tease out what we hope to do as a result of the review, I believe that it is a proper response to the properly expressed concerns. The group will report before the end of the year. Noble Lords have welcomed the role of the noble Lord, Lord Sharman, in the group. I shall be happy to discuss in Committee, or at any other stage, its terms of reference and methods of procedure.
Lord Higgins: My Lords, I am grateful to the Minister for giving way. We are concerned that if a such a study group were considered necessary, it should have been set up before the Bill came before the House. The problem is that it will not report until after the Bill has received Royal Assent. If precedents are anything to go by, it could be another half century before we have a chance to incorporate in primary legislation any recommendations that it may make. A timing problem exists and we must be clear about the terms of reference and how we can put into primary legislation whatever may be the group's views.
Lord McIntosh of Haringey: My Lords, it is not necessarily the case that they would have to be put into primary legislation. If we had wanted to agree with the comments made in another place and here today about the role of the National Audit Office, we would not have needed changes on the face of the Bill. We are doing what we believe to be right and are consulting on the issues in as open and independent a way as possible. However, it would not be fair to say that any conclusions which the review body reached must wait another century for primary legislation. It is virtually certain that such issues can be dealt with without primary legislation.
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The issue of accounting definitions was raised by a number of speakers. The noble Lord, Lord Higgins, claimed that there is too much Treasury discretion over them. We must look at the process. We are told that an independent body should be responsible for them, but there is already such a body, the Accounting Standards Board. It is not, and never has been, a government body. It has been a body of the accountancy profession which has survived because it has gained the confidence of that profession, of its clients, and of business in this country. The commitment in the Bill is to the generally accepted accountancy practice and to the "true and lair" phrase which is used by the Accountancy Standards Board. That is our starting point and it is entirely independent of government.
However, we are not satisfied with that. We have not done what several other countries have done in introducing resource accountancy; that is, simply to take private sector accountancy standards and apply them wholesale to the public sector. We do not believe that that is the best way to proceed. We have explicitly, openly and transparently set out a resource accounts manual. That is a huge document, which is explicit about the changes necessary for the application of accountancy standards to the public sector.
That manual has been under the oversight of the Financial Reporting Advisory Board. The FRAB was not set up only by government with only government members, but with distinguished members of the business community and the accountancy profession, and with the active participation of the National Audit Office. Therefore, the charge that we do not accept independent oversight of accountancy standards cannot be sustained. The noble Lord, Lord Higgins, asked why there should not be pro forma accounts. There are pro forma accounts in the annexes to the resource accountancy manual. That is the basis on which we are proceeding.
The noble Lord, Lord Higgins, went on to ask—I am not sure that I understood the question—who takes what decisions on the basis of the new accounts. I hope that I am interpreting it correctly, but my understanding is that departments which seek resources for the activities that they wish to pursue in the public sector will have exactly the same role as they have had in the past. However, they will seek resources rather than cash. Again, Parliament will have not only no lesser a role but a greater role than it has had in the past.
In the past, when parliamentary committees looked at the annual report of a department of state, they had one annual report to examine. Now, they will have two annual reports to look at with an entirely different approach: one will cover the plans for the forthcoming year or period of budget—we have, after all, moved from annuality to three-year budgeting—and the second will be the report of what has happened in the past year. That represents an increase in parliamentary accountability and in no sense is there an3, decrease. Therefore, in so far as decisions are taken other than by the Treasury, they are taken by departments in the application that they make for funding, as they always

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have done, and the scrutiny role is as strongly—indeed, more strongly—in the hands of Parliament. I believe that that point was raised by the noble Lord, Lord Taverne, and, if I may say so, I believe that that is the answer to his question.
I turn to a question from the noble Lord, Lord Higgins, regarding depreciation. When I was told by such a distinguished accountant as the noble Lord, Lord Freeman, that cash accounting is a science and that resource accounting is an art, I asked myself whether he meant that it was a creative art or whether it was perhaps some kind of more respectable art. Of course, there are different definitions of "depreciation". However, the definitions which we are using are those governed by generally accepted accounting practice and by the need to present a true and fair view; in other words, not only are the standards of presentation of calculation of depreciation the same as they are in the private sector, but they are also required to be more explicit than sometimes is the case in the private sector. Of course, they are provided in addition to the cash requirement because of the period of dual running. I shall return to that point in a moment.
The noble Lord, Lord Higgins, then asked why income tax was excluded from the accounts. Because we do not have hypothecated tax in this country, income tax is not included in departmental accounts. However, in due course it will be included in the whole of government accounts, and the whole of government accounts will include all the areas of the public sector to which he referred. They will include local government, schools and hospitals. I believe that in most cases hospitals currently work on resource accounts. In due course, there will be no question of excluding local government expenditure within the whole of government accounts. It is also intended that income from taxation, both central and local, will be included in the whole of government accounts. Therefore, all sources of income to the public sector will be taken into account.
I believe that I have already answered the specific points raised by the noble Lord, Lord Taverne. Therefore, perhaps I may move on to those raised by my noble friend Lord Lipsey. I echo the tribute paid to all who have taken part in the preparation for this change. They include not only Treasury officials but financial officials in all departments who have a very difficult role to perform. My noble friend said that there was a question as to whether Parliament moves at the same speed as government. I believe that he referred primarily to the House of Commons, although he suggested that this House might have a wider role. The rules which govern this House in respect of comity between the two Houses prohibit me from making comments about the adequacy of scrutiny of financial matters by the House of Commons.
The noble Lord, Lord Freeman, asked a number of most interesting questions. The first related to the timing of the change. I believe that he was moving in the opposite direction to the noble Lord, Lord
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Higgins. The noble Lord, Lord Higgins, was keen that we should not give up cash too soon. I believe that the noble Lord, Lord Freeman, was keen that we should avoid dual running for too long a period. Of course, we have taken a great deal of care with the four triggers to ensure that we do not move on to stage 2 before we are satisfied that stage I works, and so on. The third trigger is in the middle of being achieved, and we believe that we reached a happy medium between those who want to carry on longer with cash and those who want to avoid excessive dual running.
