Lords Sitting of 12 July 2001

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by Lord Bishop of Manchester): The CHAIRMAN OF COMMITTEES on the Woolsack.
Several Lords—Took the Oath.

Sand Eels
Lord Hardy of Wathasked Her Majesty's Government:
What action is being taken to reduce the taking of sand eels and similar species given the effect this appears to be exerting upon the breeding of sea birds, particularly of kittiwakes and puffins on the Yorkshire coast.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whiny): My Lords, in December 1999 the EU Fisheries Council agreed an initial closure for three years of the sand eel fishery off the north-east coast of England and the east coast of Scotland to protect seabirds and other species that rely on sand eels as a food source at particular times of the year. The impact of the closure is being carefully monitored, with reviews of its operation in 2001 and 2002. In the light of those reviews, the council will take a decision on the future of the closure. We shall then also be in a position to decide whether to press for action to safeguard other areas, including that off the Yorkshire coast.
Lord Hardy of Wath: My Lords, I am grateful for that Answer. Does my noble friend accept that an urgent decision may be needed? The present position of a number of seabirds is becoming crucial as the sand eel is their staple diet. Does my noble friend also accept that, while the situation off the Yorkshire coast causes anxiety, the latest evidence of the situation in the Orkneys and in Shetland is even more serious for the Arctic tern and the kittiwake? Given the ecological consequences, is it reasonable to assume that the harvesting of sand eels for the purpose of providing agricultural fertiliser should end as soon as possible?
Lord Whitty: My Lords, it is certainly true that since the closure of the sand eel fishery, the breeding of kittiwakes and others on that particular coast has been improved. Whether that relates directly to the closure will have to be assessed at the end of the monitoring. In regard to Scotland—I must be careful as this is a devolved responsibility—I have seen reports that distress has been caused to birds by the decline of sand eels, although there may be other reasons for the reduction in the numbers of sand eels. This year fishing took only 10 per cent of the agreed quota in that area, so there may be climatic effects as well. My colleague,
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Elliot Morley, has made absolutely clear that we want restrictions on industrial fishing for sand eels and other non-human consumption fish.
Baroness Nicol: My Lords, is not the sand eel also an important part of the diet for cod, mackerel and other fish on which we rely? Is it not odd that as late as 1999 the allowed catch for sand eels was 1 million tonnes, when so far no organisation has succeeded in reaching that limit. Can the Minister explain why the figure of 1 million tonnes was set? Was it just plucked out of the air or was it calculated and, if so, on what was it based?
Lord Whitty: My Lords, perhaps I should put this matter in context. There are a lot of sand eels around—some 650 billion I believe—therefore counting them is a little difficult. Nevertheless, the maxim um quota that was set followed two years of substantial breeding of sand eels and it may be that the quota was set at a relatively generous level. I do not believe that the fact that they have not reached the quota necessarily means that there is a significant decline in the actual number of sand eels there. In relation to cod, sand eels form about 4 per cent of their diet, but it is unlikely that the decline in cod catches and the cod population is related to the availability of sand eels. I believe that other factors are involved, but we need to keep an eye on the matter.
Baroness Strange: My Lords, is the Minister aware that sand eels form the staple diet of young seabirds and that many young seabirds of rare species are dying of starvation because they cannot get enough sand eels?
Lord Whitty: My Lords, that was one of the reasons for the closure of the sand eel fishery in Northumbria and off the coast of Scotland up to the Grampian area. It appears that there has been some recovery in breeding of seabirds in that area. We do not have full monitoring on the Yorkshire coast and further down the coast to draw that causal connection. Within the Shetlands it appears that any change in the sand eel population has been due, not to fishing, but to other factors. I repeat that we are concerned that this form of industrial fishing does not destroy the sand eel population and thereby have an effect on the seabird populations right up the east coast.
Lord Shutt of Greetland: My Lords, I am delighted to learn from the Minister of this great quantity of sand eels that he has been able to count. The expectations of the catch is 60 per cent of a million at the present time and if the Danes cannot catch the sand eels at the moment what chance do the birds have of getting theirs? Does he believe that the number of sand eels in the quota should be substantially reduced?
Lord Whitty: My Lords, that is exactly the reason that in 1999 we raised the matter with the Fisheries Council and achieved agreement to extend the closure of those fields to EU waters. We have had good

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discussions with the Danish authorities since then. As I have said, our aim is to restrict the industrial fishing of these creatures, but the fact that there has not been a full take-up of the quota does not necessarily mean that the number of sand eels up the coast has declined. I also understand that only some of the sand eels—the younger ones—are actually food for the young birds. So one has to distinguish between sand eels as well as count them!

Police Officers: Retirement
3.8 p.m.
Lord Janner of Braunstoneasked Her Majesty's Government:
Whether they will take steps to encourage police officers, where appropriate, to delay their retirement.
The Minister of State, Home Office (Lord Rooker): My Lords, we are considering how suitable officers may be encouraged to delay their retirement as part of our plans to boost police numbers to record levels. That will be discussed as part of the police reform process. The introduction of financial incentives for officers to delay retirement would be one possibility. However, the majority of police officers are entitled to retire with an immediate pension after completing 30 years of service and they can then obtain alternative employment. The re-employment of recently retired officers, therefore, is another possible approach.
Lord Janner of Braunstone: My Lords, does my noble friend accept that the fact that most police officers who stay on after 30 years' service earn scarcely more than those who retire is a grotesque anomaly? Surely at a time when there is a grave shortage of police officers in most parts of the country, it is ludicrous to provide incentives to people to retire early, especially when, in many cases, they are the most senior, experienced and useful officers who would wish to stay. Please will Her Majesty's Government have another look at this matter and consider providing incentives to encourage people to stay on after 30 years without penalising those who want to exercise their rights?
Lord Rooker: My Lords, yes, we will look at those issues as part of the review. Such matters are not always straightforward and there are many detailed rules, for example, about retiring from a job with an occupational pension and recommencing the following week. The Inland Revenue is not happy about such an arrangement.
Nevertheless, my noble friend raises a valid point and it will be included in our approach and as part of the review.
Lord Renton: My Lords, in reaching a decision on the matter, will the Government bear in mind that
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some people are finished at 50 while a good many people are shining at 70? The Government should take full advantage of the experience of those who are carrying on efficiently.
Lord Rooker: My Lords, the noble Lord is a shining example of that because he has 32 years start on me and I am just 60! However, he is right. In this country there are 3 million economically inactive people between the age of 50 and retirement age. It is a wasted resource, and in many ways a combination of the complexities of benefit and tax systems has caused disincentives. Winning the Generation Game, a report published about two years ago by the Performance and Innovation Unit, was designed specifically to address the issue. It contained some 75 recommendations. People should be able to retire early if they want to but there should not be compulsory retirement where people are forced out of employment.
Lord Burnham: My Lords, can the Minister assure the House that if police officers want to continue beyond their 30 years' service they will be allowed to do so keeping their current rank, conditions and pay?
Lord Rooker: My Lords, we have no change to make to that but, provided that age limits are not breached, there is provision to carry on for a further five years after the initial 30 years' service, subject to the agreement of the chief constable and the conditions prevailing in the force. Therefore, retirement is not necessarily automatic; it depends on certain conditions. A person joining the police force at 18½, will have served 30 years at 48½ years and it is then up to him to decide what to do. If he wants to carry on he can do so as a police constable or sergeant until the age of 55, provided he has the agreement of the chief constable. However, there are no proposals for terms and conditions to deteriorate as suggested by the noble Lord.
Lord Mackenzie of Framwellgate: My Lords, does my noble friend agree that the police service is probably the only public service where the customer is always wrong? Does he also agree that morale is the key to this issue? As the police service deals with all the difficulties in society, it would help if from time to time bodies such as this House occasionally supported it—and I know that your Lordships often do.
In any organisation, good leadership is critical to high morale and the chief constables should lead by example. It may well be that there would be fewer differences in performance between forces if there were fewer chief constables.
Lord Rooker: My Lords, I shall kick that one into touch! I cannot respond to my noble friend's question but in the light of our proposals for police reform I am sure that we shall have plenty of opportunities to discuss these issues in the coming Session.
Lord McNally: My Lords, further to the point made by the noble Lord, Lord Renton, does the Minister

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recall that the late Jack Warner was well over the age of 80 when he hung up his truncheon as Dixon of Dock Green? As regards police retirement, there is a wide variety of ages and a wide variety of reasons is given for early retirement, which is extremely expensive. Is the Home Office carrying out a study into the patterns of retirement from force to force and the reasons why policemen are leaving early?
Lord Rooker: My Lords, I take on board what the noble Lord said. During the past three years, the wastage measured in the police service has been only 4.7 per cent, 4.7 per cent and 4.8 per cent. That compares with the survey conducted last year by the Institute of Personnel & Development of all employees of 18 per cent. Therefore, in terms of wastage the police service has a good record. On the other hand, as regards retirement in forces in England and Wales in 1999–2000, some 3,929 officers from all ranks retired. Of those, 69 per cent retired ordinarily and 31 per cent retired for medical reasons. Five years previously 46 per cent retired for medical reasons. Therefore in the past five years there has been a decline in the number of officers retiring for medical reasons and I believe that the problem is being tackled.
Lord Cope of Berkeley: My Lords, does the Minister agree with the first part of his noble friend's question: that morale is most important in the decision to take early retirement, sick leave and so forth? As one of the causes of low morale is the weight of bureaucracy on the police force will the Government tackle that?
Lord Rooker: My Lords, one of the reasons for having more civilian and technological support in the police force in recent years is to lift that weight of bureaucracy. As a Member of another place, I did a night shift with the local station and saw what happened when an arrest was made. The time spent on paperwork is horrendous and if you are not careful you are locked into the station for the rest of the night. But that is why we have a programme of civilianisation and it must be supported. It may be that former police officers can have a role in the civilianisation of the force because they have an expertise which can be of considerable assistance to their colleagues. However, low morale caused by bureaucracy is a bane of every walk of life and we must tackle it, attack it and reduce it.

EU Enlargement: Irish Referendum
3.17 p.m.
Lord Lamont of Lerwickasked Her Majesty's Government:
How they envisage the process of enlargement of the European Union can proceed after the rejection of the Nice Treaty in the Irish referendum.
The Minister for Trade (Baroness Symons of Vernham Dean): My Lords, the Nice Treaty is essential for enlargement to be a success. All member states,
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including Ireland, have agreed that the accession negotiations should proceed and that the Nice ratification process will continue so that the Union is in a position to welcome new member states from the end of 2002.
Member states have expressed their readiness to help the Irish Government to find a way forward, taking into account the concerns reflected by the Irish referendum result, without reopening the text of the Nice Treaty.
Lord Lamont of Lerwick: My Lords, I thank the Minister for that Answer and agree that enlargement of the EU is highly desirable. However, will she confirm that on 21st June, in an interview in the Irish Times, Mr Prodi said that even if Nice fell by the wayside there was no reason that enlargement should be delayed or not take place? Is not Mr Prodi right in that, while it might require dropping what in the view of some people are desirable aspects of the Nice Treaty, alterations to voting in the Council of Ministers could be made by amendment to the treaties of accession, thus amending the basic treaties? Is not Mr Prodi's first position correct?
Baroness Symons of Vernham Dean: My Lords, I believe that the noble Lord knows that Mr Prodi has modified his position from what was then said. The noble Lord is right and I phrased the opening Answer very carefully: I said that it was essential for enlargement to be a success. Of course one could have a succession of individual accession treaties, but the point is that the Nice Treaty does much more than address accession as an issue by itself. It creates the circumstances in which accession will be a success by the way in which it deals with some of the institutional arguments and the flexibilities which will be needed with what, after all, will be the largest number of countries joining. Therefore, it is important to remember that, in order for the process to be a success—and there is no point in doing it unless it is—the Nice Treaty must go ahead.
Lord Barnett: My Lords, on this occasion the noble Lord, Lord Lamont, raises a very serious financial matter, as opposed to the Irish question. With or without ratification, will not the Government have to consider in the IGC in 2004 whether to allow the admission of any member state without major changes in the financial provisions, such as the CAP and other matters? Is my noble friend able to give an assurance that the Government will not agree to the admission of any single member without major changes of that kind?
Baroness Symons of Vernham Dean: My Lords, noble Lords will have an opportunity fully to debate this matter when they consider the Treaty of Nice. The detailed points on the treaty that my noble friend raises, in particular the way in which the financial institutions work and the all-important issues surrounding the common agricultural policy, will be properly debated at that time. More generally, the

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treaty was published on 20th March this year. It was perfectly clear that the Government supported the treaty, and the British people knew that when they voted in the election. We shall go ahead on that basis.
Baroness Williams of Crosby: My Lords, does the Minister agree that one of the factors in the Irish referendum was concern about Irish neutrality and that the European Council is looking at the possibility of a protocol or declaration to deal with that issue? Further, am I right to conclude that, if a referendum is to be held, it is very useful to have a period of information and discussion prior to and not after it?
Baroness Symons of Vernham Dean: My Lords, I believe we all agree that when a referendum is held on whatever subject it is wise to ensure that the issues are properly aired. A number of reasons are put forward for the result of the Irish referendum. The particular issue that is put forward depends very much on the interlocutor to whom one speaks. The Irish Government supported the position reached at Gothenburg that the text of the treaty should not be changed and made it clear to partners that they would like a period of reflection before they themselves brought forward proposals for others to consider in a way which we hope will be constructive.
The Earl of Onslow: My Lords, can the noble Baroness confirm that the Treaty of Nice did not mention the common agricultural policy and that the CAP is not up for discussion until 2006? Can the Minister also confirm that a committee of this House under the chairmanship of Lord Middleton went into the accession of eastern European countries and its effect on the common agricultural policy in great detail and that its members, whether xenophiles or xenophobes, came to the unanimous decision that such accession was totally impossible without a complete change of the CAP? Further, is it true that if there is a referendum which is answered in the negative, one is asked to hold another one, but if there is a referendum which is answered in the affirmative that is the end of the matter?
Baroness Symons of Vernham Dean: My Lords, if he is sufficiently interested I suggest that the noble Earl raises the last question with the Irish Government. No doubt they will be very interested in what he says and treat it appropriately. I do not believe that there is any difference between the two sides of the House on the desirability of the reform of the common agricultural policy. Many times I and other colleagues, as well as noble Lords on the other side, have stood at the Dispatch Box and referred to the desirability of reform, but whether that is absolutely fundamental to accession is a quite different question. That is a matter of judgment to which your Lordships will be able to give full vent when you have the pleasure of debating the Bill before the House.
Lord Bruce of Donington: My Lords, does my noble friend agree that much of the existing difficulty about
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the various accession treaties, which will be exacerbated, is due to the widespread uncertainty as to the full extent of the acquis communautaire and the extent to which the Treaty of Nice is likely to affect it fundamentally, bearing in mind that a very large number of Ministers have not even read the treaty?
Baroness Symons of Vernham Dean: My Lords, I am sure that all noble Lords will have read the treaty in detail, and a great deal more besides, by the time they come to debate it in your Lordships' House. My noble friend is quite right that there will be a very wide variety of opinions on the issue of the acquis communautaire. I am sure that my noble friend will contribute to the debate on that treaty to the fullest extent, and I hope that many other noble Lords who take such an interest in the matter will do likewise.

National Health Service: Have Your Say
3.25 p.m.
Baroness Youngasked Her Majesty's Government:
What purpose is intended to be achieved by the recently launched National Health Service advertising campaign, Have Your Say, aimed at 10 to 16 year-olds.
The Parliamentary Under-Secretary of State, Department of Health (Lord Hunt of Kings Heath): My Lords, the campaign aims to raise awareness among young people, parents and health professionals that young people are entitled to have their say in relation to their healthcare. This may include seeing a health professional unaccompanied if that is their wish. The campaign encourages young people to adopt a responsible approach to their healthcare needs.
Baroness Young: My Lords, I thank the Minister for that reply. Is the noble Lord concerned that in most cases this activity will take place behind the backs of parents who will not know what their children are doing? Can he explain how that squares with a reply given by the noble and learned Lord the Lord Chancellor to the noble Lord, Lord Quirk, to a Question for Written Answer? In that Written Answer the Lord Chancellor said that the Children Act 1989 was based on the Law Commission report of 1988 which in turn said that the law of parental responsibility included,
"to provide consent for medical treatment".—[Official Report, 10/7/01; col. WA 70.]
Lord Hunt of Kings Heath: My Lords, with reference to the information to be made available to young people if they access the website that is referred to in the poster campaign, the matter arose as a result of work done by nurses in London. Those nurses worked with young people in a variety of healthcare settings in particular with those who had long-term illness. They found that sometimes it was difficult for them to talk to professionals about health issues. I am sure that the information contained on the website will be

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invaluable to young people. On the more general issue raised by the noble Baroness, the aim of the campaign is to make sure that any competent young person, regardless of age, can seek medical advice and give valid consent to treatment. That is exactly what is stated in the guidance paper produced in 1994 by several professional bodies, including the British Medical Association. I also refer the noble Baroness to the Gillick ruling which established the current position that doctors and other health professionals are justified in giving advice and treatment to those under 16 without parental knowledge or consent provided certain conditions are met. One fully accepts that one wishes to involve parents as much as possible, but one must also face up to the fact that many young people do not always find it easy to do so. I believe that in those circumstances it is better that they still have access to professional advice.
Baroness Gardner of Parkes: My Lords, can the Minister inform the House whether it is now possible to treat a dental patient under the age of 16 without requiring the parent or guardian to sign a form as has always been the practice? Has that rule been changed?
Lord Hunt of Kings Heath: My Lords, I understand that the position as I have just stated it applies to doctors and other healthcare professionals.
Baroness Walmsley: My Lords, does the Minister agree that the main objective of the campaign is to encourage young people who may not otherwise do so to come forward for medical advice from professionals? Does the noble Lord also agree it is very important that young people believe that they will be understood and their own personal concerns taken into account and that, if so, they are more likely to cooperate and take the professional advice that they are given?
Lord Hunt of Kings Heath: My Lords, I agree with the noble Baroness. The website to which people are referred as a result of the poster campaign was set up and is run by two practising general practitioners who specialise in adolescent healthcare. I have looked at some of the information that is available on the website. It is perfectly sensible and would be very applicable to young people who quite rightly seek information. Compared with other information obtainable on the Internet, it is very wholesome and sensible stuff.
Baroness Andrews: My Lords, since the two groups in society which make the most intensive use of the health service are young people and elderly people and as they are the people who are most likely to be neglected in consultation processes, does the Minister agree that when we are seeking to improve the health service we should make as many opportunities as possible available to them in order to contribute to the future of a service which affects them so deeply?
Lord Hunt of Kings Heath: My Lords, I very much agree with my noble friend. In some parts of the
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country efforts are made by local statutory bodies to involve young people in discussions about health and other policy issues. For instance, the young people's parliament in Birmingham has a specific role and remit to pick up young people's concerns and opinions about health. They can then be fed back to the local health service. We should certainly encourage that.
Baroness Carnegy of Lour: My Lords, with reference to the Question of my noble friend Lady Young and the quotation from the noble and learned Lord, the Lord Chancellor, is the Minister saying that the noble and learned Lord was misinformed?
Lord Hunt of Kings Heath: No, my Lords. My noble and learned friend put forward a general rule. He is not misinformed. But I have stated the position following the Gillick ruling.
The Earl of Listowel: My Lords, has there been a decline in teenage pregnancy rates? If so, can the Minister say to what he ascribes that decline?
Lord Hunt of Kings Heath: My Lords, it is well known that the teenage pregnancy rate in this country is very high. Live birth rates per 1,000 women aged 15 to 19 in 1996 were 22.9 per cent in the UK. While the US rate is double that figure, other European companies are doing much better; for instance, the Netherlands rate is 4.1 per cent. However, I understand that the latest figures that we have for 1999, compared with 1998, show a reduction in under-18s of 4 per cent and under-16s of 7 per cent. That is encouraging.
We clearly must hope that the trend continues. I believe that the way to achieve that is by a balanced approach; by making information available to young people as much as possible; by having these media campaigns; and by having local strategies. But clearly there is an awfully long way to go before we can get these teenage pregnancy rates down to any level that could be called acceptable.

Office of Communications Bill [H.L.]
3.32 p.m.
Lord Carter: My Lords, on behalf of my noble friend Lady Blackstone, I beg to introduce a Bill to establish a body corporate to be known as the Office of Communications; and to confer functions in relation to proposals about the regulation of communications on that body, on certain existing regulators and on the Secretary of State. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(Lord Carter.)
On Question, Bill read a first time, and to be printed.

Greenham and Crookham Commons Bill
The Chairman of Committees (Lord Tordoff): My Lords, I beg to move the first Motion standing in my name on the Order Paper.
Moved, That this House do agree with the orders made by the Commons set out in their message of 10th July.—(The Chairman of Committees.)
On Question, Motion agreed to; and it was ordered that a message be sent to the Commons to acquaint them therewith.

Animals in Scientific Procedures
The Chairman of Committees: My Lords, I beg to move the second Motion standing in my name on the Order Paper. At the request of the Select Committee I feel that I should say a word or two about this matter.
This is an unusual Motion. The Select Committee on Animals in Scientific Procedures was appointed by the House in March. Some witnesses have been called before the Committee; for example, those who work for companies involved in animal experiments. They have expressed their concern at being filmed while giving evidence. They are worried in particular that their photographs could be shown on the world-wide web. Your Lordships will be aware that already there have been attacks on people working in this area. Under the rules of the House, normally broadcasters have the right to film any public meeting of Select Committees. The only way to exclude cameras is to hold the meetings in private.
The Select Committee does not wish to keep out members of the public, nor to prevent sound broadcasting of its proceedings. It simply wishes to have the power to prevent the televising of a meeting that might endanger witnesses. The Motion before the House will give the Committee that power. As the Motion makes clear, this applies only to this committee and will not affect the broadcasting of other committees of your Lordships' House.
Moved, That the Select Committee on Animals in Scientific Procedures shall have power to refuse to allow the televising of proceedings to which strangers are admitted.—(The Chairman of Committees.)
On Question, Motion agreed to.

