Financial Services and Markets Bill

HL Deb 20 March 2000 vol 611 cc88-134

House again in Committee.

Clause 10 [Reviews]:

Lord Saatchi moved Amendment No. 79: Page 4, line 41, leave out ("may") and insert ("must on the second anniversary of the day on which section 1 comes into force and every two years thereafter").

The noble Lord said: Amendments Nos. 79 and 81 to 83 relate to the intervals at which reviews of the FSA should take place. I should like to discuss also the next group of amendments—Amendments Nos. 80 and 84 to 86—which deal with who will carry out the reviews. If it is for the convenience of the Committee, I shall try to cover the key issues in relation to those amendments.

One would have thought that having a review of the FSA would be a reasonable suggestion. But extraordinarily, there is no provision for it in the Bill. The Bill states: The Treasury may appoint an independent person to conduct a review".

However, on the other hand, it may decide not to conduct a review. It is up the Treasury. Therefore the clause is what is called an enabling clause.

Any doubt about that is removed by the Explanatory Memorandum which states that, the Treasury can commission independent reviews".

The fact is that the Treasury can do just about what it likes under the clause. Not only can it decide whether to have a review in subsection (1), but in subsection (2) it can decide to limit the scope of the review, and subsection (3) specifically excludes the opportunity for a fundamental review. Nor is the independence of the reviewer guaranteed. The Treasury can also decide what "independence" means. Subsection (7) states: Independent' means appearing to the Treasury to be independent of the Authority".

We believe that the Bill hands too much power to the Treasury. The enabling provisions amount to an unacceptable level of discretion in the hands of the Treasury and we should like to find ways to limit it. I hope that the Minister will concede that reviews should take place, not merely when the Treasury decides but even when the Treasury and Treasury Ministers might not find it convenient to have a review. I hope that he will concede also that leaving the scope of the review entirely in the hands of the Treasury cannot be satisfactory. I do not believe that the industry considers that to be satisfactory.

I expect that in a few moments the Minister will say that the FSA is accountable to the Treasury and the Treasury is accountable to Parliament. He will probably point out also that there are the consumer and practitioner panels to assist with the review process. It is true that the Government have conceded some form of review. The clause as it stands was a concession after consultation. But their concession starts to disappear the more that one looks at it. Is it not true that, as we heard earlier, the consumer and practitioner panels have serious shortcomings, as many noble Lords have said? It is not clear how much notice the FSA and the Treasury will need to take of the panels' recommendations. The chain of accountability from the FSA and the Treasury to Parliament is weak and it does away with questions on the Floor of the House. We believe that we need something stronger for such a powerful body.

Where can we go to get: something better? That is where Amendments Nos. 80 and 84 to 86 arise. They deal with the question of who should conduct reviews and they suggest that the Comptroller and Auditor General of the National Audit Office should take that role. One cannot compare the Treasury and the independence of Treasury Ministers with the NAO's role. Treasury Ministers have a government to run and a party political agenda to pursue. The NA0 is and has on many occasions been seen to be unimpeachably independent. It has the power to produce reports which go to the Public Accounts Select Committee. It can provide a more thorough and detailed form of parliamentary scrutiny than the proposed system. The NAO already conducts reviews of other public bodies, some of which include the other principal regulators, such as those for the electricity, gas, rail, telecom and water industries.

The Government have argued before that the FSA does not receive public funds, so it should not be scrutinised as a public body and should not be subjected to such a review. But who can argue with the fact that Parliament is entitled to ask for an independent full review of a body in which it places so much power and public trust? That is what the two groups of amendments seek to achieve. I beg to move.

Lord Barnett

I have been reluctant to participate in the debates to lengthen the time that the noble Lord, Lord Saatchi, wishes to take on amendments. However, I have a good deal of sympathy with all that he says—he was extremely brief—about the Comptroller and Auditor General. I declare a past interest, in the sense that I have been chairman of the Public Accounts Select Committee of another place, where I had quite considerable experience with Comptrollers and Auditors General. All of them, without exception, were excellent people. I do not know the current Comptroller and Auditor General, Sir John Bourn, as well as the others, but I gather that he is excellent. I note that the noble Lord could not help but refer to the following grouping of amendments, because once one says "must" instead of "may" one must mention to whom one is referring. He rightly talked about the Comptroller and Auditor General. I have a great deal of sympathy with his view.

On the other hand, I am bound to say that to lay down categorically that the Government, or the authority, must appoint a particular individual, no matter how good, is not sensible. (It sounds as though someone agrees with me—or disagrees, as the case may be. I hope that they will not be ejected too forcibly, whoever it may be.) It sounds rather like my noble friend Lord McIntosh to say, "I have a great deal of sympathy, but—", but I have great sympathy with the amendment because if, by any chance, the authority were to appoint the comptroller, in certain instances I should be extremely pleased to see that happen. I do not know whether this does in fact sound like my noble friend. He may in fact be about to disagree with me and to say that he will accept the noble Lord's amendment. It would be foolish to do so. Therefore, I hope that my noble friend will not accept the amendment. If we are pressed to a vote, I am bound to say that I shall oppose the noble Lord, Lord Saatchi, much as I should regret to do so. He knows how fond of him I am and that. I know how much he cares about his public service which demands that he should move such amendments.

Baroness O'Cathain

I wonder whether the noble Lord, Lord Barnett, realised what he actually said. He said that he believed that there was some merit in the Comptroller and Auditor General being involved, but that he would object to that being put on the face of the Bill. There is a case for limiting the powers of the Treasury. Everyone seems to go terribly tippy-toed every time the word "Treasury" is mentioned, as though its Ministers are somehow on a completely different planet from the rest of us. Of course they are, I suppose, but should they be? After all, they are servants of the state and they probably still have to do what is right for the general populace. We are kowtowing too much to the Treasury. I should like to see the amendment carried—or, at least, agreed to. I hope that the Minister will feel that way too.

8.45 p.m.

Lord Boardman

For an awful moment I believed I was going to find myself in complete agreement with the noble Lord, Lord Barnett. I have agreed with him from time to time, when he has been sensible. Tonight he began with support for the appointment of the Comptroller and Auditor General, which I entirely endorse. He is absolutely right. That appointment should be made. The Bill describes the post as "an independent person". No one has the hallmark of an independent person better than the Comptroller and Auditor General. Where I disagree was that in the endorsement of the noble Lord, Lord Barnett, it was left open as to whether or not "may" should be used. In my view, "must" is correct. The independent person must be the Comptroller and Auditor General. For that reason I support the amendment.

Lord Newby

I shall deal with the two groups of amendments separately. The first amendment seeks a two-year review covering the economy, efficiency and effectiveness of the FSA. I can see why that provision is needed in the Bill, but having had some discussion on Thursday about the annual report which the FSA will be required to provide on the assumption that our extremely sensible amendment proposing a joint committee of both Houses were acted on, I wonder whether such a wide-ranging report—a kind of "Ofsted for the FSA" every two years—is absolutely necessary, in particular, during the first period of operation of the body when it is setting itself up. The first set of amendments is probably rather too prescriptive.

On these Benches we see a logic in the Comptroller and Auditor General being specified, in that he is the servant of Parliament. We are relying on Parliament in our concept of the operation of the FSA to be the body which exercises effective control. There is a strong prima facie case for that. However, there are many other bodies which could carry out the role which the Comptroller and Auditor General might perform. They may do so more effectively and there is an argument for having some proper competition. Perhaps we should have a look to see who else might be able to do the job most effectively and most cost-effectively. Equally, even if it is not the Comptroller and Auditor General, a body appointed to look into the effectiveness of the FSA could report to Parliament just as well as the Comptroller and Auditor General.

Lord Jenkin of Roding

I wonder whether the noble Lord might give way. Was he about to suggest that perhaps a leading firm of chartered accounts might be invited to do the job?

Lord Newby

There is a range of possible bodies which could do the job.

Lord Elton

One of the great anxieties which the Bill stirs in my heart is the impenetrability of the actions of the new body to parliamentary inspection. The great advantage of my noble friend Lord Saatchi's proposal in the second group of amendments is that the FSA shall be made open to inspection by the Comptroller and Auditor General who, under the 1983 Act is, I understand, an officer of the House of Commons, thus bringing parliamentary inspection back into the circuit, which is so missing. It is a neat and sensible solution which I warmly endorse.

Lord Faulkner of Worcester

I do not disagree with the sentiments expressed in this debate. However, I want to ask the noble Lord, Lord Saatchi, and his colleagues on the Opposition Front Bench why they have changed tack from the line that their colleagues adopted in another place. On Report they proposed that the FSA should be subject to independent scrutiny in 2002 but did not specify who should be responsible, and said that the review should be conducted, not at two-year intervals, but at five-year intervals. In another place there was no reference made to the Comptroller and Auditor General.

Is it the case that if the Comptroller and Auditor General is involved in such a process, the only body that exercises scrutiny is the Public Accounts Committee in another place? Along with the noble Lord, Lord Newby, I would welcome the continuation of the Joint Committee approach which examined the Bill in its pre-legislative mode. I would not have thought that the Public Accounts Committee was the most appropriate body to exercise that function. Indeed, it is interesting to see that the plan and the budget of the FSA was considered as recently as last Tuesday, not by the Public Accounts Committee, but by the Treasury Select Committee in another place. It strikes me that we are in danger of establishing rather too much parliamentary scrutiny in another place and denying ourselves the opportunity of carrying out the role in this House.

Another point is that the non-executive board members of the FSA are given the specific responsibility of controlling the budget under Schedule 1 to the Bill. I am fearful that if we go too far down that road we shall find that the role of the non-executive board members will be greatly diminished. I hope that that is something that can be addressed as we consider the issue further.

Lord Jenkin of Boding

The noble Lord, Lord Faulkner of Worcester, chides my noble friends because they have not put forward the same amendment in this place as was tabled by my right honourable and honourable friends in another place. As the Government rejected the amendment tabled in another place, surely we are entitled to try another one. Ministers may say the same in both Houses, but happily Oppositions do not. When the noble Lord has been in this House a little longer and sits on this side of the House—that may happen sooner than he believes—he will realise that that is one of the advantages.

Having had some experience of such matters, I am impressed by the amount of support for the idea that the Comptroller and Auditor General should have responsibility. As a former Financial Secretary at the Treasury, I was an ex-officio member of the Public Accounts Committee in another place. I believe that proposal is right. The alternative, which may be considered, is the Audit Commission.

However, I believe there may be room for doubt on whether the period of two years is correct. That is a short period. Conducting a review will be a long process. It will be like painting the Forth Bridge. As soon as the procedure is started for one term, it will need to be started again I shall listen to what the Minister has to say, but I believe the idea of the linkage mentioned by the noble Lord, Lord Newby, between the Comptroller and Auditor General and, as I hope it will be, a Joint Committee of both Houses, is a good one. I do not believe that the Comptroller and Auditor General has to report to the Public Accounts Committee. If that turns out to be the law, we can amend that law in this case.

Has the Minister yet had time to hold discussions with his noble friend the Deputy Chief Whip to find out whether there may be a possibility of a Joint Committee being appointed to undertake the parliamentary scrutiny? If the Comptroller and Auditor General conducts reviews, not necessarily every two years, and reports to a Joint Committee, I believe that that would provide a pretty good chain of command whereby this uniquely powerful institution can be subject to proper professional and parliamentary scrutiny.

Lord Elton

In view of the rapidity with which these markets develop and the relative slowness with which committees come to conclusions, does my noble friend believe that a quinquennial meeting, taking a year to report, will look more at history than current affairs?

Lord Jenkin of Roding

I did not say the period should he five years. I felt that every two years would be too frequent. Somewhere in between, say every three years, may be better.

Lord Burns

I want to join with those who have expressed their admiration for the Comptroller and Auditor General. In my previous life I worked closely with him. I have been scrutinised and audited by him. Sometimes such a process went well and sometimes not so well. I can vouchsafe for his dedication and skill. I join with the noble Lord, Lord Barnett, in questioning whether it is necessary to give him a monopoly position. In my previous life we had an ongoing debate about the Comptroller and Auditor General and whether he should follow public money wherever it goes. Of course, with contracting out and with more services being bought in, the border line has become more difficult to define.

Here we have a private sector company with no taxpayers' money involved and the finance for the organisation will come from the private sector. Therefore, it seems strange that we should give the Comptroller and Auditor General a monopoly position. There is nothing to stop the Treasury appointing him to this task. But why should he get the job by default rather than through some process of competition? I am reluctant that this situation should be part of the legislation rather than being considered on an ongoing basis.