I believe that I dealt with the scope issue because I made it clear that the whole of government accounts will include the entire public sector. I hope also that I dealt with the question raised by the noble Lord, Lord Freeman, with regard to the basis of depreciation coming from GAAP and from "true and fair". Of course, the issues are hugely difficult, as they have been in the private sector in moving from historic cost to modified historic cost to the ultimate dream of some people of current cost accounting. Those difficulties exist no less in the public sector and may, to some extent, be greater than in the private sector. However, I believe that the noble Lord's accusation that we are stuck with annuality is not fair because, with the Comprehensive Spending Review and now with SR 2000, we have, after all, moved to a three-year horizon. That has been widely welcomed by the public sector and by those who are affected by it.
The noble Lord's fourth point concerned the nature of the set of accounts to be produced. The Bill covers accounting requirements. Of course, the supply procedure is, and has always been, non-statutory. Changes to the procedures of voting supply and of scrutinising Estimates are a matter for Parliament rather than for legislation. I believe that that goes back to the point raised by my noble friend Lord Lipsey.
On the same matter, he suggested that the role of Select Committees in the Commons should be extended to a power to vote on resource Estimates. Again, that is a truly revolutionary proposal. It is one which raises the whole issue of the separation of powers between the legislature and the executive. Since it is primarily a matter for the other House, I hope that he will forgive me if I do not venture into what I see as very dangerous territory. His final point concerned the Treasury determining the form of the accounts. Again, I believe that I have dealt with that matter.
In reply to my noble friend Lord Desai, who asked for an eventual move to social resource accounting, I can say only that if that is where we want to go, this is the only way to get there. I am not saying that it achieves what he wants, but I do not see how we could take into account the social concerns that he very properly raises except by the route that we are adopting. I do not say that the route is being adopted for that purpose.
I was asked by the noble Baroness, Lady Hogg, about the link between Partnerships UK and resource and account budgeting. She made the point quite legitimately that inevitably public/private partnerships build up liabilities. Of course, those liabilities will have

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to he reflected in the whole of government accounts; indeed, they may have to be reflected in departmental accounts if, strictly speaking, the projects are within departments. So she is quite right to say that that is a much larger issue than that about which she and I have crossed swords from time to time; namely, the size, complexity and opacity of the Red Book.
I was extremely interested in what the noble Baroness said about the upstream and downstream activities role of Partnerships UK. She was happier about the facilitation role of PUK than about its downstream role. But there is still a public sector skill deficit in that area. It is not just a matter of being another body of advisers. Advisers exist—at a price. But PUK could act as a co-sponsor of projects and sit alongside the public sector project team, taking decisions with it and, to some extent, sharing responsibility for it. That is why we have included in the Bill, which I understand the noble Baroness welcomes, the limit of £400 million at any one time in relation to PUK involvement.
I should love to engage in a long debate with the noble Baroness, Lady Sharp, about the PSBR. I have always agreed with what she said about, for example, the £20 billion needed by British Telecom for investment which had to be ruled out in the old days under the public sector borrowing requirement.
But I believe that the noble Baroness is being unfair about this Government's policies, for two reasons. First, the golden rule, which is set out in the fiscal strategy document, says that over the economic cycle, we would borrow only for revenue purposes. We have set up distinct investment funding and we have doubled our capital investment expenditure over that period, quite apart from PPP. That is additional to PPP. There is an additional £10 billion of public investment without any partnership involvement whatever.
It was suggested that there is no Public Accounts Committee/NAO scrutiny of Partnerships UK. Any money which goes from the Treasury to Partnerships UK comes out of voted money. It comes out of appropriation or resource accounts which have been audited by the NAO. Of course, it is always possible for the NAO to undertake value-for-money studies under the auspices of the National Audit Act 1983.
I have spoken for longer than I intended. I accept that the debate on the role of the National Audit Office and the Public Accounts Committee will be raised in Committee. I acknowledge that and am prepared for it. We believe that we have good answers to the questions which have been raised but we are grateful that they have been expressed in the terms in which they have. We are grateful for the general support for the Bill expressed by your Lordships. I look forward to further consideration at later stages of the Bill and I commend it to the House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Teachers' Pay
6.3 p.m.
Lord Toperose to ask Her Majesty's Government how their plans to implement performance-related pay for teachers in schools are progressing.
The noble Lord said: My Lords, this evening I want to get some kind of an interim progress report on how the Government's performance-related pay scheme for teachers is progressing. Before I progress, I must declare what I hope will be a pecuniary interest in that my wife is a teacher and at this moment she is filling in an application to cross the threshold. I must make it absolutely clear that she bears no responsibility whatever for anything that I am about to say and I hope that it will not count against her.
As the Minister knows from previous encounters on this matter, Liberal Democrats have grave reservations about the Government's plans, reservations shared widely among the teaching profession. However, while we should not have followed the Government's route, in the spirit of constructive opposition, we should like to try to avoid unnecessary potholes and to steer the Government away from cliff edges along the route that they have chosen.
Therefore, I start by suggesting that there is an absurd timetable for the implementation of the scheme with insufficient time properly to train head teachers and to allow them to carry out assessments in the way required by September this year. We welcome the reduction of the number of criteria from l6 to eight but, perversely, that seems to have resulted in a new deluge of guidance notes for head teachers.
We accept that the training of head teachers, such as it is, is well under way. However, applications from teachers who want to cross the threshold and have access to performance related pay have apparently to be in by 5th June. The head teachers have to send in judgments by the end of July. A head teacher in a secondary school may well have 25 or 30 such applications to process. Head teachers have other things to do during the summer term. Specifically, I remind the Government that since they came to office, the DfEE has set 4,585 separate targets—I repeat, 4,585 separate targets.
