Lords Sitting of 25 June 2002

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

Royal Assent
The Lord Chancellor (Lord Irvine of Lairg): My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts
State Pension Credit Act,
National Health Service Reform and Health Care Professions Act
Land at Palace Avenue, Kensington (Acquisition of Freehold) Act.

Civil Service: Equal Opportunities
Baroness Gould of Potternewtonasked Her Majesty's Government:
Whether they are satisfied with their progress towards achieving equal pay and equality of opportunity in the Civil Service.
The Minister for the Cabinet Office and Chancellor of the Duchy of Lancaster (Lord Macdonald of Tradeston): My Lords, the Government have committed all departments and agencies to undertake an equal pay review and to prepare any necessary action plans by April 2003. Departments and agencies are at various stages of reviewing their pay systems. We are making good progress with equality of opportunity in the Civil Service, with increasing numbers of women, ethnic minority and disabled staff at all levels, including the senior Civil Service.
Baroness Gould of Potternewton: My Lords, I thank the Minister for that detailed Answer. I am given to understand that in response to a survey among staff on Civil Service diversity, which was conducted sometime last year, more than half of those who replied did not believe that promotion policies operated fairly or were based on individual merit, and were particularly to the detriment of women and ethnic minorities. Given that finding, can the Minister indicate whether there are any plans to undertake a skills and qualifications audit of Civil Service staff in order to ensure that promotion prospects are felt to be fair and based purely on the merits of candidates?
Lord Macdonald of Tradeston: My Lords, the Civil Service takes very seriously the concerns expressed by the noble Baroness and others. We are not clear about what is to be gained by having information on the skills and qualifications of around half a million staff. We
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believe that it is most important that departments and agencies operate a system of open advertising of vacancies, where staff are free to put themselves forward and to demonstrate how their skills and experience are relevant to the post.
Baroness Lockwood: My Lords, in view of the Minister's reply to the Question of my noble friend Lady Gould, can he explain why women whose jobs have been rated as of equal value to those of men—women in administrative work and men in technical work whose jobs have been rated as of equal value—are paid less? Can he explain why?
Lord Macdonald of Tradeston: My Lords, taking that point across the economy as a whole, the gender pay gap was assessed and explained by the Equal Opportunities Commission task force as arising through, yes, unfair—and, indeed, sometimes unlawful—discrimination in pay systems: the impact of the different patterns of male and female careers; and occupational segregation of the workforce. The task force estimated that up to half of the gap was caused by discrimination in pay systems. But government departments are leading by example in carrying out pay reviews, which are to be completed by April 2003. Research by the trade union Amicus suggests that only 1 per cent of private sector employers have similar plans.
Baroness Thomas of Walliswood: My Lords, does the Minister agree that inability to make progression in a service amounts to a form of unequal pay? Does he recognise that there are complaints from middle rank civil servants who might expect to progress well but who, as women, are encouraged to take time off when they are having a child or to work part time, and then find it very difficult indeed to get back into full-time work within the same job or the same kind of job'? Will any of the units established under the recent reforms announced by Sir Andrew Turnbull turn their attention towards ensuring that the Government's targets for progression of women within the Civil Service are achieved?
Lord Macdonald of Tradeston: My Lords, in regard to the final part of the noble Baroness's question, there will be a unit, led by Alice Perkins, which will attend to these issues with the same kind of commitment as has been displayed in recent times. The targets for women within the workforce were from a 1998 baseline of around 18 per cent of women in the senior Civil Service. By October last year that figure had gone up from 18 per cent to more than 25 per cent. I am pleased to say that we now have four women Permanent Secretaries and that the proportion of women recommended for appointment to the fast stream has increased almost to parity with men.
Baroness Howe of Idlicote: My Lords, does the Minister recall the Government's target in respect of appointments to public bodies, whether paid or unpaid, that, by 2005, 45 to 50 per cent of such

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positions should be filled by women? Can the Minister assure the House that these targets are being applied, in particular, to the chairmanship, deputy chairmanship and chief executive positions of all such appointments?
Lord Macdonald of Tradeston: My Lords, I cannot reply to that point in detail as it is wide of the Question on the Order Paper. I shall inquire into the matter and ensure that my government colleagues are made aware of the concern.
Lord Saatchi: My Lords, would not the Minister's assurances to noble Baronesses on all sides of the House carry more weight were it not for the fact that, while other employers pay women an average of 20 per cent less than they do men—which is bad enough—the Government pay their women employees 28 per cent less, which is truly appalling?
Lord Macdonald of Tradeston: My Lords, the equal opportunities survey that I mentioned gave a figure of 18 per cent. The trade union survey quoted by the noble Lord cited 28 per cent, but the bases of the two surveys were very different. The survey indicating a figure of 28 per cent conflated full-time and part-time employees and was therefore not comparable.
Baroness Thomas of Walliswood: My Lords, it is helpful to hear the Minister tell us that we had four female Permanent Under-Secretaries. But does he recall that Dame Evelyn Sharp was a Permanent Under-Secretary when Richard Crossman was Minister for Housing?
Lord Macdonald of Tradeston: My Lords, I do indeed recall that. I also recall that Dame Evelyn moved over to television and kept us under a very strict regime.

Immigration: Fast-track System
2.45 p.m.
Baroness Gardner of Parkesasked Her Majesty's Government:
How many immigrants have been admitted to the United Kingdom this year under the new fast-track system for those with special skills and, of these, how many have been admitted to fill National Health Service posts.
The Parliamentary Under-Secretary of State, Home Office (Lord Filkin): My Lords, 338 applications for the Highly Skilled Migrant Programme have been successful up to mid-June from a total of 831 considered; 184 successful applications were from individuals already in the United Kingdom. As no work permit is required prior to entry, applicants from overseas are not admitted to the UK to fill vacancies, but rather to look for work. The scheme has also been
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designed to allow priority applications from general practitioners. We have had three successful priority applications as of 12th June.
Baroness Gardner of Parkes: My Lords, I thank the Minister for his reply. Having studied the Home Office website today, I am slightly puzzled. It provides a seven-page application form for those wanting to come to this country under the fast-track procedure. It indicates that people must be coming from overseas. A similar website set up by the National Health Service and covering the international recruitment of doctors also makes clear that they must come from overseas. Furthermore, the National Health Service website states that a work permit must be obtained; whereas the Home Office website—I congratulate the Minister on the fact that it has received a Plain English Campaign award, which is good news—refers specifically to doctors. If someone wants to take up a post in this country and if a health authority needs doctors urgently, which is the quicker way to obtain entry—through the work permit system or through the new fast-track system?
Lord Filkin: My Lords, both appear to be working well. Under the work permit system, which is the traditional route, an NHS employer signals that it is looking for doctors or other skilled professionals. To date, 207 doctors have been granted work permits by that route, and many more are en train from Spain and Germany. Some 21,000 nurses have also been issued with work permits.
The Highly Skilled Migrant Programme, which is very new—it has been running for only four months—is an alternative route of entry for a highly skilled medical professional such as a GP. The benefit is that applicants can come into the UK without having been offered a job by an NHS employer. They would then have a period of time to obtain employment to qualify them to continue with work permit status in the UK. Both routes are possible. The work permit route is the more traditional one, but the Highly Skilled Migrant Programme has certain advantages, as I have indicated.
Baroness Uddin: My Lords, how many professionals entering the country under these schemes have come from Muslim countries? Is my noble friend aware of allegations that certain entrants of south Asian origin are being discriminated against because their standard of English is not considered to be good enough, while others from European countries whose English is even poorer have been allowed to come in? Can my noble friend clarify the position?
Lord Filkin: My Lords, I do not have the figures on the proportion from the Indian Sub-continent or from Asia more generally. Clearly, for good reasons, there are processes for ensuring that people can communicate effectively with patients if they are entering NHS employment. Furthermore, before an NHS trust recruits doctors or nurses from certain areas, including Asia, the Caribbean and Africa, there

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is a screening process to try to ensure that we do not denude developing countries of scarce medical staff should they need them. I note the noble Baroness's further point and I shall look into it.
Lord Chan: My Lords, following on from what the Minister said, does he agree that refugees in the United Kingdom with medical qualifications should be helped to upgrade their skills in order to practise in the National Health Service?
Lord Filkin: My Lords, I certainly agree that part of the NHS strategy, on which I seem to be answering questions this afternoon, is about upskilling virtually all employees in the organisation, hence the considerable investment in training going in for nurses and doctors. We are also trying to ensure that as much work as possible is delegated downwards so that those skills are used more generally. I have nothing to add apart from my general endorsement of that approach.
Baroness Anelay of St Johns: My Lords, will the Minister clarify part of his Answer to my noble friend? He said that the Highly Skilled Migrant Programme and the fast track applied to medical staff such as doctors. Has the Minister seen the form which, my noble friend tells me, states that the 50 points that can be awarded for a professional qualification apply only for the GMC qualification—that is, for a doctor? Does that mean that the only medical staff covered by the scheme are doctors and that dentists and other health professionals are not within it?
Lord Filkin: No, my Lords. As the noble Baroness clearly said, an element of the Highly Skilled Migrant Programme gives GPs 50 automatic points if they qualify to practise as a GP in the United Kingdom, for reasons that one can understand. Other highly skilled professionals, including consultants or research professionals, could apply under the Highly Skilled Migrant Programme. They would not qualify for the automatic 50 points, but they might well qualify because they had a doctorate, a particular relevant international qualification or other expertise or because they were highly paid. There is some dreadful points system that awards so many points for particular skills and experience to demonstrate that a person is highly skilled. If a person has sufficient points, they get entry to the UK and can then pick up a job. Others could get in, although without the 50-point bonus.
Lord Walton of Detchant: My Lords, does the noble Lord agree that under the Treaty of Rome, doctors and other registered healthcare professionals, such as dentists, may get full registration in the United Kingdom with the General Medical Council and the other statutory regulatory bodies? Under that treaty it is not possible to impose a language test on those coming in from the European Union. However, it was agreed many years ago that it was perfectly proper for National Health Service employing authorities to invite such individuals to take a language test before
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being employed in the NHS. To what extent are the NHS employing authorities seeking that type of testing?
Lord Filkin: My Lords, from recollection, what the noble Lord has said sounds correct. If there is an error in it, I shall drop him a note qualifying it. I do not know to what extent NHS trusts are applying the language test. I could speculate that if they thought there was any doubt when they interviewed somebody, they might follow that through with some further testing. I shall ask the Department of Health and we will correspond directly on that.

Farm Incomes
2.53 p.m.
Lord Livsey of Talgarthasked Her Majesty's Government:
What plans they have to raise family farm incomes above the national minimum wage.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whitty): My Lords, the Government recognise the economic problems facing British farming and we will work in partnership with the industry to help it meet the challenges that it faces. In the autumn we intend to publish a strategy for sustainable food and farming in England, which will build on the valuable work of Sir Don Curry's policy commission. Devolved administrations are also pursuing their own strategies.
Lord Livsey of Talgarth: My Lords, I thank the noble Lord for his Answer. Will he acknowledge that the national minimum wage now stands at £8,100 per annum and that the figures just published for the year ending 2001 show that the average net income for all UK hill beef and sheep farms was £4,000—half the national minimum wage? The average income for all farms in the UK was £5,000. That is the difference between £4·10 an hour on the national minimum wage and £2 an hour for family farms. Is not that an intolerable situation? Families cannot be sustained on farms any more. What will the Minister do urgently to raise incomes above the national minimum wage for farmers and their families? Will he also legislate to make it illegal for supermarkets to sell farm produce at below the cost of production?
Lord Whitty: My Lords, the position of the incomes of many of Britain's farmers is very worrying and leads to some of the consequences that the noble Lord referred to. However, a direct correlation with the minimum wage is not appropriate, as the income is in part a wage and in part a self-employed income and is profit rather than gross wage, to which the minimum wage figure applies. I do not think that there is a direct read-across. Moreover, it is not the Government's responsibility to determine the incomes of the workforce, self-employed or employed. We are attempting to provide a framework for the recovery of

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farming that will enable profit to come back into farming over the medium term. We shall not intervene directly on the income front.
Lord Carter: My Lords, is my noble friend the Minister aware that overall farm incomes are now at their lowest level in real terms since 1975 and in money terms have fallen by 71 per cent since 1995? At the same time, British agriculture receives more subsidy than the rest of British industry put together. Is there not something fundamentally wrong with our system of agricultural support?
Lord Whitty: My Lords, that is absolutely right. I welcome my noble friend's intervention in the debate. He has remained silent on agricultural matters for far too long. We recognise that there is a fundamental problem with the common agricultural policy, which not only does not benefit the taxpayer and the consumer, but also is of detriment to farmers and has for many years given the wrong signals to farmers. It has not supported their incomes, the kind of production that consumers want or the environment. That is why we are proposing a positive programme of reform for the common agricultural policy. We hope to see a proposal from Commissioner Fischler next month that will introduce some radical reforms through the mid-term review. Unless we alter the direction of the common agricultural policy, some of these problems will continue to affect British and European farming.
Lord King of Bridgwater: My Lords, the Minister said that he would be publishing a reply to the Curry report, but I did not hear him say when he would do that. The Government certainly cannot be responsible for the incomes of individual farmers, but he knows very well from the present situation that we are at a critical moment. Many people will look at this year's harvest and the outcome of this year's accounts after the end of foot and mouth and may then make a final decision on whether to stay in agriculture. The Government will certainly have to face the consequences of that, even if they do not get into the issues of individual incomes.
Lord Whitty: My Lords, the Curry commission rightly pointed out that some fundamental changes are needed in farming. That will inevitably involve some restructuring of farming and some refocus of farm production. Many in the industry will have to take some painful decisions. We are trying to establish within the food chain as a whole a viable medium-term framework under which money will get back into farming and farmers will be producing closer to the demand from consumers. We have already taken some steps following the Curry report to put in place a structure that will help farming in the rest of the food chain. We have also said how we want to change the nature of regulation on farming, which at times is too great a burden on many of Britain's farmers. That is already beginning to fall into place. Following the public spending review, we will be able to establish a
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three-year programme of expenditure in support of the modernisation of farming to which the Government are committed.
Baroness Miller of Chilthorne Domer: My Lords, apart from the food chain, will the Minister comment on all the parts of an animal—for instance, a sheep—that can no longer be marketed for reasons such as the Russians no longer taking sheepskins and the Food Standards Agency now suggesting that sheep's intestines cannot be sold as natural sausage casings, although I believe that that is not based on firm scientific evidence? What is the effect on the incomes of sheep farmers of all those losses into the rest of the chain?
Lord Whitty: My Lords, I am aware that the most vulnerable and hardest-hit sector of the livestock industry is sheep farming, partly for the reasons outlined by the noble Baroness and partly because of past production decisions and the aftermath of foot and mouth. I am not sure whether she is suggesting that some of the burdens of the losses in the sheep sector should be borne by the processors and the supermarkets, to revert to an earlier question. What is needed now and in the medium term is a stable market for what remains of the sheep sector. That is part of what is being dealt with in the output from the Curry commission, both in the establishment of an English Collaborative Board and in the Food Chain Centre which we have established.
Baroness Byford: My Lords, I remind the House of my family's farming interest. I should also like to push the Minister further on the issue. He has talked about the medium term, the Curry report, and the other reforms for which we are waiting. Frankly, however, many farmers—but particularly small family farmers—are going bust and have no time to wait. Therefore, while we are waiting, how will the Government ease back on some of the emerging regulatory measures, lessen the paperwork that burdens all farmers, and ensure fair competition so that our farmers can compete fairly with other European colleagues?
Lord Whitty: My Lords, I regret to say that many of the noble Baroness's requests either are, or help towards, achieving medium-term solutions. The regulation process certainly needs to be rationalised, both in the number of regulators with which farmers must deal and in the ease of access to the regulations. We also need to simplify the relationship between UK and European regulations. However, the regulatory burden is not the essential problem of farming. Farming's essential problem is that farming production has been distorted by the common agricultural policy and other pressures on farming and that it does not meet the needs of the ultimate consumer. That is what we have to address, that is what the Curry commission pointed to, and that is what the Government are pursuing.