Lord McIntosh of Haringey

I am sorry to leave the tape recorder behind. I am thoroughly antagonistic to all these amendments, except government Amendment No. 83. I believe that they would severely diminish the effectiveness of the value for money review procedure proposed under Clause:10. Currently Clause 10 provides the Treasury with the power to appoint an independent person to conduct a review of the efficiency, economy and effectiveness with which the FSA has used its resources to discharge its functions—that is to say, a value for money audit. It is intended to be a flexible power allowing the Treasury to commission reviews on a large scale or into particular aspects of the FSA's operations as often as appropriate.

Amendments Nos. 79, 81 and 82 would remove that useful element of flexibility. They would set in stone a requirement to have a value for money review every two years following the coming into force of the Bill and on no other occasion and covering nothing except the whole of the activities of the FSA.

The reason that there is no provision in the Bill requiring value for money reviews to be carried out at a particular time is a simple one. We see nothing to be gained by holding a review for the sake of it and quite a lot could be lost by having it at regular fixed periods.

Clearly, reviews are an important tool in keeping costs down and ensuring that the regulator carries out his job efficiently, but they should only take place when necessary. Reviews are not cheap. They tie up a lot of the time of staff and management and divert the regulator from the job of regulation. The FSA has expressed concerns, which I share, that there could be a planning blight in the run-up to the review.

If a value for money review happens more often than is necessary, less often than necessary or at the wrong time, that could have the opposite effect to the one intended. The amendment would also have the unfortunate effect of making it impossible for the Treasury to commission a review at other times. Depending on the circumstances, two years may be too short a gap between reviews, as some noble Lords believe, so we need a flexible power.

We have made it clear that we shall hold a review if and when there is evidence suggesting that that would be useful. There is nothing unusual in that. Indeed, it is the same approach taken in the National Audit Act 1983 which says that the Comptroller and Auditor General may carry out examinations of the economy, efficiency and effectiveness of departments. It does not say that he must do so.

We will not be short of indicators as to when a review is appropriate. The non-executive directors will conduct a report annually on whether the FSA is using its resources in the most effective and economic way. There is a great deal of transparency around the FSA's budgeting and the setting of fees for regulated persons. Of course, it is open to anyone to suggest to the Treasury that a review may be appropriate. It could be the Treasury Select Committee of another place or, if the Deputy Chief Whip were so minded, it could be a review of a joint committee or a committee of this House. Incidentally, at the present time, no discussions have taken place with the usual channels on this point.

Of course, Treasury Ministers will be answerable to the House for their use of the powers conferred by Clause 10, as they will be accountable for the use of any other powers which they can exercise under the Bill. I thought that the attack of the Opposition would be to claim that it is the FSA which is the monster that has got out of control. However, we hear that it is the Treasury, which is accountable, but which appears to be out of control.

Amendment No. 82 presents the same problem. The deletion of subsections (2) and (3) would remove the restrictions on what area of the FSA's work the reviewer could examine. Subsection (2) is simply a reflection of the fact that the Treasury might decide to commission a review for a particular purpose. If, for example, a review was triggered by events in the building society sector, the Treasury might wish to direct the reviewer to look at the FSA's work in regulating building societies, as opposed to, say, insurance regulation.

Subsection (3) is rather different. Under the National Audit Office Act 1983, the Comptroller and Auditor General has the right to carry out reviews of the economy, efficiency and effectiveness of spending by government departments and various other bodies. However, the same statute goes on specifically to prohibit the comptroller from examining the merits of the policy objective underlying this spending. I must point out to noble Lords that this was enacted under a Conservative administration. It is now being attacked from the Opposition Front Bench.

This does not mean, of course, that these policies should be beyond question, but rather that it would compromise the independent nature of the comptroller's office for him to become involved in these policy questions. Subsection (3) plays a similar role in respect of this Bill. That is not to say that the FSA's performance in terms of making policy is not to be open to scrutiny. The Bill provides for a number of ways in which the FSA can be called to account in respect of its policy and principles.

Schedule 1 provides that it must comment in its annual report on how its regulatory objectives have been met. The report will be laid before Parliament and will be open to discussion at a public meeting. In addition, Clause 7 requires the FSA to make arrangements for consulting practitioners and consumers about its policies and practices, including the consumer and practitioner panels. Furthermore, it would always be open to committees of this House or of another place to decide that they wished to examine the FSA's work, just as a committee of this House examines the work of the Monetary Policy Committee of the Bank of England.

Finally, there is a government amendment to this clause, Amendment No. 83, which I commend to the Committee. Its purpose is to allow reviews commissioned under Clause 10 to cover any functions of the FSA under Part VI of the Bill, which is the part concerned with official listings. We shall come to debate the changes that we are making to take account of the proposed transfer of the competent authority function from the London Stock Exchange to the FSA when we debate Part VI of the Bill in due course. However, it is necessary to put in this amendment first.

I shall now turn to the second group of amendments which concern the role of the Comptroller and Auditor General. Again, these would restrict the scope of the Treasury's powers under Clauses 10 and 11. At present, the Treasury can commission a value-for-money review of some or all of the functions of the FSA. The clause allows the Treasury to appoint any person it thinks is best equipped to do the job, provided that that person is someone appearing to the Treasury to be independent. The amendments would remove the Treasury's discretion, placing instead a duty on the Comptroller and Auditor General to carry out reviews.

The key to Clause 10 is flexibility; getting a review of the right things at the right time by the right person. The right person might well be the Comptroller and Auditor General. There is nothing in the Bill which would preclude the Treasury from asking him to carry out this task. However, I do not believe that we would gain anything by making it a requirement that the Treasury should appoint him on every occasion. We would lose some useful flexibility.

This is no reflection on the expertise and professionalism of the comptroller or his staff at the National Audit Office. It is simply the case that it may be that a body more familiar with how the financial markets work might be more appropriate in a particular instance. I do not believe that the NAO would always be the most appropriate body, given its separate role in relation to local government and the National Health Service. For example, in 1996, the value-for-money review of the Securities and Investment Board was carried out by a private sector organisation.

I do not think that there is very much between us in what we seek, but I believe that the amendments of the noble Lord, Lord Saatchi, would diminish the value and effectiveness of the review procedure provided in Clause 10 of the Bill. I hope that he will not press them.

9 p.m.

Lord Saatchi

Given the Minister's response, I have a suggestion on how drastically to cut short our deliberations on the Bill this evening and, indeed, all the other stages. We could scrap the Bill as it is presently drafted and have instead a one-line Bill. That would say something along the lines of, "The FSA will be a body which will carry out duties as determined by the Treasury from time to time".

What we have heard from the Minister suggests that he wants actively to maintain the maximum possible degree of discretion and flexibility for the Treasury. However, we want actively to do the reverse; namely, to limit the Treasury's powers of discretion and flexibility. Surely this is now becoming the main gulf between the Government and the Opposition on this Bill. It is the theme that we have rehearsed on the subject of the chairman of the FSA, the role of its non-executive directors, the construct of the panels and their rights, obligations and duties, and now, on the subject of the review of the FSA. A fundamental gap is emerging between us in our approach. The Minister wishes to see less prescription and more flexibility, while we wish to see the exact opposite. We shall see how this can be worked out on Report.

Perhaps I may respond to the comments of the noble Lord, Lord Faulkner, on the question of timing. As the noble Lord will have gathered from the speeches of my noble friends, we are not particularly set on one period rather than another. However, we are determined that there ought to be a period. The point as regards timing should not be one of the Minister's discretions for the Treasury.

The noble Lord's second point concerned who should carry out such reviews. I think that he can rely on the fact that we are a "joined up" Opposition. For that reason, what the noble Lord hears from this Front Bench is joined up to my right honourable friends in another place. As regards which committee might emerge as the ideal committee to carry out reviews, that would depend very much on the Minister's response to other amendments to be moved later. However, for the time being, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 80 to 82 not moved.]

Lord McIntosh of Haringey moved Amendment No. 83: Page 5, line 5, at end insert ("or in exercising functions under Part VI").

The noble Lord said: I have already spoken to this amendment. I beg to move.

On Question, amendment agreed to.

[Amendments Nos. 84 and 85 not moved.]

Clause 10, as amended, agreed to.

Clause 11 [Right to obtain documents and information]:

[Amendment No. 86 not moved.]

Clause 11 agreed to.

Clause 12 [Cases in which the Treasury may arrange independent inquiries]:

Lord Kingsland moved Amendment No. 87: Page 5, line 40, leave out ("serious").

The noble Lord said: Amendments Nos. 87 and 90 to 93 relate to inquiries, which are dealt with under Clauses 12 to 16.

Amendment No. 87 is to page 5, line 40. As members of the Committee are aware, Clause 12 allows the Treasury to arrange for independent inquiries to be held in certain circumstances. The first set of circumstances, in Clause 12(2), is where, events have occurred in relation to [either] a collective investment scheme, or … a person who is, or was at the time of the events, carrying on a regulated activity … which posed or could have posed a grave risk to the financial system or caused or risked causing significant damage to the interests of consumers".

However, there is a further requirement in Clause 12(2)(b) that, those events might not have occurred, or the risk or damage might have been reduced, but for a serious failure in the regulatory system or the operation of that system.

Amendment No. 87 deletes the word "serious" in Clause 12(2)(b) on the basis that, if the events which occurred had posed, a grave risk to the financial system or caused or risked causing significant damage to the interests of consumers", it should not be necessary to establish that those events, might not have occurred … but for a serious failure". in the regulatory system or the operation of that system.

I now turn to the remaining Amendments Nos. 90 to 93 to Clause 15. If an independent inquiry as contemplated by Clause 12 takes place, the person holding the inquiry must make a written report to the Treasury. Under Clause 15(2), The Treasury may publish the whole, or any part, of the report".

Amendment No. 90 would require the Treasury to publish the whole of the report. Amendment No. 91 is a consequential amendment and relates to Clause 15(3). Under subsections 15(3) and (4) the Treasury may remove from any report material, which relates to the affairs of a particular person whose interests would, in the opinion of the Treasury, be seriously prejudiced by publication of the material; or [where] the disclosure of which would be incompatible with an international obligation of the United Kingdom".

Amendment No. 92 makes it clear that the authority cannot be a person whose interests would be prejudiced by the publication of any material. Amendment No. 93 would require the Treasury to publish a statement if any material was removed from a report before publication, to the effect that, material relating to a particular person has been removed", from the report. I beg to move

9.15 p.m.

Lord McIntosh of Haringey

The Treasury power to commission independent public interest inquiries into regulatory matters is an important new element of the accountability framework. For the first time it will ensure that there would be proper statutory backing for any future inquiries such as the Bingham Inquiry into the collapse of BCCI in 1991, or the inquiry by the Board of Banking Supervision into the failure of Barings in 1995.

This is a very important step. The Bingham Inquiry was an important inquiry and produced an authoritative report. But it was conducted in the absence of any formal power, for example, to call witnesses. It is inherently unsatisfactory that such a vital inquiry should have to rely on witnesses coming forward on a voluntary basis.

Clause 12 provides a new statutory power to set up an inquiry, and Clause 14 ensures that an inquiry can be conducted with the full range of powers to gather evidence of the High Court.

I will deal with each of the amendments in turn. Amendment No. 87 is the trigger for the inquiry. It deletes the word "serious" from the provision in Clause 12 to allow the Treasury to arrange a public inquiry where there has been a serious regulatory failure. It would widen the circumstances in which the Treasury could arrange an inquiry to merely where there has been a regulatory failure, however small. This would confuse the purpose of providing this new power with other mechanisms under the Bill.

We do not want inquiries of this kind to become a matter of routine. They can become very disruptive of the day-to-day working of the regulatory system and it would confuse the regulatory responsibility of the FSA if every other decision was liable to be the subject of a full-scale inquiry.

The complaints investigator is there to help call the FSA to account for failures or lapses which do not have serious implications. It is therefore right that the Bill should contain explicit provision stating that the purpose of the power is to look into serious regulatory failures.

There is nothing to be gained from removing the adjective; it would just cause unnecessary pressure to have a full independent inquiry into all sorts of regulatory decisions, which is what the Government are trying to avoid. The triggers have been deliberately set high because we do not want these inquiries to become commonplace.

Amendments Nos. 90 and 91 would have the effect that the Treasury would be required to publish the entire report of an inquiry, subject to the required excisions under Clause 15(3). We do not think it would be right to remove the discretion of the government of the day to take a view on whether publication of the whole report was in the public interest. Of course we want to see as much of the report published as possible, subject to considerations of fairness, our international obligations and the wider public interest.