I quote from the 1999 report of the School Teachers' Review Body which describes the pressures on heads, especially on primary heads, as "especially onerous" and said of heads generally:
"Unless the job is manageable, any changes in pay arrangements will not achieve their aim".
I ask the Minister specifically whether the department will look seriously at giving schools more time for that process. I presume that there is no reason why the performance related awards cannot be backdated to September.
Another of our specific anxieties relates to the quality of training for head teachers. Our information from one of the professional organisations is that that training began only on 27th March and that the

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trainers received information on which to base their training only on 25th and 26th March. Will the Minister confirm those dates? If they are correct, and I believe that they are, it is small wonder that some of the head teachers complained that the trainers did not know, indeed could not know, the answers to questions that were put to them. However, it does not explain why the quality of the video that head teachers were asked to watch during the training was regarded by many of them as "patronising".
Since the heads have more training ahead of them this summer, will the Minister ask the department to look into the quality of training and the way the training is prepared as a matter of urgency?
We are told—and I ask the Minister to confirm these figures if he can—that 2,230 external assessors have been appointed. That is a veritable army, which underlines the size of the task that the Government have set themselves. There are 30 full-time regional trouble-shooters, 200 full-time assessors and 2,000 part-timers. Will the Minister confirm that they have received just three days' training?
Perhaps the Minister will clear up another matter. There appears still to be a mythology among teachers that if they cross the threshold to gain performance-related pay awards, they will thereby give up their present conditions of service, including the 1,265 hours of directed time. It is believed that the head teacher can then direct them to be available to undertake breakfast clubs or after-school activities with pupils.
That misunderstanding may have arisen because of a confusion in some people's minds about the change in terms and conditions which apply quite reasonably to teachers joining leadership teams. However, will the Minister take the opportunity this evening to reassure teachers that simply crossing the threshold does not involve a change in terms and conditions, as it appears to some to do?
Another useful reassurance would be that the new difference in status among teachers—those who have crossed the threshold and those who have not—will not be made public property. Will the Minister assure teachers that statistics about the proportions of sheep and goats in any particular school will not be required to appear in governors' annual reports to parents or in Ofsted reports; and that such considerations will not be used to judge whether a school is "failing"? We do not want to see league tables dealing with which schools have the highest proportion of teachers who have crossed the threshold.
The noble Baroness, Lady Blackstone, was kind enough to copy to me a letter she wrote to the noble Baroness, Lady Perry, after a debate about teachers a little while ago. She wrote it because, as she said, she wanted to remove misunderstandings such as the notion,
"that performance pay could undermine teamwork in schools".
I must say that, sadly, her letter did not do that. There is abundant research evidence from a variety of academics that performance-related pay is perceived by those involved in such schemes as highly divisive.
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The Marsden and French study for the Centre for Economic Performance in 1998 sought staff judgments on the impact of performance-related pay in an NHS trust. Only 19 per cent agreed that the scheme encouraged team working. On the other hand, 61 per cent agreed that it causes jealousy among staff and 52 per cent believed the scheme helped to undermine staff morale.
A similar study on a performance-related pay scheme operated by the Inland Revenue compared judgments by personnel in 1991 and 1996. In 1991 only 28 per cent believed that performance-related pay made staff less willing to help colleagues with work difficulties. Five years later, 63 per cent found that that was so. In 1996 no less than 67 per cent—two-thirds—believed that the scheme "discouraged teamworking". Similar findings are available in surveys on local government, the Post Office, the Employment Service and the water industry.
Just as Liberal Democrats have been keen to avoid setting school against school in our education policy, we are keen to avoid setting teacher against teacher. The Secretary of State claims, in what seems to be an attack on the response from the NAS/UWT, that
"collegiality tends towards the lowest common denominator".
The Secretary of State may find that to be true in the Cabinet, but it is utterly untrue in schools. Indeed, so important is collegiality that we would argue it is simply impossible to disentangle the effects of one teacher's work with a pupil from those of others.
What do we say about teachers whose pupils do well because other teachers have laid down excellent foundations; or whose personal encouragement enables pupils to do well in the classrooms of other teachers? The Minister has said, entirely fairly, that the Government's scheme is not crude payment by results. We accept that. But will he accept that it is impossible to credit accurately the responsibility for pupil progress because the work of the whole teaching team impacts in unpredictable and subtle ways on each individual pupil? The prodigious amounts of time and energy that will this summer go into pinpointing that will-o'-the-wisp must, despite everyone's best efforts, be inaccurate and unfair and will be a recipe for division and backbiting in the staff-room. With good leadership, collegiality should lead to the operation of the highest common factor. That should be the aim of the department.
Somewhere at the heart of Government—it may well be in the Cabinet Office—there is a belief that voters will not accept enhanced pay for teachers unless the Government can demonstrate in the Sun or the Daily Mail that teachers are working harder. Liberal Democrats believe that that view is utterly mistaken and that it patronises parents, grandparents and people in local communities who know only too well how hard and how effectively the vast majority of our teachers work. Will the vast majority receive performance-related pay?

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If the Government want to run a crusade in the press to trumpet to the world how hard teachers are working and how well they are doing, they do not have to look far for evidence. I quote again the School Teachers Review Body:
"Our workload surveys of recent years have shown that the overwhelming majority of teachers arc dedicated and hardworking".