Monetary Policy and Economic Affairs
3.35 p.m.
Lord Pestonrose to move, That this House takes note of the Report of the Select Committee on the Monetary Policy Committee of the Bank of England (Session 2000–2001, HL Paper 34) and the First Report of the Select Committee on Economic Affairs (Session 2001–02, HL Paper 5).
The noble Lord said: My Lords, in moving this Motion I am introducing a debate on the last report of your Lordships' committee, the Monetary Policy
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Committee of the Bank of England, and also, as a technical matter, the first report of your Lordships' new Select Committee on Economic Affairs. On behalf of the committee I wish to thank our Clerks, Simon Burton and Christine Salmon and also our economic adviser, Michael Wickens, who is professor of economics at the University of York.
Perhaps I may also say how much I welcome to our deliberations the noble Lord, Lord Sheldon. The noble Lord was an immensely distinguished figure in the other place. I am confident that he will be equally distinguished in your Lordships' House.
Having made those nice remarks, perhaps I may now be allowed to revert to my normal acerbic self. I shall draw your Lordships' attention to some of the recommendations in our main report. I shall then use that as a basis for some broader remarks on the economy and on economic policy.
On the recommendations I have to say with great regret how disappointed I am with the Treasury's response. It is not that we expect it to agree with us on all our recommendations, or indeed on any of them, but we do expect it to engage with us at a serious level. Its response simply does not measure up to that. Without being too cynical, it is hard to believe that its response took more than one hour's work on the part of some junior official.
Thus, we said that the Chancellor of the Exchequer should consider lowering the inflation target and then report his conclusions to both Houses. The Treasury response simply ignored that and gave us four quite vacuous sentences that are an insult to your Lordships' intelligence. I repeat, I am not saying that the Treasury should agree with us; I am saying that it might flatter us a little by offering some serious arguments.
Similarly, we emphasised the so-called "trade-off" between inflation and unemployment and the speed with which the Monetary Policy Committee should respond and offset an adverse shock. Again, no economics argument was offered to us by way of comment and reply.
Having praised the Government and the Bank of England for its openness on monetary policy—a subject to which I shall return in a few moments—we raised the question of the transparency of fiscal policy and the need for stronger scrutiny in that area, especially with regard to the momentary and fiscal balance. Here, too, having claimed that it is committed to transparency, the Treasury did not take the point of the contrast between the remarkable openness of the Bank of England—I cannot emphasise too strongly how remarkably open it has become—and the relative lack of openness with regard to fiscal policy.
On appointment to the Monetary Policy Committee we continued with our position that your Lordships do not wish to get informed with matters such as confirmation hearings of individual members, which the other place for reasons best known to itself feel that it is able to judge. We did, however, recommend that consideration be given to the involvement of the Commission for Public Appointments in the prior scrutiny of MPC members. That was largely ignored,

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except that the Treasury reiterated its point that these appointments are specially market sensitive. Your Lordships' committee was quite unconvinced by the Treasury's argument and looks forward one day to the Treasury demonstrating something other than an ad hoc view of that kind.
I turn to the Bank of England. A most important recommendation made by the committee was that it should undertake a review of methods of forecasting—notably of inflation. Our concern was that we should be at the forefront and should be fully cognisant of what is ca fled state of the art forecasting. I interpret the Bank of England's response as a positive one, but I am not yet in a position to report to the House that the review has been set in hand. Given the excellence of the earlier Kohn report on the MPC itself, I would expect such a review of methods of forecasting, once it takes place, to be a major contribution to public policy in this area. The next time the House debates economic matters I hope to be able to report on precisely what the Bank of England is doing.
I turn to our recommendation on the voting procedure of the Monetary Policy Committee. I continue to believe, as does the committee, that voting should be simultaneous, with everyone voting at the same time, rather than sequential, with the late voters knowing what those who spoke earlier have said they want to do with interest rates. By the end, the votes do not matter any more as a majority has already been achieved. On any rational grounds, simultaneous voting is the correct way and sequential voting is wrong. That does not mean that members of the MPC would not wish to take into account each other's views on what the relevant policy should be. But that is a matter of the discussion mechanism before the vote and should not be part of the voting procedure.
An interesting point was made to us that simultaneous voting might once in a while leave the governor in the minority. I do not regard that as a sign of weakness or as undermining the governor's authority. Quite the contrary, it is a sign of strength, both of the MPC and of the governor, that differences of view can be coped with and that any individual person can be in a minority. Perhaps I may make a personal remark. In my committee, we never vote. We always come to an agreement. But it sometimes happens that I am in the minority and the committee decides something with which I disagree. If one is part of a committee, one accepts that. That does not mean I remotely accept that I am wrong when I am in the minority. simply accept that that is how the world has to behave if we are to go ahead in terms of committee behaviour. I certainly hope that one day we shall see the governor in a minority simply to show what a powerful figure the governor is rather than the reverse.
I turn to the question of accountability. It was recognised—certainly as far back as the debates in the House on the 1998 Act—that the House would have a part to play in the process of scrutiny. Indeed, my noble friend Lord Barnett and I, even though we were on the government side, were constantly pressing the Government to recognise that, and they accepted it. The House has done so through your Lordships Select
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Committee on the Bank of England Monetary Policy Committee and I can assure the House that the new Economic Affairs Committee will from to time continue to scrutinise the Monetary Policy Committee. However, I was disappointed recently to see that a House of Commons research paper on the MPC makes no mention of our first major report on the MPC or of the report we are currently debating. Perhaps Members of the other place are so well versed in economics and economic policy that they have nothing to learn from us. But I doubt it.
I turn briefly to the economy more generally. The Economic Affairs Committee is currently looking at the global economy. One day I hope that we shall produce a report that your Lordships will be interested to debate. What I wish to stress at the moment—this is why the global remark is relevant—is that we have to recognise the extent to which an economy like ours. which is so open, is subject to external economic forces. We do not live in a world of our own. 'We live in a very large world of which we are an important but fairly small part.
Your Lordships' committee has said—I think that most people now agree—that the MPC has done remarkably well, but we have to recognise that the MPC cannot insulate us from world economic shocks. If there is a world downturn, there will be a UK downturn. That leads to the conclusion that good economic policy can dampen the cycle but it certainly cannot remove it.
I, for one, would like to see full employment given as prominent a role in economic policy as low inflation. Noble Lords are aware of my view that young men who have never had jobs, let alone decent jobs, or are unemployed for long periods are prey to those who lead them into crime, rioting and the like. I am not saying that anti-social behaviour is fully explained by economic forces, but I am insisting that those who do not appreciate that unemployment, low incomes or, more significantly, no incomes have serious adverse social effects are hopelessly naive.
Lastly, I return to transparency and the related matter of democratic scrutiny. Your Lordships' committee continues to complement the Monetary Policy Committee of the Bank of England. That stands in sharp contrast to the European Central Bank. Noble Lords know that, on balance, I favour joining the euro. But the more I reflect on the lack of transparency of the European Central Bank and its failure to be subjected properly to external scrutiny, the more worried I am. I have always been doubtful about the macro-economic foundations of the European Central Bank's policy making. It has seemed to me to be rather naive and primitive compared with the sophisticated approach of the MPC. At least as serious as that is the need to devise a better means of scrutinising what it does—both by the European Parliament and, as I have said before, by the Parliaments of the member countries. I suppose that some of the blame lies with us because we did not join in the first place. But that does not make me any the happier.

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However, I must not end on such a negative note. The Monetary Policy Committee of the Bank of England has performed remarkably well and is to be congratulated on its performance, from its inception up to the present day.
Moved, That this House takes note of the Report of the Select Committee on the Monetary Policy Committee of the Bank of England (Session 2000–2001, HL Paper 34) and the First Report of the Select Committee on Economic Affairs (Session 2001–02, HL Paper 5).—(Lord Peston.)
3.47 p.m.
Lord Saatchi: My Lords, I welcome the opportunity to debate this second report of the Select Committee on the Monetary Policy Committee. I also thank its chairman, the noble Lord, Lord Peston, and all the distinguished members of the committee for this second valuable examination of such a vital part of our financial system. It is also a particular pleasure to welcome the first report of the House's new Select Committee on Economic Affairs, again expertly chaired by the noble Lord, Lord Peston. I anticipate with pleasure the maiden speech of the noble Lord, Lord Sheldon, who will add further to the expertise in your Lordships' House on economic affairs.
The creation of the committee is a break-through for the House. I pay tribute to the noble Lords, Lord Peston and Lord Barnett, for seeing it through to fruition. I hope that one fine day it may lead on to further advances by your Lordships' House in the area of economic scrutiny of the government of the day. I look forward to coming back to that issue in the next Session.
The Select Committee system is one of the most respected aspects of our parliamentary system. The depth and precise style of the reports we are considering today confirm why that is so. So is it not deeply disappointing to all sides of the House to hear the views of the noble Lord, Lord Peston, on the Government's response to the committee's recommendations? It is baffling. I look forward later to hearing the Minister tell us why the Government have been so very negative in their response to the committee's recommendations.
It is vital that the committee continues to scrutinise the structure and performance of the MPC, an institution whose verdicts on economic policy each month are awaited with trepidation throughout the country. I believe that in 1781 the then Prime Minister, Lord North, who at the time was arguing for the renewal of the Bank of England's Charter, said that the Bank was,
"from long habit and the usage of many years … a part of the Constitution".
Echoing what was said by the noble Lord, Lord Peston, I hope that the committee will continue for many years to come. Similarly, so should the MPC, which is an excellent creation to which we add our congratulations on its efforts.
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Having said that, however, two problems can be seen on the horizon which give noble Lords on these Benches cause for concern as regards the happy arrangements we now have in place. First, I refer to the relationship between fiscal and monetary policy, a point on which the noble Lord, Lord Peston, touched in his remarks when referring to a lack of openness about fiscal policy; and the potential risk to what we now have in place caused by the Government's taxation and spending plans as revealed in the Red Book. The second is the implication for the MPC and its workings of the pressure coming from many quarters in the country to join the euro at a rate which, it is said, will help businesses that are exporting to the euro-zone. Perhaps I may deal with each of those two points in turn.
Paragraph 127 of the report contains what I think is an interesting revelation on the first of the issues; that is, the relationship with fiscal policy. The committee stated that:
"We are surprised that the Chancellor and the Governor do not discuss the balance between fiscal and monetary policy".
In paragraph 2 the report sees a strong argument for openness in, and scrutiny of, fiscal policy, as there is for monetary policy. How effectively can the Bank and the Treasury liaise on monetary and fiscal policies when we are told that the Chancellor and the Governor do not discuss them? Does the MPC rely on the Government's public statements, like the rest of us? The Government's answer, contained in paragraph 4 of their responses to the first report, is that,
"The Government is committed to openness and transparency in fiscal policy".
However, we have just heard the noble Lord, Lord Peston, state that the Government's responses to this expert report could not possibly have taken more than an hour's work. He described them as an,
"insult to your Lordships' intelligence".
When the Government say that they are committed to openness and transparency, was it not also an insult to the intelligence of the editor of the Financial Times who, on this subject, stated that the Government had,
"reduced Budget transparency to a new low. Important tax changes have been omitted from the speech"?
The editor refers here to the Budget Statement.
"Statistics have rarely been quoted on a consistent basis. The Budget documentation has been filled with political point-scoring rather than factual analysis. There has been a continued tendency to classify the collection of revenue as anything other than taxation".
That is a powerful combination of opinion from the noble Lord, Lord Peston, and the editor of the Financial Times. They do not think that the Government have shown openness and transparency on fiscal matters.
Can the Minister tell the House when the MPC was made aware that in April and May of this year government spending would rise by a staggering yearly rate of 12.5 per cent? Will the Minister also explain how the MPC first found out that the Government, having first repaid debts of £34 billion—and received

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applause for doing so—would then promptly borrow it again over the next four years? In the Red Book, the Government say that their solution to the gap between income and expenditure is to borrow £12 billion a year by the end of this Parliament. Has the Minister held discussions with the MPC about the consequences of such a deficit? Would it not be better if the Monetary Policy Committee could speak out, if it believes that fiscal and monetary policy are at variance, and perhaps then declare publicly whether its decisions might have been different, given a different fiscal stance?
Those remarks cover the first issues concerning the relationship between fiscal and monetary policy to which the noble Lord, Lord Peston, referred. Perhaps I may turn now to another subject on which he touched; namely, the euro. A sharp weakening of the pound is being quietly cheered on by all those who want this country to join the euro. But wisely, in paragraph 49 of this report, the committee has issued a warning which states that:
"We note the possibility of serious effects should the markets begin to anticipate that the UK will join the euro".
A decision to join the euro inevitably would mean that the MPC would need to pursue a more proactive monetary policy because no one seems to want to join the euro at today's exchange rate.
That is only the beginning of the problems for the MPC which would be created by a move towards the euro. If we start moving towards the euro, this current period—on which the noble Lord, Lord Peston, has correctly congratulated the MPC on sustaining a period of stability—of relatively independent monetary management under the MPC regime, which we all praise, would cease to be a part of what Lord North called the "usage of many years".
I should like to consider some aspects of the new regime which we shall be getting into. First, again following on from what was said by the chairman of the committee, the transparency in which the MPC operates is renowned. Everyone considers that to be excellent. But, as the noble Lord, Lord Peston, said in terms, the MPC's practices stand in stark contrast to the opaque workings of the ECB. Perhaps noble Lords would consider the following exchange of correspondence between my researcher in this House and her opposite number in Europe. I believe that it is quite revealing. The Minister should find this particularly amusing:
"Hi, Samantha, I hope you're OK. I have a really quick query. How long after the ECB meet to discuss euro-zone interest rates are the minutes of the meetings published? Many thanks, Alex".
The reply reads as follows:
"Hi, Alex. Sorry I didn't get the chance to get back to you yesterday. Hope all is well. The ECB does not publish any minutes of meetings at all as they are 'confidential'. All you can get is a two-paragraph statement on the rate that appears on their internet site—www.ecb.int. Hopeless, isn't it? Samantha".
I offer a further illustration. On 10th May, the ECB stated that it was cutting interest rates because low growth prospects meant lower inflation. The ECB said that future prospects,
"no longer pose a risk to price stability".
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But now we know that in May—the month in which that statement was made—inflation in the euro-zone rose from 2.9 per cent to 3.4 per cent, its highest level since the euro's launch in January 1999. By what reasoning did the ECB get it so wrong? This we shall never know and is the reason why many people, led by the noble Lord, Lord Peston, are becoming worried about replacing the MPC with the ECB.
By contrast, the Bank of England publishes the minutes and voting records from its rate setting meetings. The Bank of England Act 1998 laid down that minutes of the MPC meetings would be published within six weeks. The MPC then voluntarily reduced that period to two weeks. Furthermore, the United States Federal Reserve Open Market Committee publishes the minutes of each meeting before the next regularly scheduled meeting. However, that does not apply to the ECB.
Perhaps I may cite another worrying issue, on which I can offer a further exchange of correspondence, which will be new to the Minister. This is an e-mail to James from Alex:
"A question, James. Will Eddie George be our man in Frankfurt? Alex".
The reply to Alex stated that:
"The answer to this is yes".
James then goes on to say that:
"Article 10 of the Protocol on the Statute of the European system of central banks and of the European Central Bank states that the Governing Council shall comprise the members of the Executive Board of the ECB and the Governors of the national banks. Together they all vote (by simple majority) on the interest rate policy. In the event of a tie the president has a casting vote. The council is required to meet at least 10 times a year".
What that means is that, instead of the MPC regime—I am sure that most noble Lords will praise it in the course of their remarks—we shall get into a situation in which we shall have no more influence on euro-zone monetary policy than the governor of the Luxembourg central bank, even though our economy is much bigger.
If we take these moves towards the euro, the Bank of England's independence and the MPC's role would end. It would become the London branch of the ECB. Control over interest rate decisions to suit not only Britain but the whole of the European Union would pass to the European Central Bank and our Governor's vote would become only one out of 17 votes. I find that extremely worrying.
It will lead to a tangled web at the centre of the future of the MPC. Multinational companies, many of whom we know are pressing the Government to join the euro, are saying that the exchange rate must fall below our current rate of 3.15 to 3.20 deutschmarks. All of them say that the present rate of sterling is "unsustainable" and "uncompetitive" and would cause another ERM débâcle if we joined at this rate. Noble Lords should remember that, when we joined the ERM, it was set at the fateful rate of 2.95 deutschmarks. We all remember what happened. So they say that the pound must be cut. Sir Edward

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George says that he hears suggestions from such businessmen varying from 2.40 deutschmarks to 2.90 deutschmarks.
This implies, on average, a 12 per cent fall in the pound versus the euro. I am told by those who well know about these things that that kind of devaluation will add 1.5 per cent to UK inflation, taking it to over 4 per cent, way above the Bank of England's target of 2.5 per cent.
We should remember that inflation in the UK is already at 2.4 per cent, so we are already on the Bank of England's limit. Any further rise in inflation caused by a devaluation of the pound to get us into the euro at the right rate, will trigger interest rate rises. That would lead to a wider gap in interest rates between the UK and the euro zone, less convergence and, probably, a higher pound—the exact opposite of what the devaluers in industry want.
It is no wonder that the Chief Economic Adviser to the Treasury said that the inflation target and price stability were both at risk. These are the very essence of the MPC's work. Is not the Government allowing an exchange rate target to creep into the deliberations of the Bank of England, which the Bank of England Act expressly states it will not do? Is not euro entry—or the prospect of euro entry—threatening the separation of powers expressly laid down in the Bank of England Act, on which your Lordships toiled for many a long hour?
As Mervyn King, deputy governor of the Bank of England, said:
"The only problems worse than those of an excessively strong currency are those of an excessively weak currency".
Given all these issues ahead, it is not surprising that the report of the Economic Affairs Committee tacitly foresees the emergence of strong, differing opinions within the MPC and recommends that,
"any MPC member wishing to offer a short paragraph by way of explaining their vote should be encouraged to do so".
That is surely a welcome suggestion from the committee, but so far there has been no response to it. I suspect that, given the difficulties ahead—which I hope I have described—the monetary policy debate will get much hotter in the next few years. I very much hope that the MPC, with the help of the recommendations of the Select Committee, will keep up the good work it has done so far.
4.2 p.m.
Lord Taverne: My Lords, I look forward to the maiden speech of the noble Lord, Lord Sheldon. We have had many discussions in the past about economic policy. That was more than 30 years ago. At that time I was a Treasury Minister and he was a very critical Back-Bencher. We very much look forward to his contributions in general.
I enjoyed being a member of the committee of the noble Lord, Lord Peston. I am sorry that it was incompatible with membership of another committee on which I now serve. It was a pleasure to serve under his vigorous and erudite chairmanship. I am delighted
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that he has not allowed his tendency for the odd acerbic remark to lapse. In fact, I am slightly worried that his independence may lead to the Government seeing to it that he should follow the fate of Mrs Dunwoody in another place. But no doubt in this House things are better ordered.
I believe that this is a useful report. I do not agree with every detail of the comments on appointments or the voting order, but these seem to me to be relatively minor points. The reason the report was inevitably detailed—as the noble Lord, Lord Peston, pointed out—is because the main conclusion of the Select Committee, which is shared by informed opinion generally, is that so far the Monetary Policy Committee has been working well. I believe that most of us agree that its framework for policy is probably better than that of the European Central Bank, but it is too early to judge whether its record will necessarily be better. These are early days.
One has to remember that so far the MPC has performed in largely favourable circumstances, whereas the next few years are likely to be more testing. I want to talk briefly about the future problems, leaving the details of the report to others who were members of the committee. What prospect do we face at the moment? I do not think that it has ever been more uncertain. Will we face recession? Will we face inflation? Or, possibly, will we face a combination of the two?
Manufacturing industry is already in recession. Consumption is still roaring ahead—certainly it is still increasing—but the future of services has become somewhat doubtful. Does this mean, as industry as a whole has demanded, that we need lower interest rates? That would not greatly help exports directly. On the other hand, obviously, we also face the possibility that we will have a lower pound and pressure for higher inflation, which means higher interest rates.
One of the regrets that I have about the Select Committee is that we did not pursue more vigorously the question of the influence of the pound. That is clearly of the greatest importance, both for inflation and for manufacturing. It seemed to me that the circumstances were favourable for intervention. Sterilised intervention was possible with the pound high in a way that would not have affected inflation and would not have led to a loss of reserves.
I was always met with the argument that the case against sterilised intervention is very well known; or that there is academic literature which disproves the case for it. There is also some recent academic literature, which is supported by some highly reputable economists, in favour of it. Indeed, I learnt afterwards that some members of the Treasury, who denied any contemplation of any such intervention at any stage, had discussed it and that some had been in favour. But the issue was rather dismissed and it was not properly examined.
The role of the pound clearly will be crucial. The question we have to face is what is the greater danger at the present time, recession or inflation.

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In the short term, the key is not what the Monetary Policy Committee does but what happens in the United States. What will happen there and what can the Federal Reserve do? The name on everyone's lips is "Schumpeter". I do not say it is a subject of daily discussion in the pubs of this country, but many people have raised the question of whether we are facing a Schumpeter recession.
This does not look like a normal business cycle. It is not a case of recession being faced because of a decline in consumption. It is more like the classic Schumpeter cycle where innovation leads to mania, which in time leads to recession. Certainly the irrational exuberance of the American stock exchange—particularly for high tech stocks—has had an element of mania about it. The result has been over-investment, excess capacity and now, of course, sharply lowered profits, which were 10 per cent down in the first quarter of this year.
It is amazing how rapidly the forecasts have changed. In September, most commentators seemed to be expecting a continued high rate of growth in the United States of 4 per cent; now they are forecasting 1.5 per cent, and it may well be that the forecast will go even lower.
Will there be a further fall of the stock market in the United States? Will this lead to a loss of consumer confidence—in which case we really would face a recession? Or is it possible that Greenspan can ride to the rescue again? Certainly the recent results of intervention by the Federal Reserve have been very different. as an article in today's Financial Times points out, from the two previous occasions on which it cut interest rates. Rather perversely, unlike the past two occasions, long-term interest rates have risen; the exchange rate of the dollar has risen, instead of falling as one would expect; and share prices, far from being boosted, have fallen further.
So can the Fed prevent recession? It may be that in due course—again, it is early days—the cuts which have already been announced, and possible future cuts, will lead to more borrowing and will sustain consumer expenditure. On the plus side, it is clear that the housing market in the United States has held up. But if there is further inflation in the United States and the Fed has to raise interest rates, it could be that previous actions will lead to a worse recession than we would otherwise face.
As I said, what happens in the United States is vital. I am not in the business of predicting, except in one respect. I do not know whether we will face a slowdown in the United States and then a recovery, with the increased rate of productivity leading to a recovery sooner rather than later, or whether we will have a recession. However, I can make one prediction. It seems clear that we are, at the least likely to face a period of considerable slow-down. As the noble Lord, Lord Peston, said, that is bound to affect the European Union and this country.
Contrary to expectations, we have not so far been worse hit than other EU countries but rather less so. Germany has been badly hit; France is now also being badly affected. But we are not immune. What seems
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clear is that economic growth in this country will be much lower than was expected only last autumn. Revenue will be lower because of a lower rate of growth. The public finances will be affected.
Last autumn, figures issued by the Government predicted that, at the present rate of rapid growth in public spending, the deficit would grow to a level that might mean some change of policy by about 2004. My prediction would be that that is more likely to happen in 2003. Then, we shall probably face, in the middle of this Parliament, a choice between either abandoning the higher rate of growth in public services announced by the Government, or we shall have to face a considerable rise in taxes. The rashest promise made by the Government during the election campaign was that there would be no rise in direct taxes, which would leave the burden to fall on indirect taxes. It was a terrible hostage to fortune. It may well result in promises being broken for the continued expansion of the public services.
None of this will make the task of the Monetary Policy Committee any easier. Indeed, I suspect that in a year or two the future minutes of the Monetary Policy Committee will make even more interesting reading than they have done in the past. In two or three years' time we shall be in a better position to judge whether the Monetary Policy Committee has earned the same kind of respect in the United Kingdom as Mr Greenspan has earned in the United States.
4.12 p.m.
Lord Sheldon: My Lords, first, I must express my gratitude for the kindness and help that I have received. I offer particular thanks to Black Rod, to the Clerk of the Parliaments, to my noble friend Lord Carter, to the attendants, and not least to my noble friend Lord Barnett. In another place I enjoyed the presence of my noble friend Lord Barnett on the same Bench for 19 years. I missed it for 18 years and I am delighted to be able to resume my place next to him.
Inflation was the problem of the 1970s, 1980s and early 1990s. The question that we have to ask ourselves is this: is inflation going to be the main economic problem of the early part of this century?
When I entered the House of Commons in 1964, the noble Lord, Lord Callaghan, then Chancellor of the Exchequer, talked about his economic objectives: growth; balance of payments; inflation; and unemployment, as was mentioned by the noble Lord, Lord Taverne. These are surely still the unchanging objectives of our time.
Of course, inflation has been a most serious matter and the present Chancellor of the Exchequer was right to deal with it. In one sense, it is the easiest of the four objectives to deal with. Sufficiently severe deflation can bring it down. In the past four years, it has been dealt with efficiently and sensitively without that severe deflation. The question that needs to be put is this: is inflation still our main economic problem and does our preoccupation with it limit the success we might be able to achieve in the other three areas?