It must be a decision for the government of the day. The report may well include sensitive material. Much of the Bingham report was not published. The previous government took the view that the public interest lay in publishing some but not all. People gave evidence to the Bingham inquiry in confidence, and publishing their evidence could have prejudiced future inquiries. We agree that that confidence should be respected.

It is right for the Government to exercise judgment on where the public interest lies, in the light of the particular circumstances, and to be answerable to Parliament for that decision. If we were to make publication of the whole report mandatory, it would be less likely that this valuable power would be exercised in the circumstances that warranted it; so the lessons of a serious regulatory failure might not be fully or adequately learned.

Amendment No. 92 would exclude the FSA from the protection against prejudice that is being given to other persons. Subsection (3), as currently drafted, restricts the discretion of the Treasury in that it expressly prevents publication of material that would be prejudicial to a particular person or which would be incompatible with an international obligation. This is an important restriction, given our desire to provide for fairness throughout this legislation.

It is not clear why we should make a special case for the FSA if there was material published which might prejudice the ability of the FSA, or members of its staff, to defend themselves against charges brought in connection with events in this report. We must remember that the purpose of inquiry is to learn the lessons of regulatory failure, not to facilitate other legal actions. In particular, we would always expect the FSA to co-operate fully with an inquiry, but it would be less likely if the FSA was not afforded the same protection as other witnesses.

Amendment No. 93 on disclosure of excisions would require the Treasury to make public material that is related to a particular person that has been removed by means of a statement. I understand the intention behind the amendment. In the interests of openness and transparency, we would expect to make it clear when parts of the report had been removed, but we cannot rule out circumstances where even this disclosure would be prejudicial or contrary to the wider public interest.

These inquiries are not intended to become commonplace. They are to enable lessons to be learned from serious regulatory failures. As much as possible should be made public, but it should not be at the expense of basic principles of fairness, our wider international obligations or the public interest. These judgments must be taken by the government of the day, as they were taken in relation to the Bingham report. I hope that noble Lords will not press the amendment.

Lord Boardman

I regret that the Minister does not feel able to accept the amendment. The damaging aspect of publishing only part of a report is that it creates an atmosphere of great suspicion about the parts that are concealed. Very often, an amendment of this kind will mean that those who are supposed to be protected will face even greater exposure.

I hope that the Minister will reflect again on that matter. People can be severely damaged by omission, far more than by a statement of the material facts.

Lord Kingsland

The most remarkable thing about the Minister's statement is that he succeeded in reading it out while maintaining a completely straight face. With the greatest possible respect to the Minister, his reply to the amendments is wholly inadequate. The noble Lord said that these inquiries were established and pursued in the public interest. Can it really be right that, at the end of this process, the Treasury can say that it is not in the public interest for a report produced in the public interest to be published? That seems to me to be "nonsense upon stilts", to quote a famous 19th century philosopher.

I also wholly endorse the remarks made by my noble friend Lord Boardman. It was not just that the Minister said that it was wholly proper for the Treasury to allow only the partial publication of a report; if I heard the noble Lord correctly, he also went on to say that the Treasury was not obliged to say that it was only permitting partial publication. In that case, what is published would appear to the general public to be the whole story. That simply cannot be right.

Moreover, your Lordships find that the authority is allowed to protect itself by not publishing certain passages in the report or not revealing the identity of certain of its employees, even though, in another part of the Bill, the Minister seeks total statutory immunity for the FSA and its employees. I hope that the noble Lord will forgive me if I find his answer wholly unsatisfactory. It is not a matter that I intend to press on behalf of the Opposition at the moment, but the noble Lord can be assured that we shall return to it on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 88: Page 6. line 11, leave out from ("persons") to end of line 16 and insert ("—

1. (a) who are consumers for the purposes of section 129: or
2. (b) who, in relation to regulated activities carried on otherwise than by authorised persons. would be consumers for those purposes if the activities were carried on by authorised persons.").

On Question, amendment agreed to.

Clause 12, as amended, agreed to.

Clause 13 agreed to.

Clause 14 [Powers of appointed person and procedure]:

Lord McIntosh of Haringey moved Amendment No. 89: Page 7, line 8, leave out subsection (4).

The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 226, 234, 236, 237, 244, 245, 252, 258 and 277, as well as addressing the question as to whether Clause 401 (privileged communications) should stand part of the Bill. These amendments bring the definition of "legal professional privilege" in the Bill into line with the Police and Criminal Evidence Act 1984. At the same time they provide a consolidation, in a single clause, of existing provisions in the Bill that prevent powers being used to require a person to disclose or permit the inspection of material that is subject to legal professional privilege.

The new clause will ensure that no powers under the Bill can be used to require disclosure or access to privileged material. Adopting the PACE definiton also makes it clear that privilege attaches not just to legal advice but also to documents and other material enclosed with legal advice where those were brought into existence for the purposes of legal proceedings and are in the hands of someone who is entitled to possession of them. I beg to move.

On Question, amendment agreed to.

Clause 14, as amended, agreed to.

Clause 15 [Conclusion of inquiry]:

[Amendments Nos. 90 to 93 not moved.]

Clause 15 agreed to.

Clauses 16 to 18 agreed to.

Clause 19 [Restrictions on financial promotion]:

Lord Kingsland

had given notice of his intention to move Amendment No. 93A: Page 8. leave out line 24 and insert—

1. ("(a) an invitation to engage in investment activity: or
2. (b) any other information with the purpose of inducing another person to engage in investment activity")

The noble Lord said: I must apologise to the Committee for having introduced into today's proceedings some manuscript amendments which I trust noble Lords have to hand. In any event, I understand that under the rules of this House I am obliged to read out these amendments verbatim. Those noble Lords who do not have the amendments before them therefore will not be inconvenienced or prejudiced in any way. I shall not move Amendment No. 93A.

[Amendment No. 93A not moved.]

Clause 19 [Restrictions on financial promotion]:

Lord Kingsland moved Amendment No. 94: Page 8, line 24, leave out ("or inducement to engage in investment activity") and insert ("to engage in investment activity or information which is intended or might reasonably be presumed to be intended to induce any person to do so").

The noble Lord said: This amendment seeks to excise the expression, or inducement to engage in investment activity", and insert the expression, to engage in investment activity or information which is intended or might reasonably be presumed to be intended to induce any person to do so".

Clause 19 prohibits companies which are not authorised under the Act from issuing communications which constitute invitations or inducements. As the Committee is undoubtedly aware, the trouble with inducements is that they look only to the effect on the recipient of the communication. Thus good news about a company may persuade someone to invest even if there was no intention to induce that person to do so. The term "inducement" is unsatisfactory since a communication could operate as an inducement whether or not the person making the communication intended it to do so. The term "inducement", in short, would reinstate much of the confusion which has surrounded the 1986 Act's definition of "investment advertisement", but in a wider sphere, given that the new law will apply to a much wider group of communications.

I shall not move or speak to Amendment No. 94A. I now turn to Amendment No. 95, which states, Page 8, line 30, leave out from ('(1)') to ('in') in line 31 and insert ('does not apply unless the communication is intended or might reasonably be presumed to be intended to be acted on by a person')", in the United Kingdom. Clause 19(3) extends the prohibition to communications from outside the United Kingdom if they are capable of having an effect in the United Kingdom. This is far too wide, as it covers, for example, any communication relating to shares registered or quoted in the United Kingdom. In addition, Clause 19(3) does not reflect either host or home country control, which is all the Treasury, as I understand it, has said that it wanted to achieve.

The Government have tabled an amendment to this clause which would introduce a new subsection (5A). The amendment is helpful in that it enables the Treasury to switch to a country of origin approach, in circumstances such as the proposed e-commerce directive, where the Government consider that another state's requirements provide sufficient protection to United Kingdom customers both to allow mutual recognition of home state control and to disapply control over promotions originating from that state, even though they may be capable of having effect in, or be directed at, the United Kingdom.

Nevertheless the application of the general prohibition to both outgoing and incoming promotions still exposes United Kingdom firms to the possibility of overlapping and potentially contradictory requirements in respect of countries where a subsection (5A) order does not apply. The Government have partially recognised this problem by the provision in Article 15 of the draft exemptions order that "foreign source" communications are saved from being illegal—because they are capable of having an effect in the UK—if they are not directed at the UK.

However, this exemption applies only to investment business activity and not to foreign-source deposit or insurance advertisements. The "capable of having an effect" wording is widely regarded as unclear and could cover all foreign banks and insurance companies using the Internet since, in theory at least, someone in the UK could act on the information in those websites. It is in order to avoid uncertainty and the possibility that promotions might need to comply with more than one regime that Amendment No. 95 has been tabled.

I now turn to manuscript Amendments Nos. 96A to 96E. Amendment No. 96A reads: Page 9, line I leave out ("an") and insert ("a specified")". Amendment No. 96B reads: Page 9, line 2, leave out ("an") and insert ("a specified")". Amendment No. 96C reads: Page 9, line 8, after ("of") insert ("subsection (6)(b) and")". Amendment No. 96D reads: Page 9, line 9, leave out ("that subsection") and insert ("those subsections")". Amendment No. 96E reads: Page 9, line 11, after ("by") insert "subsection (6)(b) or")". The purpose of these amendments is as follows. Under Clause 19(6)(b), "Engaging in investment activity" is defined as including, exercising any rights conferred by an investment to acquire, dispose of, underwrite or convert an investment".

Under Clause 19(11), "Investment" is defined to include "any asset, right or interest". This could clearly extend to assets, rights and interests which are beyond the field of financial services. The legislation should therefore contain a power for the Treasury to limit its application by order.

These are manuscript amendments. The next one is Amendment No. 116A. I am not sure whether I should deal with the remaining manuscript amendments in this group or wait until we come to deal with Clause 28. I shall not deal with them now. I beg to move Amendment No. 94. I have spoken to the other amendments in the group.

9.30 p.m.

Lord McIntosh of Haringey

I shall do my best to keep up. The noble Lord has introduced manuscript amendments and then not moved them; he has brought Amendment No. 95 from a different group into this one and I am struggling to keep the argument together. Perhaps I may be excused from giving a general introduction on financial promotion and, with some diffidence, speak to Amendments Nos. 93A and 94, even though Amendment No. 93A has not been moved. They concern alternative approaches and I have to discuss them both in order to enable the Committee to understand them.

Lord Kingsland

I thank the Minister for giving way so generously. I can only say, on this occasion, mea maxima culpa.

Lord McIntosh of Haringey

We all do our best. No doubt I shall have to do the same at some stage.

Opposition Amendments Nos. 93A and 94 propose two alternative strategies to Clause 19 on financial promotion. Amendment No. 93A proposes to limit the prohibition to, an invitation to engage in investment activity; or … any other information with the purpose of inducing another person to engage in investment activity". Amendment No. 94 proposes to limit the prohibition to invitations "to engage in investment activity", or to, information which is intended or might reasonably be presumed to be intended to induce any person to do so". I thought that Amendment No. 93A would be the preferred approach, but 1 was wrong.

The Government have reiterated the policy behind Clause 19(1) on several occasions. In their consultation paper, Financial Promotion—Second Consultation Document, issued last October, they indicated that the prohibition now applies only to those communications containing a degree of "incitement"—invitation, inducement, incitement—and not to communications comprising purely factual information where the facts are presented in such a way that they do not amount to an invitation or inducement. The Economic Secretary said in Committee in another place that Clause 19 is intended to catch "promotional" communications, which is the common-sense way in which one would understand the clause.

However, we should appreciate a further opportunity to review whether the policy behind the clause could be clarified. We may possibly bring forward amendments at Report stage. The provision in the Bill as drafted is the best way of tackling these issues; however, we shall take the noble Lord's points away in a constructive spirit, perhaps talk to him between now and Report, and see what there is of value in his amendments. I am by no means saying that there is nothing of value in what is proposed.

Manuscript Amendments Nos. 96A to 96E relate to subsection (6)(b) and related subsections in Clause 19, as well as Clause 98, limiting engagement in investment activity in Clause 19(1) to activities in relation to investments which are specified in secondary legislation.

Amendment No. 116A, 'which amends Clause 28, is consequential upon this amendment. I am sorry that I said that the noble Lord should not speak to it. If I thank him for the amendments and agree to consider them, perhaps he will not feel too bad about my telling him not to debate them now.

I do not know whether the noble Lord has spoken to Amendment No. 104. I understood that it was included in this grouping as printed. I wonder whether I may respond—

Lord Kingsland

I was about to suggest that if the noble Lord responds to the amendment before I speak to it, perhaps I shall not need to speak to it!