Those surveys showed all classroom teachers working more than 50 hours per week. Back in 1993–94, the quality of teaching was judged to be unsatisfactory in 25 per cent of key stage 1, 30 per cent of key stage 2, 19 per cent of key stage 3 and 17 per cent of key stage 4 lessons. In 1997–98 the figures were 8 per cent, 8 per cent, 10 per cent and 7 per cent respectively. And with what result? GCSE, A-level and GNVQ results are at record highs. Greater numbers of young people are entering higher education than ever before. The truth is that because of our high performing teachers, the vast majority of our schools are delivering greater success than at any time in their history.
All that achievement is on the back of an extremely heavy workload in a job that entails a high expenditure of nervous energy. However, it is not enough to have carried out all that hard, effective work. Ministers now expect teachers to devote additional time and energy to gathering together evidence to prove what wonderful work they do. I quote again the Minister's letter to the noble Baroness, Lady Perry:
"Teachers would be asked to provide evidence that they had these characteristics, and examples of creativity and teamwork would certainly be relevant".
By 5th June this year, each teacher who wants that extra bit of pay will have to put together a portfolio so that his headteacher can convince an external assessor.
I have sought to say that from what Liberal Democrats have seen so far of the implementation of performance-related pay for teachers, the process can be described only as a sledgehammer to crack a nut. It will add to teacher stress at a time when, according to an ICM poll in February this year, more than one-third of teachers over 35 years of age said that they wanted to leave teaching within 10 years. In only 9 per cent of cases was pay the prime reason. It is abundantly clear that an additional £2,000 a year—welcome though it is—gained with great difficulty through the most tortuous and time-wasting of processes, will not solve the teacher recruitment problem. That problem will be solved chiefly through reducing stress, by removing bureaucratic burdens and by ceasing to expect teachers to act as social workers.
A great step forward could be taken if the Government were to grant statutory access to non-contact time for preparation and marking. That is vitally necessary and long overdue in primary schools. Perhaps the biggest culture change of all would be signalled by the Government at last paying teachers the compliment of treating them like an independent and expert profession which, through its new General Teaching Council, can be trusted to take charge of the educational agenda. Liberal Democrats championed the General Teaching Council during the passage through this House of the Teaching and Higher
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Education Bill in 1998, as did many others. We should now like to see the new GTC made responsible for establishing, after careful and genuine consultation with the profession, a set of professional competencies.
Enabling less experienced teachers to work towards those competencies and more experienced teachers to update their skills, the GTC should oversee a high quality programme of continuing professional development. I remind the Minister that in the Warwick University survey of teachers carried out for the NUT, nearly four out of five teachers strongly agreed that there should be a right to high quality professional development. With regard to pay enhancement, our key proposal is that there should be a "college of teachers" under the auspices of the GTC, which would offer a number of grades of membership to teachers, such as associate member, graduate and fellow. Gaining those grades would be the passport to higher pay grades.
The college would award those grades after assessment of both theoretical and practical classroom skills, in much the same way as surgeons qualify for different grades of membership of the Royal College of Surgeons. Fellows of the college would be expected to maintain their award by being reassessed every five years. All schools would have allocated to them a certain proportion of fellowship grade points which would attract considerable extra salary, for which only fellows of the college could apply. Schools identified as having difficulties could have extra fellowship posts granted to them on a temporary basis in order to attract highly skilled teachers.
I have raised a number of questions with the Minister about the Government's own scheme, which we find deeply flawed, but which naturally we are anxious to see work as well as can be managed. We look forward to his answers, as I said earlier, in a spirit of constructive opposition.
6.19 p.m.
Baroness Brigstocke: My Lords, I have one point to make on the Government's plans to implement performance-related pay for teachers in schools. First, I shall declare an interest. For 25 years I was a school principal. Since 1993 I have been chairman of governors of Landau Forte College in Derby, a city technology college with over 1,000 students aged 11 to 18 with a fully comprehensive intake. Last month, Landau Forte ranked sixth in a league table of 321 government specialist schools.
Basically, performance-related pay is a good plan. But I am afraid that, perhaps typically, the idea has not been thought through. Too little time has been allowed for the process. That will cause problems, if not havoc. I worry about the practical arrangements for implementing the PRP plan and especially, as the noble Lord, Lord Tope, said, its short timescale. It seems that at least 250,000 schoolteachers are at the top of their current salary scale and therefore eligible to pass through the threshold to a substantially higher salary—up to £2,000 per annum—in recognition of

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their quality and work; not only for their professional effectiveness but also for their professional characteristics.
Two hundred and fifty thousand is an enormous number of teachers for head teachers to evaluate and assess and for the external assessors to reassess and check afterwards. It is important that the process should be carefully thought out and worked through, especially during the first year. Yet I understand that the performance management review document will not be ready until well into the next academic year.
There is newly published DfEE guidance for teachers who want to apply to pass through the threshold, but there is a deadline of 5th June, less than two months ahead. There is a 100-page guidance book for head teachers on the application process which is rather elementary in its English. Head teachers have until 31st July to hand in their judgments. But what happens if, as with Landau Forte College, a principal has 30 teachers in a school who wish to apply? I have even heard of one city technology college in which over 80 teachers want to make the PRP application.
Some training sessions have been held around the country for head teachers, but they seem to have been of poor quality. The ones held so far have lasted a whole day. I know of several head teachers who wondered what they were doing sitting listening to somebody reading from the training manual word for word. They kept thinking of important things they could be doing at school.
Who is being appointed—obviously in a great hurry—to act as trainers for the head teachers and as accredited external assessors to check the work of head teachers? Anecdotal evidence so far suggests that some former heads—teachers who may have been less than satisfactory in their roles as school heads—are now running some of the teacher training courses. As I have indicated, the courses are of rather poor quality and time consuming.
What exactly have the Cambridge Education Associates been hired to do? How is it possible for the DIEE and/or the Cambridge Education Associates to find enough external assessors of the right calibre in time to visit each individual school to verify the standard of assessment of each head teacher? This coming year—that is, this year—the 250,000 potential applicants will represent an enormous backlog. I have already said that we at Landau Forte College have 30 teachers who want to qualify.