Exchange Rates
3.1 p.m
Lord Renton of Mount Harryasked Her Majesty's Government:
Whether they have any target exchange rate for sterling in relation to the euro.
Lord McIntosh of Haringey: My Lords, the Government do not have a specific exchange rate target, but a stable and competitive pound is sought over the medium term. The key to a stable and competitive pound is low and stable inflation, combined with sound public finances.
Lord Renton of Mount Harry: My Lords, I thank the noble Lord for that Answer. Does he not agree that the debate on entry to the euro is now inevitably hotting up, and that it would be very helpful for British manufacturing industry if the Government could make their hand rather clearer than they have done to date? With sterling having decreased by 10 per cent against the euro and approaching the range at which many businesses think it would be reasonable to exchange sterling for the euro, surely this is the time when the Government should say, "The five economic tests have been passed. Let us now make it clear that we are going to have a national referendum on whether or not we join the euro".
Lord McIntosh of Haringey: My Lords, I do not agree that it would be in the interests of British industry and commerce for us to advance in any way the proper consideration of the five economic tests. We have undertaken to complete those five economic tests within two years of the last general election, and we shall do so. We shall do so when it is in the best economic interests of this country.
Lord Pearson of Rannoch: My Lords, since EMU is designed to hold the emerging EU mega-state together, is it not dishonest of the Government to set economic tests, however bogus and whatever they may be, for what is clearly a constitutional project?
Lord McIntosh of Haringey: My Lords, as I do not accept the premise of the question, the conclusion that the noble Lord, Lord Pearson, draws must be illegitimate.
Lord Stoddart of Swindon: My Lords, does the noble Lord—
Lord Tebbit: My Lords—
Noble Lords: This side!
Lord Stoddart of Swindon: My Lords, we are not going to quarrel about it.
Does the noble Lord agree that whether we scrap the pound and join the euro is such a vital and fundamental decision that it ought not to be entered
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into lightly? Does he remember how, in 1989, the same sort of people asking this question urged us on to join the ERM come what may, and what a disaster that turned out to be? We do not want high unemployment again—1 million extra unemployed—or 100,000 people to go bankrupt, do we? I therefore agree with the noble Lord that the Government are right in being cautious.
Lord McIntosh of Haringey: My Lords, I am unnerved to find myself agreeing with the noble Lord, Lord Stoddart, that this is a fundamental question for this country—of course it is. We have already said that we see significant advantages for this country in being part of European monetary union. We recognise that there are constitutional issues, but they are surmountable. The fundamental decision that has to be taken is an economic one. It will be taken with due seriousness not only by the Government but also by Parliament and the people of this country.
Lord Newby: My Lords, does the noble Lord agree that the movement of the pound against the dollar in recent days effectively demonstrates that the argument that we should not join the euro zone because the pound is effectively linked to the dollar is patently not true?
Lord McIntosh of Haringey: My Lords., the Government do not comment on short-term exchange rate changes.
Lord Lea of Crondall: My Lords, when recalling who said what and when in recent years, is it not a fact that many noble Lords speaking against Britain joining the euro have repeatedly in the past couple of years predicted that the euro would go through the floor, and that the whole thing would fall apart? However, in a matter of days—or, at most, weeks—the euro will probably return to parity against the dollar and prove a very successful project.
Lord McIntosh of Haringey: My Lords, I do not think that that question is addressed to me. Certainly many Members of this House have said many times in the past two and a half years that the euro was not a success because it had a weak exchange rate. I do not notice them saying that it is a success now that it is stronger.
Lord Tebbit: My Lords, will the noble Lord say what are the constitutional issues to which he just alluded?
Lord McIntosh of Haringey: My Lords, I do not wish to add anything to that which the Chancellor of the Exchequer and the Prime Minister have already

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said. Indeed, I have answered a number of Written Questions from the noble Lord, Lord Tebbit, on this issue which are available from Hansard.
Lord Howe of Aberavon: My Lords, would the noble Lord find himself less embarrassed by the company he has to keep if the Government were more prepared to argue positively the case in which they claim to believe?
Lord McIntosh of Haringey: My Lords, I am not embarrassed in any way by the company I keep. Moreover, my personal opinions are of no importance in this matter, even if there were any differences—which there are not. I think that we all regard the Government's position on the issue as being responsible, as recognising the importance of the issue, and as being prepared to take the views of the people of this country seriously, while giving priority—as I am sure is right—to the protection of this country's economic interests.

Middle East
3.8 p.m.
Lord Howell of Guildford: My Lords, I beg leave to ask a Question of which I have given private notice; namely, to ask Her Majesty's Government what is their response to the latest developments in the Middle East peace process?
The Minister for Trade (Baroness Symons of Vernham Dean): My Lords, Her Majesty's Government welcome President Bush's statement which calls for a final settlement within three years— including,
"two states living side-by-side in peace and security"—
and sets out what both parties have to do to achieve this goal. He said that there must be "an end to terror", and that,
"Israeli settlement activity in the Occupied Territories must stop".
He went on to say:
"Israelis and Palestinians must address the core issues … This means that Israeli occupation that began in 1967 will be ended through a settlement negotiated between the parties, based on UN Resolutions 242 and 338, with Israeli withdrawal to secure and recognised borders. We must also resolve questions concerning Jerusalem, and the plight and future of Palestinian refugees".
Although there are some uncomfortable messages for the Palestinian Authority, Her Majesty's Government are glad that President Arafat has welcomed the speech. We strongly support the call for reforms to the Palestinian Authority and for new elections. These will be an opportunity for the Palestinian people to decide who will lead them towards a final and peaceful settlement. Her Majesty's Government will do all we can to assist in the process outlined.
Lord Howell of Guildford: My Lords, I am very grateful indeed to the noble Baroness for that reply.
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Does she accept that we, like the Government, welcome the US positive engagement in the Middle East crisis; and, indeed, express the hope that they will persist as it will be an arduous and long process? Does the noble Baroness agree that it would be right to see President Bush's speech more as a set of principles than as a detailed blueprint? Does she also agree that it rightly reflects a good part of the Crown Prince Abdullah plan for two states living in harmony—and, we hope, constructively—side by side and for a balance of obligations to be fulfilled by both sides; that is, a reformed Palestinian Authority with a new leadership in due course, rejecting terror, matched by the end of occupation coming about in stages and a reduction, indeed, the end, of what President Bush calls "settlement activity"? I am not sure what that really means.
Does the noble Baroness agree that everything really depends on the precise nature and sequence of those obligations and on what the frontiers of the new transitional, or eventually permanent, state will be? Does she accept that the details in the full text of the speech are much more enlightening in terms of describing the heavy obligations on Israel than the newspaper reports which were carried in most newspapers this morning? Given that there really will be no advance until there is an end of suicide bombing and probably no end of suicide bombing until there are moves to end the Israeli occupation, how does the noble Baroness feel that the British Government can help take all this forward?
Baroness Symons of Vernham Dean: My Lords, I very much welcome what the noble Lord, Lord Howell of Guildford, said on the positive engagement of the United States. I agree with him that the speech that we have seen bears a strong resemblance to many of the points put forward earlier this year by Crown Prince Abdullah of Saudi Arabia in the plans that he suggested might be a possible way forward. Copies of President Bush's speech have been put in the Library of the House. I agree with the noble Lord that it makes interesting reading. It is very much a set of principles rather than details. It is worth noting that the President has said that he has asked Secretary of State Powell to work intensively with Middle Eastern and international leaders to realise the vision of a Palestinian state, focusing them on a comprehensive plan to support Palestinian reform and institution building. He has charged his Secretary of State with taking that issue forward.
The United Kingdom will do whatever it can to help in that process. The speech itself does not mention a conference, but we understand that the United States still believes that a conference would be helpful and that it would want to engage at ministerial level with Palestinians and Israelis and, of course, with members of the quartet as well. The United Kingdom will hold itself ready to help with preparing for and monitoring of any elections which might take place.
Lord Wallace of Saltaire: My Lords, if we all welcome this clear statement that there is to be a two

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state solution to the problem, we also recognise that the Palestinians have to have a state on the West Bank and that does require a rather clearer statement about the ultimate withdrawal from the settlements than is contained at the moment within President Bush's speech. The Government must make it clear that the very peculiar alliance of Christian fundamentalists and Jewish fundamentalists who feel that the whole of the land of Israel should now be part of a single state, with the implication that Palestinians should be forced to cross the Jordan, should be opposed and that a two-state solution has to have clear borders between two states sharing the land west of the Jordan.
Baroness Symons of Vernham Dean: My Lords, the noble Lord, Lord Wallace of Saltaire, made it clear that there is to be a two-state solution. The President of the United States is an enormously influential and powerful man, but it is not for him to decide that. It will, of course, be a matter for the people of the region—the Palestinians and the Israelis—who must understand (as I am sure we hope that they all do) that the way forward on this issue is not through the appalling violence that we have seen in recent weeks but through a negotiated settlement. It is very much to be hoped that they see the wisdom not only in what is being put forward today by the President, but also, as the noble Lord, Lord Howell, said, in the way that it reflects so much of what has been put forward by Crown Prince Abdullah. It is up to both sides to take the matter forward.
The noble Lord went into details about where the individual borders of the states might run. That would be a matter for negotiations. But the President of the United States has made it clear that he thinks that the Israeli forces need to withdraw to the positions that they held prior to 28th September 2000, which refers hack to the Mitchell committee, and says that the Israeli settlement activity has to stop. Those are the tenets from which he is beginning. We very much hope that this opportunity will be seized by both sides to find a peaceful solution to their very longstanding problems.
Lord Grenfell: My Lords, would my noble friend the Minister care to tell the House whether or not Her Majesty's Government agree with President Bush when he implicitly calls for the removal of Mr Arafat as leader of the Palestinian Authority? As the Palestinian Authority has already stated that it wishes to hold elections in the Palestinian area, does my noble friend agree that it would be far better if Israel were to try to help create the conditions in which fair elections could be held there so that the Palestinian people could decide for themselves who they wished to have as their leader?
Baroness Symons of Vernham Dean: My Lords, let us be clear what the President of the United States actually said. He said:
"Peace requires a new and different Palestinian leadership so that a Palestinian state can be born. I call on the Palestinian people to elect new leaders, leaders not compromised by terror".
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The noble Lord has said that he draws some implications from that. I agree with him that it is up to the Palestinian people to choose their leaders. We look forward to the democratic elections which, as the noble Lord, Lord Grenfell, quite rightly pointed out, President Arafat has already said should be the way forward. It will require action by both the Palestinians and the Israelis to make those elections happen. Of course, they will enjoy the support of the international community both in helping them to prepare for those elections and in the monitoring that will take place around those elections. That is an important point, but it involves both the Israelis and the Palestinians seeking to make the elections fair and open.
Lord Janner of Braunstone: My Lords, does my noble friend agree that President Bush commented on the need for a different leadership because he shares the views of many of those of us who seek peace in the Middle East that the present Palestinian leadership would create a terrorist state in waiting?
Baroness Symons of Vernham Dean: My Lords, the reasons for President Bush saying what he did are a matter for him. Her Majesty's Government have made it very clear that we expect President Arafat and the Palestinian leadership to do everything that they can to combat terror, which has been such an appalling facet of what has happened in the Middle East. I can do no more than repeat what I said; namely, that it is the firm view of Her Majesty's Government that this is a matter for the Palestinian people. Until the elections are held, President Arafat is the elected president of the Palestinian Authority and the representative of the only organisation with which Israel can negotiate at the moment.

Justice (Northern Ireland) Bill
3.18 p.m.
Lord McIntosh of Haringey: My Lords, on behalf of my noble and learned friend the Lord Privy Seal, I beg to move the Motion standing in his name on the Order Paper.
Moved, That the amendments for the Report stage be marshalled and considered in the following order:

Clauses 1 and 2,

Schedule 1,

Clause 3,

Schedule 2,

Clauses 4 and 5,

Schedule 3,

Clauses 6 to 10,

Schedule 4,

Clauses 12 and 12,

Schedule 5,

Clauses 13 to 19,

Schedule 6,

Clauses 20 to 28,

Schedule 7,

Clauses 29 to 44,

Schedule 8,

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Clauses 45 to 49,

Schedule 9,

Clauses 50 to 61,

Schedule 10,

Clause 62,

Schedule 11,

Clauses 63 to 84,

Schedule 12,

Clause 85,

Schedule 13,

Clauses 86 to 92.—(Lord McIntosh of Haringey.)

On Question, Motion agreed to.