Lord McIntosh of Haringey

Yes, all right. The Opposition also propose to add to Clause 23 a further subsection. Under Clause 23 as amended, subsection (1) setting out the criminal offence of contravention of Clause 19(1) would not apply to, an oral communication which does not constitute an invitation to engage in investment activity", although contracts made as a result of such promotion would presumably remain unenforceable. I am afraid that we cannot accept this amendment. The impact would be to create a two-tier regime with regard to penalties for breach of Clause 19 whereby some communications which breach the prohibition are subject to criminal sanctions while others are exempt.

It is not just invitations that can lead to people entering into investment agreements but material that does not constitute an invitation but nevertheless contains a promotional element. The impact of the promotion will be the same if there is something less than an invitation but if it nevertheless contains a promotional element. In any event, an exclusion of the kind proposed would lead to arguments as to whether what had actually been said constituted an invitation. That is the kind of uncertainty that we want to avoid.

We have already proposed, in our second consultation paper in October, that solicited real time communications, including oral communications which are not part of a co-ordinated promotional strategy should benefit from an exemption. However, we remain convinced that unsolicited real time communications of a certain character should be subject to controls and restrictions. It is important that we adopt a stronger line on unsolicited calls, given the risks to which they expose consumers.

In any event, it is in the interests of consumers that a uniform approach be taken on the face of the Bill with regard to all communications, oral or otherwise, that amount to an invitation or inducement to engage in investment activity. The debate on the draft financial promotions exemption order which will take place after Royal Assent will be the appropriate point at which to discuss which real time communications should be classified as exempt from the prohibition. In any event, Clause 19 prohibition can have no effect and cannot be brought into force until the necessary subordinate legislation has been made. So in regard to this as opposed to the other amendments, I can only say that we cannot accept the amendment and I hope that the noble Lord will withdraw it.

The noble Lord went on to speak to Amendment No. 95. That is grouped with Amendment No. 94A, which the noble Lord does not intend to move, and my Amendment No. 96. Amendment No. 95 would amend subsection (3) of Clause 19 so that subsection (1), which deals with communications originating outside the United Kingdom, applies only to communications which are intended or might reasonably be presumed to be intended to be acted on by a person in the United Kingdom. That would be similar in effect to Amendment No. 94. It would apply the limitation sought in that amendment, to limit the prohibition to invitations to engage in investment activity or information which is intended or might reasonably be presumed to be intended to be acted on by a person, to subsection (3), which establishes the territorial dimension of the financial promotion prohibition. The amendment is certainly worthy of further consideration in the light of the discussion we have been having. I hope that the noble Lord will not move it on the basis that we will reconsider the issues involved.

Perhaps the noble Lord will allow me to refer to my Amendment No. 96, which is grouped with Amendment No. 95. The purpose of the amendment is to clarify that the Treasury can adjust the scope of the Bill's financial promotion regime to take full account of international and technological developments. Clause 19 prohibits financial promotions unless the promoter is authorised by the FSA or the promotion is approved by a person who is authorised. Subsection (5) of Clause 19 allows the Treasury by order to specify circumstances in which this restriction does not apply. The amendment makes it clear that the circumstances that can be specified under subsection (5) extend to the circumstances for which subsection (3) expressly makes provision. Subsection (3) prohibits communications originating outside the United Kingdom if the communication is capable of having an effect in the United Kingdom. In other words, the amendment makes it clear that an exemption can be made for a communication which originates from outside the United Kingdom even if it is capable of having an effect here. Paragraphs (b) to (d) of the amendment deal expressly with the possibility of exemption for communications originating in specific countries, or in specific groups of countries, such as EU member states, and would allow all communications originating overseas to be exempted if that became appropriate.

The exemption for groups of countries would allow the UK to move to a full home state regime if and when EU legislation to that effect comes into force or, in an appropriate case, before any binding obligation. Subsection (5B) provides that the Treasury may at some point in the future repeal subsection (3) of Clause 19.

I know that that sounds complicated but the principle behind the provision is that we have to adopt a host state regime at the present time. It is the intention of the European Union to move towards a home state regime. We do not wish to leave anyone unprotected in the interval. But until a full home state regime exists in which all member states of the European Union have a regulatory system that is satisfactory for the purpose, we will operate, so to speak, a hybrid of host state and home state regimes which will be fail-safe and will protect the users of financial services. I realise that this is not an easy concept but I hope noble Lords will accept that the thinking behind it is reasonable.

Lord Kingsland

I realise that one swallow does not make a summer, but I am rather heartened by most of the noble Lord's observations. I shall reflect on what he said about Amendment No. 104. If the Minister engages in a spot of archaeological reconstruction in respect of the speech with which I introduced these amendments, he will note that I did in fact speak to Amendment No. 95 and indeed made some fairly detailed observations on his Amendment No. 96. I hope that he will be able to take those comments into account when he considers these matters later. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 94A and 95 not moved.]

9.45 p.m.

Lord McIntosh of Haringey moved Amendment No. 96: Page 8. line 38, at end insert— ("(5A) An order under subsection (5) may, in particular. provide that subsection (1) does not apply in relation to communications—

1. (a) of a specified description;
2. (b) originating in a specified country or territory outside the United Kingdom;
3. (c) originating in a country or territory which falls within a specified description of country or territory outside the United Kingdom; or
4. (d) originating outside the United Kingdom.

(5B) The Treasury may by order repeal subsection (3).").

On Question, amendment agreed to.

[Amendments Nos. 96A to 96E not moved.]

Clause 19, as amended, agreed to.

Clause 20 [The classes of activity and categories of investment]:

The Deputy Chairman of Committees (Lord Lyell)

I must advise the Committee that if Amendment No. 97 is agreed to I cannot call Amendment No. 98.

Lord Sharman moved Amendment No. 97: Page 9, line 16, leave out subsection (1) and insert— ("(1) An activity is a regulated activity for the purposes of this Act if it is—

1. (a) an activity of a specified kind which is carried on by business and—
1. (i) relates to an investment of a specified kind: or
2. (ii) in the case of an activity of a kind which is also specified for the purposes of this paragraph, is carried on in relation to property of any kind;
2. (b) an activity which is carried on by business and relates to loans secured on land or any other property.").

The noble Lord said: In rising to move Amendment No. 97 I should like to speak also to Amendments Nos. 100 to 102. This group of amendments deals with mortgages. As the Committee will be aware, this matter was added at a rather late stage in the passage of the Bill through another place. I am somewhat hopeful that at this stage in the proceedings the recently found flexibility of "Dr No" on the Government Front Bench may indicate some willingness to consider these amendments.

Amendment No. 97 seeks to extend the regulatory regime beyond coverage of the providers of mortgages and products related to them to those who intermediate in those transactions. The Committee will be aware that often a mortgage is the largest single transaction ever undertaken by a consumer. It is important that the Bill should cover those who provide advice on mortgages and intermediate in that regard.

Amendment No. 100 seeks to help the Minister to find a better definition of "mortgage". At the moment the Bill defines a mortgage as a loan that is secured on land. Loans, commonly referred to as mortgages, may be secured on many types of physical property; for example, leaseholds, boats, aircraft and even caravans. Currently, mortgage lending leans heavily on what is called churn and involves both second mortgages and the provision of finance for other physical property. Frequently, a mortgage that is secured on a boat may be two or three times the size of that secured on the average house. These definitions, which I hope are well drafted, certainly have merit. I beg to move.

Baroness Turner of Camden

I support the amendment. My Amendment No. 101, which is included in this group, was tabled at the instance of the National Consumer Council. That body wrote to me to express disappointment that the Government had not chosen to include full regulation of mortgages within the authority's remit. As has just been said, a mortgage is probably the largest investment that the average person makes in a lifetime. The only other investment of similar size is that related to pension provision. These are major decisions which matter awfully to most people. I understand that regulation is partially extended to this area. I should like to hear from the Minister precisely what that means because the amendments before the Committee this evening seek to provide full regulation of mortgages by the FSA.

Lord Jenkin of Roding

I speak from my former experience as chairman of a life insurance company. The life insurance industry found itself increasingly affected and disadvantaged by the fact that almost identical products were able to be sold under the guise of mortgages which were not subject to the full regulatory impact of the financial services legislation. They were in competition with similar products sold by life insurance companies. On a number of occasions and on a number of different platforms I argued that that was a very uneven playing field.

Therefore when the Government decided finally that mortgages should come within the scope of the Bill, I was pleased. My reaction at the time was to say, "Not before time". However, until the National Consumer Council and others reacted with disappointment, I had not realised that the people who sell them—brokers and others throughout the country—are not to be subject to the controls provided by the Bill. I find that quite extraordinary. How one can divide the market in mortgages between the providers— building societies, banks and others which advance money on the security of property (and I accept the point that the noble Lord, Lord Sharman, made; it is not just land)—without at the same time bringing within the control the people who deal face to face with the public who have to borrow in order to finance their purchase leaves me deeply puzzled. One has half the control. But consumers may not be particularly sophisticated and may have difficulty in understanding some of the projects they are being invited to buy. As we discussed earlier, we seek to protect them and to make sure, for instance, that there is a proper fact find. Is a mortgage backed by an endowment policy right for them; or should it be an interest-only mortgage? Those are important questions almost wholly decided between the customer and the mortgage broker.

As I understand the changes that the Government have made to the Bill, the mortgage broker is not within that control. The Government have not taken even two steps forward but only half a step forward and one step back in bringing in the building societies but not the brokers. I join with the noble Baroness, Lady Turner of Camden, in asking Ministers to justify what seems at first sight to be a somewhat extraordinary division.

Lord Burns

I support the amendment of the noble Baroness, Lady Turner of Camden. When the issue was discussed in the Joint Committee a variety of views was expressed. However, the majority decided in favour of including mortgage advice. We recognised that a timetable for implementation would be required. The costs could be high. It might be a problem for the FSA to implement it quickly. Nevertheless, there was concern for a number of reasons: the importance of the transaction; and the growing complexity of choice available, in particular between fixed and variable rate mortgages. There is a wide range of discounts on offer; and there is the question of penalties on repayment.

I understand why the Government have opted for a balance between having the mortgage providers fall within the regulations and trying to keep mortgage advice out. The majority of the problems which arise are concerned with the mortgage providers and the hope is that one can deal with many of them by setting out in more detail the facts and the commitment that the customer is making.

However, we shall be faced with enormous problems in the future. When people believe that they have been given bad advice there will he a great debate as to where the fault lies. To what extent does it lie with the providers and to what extent does it lie with those who gave advice? Mortgages are a large financial product and play a big part in people's lives. To leave people in doubt as to which part of the process falls within the regulations and which part does not can only cause great confusion.

I understand the problems of cost and the number of people who will be brought within the framework of the regulations. I can also understand why there is no hurry to act. However, I should be greatly surprised if the balance between what is in and what is out were sustainable. The time will come when everything must be included.

I had hoped that we could move forward with a general expression of intent and then worry about the timetable. The Government have chosen not to do that and I, like the noble Lord, Lord Jenkin, am sorry about that.

Lord Joffe

I, too, support the amendment. I share the puzzlement of the noble Lord, Lord Jenkin, at the rationale behind the Government's proposal to introduce the regulation of mortgages on only a piecemeal basis. In order to recognise the dangers of the proposal, it is helpful to explore what happens at the point of sale. The borrower seeking a mortgage is often engaging in the largest and most complex financial transaction of his life. He often has no experience of such transactions. And even if some of the options are explained to him, there are, as the Treasury's press release on mortgage regulation points out, some 4,000 to 5,000 different mortgage deals to choose from.

Perplexed by all the options—and often they are not explained at all—the borrower normally turns to his friendly mortgage broker, who is trying to sell him a mortgage, asks for his advice and then follows it. If that advice is inappropriate, it may be many years before the borrower realises it. And when he does, under the Government's proposals he will have no redress.

When I was chair of the complaints committee of LAUTRO, the regulator that preceded the Personal Investment Authority, time and again we were prevented from redressing the obvious mis-selling of life insurance products for the very reason that mortgage advice was not regulated. The FSA ombudsman will find himself in an identical position. As the noble Lord, Lord Jenkin, said, it is difficult to understand the reasoning behind the Government's decision to exclude mortgage advice. On the one hand, sales people who sell life insurance products, which are often simpler than the current range of mortgage products and of a relatively lower value, are regulated while mortgage brokers, who sell the complex and often high-value mortgages, are not. It is difficult to understand the rationale behind the approach.

Experience of mis-selling of life insurance policies has demonstrated how difficult and costly it is to deal with the consequences of mis-selling. The aim of regulation must surely be to prevent poor advice being given in the first place and the proposed amendment will help to achieve that.