The system should settle down in future and I certainly wish it well. But the rushed nature of the whole programme worries me. I look forward to hearing the comments of the Minister.
6.25 p.m.
Baroness Sharp of Guildford: My Lords, my noble friend Lord Tope made clear that we on these Benches have great reservations about the whole concept of performance-related pay for teachers. I speak as a school governor of a local primary school in Guildford. It is not a large school and is located in one
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of the areas of Guildford that is relatively deprived. It is a one-form entry primary school. We have a team of about eight basic teachers within the school. I am concerned about the existing pressures on those teachers and in particular on the head.
Over the past few years there has been initiative after initiative. One can think of the literacy hour and the numeracy hour which have been introduced. On top of that, plans for an education action zone have taken up time. Problems over closures have taken up yet more time. There have been ICT initiatives and one initiative after another. If one speaks to teachers these days, they will tell you that there is an initiative overload.
On top of all those pressures, heads are being asked to consider performance-related pay. Admittedly the pressures placed upon a small school are nothing like those placed upon a city technology college, but proportionately they are not dissimilar. There is now the rush to introduce this new initiative.
Above all, the difficulty I see is the degree to which the initiative is causing dissension within the team, particularly in a small school where the nature of the team is so important. Perhaps that is the core of the reasons why we on these Benches have such great reservations about the whole initiative. Essentially a school is a collegiate body. The concept of working as a team is of a team of teachers with support staff. A successful school is one in which members of the team work in the same direction. I have been a parent governor in my time and worked closely with others. As a result, I would also argue that a successful school is one in which parents are part of that team. There is a working together on the part of parents, pupils, teachers and support staff. All the objectives work to the same end. That is part of a collegiate initiative.
As a lay person I go into schools and ask teachers, "Why are you teaching; after all, the pay is not that good?" They seldom say "The pay is the main problem". There are many other factors. There are always gripes about the relative pay. However, if one asks, "Why are you teaching", they will answer, "I am teaching because of the children". That is the key issue. In a primary school it is the joy of opening up young minds, seeing them expand and grasp knowledge, which they do readily at that stage. Often at a secondary school it is the joy of teaching a sixth-form class and taking pupils forward to explore new areas.
That team spirit may be lost. There is a great danger that once performance-related pay is introduced, one is immediately setting individual against individual. That is why we must be aware of the problems. As my noble friend Lord Tope has already said, we have a major crisis on our hands in terms of the shortage of teachers.
Teachers work under very great stress. Every survey shows that the teaching profession is one of the most stressed at the moment and head teachers are among the most stressed of all. Many applications are made for early retirement. I am worried that the speed with which this new initiative is being brought in will increase those stress levels. In one sense it may even be the straw that breaks the camel's back.

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At a time when we are desperately anxious to keep as many teachers in the profession as possible, is it really sensible to push forward with this initiative and to push it through at such a fast pace? Are we not in danger that the result of such a move will be that many more teachers will seek early retirement? There is a chance that we may push the baby out with the bathwater here. The Government need to think through this area most carefully. I join my noble friend in asking about progress and whether the Government have considered that they may yet rethink the entire process.
6.31 p.m.
Baroness Blatch: My Lords, I thank the noble Lord, Lord Tope, for giving us an opportunity to debate teachers' pay policy. At this moment it is particularly opportune because there may be an 11th-hour chance to ask the Government at least to think about matters such as the timetable. Perhaps I may also say at the beginning of my remarks that I am thinking of founding a society for the promotion of the noble Lord, Lord Bach, to the position of Minister for Education, such is the number of times that he has had to deputise on this subject.
When I first read the Motion for this debate my initial reaction was to declare, "Good Question". What is the progress on plans for implementing performance-related pay for teachers? I shall be interested to hear the reply from the Minister. I have met and spoken to a number of teachers and governors who are very critical of the costly system for performance-related pay that has been put in place.
Where there is agreement in principle between these Benches and the Government is that we share the view that good teachers should he rewarded and that a responsive pay system can help in recruitment and retention. As the Minister knows, both recruitment and retention of teachers have worsened of late and are key issues that need to be addressed.
However, I must point out that the disproportionate way in which graduates who come through the Postgraduate Certificate of Education route are treated when compared with the majority of student teachers who study a Bachelor of Education course begs certain questions. The postgraduate student teachers pay no tuition fees for what is in effect a fourth year of study, whereas the Bachelor of Education students, who must study for four years, pay tuition fees for each of those four years. Furthermore, the postgraduate students are to receive not only a £6,000 hand-out during the year's course, but an additional £4,000 should they take a job at the end of it. That, together with the Scottish anomaly, which is much worse since the publication of the Cubie and Quigley reports, creates even greater anomalies for our student teachers.
As has been said, teachers are to receive a pay award of 3.3 per cent. Additionally, there is to be a threshold payment of £2,000 for most teachers, subject to a performance assessment. There will also be a separate pay spine for heads, deputy heads and other senior
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teachers. Outstanding performance may be recognised by jumping two increments on the pay spine. A raft of flat-rate allowances is to be put in place for aspects other than experience and qualifications, for example, management, recruitment and retention to help schools in London and/or on special measures. Perhaps I may ask, as an aside, why London has been singled out over any other city or isolated rural area. Finally, allowances are to be made available for special educational needs. There is to be a range of pay specifically for advanced skills teachers. Teachers entering the fast-track system will have their own provisions for pay. Pay bonuses will he made available to recognise the school achievement award scheme.
Noble Lords will realise, from the plethora of pay schemes that are to be superimposed on to the basic system, that the new systems will require understanding and management at both local education authority and school level. Needless to say, the dead hand of the Department for Education and Employment is placed heavily on the how and when of implementation. Bureaucracy will inevitably increase with such a centrally controlled and complex system of pay awards.