Proceeds of Crime Bill
3.19 p.m.
The Minister of State, Home Office (Lord Falconer of Thoroton): My Lords, I beg to move that this Report be now received.
Moved, That the Report be now received.—(Lord Falconer of Thoroton.)
Lord Ampthill: My Lords, before the noble Lord on the Woolsack puts the Question, does the noble and learned Lord have a faint feeling of embarrassment at the fact that out of the 232 amendments to be moved today and later, he is responsible for 130, or over half of them?
Lord Falconer of Thoroton: My Lords, the amendments that I shall move are constructive and will be welcomed by all. Therefore, I have no sense of embarrassment.
On Question, Motion agreed to.
Report received.
Clause 1 [The Agency and its Director]:
Lord Falconer of Thorotonmoved Amendment No. 1:
Page 2, line 3, at end insert—
"(4A) But the Director must obtain the approval of the Minister for the Civil Service as to the number of staff appointed under subsection (4)(a)."
The noble and learned Lord said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 2 to 6, 146, 221 and 222.
Amendments Nos. 1 to 6 are technical amendments that we have identified as being necessary to confirm the agency's status as a non-ministerial department and the director's employment status as a civil servant. They do not reflect any change in policy.
Amendments Nos. 1, 4 and 5 are required to confirm non-ministerial department status. Amendments Nos. 1 and 4 are needed because it is normal for the Minister for the Civil Service to have a formal role in determining the number of civil servants employed and their terms of employment.
Amendment No. 5 is required because a non-ministerial department must be funded directly rather than via the Home Office vote. The amendment makes
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provision to that effect. It also deletes the provision currently made for the agency's accounting procedures. As a non-ministerial department, the agency will automatically be subject to existing government accounting rules under the Government Resource and Accounts Act 2000 and no further provision is needed in the Bill.
The change will require a consequential amendment to the money resolution that was passed in October in another place. The Government will seek that when the Bill returns there after noble Lords have completed their consideration.
Amendments Nos. 2, 3 and 6 are needed in view of the director's intended status as a civil servant. The nature of the director's role—carrying out public functions on behalf of the state—is such that he will be a civil servant. Whether or not the head of a non-ministerial department is a civil servant depends on the nature of his functions and the relationship with Ministers.
The director of the Serious Fraud Office, the Director of Public Prosecutions and the chairman of the Inland Revenue are all civil servants. Although the heads of some other non-ministerial departments are not civil servants—the chief inspector of schools is one example—the director of the new agency will be more akin to the director of the Serious Fraud Office.
Amendment No. 3 deletes the reference to the director being added to the list of office holders who can be members of the Principal Civil Service Pension Scheme. As the director will be a civil servant, that provision is not needed. Amendment No. 2 requires formal approval from the Minister for the Civil Service of the terms on which the director holds office.
Amendment No. 6 deletes the reference to the director being added to the list of office holders who are disqualified from membership of the Westminster Parliament and the Northern Ireland Assembly. As a civil servant, he will automatically be disqualified from membership. In Committee, the noble Baroness, Lady Buscombe, moved amendments to disqualify the director from membership of the Scottish Parliament and the Welsh Assembly. I hope that she will accept that, as a result of these amendments, the director will now be automatically disqualified from being a member of those bodies.
Amendments Nos. 146, 221 and 222 will ensure that there is a proper basis for the secondment of police officers to the new assets recovery agency. Amendments Nos. 221 and 222 provide for the secondment of police officers from England, Wales and Northern Ireland to the agency on standard central service terms. Making the provisions will not require any officers to be seconded to the agency but it will ensure that they can be seconded on terms that protect their conditions of service in appropriate cases.
Amendment No. 146 makes provision in respect of the work that any seconded police officers will be able to undertake at the agency. Clause 1(5) provides generally that anything that the director is authorised or required to do may be done by a member of staff of the agency or a person providing services under

1207
arrangements that are made by the director if the director authorises them to do so. Clause 319(2) already makes one exception to that general provision as it prevents the delegation of the director's tax functions to persons providing services.
Amendment No. 146 will make a further exception in respect of seconded police officers. Those officers will be seconded on central service terms and will remain constables and retain their police powers. It will not therefore be appropriate to have seconded police officers working on civil recovery cases. The amendment simply provides that seconded officers will not be able to undertake civil recovery work on behalf of the director. I beg to move.
Baroness Buscombe: My Lords, I rise simply to thank the Minister for tabling amendments in response to our debate in Committee. They provide for the automatic disqualification of the director of the assets recovery agency from being a Member of the Scottish Parliament or the Welsh Assembly.
Lord Goodhart: My Lords, I, too, have no objection to the amendments. I intended at this stage to make the same point as that raised by the noble Lord, Lord Ampthill. We are getting back to the bad old days of two or three years ago, when major Bills kept appearing with hundreds of government amendments. That has happened again on this occasion. It suggests serious overload on parliamentary counsel. I hope that we shall not see that happening again.
On Question, amendment agreed to.
Schedule 1 [Assets Recovery Agency]:
Lord Falconer of Thorotonmoved Amendments Nos. 2 to 6:
Page 267, line 13, at end insert "with the approval of the Minister for the Civil Service"
Page 267, leave out lines 14 to 17.
Page 267, line 28, at end insert "with the approval of the Minister for the Civil Service"
Page 267, line 30, leave out paragraphs 6 and 7 and insert—
"6 (1) These amounts are to be paid out of money provided by Parliament—

(a) the remuneration of the Director and the staff of the Agency;

(b) any expenses incurred by the Director or any of the staff in the exercise of his or their functions.

(2) Subject to anything in this Act any sums received by the Director are to be paid into the Consolidated Fund."
Page 269. leave out lines 12 to 20.
On Question, amendments agreed to.
Clause 6 [Making of order]:
Baroness Buscombemoved Amendment No. 7:
Page 3, line 38, at end insert "unless it is of the opinion that there are exceptional circumstances which justify its not doing so"
The noble Baroness said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 30, 32, 33, 58, 60, 61, 65, 82, 84 and 85.
I shall begin by concentrating on Amendments Nos. 7 and 65. which relate to Clause 6. This issue has been debated at length in your Lordships' House and
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another place. We continue to reiterate our deep concern about the Government's refusal to give the courts any discretion to decide whether or not to proceed with an investigation if an investigation is requested by the prosecutor. As currently drafted, an investigation is mandatory even if there are exceptional circumstances that justify its not being so. That, we believe, risks injustice. It is a denial of any safeguards and shows, we believe, a somewhat disturbing mistrust of our judges.
Our amendments seek to persuade the Government that there should be in the Bill an element of discretion whereby the court can intervene and prevent proceedings from taking place where there are exceptional circumstances that justify its not doing so, thus preserving a safeguard, albeit a minimal one.
I fully suspect that the noble and learned Lord the Attorney-General will respond by saying, as he did in Committee, that there are already sufficient safeguards in Clause 10. I must say that I disagree, particularly in view of the draconian powers contained in the Bill. The defendant is placed in the position of having to satisfy the court that there is a serious risk of injustice. The onus is on him or her rather than the prosecutor or the court. The introduction of exceptional circumstances at an earlier stage is in our view a fairer approach, which does not render the Bill unworkable or ineffective.
On the amendments relating to Clause 6 that were tabled by the noble Lords, Lord Goodhart and Lord Thomas of Gresford, the effect would be roughly the same. Amendment No. 8 and subsequent consequential amendments propose that if there is a serious risk of injustice, proceedings should stop there and then. The threshold is the serious risk of injustice. Our amendment is slightly different in that it expressly refers to "exceptional circumstances". If the Government are not prepared to agree that proceedings should stop when there is a serious risk of injustice, they should, we contend, be prepared to stop at "exceptional circumstances".
I view the amendments tabled by the noble Lords, Lord Goodhart and Lord. Thomas of Gresford, as the wicket and our amendments as the long stop. If the amendments proposed by the noble Lords, Lord Goodhart and Lord Thomas of Gresford, are not acceptable, it would be quite absurd to refuse ours.
I turn to the amendment relating to Clause 75. The amendment, which was proposed by the noble Lords, Lord Goodhart and Lord Thomas of Gresford, and to which my name and that of my noble friend Lord Kingsland have been added, deals with the interpretation of a criminal lifestyle. The defendant has a criminal lifestyle if the offence concerned is, first, specified in Schedule 2 under the heading "Lifestyle Offences". In passing, I wonder whether they should be called "criminal lifestyle offences". However, that is clear, and we welcomed the schedule in Committee. Secondly, there is also a criminal lifestyle if it constitutes conduct forming a part of criminal activity or if it is an offence committed over a period of at least six months.

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As I said, in Committee we welcomed the inclusion of Schedule 2. However, the list of offences is not conclusive. Notwithstanding that subsection (2)(a) of Clause 75 is clear, paragraphs (b) and (c) allow for a wider test; namely, for conduct forming part of a course of criminal activity or an offence committed over a period of at least six months.
Therefore, in spite of Schedule 2, which we welcome, the concerns remain as expressed by my honourable friend the shadow Home Secretary in another place and by myself concerning minor traffic offences leading to the label "criminal lifestyle" when we both spoke on the matter at Second Reading. Particularly given the Government's continued aversion to judicial discretion, we firmly believe that the taint of a criminal lifestyle should attach only where the course of criminal activity or the offences committed over a period of six months are punishable by imprisonment. I beg to move.
3.30 p.m.
Lord Goodhart: My Lords, the amendments in this group could have been dealt with as two different groups. The first group includes Amendments Nos. 7, 8, 37, 38, 65 and 66. Three are in the name of the noble Baroness, Lady Buscombe, and three are in my name. The second group includes Amendments Nos. 30, 32, 33, 58, 60, 61, 82, 84 and 85, all of which are in my name together with that of my noble friend Lord Thomas of Gresford and to which the noble Baroness, Lady Buscombe, and the noble Lord, Lord Kingsland, have now added their names.
The noble Baroness, Lady Buscombe, and I thought that it would be for the convenience of the House if the two groups were put down together for debate. They are both concerned with mitigating what we see as the draconian impact of the provisions in Clauses 6 and 75 relating to the question of a criminal lifestyle. As I said, the two groups contain somewhat different approaches.
The first group—that is, the one starting with Amendments Nos. 7 and 8—gives the court power to hold that a defendant does not have a criminal lifestyle, even if the conditions in Clause 75 are certified. The second group says that the offences needed under Clause 75 to constitute a criminal lifestyle must be either the specified offences or other offences which are punishable by imprisonment. Those are different points. They are not, in fact, inconsistent with each other, but each would serve to mitigate the impact of the criminal lifestyle provisions. If the Government could see their way to accepting either amendment, that could well temper the impact of Clauses 6 and 75 to a level that was tolerable.
With regard to Amendments Nos. 7 and 8, we believe that it is right to give the court some degree of discretion. We are not proposing that the discretion would be an absolute one in which the court would have power whenever it thought fit to dispense with the hearing of an application for a confiscation order. But, of course, the finding that a defendant had a criminal
1210
lifestyle would give rise to a substantial second trial— the criminal trial being the first. In the second trial, the defendant would have to prove effectively that any property held by him at the time of his conviction, or transferred to him six years or less before the start of the proceedings which resulted in that conviction, were not the proceeds of crime. That would not be easy.
Therefore, the application for a confiscation order is potentially oppressive. It puts a heavy burden on the defendant, even if ultimately he succeeds in proving that none of the property is the proceeds of crime. Surely it is right that the court is able to say, "We have heard what was said at the trial. We have heard what the prosecutor said in opening the application for a confiscation order, but we think that it would be unjust to the defendant to force him to defend his right to property." We say that the court should be able to say that the conditions of Clause 75 were technically satisfied but it would be unjust to require the defendant to go through the process of proving title to assets.
The Government can, of course, say, and no doubt will say, that the prosecutor or director have a discretion not to ask for a confiscation order. But surely it cannot be said that the prosecution will never exercise that power oppressively. The prosecution is not, in a real sense, an impartial party, and the judge, who is impartial, should have the power to stop the application for a confiscation order where it would be unjust to proceed.
Amendment No. 7 is very much to the same effect. It requires not that it should be unjust but that there should be exceptional circumstances. Both are directed at what would no doubt be the rare and unusual—but still possible— event of the prosecution acting oppressively in proceeding to ask for a confiscation order.
The alternative route involves restricting the power to find a criminal lifestyle to cases where offences can be punishable by imprisonment; that is, the three offences—the one which led to the conviction and the two prior ones within the preceding six-year period—which will, under Clause 75, lead to holding that a criminal lifestyle exists. We say that the power should be limited to offences punishable by imprisonment.
We are not suggesting that they should be indictable offences. We accept that some offences are triable either way. Indeed, a few which are triable only summarily could justify a finding of a criminal lifestyle. But if the offence is so minor that it can never lead to prison, then we believe that it should not lead to a confiscation order.
At one stage the Government gave the example of an offence which was not punishable by imprisonment but which could lead to a considerable gain by an offender. They gave the example of a developer who felled protected trees on a development site in order to make it easier to develop the land. That may be an example of a summary offence which may lead to a gain. It is an offence which is not punishable by imprisonment. But surely it is not the type of offence which should lead to the conclusion that there is a

1211
criminal lifestyle or which should lead to a confiscation order. Surely, the answer to a case of that kind is to make it possible to impose a much higher fine on the offender. That leads to a question which to my knowledge has not been raised in this debate, and on which I should like to hear the views of the noble and learned Lord the Attorney-General.
In the case given in the example, the offender may be—probably will be—a corporate body rather than an individual. The question is whether a corporate body can have a criminal lifestyle. That is an important question. Let us suppose that over a six-year period a major supermarket chain with hundreds of stores throughout the country is convicted on three occasions of minor infringements of food safety legislation from which it has benefited, perhaps to the extent of a few pounds. Does that mean that the chain has a criminal lifestyle? Certainly, if a corporate body is capable of having a criminal lifestyle, that would appear to be the case. That conclusion would be rather unwelcome to at least one noble friend of the noble and learned Lord the Attorney-General.
Equally, looked at from the other side, if a corporate body cannot have a criminal lifestyle, there is potentially a major loophole in this legislation. As a matter of ordinary English, I find it hard to see how any legal person can have a lifestyle without being a living and sentient being. That seems to me to be an important issue, which is unclear and which should be considered.
I return to the original point. We ask the Government to accept Amendment No. 7, which we would be happy to support, Amendment No. 8, or our own group of amendments to Clause 75 to make it necessary for an offence to be punishable by imprisonment. In the absence of that, we believe that potentially a serious injustice is waiting to emerge from this legislation.
3.45 p.m.
Lord Carlisle of Bucklow: My Lords, surely Amendment No. 7 raises an issue of principle, which I do not believe the Government have fully answered. It goes to the whole root of the question of the use of judicial discretion. Clause 6 and the powers to make the necessary confiscation orders and findings of criminal lifestyle can be implemented following an application by the prosecutor or the director—who, as the noble Lord, Lord Goodhart, said, are not neutral bodies in this matter—to ask the court so to proceed. If they ask it, the court has no alternative but to make that order or to proceed in that way, whereas if the order is not requested, the court still has a discretion on its own decision to proceed under Clause 6.
If it is right that there should be discretion in the court to proceed under Clause 6 even though an application has not been made, I cannot understand why equally there should not be a discretion in the interests of defendants to refuse to proceed under Clause 6, even if the application has been made, if the
1212
court thinks it unjust to do so. It seems to me that that is fair and reasonable and that that is what the Bill should say.
Viscount Goschen: My Lords, I rise briefly to support Amendments Nos. 7 and 8, which give the court a discretionary "get out" clause. We have heard that Clause 75 specifies that one of the conditions of a criminal lifestyle shall be considered if the defendant is convicted of any of the offences within Schedule 2. Schedule 2 contains a wide range of offences, from serious issues such as arms trafficking and drug dealing to offences which are serious hut could be the result of fairly minor convictions. I am thinking of the reference within Schedule 2 to copyright offences. In Committee I suggested instances where the defendant could have committed a relatively minor offence but must be considered to have a criminal lifestyle because that offence is specified within Schedule 2. The example I gave was of a student who might have made or dealt in an illicit recording; who might perhaps have illicitly copied a CD or video and distributed it to his or her friends.
When I raised that in Committee, the noble and learned Lord, Lord Goldsmith, drew our attention to the fact that dealing would have to take place. There would have to be a commercial basis. But what if that were the case and the theoretical student copied a CD on to cassette and distributed it among his friends for money? That individual may well be guilty of a copyright offence. But surely, if it were done on a minor basis, it would be absurd to say that that individual had a criminal lifestyle. Therefore, the court should have discretion in proceeding.
The Attorney-General (Lord Goldsmith): My Lords, there are three groups of amendments. They have been divided slightly differently by noble Lords, but all are on the theme of criminal lifestyle. I would divide them in this way. The first two groups of amendments are rather similar because the effect of both groups would be to prevent the criminal lifestyle procedures from being triggered under certain circumstances. Amendments Nos. 7, 37 and 66 would empower the court not to decide whether a defendant had a criminal lifestyle if it considered that there were exceptional circumstances. Where it decided to exercise its discretion, the court would not proceed to confiscate the defendant's benefit from his general criminal conduct. I assume that the court would still be required to confiscate the defendant's benefit from his particular criminal conduct.
Amendments Nos. 8, 38 and 66 would require the court to decide whether the defendant satisfied the criminal lifestyle test, but it would nevertheless be able to decide that he did not have a criminal lifestyle if it was satisfied that there would be a serious risk of injustice in so doing. Again, where the court exercised that power, there would be no attempt to confiscate the defendant's benefit from his general criminal conduct. However, as with the first group of amendments, the court would nevertheless be required to confiscate his benefit from his particular criminal conduct.