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But, first, there is the question as to how far we should pride ourselves on our success in reducing inflation. After all, it may have less to do with the mechanisms we have been putting in place but rather more to do with the international events that have taken place in recent years. World prices, even though distorted by certain continuing trade barriers, continue to provide a deflationary aspect. In the four years 1996 to 1999, world imports increased by nearly 20 per cent. In the same period, world import prices fell by 12 per cent. So we had increased trade with lower prices. The consequence has been a world-wide downward pressure on prices. These movements are the consequences of the reduction in trade barriers and of greater international competition. Additional to this, we have had the over-valuation of the pound, which has reduced import prices.
What of the future? There are two events which are likely to influence inflation. One is the continuing effects of globalisation: the ease with which manufacturing expertise is passed from one country to another. This is the situation where companies operating internationally can produce in whichever country is the most favourable, particularly where there is a combination of low-cost labour and access to modern technology. The other is the influence of the euro, which was addressed by the noble Lord, Lord Taverne.
With world trade still continuing its increase, price differentials in the euro-zone will continue to come under the pressure of international competition. When price differences between countries in the euro-zone become more and more anomalous—when consumers see the identical product priced in the same currency but at a higher price in one country than in another—consumer pressure will be unstoppable. Again, the pressure on prices will increase. Of course, not all transactions are easily tradable across countries, but the overall result will be to drag many prices downwards.
If, as I hope, we shall be joining the euro earlier rather than later, there will be two consequences. The first is the further pressure downwards on common prices in the euro-zone. But the second will be the consequences of entering at a competitive rate for sterling. The net result for inflation will be influenced by the actual exchange rate of entry. On this matter my expectations in the past have usually been disappointed. On such occasions, when a fundamental change in the exchange rate is proposed, I have usually been in favour of a lower rate for sterling than that which has been achieved. That is mainly because of my concern for our manufacturing industry.
Financial interests have always been stronger than industrial interests in Britain. The current piece of evidence for this comes from the very composition of the Monetary Policy Committee. The City is just down the road from Whitehall—manufacturing industry is much further away and its voices are weaker. If the pressures against a truly competitive exchange rate remain as they always have been, then the inflationary consequences even on joining the euro may be only
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mildly positive. Even if, against my expectation, the rate is realistically competitive, then the inflationary pressures will, I believe, be short term and containable.
Following this assessment, the control of inflation, although obviously a major objective, may need to cede its primacy and revert to the position 30 years ago, when it was one objective among others.
Denzil Davies, the Member for Llanelli—a Treasury Minister in the 1974 to 1979 Labour government—said in another place on 9th April:
"As I see it—perhaps I should not say this—the problem is becoming not rising inflation but a falling rate of inflation. If the trend continues, there could be a fall in the general level of prices. That would take us into deflation, as may have happened in Japan over the past few years, where inflation has probably settled at zero".—[Official Report, Commons, 9/4/01; col. 748.]
Voices such as this are not often heard.
Of the four Callaghan objectives—growth, balance of payments, inflation, and unemployment—the first objective for me has always been growth. It is the prosperity of our nation which must be our first consideration. Thereafter, we ought to be able to deal with the fairer distribution of wealth and income, which was the starting-point of my personal political allegiance.
So, in the more relaxed atmosphere now that inflation might not appear as the overarching consideration, I would hope that we can turn our attention once again to the more difficult task of bringing about growth in the economy; more difficult because there is no sure mechanism. There are, however, a number of useful pointers. The first is the ability to run the economy at a reasonable level of demand; the second is to ensure that this is made more likely by an exchange rate which does not pass too much of that increased demand to overseas suppliers; and the third is to continue and expand the micro-measures to help companies.
In the context of stable, or, on occasion, even falling prices, the consequence will need to lead to a monetary relaxation with, I would hope, a lower pound and a greater importance being given to fiscal rather than monetary policy.
In the past four years, the decisions of the Bank of England have circumscribed the fiscal decisions of the Treasury. The Chancellor of the Exchequer always had to take into account how far the Monetary Policy Committee would assess his economic decisions and whether it might compensate for them. Of course he could alter the 2½ per cent central inflation rate, but that might put the credibility of the Monetary Policy Committee arrangement in some doubt. But if inflation ceases to be the overriding economic problem facing us, the situation may well revert to somewhere near normal with the actions of the Treasury limiting the effectiveness of the Bank's procedures rather than the other way round.
The result of all this might be a fresh look at some of the earlier ways of managing the economy. I suspect that future debates are more likely to deal with the problems of growth, manufacturing industry and the balance of payments than those we have had in recent decades. I look forward to them.
4.23 p.m.
Baroness Noakes: My Lords, in the post-maiden position on the Speakers' List, it falls to me to welcome the excellent speech just made by the noble Lord, Lord Sheldon, in which he demonstrated a completely masterly understanding of economic affairs; and, as such, made a great contribution to today's debate. I hope that he will make many more contributions to our future debates. Of course, all that should not have surprised us because the noble Lord's reputation came before him. However, perhaps I may remind the House of what that reputation—at least, in part—comprises.
The noble Lord, Lord Sheldon, was a Member of the other place for 36 years. For 14 years of that time—the longest ever—he was the chairman of the PAC. The noble Lord has also chaired other committees in the House of Commons and served a spell as Treasury Minister in the 1970s; and, indeed, ended up as Financial Secretary to the Treasury. I believe that that legacy was evident in the most interesting contribution that he has just made to today's debate. We very much look forward to hearing from the noble Lord again.
I am very pleased to have the opportunity today to contribute to the debate on the excellent report of the Select Committee on the Monetary Policy Committee. I join other noble Lords in thanking the noble Lord, Lord Peston, and his committee for a most stimulating report.
Until a few weeks ago I was a non-executive director on the Court of the Bank of England, having first been appointed in 1994. For the past three years, I held the position of chairman of the Sub-Committee of Non-Executive Directors of the Bank of England—in common parlance, the senior non-executive director. This is the first opportunity that I have had to speak on Bank of England matters as an outsider; and I welcome that opportunity.
I hope that I shall not disappoint noble Lords when I say that this will not to be a "kiss and tell" speech. I have no great revelations of life inside the Bank to unleash— at least, not today! Rather, I should like to speak to some of the recommendations in the committee's report on which I have some experience by virtue of my membership of the Court.
It may help noble Lords if I explain briefly the role of the Court of the Bank of England in relation to monetary policy. The Court of the Bank has statutory responsibility for managing the affairs of the Bank with the specific exception of the formulation of monetary policy, which is reserved to the Monetary Policy Committee. But the story does not end there as the Court and, in particular, the Sub-Committee of Non-Executive Directors have a statutory responsibility to keep the procedures of the Monetary Policy Committee under review. In my time as chairman of the subcommittee this oversight of the MPC's procedures was the most challenging of our statutory responsibilities.
I know that your Lordships' committee has taken evidence from all members of the MPC. I hope that the committee found that MPC members are not complacent about the way in which the MPC operates.
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One of the features of the MPC from which the non-executive members of Court took great comfort was the willingness to review the way in which it works and, indeed, to make changes. One example of this, which is referred to in the report, is the decision to release the minutes of the MPC meetings two weeks thereafter rather than the four to five weeks that it took previously. That was the MPC's own decision; it did not have to do it. Under the Act, the MPC has up to six weeks to publish the minutes of its meetings. But the MPC cares about transparency, to which the noble Lord, Lord Preston, referred as being one of the positive features of the way in which the new arrangements are working. The MPC also cares about good communications and about stimulating an informed debate on the economic issues of the day. So the committee took that initiative.
The Select Committee has suggested some changes in the way that the minutes are handled, especially the attribution of views to individual members of the committee, and giving views on the future path of interest rates. I can assure noble Lords that both of these issues have often been discussed by MPC members. There are both advantages and disadvantages in making a change, and no solution is without difficulty. The MPC currently calculates the balance of advantage in one direction, but I do not think that it is indiscreet of me to say that opinions vary. I should not rule out change in that approach from the MPC in the future. However, I advise the Select Committee not to hold its breath on the subject.
Another example of the flexibility of the MPC is the way in which it has shifted its approach to the quarterly inflation forecasting round, some of which was in direct response to the emerging findings of the report by Don Kohn, to which the noble Lord, Lord Peston, referred. The MPC did not wait for Mr Kohn's final report to be released; it actually took the emerging findings and ran with them. However, I do not believe that the MPC has reached the end of the road on responding to the Kohn recommendations, which raised a number of very complex issues. I know that the Select Committee on Economic Affairs has already discussed some of those issues with the Governor of the Bank of England. I hope that this new committee will take the opportunity to look comprehensively at the Bank's follow up to the Kohn report in due course. There are still many more interesting areas to consider.
Therefore, for those matters that are within the competence of the MPC—of course, not everything has been covered in the Select Committee's report—my firm belief is that the MPC can be relied upon to examine carefully and regularly how they work and to make the necessary changes. From my many conversations with MPC members, both collectively and individually, I believe that they really care about doing their job of formulating monetary policy to the best of their ability. They have a genuine ambition to be world class, if not the global leader, in that task.

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One of the suggestions made in the Select Committee's report concerns the process of voting. The noble Lord, Lord Peston, pressed the case for the introduction of simultaneous voting. I urge caution with that recommendation. Whatever theory experts would have you believe, decision-making is more art than science. It concerns the best way for a group of individuals with shared goals to reach agreed solutions to real problems. The MPC is a group of individuals with a common goal of setting the best possible interest rate for the British economy consistent with its statutory remit of price stability. For my money, whatever method the MPC feels most comfortable with is the right method for decision-making. I should be wary of trying to impose some theoretically superior model. "If it ain't broke, don't fix it", remains good advice.
The Select Committee's report raises a number of issues about the appointment of the external members of the MPC. I have much sympathy with those recommendations. Like the noble Lord, Lord Peston, I was extremely disappointed in the Government's response. I highlight especially the recommendation that not all of the external members should be full-time appointments—to which the Government did not even bother to respond. I hope that the Minister will say something about the Government's policy on that issue.
I go further than the committee and question whether any of the external members of the MPC should be full-time appointments. I know that there are some practical difficulties to be resolved relating to conflicts of interest but I am sure that practical solutions can be found if there is the will to do so. I urge the Economic Affairs Committee to consider the time that needs to be devoted by an external member of the MPC to discharge his or her functions and also to consider the benefits that a life, albeit part-time, outside Threadneedle Street can bring to the workings of the committee.
On the subject of appointments, the committee confined its observations to the appointment of the external members. I urge the Economic Affairs Committee to cast its net wider. The four external members of the MPC are appointed by the Chancellor. Two of the internal Bank members are appointed by the Governor in consultation with the Chancellor, but in effect they are ex officio appointments as laid out in the Act. The remaining three are the Governor and the two deputy governors and these appointments are likely to be live issues over the next couple of years. The Governor's term and that of one of the deputy governors expires in 2003 while the other deputy governor's term expires in the autumn of next year.
These appointments are formally made by the Queen but, of course, on the advice of the Prime Minister and his Chancellor. The appointment of other members of the Court, also Crown appointments, are now made following Nolan procedures. The previous appointments of the Governor and the deputy governors were not made using open selection procedures—far from it. I should
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be interested to know how the Government intend to proceed with these new appointments, or indeed the process of reappointment if that is thought to be appropriate for any of the three positions.
I am sure that the Economic Affairs Committee should take an interest in that matter. These three make up one-third of the MPC and the Governor's role as chairman of the MPC is pivotal. Furthermore, the Act states that the external members must have knowledge and experience relevant to the MPC's functions and the two internal ex officio members by definition bring to the job particular expertise. However, the Act is silent on the competencies required of the Governor and the deputy governors. The Government's specification for those appointments is thus a crucial issue and one which I hope can be exposed along with the process itself.
For the past seven years the Bank of England has been an important part of my working life. I am proud to have been a director and continue to hold the Bank dear in my affections. I hope therefore that I shall be forgiven for having taken so much of your Lordships' time in responding to the valuable report produced by the Select Committee.
4.35 p.m.
Lord Barnett: My Lords, I hope that your Lordships will not mind if I say a few words about my noble friend Lord Sheldon. After all, we were elected together nearly 37 years ago—I was a child at the time! It is marvellous to see him here. Noble Lords may not appreciate how lucky we are to have the noble Lord with us, as last year in St James's Park his life was saved by Duncan Goodhew, the famous swimmer. My noble friend collapsed but his life was saved. I, too, am delighted to welcome him as it is wonderful to have him here.
The noble Baroness appeared to indicate that she would reveal some secrets about the Bank of England, if not today, then tomorrow. I look forward to reading a serialisation in the Sun newspaper at some stage. I refer to the opening remarks of my noble friend Lord Peston. I agree with everything he said. As regards why the Treasury response was as it was, anyone who has been a Treasury Minister—as have my noble friend, myself and the noble Lord, Lord Taverne—will know—I state this mildly—that Ministers in the Treasury do not care very much about what happens in the House of Lords. They do not respond in the way that we should like. I am sorry that that is the case. It is a pity that the situation has not changed since my day but I hope that it will soon. As my noble friend Lord Peston said, as regards appointments to the Monetary Policy Committee, the Treasury gave a totally inadequate response.
I hope that, on reflection, the Treasury will recognise that House of Lords Select Committees are rather more important than those in another place. We are normally much more objective, brighter, more perceptive and show a greater understanding of the issues, but, more importantly, we do not make party political points. We are, of course, also more modest!

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The important point to note is that our committees do not take on board party political views. We consider matters more objectively. I hope that the Treasury will recognise that point and will respond to our reports rather more satisfactorily than it did as regards the report we are discussing.
Unlike the Members of the Treasury Select Committee who indulge in many party political disagreements in their reports—I do not know how Mr Radice, who is soon to become my noble friend Lord Radice, managed to chair such a committee—our committee quite rightly does not second guess what the Monetary Policy Committee does from month to month. We are much more concerned with how and why it makes its decisions.
I want to consider what the Monetary Policy Committee would do if there were to be convergence of the euro and sterling. It was made crystal clear to us by the Governor that virtually the sole concern of the committee is to meet the inflation target. If noble Lords care to look at the evidence, they will see that despite pressure the Governor simply would not admit for one moment that it considers economic and other issues. As regards a secondary target, subject to that, of considering the Government's economic policy, he refused point blank to say that the committee ever directly takes account of economic policy. I found that rather surprising, but there you are. He says that achieving a sustained inflation target alone meets all the objectives of the policy, as set out by the Bank of England Act.
Uncynical as I am, I found the Governor's replies possibly somewhat economical with the truth. Having read the minutes of the Bank of England Monetary Policy Committee, which discusses economic policies in great depth, I cannot believe that the issues are ignored after they have been discussed.
After what we have heard from the Governor of the Bank of England and others, there is little doubt that an overnight convergence of the euro-sterling exchange rate would have an impact on the inflation rate and on the economy generally. Exactly what would happen in such circumstances would depend on many other factors as well, and the action needed by the Monetary Policy Committee would depend as much on those other factors as on the convergence. There would be some beneficial effects for exporters, although importers might not be so delighted. It is worth at least wondering what the Monetary Policy Committee would do, because a lot would depend on its reaction.
Total convergence is highly unlikely to happen overnight. In any event, convergence—or a lack of it—with the euro is not the real issue. It is nonsense to suppose that the world is waiting to see whether sterling and the euro are converging and if so by how much, or that it would be the end of the world if they did not do exactly as we would like. The real question is how the Monetary Policy Committee would react.
Not untypically, the noble Lord, Lord Saatchi, taking on board what my noble friend Lord Peston said about the European Central Bank, took the
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opportunity to make a strongly euro-sceptic speech. He will be pleased to know that he even had my noble friend Lord Shore nodding in agreement. That is the best that can be said about his speech—or at least about that part of it; I like the jokes that his researcher found and the noble Lord delivered them well.
Given the objectives set in the Bank of England Act and the interpretation described by the Governor, there is an expectation that interest rates would rise, possibly substantially, if there happened to be such convergence. What about the Chancellor's reaction to his five economic tests on whether we should join the euro:
"the first and most critical is convergence"?
Those are not my words, but those of the Chancellor. He explained that that meant,
"sustainable convergence between Britain and the economies of a single currency".—[Official Report, Commons. 27/10/97; col. 584.]
That means convergence not just of exchange rates, but of economies as well.
If the Monetary Policy Committee's remit is as stated by the Governor, euro-sceptics such as my noble friend Lord Shore—of whom I am very fond., as he knows—should be delighted. If we met the exchange rate convergence criterion, we would inevitably diverge even more on interest rates and other parts of the business cycle. In those circumstances, whatever the views of the Governor or the Monetary Policy Committee, the Chancellor at least is committed in principle to Britain joining the euro. The concern must be that with the Government's present policy we will never have the sustainable convergence that the Chancellor wants. As soon as we converge, we will immediately diverge. I am glad to see my noble friend Lord Shore nodding in agreement. If we stick rigidly to the present policy, we will never meet the Chancellor's five tests. I hope that that is not the reason why he set them.
Euro-sceptics would be even more delighted if the present member states of the euro had to meet the Chancellor's test of convergence for all time. They would never achieve it and the euro-zone would break up. However, that is not going to happen. There is not sustainable convergence even between any 15 counties of the UK. Economics does not work that way in the real world.
The Government have told us that the Chancellor and the Prime Minister—I assume that it will be only those two—will make an assessment in two years on whether we shall have a referendum. It will be a trifle difficult, to put it mildly, for the average voter to understand the complex arguments on whether, at that time or in the future, there could be sustainable convergence. I dare say that most Members of your Lordships' House, or even members of the committee, would find it difficult to assert that there would be sustainable convergence. However, that is required by the five tests. The average reader of the Sun, the Mirror or any other paper would know all about that, of course, because they would read our debates avidly

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and would know exactly what was going on. I have always opposed the idea of a referendum on such a complex matter and I am even more opposed now.
Neither the Governor nor the Chancellor, who are both very able men, can say when the country will achieve sustainable convergence. Nobody can say that. The Chancellor said on 27th October 1997 that among his main reasons for divergence was the,
"legacy of Britain's past susceptibility to boom and bust".
We know from the number of times that the Chancellor has used that phrase that they are his favourite words. However, we cannot be susceptible to boom and bust any more, because he is in charge and he has assured us that measures are in place,
"to ensure that we are capable of maintaining stability".—[Official Report, Commons, 27/10/97; col. 584.]
Stability is not the same as sustainable convergence. The main problem could be how the Monetary Policy Committee interprets the Bank of England Act. We are told that the Chancellor and the Governor never discuss what the Monetary Policy Committee is doing on fiscal and monetary policy. I find that surprising. There is no "Ken and Eddie show" any more, but there is a private "Eddie and Gordon show". I suppose that they talk about the weather or something, because we are told emphatically that they do not discuss monetary or fiscal policy. I can only conclude by saying that it is time that they did, especially on the interpretation of how they will achieve sustainable convergence.
4.48 p.m.
Baroness O'Cathain: My Lords, I welcome the opportunity to debate these two reports—the end of term report of the Select Committee on the Monetary Policy Committee of the Bank of England and the first report of the Select Committee on Economic Affairs, which is really the final chapter in the work of the first select committee, being the Government response to the former report. In one way it will be difficult to adjust to the new name for the old committee, as it is very much a case of plus ça change, plus c'est la même chose. I use that phrase particularly for the benefit of the noble Lord, Lord Barnett, Europhile that he is—although he probably does not understand it. The new committee has a much wider remit, but we shall still keep our collective beady eye on the continuing work of the Monetary Policy Committee.
It is customary to pay tribute to the chairman, the specialist adviser and the clerks of the committee. I do so with no hesitation. In my experience, which is now quite extensive, all four of them were fundamental to the creation of a good atmosphere, which encouraged all the members of the committee to give of their best. I am sure that all the members of the committee agree that we have been very fortunate in our quartet and I thank them.
Although the report printed on 13th February was a follow-on report to our original work, it is important. It shows how the House can serve a useful
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purpose in continuing to scrutinise a relatively new area of activity and ensure that it is satisfied that all is going well.
The granting of independence to the Bank of England was a dramatic development in many ways, but one that has achieved positive acceptance. It is seen to have worked and, indeed, is seen to be working. But there is nothing that cannot be improved upon in life, and both the reports are, I suggest, required reading for those with a keen interest in how the MPC has progressed during its still relatively short life.
In this debate I want to highlight two recommendations in the first report and, while doing so, comment on the Government's response to them, contained in the second report. They are, first, the advisability of maintaining the inflation target at 2.5 per cent, as referred to in paragraph 18 of the report, and, secondly, the subject of the scrutiny of appointments to the Monetary Policy Committee, dealt with in paragraph 122.
Although the committee supported the symmetric inflation target and considered that the figure of 2.5 per cent should be retained for the moment, it recommended that the Chancellor should give consideration to setting the target at a lower level and that he should report his conclusions to both Houses of Parliament. The noble Lord, Lord Peston, has already spoken of his disappointment at the Government's response. That response, in effect, thanked the committee for endorsing the continuation of the 2.5 per cent target but ignored the suggestion that consideration—mark the word "consideration"—be given to setting the target at a lower level; in other words, "Thanks for the support and don't make any stupid suggestions that are not worthy of comment or consideration".
I appreciate that at times the deliberations of Select Committees are an irritant to a government who have, in their view, "Better things to do". But irritants can often lead to better things in themselves—let us not forget the grit in the oyster. The Government's response reads a little like, "Run away, little boy"—or "little girl", as the case may be. Indeed, the noble Lord, Lord Barnett, stated that even more succinctly, "Treasury Ministers do not care"—he stated that twice—"about the House of Lords". Perhaps I may suggest gently that sometimes the mandarins at the Treasury do not interpret the impact that economic fundamentals, such as the inflation rate, have on lesser mortals. Wage claims is a case in point.
The argument out there goes something like this. The Government believe that 2.5 per cent is the correct inflation rate for this economy. We know that the true inflation rate, if measured on the same basis as it is measured in the EU, is somewhere below 1 per cent. It is acceptable to ask for 2.5 per cent wage increases and some more—say, another two or three percentage points—as the Government appear to be sanguine about inflation. Then what happens to our competitiveness?
We are constantly reminded that we cannot operate in isolation and that we are part of the global economy. I do not wish to anticipate the work on globalisation

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being undertaken by our revamped committee—the Select Committee on Economic Affairs—but none of us should be unaware that economic developments, particularly in the areas of finance and business, now impact much more rapidly throughout the world than they did even four years ago. In fact, work has been carried out which suggests that they operate within hours. That is borne out when one looks at the impact on stock markets over the past few months.
Fixing an inflation rate target immutably may not be such a bright idea. We are not suggesting for one moment that the Government should fix and change the target on a regular basis; rather, we suggest that it would be sensible at this stage for the Chancellor to consider setting the target at a lower level and to report his conclusions to both Houses of Parliament.
I know that the Government will not readily admit that they have inherited, and been blessed with, a benign period of economic stability since 1997. Even less readily will they admit that they inherited the best set of economic fundamentals that any government have done since World War II. However, that should not result in the perception being created that it is valid to seek to increase wage settlements and prices by near monopoly suppliers of goods and services to a figure above the 2.5 per cent target rate of inflation when our true rate of inflation, measured on the same basis as that of our major trading partners, is about 1 per cent. I believe that the Government should look again at our recommendation and report back.
With regard to my second point, following the government response to the recommendations in the February report—namely, on the scrutiny of appointments—our recommendation stated:
"We note the continuation of non-statutory confirmation hearings by the [Commons] Treasury Committee. We do not propose [that the new Economic Affairs Committee should undertake] such confirmation hearings … We do call on the Chancellor, however. to report to Parliament on the merits and implications of involving the Commissioner for Public Appointments in prior scrutiny of MPC members".
In view of the evidence that we had received, the response from the Government was utterly predictable. One cannot but feel that on issues of the selection of individuals to take on hugely important roles, this. Government consider that they "know best". Is it always the case that they know best? Has it always been the case that governments know best? Do government fly in the face of valued experience from other sectors, readily offered, and, indeed, free advice readily given?
As an aside, I remember vividly the arguments that the roles of the FSA chairman and chief executive could easily be combined under one person, as they are now. In view of the latest hot-off-the-press information in the sorry saga of Independent Insurance, I wonder whether the onerous responsibility of the combined role on one man might have led to a less than detailed scrutiny of the warning from France many months ago that all was not particularly well with that organisation.
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However, I return to the subject of the debate. The third paragraph of the Government's response to the recommendation states:
"The MPC is also subject to internal scrutiny by the directors of the Bank's Court who are responsible for monitoring the M PC's procedures"—
as my noble friend Lady Noakes described to us—
"The membership of the Court is broad, including leading figures from organisations representing the consumer, from manufacturing industry, the trade unions and the financial services industry".
However, I ask noble Lords to note the words:
"The MPC is also subject to internal scrutiny".
Nothing whatever is said about the scrutiny of appointments. The response to the MPC Select Committee can be seen on page 40. I want to ask the Minister whether appointments to the MPC have been subject to internal scrutiny by the Court of the Bank of England and what the Court has done in that regard. In looking at the printed words, I believe that there has been no scrutiny by the Court because no mention is made of it in the evidence to the committee.
As a consequence, I believe that two of the three paragraphs in the Government's response to our recommendation about appointments have nothing whatever to do with appointments. That reinforces the view of the noble Lord, Lord Peston, that the response was put together in about an hour and probably with the use of a Word programme so that two paragraphs could be slotted in to make the response appear more wordy.
The Court of the Bank of England is held in high regard. The doubts that I have about the necessity for a broader method of scrutiny of appointments to the MPC could be allayed if the Court scrutinised the appointments. I would welcome a response from the Minister telling me whether the Court does or does not do so.
In the early stages of my contribution this afternoon, I remarked that the granting of independence to the Bank of England was seen as a positive move. It has worked, and is working, well. I suggest that my comments are in a positive vein, wishing the MPC well and hoping that it will continue to be successful. Above all, however, one wants to avoid a situation where a bland acceptance of the target inflation rate leads to complacency, which, in turn, creates a casual disregard of global and national economic reality. It sometimes behoves us to remember, as I do, vividly the 10 consecutive months in 1975 when inflation in this country ran at a rate of between 21.2 and 26.9 per cent per annum. At least we are now somewhat more financially secure.
4.59 p.m.
Lord Burns: My Lords, it has been a great pleasure for me, too, to participate in the committee and I also pay tribute to the noble Lord, Lord Peston, for his chairmanship. I am sure that he will understand if I say that his style often has challenging aspects. Sometimes I am not sure whether we are taking evidence or helping the noble Lord to give witnesses a tutorial.