Over recent days I have read with great care the paperwork, training schedules and supporting materials, and I can only agree with my right honourable and honourable friends in another place that the Secretary of State has produced another cumbersome and bureaucratic scheme based almost entirely on his belief that the man in Whitehall knows best. What is needed is more local flexibility and local discretion. All schools are subject to regular inspection. The way in which governors and head teachers deal with staff is addressed as a part of that process.
I was interested to see that only 37 per cent of respondents out of a record 41,000 supported the performance threshold to a higher pay award. It is a strange proposal which determines a performance threshold and pays a significant sum as a permanent addition to salary with no further related assessment. Would it not have been better to have made that considerable sum available to the schools with flexibility on the pay spine to recognise performance? There could be a significant saving on bureaucracy when one considers the army of external assessors who will perambulate around the country second-guessing every decision. That army of DfEE-controlled assessors will have to be recruited and trained. They will prove to be a costly peripatetic force, siphoning off precious resources from the classroom.
The most vexed issue will be the supporting costs. When asked about costs, the Government have been very evasive. When my honourable friend James Clappison in another place asked Estelle Morris about costs, she responded on behalf of the Government by saying,
"Headteachers will be responsible for assessing teachers against national standards at a Performance Threshold to move to the new upper pay spine proposed by the Government. DfEE has contracted Cambridge Education Associates Limited (CEA) to

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manage the appointment, deployment and quality assurance of external assessors who will verify, through sampling, headteachers' assessments.
The payment of external assessors is a matter for CEA".
As the Minister said, the payment of the external assessors is to be a matter for CEA. That company is not accountable to Parliament and we have not been told how much, but the payments will be made on a pro rata basis dependent on the number of applicants in each school.
Estelle Morris went on to say that,
"The number of external assessors to be deployed will be dependent upon the number and distribution of teachers who apply to cross the Performance Threshold. This number will not be known until summer 2000. The total cost of administering the scheme will be dependent upon the number of assessments carried out and again this will not be known until later in 2000".—[Official Report, Commons. 16/3/00; WA 295.]
I believe that we need to know a little more about the money that the Government have set aside. If all eligible teachers, for example, went through the threshold, what would be the start-up and full-year costs of administering the assessment scheme? If Cambridge Education Associates Limited has been contracted, what money has been set aside for it, or has it been given a blank cheque? To date, how many assessors have been recruited and are undergoing training? Is the figure that I have been given—5,290—accurate?
We have been told that the Standards Fund Grant 35 will provide £20 million at a 60 per cent grant rate to assist with implementation. Sixty per cent of what, and who will pay the remaining 40 per cent? There is also a supplementary £20 million (at 100 per cent grant rate) to free up teachers for training. That sum would buy a great many teachers.
As a matter of interest I believe this money is to be channelled through local education authorities rather than schools. Is this correct, and, if so, how does it fit in with recent comments made by the Secretary of State, who said of the £300 million from the year 2000 budget which, as I understand it, is going direct to schools, that,
"We arc cutting out the middle-man. If we did it any other way, we could not guarantee it would reach the school."
Why is this so different? What guarantee is there that all the money will go to schools, to commission the help that they deem necessary?
The Secretary of State has said that there will be no quota. Every teacher who qualifies will receive the threshold payment as a permanent addition to salary. Will the Minister give an assurance tonight that local education authorities or schools, or both, will receive in full the cost of salaries, including all the additional payments, in subsequent Budget settlements? If not, the only alternative for many schools will be fewer teachers in future.
Many teachers, governors and parents are aware of the confidence trick of double and treble counting of the £19 billion for education over three years and the £21 billion for health, so an assurance from the Government tonight is absolutely essential.
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The information sheet on payments to heads and governors makes reference to "a cash-limited grant" to support pay progression based on performance for heads, deputies and advanced skills teachers and their assimilation into the leadership spine. Why is it cash-limited? Why is the grant not commensurate with the additional costs to those schools?
Much of the detail has yet to he published on the 2000 pay and conditions document, the application of flat-rate allowances, school achievement awards, and skills teachers and fast-track entrants. What is the timetable for the provision of that information? I share the reservations expressed by the noble Lord, Lord Tope, about the timetable for implementation of performance-related pay. That detailed information is absolutely critical for the understanding of those who will have to administer the scheme.
I have seen some of the training schedule notes, so I am not surprised that teachers and governors are critical. One group of teachers were astounded to find that they were being lectured about standards by someone who had performed less than satisfactorily herself in the classroom. Others were aghast at the time wasted on courses that were in nature patronising and more focused on taking orders from the DfEE than on enhancing professional skills.
The draft guidelines on governors make disturbing reading. Governors are the interface between the school, professionals, parents and the wider community. The phrases used put an extremely heavy burden on governors. It is said that they must determine procedures for appraisal; and that they are responsible for securing the performance of teachers; deciding the timing of performance reviews; appointing external advisers; carrying out the performance reviews of head teachers; ensuring objectives are set and recorded by 31st December; and appointing the reviewing officers.
The chairman of the governors must provide a performance review statement; pass the training and development annex of the head's performance review statements to the person responsible for training in the school; provide a summary of the head's assessment of the performance section of the performance review statement to the chief education officer; seek advice from external assessors; meet the head teacher and adviser before doing a performance review and again at the end of the cycle, to review progress; write a performance review statement and give it to the head teacher within 10 days of the review; and provide copies of the head teacher review statement to the other governors.
Performance reviewing is a professional job, for which people train for much longer periods than the odd day provided for governors. Personnel management is not a ready skill for all governors. Professional help and advice is expensive. Who will pay? What will happen when a head takes exception to being assessed as a professional by someone with no experience?