10 p.m.

Lord McIntosh of Haringey

It may be helpful if I begin by explaining briefly the context in which these amendments are being debated. The announcement by the Government about the inclusion of mortgages in the scope of the Bill did not require an amendment to the Bill. That is the way in which Clause 20 and Schedule 2 are constructed.

Under Clause 20, the scope of regulation is to be set out in secondary legislation. Schedule 2 contains an indicative list of the core activities and investments which might reasonably be regulated by a financial service regulator. However, the list is not exhaustive and Schedule 2 does not limit the Treasury's power to make an order under Clause 20(1). Clause 36 gives the Treasury the power to make orders which exempt specific natural or legal persons or classes of person from the general prohibition under Part II and, therefore, from the need to be authorised by the FSA.

With that, I move to the substantive issue which, I accept, is more important than the amendment because an amendment would not be necessary to give effect to what Members of the Committee want. I should stress that although the general scope of regulated activities is indicated in Schedule 2, the scope of regulation will be marked out in the Regulated Activities Order, where regulatory issues can be handled more flexibly. The first order made in exercise of this power and all subsequent orders which extend the scope of regulation will be subject to an affirmative resolution procedure, giving both Houses the opportunity to voice their views on regulatory issues.

I turn to the issue of whether and how much mortgages should be regulated. The Government plan to cover most residential mortgages as we are determined that lenders should not be able to take advantage of mortgage borrowers at a time when they may be vulnerable because they are focusing on a home purchase. I go along with what every Member of the Committee has said about the importance of a decision of this kind in people's lives.

As for "any other property", referred to in Amendment No. 97, the Government are concerned about protecting people's homes. On the whole, caravans and yachts do not fall into this category; nor does any other non-residential property. We recognise that mortgage borrowers need better information. Regulation through the FSA will ensure that they receive it in a form which will readily enable comparisons to be made in order to help people to decide what suits them. Therefore, so far as concerns Amendment No. 97, I hope that that meets noble Lords' concerns and that they will be able to withdraw their amendment.

I turn to Amendment No. 101 in the name of my noble friend Lady Turner of Camden. The Treasury consulted last year on whether mortgage advice should be regulated. Evidence from the consultation showed that the main area of preventable consumer detriment was poor quality or misleading information which resulted in consumers buying an inappropriate mortgage product. In other words, consumers wanted clear, comprehensive and reliable information.

The Treasury received little evidence of specific cases where consumers were receiving bad or biased advice. When that was mentioned, it was in the context of selling commission-based products, such as endowment policies. I hope that it is clear, because it was not clear to me at the beginning, that commission-based products, such as endowment policies, are already FSA-regulated and did not need to be included in the Bill under the change which was made in relation to mortgage regulation.

On that basis, most problems in the mortgage industry could be dealt with by a combination of a disclosure regime and CAT standards, together with action taken by the DTI banning the tying-in of insurance policies and standardising annual percentage rates. Therefore, there is no need to regulate advice.

I turn now to Amendment No. 102. I have already indicated my reasons for resisting the amendments to Clause 20. I hope that this amendment may be withdrawn, too. It is not that we do not want to cover mortgages; we shall be covering most residential mortgages, first legal charges, home income plans and equity release schemes on property occupied by the borrower. The Bill will cover mortgage lending on property to be occupied by the borrower or the family.

It will not cover mortgage brokers, who will not need to be specifically authorised unless they also carry out investment business such as advising on endowment policies. We certainly shall not cover second charges on homes; for example, for loans on replacement windows or kitchens and so on. That is partly because roost transactions of that nature are covered by the below £25,000 limit contained in the Consumer Credit Act. Therefore, they are covered by the CCA.

I hope that I have persuaded Members of the Committee that we have covered the most important elements of mortgage regulation at a price which is acceptable and at an addition to the FSA's resources and responsibilities which is also acceptable.

Lord Sharman

Sadly, that was a false dawn. I am in a state of total confusion. I really do not understand what the Minister has been saying to us. I wish to reserve my position until I have had an opportunity to read in detail in Hansard what he said.

I make two observations which struck me as he was making his remarks. Clearly, the noble Lord does not consider that a caravan can be a home, which it is to many families in this country. The same can be said about a boat. Both may have valid legal mortgages on them and, for the life of me, I cannot understand why they should not be considered in the same manner.

However, I shall look in some detail at what the Minister said before returning to this matter on Report. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 98 not moved.]

Lord Lipsey moved Amendment No. 99: Page 9, line 25, at end insert— ("() The Treasury shall within 28 days of the passing of this Act make provision under subsection (1) in respect of buying, selling, subscribing for, carrying out or underwriting contracts of insurance against the provision of long-term care or offering to do so, either as a principal or as an agent.").

The noble Lord said: First, I thank noble Lords on all sides of the Chamber who have been kind enough to support this amendment. In recent weeks, I felt rather like the Ancient Mariner as I prowled the Corridors of this House, stopping one in three and telling of the woes which will arise if this amendment, or at least its substance, is not accepted by the Government. However, I have been received with nothing but patience, understanding and a great measure of support. I extend that thanks to my own Front Bench and to the Minister, in particular, who has been endlessly generous with his time and patience in discussing this matter.

When I spoke on this matter on Second Reading, I pointed out that there really was a very wide consensus that long-term care products should be brought into regulation in view of their nature and the vulnerability of those to whom they are sold. That extended to the PIA, the new FSA, both the majority and minority members of the Royal Commission on Long Term Care and, perhaps most significantly, to the Joint Committee chaired with such distinction by the noble Lord, Lord Burns.

In the past few weeks, we have been reminded of that by some of the letters that we have received from outside. Many Members of the Committee will have received a letter from Age Concern. I see the noble Baroness, Lady Greengross, in her place. Age Concern states that it believes that it is, vital that people arc given appropriate financial advice from a competent professional and hence we believe these products ought to come under the rules of the Financial Services Authority".

I have received a letter from the Continuing Care Conference which is an umbrella organisation, a very fine organisation, embracing all the interests from producers to those who are cared for. It too says that it believes that, regulation and consumer protection is essential". since it says that, by their very nature. they involve large sums of money and entail a long-term relationship with the customer".

It is striking that that is also the view of the industry. I have received a briefing from the Association of British Insurers which says that it is supportive of regulation. Even the industry wants to be regulated.

Today, the fourth estate has rowed in. In its leader this morning, the Guardian stated that, peers should step in where pusillanimous ministers fear to tread".

Needless to say, I should resist absolutely any suggestion that anyone on our Front Bench has any pusillanimity of any kind whatever. But I agree with the broad thrust of the Guardian's leading article. So it seems that everyone is out of step except our Treasury. That is a puzzle, particularly to people like me who believe that the Treasury does little wrong. The problem is that the Treasury has not been terribly good at communicating its problem. It has taken more positions on the issue than appear in the Kama Sutra. I have argued through each of them, only to find that behind it lies yet another position. I hope that we are now getting somewhere near the top of the mountain and that we shall see what it is really on about.

In the course of saying that, I shall deal with the argument eloquently put by the Minister at Second Reading where he hinted that CAT standards might be enough to control the product. But the, are not enough in this area. I take the example of a lady of 90 who has no dependants, no heirs; no one to whom she wants to leave her money. She is going into a home. A salesman comes up to her and says, "Listen dear, unless you take out my insurance policy, you will be on the streets". He gives her his insurance policy. That policy may be absolutely perfect. It may meet CAT standards in every regard, but she does not need it, because under the existing arrangements, even before the Royal Commission's report is implemented, as soon as her assets go down to a certain level, she will be paid for by the state. She does not need the product, although it is an excellent product. What is needed is a salesman who is regulated, so that he cannot say that to the old lady, at least not if he wants to be reasonably sure of keeping his job.

As the debate went on, however, we found a different argument coming forth from the Treasury; the argument that we are hearing. When I was on various broadcasts the other week debating the matter, I was told that a Treasury press spokesman had said that the idea was premature. What a great, "Sir Humphrey" word "premature" is. "Premature", when 30,000 policies have already been sold. "Premature", when it is 12 months since the Royal Commission reported and 10 months since the Burns committee reported. "Premature", when the Government have only just got around to setting up a committee to consider the issue, which has met—I asked the other day—precisely once. "Premature"—this is the most important point, because it matters to consumers—because, by this summer, the Government have promised to give their response to the Royal Commission and to tell us what is to happen. When that response comes—the Royal Commission majority and minority reports both found a role for long-term care insurance—many people will realise for the first time that, contrary to their present expectations, the state will not fund all their care needs for them and, if they want to leave legacies to their children or to keep their money, they must insure for it.

There is an issue of timing here. If the matter goes on being "premature" for too long, we shall find that we are just getting out to look at the bolt on the stable door while in the meantime the horse is galloping off, four fields away. It will then be too late to deal with the matter. It is not premature; it is overdue.

From what I am saying, it will be clear to the Committee that I believe that the matter should have been dealt with before now. Having said that, we are where we are. I accept that there are certain hoops which must be gone through before regulation may be put in place. For example, it is clearly right in terms of general government policy that a proper regulatory impact analysis should be carried out before the form of regulation is finalised. Equally, it is clear also that the matter is urgent. As the time for the Government's answer to the Royal Commission looms closer, it is becoming more urgent.

Having spoken to many noble Lords about the matter, I do not believe that the House will ever forgive itself if it allows the legislation, which gives it a grip on the issue, to go through unless and until it is satisfied that the Government have seized the point and are moving to action on it. I look with my customary optimism—perhaps with a little more than my customary optimism—to my noble friend the Minister for comfort. By the time we reach Report stage, I shall be looking for more than comfort. I shall be looking for commitment. I do not believe that we should let the Bill pass unless we are reasonably assured by Ministers that the interests of such a vulnerable group of consumers will really be protected.

10.15 p.m.

Lord Burns

I too want to support the amendment. I agree with the noble Lord, Lord Lipsey. It is a puzzle that we are debating this matter. Just over a year ago, on, I believe, 16th March—I stress that date—in evidence to the Joint Committee, Howard Davies put the case for the regulation of long-term care better than I could. He took the committee through the methodology he wanted to deploy in looking at the new product area. He argued: I would say that long-term care insurance probably also scores quite highly … I suspect that if you ran a complete cost-benefit analysis on that you would find that scoring quite highly". Having listened to the arguments, the Joint Committee also concluded that long-term care should be included.

In response to the report of the Joint Committee, the Government offered some optimism. They said that they also appreciated the thinking behind the recommendation that long-term care insurance be brought within the remit of the FSA. That has been considered in the context of the Government's response to the recent report of the Royal Commission on long-term care which reached a similar conclusion.

That is good. But almost nothing has happened. As the noble Lord, Lord Lipsey, pointed out, we have had radio silence. That has caused a number of noble Lords to wonder what is going on. Those of us who know the Treasury well know that it can work fast when it needs to. We also know that sometimes it does not necessarily want to move too quickly.

I would like to believe that it is merely the pressure of work and the huge effort that has gone into this Bill that explains the silence. I hope that there is no joined-up decision-making problem with other departments. The best gloss I can put on it is that a decision in principle has been taken but that it will take time to complete the work.

It would be sad if the Government decided on the basis of all the talk about this over-mighty and unaccountable organisation that somehow or other we should draw a line in the sand on this point and that these products should be left out of the ambit of the FSA. That would be a bad mistake. There may be worries that if we have regulation here it may stifle growth in the market. It is equally possible to argue that if we had regulation it would make the market grow faster than otherwise because of the extra security that it would give to people.

The Minister said in relation to the previous amendment that in practice this provision does not need to be in the Bill. I believe the scope is already there. However, several noble Lords want some reassurance, not only that it is possible, but also that there is a good chance that it will happen. I believe that we need a decision in principle about this matter, even if all the detail cannot be announced now. At a minimum, we require a strong indication that the Government are minded to include long-term care within the scope of the Bill.

I do not believe that there is any reason to make a fuss over this issue. 1 hope that the Minister can give us the comfort that we need to go quietly because that is what we want to do. But it is important to say that to some of us that it is beginning to look a little too difficult.

Lord Phillips of Sudbury

I was happy to add my name to this amendment. Most of what needs to be said has been said, but I want to make a few points. First, if this Bill has any popular support, I suspect that in this area it will have more support than in any other for the simple reason that it affects a great and growing number of people. Recently, in these times of difficulties for the National Health Service, we have read of the growth in private health generally. That is true too of the subject about which we are talking. Secondly, it is a matter that affects old people for a long time. They will enter into such a contract for life and it will take a sizeable part of their assets if not, in extreme cases, all of them.