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Sometimes our deliberations take on the style of an academic debate on some finer points of economic theory. It is an even greater tribute to the noble Lord that he is able to secure such a wide measure of agreement amidst such fine activity.
The delay in having this debate meant that we had time to receive responses from the Treasury and the Bank of England. As noble Lords, including the noble Lords, Lord Peston and Lord Barnett, have said, the report received the most cursory response from the Treasury, which simply does not do it justice. I am always reluctant to criticise Treasury Ministers, but for a Government who pride themselves on openness and transparency it is astonishing that they are so reluctant to give reasons or to explain why they disagree with the committee's recommendations. I hope that we will receive a response that is a little more reasoned.
I seek to distinguish between the issues that are the clear responsibility of the Treasury and those that fall to the Bank of England. The Treasury's responsibilities include legislative arrangements, the letter from the Chancellor to the MPC setting out its remit for the following year and the appointment of members of the MPC.
On this occasion the committee did not make any recommendations about legislative arrangements. There is general agreement that the Bank of England Act has worked well and that the separation of roles between the Treasury and the Bank of England has been a success. The setting of interest rates has been depoliticised, but the Government are still seen as being accountable for the broad sweep of economic policy and the institutional arrangements that are in place, which is a good balance.
The issue that keeps coming up in this context—it has already arisen in this debate—is whether it is right for the focus of monetary policy to be so firmly on inflation rather than giving more weight to other considerations. I believe that everyone agrees that there was recently a degree of misalignment in the exchange rate and we are increasingly seeing structural imbalances in the economy, with a high level of domestic demand and an emerging balance of payments deficit. We also have the ongoing divergence between the performance of manufacturing and that of non-manufacturing.
That is a long-standing problem for economic management and the number of ambitions that policymakers have in that regard far exceeds the instruments that are at their disposal. So far my view is that the concentration on inflation has worked well. We state in the report that on the basis of our evidence there is greater agreement about the fact that that approach is correct. However, I doubt whether the debate is over for good. It is not difficult to imagine circumstances that would return the argument to the forefront—a balance of payments deficit could spark a sequence of events, including a sharp correction of sterling. In his excellent maiden speech, the noble Lord, Lord Sheldon, raised some aspects of that debate. I say that as someone who has for a long time
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supported the notion that monetary policy should concentrate on the inflation rate; however, the current level of agreement on that may turn out to be a temporary phenomenon.
The committee made some suggestions about the annual letter from the Chancellor to the Governor in respect of the inflation target. At the outset, however, we make it clear that there is widespread support for the symmetrical target, which I believe has been a great success, and for sticking to the RPIX measure, although in some respects that is not ideal for our purpose. The committee did, however, raise the possibility of considering a lower target if we continue to undershoot the 2.5 per cent target. That was one of the recommendations that received a very curt response from the Treasury.
Personally, I see no great urgency for changing the target but I get alarmed by the suggestion that moving from 2.5 per cent to 2 per cent will be an enormous blow in relation to growth, unemployment and stability in the period ahead. There are of course short-term trade-offs but we would not be in the business of trying to control inflation if we did not believe that low inflation was a goal worth striving for and which brought longer-term benefits to the economy.
The next area of Treasury responsibility that I want to discuss is the making of appointments to the MPC. It seems clear that there is scope for improvement in that regard and, again, I am very disappointed by the Treasury's response. There is widespread agreement outside the Treasury that members' terms should be longer and that there should be renewal only very rarely. As I pointed out the previous time we discussed this matter, political influence comes much more through the process of reappointment than through the initial appointment. The present three-year term for members sits very unhappily in a process in which we expect changes in interest rates to have their full effect in two years. In practice we are seeing a very rapid turnover among members of the MPC either because they have not been invited to stay on or because they do not wish to stay on. The degree of turnover is probably higher than one would like. If we want stability of membership and we really want members to be independent, we must have the courage to give them sensible terms of appointment—to give the committee's recommendation, it could be for five years—and to rotate membership at that point. I cannot understand why the Government are not prepared to engage in some discussion on that issue.
The committee also made several suggestions about improving the handling of appointments, which have also been rejected. I understand some of the Treasury's concerns and, having had some experience of trying to find people to fill the slots, I confess that I am not a great fan of "Nolan procedures" for this type of post. At a minimum there should be an announcement of a forthcoming vacancy and an invitation for candidates to put themselves forward if they wish. That would not prevent the tap on the shoulder or the telephone call out of the blue asking for an immediate response. We learnt that that is the standard procedure and that it is designed in such a way as to surprise everyone, so there

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is no opportunity to discuss who might be a possible candidate. Changing the system would give others a chance to advance their own case and would reduce the suspicion that one was simply chasing after the "usual suspects". As the noble Lord, Lord Peston, said, the argument about the market sensitivity of appointments is at the very least a huge exaggeration and will not persuade many.
I turn to the responsibilities of the Bank of England, which include setting interest rates and the working of the MPC, including the publication of minutes. I join with other noble Lords in acknowledging the continued success in carrying out those responsibilities. The average inflation rate over the period was very close to the target and we have seen the close tracking of the inflation rate to the target over the whole period that the MPC has been in place. That was combined with relative stability of output growth. Taken together, it is right to acknowledge that that has been really impressive by any standards. There is a high degree of confidence about the way in which the MPC is discharging its job and everyone involved should be congratulated.
It has become usual for commentators to qualify their praise for the MPC by suggesting that conditions have been very benign. That seems to upset some members of the MPC, who like to point out that they have been dealing with an enormously difficult set of circumstances and who are prepared to give one a very long list. I agree with the noble Lord, Lord Sheldon, that the real comparison is with the situation in other industrial countries. I, too, note that output stability and low inflation have also been present elsewhere. Without doubt, that makes life easier for this country and for the MPC. As a result, my concern, if anything, is that the MPC has actually been too successful over the period. It has got us used to the standard of meeting the inflation target, which it will be enormously difficult to continue to meet. When we return to a situation that is more like a normal level of tracking error I worry that that will be wrongly seen as a great failure. However, we will have to deal with that problem when we meet it.
I would like to pick up one point from our report so far as the Bank is concerned relating to the issuing of minutes. The committee made some suggestions for improvement, although it welcomed the prompt publication and clarity of minutes. Our suggestion was that individual members might write a short paragraph of their own explaining their vote. The Bank's response is that most members are not enthusiastic about the suggestion. The implication, however, is that some members are enthusiastic—that was confirmed by the noble Baroness, Lady Noakes.
However, the MPC seems to suggest in its reply that individuals can explain their points of view better in personal speeches and interviews. So we have a rather elaborate parlour game. The minutes contain a variety of views, which are not attributed to individual members, although members are encouraged to make speeches and to give interviews. Commentators then scour those speeches and interviews. They try to marry up comments in the minutes with particular
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individuals. That may be very good for employment in the City, but I have grave doubts about the transparency of it all. We agreed in the committee that we do not want to see a blow-by-blow account of what happens or to pry into the intricate nature of the decision making. I hope that soon we can move beyond these games. I am disappointed by the comments of the noble Baroness, Lady Noakes, that we should not hold our breath on this particular issue.
I was also disappointed by the rejection of our suggestion to provide an executive summary to the minutes. The MPC suggests in its response that, instead, the busy reader might turn, first, to the section headed "immediate policy decision" in order to see the essence of the argument. I confess that that is exactly what I do. I go straight to that part of the minutes and then, if I have time left, I go to the front and start skimming the detail. I suspect that a very large proportion of readers do exactly the same thing. Some of them may not be as willing as I am to confess this weakness. This action tells us something about the weakness of the structure of the minutes; at least there is some suggestion that there is a need to re-think. It is disappointing that there is no willingness to do that.
My comments distract me from the fundamental conclusion that the process has been a success. The design has stood the test of time so far, and I think that the execution has been first rate. The main job now is to maintain the standard of performance. The committee set about its recommendations very much in the spirit of trying to find ways in which one can take a good performance and make it better, and also to give us a better chance that it may be sustained in the future.
5.12 p.m.
Lord Haskel: My Lords, I congratulate the committee on its work. I am also surprised at the response of the Government especially as the first and second reports from your Lordships' committees have generally been supportive of the work of the Monetary Policy Committee. The recommendations have generally been helpful rather than destructive and friendly rather than antagonistic. However, this was not always so.
When the Chancellor first announced the independence of the Bank of England and that interest rates would be set outside Government, the criticisms came thick and fast, not just from political opponents but also from some sections of business and industry. Some in the City were critical and, to be fair, some in our own party were critical and unhappy about the arrangement. They told us that the British economy was too diverse for an independent committee to take such a decision: that the interests of rural fanning and urban industry could not be reconciled; the interests of the growing services sector were in conflict with those of the manufacturing sector; and the incidence of home ownership meant that mortgage rates had an important social and political implication. We were told that these differences meant that setting interests rates was as much a political as an economic matter and must be retained within the Government.

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Now, four years on, we can judge who was right. The strategy of making the Bank of England independent, insisting on some tough fiscal rules and sticking to an inflation target has produced a stability in the economy from which we all benefit. Generally, things have gone better. Some sectoral interests claim to have suffered but, generally, the economy is in better shape than if the Monetary Policy Committee had not existed. Unemployment is low; inflation is low; and people feel more confident.
My noble friend, Lord Sheldon, and others have spoken of the inflation rate. I am not sure that I agree with your Lordships' committee that the inflation target of 2.5 per cent should be reduced. I think that sticking to the same target gives a sense of continuity. The 2.5 per cent target provides some flexibility to accommodate these diverse pressures on which people remarked at an earlier stage. These diverse pressures within our economy are important. The figure of 2.5 per cent seems to be working.
In the debate as to whether the Monetary Policy Committee could reconcile all the different interests of our economy and geography, it is interesting to note that this argument is being repeated again over the single European currency. My noble friend, Lord Barnett, referred to it. Exactly the same arguments about diversity and geography are being presented to explain why the euro will not work and is unsuitable for us. Excepting that joining the euro is virtually irreversible—but the Bank of England Act 1998 can presumably be repealed—the economic and geographical arguments are much the same, as though Britain were a microcosm of Europe, which it could well be.
Like the European Central Bank, the Bank of England does try to take care of these regional concerns. The Bank has 12 regional agents, whose task it is to brief the Monetary Policy Committee about what is going on throughout the country, and all these diverse branches of the economy have had their say. The Bank of England strongly emphasises this point in its Annual Report 2001. It does seem to work. I think that those in favour of Britain joining the euro can gain some comfort from this.
There seem to be some other lessons that the European Central Bank can learn from the MPC—for instance, the advantages of more open and accountable decision making. My noble friend, Lord Peston, and the noble Lord, Lord Saatchi, made this point. There is a meeting of minds!
The clarity of the minutes giving the views of individuals rather than the committee also finds the approval of your Lordships' committee, but the noble Baroness, Lady Noakes, seemed to put a question mark over that. My noble friend, Lord Peston, told us that the working of the Monetary Policy Committee has been subjected to a kind of peer review by Mr Kohn from the Federal Reserve Board in Washington. Does the European Central Bank have the benefit of a peer review?
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I agree with my noble friend, Lord Peston, that the European bank could benefit from the kind of scrutiny of the Monetary Policy Committee provided by the Treasury Select Committees in another place and by your Lordships' committees. I am not sure that the scrutiny provided by the European Parliament is as effective, detailed, well-informed or non-partisan.
I thank the committee for its report. It reinforces our understanding of the requirement to distinguish between the needs of current consumption on the one hand and the importance of long-term investment on the other in creating the stability which benefits us all. As a result, there is a shared consensus now for building the wider and deeper enterprise and business culture which we need to hold our position in today's more competitive world.
The noble Lord, Lord Burns, suggested that the Monetary Policy Committee had been perhaps too successful. The real test of the Monetary Policy Committee is yet to come. Its real test will be when something totally unexpected happens. Economists have become quite good at projecting economic trends but they are put to the test when those trends make a sharp change in direction because something totally unexpected happens. The bursting of the dot.com bubble was expected but no one knew when it would happen. But Britain's withdrawal from the ERM was not and this caused an important change of direction in economic trends. It is when the totally unexpected happens—as it will—that the Monetary Policy Committee will be put to the test.
5.19 p.m.
Lord Shore of Stepney: My Lords, I begin by joining others in congratulating my noble Lord, Lord Sheldon, on his maiden speech. I, too, have personal recollections of the noble Lord in another place. I have found, over some 30-odd years, that our interests often coincided although the conclusions we reached in terms of policy were not identical. Nevertheless, he always brought to the debate a seriousness and, more than that, both a penetration and an intellectual power which I think was a hallmark of his contribution in the House of Commons. It is a delight to see him at work here today.
I am not just saying that I am glad to see the noble Lord here because of our previous personal relationship; he made a marvellous speech. It was like a breath of fresh air. How long is it since we heard someone say that we ought to remove from our minds this obsession with inflation? Although we must not forget it as a problem, it should take its place in the queue of other economic objectives which are more important in the long term. I was delighted to hear those sentiments.
I am very pleased that the report we are discussing today extended its terms of reference from the consideration of monetary policy to economic policy as a whole. That is important; otherwise, if we simply concentrate on monetary policy as it is now framed in the terms of reference of the Bank of England, it is all about inflation, and it ought not to be. It ought to be about other, more important economic matters.

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I believe this is a preliminary report and I look forward to further reports of the economic policy Select Committee. Over the years the House of Lords has lacked an extension of the experience and wisdom that it undoubtedly possesses on economic affairs, allowing for the long history of the past when it was very controversial to have the House of Lords involved in matters of expenditure, taxation and so forth. We are now able to put that behind us, following certain changes last year in the composition of the House, and can think seriously about what we can do. I look forward to the future reports of my noble friend Lord Peston and the committee.
The extension from worrying about inflation and the control of it to broader matters is almost at the heart of what I want to say tonight. Unfortunately, the major problem that has emerged is that the exchange rate has now been divorced from the Bank of England and its terms of reference. That is a serious matter because we have misalignment in our exchange rate, particularly with the euro.
The report contains the evidence of the Governor of the Bank of England. I was interested to see that at page 16, paragraph 17, he says,
"I do think that it is the sectors [of British industry] which were exposed to the weak euro which have really suffered".
Nobody should doubt that there has been a considerable price to pay already for the misalignment of the pound, the euro and other exchanges. The effects of that, particularly on the North-South divide in the United Kingdom—it still exists although "North" is a bit crude to describe the areas of manufacturing, and includes Wales, the north of England and parts of Scotland—have accentuated the problem. We have had the booming South with its service economy and we have had the rather severe effects of an adverse exchange rate on our manufacturing industry mainly concentrated elsewhere in the country and indeed also affecting agriculture.
One of the results of that, as we know, has been an increase in imports, a falling off of exports and the widening of a trade gap which is now of a very serious order. I know things can be more easily managed in the world of the 21st century than was the case in the past century with trade deficits. But we are running the largest trade current account deficit in our history. It is bigger even than the appalling affliction that we had to cope with in 1975 when our oil prices quadrupled almost overnight and we faced the severe problems that flowed from that. So the situation is extremely serious. It is likely to be accentuated because the world economy is slowing down. All that reinforces the difficulties which I describe.
We come to what seems to me to be the crucial question: what can we do? The most obvious thing that comes to mind in terms of monetary policy is, of course, to lower interest rates. British interest rates are much higher than they are in euroland; they are much higher than in Japan and they are very much higher than in the United States, where the Fed has acted vigorously to reduce interest rates as a counter-recessionary measure.
So why do we not cut our interest rates? What is to prevent us doing that? The answer is that, unfortunately, that decision no longer lies within the
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competence of the Governor of the Bank of England. It lies still with the Treasury; and the Treasury has shown an astonishing indifference to this problem. If it were to take some action on interest rates in order to have some effect on the exchange rate—it is not the perfect solution but it is one of the great tools of macro-economic policy—other problems in the economy would arise. Once again I turn to the wise words of the Governor of the Bank of England, Eddie George, in his evidence on 1st May. He was asked directly by my noble friend Lord Paul whether we should lower interest rates, and the reply was,
"I think the short answer, Lord Paul, is that we have certainly been, and I suspect still are, operating much closer to capacity in the UK economy than in some other economies".
What he is really saying is that with the labour market tightening, with the gap between full capacity operation and actual output being very small, the effect of lowering the interest rate (and the increase in demand that would then follow) would be inflationary. There is no doubt about that. I am sure everyone agrees that it is likely to be inflationary. But what is to be done?
That is where I see the great problem revealed by the committee. There is a great gap between monetary policy on the one hand and fiscal policy on the other. The obvious answer to the question of what is to be done if inflation is to be brought in as a result of a sensible interest rate policy is that we have to operate either on public expenditure or on taxation, on fiscal policy or on the gap between them. That is a dilemma.
If my party, my colleagues and the Government are as wedded, as they are, to high totals of public expenditure which will grow—there is no doubt about that—they will have to look again at the fiscal instrument. Instead of dodging around and making rather dangerous promises about not increasing taxation, they had better think again.
Almost inevitably something has to be done if the ambition of my noble friend to join the euro is to become a possibility. The Government know very well that they cannot join at the present rate of exchange. They have to get it down. But they must not be surprised that the Bank of England and the ECB have as their first objective the containment of prices. Price restraint is built into the Maastricht Treaty, into the protocols about the exchange rate and the euro, and as noble Lords well know it is in the Bank of England Act as well. We must not be surprised about that.
That leads me to my conclusion. I asked what is needed. My noble friend, for whom I have the utmost admiration, as he well knows—his knowledge and experience in this field is truly admirable—unfortunately is not the master of macro-economic policy. That is in the hands of the Chancellor of the Exchequer. I belong to that small group of people—we are almost a unique club—that does not yet believe that the economic judgment of the Chancellor is wholly infallible. We think that he may have made a great mistake in separating fiscal from monetary policy, either by making the Bank of England independent or, at least, by giving the Bank of England such restricted terms of reference.
5.32 p.m.
Lord Skidelsky: My Lords, I want to add my name to those who have already congratulated the noble Lord, Lord Peston, and his colleagues on the Select Committee on this admirable report. It is an intellectual treat, a store of practical wisdom and a notable contribution to economic education.
It is also an example of what your Lordships' House does superbly well. We are constitutionally debarred from voting on supply, but that should not prevent us discussing the principles of economic policy. I hope that the two reports produced by the noble Lord, Lord Peston, and his committee, will embolden us to seize this opportunity more confidently than we have done in the past.
We are almost at the point of having a critical mass of economists in this House. While economic debates should not be monopolised by economists—as is well known economists are not much in favour of monopoly—it does help to have the principles of economic policy discussed by those who know and understand some economic theory. I hope that such a development will also improve the quality and confidence of our debates.
I welcome the decision to turn the Select Committee on the MPC into a Standing Committee on economic affairs. As the report notes, the new committee will have a wider remit than the previous one, although, happily, the same chairman and much the same membership. It will be able to look dispassionately at such matters as the balance between monetary and fiscal policy; problems of forecasting that were much discussed in the evidence; what account policy should take of regional variations in the economy; the causes of low inflation; globalisation; debt management and such like.
I would dearly like to engage with Paul Ormerod's view that the low inflation of recent years has nothing whatever to do with monetary policy, especially monetary policy in this country, but that must await another occasion.
I suggest to the new committee a further topic. At present the relationship between the level of taxation and economic growth, or more generally between economic growth and the size of the state, is a matter of intense political, even ideological, division. I would like some progress made towards de-politicising it. An inquiry into that relationship by the Select Committee on economic affairs would help to give the public debate a much firmer underpinning in economic theory and economic evidence, so I hope that they will consider that at some point in the future.
Reading through the report and the fascinating minutes of evidence accompanying it, I was driven to reflect on the differences and on the similarities as regards the way in which these kinds of issues are discussed today compared with the period that I know best, which was the time of Keynes and the Keynesian ascendancy.
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I want to pick out two themes. Often it is claimed that Keynes is dead, that governments have given up the attempt to manage economies. Of course, that is nonsense. What is the Bank of England MPC doing? Let me quote Sir Eddie George:
"What we are trying to do all the time is to balance the aggregate demand with the aggregate underlying supply in the economy".
That is true of all central banks, whatever their explicit mandate. Donald Brash, governor of the Reserve Bank of New Zealand said:
"Monetary policy should be aimed at regulating the level of demand … it is trying to keep demand in line with the economy's sustainable capacity … to minimise the booms and minimise the busts. So … we are fine-tuning".
That is not what Montagu Norman, governor of the Bank of England before the Second World War, thought he was trying to do. He did not think in these conceptual categories of aggregate demand and aggregate supply. We owe that to the Keynesian revolution and to the associated development of national income accounts. Today no central bank would dream of pursuing a monetary policy, nor would a finance minister dream of pursuing a fiscal policy that would allow aggregate demand to become seriously out of line with what Sir Eddie George called "underlying supply". The fact that they now pay as much attention to excess demand as to deficient demand is a return to original Keynesian virtue, for a time neglected by his followers.
Of course, there has been a change in theory and I believe that it is necessary to understand that in order to understand why there is now an inflation target. That is indicated by the two governors' careful choice of the adjectives "underlying" and "sustainable" before the word "supply". Today we measure the balance between aggregate demand and aggregate supply not by the unemployment rate, but by the inflation rate. The economy is said to be in balance, with unemployment at its equilibrium rate, when there is no tendency in the price level to move up or down. That reflects the influence of Milton Friedman and particularly his theory of the natural rate of unemployment. That theory was put forward in the late 1960s as a critique of the existing methods of demand management, but not against the principle of demand management per se.
During the committee's hearings the question was frequently raised as to whether the Bank's mandate should include a specific requirement to pay attention to the level of unemployment. It seems to me that the Chancellor gave a convincing reply in his evidence when he stressed the symmetrical nature of the 2.5 per cent inflation target. That is the key point. It has been referred to glancingly in the debate but to me it appears to be absolutely crucial. Undershooting the target, which indicates the development of demand deficiency, would be of as much concern to the Bank as overshooting, which is an indication of the opposite. In endorsing that symmetrical target, the report rightly noted that the symmetry is in order to avoid too conservative a monetary policy. In the debate, members of the committee have regretted the feeble

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Treasury response to the committee's suggestion that the inflation target may be lowered. I agree that the response was a disgrace.
However, a more effective reply was given by Sir Andrew Turnbull of the Treasury at question 284 of his evidence. He said:
"Can I bring in my Sam Brittan quote, which I think is relevant here? Sam Brittan noted in the FT on April 13th. 'If made now such a change would only increase the impression that the British adopt a bewildering succession of monetary objectives only to drop them when the going gets rough'".
That is an important argument for allowing a particular target to bed down before starting to fiddle around with it.
My Lords, I think that I should stop.
Lord McIntosh of Haringey: My Lords, I beg to move that the House do now adjourn during pleasure.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended at 5.41p.m.]
Lord McIntosh of Haringey: My Lords, it has been agreed that debate on the Motion moved by the noble Lord, Lord Peston, should be concluded at this point. When the Motion has been agreed to, I shall move that the House do adjourn during pleasure until 6.30 p.m., at which point debate will take place on the orders on the Order Paper.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 6.12 to 6.30 p.m.]