On Sunday, in answer to a question on a television programme, Mr Blunkett was very critical of costly, bureaucratic local education authorities. I can almost

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hear the crash of glass houses. The Secretary of State wins the golden award for sheer hypocrisy. Not only did he preside over one of the most inefficient LEAs in his home town of Sheffield, but his department has beaten all records for demanding an unprecedented level of bureaucracy from LEAs and schools. It is the cost of the DfEE that should be put under the microscope.
The system for performance-related pay adopted by the Secretary of State will go the way of many proposals of the past three years. It will siphon off money, time and energy that could be better spent by schools, with greater benefit to children.
6.45 p.m.
Lord Bach: My Lords, I am delighted to be answering this Question on behalf of the Government. I genuinely thank the noble Lord, Lord Tope, for raising the issue and for his constructive opposition. I am sorry that this important subject has not had the benefit of more speakers, bearing in mind how much educational experience there is in the House. I am particularly grateful to the noble Baroness, Lady Brigstocke, as the only speaker from the Back Benches. She probably has more practical experience of teaching than any of us—perhaps with the exception of the noble Baroness, Lady Sharp. I wish all the best to the wife of the noble Lord, Lord Tope, in her application—just get it in by 5th June!
The answer to the noble Lord's Question is, "Very well"—but he and others expect me to say more. Pay reforms should not be seen in isolation. They are part of a much wider programme to provide teachers with better leadership, better training and better support—as well as better rewards. Better leadership includes the new national college for school leadership and the coherent framework for leadership training.
Better training includes more flexible and rigorous initial training and a new framework for the professional development of serving teachers. Better support includes recruiting 20,000 more teaching assistants, improving teachers' working environment and giving small schools extra administrative help. All that will help to raise the status and morale of the profession, which for too long has lacked the status it deserves.
We need also better rewards to attract, motivate and retain good teachers—which is where the new pay structure comes in. Performance-related pay is an important part of the new structure but I emphasise that it is not the whole story. Every teacher will continue to benefit from the annual pay uplift. At 3.3 per cent, this year's rise is well above the rate of inflation. Teachers on the pay spine will, as now, normally get an experience point every year and there will be separate fixed-rate allowances for extra responsibilities.
The centrepiece of the new structure is a threshold and upper pay range directly related to performance. I am delighted that, at least in theory, the noble Baroness, Lady Brigstocke, feels that it is a good idea.
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I am not sure what the noble Lord, Lord Tope, feels, but I am comforted by his remark in our last debate that he did not believe it was a bad idea.
About 40 per cent of the profession will retire over the next 15 years, so we need a pay structure that attracts good quality replacements as well as retaining experienced teachers. That means eliminating the main weaknesses of the present structure. They are not the starting salaries—roughly speaking, they are the going rates for new graduates—but the salaries paid to more experienced teachers, which do not compare well with their contemporaries in other jobs. In the existing structure teachers can, from 1st April, earn just less than £24,000 for qualifications and experience. But, unless they take on those extra responsibilities, that is where they stop. The new structure replaces this ceiling with a threshold leading, frankly, to much higher pay.
Passing the threshold will put teachers on the first point of the new upper pay range—a £2,000 increase on top of the 3.3 per cent general uplift. Taken together, this means a 12 per cent rise for a teacher currently on point 9 of the pay spine. Joining the upper pay range gives teachers access to four more points stretching to over £30,000. So, in financial terms—and I do not think that this has been denied by any speaker tonight—this is a very good deal.
However, if the idea is to give experienced teachers a big pay rise, why link it to performance? Why look for trouble? We have, perhaps, had a little trouble here tonight. We believe that the new pay structure is a means to an end. The end, frankly, is pupils learning more effectively. To do that they need better teaching. That is what this threshold and upper pa range are really about.
We believe that this threshold will promote better teaching in at least three ways. First, the threshold standards define what an experienced teacher should be able to do. That will give teachers in the early part of their careers clear goals for developing their professional skills. Of course, the pay rise for passing the threshold will be an incentive to reach those goals.
Secondly, passing the threshold will confirm teachers' professional effectiveness. That must be good for confidence, as well as for the bank balance. But even the best teachers have something to learn. We believe that feedback from their applications will help good teachers become even better. Thirdly, the threshold process will also help experienced teachers who do not yet meet all the standards. Some may decide to defer their application to give them time to develop less strong areas, while others will benefit from constructive feedback from an unsuccessful application. In both cases, the process will help to focus development and improve performance.
But threshold assessment will happen only at a particular point in a teacher's career. Continuous improvement needs a dialogue between teachers and their team leaders that continues from year to year. That is what we believe the new performance management system will provide. It will be based on an annual cycle of planning, monitoring and review. The review stage will include an overall assessment of a

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teacher's performance by his or her team leader. Review outcomes will help to steer teachers' continuing professional development, but they will also inform pay decisions. For a teacher below the threshold, review outcome could provide evidence for future applications. For a teacher on the upper pay range, they could provide the basis for another pay point. These points will be awarded for substantial and sustained achievement.
In these ways, the new pay and performance management arrangements will work together to promote better teaching. And better teaching means better education for pupils, which, of course, is what schools and teachers are for. That is the background from the Government's perspective. I shall now try to deal with a number of points that were raised during the course of tonight's debate. My time is also limited, but I shall do my best.
Criticisms were made about the speed with which this important scheme is being introduced. I shall try to meet them by reminding the House that the School Teachers' Review Body has specifically said that neither it nor consultees have argued for delaying the pay reforms. The Government want teachers to benefit as soon as possible. That leads me on to the timetable and the point made by the noble Lord, Lord Tope, about its adjustment. We have adjusted the timetable to some extent. Large schools with more than 40 applicants have until 30th October, if necessary, instead of the 31st July deadline. All those passing thresholds will have their pay backdated to 1st September this year.