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The effect of the third group of amendments is straightforward. The amendments would make it impossible for any criminal to be treated as having a criminal lifestyle where the offence or offences of which he had been convicted were not punishable by imprisonment. As the noble Baroness, Lady Buscombe, said, those areas have been covered both in Committee and in another place.
I shall start with the first two groups of amendments. Both those groups would dispose of one of the central policies of the Bill and as such would be wholly unacceptable to the Government. It is important that criminals know exactly what they expose themselves to in confiscation terms when they commit criminal offences. One of the great strengths of the Bill is that it makes clear when crimes will attract a criminal lifestyle regime and when they will not.
Introducing a discretionary power not to proceed, whether it refers to exceptional circumstances or to a serious risk of injustice, would do away with that certainty and introduce instead what the Government regard as an unnecessary subjective and discretionary element. It would also erase the consistency of approach that we hope to achieve across the jurisdiction, because courts up and down the land would almost certainly exercise the powers differently in cases that were not in fact materially different.
I anticipate that your Lordships would agree that the inconsistent application of justice is bad and undesirable. The Government do not consider either as a matter of principle. There can be either exceptional reasons for the court not to proceed or a serious risk of injustice in treating a defendant as having a criminal lifestyle. The criminal lifestyle regime has effect only where there is good reason to suppose that the defendant is living off crime. The tests have been carefully selected to catch only repeat offenders or those guilty of lengthy or inherently acquisitive offences. I am grateful again for the appreciation expressed by the noble Baroness, Lady Buscombe, at the schedule identifying those latter offences.
However, I remind your Lordships of the safeguards that can be relied on. First, the confiscation hearings are instituted only by the court or on the application of the director of the agency or the prosecuting authorities. The director and the prosecuting authorities are under a duty to act reasonably and will not mount hearings in inappropriate cases.
Furthermore, in a criminal lifestyle case, the court has power not to make the assumptions, if the assumptions—obviously—are shown to be incorrect or if there would be a serious risk of injustice. I give way to the noble Lord, Lord Goodhart.
Lord Goodhart: My Lords, does the noble and learned Lord the Attorney-General therefore accept
1214
that a decision of the prosecution to proceed with an application for a confiscation order could be judicially reviewed on the grounds of irrationality?
Lord Goldsmith: My Lords, I need to consider that because normally, and in many cases, the decision of a prosecuting authority in the exercise of its discretion is not amenable to judicial review. I shall certainly consider the question and come back to the noble Lord.
In terms of the Human Rights Act, the prosecuting authorities are public bodies and subject to the duties under that Act.
I want to emphasise that the provisions of Clause 10(6) of the Bill, state that the court,
"must not make a required assumption in relation to particular property or expenditure if—

(a) the assumption is shown to be incorrect, or

(b) there would be a serious risk of injustice if the assumption were made".

That safeguard exists if the court considers it right or if the test of serious risk of injustice is made out in relation to particular property or expenditure. I beg to differ from the noble Baroness, Lady Buscombe—that is an important and valuable safeguard.
If the court therefore decides not to make the assumption, because it is shown to be incorrect or because there is a serious risk of injustice, the prosecutor or the director—whoever is bringing thecase—will have to prove on a balance of probabilities every penny of the defendant's benefit.
For those reasons, shortly, the regime that has been constructed appears to us to be soundly based. I want to remind noble Lords of two matters. First, the idea that it is mandatory for the court to embark on a process of confiscation and mandatory in certain circumstances for it to make assumptions is not new to the Bill: it exists already in legislation.
I took the trouble to ask what was said in another place during the passage of the Drug Trafficking Bill 1993, which became the Drug Trafficking Act 1994. The then Minister—of course the Minister in the party of the noble Baroness—said, in referring to discretionary assumptions, that:
"During the six years in which the legislation has been in force, the courts have declined to apply the assumptions in a number of major cases, thereby placing the prosecution in the impossible position of being expected to prove matters in relation to the offender's property which are solely within his knowledge".—[Official Report, Commons, Standing Committee B, 8/6/93; col. 76–77.]
That reinforces an important point. The defendant will know where his property comes from; the prosecutor rarely will have that information.
The noble Baroness stated that the onus would be on the defendant to show a serious risk of injustice for the purpose of Clause 10(6)(b), to which I have just referred. But under Clause 16(4) the prosecutor must state if he has any information to suggest that there might be a serious risk of injustice if the assumptions are made.

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I turn to the third group of amendments. One of the fundamental approaches to the Bill is to deal with the proceeds of crime on an "all crime" basis. In the context of criminal confiscation, that means both the benefit from any criminal conduct—summary or indictable—should be liable to confiscation and that any offence should be capable of triggering the criminal lifestyle provisions, provided that the specified criteria—repetition of offences and so forth—are satisfied.
In the criminal lifestyle schedules, the offences are both indictable and attract terms of imprisonment. The amendments exclude the possibility of an offender who satisfied one of the other tests being treated as having a criminal lifestyle where the offences did not attract a term of imprisonment, regardless of the duration and regardless of the number of times such offences had been committed. Therefore, to introduce what is proposed in these amendments would be to introduce a test which is no less arbitrary than the test proposed by noble Lords in amendments tabled earlier in the passage of the Bill; namely, that the triggering offences should each have generated a certain level of proceeds.
The tests which are set out in Clause 75(2)(b) and (c) are not designed to reflect the seriousness of the offences but the duration and repetition of the offences concerned. The fact that they have given rise to benefit is an indication that the defendant has a criminal lifestyle. As has been said before, it is the capacity of offences to generate benefit that drives the agenda, not their seriousness in other ways. Again, I remind noble Lords that a number of offences specified in Schedule 4 to the Criminal Justice Act 1998—that is existing confiscation legislation which provides for confiscation where there are certain repeat offences— also include offences which are summary only and which include no term of imprisonment.
So there is nothing new in including the possibility of offences which are summary and which do not carry imprisonment into this kind of legislation. That means that at the moment if two or more convictions are obtained, the magistrates' court has the power to make a similar confiscation order to the criminal lifestyle order under the Bill.
So we believe that allowing the third group of amendments would represent a weakening of the current powers of the courts. Two particular questions were raised. The first was by the noble Lord, Lord Goodhart, about a body corporate. A corporate body is a person and can have a criminal lifestyle, subject to the usual rules about showing the necessary mens rea, the necessary mental state, for the commission of offences. As the noble Lord says, to allow a vehicle to be used as the means of committing crime and gathering the proceeds of crime as a device for avoiding the implications and the safeguards in the Act would be wrong. So of course he is right to say that a corporate body should be covered. If a developer, for example, was repeatedly flouting local authority laws and making substantial profit, I respectfully suggest that it would be appropriate to apply the criminal lifestyle test where the prosecutor applied for it.
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As he did in Committee, the noble Viscount, Lord Goschen, raised the question of copyright—in particular offences relating to commercial distribution. Today, he raised the example of a student. If a student were involved in such activity on a commercial basis, if he were engaging in the sort of crime that gives rise to substantial benefit—that is, piracy of intellectual property, counterfeiting and large-scale distribution—I think that the noble Viscount would agree that it is appropriate that he should be subject to that process.
It will always be possible to identify examples in which the prosecutor is most unlikely to proceed with an application. Whether it is the supermarket chain with three minor food safety convictions or a student doing something minor who gets himself on the wrong side of the provision because his activities are in some way termed commercial—although I cannot quite understand how that would happen—I should not expect the prosecutor to proceed. Earlier, I reserved the question of whether a decision could be judicially reviewed. The view of my advisers is that there could be judicial review of the prosecutor's decision to ask for a confiscation order. I suggest that the public interest is such that such an application would rarely be successful, but as the noble Lord, Lord Goodhart, raised the matter, there is an additional safeguard for him.
So all three groups of amendments would substantially undermine central provisions of the Bill. I therefore invite the noble Baroness, Lady Buscombe, to withdraw her amendment and the noble Lord, Lord Goodhart, not to press his.
4 P.m.
Baroness Buscombe: My Lords, I thank the noble and learned Lord the Attorney-General for his response, although I am deeply disappointed by it. As I said in opening, these important matters of principle have been debated at length both here and in another place with good reason but, sadly, not to our satisfaction.
We are asking for a minimum safeguard to kick in in exceptional circumstances. We are concerned when the Attorney-General refers to the amendments introducing an unnecessary, subjective and discretionary element. Is introducing such an element into our criminal justice system so terrible? What is the Government's approach to the ability of the courts and the judges to decide, in exceptional circumstances, whether it is right for a prosecutor to be able to ask and, as a result of that simple question, for an investigation to take place?
There is a serious problem here. Let us turn the argument on its head. As drafted, the Bill provides that the court must make a confiscation order even if it is of the opinion that exceptional circumstances justify it not doing so. That cannot be right; no one could possibly agree with that.
Turning to the amendments to Clause 75 and the interpretation of "criminal lifestyle", it is clear that as drafted the tests are not designed to reflect the gravity

1217
of the offences but, as the Attorney-General said, to test the duration of the course of the criminal activity during which what may be very minor offences have been committed. We are genuinely concerned about that. I respectfully suggest that the weakness of the Attorney-General's argument was demonstrated when he said that in the case of three minor offences relating to food safety standards or a student copying music onto CDs, the Government would not expect the prosecutor to proceed. The point is that the prosecutor can proceed.
In Committee, the Attorney-General dismissed the prospect of the over-zealous and unreasonable prosecutor. But that may be wishful thinking. With the expected creation of financial targets for the assets recovery agency, there will be pressure on prosecutors unrelated to the merits and justice of each case. Nowhere is the dichotomy between criminal justice and revenue generation in the Bill so clearly in view. Surely it is only right for the judge, who has sole responsibility to determine these matters, to retain residual discretion.
We are deeply concerned about those issues. We are now at Report stage. By tabling amendments that would reserve opportunities for discretion to exceptional circumstances, we have been entirely reasonable and sensible. On that basis, I wish to test the opinion of the House.
4.7 p.m.
On Question, Whether the said amendment (No. 7) shall be agreed to?
Their Lordships divided: Contents, 137; Not-Contents, 131.

Division No. 1

CONTENTS

Aberdare, L.

Crickhowell,L.

Ackner, L.

Cuckney, L.

Addington, L.

Cumberlege, B.

Anelay of St Johns, B.

Dean of Harptree, L.

AstorofHever, L.

Deedes, L.

Attlee, E.

Dixon-Smith, L.

Avebury, L.

Ecdes of Moulton, B.

Beaumont of Whitley, L.

EdenofWinton, L.

Biffen, L.

EUes, B.

Blatch, B.

Elliott of Morpeth, L.

Boardman, L.

Elton, L.

Brabazon of Tara, L.

Ferrers, E.

Bridges, L.

Flather, B.

Brooke of Sutton Mandeville, L.

Fookes, B.

Brougham and Vaux, L.

Fraser of Carmyllie, L

Buscombe, B.

Freeman, L.

Byford, B.

Gardner of Parkes, B.

Caithness, E.

Geddes, L.

Campbell of Alloway, L.

Geraint, L.

Campbell of Croy. L.

Goodhart, L. [Teller]

Carlisle of Bucklow, L.

Goschen, V.

Carnegy of Lour, B.

Gray of Contin, L.

Carrington, L.

Greenway, L.

Chadlington, L.

Hanham, B.

Clement-Jones, L.

Hayhoe, L.

Colwyn, L.

Henley, L.

Cope of Berkeley, L.

Higgins, L.

Crathorne, L.

Holdemess, L.

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Howe of Aberavon, L.

Rawlings, B.

Hylton, L.

Redesdale, L.

Jellicoe, E.

Rees,L.

Jenkin of Roding, L.

Rennard, L.

Kimball, L.

Renton, L.

King of Bridgwater, L.

Roberts of Conwy, L.

Kingsland, L.

Rodgers of Quarry Bank, L.

Lawson of Blaby, L.

Roper, L.

Lindsay, E.

Rotherwick, L.

Liverpool, E.

Saltoun of Abernethy, Ly.

Livsey of Talgarth, L.

Sandberg, L.

Lloyd of Berwick, L.

Scott of Needham Market, B.

Lucas, L.

Seccombe, B. [Teller]

Lyell, L.

Sharman, L.

McColl of Dulwich, L.

Sharp of Guildford, B.

MacGregor of Pulham Market, L.

Sharpies, B.

Shaw of Northstead, L.

Mackie of Benshie, L.

ShuttofGreetland, L.

McNally, L.

Skelmersdale, L.

Maddock, B.

Smith of Clifton, L.

Mancroft, L.

Soulsby of Swafiham Prior, L

MarandKellie, E.

Stevens of Ludgate, L.

Miller of Hendon, B.

Strathclyde, L.

Molyneaux of Killead, L.

Swinfen, L.

Monro of Langholm, L.

Taveme, L.

Montrose, D.

Thomas of Gwydir, L.

Mowbray and Stourton, L.

Thomas of Swynnerton, L.

Naseby, L.

Thomas of Walliswood, B.

Newby, L.

Thomson of Monifieth, L.

Northesk, E.

Trefgame, L.

Northover, B.

Vivian, L.

Norton of Louth, L.

Waddington, L.

O'Cathain, B.

WadeofChorlton, L.

Onslow, E.

Wakeham, L.

Oppenheim-Barnes, B.

Wallace of Saltaire, L.

Patten, L.

Walmsley, B.

Perry of Southwark, B.

Wamock, B.

Peyton of Yeovil, L.

Weatherill, L.