Life Sentences (Northern Ireland) Order 2001
6.30 p.m.
The Minister of State, Department for Transport, Local Government and the Regions (Lord Falconer of Thoroton)rose to move, That the draft order laid before the House on 26th June be approved [First Report from the Joint Committee].
The noble and learned Lord said: My Lords, the Life Sentences (Northern Ireland) Order establishes new arrangements for the review and release of life sentence prisoners in Northern Ireland. Its key features are, first, the appointment of life sentence review commissioners to consider the cases of all life sentence prisoners; secondly, the setting of a "tariff" by the court which represents the punitive element of the sentence after which release can be considered by the commissioners; thirdly, the power of the commissioners to direct the release of a prisoner on completion of the tariff period subject to the requirement that release would not present a risk to the public; fourthly, the attachment of licence conditions by the Secretary of State on the prisoner's release; fifthly, the power of the Secretary of State to revoke a prisoner's licence and recall him to prison; and, sixthly, through the underpinning rules, the entitlement of the
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prisoner to a hearing of his case, including legal representation, when being considered for release by the commissioners.
Copies of the draft statutory rules have also been made available. They are called the Life Sentence Review Commissioners' Rules 2001. They underpin the operation of the legislation. I have provided those rules simply to ensure as much understanding of the draft order as possible. However, I do not propose to deal with the draft rules in today's debate. They will be formally put before Parliament by negative resolution.
Your Lordships will be aware that we have a second draft order for consideration today, which is a consequential amendments order. That provides for minor, technical adjustment of UK legislation in light of the main order itself. I propose to cover the draft Life Sentences (Consequential Amendments) Order at the appropriate point in my speech, and then move its consideration separately at the end of this debate.
There are two reasons why the Government are bringing forward new proposals in this area: first, the commencement of the Human Rights Act on 2nd October last year; and, secondly, as a result of the report of the review of the criminal justice system in Northern Ireland, completed as part of the Good Friday agreement and published last year.
In anticipation of the implementation of the Human Rights Act, the Government undertook a review of Northern Ireland prisons law and practice with a view to ensuring Human Rights Act compliance. The review revealed that current procedures in place to deal with prisoners sentenced to life imprisonment in Northern Ireland might be inconsistent with the requirements of the Human Rights Act.
Legal advice suggested that compliance would require that, once the punitive element of the sentence has been completed, such prisoners should have their cases subject to periodic review by an impartial and independent body, established by law and with specific power to give a legally binding direction concerning the prisoner's release.
The report of the Northern Ireland Criminal Justice Review endorsed that view. The lack of openness of Northern Ireland procedures was commented upon; that is to say, an executive Life Sentence Review Board advising the Secretary of State who then consults with the Lord Chief Justice. The Secretary of State then makes the final decision on all releases. The Criminal Justice Review recommended that an independent body should make such decisions based on risk to the public.
The Government are now proposing to introduce arrangements whereby all life sentence prisoners have the punitive period of their sentence clearly identified in law, and their case for release independently assessed and directed at the appropriate time by an independent body of judicial character. In essence, the proposals will establish for Northern Ireland arrangements for life sentence prisoners similar to the Parole Board system in England and Wales.

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Perhaps I may give a very brief description of the key provisions of the order. It contains 13 articles and three schedules. However, I shall briefly focus on five articles. Article 3 provides for the appointment of life sentence review commissioners and defines the factors which underpin commissioners' functions. Expertise in the fields of law, psychiatry, psychology, criminology and the rehabilitation of offenders are the key skills necessary for the assessment of life sentence prisoners for release.
Article 5 provides for the setting of the tariff by the sentencing judge. The "tariff is the period of retribution and deterrence, sometimes known as the "punishment part" of the sentence, which the judge will order in court on conviction.
Article 6 provides the arrangements for the release of life prisoners. On completion of the tariff, cases will be referred to the life sentence review commissioners who will consider detailed case histories and dossiers. They will have the power to direct release provided that there would be no serious harm to the public.
Article 8 provides arrangements for the Secretary of State to impose life licences on release which may require post-release supervision by a probation officer.
Article 9 provides for the recall of life sentence prisoners, either directly by the Secretary of State or on the recommendation of the commissioners. In all recall cases prisoners will be advised of the reasons for their revocation and told that they can make representations. All recalls will be referred to the commissioners for consideration and direction.
The remaining articles provide arrangements for specific issues—compassionate release, transferred prisoners—as well as incorporating current life sentence prisoners and licensees into the new legislation.
I turn to the consultations the Government have conducted on the order. The proposal was laid before Parliament on 15th January this year. We invited the Northern Ireland Assembly to consider it. We took the opportunity to copy it for comment to organisations with an interest in this policy area. The Northern Ireland Grand Committee debated the proposal on 22nd March. A statement summarising the responses to the proposal, and a further statement of the changes made as a result of these, has been laid before Parliament along with the draft order.
The Government's proposals were widely welcomed. Respondents commented favourably on the proposals for the appointment of commissioners and the setting of tariffs in court. Respondents also made a series of points of detail on individual provisions. I shall not review each individual representation as that would take much too long. I propose to advise your Lordships of the four overarching issues which arose during the consultation process and of our responses to them. The four issues were: first, human rights compliance; secondly, victims' rights; thirdly, ministerial guidance and directions; and, fourthly, implementation. I also
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propose to say a few words about the independence of commissioners. That matter was raised by a number of respondents.
First, I turn to human rights compliance. During consultation it was stated that our legislative proposals should comply with current UK and European Court Human Rights law. Human rights is the very basis of the proposals that we have developed. Perhaps I may remind your Lordships of the core provisions of the order. They were the setting of tariffs in court; the establishment of an independent body of experts with the skills required specifically identified; the hearing of prisoners' cases for release at which they can be legally represented; and the provision of legal aid. The order is human rights driven and the rights of prisoners are fully covered. It is the Government's view that the provisions contained in the draft order are compatible with convention rights.
Secondly, I turn to victims' issues. Representations were made that victims' or their family's rights should be acknowledged and reflected in the legislation. Victims' interests will be catered for. Their views will be sought and made available as part of the review and release process. Indeed, that is already the case. Any victim or his family who wants to be advised of a life prisoner's release can register his interest and be kept advised where appropriate. Under the proposed legislation, that will be enhanced in law to allow victims' views to be provided to the commissioners when they are considering final release. Views will be obtained and provided by the Probation Service.
Victims' needs and interests are obviously issues facing the criminal justice system as a whole. In addition to its recommendations on life sentence prisoners, the Criminal Justice Review made important recommendations in that area. As a government, we shall be looking at ways to further cater for victims' interests. Many victims prefer to put difficult events behind them and to move on. Therefore, across all these arrangements it will be at the discretion of the victim or his/her family.
Thirdly, I turn to ministerial directions and guidance. Representations were made during the consultation suggesting that the Secretary of State should have the power to issue directions or guidance. We accept that there will be a need for Ministers to make clear certain procedures which will apply. An obvious example is guidance for life prisoners on the process. Arrangements for victims to register their concerns, and advising licensees on the conditions of their release, are others. But issuing guidance has, in itself, no statutory authority. Therefore, to provide for guidance in law would have no substance. We recognise the need, and will address it administratively. Officials will be producing and making available guidance notes on all relevant areas to prisoners, victims and the criminal justice system in general.
With regard to the suggestion that Ministers should issue directions, I remind your Lordships that the proposals before the House today are to establish an independent sentencing and review process.

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Independence is the key feature. Ministers should not, for example, be directing the commissioners on how to make decisions. Such a step would quite simply run contrary to the concept of independence. It will be for the commissioners to establish standards in their release decisions, guided by the extensive domestic and international case law already in existence.
I turn to implementation. Representation was made that there should be meaningful consultation with relevant organisations prior to the implementation of the legislation. Consultation has already been taking place as our proposals have been developed. We have worked closely with relevant criminal justice agencies, and through the consultation period, our proposals were made available to more than 200 interested parties or groups.
To ensure smooth introduction, my officials will continue to consult with relevant bodies. It is our intention to develop working protocols with and between criminal justice agencies and to encourage a similar approach with the new commissioners. We will also keep prisoners fully advised of progress and we will be working to ensure that all relevant staff are aware of and trained in the new procedures.
Perhaps I may move on to the independence of commissioners. Some respondents seemed concerned that commissioners' independence should be emphasised. Commissioners' independence is provided for in a variety of ways. The draft order establishes commissioners in law and provides them with specific power to give a legally binding direction concerning the prisoner's release. If release is directed, then the Secretary of State must comply. Commissioners will be appointed by open competition. Appointment will be for a period of five years, which is renewable subject to the provisions of the order. If a commissioner were to be considered for dismissal, this can be done only with the agreement of the Lord Chief Justice. The professional expertise of the commissioners is specified in the legislative proposals. Legal qualifications, professional qualifications, and expertise in the rehabilitation of offenders are all provided for. These will be important in establishing credibility, acceptability and professional independence. There is no question of the commissioners' independence.
Before concluding, I should like to deal with the need for a separate statutory instrument—the draft Life Sentences (Northern Ireland Consequential Amendments) Order 2001—to provide for the amendment of related UK legislation. The reason for the Life Sentences (Northern Ireland Consequential Amendments) Order is simply that an order made under Section 85 of the Northern Ireland Act 1998—which provides the legislative vehicle for the main life sentences order—can amend legislation only as it applies to Northern Ireland. The Section 84 order is a technical requirement, needed to amend legislation as it applies in England and Wales. It provides for the inclusion of references to the life sentences order in the Repatriation of Prisoners Act 1984, the Crime (Sentences) Act 1997 and the International Criminal Court Act 2000 which provide various transfer and repatriation arrangements within and to the United
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Kingdom. The order also provides for the inclusion of references to Life Sentence Review Commissioners in the Freedom of Information Act as a group to whom the Act will apply.
I shall conclude my speech by reminding your Lordships of the reasons for the Government's proposed Life Sentences (Northern Ireland) Order—the need for compliance of life sentence review and release arrangements with the Human Rights Act: and the recommendations of the review of the criminal justice system in Northern Ireland. It is the Government's view that the time has come in Northern Ireland to transfer responsibility for review and release of life sentence prisoners out of the hands of Ministers. With Parliament's approval, life sentence prisoners in Northern Ireland will have their "tariff' set in court; will be referred to the independent Life Sentence Review Commissioners; and will have their release considered at the appropriate time based on the avoidance of risk to the public. The commissioners will have relevant professional and expert knowledge to enable them to take such decisions. Prisoners will be entitled to a hearing of their case at which they can be legally aided and represented.
I am confident that the system we are proposing caters for the needs of society and of victims and ensures the rights of prisoners. I commend the order to the House.
Moved, That the draft order laid before the House on 26th June be approved [First Report from the Joint Committee].—(Lord Falconer of Thoroton.)
6.45 p.m.
Lord Glentoran: My Lords, I thank the noble and learned Lord for bringing the order before the House. In principle, I have no argument with it. It was well debated in another place. I have read the Hansard report thoroughly. My honourable friend Mr John Taylor asked a number of pertinent questions concerning independence, human rights and other matters to which he received satisfactory replies. I have no difficulty in supporting the order.
Lord Laird: My Lords, I have no difficulty in supporting the order. I prefer the concept of an impartial commission looking after this type of activity rather than it being open to political pressure. There is nothing more unattractive in society than a lynch mob, which may be organised through the local tabloid press which is on the case of some unfortunate person. I am satisfied with the concept of an impartial body. I am pleased to hear that membership will last for five years. How many commissioners are there likely to be? I support the order.
Lord Falconer of Thoroton: My Lords., I am extremely grateful to noble Lords for their support for the order. I was asked how many commissioners there will be. The answer is 15 to 20 depending on business.
On Question, Motion agreed to.

Life Sentences (Northern Ireland Consequential Amendments) Order 2001
Lord Falconer of Thorotonrose to move, That the draft order laid before the House on 26th June be approved [First Report from the Joint Committee].
The noble and learned Lord said: My Lords, I have already spoken to this order. I beg to move.
Moved, That the draft order laid before the House on 26th June be approved [First Report from the Joint Committee].—(Lord Falconer of Thoroton.)
On Question, Motion agreed to.

Northern Ireland Assembly (Elections) Order 2001
6.46 p.m.
Lord Falconer of Thorotonrose to move, That the draft order laid before the House on 4th July be approved [2nd Report from the Joint Committee].
The noble and learned Lord said: My Lords, this order is necessary to ensure that the mechanisms are in place to permit elections to the Northern Ireland Assembly to take place. The order provides for the conduct of elections to the Northern Ireland Assembly. It is being laid at this time purely as a precautionary measure. It is essential, in order to keep open the option of elections if the Assembly fails to elect new First and Deputy First Ministers within six weeks. But that does not indicate the Government's intention, nor commit the Government or the parties to this particular course of action. It is too early yet to say what will happen. This is contingency planning. All our focus is on intensive discussions with the parties and the Irish Government to carry forward the implementation of the Good Friday agreement.
The content of the order, which of course complies with the European Convention on Human Rights, is made under the powers of the Northern Ireland Act 1998. We are required to lay this draft instrument as the original order, the new Northern Ireland Assembly (Elections) Order 1998, provided only for the original Assembly elections. This order now replaces the one made in 1998 and falls broadly in line with its provisions.
There is one notable change. The timetable for Assembly elections will, in future, be based on a 25 day timetable rather than 19 days, as was set for the 1998 elections. Twenty-five days is more usual for PR(STV) elections in Northern Ireland, being the timetable also used for district council elections. Some minor modifications have also been made in respect of the changes which have been brought about by the Political Parties, Elections and Referendum Act 2000 and the Representation of the People Act 2000. These relate primarily to the control of donations to candidates and the rules concerning the description in nominations and the ballot paper.
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As I have mentioned, the 1998 order provided only for the elections which took place that year in forming the new Northern Ireland Assembly. The provisions of this order provide for the conduct for all future elections to the Northern Ireland Assembly. Assembly elections are scheduled to take place in 2003 and the Government planned to introduce these measures at some point prior to those taking place. However, due to the recent developments in the political situation in Northern Ireland it has become a necessity to lay the order before the House now.
Perhaps I may explain why it is so essential that the order is needed at this time. Under the terms of the Northern Ireland Act 1998 the recent resignation of the First Minister means that the Deputy First Minister automatically ceases to hold office at the same time. In those circumstances, the 1998 Act provides that the Assembly must hold an election to fill those vacancies within six weeks. It is hoped that the Northern Ireland Assembly will be successful in electing a new First and Deputy First Minister but should it not, the Secretary of State for Northern Ireland is then required to exercise his statutory duty in calling fresh Assembly elections. This order ensures that elections to the Assembly could be called if required and is fundamental to keeping this option open.
Noble Lords will note that I speak of an option. At this crucial time in the peace process in Northern Ireland, it is important that we keep all the options laid down in the 1998 Act open to us. It does not force either the Government or the political parties of Northern Ireland into one particular course of action or assume that the search for a new First and Deputy First Minister will be unsuccessful.
Intensive talks with the Northern Ireland parties and the Irish Government are, as noble Lords know, taking place this week. It is hoped that these talks can pave the way forward in our continuing efforts to implement fully the terms of the Good Friday agreement. However, we must ensure, whether for now or for the future, that the procedures are in place for holding future elections to the Northern Ireland Assembly. I commend the order to the House.
Moved, That the draft order laid before the House on 4th July be approved [2nd Report from the Joint Committee].—(Lord Falconer of Thoroton.)
Lord Glentoran: My Lords, while we accept that this order is necessary for the reasons pointed out by the Minister—namely, in order to be able to hold fresh elections to the Assembly in 2003—this order is being taken early in this Parliament because of the situation pertaining in Northern Ireland today. Noble Lords will know that it is extremely serious. I understand that two alternatives face the Government: if no agreement is reached tomorrow or over the coming few weeks—the final date is 11th August—the first is to call fresh elections for the Northern Ireland Assembly, while the second is to suspend the Assembly and reinstitute direct rule.

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I have given the Minister prior notice that I should like to be reassured that the Secretary of State for Northern Ireland, should he wish to do so, currently holds the power to suspend all those governances that would need to be suspended without the need to lay orders either in this House or in the other place. I hope that the noble and learned Lord will be good enough to give me that assurance before we adjourn for the Summer Recess.
Matters are moving on in Northern Ireland. The situation is serious and it has changed considerably since the House returned. I hope that noble Lords will not think that I am out of order if I state that we have requested, through the usual channels, an opportunity to debate the situation in Northern Ireland before the Summer Recess. Noble Lords on this side of the House feel that a debate is necessary and would be extremely helpful. We have held a number of excellent, passionate, learned and intelligent debates on Northern Ireland in this House. I hope that we shall be allowed to hold another.
Perhaps I may quote from Hansard of 21st June and thus remind the noble and learned Lord of a statement made by his noble and learned friend the Lord Privy Seal:
"I personally think that any request from the noble Lord, Lord Strathclyde, would have to receive sympathetic consideration"— [Official Report, 21/6/01; col. 111.]
That statement was made in response to an inquiry into the possible need for a debate on Northern Ireland. Matters have moved on considerably since that date. I hope that this request will be looked at sympathetically.
As regards the order laid by the noble and learned Lord, I have no qualms in supporting it.
Lord Smith of Clifton: My Lords, this order is necessary but regrettable. It is necessary if the current talks conducted by the Prime Minister and the Taoiseach with the Northern Ireland political parties break down. We all hope fervently that that will not be the outcome and that prudence and common sense will prevail. If the negotiations collapse, Northern Ireland will be on the brink of returning to the politics of the preposterous. Other options will then have to be considered.
The institutions created by the Belfast agreement have been suspended once and, in principle, could be suspended again. That particular option did not resolve the fundamental rift that is the root of the problem, and there is no reason to believe that the outcome would be any different if suspension were to be tried again.
That leaves only one other feasible option—to dissolve the Assembly and to call for new elections to it. That is why we are considering the order that has been laid before your Lordships' House today. The risk is that the election may reflect the polarisation that has occurred in the recent general election. The one reason for optimism that this may not be the case in a new Assembly election, is that the voting system—STV—being proportional, gives a much fairer chance
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for all shades of opinion to be represented. The problem is that the stalemate over the Belfast agreement is the basic cause of the political polarisation, so that there is a far smaller middle ground to be represented. We shall see.
In the meantime, as the noble and learned Lord has pointed out, contingency plans have to be made in order to cope with a situation which few wish to see come about. Of course, new Assembly elections may well not do the trick. If that happens, as I said the last time we suspended the Assembly, the likely outcome will be the imposition of direct rule run by a de facto condominium comprising the British and Irish Governments.
We support the passing of this order.
Lord Laird: My Lords, on behalf of the Ulster Unionists, I can see the logic of bringing forward this order. I have no difficulty with it. It is obvious that this is a piece of housekeeping that has to be done. However, it is perhaps unfortunate that the Electoral Fraud (Northern Ireland) Bill currently being discussed in another place was not passed before the recent general election, despite the fact that in 1998 the Northern Ireland Grand Committee stated that there was a pressing need for electoral fraud legislation. It is regrettable that this Bill has not yet made more progress, and that it was not put before the last Parliament.
I listened carefully to the remarks of the noble Lord, Lord Smith of Clifton, and I agree with much of what he said. Perhaps I may add to a point that he made. I, too, am not sure whether an election will change much in Northern Ireland. That is because the "dreary spires" of Fermanagh and Tyrone will still be there once the dust has settled.
I should like to make one further point. In Northern Ireland, when the people are faced with an election, they tend not to be very flexible. The difficulty we have is that the Sinn Fein elements of the process will not undertake or carry out that which they have said they will do in terms of decommissioning their weapons. This is the major cause of concern for those of us in the Unionist community. We have gone to extreme lengths but, although it is not satisfactory to say it, it is getting us nowhere in the line of history. But our consciences are clear in terms of what we have done and how we have tried to proceed.
We have been let down consistently by Sinn Fein, by the SDLP and its failure to support the police and, indeed, we have been let down consistently by the government of the Irish Republic—none of whom has, in my opinion, rolled in heavily behind us with help and support to make the Belfast agreement work. As a result, we are in a difficult position back home. The community has not been well served. We had a local government and general election process in June and, as we know, those results could have been better. We are not frightened of elections to the Assembly, but I

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do not know what it will prove. However, in terms of the business before the House today, I support the order.
Lord Falconer of Thoroton: My Lords, I am grateful for the expressions of support from all sides of the House. I note the question of which the noble Lord, Lord Glentoran, had given me prior notice. I shall comply with his request to give him an answer before the Summer Recess.
On Question, Motion agreed to.

Police and Criminal Evidence Act 1984 (Drug Testing of Persons in Police Detention) (Prescribed Persons) Regulations 2001
6.58 p.m.
Lord Rookerrose to move, That the draft regulations laid before the House on 20th June be approved [First Report from the Joint Committee].—(Lord Rooker.)
The noble Lord said: My Lords, this statutory instrument relates to new sections inserted into the Police and Criminal Evidence Act 1984 by the Criminal Justice and Court Services Act 2000, which introduced new powers for the compulsory drug testing of offenders and alleged offenders at various points of the criminal justice system, including the testing of persons in police detention.
The purpose of these regulations is to prescribe the persons who, if certain conditions are met, may take a sample of urine, or a non-intimate sample, from a person in police detention, for the purpose of ascertaining whether he has any specified Class A drug in his body. The conditions and procedures for such testing are set out in new Sections 63B and 63C of the Police and Criminal Evidence Act 1984, as inserted by Section 57 of the Criminal Justice and Court Services Act 2000.
Under these new provisions, police officers will have the power to request persons aged 18 or over in police detention to provide a sample of urine or a non-intimate sample, such as oral fluid (saliva), for the purpose of testing for any specified Class A drug where the person concerned has been charged with a "trigger" offence (as set out in Schedule 6 to the Criminal Justice and Court Services Act 2000), or has been charged with an offence and a police officer of inspector rank or above, who has reasonable grounds to suspect that the misuse of a specified Class A drug caused or contributed to the offence, has authorised the taking of the sample.
The Class A drugs concerned are heroin and cocaine, including crack, as currently defined in the Criminal Justice (Specified Class A Drugs) Order 2001 (SI 1816/2001), laid before Parliament on 10th May. The "trigger" offences are offences under various provisions of the Theft Act 1968, mainly relating to
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acquisitive crime, and certain offences under the Misuse of Drugs Act 1971, if committed in respect of a specified Class A drug.
The draft statutory instrument, in compliance with Section 63B(6) of the Act, defines the person who may take samples from persons in the target group. The classes of prescribed person in regulation 2 are intentionally wide. It is proposed that, in addition to police officers (as provided for in sub-paragraph (1)(a)), the persons prescribed to take samples should also include persons employed by the police force or police authority for this purpose among other duties, and persons employed by a contractor engaged by the police authority or police force to provide the drug testing service.
Sub-paragraph (1)(b) provides for police forces or police authorities to employ civilian staff directly for this purpose among other duties. This would allow for a similar arrangement to that which already exists in some police forces, where civilian staff—sometimes referred to as "civilian detention officers"—are recruited to carry out fingerprinting and other processes, including the taking of DNA swabs, within the custody environment.
Sub-paragraph (1)(c) extends this further to allow the possible future use of persons employed by other bodies contracted by police authorities or police forces to provide the service of taking samples for this purpose.
The draft regulations will provide flexibility to police forces and police authorities to use non-police personnel to take the samples when considered appropriate, and thereby free up police officers for other duties. The Association of Chief Police Officers drugs sub-committee, the Association of Police Authorities and the police forces involved in the pilot drug testing programme were included in those consulted about the persons to be prescribed to take samples.
The regulations are subject to the affirmative resolution procedure to allow for better scrutiny by Parliament, given the intrusive nature of drug testing, especially if the sample to be taken is urine. Although the class of prescribed persons is wide, samples can be taken only following a request by a police officer, and there are sufficient safeguards in place to ensure that those taking the samples can properly carry out the task. These include training in the use of drug testing equipment and procedures; modifications being made to the PACE codes of practice in accordance with the new Section 66(2) of the Police and Criminal Evidence Act 1984 in connection with the exercise by police officers of their powers under Section 63B; and guidance to be issued to the police, which will be revised, as necessary, to ensure that any future contracting-out arrangements include safeguards in respect of training, security, health and other relevant issues in relation to the persons who will take the samples.