Thirdly, it is clear to me that these products are very complex and sophisticated. The numbers and types of product are legion and none is simple. One has to add to that the personal complications that can beset old people, in particular lonely old people, when trying to decide what is best for them. They need to embark on what one might in effect call a series of gambles on the future. How is their health going to fare? What demands will be put on their assets? What will those assets amount to and what will their families need of them? This is a difficult set of issues for people to face, both personally and legally.

Finally, I turn to a point that is most important to me: the very people who need to confront these issues are those who have reached a stage in their lives when they are least capable of dealing with them. One does not need to conjure up black tales of wicked salesmen. Far more often it is simply the case of an old person pretending to understand that which he or she does not understand and failing to put those questions which in the prime of life he or she would have leapt to ask. Old people are highly suggestible and vulnerable.

I am absolutely convinced that if there is only one amendment that deserves to be accepted without demur by Her Majesty's Government, it is this one or something very like it.

Lord Gralbiner

Perhaps I may say that my noble friend Lord Lipsey is to be complimented on his persistence in this matter. This amendment identifies a very vulnerable group in society. To omit regulation in relation to this group would send out all the wrong signals. I do not believe that it is an exaggeration to say that these are potentially shark-infested waters, but with regulation it is probable that good competition will emerge in the market-place for this kind of business.

Finally, I should like to say that 1 am not aware of any argument of substance against the amendment.

Baroness Greengross

I rise briefly strongly to support this amendment. The noble Lord, Lord Phillips, has already told the Committee how complex these products are, as is the whole market. People need to have confidence in it and to be given a feeling of security. For example, for those purchasing an immediate care plan dealing with a situation of personal crisis, it is of particular importance that this area is regulated.

Disputes are another reason for providing good regulation. Disputes that may arise at the time or a claim need a form of independent complaints procedure. The voluntary jurisdiction by the Pl A ombudsman is not sufficient.

Finally, I should like to mention training and competence. A person selling this type of product needs a great deal of knowledge of the area. That person needs to be able to explain to the purchaser the interaction between the long-term care insurance product and the state support system. It could be very damaging to some people if they purchased such a scheme. However, in order to explain it, a salesman does need to understand it thoroughly because it is not an easy area.

Furthermore, when selling these products, up-to-date advice needs to be given, balancing the benefits of the different options that are available. Also, a good knowledge of the variations in local authorities' procedures, what they make available, their rules and practices is also necessary. A new classification in training is desperately needed. For those reasons, I strongly support this amendment.

Lord Jenkin of Boding

I agree with virtually everything that has been said on this amendment. I wish to add two points. The first is that this is a market which, despite the figure stated by the noble Lord, Lord Lipsey, of 30,000 policies—that surprises me but of course I accept his word—is still in embryo. The products are extremely expensive. I made a few inquiries a couple of years ago to see whether this was perhaps a way of providing for myself and my wife, but was put off in the end because it was an extremely expensive option.

The second difficulty, which I am sure the noble Baroness, Lady Greengross, has come across, is the test of eligibility when one comes to claim. A year or two ago I took part in a series of discussions initiated by the Medical Research Council—by Professor George Radda—and addressed to the Association of British Insurers and particularly those engaged in underwriting. The MRC wanted to find out if there was a need for research to establish more appropriate tests to find out whether or not an individual would qualify under a long-term care policy. Surprising though it may seem, the tests—certainly the ones I saw—were still those used in World War I in relation to military pensions; that is, the simplest tests as to whether or not a person could dress themselves, feed themselves, look after themselves and so forth. But medical science has advanced a long way from that. As the MRC said, there should be more effective and sophisticated ways of establishing a claim.

This is a market which is developing quite fast. I lost touch with the discussions taking place with the MRC. I hope that they are continuing because they seemed to me to be important. In the circumstances of expensive policies in a branch of insurance which is still developing and the vulnerability of individuals as expressed by other Members of the Committee, these plans are crying out to be brought into the Act.

I too am puzzled at the Government's reluctance. It was said in reply that they are considering this along with the response from the Royal Commission on Long-Term Care of the Elderly. Having been both a Treasury Minister and the Secretary of State for Social Services, I understand the Government's difficulty with the Royal Commission. It will surprise me if anything substantial comes forward on that in the next few years. But that is not a reason for refusing to bring long-term care insurance within the Bill. I hope that the Government will respond to the pleas that have come from all parts of the Chamber for that.

Baroness Dean of Thornton-le-Fylde

I too support the amendment and everything said in its favour this evening. It is probably appropriate that I declare an interest. I am a member of the General Insurance Standards Council. I do not seek to speak for the council tonight. Indeed, I have no idea what its members' views are. I am sure that if the majority of my colleagues on the council were asked, their view would be that we have not discussed it because we assumed that this area would be covered by the Financial Services and Markets Bill. It is right that it should be.

I am pleased to support the amendment. I am reluctant to be drawn into the view that regulation will deter growth in this sector. Rather, I believe the reverse. If we look at sectors which are well regulated, the consumer has confidence in them to support and buy the products. We are still suffering from the mis-selling of pensions. Many people who would be in the appropriate bracket to buy long-term care packages, will be the very people who were victims of mis-sold pensions. They will be looking for some kind of confidence and guarantee that what they are entering into—an enormous financial commitment for the individual—will be properly regulated.

The proper way to regulate would be for it to come within the purview of the Bill from the beginning, not waiting to see if there is any mis-selling and, if there has been, what damage has been done when it is too late to rectify that damage. Many of these people will be elderly. I hope that the Minister will respond positively to the amendment.

10.30 p.m.

Lord Desai

If the Government are minded not to follow the recommendations of the Royal Commission, it is all the more necessary that the market should be regulated. That should be the most important priority.

I have read that most of us use care services or health services in our lifetime, and 90 per cent of that use is in the last two years of our lives. Therefore, these decisions will be very important to a lot of people. Their anxiety about choosing the right product will be all the greater. Given the mental strain that people are under when they are elderly, it is very important that they can be sure that what they buy is guaranteed to deliver the service that is claimed.

Lord Clement-Jones

I am more used to taking part in health and social service debates, and precisely for that reason I should like to express very strong support for the amendment.

Long-term care insurance is extremely important because so many people are potentially affected by it. There are currently half a million people in nursing and residential homes, and the costs per annum are extremely high, of the order of £18,000 to £23,000 depending on the area of the country in which you live.

Most of us can confidently predict that the Government are unlikely to pick up a substantial part of that cost, and in view of their very delayed reaction to the report of the Royal Commission, it appears that they are terrified to make a decision on the subject. In view of those costs, I am not surprised.

Even personal care that is provided at home can be a substantial cost. It can be of the order of £15,000 per annum. The investment required in order to cover those costs is potentially very large indeed.

The products designed to provide all or part of these costs and to allow older people to plan with confidence are extraordinarily complex. I have carried out an exercise in relation to some of these products. I have looked at them as if I were insuring for my own future at the age of 50. It is as if there is a huge set of multiple choice hurdles in front of the intending insured. These are some of the questions. Will it be a lump sum capital bond? Will there be an insurance product linked to it? Will the capital growth pay the premium? Will it be a pure insurance product with a single premium or a monthly payment? If it is a bond, what type of bond will it be? One company has three types of bond: capital growth, capital reserve or the protection select option. Others have more types of capital bond. What conditions are excluded from the insurance? Mental health conditions like schizophrenia are often excluded from this type of insurance. When is the insurance triggered?

The noble Lord, Lord Jenkin, spoke of the rather archaic activities of daily living that are included in these insurances. How many of these activities of daily living must a person be unable to carry out before they are regarded as being severely or moderately disabled? Is there an option of a capital sum to pay for assisted devices, for example stair lifts? Are the services of an independent care consultant provided? What extra frills are provided, such as a bed reservation benefit? Is respite care included for carers? Is so-called accelerated care cover included?

All these options affect the cost of the insurance or the bond, and I have not even begun to address the issue of growth assumptions and how much a person may need to insure or put aside for this purpose. There are widely differing assumptions about what the cost of care will be in 10 or 20 years' time, and insurance companies use a very wide range of cost projections indeed, some of them of doubtful accuracy. In that context, is the product indexed? What charges are made and what is the administration fee? What is the establishment charge? What is the annual fund management charge? What are the encashment charges? What commission does an independent financial adviser receive?

Just looking at some of these options—this multiple choice set of hurdles—one can see that there are clearly massive traps for the unwary. At the very least, such products should be brought within the scope of the Bill. At present, they are covered only by the ABI codes of practice. In the light of the ABI's performance as regards genetic testing, I suggest that a voluntary code is not good enough. If anything, the ambit of the current amendment is rather narrower than it should be. Some of the products are not insurance products, yet they still purport to be long-term care products. Disputes and complaints should also be covered by the Bill, but the amendment does not cover them. Nevertheless, I very much hope that the Government will see the enormous sense in these proposals and that they will agree to accept the amendment.

Lord Joffe

I, too, wish to express my support for the amendment. As other noble Lords have said, the products are very complex. I know just how complex they are because, with the noble Lord, Lord Lipsey, I sat on the Royal Commission for the care of the elderly and we were required to analyse these products. With some experience in the field, I, frankly, was unable to understand them, or certain sections of them.

It seems strange that consumers of even simple products like unit trusts are fully protected, even when the amount at risk and the risk of mis-selling is small. If this is so, what is the logic for the decision not to regulate long-term care products when they are so complex and the most vulnerable members of society are at risk? Indeed, it could be interpreted as a caring government discriminating against the elderly rather than in their favour.

Every organisation that is concerned with consumer protection, ranging from Age Concern to the Consumers' Association, has underlined the importance of regulating long-term care products. Even the insurance industry, which has opposed much regulation over the years, has called for the regulation of long-term care products. The reason is self-evident: the industry knows the extent of mis-selling that is likely to take place and is desperate to avoid yet another assurance mis-selling scandal.

Based on my 30 years' experience in the life assurance industry, my five years campaigning for effective regulation and my chairmanship of the complaints sub-committee of LAUTRO, the previous regulator, I reluctantly predict that if the Government do not regulate long-term care products now they will have no alternative but to do so within the next five years. By the time they then do so, there will be a significant number of elderly people to whom products will have been mis-sold and it will take much time and effort to seek to compensate them. Just as with the Home Income Plan selling scandal, a significant number of these victims will go to their graves before they have been compensated, with their last years having been blighted by the mis-selling, that the Government had the opportunity to prevent.

Lord Newby

In rising to speak in the debate at this stage, I realise that I am in danger of exemplifying the old adage that everything has already been said but not everyone has said it. Therefore, in associating these Benches formally with this amendment, I want to stress what is, in a sense, the central juxtaposition of the reasoning behind the amendment. On the one hand, as we have heard, there is the immense complexity of the product being regulated and, on the other hand, there is the peculiar vulnerability of many of the people who are considering whether to purchase it.

In many cases, the person who is considering whether to buy the product for the first time is already frail. But, more importantly, such a person may have recently become a widower or a widow and will, therefore, feel much more vulnerable than he or she has ever felt before. There is a particular need for such people to have confidence in the products that they are being asked to purchase. Moreover, those products should conform in such a way as to make it easier for such people to consider them rationally. Therefore we on these Benches—both Front-Bench and Back-Bench speakers—have no difficulty at all in enthusiastically supporting the amendment.

Lord Saatchi

As my noble friend Lord Jenkin has said, these Benches are in favour of the amendment. I wish to express that clearly. Given the range of support for the amendment throughout the Chamber, it would be a great pity if the Minister did not say something positive and constructive about the attitude that the Government might adopt to the clause we are discussing. It would be sadly backward looking on the part of the Government if they did not take the point made by the noble Lord, Lord Lipsey; namely, that this market is bound to grow. For the reasons that have been stated by the Liberal Democrat Benches, the time is overdue for these products to be brought within the regulatory guidelines.

I do not mention the following figures to make a party political point, but do so strictly in support of the amendment of the noble Lord, Lord Lipsey. Every opinion survey shows that the public consider that the state of the NHS and healthcare is the number one issue facing the country. Research which probes more deeply what the crisis in the NHS means to people reveals that one of their greatest worries is how they will pay for their parents' or, indeed, their own old age. It is a sad fact that 72 per cent of the public now believe that the NHS is in crisis. They are considering private healthcare. I believe that I saw a figure today which claimed that 160,000 people have paid for their own major operations. The assumption behind the amendment of the noble Lord, Lord Lipsey, is 100 per cent correct; this area is bound to grow. It would be deeply sad if, through some ideological distaste of private healthcare, the Government were unable enthusiastically to support the amendment.