The noble Lord also asked whether the information on the number of teachers having crossed the threshold would be published. There is no such requirement to publish this at school level and there are no plans to introduce one. I hope that that gives the noble Lord some comfort.
The question of workload, especially for head teachers, was rightly raised in the debate. It must be remembered that head teachers already have a legal responsibility to evaluate standards of teaching and learning in the school. We believe that we have taken steps to make the process manageable by changing from the concept of the portfolio to an application form on which teachers would summarise relevant evidence about how to meet the standards. We have in mind not a difficult application form but a fairly simple one. Heads in larger schools could delegate elements of the assessment to senior colleagues, while retaining—this is important—the decision-making role.
The noble Lord, Lord Tope, also asked directly whether the new contract above the threshold removes the limit of the 1,265 hours and changes conditions of work. I am happy to confirm that there is no change of contract on passing the threshold and that the conditions of employment remain identical.
The noble Lord also made the point that pay is not the main issue, that more non-contact time is necessary and that the new organisation, the General Teaching Council should oversee professional development
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strategy. As I have already argued, the Green Paper is about much more than just pay; indeed, its key section was on better support and training for teachers. The initiatives included grants to help small schools work together and share resources and better training and consulting on a national framework for professional development.
The noble Baroness, Lady Brigstocke, talked about a 100-page guidance for head teachers. I am advised that the guidance in this case amounts to nine pages, with 14 "prompts" to assist heads. However, it is possible that we are not speaking about precisely the same document.
The noble Baroness, Lady Blatch, questioned why we should help schools in London above others. The recruitment and retention allowances are not only for London; indeed, they will give all schools flexibility to offer pay enhancements to attract and retain the staff they need.
Perhaps I may now move on to say a few words about the announcement made on 30th March regarding postgraduate trainee teachers. I can assure the House that the decision was made not because we under-value the undergraduate route to qualified teacher status. At present, our greatest priority is to attract more and higher quality students into postgraduate training. As noble Lords know, many attractive career options are open to graduates, especially with such buoyant economic and employment conditions as it is generally agreed the country is now enjoying.
It is in secondary training that recruitment difficulties have been greatest. That is where the new training salaries should have most effect. However, we are also making the training salary available to postgraduate primary trainees next year. We should like to see more applications at primary postgraduate level, especially from men.
I see that time is against me. I know that I have just a little more time at my disposal than the 15 minutes allowed for each speaker. However, I do not want to take too much advantage of the situation. Nevertheless, I ought to say something about the position of head teachers and the courses that they have taken, or are about to take.
Some criticism has been made as to the quality of those courses and it is right that I should deal with it. So far, 120 training events have been held across the country and 16,500 heads have attended. A few were dissatisfied and, because bad news is rather more fun and, perhaps, travels much faster than good news, their comments have been reported. The Government are keeping the position under review with the contractors—the Centre for British Teachers. We looked particularly hard at quality and how it was being received, bearing in mind the scale of the operation—130 facilitators a day working every day over three weeks—and the speed with which the training has been assembled.
The department received complaints from fewer than 0.1 per cent of those who attended. About 89 per cent said that the training met the objectives

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satisfactorily or better and 94 per cent were happy with the facilitators' knowledge of the course. Those are good figures for any training event. However, we wanted to do better. We know that some heads felt unprepared for the threshold and as a result the department made sure last week that the lessons from the event were fed into the training design and delivery. So continuous improvement is built into the programme. That has been clearly reflected in the statistics. For example, the number of heads satisfied that the course met its objectives had risen from 74 per cent to 89 per cent at the close of last week.
However, we recognise that we need to do something for those who have been dissatisfied. In addition to the arrangements already in place, we shall ensure that those head teachers for whom the training has not been satisfactory can contact a telephone surgery where issues and concerns can be dealt with by experts in the new arrangements.
The performance threshold is a key aspect of the reforms designed to give a significant pay rise to teachers. We shall continue to work with heads and their representatives to ensure that the threshold is a success and that teachers receive the pay rises that they richly deserve.
There was comment about the threshold assessors. The number of applications is around 6,000. The recruitment was conducted in line with criteria set by the department. We believe that all those appointed are professionally credible individuals. They are all graduates with relevant expertise and qualifications in teaching and many are also accredited through Ofsted among other organisations. The numbers needed will depend, of course, on the number of teachers who apply for a threshold assessment. We are confident that we can meet the deployment requirements.
It is no secret that recruitment to initial teacher training has been a real problem. We believe that the steps we have taken go a long way towards putting that
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right. However, I remind the House that pay is only part of a much wider programme designed to strengthen the teaching profession. I believe that Members from all sides of the House will support that. A good pay structure is one key element, but our strong profession also needs effective leadership, training and support. We believe that our reforms cover all those aspects. Perhaps most importantly of all, we need to attract the kind of people who will make good teachers.
The Government have put much investment into these initiatives and into the teaching reform programme as a whole. It is the clearest possible evidence of our commitment to make teaching a first-class profession. We must do that because teachers are doing one of the most important jobs in the country. The country's future is quite literally in their hands. I again thank the noble Lord, Lord Tope, for raising this issue.
Baroness Blatch: My Lords, before the noble Lord sits down, I should inform him that my reference to London was taken from a Din publication of 24th March which refers to,
"2 allowances for recruitment and retention, with more for schools in London and/or on special measures at values of £909, £1,782, £2,703, £3,765".
There is no mention of any other part of the country.
Lord Bach: My Lords, I am grateful to the noble Baroness for mentioning that. The figure for London relates to higher costs in the capital city. However, the two recruitment and retention allowances are available for all schools. The reference to,
"2 allowances for recruitment and retention, with more for schools in London and/or on special measures".
implies that schools up and down the country receive the two allowances for recruitment and retention.
House adjourned at five minutes past seven o'clock.