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The provisions for testing persons in police detention are to be piloted initially in three police force areas, Nottinghamshire. Staffordshire and part of the Metropolitan Police district. For the purpose of the pilots, only non-intimate samples, oral fluid (saliva), are to be taken, making use of the advancements in drug testing technology. The use of oral fluid is less invasive and avoids some of the health and safety and human rights issues associated with urine testing.
Approval of the draft regulations will help provide police forces and police authorities with sufficient flexibility to engage staff to undertake drug testing now and in the event of further implementation in other areas.
I shall be happy to answer further questions in relation to the regulations. The House will know that SI 2254/2001, which is subject to the negative procedure, also relates to this issue. It gives the power required to carry out the pilot projects. I commend the regulations to the House.
Moved, That the draft regulations laid before the House on 20th June be approved [First Report from the Joint Committee].—(Lord Rooker.)
7.15 p.m.
Viscount Bridgeman: My Lords, this is the first occasion on which I have had the pleasure of speaking opposite the Minister. With due deference as a Whip, I congratulate him on his performance during his first two weeks at the Dispatch Box in your Lordships' House, in particular on the prisons' debate last night.
These regulations have the support of my party. The Minister has answered the points which were of some concern to us. This is a pilot scheme and I understand that it will not be rolled out until it has been properly evaluated. He has also covered the question of the training of civilian personnel, which we regard as of paramount importance. We have been assured that the operation will at all times be closely monitored by a police officer.
I wish to raise only one other point. During the passage of the Bill in another place, my right honourable and honourable friends made the point that Class B drugs, particularly amphetamines, might be included. The then Parliamentary Under-Secretary of State said that, in the Government's view, it was not appropriate at that time. Has the Minister had any further thoughts on this point? Otherwise, we support the regulations.
Lord McNally: My Lords, it may have been a technical oversight, but the Minister did not make the usual declaration that this statutory instrument is compatible with the Human Rights Act. I am sure that it is, but Ministers usually do give that assurance.
The Minister recognised that there are human rights aspects to these regulations. My honourable friends in another place have voiced concerns. We are talking about people who have not been convicted of any crime, and. it is therefore necessary that Parliament should look carefully at the powers that the Government and the authorities intend to take.
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So far as concerns these powers, we should be very careful about what we put in place. One only has to look at the problems that various athletics and sporting bodies have had in relation to drug testing and the taking of samples to imagine what "my learned friends" might do with sample testing that had not been rigorously carried out. When this testing is being carried out by what the Minister said was an intentionally wide group of people, will there be external witnesses to verify the testing procedures? The Minister pointed out that this was partly intended to free up the police for other duties, but will the police have overall supervision and responsibility for the testing?
We welcome the fact that pilot projects will be carried out. It is an indication that the Government realise we are entering delicate areas. Will we know in advance what the definition of "success" will be for these pilot projects, or will the Government simply say retrospectively that the pilot projects have been a success? It would help to know in advance what "success" is deemed to be.
A point which occurred to me as the Minister was moving the regulations is what would be the situation if the tests produced evidence of a non-Class A drug? If testing produces a result that is outside the terms of the order but still of use in a criminal case, could that be allowed in evidence?
Overall, we, like the Opposition, accept that this is a proper way forward but that it carries some dangers. We recognise that there is now an intimate connection between the levels of violent crime and intrusive crime—that people under the influence of drugs commit crime and that crime is committed in order to provide the funds to obtain drugs. We realise why the Government are taking this route, but they are right to proceed with caution.
Lord Rooker: My Lords, I regret that I did not include a verbal statement to the effect that we were satisfied that the regulations complied with human rights legislation. We are satisfied. I probably shortened my briefing notes too much and removed a paragraph. I know that in regard to the following order I have kept that statement in the notes.
Lord McNally: My Lords, as the Opposition Whip indicated, the Minister has had such a successful first two weeks in his new post that it might be good to miss once in a while.
Lord Rooker: My Lords, they have not laid a finger on me as yet!
I am glad to have the opportunity to place these facts on record. As regards evaluation, I cannot score up what will be a success or a failure. Evaluation is not a five-minute job. It will take place over a two-year period and will continue beyond the end of the pilots. As information about changes in re-offending becomes available, we can carry out a longitudinal study. Interim reports are due in spring 2002 and 2003.

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They will inform decisions on the extension of the programme. A final report will be available in early 2004. We are not rushing this matter.
I want to make one point absolutely clear for the record. The samples taken, whether they relate to Class A or Class B drugs, may not be used in evidence in respect of any offence. That is not their purpose. Samples can be taken only under the conditions that I have set out; namely, if a person is charged with certain trigger offences. I am happy to give specific details. These are generally acquisitive crimes: theft, robbery, burglary, aggravated burglary, taking of motor vehicles and obtaining property by deception. That is where we see the correlation between the use of Class A drugs and robberies and theft in order to fund a Class A drug habit. That is in some ways the purpose of the exercise.
I turn to the supervision of samples. Samples will be taken and tested in the presence of the detainee. The purpose is to identify those drug-misusing offenders who may need treatment. The drugs will be validated using the equipment provided; namely, by electronic identification. The sample will be sent to the Forensic Science Service laboratory for more detailed confirmatory analysis if the test result is disputed by the detainee—if the person says, "I haven't been on these drugs". I hope that covers the point regarding drugs for medication. The Forensic Science Service laboratory will be able to separate out the information relating to medication, which the equipment, good though it is, is unable to do. I used the term "people" widely. I was not saying that any Tom, Dick or Harry could come along and carry out this work. The idea is to give flexibility to police authorities and police forces to decide whether to use their own staff or independent contractors who are trained and qualified to carry out all the necessary procedures.
As regards Class B drugs, we do not have a smidgen of information connecting the kind of crimes that I have listed. So the pilot study is narrow, but it is nevertheless important given the amount of Class A drugs and the amount of acquisitive crime connected to them. To approach Class B drugs in the same way would not be proportionate. We can claim on the evidence we have that what we are attempting to do is proportionate to the kind of crime and what is thought to be the connection with Class A drugs. We do not have evidence that would stand the test regarding Class B drugs. Therefore, to apply the same procedures would be held as non-proportionate. I suspect that my learned friends in the judiciary would throw any such case out. The measure is highly targeted in that respect.
I have covered issues of quality, testing and the breadth of the pilot studies. As the pilots continue and we receive the reports we shall no doubt return to the matter in this House and in another place.
On Question, Motion agreed to.

Immigration (Leave to Enter) Order 2001
7.15 p.m.
Lord Rookerrose to move, That the draft order laid before the House on 20th June be approved [First Report from the Joint Committee].
The noble Lord said: My Lords, so as to assist the House, I shall seek to put the draft order in the context of the legislation that is currently in force; and also to explain the practical impact that the order, if affirmed by both Houses, will have on the immigration and asylum process.
Under legislation currently in force, the power to grant or refuse leave to enter can be exercised only by an immigration officer. These powers are not given to other Immigration and Nationality Directorate officers who, on behalf of the Secretary of State, can only grant, vary or refuse leave to remain. Section 1 of the Immigration and Asylum Act 1999 changed this so that the Secretary of State may grant or refuse leave to enter as well as leave to remain. The order will enable those powers to be exercised.
The provisions in the order are part of the general flexibility provisions set out in Sections 1 and 2 of the 1999 Act. We took these powers because it was becoming increasingly difficult within previous legislative restraints to maintain efficient and effective controls at ports while coping with substantial passenger growth. We wanted to create a legislative framework that would allow more operational flexibility and better use of information technology, encourage inter-agency co-operation and maximise efficient use of resources to expedite passenger clearance and deal more effectively with those who seek to abuse or circumvent the immigration controls. These provisions are being brought into effect in a managed and staged way and this order will add to and enhance these.
I hope that that answers the only question I had when the measure arrived on my desk: if these provisions are so important and are part of the 1999 Act, how come that I am introducing them only in July 2001? It is simply because of the changes that have arisen in the management and operation of the Immigration and Nationality Department, with some 3,000 extra staff—the number has almost doubled in the past two years—and £2 billion of extra expenditure. The aim has been to bring about a massive increase in, it is hoped, efficient, firm and much faster decisions in a managed way so as not to overload the changes that have taken place. The changes that we are now introducing are part of that managed process.
The main thrust of the order is that it will give the power to grant or refuse leave to enter to the Secretary of State in cases where the applicant has applied for asylum or on human rights grounds. During the passage of the Immigration and Asylum Act the Government said that the power was likely to be used in such circumstances. The power being taken in the order has been drawn up specifically to improve the

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operation of the asylum process. However, the scope of the primary legislation does not preclude the taking of further, wider powers by order if the practical operation of the current order indicated a need or if the profile of applications merited it.
To put the matter in context it may be helpful if I briefly explain how the asylum process works at present and how the provisions of the order will change this. Currently, where an applicant applies at a port of entry for asylum or on human rights grounds the application has to be referred by the port to the Integrated Casework Directorate of the Immigration and Nationality Directorate. This is in recognition of the "Basic Requirements" set out in the Handbook on Procedures and Criteria for Determining Refugees Status provided by the Office of the United Nations Commissioner for Refugees. The handbook recommends that there,
"should be a clearly identified authority—wherever possible a single central authority—with responsibility for examining requests for refugee status and taking decisions in the first instance".
It is the caseworker at the Integrated Casework Directorate who decides the merits of the asylum or human rights claim, and whether it should be granted or refused. In the case of someone who applies in-country, the caseworker would make that decision and also grant or refuse leave to remain. However, because of the way that the legislation is currently framed, the grant or refusal of leave to enter can be carried out only by an immigration officer. In applications made at ports on entry, therefore, the case must be returned to the port for an immigration officer to serve the leave to enter decision.
It is our view that there are no sensible, logical reasons why asylum and human rights cases should normally have to pass between the caseworker and the ports in this way. It involves double handling of cases, which cannot be an efficient or an effective use of resources. There seems to us no sound reasons why the caseworker deciding the claim cannot also give or refuse leave to enter. Decisions are served by post by immigration officers and can easily be served by post by caseworkers. This will release immigration officer resources and enable them to be used to handle other areas of the control for which they are specially trained; for example, combating clandestine entry, locating absconders, and effecting returns of those who have no basis to stay here.
The powers provided by the order will have other welcome effects. The physical movement of the cases back to ports is in itself a burden to the asylum process. Cutting out this unnecessary double handling will help the Immigration and Nationality Directorate to speed up and streamline that process. We have always said that we shall implement the 1999 Act in a planned and staged way. This order is part of that planned process. We shall implement the specific provisions in a planned manner.
Significant changes to the working practices of the Integrated Casework Directorate and the Immigration Service will be needed. To ensure that the new procedures work smoothly, a pilot is to be undertaken
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involving around 50 cases per week in the first instance. This will involve asylum applications made at Heathrow Terminal 3, which will be considered by one caseworking team in Croydon and one in Leeds; or, if appropriate, at the Oakington reception centre. Caseworkers will receive all necessary training. Subject to ongoing review, the pilot scheme will gradually be extended to other ports and to further caseworking teams before its effectiveness is fully evaluated in the autumn.
In accordance with the general commitment that the Government gave during the passage of the Immigration and Asylum Bill 1999, I should like formally to state that, in my opinion, the provisions of the Immigration (Leave to Enter) Order 2001 are compatible with the convention rights as defined by Section 1 of the Human Rights Act 1998.
Having explained to the House the purpose and content of this order, as well as outlining how it will work in practice, I shall, if required, do my best to answer any points that noble Lords may care to raise. I beg to move.
Moved, That the draft order laid before the House on 20th June be approved [First Report from the Joint Committee].(Lord Rooker.)
Viscount Bridgeman: My Lords, we support the order in principle. It certainly recognises the considerable increase in traffic through the ports and airports in this respect. The Minister gave us a detailed evaluation of how the two bodies will work together. As regards caseworkers, this proposal is a slight expansion of their current role. However, I am sure that the noble Lord can assure us that they will receive adequate training.
We also welcome the fact that this is a pilot scheme, and that true evaluation will be given to the two projects before the process is rolled out, so to speak. Therefore, as I said, we have pleasure in supporting the order.
Lord McNally: My Lords, as the Minister will appreciate from his recent life as a constituency MP, it is often the latter who can judge best how efficiently any particular process is working. Therefore, it may help the House to hear what the adviser to my honourable friend Simon Hughes on immigration matters observed on this order. He said that the order will make a genuine difference, and that:
"Frequently, cases that are referred to the caseworker and then returned to immigration officers are further delayed, thereby slowing down the process. In principle, we are keen to have a speedier process. That is in the interests of everybody, and particularly those whose claim is being considered".
I believe that that endorsement from the sharp end, as it were, shows that the Government are trying to carry out what they promised to do; namely, to get this process of assessment speeded up, which will result in it becoming more humane.

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However, just in case the Minister thinks that he is getting an entirely easy ride, my honourable friend asked me to repeat the questions that he raised with Ministers in another place. I quote:
"How can someone who is seeking to come to the UK to claim asylum under the law, or to claim their rights under a United Nations convention, legally get here? How does someone in that position travel from another country to this one, without illegally getting on a ship, lorry, train or plane? … At the moment, asylum seekers cannot be given a legal route to get to this country to put their case".—[Official Report, Commons, 7th Standing Committee, 11/7/01; col. 10.]
My honourable friend asked me to raise the matter again, because he has not received satisfactory responses in the other place. As the Minister is getting such rave reviews, he may, indeed, be able to give the answer tonight.
Lord Rooker: My Lords, asking me questions which the noble Lord knows I cannot answer is bound to lead me to drop myself in it. It is true that we do not generally—I emphasise the word "generally"—accept claims for asylum from third countries. The intention of the United Nations protocol on such matters is that people must have a well-founded belief, and so on, and are fleeing from persecution. By and large, they are not exactly stopping off at the first democratic country that they reach. Indeed, that is our experience. Of course, this issue has been raised many times. In principle, asylum seekers should apply for asylum at the first safe country that they reach. By definition, they have to pass through many safe countries before they get to the United Kingdom. I do not believe that I can give an answer that will satisfy the noble Lord, any more than my colleagues in the other place have been able to satisfy Simon Hughes in their response.
However, I am most grateful to the noble Lord for placing on the record the point about support for this important order. There have been tremendous changes in the caseworking directorate. I visited Liverpool this morning and opened the training centre for Caseworking Directorate Liverpool in the old, revamped Cunard building. I should add that people from the Leeds office were also present. It is an incredibly modern facility that will be up and running in August. We have taken on a large number of staff in that part of the world and they have achieved remarkable success in the past 18 months, after starting from scratch. Indeed, some 44,000 decisions have been made. They have gone through a course of training, and will continue with training as the process continues. Of course, many staff at Croydon have done likewise.
It is important that people are fully trained so as to enable them to carry out this important work, because the lives of human beings—indeed, of whole families— rest on such decisions. We must train these people, otherwise we shall not be able to satisfy those who check on us in respect of human rights, and so on. It is absolutely right that we follow that course. We are making every effort to ensure that adequate training will take place.
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To avoid any misunderstanding, I should add that we are piloting the introduction of the scheme; we are not exactly piloting the order. We shall be piloting this as a management tool. We are not starting off all at once, so to speak, because, as one can imagine, we need to ensure that the procedures are correct. However, once the process starts, I hope that there will be less chance of my department losing papers, passports, and documents. As Members of Parliament know, one of the most frustrating experiences when you are chasing a case is to be told, "We've mislaid part of the file". If the files are whizzing round the country in the way that has been the case, one can understand how it happens. It is to be hoped that the implementation of this order will also solve that problem. I commend the order to the House.
On Question, Motion agreed to.

Football (Disorder) (Duration of Powers) Order 2001
7.29 p.m.
Lord Bassam of Brightonrose to move, That the draft order laid before the House on 20th June be approved [First Report from the Joint Committee].
The noble Lord said: My Lords, I beg to move the Motion standing in the name of my noble friend the Minister.
The order, which was approved by a Standing Committee of the other place earlier this week, extends from a period of one year from 28th August 2001 the powers conferred upon the courts and the police under Section 14B (banning orders made on complaint) and Sections 21A and 21B (summary measures) of the Football Spectators Act 1989.
The early evidence strongly suggests that the measures are making a significant contribution to tackling the longstanding menace of English football disorder. That is why a Bill removing the "sunset" clause contained in the 2000 Act will be introduced shortly. This order is required to cover the period during the passage of that Bill through Parliament. There are a number of high risk matches on the horizon and the provisions of the 2000 Act need to be in place to help minimise the risk of serious disorder in Munich when Germany plays England on 1st September and, of course, during the Euro 2004 qualifying matches. There are also bound to be a number of potentially difficult overseas club matches to be navigated in the months ahead.
In accordance with Section 5(5) of the Football (Disorder) Act 2000, a report on the working of the Act during the period from 28th August 2000 to 11th June 2001 was laid before Parliament on 20th June. The report, a prerequisite of the introduction of this order, briefly outlines the background and circumstances which led to the 2000 Act, along with its aims and key provisions. It concludes with an assessment of the impact of the Act during the period concerned.

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If I may, I remind your Lordships of the measures that we are seeking to extend and briefly explain why we think it necessary to keep them on the statute book for a further 12 months. Section 14B empowers magistrates to impose banning orders on individuals who have not previously been convicted of a football-related offence but in relation to whom there is evidence of involvement in violence or disorder.
This complaint process requires the police to satisfy the courts that the person before them had caused or contributed to violence and disorder and—I stress the word "and"—that there are reasonable grounds to believe that the making of an order would help to prevent violence or disorder in connection with football matches.
Sections 21A and 21B provide a different route to seeking an order on complaint during control periods—this is the five-day period prior to an overseas match involving the England or Wales national team or an English or Welsh club side.
Section 21A empowers the police to detain an individual for up to four hours (six with the authorisation of an inspector) where a police officer has reasonable grounds for suspecting that a particular person has caused or contributed to any violence or disorder in the United Kingdom or elsewhere and for believing that imposing a banning order on that person would help to prevent violence or disorder at or in connection with any regulated football matches. The purpose of the detention is to enable the police to decide whether to issue a Section 21B notice. A Section 21B notice requires the individual to appear before a magistrates' court within 24 hours and in the meantime the individual is prevented from leaving England and Wales. The magistrates' court will then treat the notice as an application for a Section 14B banning order on complaint.
The need for these powers can be found in the catalogue of shame that has been inflicted on our national reputation by England followers overseas. The most recent and best documented example was provided during Euro 2000. Notwithstanding extensive precautions, English fans were still involved in significant disturbances in both Charleroi and Brussels. Those preparations were successful to the extent that only one of the 965 England followers arrested during the tournament was subject to a banning order imposed following conviction of a football related offence. Yet subsequent police checks revealed that 40 per cent of those arrested had convictions for offences of violence or public disorder not necessarily connected with football. This provided strong evidence for empowering the courts to impose banning orders (that is Section 14B orders) in circumstances other than on conviction of a football related offence.
The need for the Section 21A and 21B powers was also based on the experience of Euro 2000, which confirmed that the police would not always have sufficient time to pursue the banning order process before the control period for a regulated match or
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tournament had commenced. For example, although the local police may be aware that an individual has caused or contributed to violence or disorder, they will not necessarily know that the individual concerned has an interest in football and intends to follow the national team overseas. We now believe that there is compelling evidence for maintaining Sections 14B, 21A and 21B on the statute book for a further 12 months. It is the Government's view that the provisions of this order are compatible with the European Convention on Human Rights.
The need for adequate safeguards was recognised when the 2000 Act was drafted. As I argued at the time, the measures had to be proportionate. They had to strike a balance between national and international interests and—this is important—individual civil liberties. This, of course, must also include the civil liberties of host populations and well-behaved English supporters who are intimidated by the aggression and xenophobia of some of their fellow supporters.
I am sure that noble Lords will agree that the impact report confirms that the police have adopted a highly targeted, intelligence-led approach to using the new powers. During the passage of the 2000 Act, the then Home Secretary stressed that the powers we are now seeking to extend would not be used arbitrarily: that personal appearance, for example, would not of itself provide grounds for a Section 21A detention; and that an isolated expulsion unsubstantiated by accompanying evidence of misbehaviour would not provide grounds for seeking a Section 14B order. No orders have been imposed solely on the basis of a deportation from Belgium during Euro 2000.
I am also pleased that the measures have been warmly welcomed by governments and police forces across Europe. Indeed, governments across Europe are now considering a recommendation of European experts on football hooliganism that there is a compelling need for an instrument at European level to encourage member states to pass comparable legislation. No doubt we shall hear more of this during the Belgian Presidency.
I am equally pleased that UEFA has been impressed by the good behaviour of English fans since the measures came into force. The threat to exclude English football from European competition was real and remains in place. UEFA has stressed the importance of that good behaviour being maintained. Perhaps most of all I am pleased that, despite potentially high risk England matches in Paris, Turin and Athens and the vast number of fans—I believe that it is in excess of 100,000—who have traversed Europe over the past year in support of our national club sides, there have been only 43 arrests and no significant disorder since Euro 2000. Since Euro 2000, the number of troublemakers prevented from travelling to matches overseas has increased significantly from around 100 to over 450 and the legislative gaps exposed by the disorder during Euro 2000 have been closed.
There is no suggestion that the problem of English football violence overseas has been solved: as I said, a number of potentially high risk matches lie

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ahead. The Government made clear when the measures were proposed that legislation alone could not eliminate the risk of football disorder: in many respects the phenomenon is a symptom of wider social problems. That is why the Working Group on Football Disorder, which I chaired, was asked to identify what could be done to tackle the attitudes and behaviour that prompt disorder. And that is why the Government are committed to seeing its 55 recommendations taken forward. Therefore, we welcome particularly the launch of "Englandfans"—the FA's new England Members Club. The vetting arrangements put in place should ensure that all persons with recent convictions for violence or public order offences will be denied membership and, as a consequence, tickets for England matches overseas.
In respect of the order, the Government recognise that the police and courts are still exploring how best to use the complaint procedure. But the actual number of orders imposed is but one measure of the Act's effectiveness and is by no means the most important. The key aim was and must remain to minimise the risk of further disorder. The early indicators strongly suggest that the measures we are seeking to maintain have made a significant and important contribution in that respect. There have been no significant outbreaks of disorder; fan behaviour has improved; the number of troublemakers prevented from travelling to matches overseas has increased significantly; governments across Europe are considering the introduction of similar measures; and legislative gaps exposed by the disorder during Euro 2000 have been plugged. Importantly, the Act is being applied in a targeted and proportionate way. To lose the powers at this early stage would send out entirely the wrong message both to any supporter tempted to misbehave and to authorities and police forces across Europe.
Moved, That the draft order laid before the House on 20th June be approved [First Report from the Joint Committee].—(Lord Bassam of Brighton.)
Viscount Bridgeman: My Lords, we on this side of the House supported the fast passage of the original Bill. The order, which is a holding order until the new Bill comes before us, is very much to be welcomed.
I congratulate the noble Lord, Lord Bassam, on the comprehensive report which will form a useful tool for the formulation of the new Bill. We agree with the Minister that the operation of the measures has been remarkably successful overall. However, with the increased sophistication of electronic communications and the use of mobile telephones by known troublemakers, we must always be on our guard. I am sure that the new Bill will take account of that.
My honourable friend Nick Hawkins, who should have declared an interest as a keen cricketer, pointed out in another place that, since the order has come before us, there has been a regrettable and unexpected series of disturbances at cricket matches. Will the Government consider extending the legislation to
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include other sports, of which cricket is the most topical? In other respects, we very much welcome the order.
Lord Phillips of Sudbury: My Lords—
Lord McNally: My Lords, I shall probably have to have a restraining order on my noble friend Lord Phillips. I thought that I had better get in first to make it clear that the Liberal Democrats accept the need for a renewal. It would be wrong not to give an extension at this point. However, as I suspect that my noble friend is about to tell the Minister rather more forcefully, we are still worried about some of the civil liberties implications of orders that can sweep up the innocent as well as the potentially guilty. We also feel that the issue goes wider than sport. Some of the people who are the prime causes of anti-social behaviour are not really connected with football, but use it as a vehicle for violence.
I should like the Minister to elaborate on a number of points. The order provides for a one-year extension. He said that legislation would come shortly. Will he give us an idea of how short "shortly" is? As the noble Viscount, Lord Bridgeman, asked, is the new legislation likely to have a broader focus on sports disorder rather than dealing only with football? The disturbances at recent cricket matches show that the problem could spread to other sports.
Is there any pattern in the discretion used by police forces? Have some been more zealous than others in using their powers? Has that been examined?
Looking around the Chamber, this is a little like a reunion. It is nostalgic to see the Minister in his place. Our doubts about the legislation centre on the fact that some of the claims for it are still like the old claims for elephant dust—you spread the dust around and there are no elephants. We have passed an Act and, lo and behold, there is no disorder. I am not sure that the relationship is quite so direct. Let us keep the Act on the statute book, but I hope that the Government keep up the momentum that the Minister's committee produced.
In some ways, I would like that committee to sit again in the medium term to take stock of what is happening. There are other issues to consider. Has there been any study of best practices by host countries? Should bars be open or closed? I imagine that host countries will have mixed feelings about that, because we are talking about a lot of custom for them. Are there any lessons to be learnt from countries that have closed bars within a certain radius of grounds? Ticket touting has also been a cause of disorder and conflict, with tickets getting into the wrong hands and segregation being broken down. As well as looking at the hooligan element, there are some best practices that should be encouraged across Europe.
One example of best practice that we welcome is the introduction of Englandfans. The old so-called supporters association was a cover for some very nasty elements. The action that has been taken is welcome, if perhaps a little belated.