Lord McIntosh of Haringey

I assure the noble Lord that ideological distaste of private healthcare has nothing to do with the Government's response to the amendment. It is important to state that we do not place any emphasis on whether the amendment is technically correct. I said in response to the previous debate on mortgages that we were able to introduce regulation of mortgages without any amendment to the Bill. We would be able also to introduce regulation of long-term healthcare products without any amendment to the Bill. That is not the issue between us. We are talking about content, not form. If we want to introduce such regulation, we could do it by means of a statutory instrument subject to an affirmative resolution procedure in both Chambers. That would be the correct way to do it without introducing a regulated activities order within 28 days of Royal Assent.

We understand the nature of the amendment. We understand the nature of the arguments which have been unanimous as between speakers on all sides of the Committee. We have listened carefully to what has been said. I think that it is recognised that we are discussing a new market where products are at an early stage of development. The market could evolve rapidly and most Members of the Committee appear to think that it will. We need to take account of that in our decisions about regulation. That is why we are working with industry to understand the way in which the products and the market are developing and have established a committee which comprises industry, the public sector, charities which represent the elderly population's interests and the financial services regulator, with a remit to see how long-term care insurance and other financial products could be made more attractive to a wider audience. We are concerned at all times to operate on the basis of sound regulatory practice. This means that before introducing new regulation we are anxious to carry out appropriate consultation and assessment of the costs and benefits.

We have made that guiding principle clear. We wish to see a light touch where possible, but we want to ensure that there is consumer protection where necessary. This considered approach to consultation and assessment of costs and benefits is implicit in the Opposition's Amendments Nos. 103 and 137—which we shall discuss shortly—which would require the Treasury to consult before extending regulation. The same concerns underlie Liberal Democrat Amendment No. 279—which we have already debated—which would require draft statutory instruments to be submitted to the consumer and practitioner panels.

We do not take lightly decisions to impose new regulations, but that does not mean that we will let the need for proper consideration cause unnecessary delay. On the contrary, we have no intention of waiting until evidence of actual consumer detriment occurs before taking action.

When the Committee reports in the summer we shall have a better idea of the future size and shape of the market. We should then be able to assess in more depth the risks to vulnerable consumers; we should be able to form a judgment as to their needs in respect of information and other forms of protection; and we shall be better able to assess the products, including the complexity described, whether sales of those products fall technically within areas already subject to regulation, and the costs and benefits of further regulatory options.

I have listened with great sympathy to all noble Lords who have spoken in favour of regulation. I think that there is less of a gap than there may appear to be at first sight between the Government and those noble Lords. We shall want to mull over the debate between now and Report stage to see whether we can find a way forward that meets the concerns expressed by noble Lords today.

10.45 p.m.

Lord Northbrook

Before the Minister sits down, he mentioned dealing with these issues about mortgage regulation and long-term care by way of regulation. I do not understand why they cannot be put on the face of the Bill if he is genuinely sympathetic with the comments made on both subjects.

Lord McIntosh of Haringey

I do not know how much of the previous debate the noble Lord attended, but we have debated in considerable detail the relationship between Clause 20 and Schedule 2. We have debated the fact that Schedule 2 is an indicative list of the scope of regulation, but not a complete list. We have made clear that the Government will implement, if you like, both Clause 20 and Schedule 2 by the regulated activities order which will be introduced after Royal Assent. That will set forth on a committed basis, on a formal basis, those activities which are to be covered. But it will be done through secondary legislation rather than by amendments on the face of the Bill. It will be done that way because financial markets change over the years and we shall want to change the regulatory activities order from time to time when new products appear and new financial markets arise. We shall want to do that without having to change primary legislation by amendments to this Bill.

Lord Lipsey

I thought I was to have the rare pleasure of participating in a debate in which I could say I agreed with every single word said by noble Lords —until the noble Lord, Lord Jenkin, said that nothing would come of the Royal Commission report. My noble comrade-in-arms on that commission and myself are entirely optimistic that the sensible and carefully weighted recommendations of the minority will be accepted by the Government.

I am grateful for the strong support offered by all sides and for the many different angles from which it has come. It represents a formidable case. From the tone of the Minister's remarks—especially the tone on which he finished—it is clear that he recognises that a formidable case has been made. In view of the assurances that he has given, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 100 not moved.]

Clause 20 agreed to.

Schedule 2 [Regulated Activities]:

[Amendments Nos. 101 and 102 not moved.]

Lord Kingsland moved Amendment No. 103: Page 226, line 30. at end insert— (".—(1) The Treasury must publish a draft of any order proposed to be made under section 20(1) in the way appearing to them to be best calculated to bring it to the attention of the public. (2) The draft must he accompanied by—

1. (a) an explanation of the purpose of the proposed order; and
2. (b) notice that representations about the proposals may be made to the Treasury within a specified time.

(3) Before making the proposed order, the Treasury must publish an account in general terms of—

1. (a) the representations made to them in accordance with subparagraph (2)(b); and
2. (b) their response to them

(4) If the order made by the Treasury differs from the draft published under sub-paragraph (1) in a way which is, in the opinion of the Treasury, significant, the Treasury must (in addition to complying with sub-paragraph (3)) publish details of the difference. (5) Sub-paragraphs (1) to (4) do not apply if the Treasury consider that the delay involved in complying with them would be prejudicial to the interests of consumers.").

The noble Lord said: In moving this amendment, I should also like to speak to Amendment No. 137 which is listed in the same group.

Clause 20 provides that, An activity is a regulated activity for the purposes of this Act if it is an activity of a specified kind which is carried on by way of business and … relates to an investment of a specified kind; or … in the case of an activity of a kind which is also specified for the purposes of this paragraph, is carried on in relation to property of any kind".

Part I of Schedule 2 describes in general terms the types of activities which are likely to be considered to be regulated activities; and Part II of the schedule sets out, in general terms, the types of investments which will be considered to be investment of a specified kind. Part III of Schedule 2 gives details of the order-making power of the Treasury under Clause 20 to specify regulated activities and investments.

Throughout the Bill, the powers of the authority to make rules, codes and so on are subject to a requirement to carry out a public consultation on drafts of the rules and codes. Included, as part of the consultation procedure, is a requirement for the authority to publish an account in general terms of the representations made to it, as part of the consultation exercise, and the authority's response to those representations.

No such requirement to carry out a public consultation applies to the Treasury's order-making powers. In practice, the Treasury usually does carry out a consultation exercise. However, there is no obligation to do so; and there is no requirement on I he Treasury to give an account of the representations made to it or its response to those representations.

This amendment—and indeed Amendment No. 137 in a different context—introduces to Schedule 2 the requirement to carry out a consultation exercise. The exercise is not as onerous as would apply to the authority in relation to its rule-making powers because the authority is also required to carry out a cost-benefit analysis in relation to proposed rules. No requirement to carry out a cost-benefit analysis has been included in this amendment. I beg to move.

Lord Newby

This is a slightly broader variant of our Amendment No. 279, which deals simply with a requirement on the FSA to consult the practitioner panel and the consumer panel. The amendment takes the provision, in a more elegant form of drafting, beyond that, and gives scope for wider consultation. I have every sympathy with the mover of the amendment. I hope that not only will the Minister be sympathetic, but that he may also be able to say yes in this case.

Lord McIntosh of Haringey

These amendments seek to impose on the Treasury requirements to consult on draft regulations and to make statements about the comments it has received during the consultation. Clearly, the noble Lord, Lord Kingsland, has looked at the consultation requirements that are imposed on the authority when it exercises its delegated legislative functions and he has clearly looked on them with favour, because he seeks to reproduce them here—

Lord Kingsland

Oh.

Lord McIntosh of Haringey

I wondered whether I should get away with that.

We need to remember that the consultation arrangements imposed on the authority are there because they form part of what we sometimes refer to as the accountability package; that is to say, the Bill imposes a number of obligations on the authority to ensure that, in carrying out its functions, it does so in a way that is compatible with its general duties under Clause 1 of the Bill and to ensure that it is properly accountable. The need for the accountability package reflects the legal status of the authority—a company on which a range of statutory powers and functions are conferred by the Bill.

The same arrangements are not necessary in the case of the Treasury because the Treasury is answerable to Parliament for its actions. That is why I am here. Indeed, when it comes to the exercise by the Treasury of its powers to make delegated legislation, those powers are exercisable by statutory instrument subject to the different procedures set out in Clause 404. Any orders and regulations under the Bill, excluding commencement orders, will either be subject to annulment by either House of Parliament or subject to approval by both Houses. The procedure that applies in particular cases will depend on the nature of the statutory instrument and the power in the Bill under which it is to be made.

That leads me to two points. First, orders under Clause 20, which are the subject of Amendment No. 103, are already to be subject to an affirmative procedure when orders are first made under the power or, where such orders have the effect of bringing new types of activity within the scope of regulation, under the Bill. The second amendment, Amendment No. 137, relates to the power to make exemption orders under Clause 36. In its memorandum to the Delegated Powers and Deregulation Committee, the Treasury drew attention to the fact that it was reconsidering the procedure which should be applied to the exercise of that power. The Bill currently applies a negative procedure resolution. The committee recommended that the power should be subject to an affirmative procedure. The noble Lord, Lord Kingsland, may be aware that the Government have already indicated that they have accepted the committee's recommendation and will be bringing forward an amendment to achieve that result. My point therefore is that the two powers in question will be subject to an affirmative resolution procedure. The House will be able to debate the orders at the time they are made.

My second point—this will be apparent from what I have already said—is that the arrangements we have proposed have been approved by the Delegated Powers and Deregulation Committee. It is the case that government departments are increasingly consulted on secondary legislation and, indeed, primary legislation, such as this Bill, before it is introduced into Parliament. The whole history of the Bill is extensive—one might almost say exhaustive—consultation. The Treasury's commitment to consulting on draft legislation has already been proven by this Bill. It has also consulted, as the noble Lord, Lord Kingsland, recognised, on a number of draft regulations and orders to be made under the Bill, including a draft of the orders under Clauses 20 and 36. Where it is practicable or helpful to do so, the Treasury will continue to consult on its draft legislation.

In concluding my response, I should make one final point. The amendment seeks to impose an obligation on the Treasury in the specific case of orders under Clauses 20 and 36. That is unprecedented. I am aware of only one other piece of legislation that requires consultation by a government department before an order is made; namely, the Deregulation and Contracting Out Act 1994. But the kind of things that may be provided for in an order under that Act are very different. By their nature, orders under that Act do not define the detail of basic propositions that are set out on the face of an Act, which is the case with the powers that we are currently debating. A deregulation order under the 1994 Act can do away with vast swathes of legislation without being subject to parliamentary controls. That is certainly not the case with orders under Clauses 20 and 36. I hope that the noble Lord will not press the amendments.

Lord Kingsland

I thank the Minister for that response and I shall look carefully in Hansard at what he has said. I hope he will recognise that the fact that something has not been done in the past is not necessarily a good argument for not doing it now or in the future.

Lord McIntosh of Haringey

I had always assumed it was a Conservative principle that nothing should be done for the first time.

Lord Kingsland

Irrespective of my own party's principles, the fact that the party opposite introduced the European Convention on Human Rights and devolved power to Scotland and Wales in a very short period of time indicates that the philosophy just adumbrated by the Minister in relation to my amendment had no role whatever in the thinking of his Government in 1997 and 1998. Nevertheless, I shall read carefully the words of the Minister. Meanwhile, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

Schedule 2 agreed to.

Clauses 21 and 22 agreed to.

Clause 23 [Contravention of section 19]:

[Amendment No. 104 not moved.]

Clause 23 agreed to.

Clause 24 [Agreements made by unauthorised persons]:

Lord Kingsland moved Amendment No. 105: Page 10. line 34. leave out ("purchaser")") and insert ("counter-party")").

The noble Lord said: I now have the daunting task of moving Amendment No. 105 and speaking to Amendments Nos. 106 to 119. Amendment No. 105, together with Amendments Nos. 106 to 108, all relate to the same point, which admittedly is relatively minor. Clause 24 concerns, An agreement made by a person in the course of carrying on a regulated activity in contravention of the general prohibition".

It is provided that the agreement is unenforceable against the other party, who is defined as "the purchaser". The same definition is used in Clause 25 in relation to an agreement made with an authorised person, in consequence of something said or done by another person … in the course of a regulated activity carried on by the third party in contravention of the general prohibition". In practice, the party to the agreement, who is defined as "the purchaser", could be both the purchaser and seller of an investment. It is confusing to define a person as the purchaser when an appropriate less confusing alternative—in this case, we suggest "counter-party"—is available.