Plumb, L.

Wigoder, L.

Prior, L.

Williams of Crosby, B.

Pym,L.

Willoughbyde Broke, L.

NOT-CONTENTS

Acton, L.

Desai, L.

Ahmed, L.

Dixon, L.

Allenby of Megiddo, V.

Donoughue, L.

Alli, L.

Dormand of Easington, L.

Alton of Liverpool, L.

Dubs, L.

Andrews, B.

Evans of Parkside, L.

Archer of Sandwell, L.

Evans of Watford, L.

Ashley of Stoke, L.

Falconer of Thoroton, L.

Ash ton of Upholland, B.

Farrington of Ribbleton, B.

Bach, L.

Faulkner of Worcester, L.

Bamett, L.

Filkin, L.

Bassam of Brighton, L.

FyfeofFairfield, L.

Bernstein of Craigweil, L.

Gale, B.

Billingham, B.

Gavron, L.

Blackstone, B.

Gilbert, L.

Blease, L.

Golding, B.

Brett, L.

Goldsmith, L.

Brooke of Alverthorpe, L.

Gordon of Strathblane, L.

Brooks of Tremorfa, L.

Goudie, B.

Bruce of Donington, L.

Gould of Potternewton, B.

Campbell-Savours, L.

Graham of Edmonton, L.

Carter, L.

Gregson, L.

Chorley, L.

Grenfell, L.

Clark of Windermere, L.

Grocott, L. [Teller]

Clinton-Davis, L.

Hardy of Wath, L.

Corbett of Castle Vale, L.

Haskel, L.

Craig of Radley, L.

Hayman, B.

Crawley, B.

Hollis of Heigham, B.

David, B.

Howells of St. Davids, B.

Davies of Coity, L.

Howie of Troon, L.

Davies of Oldham, L.

Hoyle, L.

Dean of Thornton-le-Fylde, B.

Hughes of Woodside, L.

1219

Hunt of Chesterton, L.

Plant of Highfield, L.

Hunt of Kings Heath, L.

Ponsonby of Shulbrede, L.

Irvine of Lairg, L. (Lord Chancellor)

Prys-Davies, L.

Rea, L.

Islwyn, L.

Rendell of Babergh, B.

Janner of Braunstone, L.

Rooker, L.

Jeger, B.

Sainsbury of Turville, L.

Jenkins of Putney, L.

Sawyer, L.

Jones, L.

Serota, B.

Jordan, L.

Sheldon, L.

Lea of Crondall, L.

Simon, V.

Lipsey, L.

Simon of Highbury, L.

Lockwood, B.

Slim, V.

Lofthouse of Pontefract, L.

Smith of Gilmorehill, B.

Macdonald of Tradeston, L.

Smith of Leigh, L.

McIntosh of Haringey, L. [Teller]

Stallard, L.

Stone of Blackheath, L.

Mclntosh of Hudnall, B.

Strabolgi, L.

MacKenzie of Culkein, L.

Symons of Vernham Dean, B

Masham of Ilton, B.

Taylor of Blackburn, L.

Mason of Barnsley, L.

Temple-Morris, L.

Massey of Darwen, B.

Thornton, B.

Merlyn-Rees, L.

Turnberg, L.

Milner of Leeds, L.

Turner of Camden, B.

Mitchell, L.

Uddin, B.

Morgan, L.

Varley, L.

Morris of Manchester, L.

Walker of Doncaster, L.

Murray of Epping Forest, L.

Warwick of Undercliffe, B.

Nicol, B.

Whitaker, B.

Orme, L.

Whitty, L.

Parekh, L.

Wilkins, B.

Paul, L.

Williams of Elvel, L.

Pendry, L.

Williams of Mostyn, L. (Lord Privy Seal)

Peston, L.

Pitkeathley, B.

Woolmer of Leeds, L.

Resolved in the affirmative, and amendment agreed to accordingly.
4.18 p.m.
[Amendments Nos. 8 and 9 not moved.]
Lord Alton of Liverpoolmoved Amendment No. 10:
Page 4, line 12, at end insert—
"() If the conditions referred to in subsection (2) relate to an offence involving the trafficking of people the court must order that sums payable under subsection (5) be paid into the trafficked persons fund."
The noble Lord said: My Lords, the amendments in my name—Amendments Nos. 10, 40, 68, 129, 142 and 211—have been grouped. After the balloted debate in your Lordships' House on 13th March, in which several of your Lordships, including my noble and learned friend Lord Wilberforce, participated, we had constructive discussions with the Minister's predecessor—the noble Lord, Lord Rooker—and with officials. I would have preferred it, however, if, along with the other amendments that he tabled for today, the Minister had produced some proposals on the subject of people trafficking.
I am sure that the Minister will agree that it is an appropriate moment to return to the issue of trafficking and to consider how the recovered assets of those involved in the trade might be used to help victims and combat the crime.
People trafficking, particularly trafficking in women and children, is a contemporary form of the slave trade, causing misery for the victims and their
1220
families and generating vast sums of money for the traffickers. It is worth commenting on the scale of the problem. Research commissioned by the Home Office on trafficking provides conclusive evidence that at a minimum, hundreds of women and children are being trafficked into the United Kingdom every year.
A report in the Financial Times published on 20th February stated that, according to the United Nations Office for Drug Control and Crime Prevention in Vienna, people trafficking has become the fastest growing facet of organised crime. Powerful criminal organisations are estimated to earn a staggering £4·3 billion per year from economic and sexual slavery. People trafficking is therefore considered to be the third largest source of profit for organised crime after the trafficking of drugs and firearms. The United States Department of State says that more than 175,000 women are trafficked annually.
There are numerous consequences. I should like to draw attention to the problems in West Sussex. Since 1995, 66 children who arrived unaccompanied in the United Kingdom have gone missing from West Sussex social services, the majority in the past two years. During Question Time in your Lordships' House on 13th June I sought information from the Government on the plight of those missing children and on reports that further children have disappeared this year. I have since been advised by the Home Office Minister Beverley Hughes that a further four young people have gone missing from that social services department in 2002. I am grateful to the noble Lord, Lord Bassam of Brighton, who is in his seat today, who responded to that question and arranged for that information to be provided.
Those disappearances took place in February. Of the four children, three were female and one was male. One of the females was Chinese and the other three young people were West African. The absence of comprehensive anti-trafficking legislation and adequate victim support services gives rise to such horrendous situations. I hope that the Minister will be able to say what more is being done to protect children in our care. It is an extraordinary state of affairs that children committed to care in this country, having been rescued from trafficking, should have gone missing on such a scale. I hope that the Minister will say something about their plight. What do we know of the outcome for those 70 missing children? Surely we must have some knowledge.
I welcome the Government's commitment to legislate in this area. The stop-gap offence of trafficking in prostitution in the Nationality, Immigration and Asylum Bill is an important start and one that I hope will be followed shortly by comprehensive anti-trafficking legislation as the Government have promised. People trafficking is included in the list of lifestyle offences in Schedule 2 to the Bill before your Lordships today. The offence referred to is in Section 25(1) of the Immigration Act 1971.

1221
I am concerned that it is a relatively toothless provision. In a Written Answer, the noble Lord, Lord Filkin, acknowledged that,
"At present there is no specific offence of trafficking in human beings and so no data exist about the confiscation of assets of those engaged in this practice".—[Official Report, 18/6/02; col. WA 70.]
That will not do. Following that admission, I tabled two further Written Questions. The first highlights my concern that the offence of people trafficking in Schedule 2, paragraph 3 is wholly inadequate in combating it. The second seeks clarification as to whether the Proceeds of Crime Bill will be amended when new offences of people trafficking are introduced in forthcoming legislation, particularly the new offence of trafficking in prostitution in the Nationality, Immigration and Asylum Bill, which received its Second Reading yesterday.
Yesterday we debated one piece of new legislation that creates an offence of trafficking in prostitution, because the current legislation in that area is, as the Government admit, wholly inadequate. Yet today we are scrutinising another piece of legislation that refers to a specific lifestyle offence of people trafficking which is already in existence, which has been acknowledged to be ineffective in tackling the problem and which will be superseded in due course. To have such ambiguities in two pieces of legislation currently before your Lordships' House does not strike me as a good example of joined-up Government.
Despite those misgivings, the fact that the Proceeds of Crime Bill includes people trafficking as one of the lifestyle offences allows me to focus on the need to apply assets recovered towards anti-trafficking initiatives and support services for the victim. The Metropolitan Police Clubs and Vice Unit in London has seized over £275,000 from traffickers this year alone. Despite the growing scale of the people trafficking problem, support services for the victims of trafficking, both here and in the overseas countries from where women and young girls are taken, remain chronically underfunded. To the best of my knowledge and that of those working in this area, there is at present no central Government funding of services that seek to support and protect the victims if trafficked in the United Kingdom.
In a Written Answer dated 9th January, the noble Lord, Lord Rooker, advised me that Her Majesty's Government, in conjunction with the United Nations, national governments and non-governmental organisations, were working to address the problems of people trafficking and to provide support for the victims of this serious crime. I welcomed then the programmes currently underway in the Western Balkans region, in Southern Europe, and in the Greater Mekong region that covers parts of Cambodia, China, Laos, Thailand and Vietnam and in West Africa. They are vitally important in helping potential trafficking victims in their countries of origin to escape the cycle of poverty and desperation that forces them into the hands of traffickers.
1222
A fortnight ago, my noble friend Lord Hylton and I, together with the noble Lord, Lord Ahmed, were in Azerbaijan looking at the problems of the million displaced people there. We heard firsthand accounts from people who had been offered work in so-called slave bazaars at the rate of 2·5 dollars per day for the most menial work. Is it any wonder that people trying to escape such destitution either arrive here as so-called economic migrants or are sold into the cycle of despair that becomes human trafficking?
I also wish to draw attention to the lack of funding for organisations based in the UK that seek to support and protect the victims of trafficking, perhaps better than we have been able to do in social services institutions such as the one I mentioned, from which 70 children disappeared. A housing association called Eve's Housing is the only organisation providing any help with accommodation for victims of trafficking. It has dealt with six cases in the past six months, all of whom were Albanian women.
Today I spoke with a lawyer who recounted the story of one Albanian woman. She was originally kidnapped, raped and forced into prostitution in Albania. She was then rescued by a man who fled with her to London, whereupon he forced her into prostitution. Her vulnerability was such that it took her four months to realise that the person she believed to be her potential saviour and protector was in fact simply out to exploit her.
Eve's Housing has taken upon itself to look after such vulnerable women by accommodating them in properties it manages. However, Eve's Housing receives no central government funding for doing this and so is clocking up bad debts as it helps those women. As far as the system is concerned, the women are asylum seekers and so are liable to be dispersed to different parts of the country without any regard for their special needs. The National Asylum Support Service does not have any system in place to offer specific advice and assistance to victims of trafficking.
Organisations such as Eve's Housing deserve central Government support. If assets seized from traffickers were properly applied towards services for the victims of trafficking, it would not only allow the victims to rebuild their shattered lives but could also help tackle the trafficking problem as it might lead to greater cooperation with the police.
We already have a precedent in transport where certain police forces are able to reinvest fines recovered from speed cameras into other traffic calming measures. Could we not achieve something similar in the Bill? If the Treasury has given the green light for reinvestment of resources from traffic offences involving motor cars, surely when it comes to trafficking in human beings we could apply the same approach—or is reinvestment in traffic calming to assume greater importance than investment in measures to prevent trafficking in young women?
A multi-agency group has been established in London involving police forces, the Immigration Service, social services, the Home Office and NGOs, which is seeking to achieve better co-ordination of

1223
operational activities and more effective support for victims, including the provision of safe houses. I have entered into correspondence with the Home Office on the matter and met with the noble Lord, Lord Rooker, and other Home Office officials on 20th May. They then advised me that the Recovered Assets Fund—RAF—can use seized criminal assets, including funds retrieved from traffickers, for a number of initiatives. Presently, the RAF is used, among other things, to support anti-drug initiatives through the funding of projects linked to the drugs White Paper, Tackling Drugs to Build a Better Britain. I understand that the police would support the direct use of recovered assets to establish a fund for victims of trafficking, but recognise that that would require a change in legislation. The police would therefore support appropriate applications to the Recovered Assets Fund as a means of benefiting victims of trafficking in lieu of a change in legislation.
In a letter dated today, the Minister of State, Beverley Hughes, says in relation to the RAF:
"Consideration will be given to including a specific reference to anti-trafficking initiatives",
in future RAF funding rounds. But as a minimum, could not the Minister underline that assurance and ensure that the Recovered Assets Fund could be used to support anti-trafficking initiatives and specifically to fund agencies to provide secure accommodation, advice and assistance to victims of trafficking in the future?
I also raised with the Home Office how much it spends on anti-trafficking initiatives and what percentage of total Home Office expenditure that represents. The Minister was unable to give me any figures in her reply. Although she stated:
"We are currently looking at appropriate funding for all these strands",
it is difficult for us in your Lordships' House to have an informed debate about what is needed when the figures are simply not forthcoming. Perhaps today the Minister can tell us what Her Majesty's Government are spending on anti-trafficking initiatives and what percentage of total Home Office expenditure that represents.
Perhaps it is too simple, but if assets are being recovered from trafficking gangs, why should not they be utilised to help the very same people who have been exploited by those gangs? The Home Office have advised me that people-trafficking victims can claim compensation from the Criminal Injuries Compensation Authority, yet so many of them have irregular immigration status, false documents, false passports and so on that that really is not possible. Irregular immigration status means that unless they immediately co-operate with the police they will be subject to deportation; hence they are not in a position to instruct a lawyer to prepare a CICA claim. That is wholly unrealistic and I am sure that the Minister knows that.
1224
In conclusion, the organisation to which the victims will be looking for support must be adequately funded to meet an ever-increasing need. My amendment seeks to achieve that without seeking recourse to the hard-pressed funds of taxpayers. I beg to move.
4.30 p.m.
Lord Hylton: My Lords, I rise to support the amendment moved by my noble friend Lord Alton and in doing so want to draw attention to the needs of those who have been trafficked. Some will be discovered in this country possibly by the police or immigration services. Others will have escaped—perhaps not a large number—and therefore may not yet have come to the attention of the special services. It is widely agreed that all those people require a period of reflection so that they can become slightly established in this country, can recover from their bad experiences and, one hopes, will be able to give evidence against those who transported, exploited and abused them.
In order for such a period of reflection to be effective, safe houses are required; places where people can live for a short period and sort themselves out. That is the kind of use which my noble friend is indicating as being highly appropriate for the money that has been or will be recovered. I hope that those comments reflect the strongest possible support for my noble friend's amendment.
Lord Wilberforce: My Lords, I strongly support the amendments proposed by the noble Lord, Lord Alton, particularly Amendment No. 211 which proposes the setting up of a fund for dealing with the issue.
I need not elaborate on the arguments which have been well articulated by the noble Lord, Lord Alton. The size of the problem is undisputed. Large numbers of people are involved and it is known to all the agencies involved. As was mentioned by the noble Lord, the amount of money involved in trafficking is extremely large. One must remember the nature of the crime. It involves, on the one hand, the taking of a large sum of money in dealing with the persons concerned—young people, particularly girls—and, on the other hand, substantial immediate and long-term damage to the persons concerned. If one provides only for a fine and possibly imprisonment of the offenders, one is dealing with only half the problem. One has not dealt with the condition of the victims and has left them without means of recourse.
It may be said, and it is true, that the Bill contains extensive powers enabling confiscation orders to be made in all kinds of criminal proceedings. No doubt when trafficking legislation is introduced those provisions can be applied. However, I venture to suggest that there are two good reasons why it is highly desirable that specific reference to trafficking is made in the Bill and that it should not be left to general references. First, under the United Nations protocol for the suppression and punishment of trafficking, we as a nation are obliged to deal with the physical, psychological and social recovery of persons involved in the trafficking. We have signed that protocol and