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We know how delicately we have to tread with any suggestion of interfering with the media, but it is worth putting on the record that it is no use bemoaning the bad behaviour of England fans if, in the 10 days before a game, our popular press has tried to present it in terms of World War III or described opponents with Second World War stereotypes. The media have a responsibility to remind everyone, especially the fans, that it is a beautiful game, but it is still only a game.
Lord Woolmer of Leeds: My Lords, I, too, welcome the order. I congratulate my noble friend the Minister on his close and effective interest in the concerns of football clubs and supporters and of the general population, both at the time of the original order and subsequently. I thank him for that and I know how much it is appreciated in the football world.
Before I make one or two cautionary remarks and raise one or two questions, I shall deal with some of the points that have already been raised in this brief debate. The noble Viscount, Lord Bridgeman, shrewdly referred to the Internet and its potential use. We are moving towards the qualifying games for Euro 2004 and we hope that our teams will participate in the tournament finals, which my noble friend Lord Faulkner of Worcester, who is usually well informed on these things, tells me will be in Portugal. Attempting to control access to Portugal for a month will be a very different animal from managing one-off games. There is a lot of work to be done, including the important task of monitoring Internet traffic.
My welcome for the provisions is cautious, because the real tests are yet to come. The noble Lord, Lord McNally, hinted that he might like broader measures introduced for other sports such as cricket. The situation for cricket is not the same. We need to start by looking at the effects of drinking for six straight hours a day. A few years ago, drink was banned for a whole test match at Headingley. Many of us who were used to the existing culture were annoyed, but the measure made an enormous difference to behaviour at the game. That is a start and does not require the full majesty of the law to chase down alleged troublemakers at cricket matches.
I have one or two questions for my noble friend the Minister arising from the report, which I found very useful. I take it that the table in paragraph 19 refers to the number of individuals who have had an order made against them. I understand that the total is 468. In one sense, I was pleasantly surprised that only 44 orders had been made under Section 14 and only 30 applications for orders had been made under Section 21. If that demonstrates that highly targeted intelligence has a big leverage effect, I am delighted.
However, those figures provide a mental word of caution that there are significantly more than 78 or 80 hard-nosed, hard-headed troublemakers in and around the football world. In looking to Euro 2004 and the World Cup qualifier, which is to take place this year in Germany, the Act is only just beginning to bite and much caution must still be exercised.
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The table in paragraph 19 refers to the issuing of notices preventing travel and the initiating of complaint banning order proceedings. It would be helpful if my noble friend could give the House a flavour of how the Act has been implemented in relation to Sections 14 and 21. What has been the nature of objections? Have magistrates always supported the application orders? What type of issues, if any, of a civil liberties nature have arisen? Given the relatively small number of orders issued thus far, my guess is that they have been very carefully targeted and have been aimed at sure-fire winners. However, it would be helpful to have a feel for that so as to know whether our concerns about civil liberties have received a germ of care.
Incidentally, I note from the appendix that, so far as concerns individual clubs, Leeds United games attracted the largest number of banning order notices. Although the notices amount to only some 25 or 45, which, in one sense, is a very small number, nevertheless the matter is obviously of concern to me as a long-standing and closely associated supporter of Leeds United.
Of course, the number of notices issued shows that a relatively small number of people can make a great deal of difference to the amount of disruption that occurs. However, I say to my noble friend that those of us who attend football games regularly, as I suspect many of us do, find that there is an ongoing tenor of violence and racism, with violent and totally antisocial language, which remains to be dealt with. That is not a matter that can be dealt with only in law; it must be dealt with by the clubs themselves.
My noble friend and the Minister concerned may not have seen the leaflets and material issued by Leeds United this year. The language in that material is as forthright and plain as possible and shows that such behaviour is simply not wanted and will not be tolerated. Football clubs are private clubs and can do what they want within the law. I hope that they will take action and follow the example of the Government.
It would be helpful to know what has happened to many of the 55 recommendations. I believe that my noble friend Lord Faulkner of Worcester is equally, if not more, interested in the outcome of the working group set up by my noble friend.
I conclude by welcoming the order. I look forward to further discussions on how it might be taken forward on a more permanent basis. Meanwhile, I hope that the House will approve the order tonight.
Lord Phillips of Sudbury: My Lords, a rather insidious rumour is circulating around the House that the Liberal Democrat Benches have become a smooth and cohesively functioning political force. Perhaps I may put noble Lords' minds at rest. Although I had believed that I was speaking for the Liberal Democrat Benches on this matter, I have discovered that I am not because I am strongly opposed to the renewal of this Act.

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I believe that the whole point of introducing a sunset clause was to ensure that, if we renewed the Act, it would be on the basis only of compelling evidence that it was a necessary piece of legislation. When we discussed the Bill, there existed across the House a rather strong coalition of individuals who were deeply concerned about the Football (Disorder) Bill. That concern arose precisely because of the civil libertarian aspects which are at the heart of the Bill and which are unprecedented in our law.
Although the noble Viscount referred to the fact that, during its passage, the Bill had the support of the Conservative Front Bench, I believe that it is perfectly fair to remind the House that the majority of Back-Bench speakers on the Conservative side were hotly opposed to it. They included a wide range, extending from the noble Lord, Lord Tebbit, at one end to more normal civil libertarians at the other. I am probably being unfair to the noble Lord, Lord Tebbit. I can see that noble Lords believe that I am. I withdraw that remark at once.
I want to say briefly why many of us believed very strongly that the measure should never have hit the statute book. First, not only can a banning order be made where there is no football-related conviction—I make it clear that, where there is such a conviction, the notion of a banning order is perfectly acceptable—but the measure allows a banning order to be made where there has been no previous conviction. It allows a banning order in respect of lawful conduct up to 10 years in the past. It also allows a banning order to be imposed on a civil test—that is, on a balance of probabilities—rather than on the normal criminal test of "beyond reasonable doubt". Finally, the measure does not contain the defence which is at the heart of the Crime and Disorder Act 1998; namely, that the conduct was reasonable in all the circumstances.
In other words, the conduct in respect of which the application for a banning order is made could none the less be held to be reasonable in all the circumstances so as to defeat the application for a banning order. Those four matters constitute a unique set of objections to a measure, which, I repeat, is without precedent in English law.
With regard to the working of the Act in the period from August last year to 11th June this year, what do we find? The noble Lord, Lord Woolmer, put his finger on it. Only 44 banning orders have been made on complaint under Section 14B or indirectly under Section 21B. That is out of a total of 468 banning orders. The noble Lord, Lord Woolmer, mentioned the 30 notices which have been issued under Section 24B. However, I believe that I am right in saying—I believe that the Minister will back me up—that those 30 come within the 44 orders made.
As the report states, one must consider that more than 100,000 English fans travelled to matches and tournaments abroad during that period. I put it to the House that that does not provide evidence of a brilliantly focused piece of legislation which has clinically picked off the troublemakers. I put it to the
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House that it is clear evidence of a measure that is not needed and, indeed, is not used. The overwhelming majority of banning orders are in respect of football-related offences.
Perhaps the noble Lord, Lord Bassam, would be good enough to refer to one matter when he replies. How many of the 44 orders issued were in respect of people on the FCIS list of known troublemakers? The answer would be extremely telling. Noble Lords may remember that, when we discussed the matter when the legislation was passed in the wake of the Euro 2000 fracas in which 900-plus British fans were expelled from Holland and Belgium, even then only 30 of the 950-odd fans were on the FCIS list. Therefore, with regard to warranting the continuance of the legislation, I do not consider that we have come anywhere close to the test that I believe was implicit when we put a sunset clause into the Bill.
I turn to the report, which states that there are several interrelated reasons why English fans appear to have adopted better behaviour during the interim period. One reason is because the,
"fans themselves are 'sick and tired' of the trouble".
The report continues,
"many host police forces are adopting low friction tactics",
and it points out that:
"The safety of visiting English fans is increasingly featuring as a higher planning priority".
There is no evidence to suggest that football fans are aware of this extremely complex piece of legislation. The noble Lord, Lord Faulkner, said that they certainly are aware of it but I should like to see evidence of that; I am not willing to accept the claim without any backing.
When the noble Lord, Lord Bassam, introduced the order, he began by saying that so far as could be gathered the evidence strongly suggests that Sections 14B and 21B are making a significant contribution—I believe that those were his words—and he later talked about "compelling" evidence. I do not believe that there is compelling evidence or even strong supporting evidence in that regard. We should attend to the basic legal objections relating to this offence, which is unparalleled and extremely dangerous, particularly because it apparently makes what is in truth a criminal offence a civil offence. I am afraid that I have to object to the renewal of the legislation.
I close by reminding the House that I tried to help when the Act was discussed last year by suggesting that extra territoriality should apply in relation to our football offences—those who breached the provisions abroad could be tried and prosecuted in this country. I still think that that would have a most effective result. The approach would be highly publicised and it would allow us to use tried and trusted public order legislation and the like.
For those reasons I regret to say that I am strongly opposed to the Act's renewal, even if only for one year. I should have been much happier if the noble Lord, Lord Bassam, and his working party, which came up

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with 55 recommendations, had continued their work. The measures that are referred to in the report made the difference in the interim.
8 p.m.
Lord Faulkner of Worcester: My Lords, I congratulate the noble Lord, Lord Phillips of Sudbury, on one thing at least; namely, his consistency. Those of us who are veterans of the one genuine all-night sitting that I have experienced during my two years in your Lordships' House will recall that he spoke with the same passion and conviction during those very long hours when we discussed the legislation almost exactly a year ago.
In view of what happened during the past year and, in particular, the preceding years, I am absolutely amazed that the noble Lord opposes the order. The legislation was necessary because an immediate response was needed to the events that occurred in Brussels and Charleroi during Euro 2000. They followed a succession of appalling incidents of crowd disorder involving England fans going right back to those in Luxembourg in 1977. Paragraph 2 of the Home Office report to Parliament details all such incidents; I need not read them out tonight.
If we had not agreed to the Football (Disorder) Act 2000, one more incident involving disorder among England fans when the England team was playing abroad would almost certainly have led to its expulsion from UEFA competitions and possibly from FIFA World Cup matches and English club teams would not have been allowed to play in Europe. It is greatly to the credit of the Government and in particular my noble friend Lord Bassam that that tide has turned. With great steadfastness, my noble friend steered the legislation through this House and he chaired the working group on disorder, which produced 55 recommendations.
Something could go terribly wrong at the match in Munich on 1st September, when the England team plays a crucial match against Germany. However, like all noble Lords, I desperately hope that that will not be so. I am confident that the chances of disorder were reduced by the enforcement of the legislation. If the legislation had not been introduced there would be a risk that an event like those that occurred in many European venues during the past 15 years could have recurred in Munich.
Noble Lords referred in particular to one of the recommendations of the working party chaired by my noble friend Lord Bassam. I was privileged to serve on that group and I hope that I made a modest contribution to it. That recommendation involved the decision by the Football Association to disband its old England members' club. That was not an easy decision for it to take; the club involved a cosy arrangement that meant that people who went regularly to matches could be sure that by continuing their membership they would go on getting tickets for matches. However, many people who were members of the old club were also at the heart of the disorders that occurred in World Cup and European championship
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matches during the 1980s and 1990s. If the working party's endeavours have managed to exclude from the new England fans' club those people, its work will have been worth while. Such people display extreme forms of xenophobia, they are often appallingly racist in their language to foreigners, black people and other minorities, and they have all the other unpleasant attributes that are associated with the extremism that accompanied England's fans during the past 20 years. The working party's other 54 recommendations are also relevant.
I unreservedly welcome the order and hope that it will be agreed to. I look forward to the more substantial permanent legislation that was promised in the gracious Speech. I was interested by the fact that the noble Viscount, Lord Bridgeman, and the noble Lord, Lord McNally, raised the question of disorder at cricket matches. I raised that matter two weeks ago at Question Time. I have to say that I did not get a great deal of support from anywhere in the House for suggesting that the offences that were proscribed by the Football Offences Act 1991—particularly those relating to hurling objects, including fireworks, on to a pitch and encroachment on to the field of play—might be extended from football to cricket. However, when we consider the more permanent legislation—we will presumably do so later in this Session—we can discuss that matter and decide whether, as the noble Lord, Lord McNally, suggested, we should have a sports offences Act and not simply a football offences Act.
I have attempted to reply to the noble Lord, Lord Phillips, with whom I shall never agree on this matter. I welcome the Bill and extend my congratulations to the noble Lord, Lord Bassam.
Lord Bassam of Brighton: My Lords, I begin by thanking those noble Lords who made kind comments on my work in this area and stress how much those comments are appreciated. I intend to take a continuing interest in this matter, not least because I am a football fan and also because the problem requires continued thought. It involves the search for solutions to long-term problems. Hooliganism, after all, has been with us for some 20-odd years. I remember the first nasty outbreaks when I watched football as a teenager. We need to bear down on the problem at all times and find genuine answers. Such answers cannot be provided only through legislation; I do not believe—I did not believe this when we passed the Act last year—that law of itself will solve all of the problems. That was why I was particularly insistent that a working party should examine some of the problem's underlying causes and try to tackle them.
Noble Lords asked pertinent and valuable questions and I shall try to answer as many of them as I can this evening. The noble Lord, Lord McNally, asked when the legislation would be introduced. I suspect that it will be introduced sooner rather than later. The noble Lord, Lord Phillips, touched on one reason for that; namely, that would ensure that there was adequate time to debate and carefully consider the provisions. As a civil libertarian myself—I do not see why the

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noble Lord should have a monopoly in that regard— I believe such matters should be given careful consideration. We are, after all, dealing with important powers which will impinge on people's civil rights and civil liberties.
The noble Lord, Lord McNally, asked whether some forces were more zealous than others. My guess is that some probably are, perhaps because they have an abundance of football clubs—perhaps some of the higher profile clubs, such as Leeds United, Manchester United or Arsenal—in their area. They may therefore take a keener interest in all aspects of the legislation. They have probably got dedicated units that spend quite a lot of time working on the issue with clubs, fans and so on. They will seek to use the powers as and when they are required.
As to the future of the working group, interestingly when I went to speak to John Denham—the new Minister with responsibility for it—I made the point that it may be important to reconvene the working group to check on the progress of the 55 recommendations. Clearly, there has to be a follow-through. I hope that in the future there will be further reporting to Parliament, not just on the effectiveness or otherwise of these measures but on the way in which the programme is being implemented.
The noble Lord, Lord McNally, asked about best practice. I think best practice is being developed, not just here but across Europe. When I have travelled abroad and talk to representatives from the football authorities they look very closely at what we are doing. They pay close attention to the measures we have introduced. I think that they are becoming much more aware of the need to develop more intrusive links into the football community to ensure that the sorts of problems we have had over the last 20 years or more do not emerge in the violent way in which they have from time to time.
One of the more important measures in the report put in place has been the taking apart of the England Members' Club and its reformulation into England fans. I thought the Football Association was particularly brave in seeking to limit the number of tickets to be made available to members of the new club. I think that will have an important impact on the distribution of tickets and perhaps limit the number of people who try to get around the controls on tickets and abuse the right and privelege of having a ticket to an important top-class football match.
The noble Lord, Lord Woolmer, made a very sensible point that probably the real test is to come. We will be foolish if we ignore the importance of the England/Germany game on 1st September. I argued earlier that it was important for these measures be restored for that game and that we should ensure that they are in place. I certainly believe that to be the case.
The noble Lord, Lord Woolmer, also referred to paragraph 19 in the table—I think his understanding of it is the same as mine. It contains important and significant detail. He also asked what sort of evidence
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was brought forward at cases. Cases have to be very carefully prepared. In itself, that has acted as an important balance or check in the way the police and courts have used these powers. The Act makes plain what sort of examples can be used in support of a complaint—overseas court decisions, deportations or exclusions from a country outside the UK, removal or exclusion from football grounds in the UK or elsewhere and conduct recorded on video or other means.
I think it is the case that evidence collected in the disturbances involving Arsenal fans in Copenhagen has probably been used in court to attempt to secure a banning order. The police have been very careful and targeted their efforts in this regard. It is in that context that I find the comments of the noble Lord, Lord Phillips, challenging, because I think the Act has begun to work. It has had a salutary impact on the behaviour of travelling football supporters. It will make an important contribution to ensure that we have a more peaceable, if not partisan—and I hope they are partisan and enthusiastic—body of supporters travelling abroad when they follow England and the Welsh national side and club sides.
The noble Lord said that there was no compelling evidence. The history of the last year or so provides that compelling evidence. The balance has been struck, rightly, as far as civil liberties are concerned. While it is true that the courts are only obliged to apply the civil test when considering the evidence, I think it is the case that magistrates are erring on the side of considering it in a criminal context and raising the threshold of evidence with which they are confronted. That is very important. The noble Lord may want to study some of the cases more closely. I am not going to give chapter and verse in each case from the Dispatch Box—that is not for me and not my responsibility or that of my party.
Lord Phillips of Sudbury: My Lords, I am obliged to the Minister for giving way. He made a very important remark. As he knows, one of the core issues is that of the criminal or civil test. I think I heard him say he thought that in a lot of cases magistrates were applying the civil test but that it was edged up towards the criminal one. I should be grateful if he would let me know whether that is a hunch or whether it is based upon fact.
Lord Bassam of Brighton: It is a hunch, my Lords. But if the noble Lord talked to prosecuting authorities, I think they would probably say that is what they were experiencing in bringing cases forward. The noble Lord is an experienced criminal lawyer. If he attended one of the courts where these cases were brought, he would probably find that likely to be the case.
The noble Lord asked about the FCIS list—I think he is referring to NCIS. I cannot give him the information for which he has asked this evening. I shall ask officials to have a look at that to see what other information can be brought forward.

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The noble Lord also referred to the proposal he made when we were considering the legislation. At the time I was struck by the suggestion and thought it to be an important one. It has been looked at again. The noble Lord and I had a meeting about the issue—why not have extra-territorial jurisdictions? There is a question of practicality here. We have a reservation in respect of Article 21 of the European Convention on Mutual Assistance. This means that extra-territorial proceedings can be pursued only if explicit statutory provision is made in respect of the offence concerned. At present, as the noble Lord is probably aware, this is limited to serious offences such as murder, manslaughter and certain sexual, terrorist and cyber crime offences. The vast majority of football-related offences are of a relatively minor public order nature, although they are serious in their impact—certainly collectively serious—on host nations.
Extra-territorial proceedings have never been an integral part of the law in the UK, largely because it is extremely difficult to secure convictions. I invite the noble Lord to consider these points. There are a number of practical reasons. The requirement of our justice system for oral evidence makes it difficult. The need for evidence to be gathered equivalent to British evidential standards is another important consideration; and within this the need to transport witnesses from the overseas jurisdiction to a court within our own jurisdiction. Also to be considered are the difficulties in obtaining the necessary documentation from overseas authorities. Those four points are very serious. They would need to be addressed urgently if we were to give further consideration to the point the noble Lord made at the time of the legislation.
The other issue raised during this short debate was the relationship between these powers and the recent cricket disorders. I answered a Question recently on this from the noble Lord, Lord Faulkner—quite properly asked. It touches on an important subject. We do not think it would be appropriate to pursue the course we pursued with football-related disorder in so far as cricket and other sports are concerned. We have had discussions with the cricket authorities. It is obviously something that will be kept under review. No doubt your Lordships will return to this subject when the Football Bill comes before the House for further debate and discussion later in the year.
This has been a good opportunity to air views on the issue. I welcome the all-party support with one notable and distinguished dissenter—and long may he dissent on this issue; it focuses all our minds. I am grateful for the warm support given to the Government's measures. I would like to pay tribute to the noble Lord, Lord Faulkner, for his support and his active participation in the working group, which produced many worthwhile and important recommendations. I commend this matter to the House.
On Question, Motion agreed to.

International Criminal Court (Immunities and Privileges) Order 2001
8.20 p.m.
The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Baroness Amos)rose to move, That the draft order laid before the House on 20th June be approved [First Report from the Joint Committee].
The noble Baroness said: My Lords, in moving this order I shall speak also to the draft Specialised Agencies of the United Nations (Immunities and Privileges of UNESCO) Order 2001 laid before the House on 25th June.
The International Criminal Court Bill received Royal Assent on 11th May 2001. The present draft order is one of a series of items of secondary legislation to prepare for ratification of the Rome Statute of the International Criminal Court. The Rome Statute was signed on behalf of Her Majesty's Government on 30th November 1998 and presented to Parliament as Command Paper 4555. This draft order implements Articles 4(1) and 48(2) of the statute. In addition to conferring the legal capacities of a body corporate on the court, the order provides that the judges, the prosecutor, the deputy prosecutors and the registrar shall, when engaged on or with respect to the business of the court, enjoy the like privileges and immunities as are accorded to the head of a diplomatic mission, as well as official act immunity after the expiry of their terms of office.
The International Criminal Court (ICC) will be a permanent court situated in The Hague, to try individuals for some of the most serious crimes known to mankind: genocide; crimes against humanity; war crimes and perhaps in the future the crime of aggression. There have been aspirations to the creation of such a court for the past 50 years, since the United Nations was founded in 1945 and after the Nuremberg and Tokyo military tribunals.
The ICC will have jurisdiction over individuals, not states. The court will be able to prosecute not only those who carry out crimes, but those in authority who order crimes to be committed—including Heads of State and government officials. The ICC will work as a court that is complementary to national courts. National courts will retain primary jurisdiction. The ICC will take over investigating and prosecuting a crime only when the states with jurisdiction are unable or unwilling, genuinely, to do so.
The ICC will consist of a chamber of 18 judges divided into pre-trial, trial and appeals division, an independent prosecutor and a registry. The ICC statute contains detailed provisions safeguarding due process and fair trial in accordance with the highest international standards. The ICC may sentence individuals to terms of imprisonment of up to 30 years or, where justified by the extreme gravity of the crime and the individual circumstances of the convicted person, life imprisonment. Fines and forfeiture of proceeds from the crimes in question may also be ordered.