Amendments Nos. 109 to 111 all relate to Clause 26 which is concerned with agreements that are made unenforceable under Clauses 24 and 25. Under Clause 26(3) the court may allow the agreement to be enforced, or money or property paid or transferred under the agreement to be retained, if the enforcement conditions are met. The enforcement conditions set out in Clause 26(4) are, that it is just and equitable for the agreement to be enforced or (as the case may he) for the money or property paid or transferred under the agreement to be retained", and that either of the requirements of paragraph (a) or (b) is satisfied. Given that a court must be satisfied, that it is just and equitable for the agreement to be enforced or (as the case may be) for the money or property paid or transferred under the agreement to be retained", it is unnecessary to stipulate further conditions which must be satisfied. In exercising its judgment as to what is just and equitable, a court will take into account a number of factors, including the belief of the relevant party to the agreement and the state of his knowledge. Accordingly, the further enforcement conditions in Clause 26(4) are unnecessary.

I turn next to Amendment No. 113. In passing, I note that the amendment seeks to insert into Clause 27 the verb "made" after "(`the deposit-taker')" in line 8 on page l2. The reason is that the word "made" appears to have been omitted.

Lord McIntosh of Haringey

Yes. Move on!

Lord Kingsland

It is a simple drafting amendment to correct the omission and perhaps a triumph for the Opposition to hear the Minister so spontaneously, and without rising to his feet, concede the point.

Amendment No. 114 is a corresponding amendment to, I think, Amendment No. 109 in the context of agreements entered into in the course of a deposit-taking business. Again it appears unnecessary in order for an agreement to be enforceable to go beyond what a court would regard to be just and equitable in the circumstances.

On Amendment No. 115, although Clause 27 refers to the activity of deposit taking, there is no definition of what is meant by deposit taking. The amendment is intended to remedy that omission.

I turn now to Amendment No. 116. It provides a new clause after Clause 27. Clause 24 deals with agreements made by a person in the course of carrying on a regulated activity in contravention of a general prohibition; while Clause 25 deals with agreements made by an authorised person in the course of carrying on a regulated activity, not in contravention of the general prohibition but in consequence of something said or done by another person in the course or a regulated activity carried on by that person in contravention of the general prohibition.

Neither Clauses 24 nor 25 applies to deposit taking. Clause 27 relates to deposit taking and corresponds to Clause 24. However, there is no provision relating to deposit taking which corresponds to Clause 25: that is, an agreement made by an authorised person in the course of carrying on deposit taking but in consequence of something said or done by another person in the course of a regulated activity carried on by him in contravention of the general prohibition.

The Government have argued that an equivalent provision to Clause 25 is not required in the context of deposit taking because it is not proposed to make giving advice on deposits a regulated activity. The difficulty with that approach is that the question of what is a regulated activity is determined by an order made by the Treasury. If, as subsequently may be the case, it is decided that the giving of advice on deposits should be a regulated activity, the Bill will be deficient as it will not deal with the case in relation to deposits in the same way as Clause 25 deals with agreements not involving deposits.

The better approach is to include a new clause in the Bill covering the point and, if appropriate, to exclude its application by determining that the giving of advice in relation to deposits is not a regulated activity. If subsequently it is decided that the giving of advice in relation to deposits should be a regulated activity, the clause will then apply without the need for primary legislation to amend the provisions of the Bill.

Amendments Nos. 117 to 119 correspond to Amendments Nos. 109 and 110 except that Clause 28 deals with the enforceability of agreements resulting from unlawful communications. However, the same points apply as before. I beg to move. I think that I have spoken to most of the amendments of note between Amendments Nos. 105 and 119.

Lord McIntosh of Haringey

If I start by saying that I shall consider most of these amendments sympathetically and agree to Amendment No. 113, perhaps the Committee will forgive me if I do what I think is my duty: to explain our attitude to each of them. There is some point in that; it is not simply resistance.

The clauses we are dealing with broadly take forward existing provisions which confirm the normal presumption against enforcement by a person who enters into an agreement as a result of his own illegal activity or who enters into an agreement in the knowledge that the agreement results from the illegal activity of another person. However, the clauses provide some discretion for the courts to enforce where the person seeking to enforce can show that he reasonably believes that he was not acting illegally or did not know that the agreement resulted from the illegal activity of another and where the court considers enforcement just and equitable.

The purpose of this is to provide a greater degree of certainty than would be provided by the general law. The boundary of what constitutes regulated activity is inevitably quite grey in some place. However, the point has been made to us that there are bound to be hard cases and that even the degree of discretion we have allowed the courts may not provide enough leeway.

We acknowledge that. We have been considering further amendments to these clauses but thought it would be useful to consider the matter once more in debate. Broadly speaking, we agree that the principal test for the court should be whether enforcement would be just and equitable. However, unlike the amendments tabled by the noble Lord, Lord Kingsland, we think that the courts should be directed in particular to have regard to whether the person reasonably believed he was not breaching the prohibition or did not know that the agreement resulted from a breach by a third party.

The compromise would still send a strong signal to the courts that reasonable belief or knowledge were factors to be accorded particular significance but would provide the kind of pressure valve which the noble Lord, Lord Kingsland, is seeking to enable the court to respond to a hard case and, where appropriate, allow enforcement.

On that basis, I invite the noble Lord not to move Amendments Nos. 109 to 111, 114 and 117 to 119.

As regards Amendments Nos. 119A and 119B, to which the noble Lord did not speak but which are included in the group, I hope that by establishing "just and equitable" as the principal test we will meet the concerns that lay behind two of the more recent amendments, Nos. 119A and 119B. They were printed during the weekend.

Naturally, the question of whether the illegal promotion actually misled the purchaser in any way is something that the courts might consider. But we deliberately moved away from tests that focused on the content and effect of the promotion as a result of debates in another place.

The main factor we are proposing should be taken into account by the court in determining what is just and equitable is whether the provider either reasonably believed that he was not breaching the financial promotion prohibition or did not know that he was doing business as a result of an illegal promotion by others. If the provider cannot satisfy those tests, he is in a sense complicit in the offence and it is not clear why the courts should be directed towards enforcing the contract.

The same argument applies to a test which, like Amendment No. 119B, depends on what might have been envisaged when a breach of the financial promotion prohibition occurred. If the provider does not reasonably believe that he is not committing a breach, or knows that the agreement results from a breach by another, what may or may not have been envisaged by the person committing the breach should be neither here nor there.

We have dealt with the substance of Amendment No. 116A in the context of Clause 19. However, we shall take away that amendment, too, and consider it further.

As regards Amendments Nos. 105 onwards relating to "counter-party", we have reflected on the points that have been made about the potential confusion arising from the use of the term "purchaser" to denote the other party to the agreement. We accept that in some circumstances that party might be selling. To some extent, that does not matter as the term "purchaser" is just a label. However, we can see the scope for confusion. We are not convinced that simply switching to the label "counter-party" resolves the situation.

We are not against the word "counter-party"—it may be the right word—but, arguably, it is confusing for one party to be a counter-party but not the other. That is not how the term is usually used. We shall resolve the potential confusion with the amendments we bring forward at Report stage. I hope that that will enable the noble Lord to withdraw Amendment No. 105 and not move Amendments Nos. 106 to 108 and 112. As he rightly said, Amendment No. 113 corrects a minor error in the drafting and I am grateful to him for tabling that amendment.

Penultimately, I refer to Amendment No. 115, which concerns the definition of deposit-taking. I am afraid that I cannot accept this amendment, although I appreciate the intentions of proposing a definition. We have sought deliberately not to define deposit-taking. The existing provision works as it stands. The clause applies to deposit-taking which is carried on in contravention of the general prohibition. The extent to which the activity of deposit-taking comes within the scope of regulation will be defined by the regulated activity order made under Clause 20. It is that definition that is important for these purposes. Whatever the regulated activity order defines as being deposit-taking and carrying on a deposit-taking business for the purposes of the general prohibition will and should have the same meaning here.

Perhaps I may explain why it is so important to keep these concepts tied together. The existing concept of a deposit-taking business for the purpose of the Banking Act includes various exclusions and exemptions which will be carried forward into the orders that we shall be making. For example, the current definition excludes the issuing of commercial paper, subject to various conditions. We do not want to create a situation whereby commercial paper issues that were perfectly legal would nevertheless become unenforceable under this clause. It may be argued that that is why the amendment refers to the "regulated activity" of accepting deposits.

However, if that is the effect of those words, that definition merely applies whatever definition is included in the regulated activities order, which is the position that would hold anyway. In that case, what benefit is gained by including the definition here? The hidden danger is that this apparently substantive definition will create uncertainty. A separate definition which applies to this clause only is bound to create some risk of divergence between this clause and the regulated activities order. I hope that I made it clear in my response to a question from the noble Lord, Lord Northbrook, why it is being done in the form of an order, rather than on the face of the Bill.

Amendment No. 116 would introduce a new clause dealing with deposit agreements entered into as a result of illegal regulated activity by a third party. The need for third party provisions in Clauses 25 and 26 arises from the fact that advising on and arranging deals in investments are currently regulated activities and will remain so under the regulated activities order. In the case of deposits, it is only the activity of accepting deposits that is intended to be a regulated activity. As now, there will be no third party activities, such as advising or arranging, which could be carried on by a third party in contravention of the general prohibition in relation to deposits. Therefore, equivalent third party provision would be an unnecessary complication.

We accept in principle the main thrust of many of the opposition amendments in this group. Perhaps I may summarise by saying that we wish to consider further Amendments Nos. 105 to 108 and 109 to 112. We propose to accept Amendment No. 113 now and to consider Amendment No. 114. We must resist Amendments Nos. 115 and 116. We propose to consider further Amendments Nos. 116A, 117, 118 and 119, but we must resist Amendments Nos. 119A and 119B. Where we are considering further, we shall bring forward amendments on Report which will give the courts broader discretion than is the case under existing law or has been envisaged in the provisions to date.

We are grateful to noble Lords for making this debate possible and for enabling us to make what I believe will be agreed progress on these matters.

11.15 p.m.

Lord Kingsland

I am most grateful to the noble Lord for his careful response to this long line of amendments, and especially so for allowing me such a high hit rate. I am not talking about hitting the Minister; I am talking about hitting the statute book. However, I must express not only disappointment but a certain amount of surprise at what he said about Amendment No. 115; and I want to go away and think about that. It is a matter to which I may return at Report stage. I know that the Minister will understand that. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 106 not moved.]

Clause 24 agreed to.

Clause 25 [Agreements made through unauthorised persons]:

[Amendments Nos. 107 and 108 not moved.]

Clause 25 agreed to.

Clause 26 [Agreements made unenforceable section 24 or 25]:

[Amendments Nos. 109 to 112 not moved.]

Clause 26 agreed to.

Clause 27 [Deposit-taking in breach of general prohibition]:

Lord Kingsland moved Amendment No. 113: Page 12, line 8, after ("deposit-taker")") insert ("made").

On Question, amendment agreed to.

[Amendments Nos. 114 and 115 not moved.]

Clause 27, as amended, agreed to.

[Amendment No. 116 not moved.]

Clause 28 [Enforceability of agreements resulting from unlawful communications]:

[Amendments Nos. 116A to 119B not moved.]

Clause 28 agreed to

Clause 29 agreed to.

Schedule 3 [EEA Passport Rights]:

Lord McIntosh of Haringey moved Amendment No. 120: Page 230, line 49, leave out paragraph (b).

The noble Lord said: In moving this amendment:, I should like to speak also to Amendments Nos. 132 and 259. Where an application for permission is granted under Part IV, the Bill used to require the authority to issue the applicant with a certificate of authorisation and provided that certificate with evidential weight in other matters relating to the authorised person's permission under the Bill. The intention was to ensure transparency.

Practical concerns were raised about giving evidential weight to certificates of authorisation. Those concerns involve whether the certificate of authorisation takes precedence over the register and. if it were to be discontinued, whether it would have to be physically repossessed and whether that may meet a refusal or whether it could have been lost; in other words, whether it is a suitable document for these purposes.

Therefore, those provisions were removed in another place so as to enable the courts to exercise discretion as to the weight to place on the documentation issued to a person.

Consequent on those changes, Amendments Nos. 120, 132 and 259 delete provisions which refer to certificates of authorisation. The Government propose also to remove Clause 193 which deals with the reissue of certificates of authorisation. I beg to move.

On Question, amendment agreed o.

Lord McIntosh of Haringey

I beg to move that the House be now resumed.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

House adjourned at twenty four minutes past eleven o'clock.