1225
are under an obligation to carry it into effect. It could properly be brought into effect and recognised if provision were made in the Bill to set up a fund, as the noble Lord suggests.
The other good reason for making specific reference in the Bill and not leaving the matter to general legislation is that it would enable the persons, agencies, local authorities and NGOs concerned to know of and be able to point to a specific destination for the recovery of money. That would not be the case were it covered up in general legislation.
Your Lordships know well that this is a pervasive crime committed in all kinds of areas by all kinds of people. It must be dealt with by a great variety of authorities and police forces all over the country, many of which have no idea of the nature of the crime or the remedies available to deal with it. If it were possible for them to point to a particular provision relating to confiscation money, they would undoubtedly be assisted in dealing with such cases.
Many of the authorities have no idea of what they should do. As the noble Lord mentioned, only one local authority—West Sussex—deals with such cases with any degree of comprehensiveness and scientific application. No doubt one or two others know about the matter but in general the existence of this evil is not known around the country and still less is it known what can be done. Therefore, it is highly desirable that provision should appear in legislation so that the existence of a fund can be pointed to and that money can be given. If confiscation were made, that money could be used for the necessary purpose for which it should be designed; namely, the rehabilitation of the traffickees. For those reasons and others given by the noble Lord, Lord Alton, I strongly support the amendment.
Lord Falconer of Thoroton: My Lords, the noble Lord, Lord Alton, spoke to the amendments with great force. His campaign on behalf of those who are trafficked for sexual or labour exploitation is well known and greatly respected. As he pointed out, he recently discussed the matter with my noble friend Lord Rooker before he left the position which I now hold.
Amendment No. 10 seeks to create a statutory fund from the confiscated assets of persons convicted of human trafficking and it requires the fund to be used for support and assistance to victims of trafficking. The noble Lords, Lord Alton and Lord Hylton, and the noble and learned Lord, Lord Wilberforce, raised much wider issues than that fund. Perhaps I may briefly touch on them.
The noble Lord, Lord Alton, referred to the incident in which 70 young people have disappeared from the care of West Sussex local authority over the course of the past 12 months. As the noble Lord knows, but other noble Lords may not know, an operation called Operation Newbridge was set up in West Sussex to address the events referred to by the noble Lord, Lord Alton. The matter concerned in particular young girls
1226
from West Africa who had arrived in the United Kingdom and claimed asylum. As unaccompanied minors, they were placed in the care of the local authority, from which significant numbers of them disappeared. It is thought that some of them may have ended up working as prostitutes in Italy.
The police investigation in Operation Newbridge highlighted the difficulty of prosecuting traffickers under the current legislation. The new offence of trafficking for prostitution will help in this regard. It will cover criminals who take people into and out of the country for the purposes of prostitution.
Since Operation Newbridge, we have seen the establishment of Project Reflex, a multi-agency task force set up to address organised immigration crime. That has led to better co-ordination arrangements with regard to police investigations into people trafficking. As I have said, the new offence of trafficking for the purposes of prostitution in the Nationality, Immigration and Asylum Bill will address the trafficking of children, as was the case in Operation Newbridge.
The noble Lord, Lord Alton, also raised the question of the extent to which what is set out in this Bill is consistent with what is to come in the new Bill. Plainly that is a matter that must be considered.
The noble Lord went on to raise wider issues. He asked what the Government are doing for victims. As set out in the White Paper, Secure Borders, Safe Haven, we are making special arrangements in partnership with the voluntary sector for the protection of the victims of trafficking for sexual and labour exploitation. These include considering giving such victims leave to remain in the United Kingdom or, where they wish to return home, helping them to do so by providing initial counselling, ensuring that they have suitable accommodation at their destination, and helping them to reintegrate into their own communities.
We are also in the process of drawing up a best practice toolkit on people trafficking that will be a guide for immigration officers, the police and others potentially dealing with trafficking. In particular, it will raise awareness of the difference between trafficking and smuggling, and help those concerned to treat trafficking victims fairly.
The noble Lord went on to mention the provision of safe houses for the victims of trafficking. As I have already indicated, our priority lies in working with the voluntary sector through the best practice toolkit and other forums to put in place the necessary arrangements to provide support services for the victims of trafficking. Those services would include consultation with the voluntary sector with regard to special arrangements for child victims. It is too early to say whether a non-governmental organisation would be the most effective mechanism for delivering these services. Currently we are discussing the provision of safe houses with a number of NGOs.
Several important wider issues have been raised in the context of this amendment, which is perfectly legitimate on the part of noble Lords. However, I turn

1227
now to the terms of the amendment. Although the noble Lord, Lord Alton, has not sought to press me very hard, I do not think that the amendment and related amendments in the group represent the best way forward. The noble Lord's proposal would present a number of problems which I shall address briefly.
First, practical difficulties would be encountered in trying to identify a particular category of confiscated proceeds for special treatment. Secondly, it would set a precedent, leading to pressure to adopt a similar approach in relation to other categories of crime. Thirdly, the proposal would detract from the non-statutory Recovered Assets Fund, which puts up to half of all seized proceeds into a pot and uses them for a range of quite broadly defined good causes. Fourthly, it would cut across the provisions already in place for the victims of trafficking and victims of crime generally.
In principle it would be open to the Government to widen the uses to which the Recovered Assets Fund is put, extending it to assist in the provision of victim support services either generally or for particular categories of victims, such as the victims of human trafficking. However, that pre-supposes that the existing and planned provision for such victims is insufficient, which the Government do not accept. Moreover, a change in the criteria for the fund would be premature at this stage, given that we set it up only late last year.
However, we shall review the scope of the Recovered Assets Fund in advance of the next financial year, 2003–04, and consider in particular whether it should be used for the benefit of victims of crime, including the victims of human trafficking.
More generally, the Government pay an annual grant, currently set at £28 million, to Victim Support to enable that organisation to provide a range of services for the victims of all types of crime. Further, it is worth pointing out that Project Reflex, which I mentioned earlier in my remarks, was provided with £22 million in the spending review of 2000. However, I am afraid that I am not able to tell the noble Lord what proportion of the Home Office budget that forms. Perhaps I may write to him with that statistic.
I hope that the noble Lord will derive some reassurance from what I have said, both with regard to the general issues and on the particular matters and thus will feel able to withdraw his amendment.
4.45 p.m.
Lord Alton of Liverpool: My Lords, I am grateful to the noble and learned Lord, Lord Falconer of Thoroton, for the constructive way in which he has dealt with the arguments put to the House today. This proposal forms part of a continuing attempt by many Members of your Lordships' House to raise the profile of human trafficking and to ensure that something is done about it. To that end, I am particularly grateful to my noble friends Lord Hylton and Lord Wilberforce for their contributions to the debate this afternoon.
1228
The noble and learned Lord told the House of the plight of some of the unaccompanied minors who disappeared from social services care. They have ended up involved in prostitution in other European Union countries. That is a matter about which we certainly cannot be complacent. We shall have to redouble our efforts to provide adequate protection for those who have been entrusted into our care. Moving way beyond the general issue of economic migrants or refugees, this issue concerns unaccompanied minors. All noble Lords have a duty of responsibility towards tackling this problem on their behalf.
I am grateful to the noble and learned Lord for commenting that he will look at the compatibility of the new offence detailed in the new Nationality, Immigration and Asylum Bill with the provisions set out in this Bill, and then ensure that they are brought into some kind of accord. From his words, I suspect that he is in sympathy with the argument; that is, that this problem has to be tackled at its source. He needs to hold discussions with his colleagues in the Department for International Development on the ways in which part of our aid programme can be used to combat this problem at source.
I am also grateful for the noble and learned Lord's remarks about safe houses and consultation with nongovernmental organisations. He also confirmed that it was open in principle to look again at the way in which the Recovered Assets Fund might be used on behalf of victims. I noted his comment at the end of his remarks reflecting his willingness to hold a review to look at the scope of the fund and the way in which these policies are being implemented.
In the spirit of the way in which the noble and learned Lord has dealt with the matter, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 11 not moved.]
Clause 8 [Defendant's benefit]:
Lord Falconer of Thorotonmoved Amendment No. 12:
Page 5, line 3, at end insert—
"(2A) Subsection (2B) applies if—

(a) the conduct concerned is general criminal conduct,

(b) a confiscation order mentioned in subsection (3) has at an earlier time been made against the defendant, and

(c) his benefit for the purposes of that order was benefit from his general criminal conduct.

(2B) His benefit found at the time the last confiscation order mentioned in subsection (2A)(c) was made against him must be taken for the purposes of this section to be his benefit from his general criminal conduct at that time."
The noble and learned Lord said: My Lords, in moving this Amendment perhaps I may speak at the same time to Amendments Nos. 13, 14, 16, 41, 42, 44, 70 to 72, and 74. These amendments to Clauses 8 and 10 and their equivalents in Parts 3 and 4 are technical changes relating to the calculation of benefit and the use of the assumptions. Unfortunately, the problem that these amendments are designed to deal with is very real and has come to light only recently.

1229
We are concerned here with the narrow situation where a "general criminal conduct" confiscation order is being made against a defendant who has previously been the subject of a confiscation order. The problem does not affect defendants who are before the court for a confiscation order for the first time.
Provision is needed to deal with the narrow situation I have referred to because, as noble Lords will be aware, "general criminal conduct" means all of the defendant's criminal conduct at any time in the past. If the court were to make a "general criminal conduct" confiscation order now and a similar one was made against the same person five years ago, there would be a risk of double counting of all the benefit gained by the defendant more than five years ago, unless the Bill prevented it.
At present, Clause 8 prevents this double counting by providing that, if the court is making a general criminal conduct confiscation order, it must deduct any amount ordered to be paid under a previous confiscation order. So if the defendant's benefit from general criminal conduct is calculated now at £120,000 and a previous order was made for £60,000, the defendant can be ordered to pay only £60,000 this time. That is obviously correct.
Unfortunately, there is a technical problem connected with the operation of the assumptions, which means that the provision will not work as we would wish it in all cases. The problem is that Clause 8 as it stands requires the court to calculate the defendant's benefit from general criminal conduct afresh every time it makes a confiscation order. This means in practice in some cases where benefit has been exposed by the operation of the assumptions at the time of a previous confiscation order that the director and the prosecutor would have to prove that benefit to the court without the assistance of the assumptions. They might well find it impossible to do so.
If the authorities were unable to prove this earlier benefit, the clause as it stands would require the defendant to pay nothing. For example, if the operation of the assumptions exposed £60,000 worth of benefit in 1990 and the operation of the assumptions against different property today also exposes £60,000 worth of benefit, the clause would require the previous £60,000 to be deducted from the current £60,000, leaving the defendant to pay nothing. That is not the desired result. The mechanism should yield a total benefit of £120,000 this time round, from which the earlier £60,000 is deducted.
The amendments achieve this. They will require the court to accept the assessment of benefit made by the court that previously made a confiscation order against the defendant. This will relieve it of the unnecessary burden of revisiting the earlier benefit when it makes another confiscation order against the same person.
The amendment to Clause 10 and its equivalents deals with the fact that a previous confiscation order may have been made in the past six years. The amendments to Clause 8 require the present court to
1230
accept the benefit found by the previous court. Without this amendment the present court could make the assumptions against the same property and so double count the same benefit. In practice, the "serious risk of injustice" exemption would probably come into play here, but we prefer to put the matter beyond doubt.
Regrettably, these amendments are of more practical importance than may be immediately obvious. It is far from unknown for more than one confiscation order to be made against the same defendant. I beg to move.
On Question, amendment agreed to.
Lord Falconer of Thorotonmoved Amendment No. 13:
Page 5, line 10, at end insert—
"(3A) But subsection (3) does not apply to an amount which has been taken into account for the purposes of a deduction under that subsection on any earlier occasion."
On Question, amendment agreed to.
Lord Falconer of Thorotonmoved Amendment No. 14:
Page 5, line 21, at end insert—
"(5) The reference to general criminal conduct in the case of a confiscation order made under any of the provisions listed in subsection (4) is a reference to conduct in respect of which a court is required or entitled to make one or more assumptions for the purpose of assessing a person's benefit from the conduct."
On Question, amendment agreed to.
Lord Goodhartmoved Amendment No. 15:
After Clause 9, insert the following new clause—
"COMPENSATION OF CREDITORS
(1) Any person who was a creditor of the defendant at the time when the confiscation order was made may, within one year of the date of the order, make an application to the court for compensation.
(2) The court may require the enforcement authority to pay compensation to the applicant if it is satisfied that—

(a) as a result of the making of the order the defendant is wholly or in part unable to repay the debt;

(b) the debt was incurred for full consideration; and

(c) at the time the debt was incurred the applicant had no reason to believe that a confiscation order could be made against the defendant."