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Funding will be through contributions from states parties to the court and it will receive some funding from the United Nations (in particular where the UN Security Council has referred a situation).
I am satisfied that the order is compatible with the rights contained in the European Convention on Human Rights. This order is one small part of a legal jigsaw, important but I believe non-controversial. I trust that your Lordships will approve it.
I now turn to the second order. The United Kingdom rejoined the United Nations Educational, Scientific and Cultural Organisation (UNESCO) on 1st July 1997. The present order is required to restore to UNESCO the immunities and privileges provided for by the 1947 Convention on the Privileges and Immunities of the Specialised Agencies of the United Nations (Cmnd. 855).
Before the United Kingdom withdrew from UNESCO on 31st December 1985, the relevant immunities and privileges were conferred under the Specialised Agencies of the United Nations (Immunities and Privileges) Order 1974 (S.I. 1974 No. 1260). The 1974 order is still in force but, as a result of UK withdrawal from UNESCO, automatically lapsed in respect of that organisation. The new order makes provision for the 1974 order to apply once again to UNESCO in accordance with its terms.
I am satisfied that the order is compatible with the rights contained in the European Convention on Human Rights. I beg to move.
Moved, That the draft order laid before the House on 20th June be approved [First Report from the Joint Committee].—(Baroness Amos.)
Baroness Miller of Hendon: My Lords, on this side of the House we support both orders.
Lord Goodhart: My Lords, we also support these orders. We have always strongly supported the creation of the International Criminal Court and we also welcome the now changed circumstances of UNESCO, and that the United Kingdom has returned to take its seat there.
I should like to make one brief point on the International Criminal Court. It is my understanding that the rules of the International Criminal Court are to be prepared by a working group which is composed of representatives of the first 30 states to ratify the statute. We have now missed that target—I believe 36 have already ratified. I regret therefore that it was not possible to speed up the ratification to ensure that we got into the first 30. Having said that, we are entirely happy to support the two orders.
Baroness Amos: My Lords, I thank noble Lords for their support. I can confirm that 36 states have now ratified.
On Question, Motion agreed to.

Specialised Agencies of the United Nations (Immunities and Privileges of UNESCO) Order 2001
Baroness Amos: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the draft order laid before the House on 25th June be approved [First Report from the Joint Committee].—(Baroness Amos.)
On Question, Motion agreed to.

Sub-Post Office Start-Up Capital Subsidy Scheme Order 2001
8.26 p.m.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)rose to move, That the draft order laid before the House on 25th June be approved [First Report from the Joint Committee].
The noble Lord said: My Lords, the network of Crown and sub-post offices plays a vital role in our society. Many of the vulnerable and elderly rely on it to deliver services to them, as well as it being a convenient place for the community as a whole to access government services, financial products and, of course, postal services.
The network is much more than just a retail outlet, especially in rural areas. It is also a public service. The local sub-post office represents vital human contact for many of its customers. Sub-postmasters know their clients by name, and can often be the first ones to raise the alarm if an elderly customer fails to collect their pension. They are a trusted point of contact with government. And the local post office is often the only place where the community can easily access cash.
I am sure noble Lords will want to join me once again in placing on record our thanks for the service to their communities that sub-postmasters and sub-postmistresses perform. This is a network built on the dedication of individuals. Yet ironically, that can also be one of its weaknesses. When an individual sub-postmaster decides to retire, Consignia is in a position where it must find an alternative person to take on that business. A new sub-postmaster must be found.
Consignia has begun to make setting up as a sub-postmaster more attractive—for example, by dropping the initial payment sub-postmasters were required to provide before taking on an office. The Government are also committed to ensuring that the network is a viable business and that running a sub-post office is and remains an attractive business proposition.
For example, new life will be injected into the network through two business streams identified following last year's Performance and Innovation Unit report: Universal Banking Services and the Government General Practitioner scheme. The GGP scheme will be piloted from this month in Leicestershire and Rutland. A further range of new

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services, including access to stakeholder pensions and entering into the fast-growing market of e-retailing and home shopping is being added to this.
The Government recognise the need for both short-term and longer-term support to assist the network as it seeks to build these new income streams. We are supporting the network through the introduction of three specific schemes. The first two look to the future. One will implement the PIU recommendation that in urban and suburban areas there should be better, brighter offices. The second will provide transitional funding to cover the gap between the payment of benefits direct to bank accounts (ACT) and the new income streams coming fully on line. The third, a short-term measure, is the subject of this order which has been brought forward to address the very specific circumstances that I will outline.
Often, someone can be found to be the new sub-postmaster and the existing premises will still be available to be used as the post office, but that is not always the case. Sometimes, although someone may be willing to become a sub-postmaster or a group of volunteers may want to preserve an important local service, there may not be an available facility. The retiring sub-postmaster may not be willing to make the premises available, or, if he or she is willing, alterations may be required to separate living and retail accommodation. Alternative premises, such as a church or a community hall, may be available, but may need to be made suitable by, for example, upgrading security.
Post Office Counters has an established team dedicated to preventing the closure of rural sub-post offices. The team is often frustrated to see a worthwhile and well-thought out community initiative to save its post office fall at the last hurdle for the sake of a relatively small amount of start-up capital funding. A. few thousand pounds may be needed to improve security or access to the premises, or to install a counter. Those are small sums, but to a small community seeking to raise funds on a voluntary basis, they can seem like mountains to climb. The plans get put on hold, and so the community loses its post office.
The scheme set out in the draft order addresses this problem. It will make available funding for the preservation of existing post offices in rural areas or their replacement. This scheme was first announced in another place by my honourable friend Alan Johnson on 15th February 2001. Following its announcement, my department wrote to all 12,000 parish and community councils across the country to draw their attention to the fact that we planned to make this funding available. The response has been very encouraging. We have received many expressions of interest and a number of specific suggestions and ideas as to how the money could be applied. Indeed, Post Office Counters has already signalled that it is prepared to fund two local schemes where the need is particularly urgent on the understanding that the Government were to bring forward this order for debate.
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Before I give some details of how the scheme would work, I believe it would be helpful to give an example of the kind of communities that may benefit from this fund. A typical example is Capel le Ferne in Kent, where the community wants to re-establish its post office in the village hall. Modifications to improve access and security and to extend the hall are planned; the villagers have raised £3,000 towards the cost with a "buy a brick" campaign and the local authority has also promised to give assistance. However, there remains a gap that this scheme should be able to fill.
I now turn to the detail of the scheme. The scheme is established under Section 103 of the Postal Services Act 2000, which allows the Secretary of State to make a scheme for the making of payments for the purpose of,
"assisting in the provision of public post offices".
The scheme itself will establish a £2 million fund to make available subsidy in respect of the costs of establishing a sub-post office in settlements with fewer than 10,000 inhabitants where an existing sub-post office has recently closed or is likely to close. We used the Countryside Agency definition of a rural settlement, which was also used by the PIU last year. We have deliberately targeted rural settlements, because in such settlements the loss of a sub-post office has the greatest impact on the community and often a convenient alternative is unavailable.
That new commitment underpins the PIU conclusion that the Government should place a formal requirement on the Post Office to maintain the rural network. We have done so, and the scheme backs up the policy with carefully targeted capital funding.
We have worked closely with Post Office Counters and we have involved the National Federation of Sub-Postmasters, PostComm, PostWatch and the devolved administrations in the development of these proposals to ensure that the scheme targets deserving cases effectively.
The scheme provides for subsidy of up to £20,000 to be paid in any particular case. Post Office Counters advises us that in many cases the amount of money needed to save a post office is small. We expect the fund to help to secure the future of up to 200 community-based sub-post offices. It is not intended to be an ongoing source of funding. The scheme is part of the package to bridge the "confidence gap" in the network until the longer-term finances of the network, with new income from Universal Banking Services, the Government General Practitioner and the other income streams and a framework for government funding of the rural network, are in place.
It is essential that the scheme dovetails with the existing arrangements within Post Office Counters to preserve the rural network. The business has appointed a senior manager to oversee the work and has established a dedicated team of rural transfer advisers. That is why we have proposed that the scheme is administered on our behalf by Post Office Counters. Subject to agreement to establish this scheme in this House and in another place, the

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Secretary of State will write to Post Office Counters to appoint the company to operate the scheme and to set out in detail how the scheme is to be run.
Post Office procedures for seeking a replacement sub-postmaster are well established and documented in a code of practice agreed with the postal services consumer council, PostWatch. The scheme before this House integrates with those existing processes, so that potential new sub-postmasters will be able to liase with a single unit in the company rather than being passed around between the company and the Government.
The company seeks, first, to find a commercial solution, advertising the post office business widely. Where no candidates come forward on a commercial basis, local authorities and local community organisations are approached to see whether a community-based solution can be found. Many communities succeed not only in devising a means of saving their post office, but also in securing funding from local sources. It is important not to stifle such initiatives, so this scheme is designed as a top-up scheme, either to make good a shortfall in funds raised from other sources or, where it is clear that the community has tried to raise funds but has not been successful, to fund the full cost of the work.
Noble Lords may notice that the scheme avoids pinning down in great detail the circumstances in which a payment may be made. Paragraph 4 sets out the circumstances which the scheme is intended to cover, but we have been conscious that every case for funding will be different and we have sought to avoid a scheme which inadvertently rules out a payment for a good case just because we had not thought of that particular solution. Therefore, the scheme builds in some discretion in Paragraph 6 which will allow those on the ground to reach sensible decisions, on a case by case basis, on whether they should be funded. The Post Office Counters team evaluating the applications will take into account attempts made to raise funding from other sources, value for money and the proximity and convenience of alternative post office facilities.
This is an important scheme. It is a key element in our strategy to support the network of rural sub-post offices through a transitional period and to see it thrive. It will allow rural communities to save their local post office or to make arrangements to have an alternative. More than that, it recognises the vital role that post offices play in our communities.
I, therefore, commend this order to noble Lords and I hope that this House will be able to give it, and post offices in rural communities, its support. In doing so, it is the practice for a Minister inviting Parliament to approve a draft statutory instrument to volunteer a view regarding its compatibility with the convention rights as defined in Section 1 of the Human Rights Act 1998. In my view, the provisions of the draft order are compatible with the convention rights. I am extremely pleased that the noble Lord, Lord McNally, is present to hear me say that. I beg to move.
Moved, That the draft order laid before the House on 25th June be approved [First Report from the Joint Committe].—(Lord Sainsbury of Turville.)
Baroness Miller of Hendon: My Lords, last February the Government announced new initiatives for the sub-post office network by encouraging new entrants. Those initiatives are welcomed by the National Federation of Sub-Postmasters on the basis that all contributions are gratefully accepted. The initiative that we are discussing today, and the one described by the Minister as the third, according to the DTI press release was:
"a new Government fund to help with the costs of relocating and refurbishing rural post offices".
The brief went on to say that the aim is,
"to help support initiatives by volunteers and community groups to maintain or re-open post office facilities where the traditional post office is closing".
This is a massive exercise in bolting stable doors— and precious few stable doors at that, according to the same press release, because the Minister confirmed that we are talking about establishing up to 200 community post offices in the UK and no more.
Rural post offices are closing because they are invariably housed in the local community shop which is currently suffering from the fierce competition from the giant supermarkets. The changed shopping patterns of the public mean that these days they often go to the out-of-town shopping centres for what they call their weekly "big shop" and simply use the village shop as a convenience store for when they run out of something or want to buy their newspapers. For people without their own cars, the disappearance of the village shop is an absolute disaster.
For many, the local shop is their only means of getting their hands on cash. But the threatened discontinuance of the payment of benefits via the post office—is not only a source of direct income to the post office but means that customers drawing their pensions or other benefits are likely to spend some of the money in the shop—is a major reason why so many sub-post offices are closing.
The Government's scheme will save the Treasury a theoretical £400 million a year. That is money taken directly out of the pockets of small businesses and out of the local economy. I say "theoretical" because an untold number of businesses will close; thousands of people will be thrown out of work in rural areas where there is no other employment and the taxes paid by the lost businesses will cease.
The short-term gains by the Treasury will be outweighed by the costs it will have to bear. And meanwhile small businesses will have been destroyed, the public put to enormous inconvenience; and they will have suffered the loss of essential amenities.
What do the Government offer in return? All they can offer is jam tomorrow from the income streams that they hope will become available in 2003 to keep sub-post offices open. That is a long time ahead and the sub-post offices are closing at an alarming rate. One of the streams which the noble Lord mentioned is

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the so-called "universal bank". The commercial banks are seemingly not falling over themselves to bail out the Treasury from the problems it has caused by strangling the sub-post offices.
By 2003, if the average decline continues at the same rate, another 1,000 post offices—more than 5 per cent of the present depleted network—will have closed their doors forever. All the Government can do is to offer this miserly one-off sum of £2 million.
Naturally, I welcome the assurance given in the other place to my honourable friend the Member for South West Hertfordshire that benefit claimants will be able to receive cash over the counter. However, to that I must add the qualification, "So long as there is still a counter there for claimants to use, which seems increasingly unlikely".
I have to add another observation about this subsidy scheme. I invite your Lordships to take a look at the annex to the order which lists the items for which the subsidies will be paid. They include all capital costs for items such as building and decorative work, legal and professional expenses and so on. But where is there any assistance with the actual running costs of these do-it-yourself post offices? The Treasury expects them to be run by unpaid volunteers in unheated, unlit premises. presumably provided rent and rate free by some local benefactor.
The scheme was rightly described by my honourable friend as.
"a sticking plaster over the gaping wound that the Government have slashed across the face of our sub-post offices".
The wound is the removal from the sub-post offices of 30 to 40 per cent—and in some cases as much as 70 per cent—of their income. That is the money which a government, who have little knowledge of business and who habitually shed crocodile tears for small businesses in particular, do not seem to realise comes straight off the bottom line.
I spoke earlier about the bolting of stable doors. Continuing with the same metaphor, I am certainly not going to look a gift horse in the mouth and we are certainly not going to vote against the order today. However, I want firmly to put on the record that we believe that it is too little to resolve the problem which the Government have themselves created.
I was pleased to read in the accounts of Consignia that in the year 2000–01 there is a £66 million post-tax profit, which was a turnaround of a loss from the previous year of £264 million. But I say to the Minister that the dividends the Government will receive from Consignia for that amount to £93 million. With all our worries about sub-post offices, it seems to me that it would have been far better if the Government had intended to plough that back into the network rather than the miserly sum of £2 million. However, that is better than nothing.
8.45 p.m.
Lord McNally: My Lords, the noble Baroness, Lady Miller, has given a powerful indictment of the order. It is a small and ambitious piece of government action.
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She highlighted the concern that as regards the hoped-for new business—the seventh cavalry for the rural post offices which the universal bank and other initiatives will bring—we are doubtful about when they will arrive and what they will deliver.
Here is a perfect example of "not joined-up" government. There is evidence that the Government are addressing the real problems of rural areas and of keeping communities together. For example, the figure of 10,000 inhabitants is extremely small because much larger communities are losing their post offices.
Furthermore, there is an absence of lateral thinking. As the noble Baroness indicated, the proposal is characterised by the local community initiative, do-it-yourself-post-office approach and I strongly doubt whether that is a real solution to the problem. Part of the problem relates to the different changes of retailing patterns; some of the old familiar retailing outlets had enough foot-fall. I may be using some retailing jargon with which the Minister is not familiar, but the general through-put which kept a butcher, baker or candlestick maker no longer exists.
There is more hope in looking at joint enterprises which may take on a range of duties in a local community; for instance, part of pub, laundrette, chemist or garden centre premises used as a post office. However, I am not clear whether such lateral thinking would benefit from what is offered in the order and whether the subsidy can take effect if other economic enterprises are related to it. Are the Government determined to keep to the do-it-yourself approach, which might squeeze through as justifying the application? If so, I do not believe that the communal effort in the village hall realistically meets the needs of rural communities or is likely to happen in the real world in all but a few isolated cases.
Will the Minister tell the House whether the lateral-thinking approach, which would allow other enterprises to take on the role and still benefit from the subsidy, still applies? Why have the Government set such a low target? A community of 10,000 is very small and does not reflect the problem faced by larger but definitely rural communities.
Finally, the sub-post office also plays an important part in inner cities where some of the closures have an impact on communities that can be just as isolated as those in rural areas. I should also like to see some signs of joined-up government in terms of the impact of closures on those areas.
Like the noble Baroness, Lady Miller, although we shall not oppose this measure we should like some recognition by government that this small scheme is very limited in its ambition and, we suspect, its impact.
Baroness Byford: My Lords, perhaps I may add a few words to this important short debate on the order. I declare my interest as a patron of VIRSA, of which I believe the Minister is aware. VIRSA is an education charity that has done an enormous amount of work with rural sub-post offices within the community. I shall comment on that shortly. I also declare an interest in that I live in Leicestershire and look forward

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to seeing how the trial proceeds. I understand that the scheme is due to start in June of this year. Is it to run for six months; and, if so, will it be evaluated immediately thereafter? How soon will we know the results? That is important in the wider context of this order.
I understand that the £2 million that is to be made available is not a gift but is to be repaid. I do not see in the order, unless I have missed it, the time-scale over which repayment is to be made. Paragraph 6(1)(b) of the order refers to "reasonable value". Perhaps I may double-check with the Minister—he almost answered the point in opening—who decides what is "reasonable value". The noble Lord referred to the input of the local authority and of Post Office Counters which would run the scheme, but the position is not clear. Can we have greater clarity as to who assesses whether giving money to one particular sub-post office amounts to "reasonable value"? In addition, how long will it take for help to be given; in other words, will it occur within a month, two months, or more quickly?
I reinforce the observations of my noble friend Lady Miller. I too am very concerned that the sum of money involved is too little. The establishment of new sub-post offices in, say, village halls is likely to be much more costly than support of existing sub-post offices. Perhaps the Minister will comment on that.
I should like to put a question to the Minister which is not directly linked to the order. However, it is hugely important that we clarify the two matters that we are considering in looking to the future survival of sub-post offices. One is the setting up of universal banking services, which the Minister, my noble friend Lady Miller and I often debated during the passage through this House of the Postal Services Bill. I remain extremely apprehensive that a year later we still have no idea of what is to be put in its place, but that is another matter.
As to universal banking services, I understand that some 66 million could qualify to use the system. Can 66 million people use it? Has sufficient money been put aside for that, or has only so much money been allocated to universal banking services? One wonders what the Government's thinking is on that matter.
I add my concern about the change of benefits payments. Most sub-post offices receive between 40 and 70 per cent of their income from welfare payments. I listened long and hard to the Minister about the schemes that the Government had in hand. We are told not to worry and that the change will not happen until 2003, but there is very real concern among sub-postmasters who cannot see a secure future and remain worried about it. Perhaps the Minister can also clarify the position.
Finally, I return to the point with which the Minister started. The noble Lord said that rural sub-post offices were an important part of the community, and I reinforce that point. Rural sub-post offices perform a vitally important role in the community, and human contact is enormously important.
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I agree with the noble Lord, Lord McNally, that the amount involved is small. However, we are grateful for anything. The noble Lord did not believe that the community would be able to make an effort. The work done by VIRSA with local sub-post offices is an example of what can be done. Although I echo the noble Lord's concern, I do not share his total pessimism in that respect. I believe that it is possible to do it, but to enable this to happen requires a great deal of commitment and support from the Government and the sub-post offices themselves. I am sorry that I have put some direct questions, but I hope that before the House passes the order the Minister is able to comment on them.
Lord Sainsbury of Turville: My Lords, I am very happy to try to deal with some of these points to which it is very important to provide answers. This is targeted investment to deal with a particular problem and is one of three schemes. The noble Baroness, Lady Miller, referred to the Government trying to shut the stable door after the horse had bolted. I remind the noble Baroness that under the previous Conservative government there were 3,500 closures and no attempt was made to bolt the door. On the contrary, we are trying to do something about it in a targeted way that invests money to achieve a purpose. It is important both to be prepared to invest resources but also not to assume that an unlimited amount of money is the way to solve the problem.
I also remind the noble Baroness that it is not until 2003 that ACT starts to become the method to be used. I also reassure the noble Baroness that there has never been any question about whether people will be able to obtain cash from the post office under this system; nor will they be required to pay any fees for that. I also remind the noble Baroness that the reason for the huge loss in the Post Office last year was the substantial write-off of all the expenditure on the benefits payment card. That was probably one of the most ill-conceived projects ever to take place in this field, and it is the ACT banking system which will replace it. This is one of three schemes. Although it is not a huge sum of money, it is directed at a very specific target and must be looked at with the other schemes.
I turn to the points raised by the noble Lord, Lord McNally. We have taken the figure of 10,000 because it is necessary to have a definition. That definition is used by the Countryside Agency and appears to make a good distinction between a rural and urban community. I also remind the noble Lord that later this year we shall bring forward a scheme for urban sub-postmasters which essentially does the same thing for them.
The noble Lord dealt with the whole question of retailing in local communities. The major issue here is not to do with supermarkets but the arrival of the car. Previously, people did all their shopping locally or made an occasional bus journey to the nearest town. All of the dynamics of that have been changed by the car. Cars, plus fewer people in many rural communities, have put pressure on sub-postmasters,

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because people can drive to shops in larger towns. The problem is that those without cars become vulnerable, which is why we are so concerned about this issue.
I can also reassure the noble Lord that places such as pubs and other commercial businesses as well as community halls will be included in this provision if they fulfil the criteria set out in the statutory instrument. We have deliberately given this matter a great deal of flexibility so that we can respond to particular circumstances, rather than trying to put everything into "one size fits all".
I turn to the other points raised. The trial is for six months. It is, however, a grant rather than a loan. Therefore, there is not a repayment period. It is a straightforward grant. It will be assessed by Post Office Counters Limited people. The reason is that they are already involved in the whole process of whether one can set up a commercial post office. It therefore seems right that it should be integrated into that process. That will mean that the people who really know the situation can make the decision and that the sub-postmaster or community group does not have to keep turning to different arms of government in order to get an answer on the decision. One cannot give an easy answer to the question about time because that would be integrated into this process of decision-making.
I am not certain what figure the noble Baroness was referring to when she talked about 66 million people. Clearly there cannot be 66 million accounts. If the figure was 16 million, that could be the people who receive benefits. Obviously, many people receiving benefits do not get them through the Post Office; they get them through their normal bank accounts. Whatever the number is, the new system will be able to deal with it.
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I hope that I have answered most points raised. The order ensures that postal services can be provided in some of the most isolated and rural communities where there is a real desire in the community to keep them. It will be of benefit to thousands of people living in hundreds of villages and small settlements up and down the UK.
Baroness Miller of Hendon: My Lords, before the Minister sits down, the noble Lord commented on how many post offices closed during the last Conservative Government. I do not have the figures with me, but, from memory, I believe that it was an average of 99 per year, whereas during the last Labour Government it was 351 per year and this year, alone, it was 541. I only say that because it is on an escalating basis. While we accept that this is just the first of three initiatives, as pointed out by the Minister, the other two initiatives do not come on stream until 2003, by which time there may not be any sub-post offices left.
The Minister need not comment on this matter now, but perhaps he could write to us. At paragraph 7(2) the order states:
"A payment of subsidy under this Scheme which becomes repayable shall be recoverable as a debt".
Lord Sainsbury of Turville: My Lords, I can give the answer to that. In the case of fraud it can be recovered as a debt.
Perhaps I may say that the figure was 3,500 post offices, and, as under the present Government, there were wide variations between different years, with some years closures being as high as 475 and some years much lower. I simply wanted to make the point that in spite of all those closures no action, was taken to do anything about it. I simply contrasted that with what we were doing.
On Question, Motion agreed to.
House adjourned at five minutes past nine o'clock.