The noble Lord said: My Lords, this is the first of a number of groups of amendments which deal with what we see as a serious problem in this Bill, which is the total disregard by the Government of the adverse effect that it may have on bona fide creditors of persons against whom orders under the Bill are made and other innocent third parties.
In moving this amendment, I shall speak also to Amendments Nos. 24, 43, 54, 73, 79 and 136. This group of amendments aims to protect the position of creditors when a confiscation order, a restraint order or a civil recovery order has been made against their debtor. A defendant against whom the order under the Bill has been made may, for example, have commissioned building works from a local, small builder, thousands of pounds may be due under that

1231
commission and the builder may know nothing about the defendant's criminal history. But as the result of the making of one of the orders under the Bill the creditor may well not get his money and may therefore end up with his business going bust.
There are in fact two sub-groups of amendments in the group. Amendments Nos. 15, 43, 73 and 136 are new clauses which provide for compensation to be payable where a confiscation order or a civil recovery order has been made and where the circumstances specified in the clauses are satisfied. The noble Baroness, Lady Buscombe, and the noble Lord, Lord Kingsland, have put their names to all of those amendments. Amendments Nos. 24, 54 and 79 allow debts to a bona fide creditor to be paid out of the property which is subject to a restraint order. I accept that a confiscation order or a civil recovery order will not necessarily leave the defendant penniless, but in a number of cases they may very well do so.
I accept that the Government have legitimate concerns about the creation of bogus debts by which funds can be extracted from the estate of the defendant subject to the order. Our amendments are designed to cover both those points because before any compensation can be paid by the director out of the funds of the agency three things will have to be established. First, it will have to be shown that as a result of the order the defendant is in fact unable to pay his debts. Clearly, if the defendant is able to do so, he should be the primary source from which payment should be sought. Secondly, the debt must be one that has been incurred for full consideration. Obviously, we do not wish to enable bogus debts and artificially created debts to be used, as I have said, to extract money. So the existence of full consideration provided by the creditor must be shown. Thirdly, the creditor must have no reason to believe that a confiscation order or a civil recovery order is likely to be made so that if the creditor is aware of the possibility of an order then he is on notice of the existence of the risk. We accept that in those circumstances it is proper that he should bear that risk.
When these amendments were discussed at Committee stage the Government strongly overstated their case against them. The noble Lord, Lord Rooker, said in the debate on 22nd April:
"In practical terms their effect would be disastrous on the operation of the legislation".—[Official Report, 22/4/02; col. 62.]
That is an absurd overstatement. I can understand the Government's concerns. We have tried to meet them and I believe that our amendments succeed in doing so.
In addition to that, what I cannot understand is the Government's attitude that somehow they have a moral claim to the proceeds of a confiscation order or a civil recovery order, which has priority to the claims of creditors. That is not so. In most cases confiscated property never belonged to the Government. In those cases where it did, such as criminal tax evasion, they have perfectly effective existing rights to get that property back. The purpose of the confiscation order is not to compensate the Government for any loss, but to impose a punishment on the defendant and a deterrent against the defendant and other possible
1232
people who make a profit from crime. In so far as a confiscation order or a civil recovery order leaves a defendant unable to pay a debt due to an innocent creditor, it is the creditor who suffers that punishment and not the defendant. The Government say that the creditor already runs the risk of the defendant's bankruptcy or default even if there is no confiscation order. That is perfectly true, but in no way does that justify adding another risk.
As I said in Committee, if I were an innocent creditor and found that the debtor could not pay because the Government had seized assets under a confiscation order, I would believe that, frankly, the Government had stolen my money and I would be right to believe that. The fact that a confiscation order overrides unsecured debts, even if the creditor can prove to the hilt that the debt was incurred for full value and in good faith, is completely unacceptable. I beg to move.
5 p.m.
Baroness Buscombe: My Lords, I, too, wish to speak to the amendments proposed by the noble Lords, Lord Goodhart and Lord Thomas of Gresford. My noble friend Lord Kingsland and I have added our names to Amendments Nos. 15, 43, 73 and 136.
As the noble Lord, Lord Goodhart, said, these amendments would allow an innocent creditor to make a claim for compensation if it is made within one year of the confiscation order. These are sensible and reasonable proposals. The creditor must be innocent of the activities of the defendant and the amendments assist only those creditors where the debt is for full value and cannot be paid in the normal way by the defendant because of the confiscation order. This right will occur only if the confiscation order has mopped up all of the assets. If there are any assets left, it is only right and proper that the debt should be paid in full.
I support the noble Lords, Lord Goodhart and Lord Thomas of Gresford, in Amendments Nos. 24, 54 and 79, which concern restraint orders. Surely there ought to be an exclusion for the purpose of meeting legitimate debts. Indeed, these amendments foreshadow amendments that we have proposed in relation to insolvency in Part 12 of the Bill. We question whether it is right that innocent creditors should lose out to the Consolidated Fund.
It is important that we briefly revisit, as the noble Lord, Lord Goodhart has done, the debate in Committee, where the noble Lord, Lord Rooker, stated that if similar amendments were accepted,
"We would be setting up a system that invites claims from bogus creditors who in reality were associates of the defendant. A whole new industry would start up. It would be difficult to prevent and would greatly weaken the confiscation system. What is worse, it would make the legislation inoperable from the enforcement authorities' point of view. The enforcement authorities would undoubtedly be discouraged from pursuing confiscations with the threat of claims from unsecured creditors hanging over them".—[Official Report, 22/4/02; col. 63.]
This goes to the heart of a weak argument. The courts are perfectly capable and perfectly astute in dealing with false claims. They are able to decide which

1233
is a false claim and which is not. We should be grateful if the Minister could provide us with examples of where a creditor has made a false claim that has been accepted by the courts. It is simply not good enough for the Minister's predecessor, the noble Lord, Lord Rooker, to dismiss the risk of business bankruptcy to many innocent, legitimate creditors as "the way of the world".
I agree with the noble Lord, Lord Goodhart, that such arguments strongly overstate the position and accentuate the weakness of the Government's case.
Lord Falconer of Thoroton: My Lords, these amendments are very similar to those which have been discussed in detail both in another place and in Committee in this House.
The effect of the new clauses proposed in Amendments Nos. 15, 43 and 73 would be to make the enforcement authorities pay the unsecured debts of any person whom the defendant was unable to repay because of the making of a confiscation order under Parts 2, 3 and 4 of the Bill where the unsecured creditor was unaware of the criminal activity of the defendant. So the recovery authority would be recovering not only the assets from the proceeds of crime, but would also become the agent which pays off all the unsecured debts of the criminal. It would become a kind of managing agent for the unsecured debts of the criminal.
Amendment No. 136 would have a similar effect in relation to Part 5 of the Bill as Amendments Nos. 15, 43 and 73 would have in relation to Parts 2, 3 and 4. Under Amendment No. 136, the court would be able to require the enforcement authority to pay compensation to any person the respondent was unable to repay because of the making of a recovery order. The requirement could be placed on the enforcement authority if the debt was incurred for full consideration and the debtor had no reason to expect that a recovery order could be made against the respondent. So a fairly stunning protection would be given to unsecured creditors by these provisions. The effect of Amendments Nos. 24, 54 and 79 would be to allow restrained assets to be used to pay the defendant's debts.
I shall speak first to the amendments as they would affect the criminal confiscation measures in Parts 2 to 4 of the Bill as the legal landscape in those parts differs considerably from that in Part 5. All of the amendments which affect Parts 2 to 4 of the Bill bear upon the position of unsecured creditors under the confiscation legislation in circumstances where the position is unaffected by bankruptcy proceedings. As your Lordships will be aware, the Bill protects the rights of secured creditors. The only issue raised here concerns the position of unsecured creditors.
I believe that it was the noble Baroness, Lady Buscombe, who raised the question of the builder who goes bankrupt because he is not paid as a result of unsecured debt. If the position of suppliers is such that their solvency depends upon the debt—we are not
1234
talking about suppliers of food or drink and so on but about builders—they can protect themselves by seeking security in relation to such a debt, which may well be sensible if the level of commitment was such that their solvency depended upon it.
As the noble Lord, Lord Goodhart, made clear, the making of a confiscation order does not relieve the defendant of the obligation to pay his debts. They remain payable whether or not a confiscation order is made. Even if the defendant uses the property currently available to him to pay the confiscation order, he remains liable to pay the debt later. It is not the responsibility of the state to pay criminals' debts for them.
Secondly, lenders who are not prepared to take the risk of losing their money can secure their loans. Thirdly, society's claim to the proceeds of crime is better than that of an unsecured creditor. Creditors have no right to be paid out of the proceeds of crime. If a criminal perpetrates a number of crimes against unknown victims from which he benefits substantially, and ultimately such property is sold to meet a confiscation order, those funds belong to society and the defendant's creditors should not be regarded as having a prior claim to them.
Fourthly, we believe that these amendments as a whole would undermine a number of other obligations to the Crown. What is the difference between the obligation to pay a confiscation order and the obligation to pay one's taxes? Are taxpayers to be relieved of their obligation to pay because they happen to owe an individual a private debt? I repeat here the question posed by my noble friend Lord Rooker in Committee: are the courts to be able to set aside fines, compensation orders, costs and other disposals merely because their subject happens to have outstanding debts? In our view, they should not.
Turning to the practical implications that were touched upon by the noble Baroness, Lady Buscombe, and the noble Lord, Lord Goodhart, the amendments would invite claims from bogus creditors who were in reality associates of the defendant. This would be very difficult to prevent and greatly weaken the confiscation system. Of course the courts could look into such matters, but we must remember that these are transactions where all of the facts are in the hands—
Lord Avebury: My Lords, I wonder why it is assumed that bogus creditors would not be equally able to put in claims if the person went bankrupt. In those circumstances there would be an examination of the claims of the so-called bogus creditors, just as there would be here.
Lord Falconer of Thoroton: My Lords, then that really detracts from the main argument; namely, how difficult is it in those circumstances to come to a particular conclusion? Let us recognise the difficulty of what such cases involve. If we assume the transaction to be bogus, they involve facts entirely in the knowledge of the two parties who are putting forward the claim to the court. Of course, the courts are

1235
extremely experienced in these matters, but they are dealing in an area where frequently no alternative view is being put.
The amendments would also encourage defendants to defeat the confiscation process by running up legitimate debts, safe in the knowledge that the authorities would be left out of pocket at the end of any confiscation proceeding. So the question posed by the amendments is: is there a sufficient risk of a real problem here to make this exception a sensible one? We firmly believe that there is not, that it would give rise to bogus claims and that it puts the balance in the wrong place.
The three new clauses proposed in Amendments Nos. 15, 43 and 73 would in our view make the legislation inoperable in practical terms. It was said by the noble Lord, Lord Goodhart, that that was over-stating the case. They would invite claims against the enforcement authorities, as he rightly acknowledged, and it is quite possible that those authorities would be out of pocket at the end of the procedure. It is difficult to imagine a better way of deterring them from taking on confiscation cases.
Moreover, as I pointed out earlier, it is not the moral responsibility of the state to take over the defendant's debts. That, however, would be precisely the effect of this group of amendments.
Continuing with the criminal confiscation amendments, the new subsections proposed in Amendments 24, 54 and 79 would enable the court to vary restraint orders to allow the defendant's unsecured debts to be paid. These amendments would reverse the effect which the confiscation legislation, including this Bill, has always had; namely, that debts should not be paid out of realisable property under restraint.
Here, too, I appreciate that noble Lords have attempted to have regard to the practical effect of the amendments, and have limited the power to debts incurred before the restraint order was obtained. Nevertheless, the amendments would undoubtedly have an adverse practical effect by encouraging the submission of claims that debts were, in fact, incurred before that time when in reality they were not, and by encouraging the submission of spurious claims in general.
Equally, we are unable to accept the principle underlying the amendments that unsecured creditors have a better claim to the proceeds of crime than victims of crime or society. Proceeds should not be allowed to remain in circulation to pay creditors.
I turn now to Part 5 dealing with civil recovery. An identical amendment was discussed in Committee. We explained then that the Government do not support the principle behind the amendment. They take the view that its effect would be highly prejudicial to civil recovery proceedings. I can add little to what was said then.
In the case of secured creditors, we do not—as with Part 2—see any difficulty. A building society, for example, would be an associated property holder in respect of a house on which the society had granted a mortgage. Its interest would therefore be protected in the same way as any other associated property. The Bill
1236
also recognises the prior claims of preferential debts, as defined in the insolvency legislation, by giving them priority over civil recovery proceedings.
The issue is therefore simply whether unsecured creditors should be granted protection in cases where a person, some of whose property has been made subject to a recovery order, is subsequently unable to satisfy some or all of the debts owed.
The director of the assets recovery agency is seeking to recover the proceeds of unlawful conduct in order to prevent and disrupt organised crime. The director will act on behalf of the state in cases where there may often be no identifiable victim. Our case is that the person in possession of the proceeds of unlawful conduct should not be able to retain such wealth, on the basis that it never properly belonged to him. If it did not properly belong to him, he had no entitlement to promise it to other people.
An unsecured lender will inevitably expose himself or herself to a wide range of risks. The fact that the borrower may subsequently be subject to a recovery order is but one of them. The borrower or recipient of goods or services may turn out to be insolvent, may die without leaving an adequate estate or may simply default.
As I have said previously, the amendment overlooks the fact that the making of a recovery order does not absolve any respondent of the obligation to pay his debts or of any other private or personal obligations. Debts remain payable in the first place out of other property owned or income earned by the respondent.
We have no reason to expect insolvency to be a routine aftermath of the civil recovery proceedings. But if a respondent later finds himself insolvent, then the normal rules for dealing with that situation, including the prioritisation of creditors, will apply. We do not accept that it would be right to characterise such a situation as being the product of the enforcement authority's success, and consequently the enforcement authority's financial responsibility. It is a product of the respondent's unacceptable reliance on recoverable property.
As we have discussed previously, the amendment would have an adverse practical effect on the operation of an effective civil recovery system, as it would invite claims from bogus creditors who were in reality associates of the respondent. The same points that I made in relation to the confiscation scheme apply as well.
In relation to civil recovery, the amendment would make the legislation inoperable from the enforcement authorities' point of view. The enforcement authorities would undoubtedly be discouraged from pursuing potential cases if the threat of claims from unsecured creditors, of whom it may be possible to know nothing beforehand, were hanging over them. Indeed, it would apparently be possible for debts incurred after a recovery order was made to come within the terms oft he amendment. The amendments are in effect saying that the recovery authority has to pay all of the unsecured

1237
debts where there is a bankruptcy after the making of the civil recovery order. That is a huge undermining of the Bill.
I understand, of course, that there is concern that civil recovery of the proceeds of unlawful conduct by the state is thereby given priority over ordinary creditors. That would certainly be the case if the situation arose. However, this would not be the only situation in which creditors could find themselves disadvantaged by the state. The same would apply if a person were unable to pay debts because of tax or national insurance commitments. Where, however, they cannot pay their unsecured debts because their assets have been taken under a civil recovery order because they are the proceeds of crime, the amenders would like the position to be that the recovery authority has to pay their debts on their behalf. We simply do not accept that the state should indemnify creditors in the particular circumstances envisaged by the amendment.
For the reasons I have given on this occasion and those recited far more eloquently by my predecessors, we believe that these amendments are unacceptable. They would have a very significant effect on our attempts to get the assets of organised crime, and on the existing law. It is a matter for noble Lords opposite whether they wish to undermine both the existing protections and those that we seek to put in place in the Bill. In the light of my remarks, I invite the noble Lord, Lord Goodhart, to withdraw his amendment.
5.15 p.m.
Lord Goodhart: My Lords, the noble and learned Lord, Lord Falconer of Thoroton, is a most distinguished and successful barrister. But even the most distinguished and successful of barristers sometimes has to appear to advance a totally indefensible argument. I must say that I have rarely, if ever, heard such an indefensible argument as that put forward by the noble and learned Lord this afternoon.
For a start, he said that the enforcement authority would be an agent paying off the unsecured debts of the criminal. In a sense, that is true. But he then said that what we are asking for would be "stunning" protection. What is stunning about this is the Government's claim to take away an innocent person's property. That is, among other things, contrary to the first protocol of the European Convention on Human Rights.
In the case of the builder that we have suggested, the Government are claiming money twice because the state gets the improved value of the defendant's building without having to pay for the cost of the improvement. That is clearly double counting.
As the Minister says, the Bill protects the rights of secured creditors. That means banks and building societies. They are the big boys, who always come out well on this sort of occasion. However, the small people—the unsecured creditors—lose out. The Minister said that an unsecured creditor could get protection by obtaining security. Let us live in the real world. Whoever heard of a builder who got security against the person who commissioned him to do the building? That is wholly unrealistic.
1238
The Minister said that it is not the responsibility of the state to pay the criminals' debts for them. It is not the right of the state to deprive a creditor of his property interest, which is the benefit of his debt. If the state seizes the only money that can be used to pay the debt, surely the state ought to pay it.
The noble and learned Lord compared the situation with the obligation to pay taxes. That is a legitimate debt due to the Government and on an entirely different basis from seizure under a confiscation order.
Is there risk of a real problem? The Government say that the amendment would give rise to bogus claims. I do not believe that it would give rise to a large number of bogus claims and when brought they would be spotted. Surely the right course is not to bar the rights of bona fide claimants unless there is clear evidence that those rights are being abused to such an extent as to justify extreme measures of the kind proposed here. No such evidence exists. The Government have put nothing before us.
The noble and learned Lord said that if the property did not properly belong to the defendant, he should not be able to use it. Surely the legal situation is that he can use it unless someone has a better right to it. As I said in a previous debate, the confiscation order is not a claim of property to which the Government are entitled. It is, in a sense legitimately, a punishment and deterrent. There is no punishment or deterrent if the sufferer is the creditor.
I do not believe that the enforcement authorities would be deterred for a moment from taking enforcement proceedings by the existence of these possible claims. The Government's attempt to override the legitimate interests of bona fide creditors is unnecessary, unfair and wholly misguided. In the circumstances, I have no alternative but to ask for the opinion of the House.
5.23 p.m.
On Question, Whether the said amendment (No. 15) shall be agreed to?
Their Lordships divided: Contents, 159: Not-Contents, 136.

Division No. 2

CONTENTS

Aberdare, L.

Buscombe, B.

Addington, L.

Byford, B.

Alexander of Weedon, L.

Caithness, E.

Allenby of Megiddo, V.

Campbell of Alloway, L

Anelay of St Johns, B.

Carlisle of Bucklow, L.

Arran, E.

Carnegy of Lour, B.

Astor of Hever, L.

Carrington, L.

Attlee, E.

Chadlington, L.

Avebury, L

Clement-Jones, L

Beaumont of Whitley, L.

Colwyn, L.

Blatch, B.

Cope of Berkeley, L.

Boardman, L.

Craig of Radley, L.

Brabazon of Tara, L.

Crathorne, L.

Brittan of Spennithorne, L.

Crickhowell, L.

Brooke of Sutton Mandeville, L.

Cuckney, L.

Brougham and Vaux, L.

Dean of Harptree, L.

Burnham, L.

Deedes, L.

1239

Denham, L.

Newby, L.

Dixon-Smith, L.

Noakes, B.

Eocles of Moulton, B.

Northbrook, L.

Eden of Winton, L.

Northesk, E.

Elles, B.

Northover, B.

Elliott of Morpeth, L.

Norton of Louth, L.

Elton, L.

O'Cathain, B.

Flather, B.

Oakeshott of Seagrove Bay, L

Fookes, B.

Onslow, E.

Forsyth of Drumlean, L.

Oppenheim-Barnes, B.

Freeman, L.

Park of Monmouth, B.

Gardner of Parkes, B.

Patten, L.

Geddes, L.

Pearson of Rannoch, L.

Geraint, L.

Peyton of Yeovil, L.

Goodhart, L. [Teller]

Platt of Writtle, B.

Goschen, V.

Plumb, L.

Gray of Contin, L.

Prior, L.

Griffiths of Fforestfach, L.

Rawlings, B.

Hamwee, B.

Razzall, L.

Hanham, B.

Redesdale, L.

Hayhoe, L.

Rees, L.

Henley, L.

Rennard, L.

Higgins, L.

Renton, L.

Hodgson of Astley Abbotts, L.

Roberts of Conwy, L.

Holderness, L.

Rodgers of Quarry Bank, L.

Home, E.

Rogan, L.

Hooson, L.

Roper, L.

Howe, E.

Rotherwick, L.

Howe of Aberavon, L.

Ryder of Wensum, L.

Howe of Idlicote, B.

St John of Fawsley, L.

Howell of Guildford, L.

Saltoun of Abernethy, Ly.

Hunt of Wirral, L.

Sandberg, L.

Hylton, L.

Scott of Needham Market, B.

Jenkins of Hillhead, L.

Seccombe, B.[Teller]

Kimball, L.

Selborne, E.

Kingsland, L.

Sharman, L.

Lamont of Lerwick, L.

Sharp of Guildford, B.

Lawson of Blaby, L.

Sharpies, B.

Lester of Herne Hill, L.

Shaw of Northstead, L.

Lindsay, E.

Shutt of Greetland, L.

Listowel, E.

Skelmersdale, L.

Liverpool, E.

Smith of Clifton, L.

Livsey of Talgarth, L.

Soulsby of Swaffham Prior, L.

Lloyd of Berwick, L.

Strathclyde, L.

Lucas, L.

Swinfen, L.

Lyell, L.

Taverne, L.

McColl of Dulwich, L.

Taylor of Warwick, L.

MacGregor of Pulham Market, L.

Tebbit, L.

Thatcher, B.

Mackie of Benshie, L.

Thomas of Gwydir, L.

McNally, L.

Thomas of Swynnerton, L.

Maddock, B.

Thomas of Walliswood, B.

Mancroft, L.

Thomson of Monifieth, L.

Mar and Kellie, E.

Tope, L.

Marlesford, L.

Trefgarne, L.

Masham of Ilton, B.

Vivian, L.

Miller of Hendon, B.

Waddington, L.

Monro of Langholm, L.

Wakeham, L.

Monson, L.

Wallace of Saltaire, L.

Montrose, D.

Walmsley, B.

Mowbray and Stourton, L.

Williams of Crosby, B.

Murton of Lindisfarne, L.

Willoughby de Broke, L.

Naseby, L.

Wolfson, L.

NOT-CONTENTS

Acton, L.

Bhatia, L.

Ahmed, L.

Billingham, B.

Alli, L.

Blackstone, B.

Alton of Liverpool, L.

Blease, L.

Andrews, B.

Bledisloe, V.

Archer of Sandwell, L.

Borrie, L.

Ashton of Upholland, B.

Bragg, L.

Bach, L.

Brennan, L.

Bassam of Brighton, L.

Brett, L.

Bernstein of Craigweil, L.

Brightman, L.

1240

Brooke of Alverthorpe, L.

Judd, L.

Brooks of Tremorfa, L.

Kirkhill, L.

Bruce of Donington, L.

Layard, L.

Campbell-Savours, L.

Lea of Crondall, L.

Carter, L.

Lipsey, L.

Chorley, L.

Lockwood, B.

Clark of Windermere, L.

Lofthouse of Pontefract, L.

Clinton-Davis, L.

Macdonald of Tradeston, L.

Cohen of Pimlico, B.

McIntosh of Haringey, L. [Teller]

Corbett of Castle Vale, L.

Crawley, B.

McIntosh of Hudnall, B.

Darcy de Knayth, B.

MacKenzie of Culkein, L.

David, B.

Mason of Barnsley, L.

Davies of Coity, L.

Massey of Darwen, B.

Davies of Oldham, L.

Merlyn-Rees, L.

Dean of Thornton-le-Fylde, B.

Milner of Leeds, L.

Desai, L.

Mitchell, L.

Dixon, L.

Morgan, L.

Donoughue, L.

Morris of Manchester, L.

Dormand of Easington, L.

Murray of Epping Forest, L.

Dubs, L.

Nicol, B.

Eatwell, L.

Orme, L.

Evans of Parkside, L.

Parekh, L.

Evans of Watford, L.

Patel of Blackburn, L.

Falconer of Thoroton, L.

Paul, L

Farrington of Ribbleton, B.

Pendry, L.

Faulkner of Worcester, L.

Peston, L.

Filkin, L.

Pitkeathley, B.

Fyfe of Fairfield, L.

Plant of Highfield, L.

Gale, B.

Prys-Davies, L.

Gavron, L.

Radice, L.

Gladwin of Clee, L.

Rea, L.

Goldsmith, L.

Rendell of Babergh, B.

Gordon of Strathblane, L.

Rooker, L.

Goudie, B.

Sainsbury of Turville, L.

Gould of Potternewton, B.

Serota, B.

Graham of Edmonton, L.

Sheldon, L.

Simon V

Gregson, L.

Simon of Highbury, L.

Grenfell, L.

Smith of Leigh, L.

Grocott, L. [Teller]

Stone of Blackheath, L.

Hardy of Wath, L.

Symons of Vemham Dean, B

Harris of Haringey, L.

Taylor of Blackburn, L.

Haskel, L.

Temple-Morns, L.

Hollis of Heigham, B.

Tenby, V.

Howells of St. Davids, B.

Thornton, B.

Howie of Troon, L.

Turnberg, L.

Hoyle, L.

Turner of Caniden, B.

Hughes of Woodside, L.

Uddin, B.

Hunt of Chesterton, L.

Varley, L.

Hunt of Kings Heath, L.

Walker of Doncaster, L.

Irvine of Lairg, L. (Lord Chancellor)

Warwick of Undetcliffe, B.

Weatherill, L.

Islwyn, L.

Whitaker, B.

Janner of Braunstone, L.

Whitty, L.

Jay of Paddington, B.

Wilkins, B.

Jeger, B.

Williams of Elvel, L.

Jenkins of Putney, L.

Williams of Mostyn, L. (Lord Privy Seal)

Jones, L.

Jordan, L.

Woolmer of Leeds, L.

Resolved in the affirmative, and amendment agreed to accordingly.
5.32 p.m.
Clause 10 [Assumptions to be made in case of criminal lifestyle]:
Lord Falconer of Thorotonmoved Amendment No. 16:
Page 6, line 25, at end insert—
"(8A) But if a confiscation order mentioned in section 8(2A)(c) has been made against the defendant at any time during the period mentioned in subsection (8)—

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(a) the relevant day is the day when the defendant's benefit was calculated for the purposes of the last such confiscation order;

(b) the second assumption does not apply to any property which was held by him on or before the relevant day."

On Question, amendment agreed to.
Clause 14 [Postponement]:
Lord Falconer of Thorotonmoved Amendment No. 17:
Page 9, line 2, at end insert——
"(11) A confiscation order must not be quashed only on the ground that there was a defect or omission in the procedure connected with the application for or the granting of a postponement.
(12) But subsection (11) does not apply if before it made the confiscation order the court—

(a) imposed a fine on the defendant;

(b) made an order falling within section 13(3);

(c) made an order under section 130 of the Sentencing Act (compensation orders)."

The noble and learned Lord said: My Lords, in moving Amendment No. 17, I shall also speak to Amendments Nos. 50 and 75.
The purpose of these amendments is straightforward. They are designed to stop confiscation orders from being quashed merely because some procedural error has taken place in the application of the postponement procedures. I shall, if I may, provide your Lordships with a little background on this occasion, as it is directly relevant to the amendments.
As your Lordships will be aware, the Bill amends the postponement regime in the existing legislation. In particular, following recommendations in a report of the Performance and Innovation Unit, the normal postponement period is extended from six months to two years. It is important to understand, however, that the basic mechanics of the postponement regime envisaged by the Bill remain rather similar to those in the existing legislation.
Unfortunately, it is becoming increasingly clear that the courts are finding this legislation difficult to operate. A string of appeal cases testifies to the fact that defendants regularly attempt to have the confiscation order overturned on the grounds that the postponement procedures were not applied properly by the court. Confiscation orders are being lost as a result. The case of Woodhead, decided by the Court of Appeal in January this year, is a good example. In that case, the postponement procedures had been followed to the letter. However, the Court of Appeal overturned a confiscation order of £200,000 on the grounds that the judge had not shown that he was exercising his discretion when agreeing to the postponement.
The Government's concern is clearly that the postponement arrangements in the Bill should not come under similar attack. The purpose of the
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amendments is to prevent that from happening. Most of the current difficulties arise from the fact that the legislation is interpreted as imposing a strict procedural regime which must be followed to the letter if a confiscation order is not to fall. We do not think that this approach is correct. We are not dealing here with a trial but with the imposition of a post-conviction measure. It is quite inappropriate to quash a confiscation order merely because there has been some procedural defect in the application of the post-trial postponement procedures. The amendments therefore make it clear that a confiscation order made under the Bill cannot be quashed just because there has been some technical defect in the court's application of the postponement procedures.
I should stress, however, that the amendments do not allow the courts to ignore other aspects of the confiscation procedures. Subsection (12) states explicitly that the procedural protection afforded in relation to postponement does not apply where they make the mistake of imposing a fine or some other financial order before they make the confiscation order. This is because the defendant would suffer serious hardship if one of these orders were made before the confiscation order. There is no discretion to reduce the confiscation order to take account of these orders. The confiscation order needs to be made first so that fines and other financial orders can be made with the knowledge of how much is required to be paid under the confiscation order.
These amendments will improve the practical operation of the Bill and preserve the integrity of a confiscation order. I beg to move.
On Question, amendment agreed to.
Clause 15 [Effect of postponement]:
Lord Goodhartmoved Amendment No. 18:
Page 9, line 5, at end insert "and unless there are exceptional circumstances shall do so if the period of postponement exceeds two months and the defendant has been remanded in custody pending sentence"
The noble Lord said: My Lords, this is a short point. The Bill gives power to postpone proceedings for a confiscation order for up to two years, and indeed in exceptional cases for longer. The Government also allow the court to defer sentence until the end of the period of postponement. I believe that defendants remanded in custody are entitled to know what sentence they are going to get within a reasonable time of the conviction. It would certainly be wholly wrong to delay the sentence for two years or more.
We therefore believe that the Bill should contain a cut-off point for sentencing in cases where the defendant is imprisoned. What we have suggested in this amendment is a period of two months with power to delay further in exceptional cases. If the Government were prepared to accept a cut-off after a

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period of more than two months, I think that we would be content with that if it was a reasonable period. But it is plain, frankly, that we should not leave the defendant hanging around awaiting sentence for two years. That would, in the American phrase, be a cruel and unusual form of punishment.
If the defendant is being unco-operative about disclosing his or her assets, which may be part of the reasoning for postponing sentence, I should expect that the defendant would be punished by imposing a longer sentence. That is the way to deal with the matter. I believe that a delay of two years in sentencing is not justified. I beg to move.
Lord Falconer of Thoroton: My Lords, an earlier prototype of these amendments was discussed in Committee. I refer noble Lords to columns 55 and 56 of Hansard of 22nd April.
I add to what was said on that occasion as follows. In its original form the confiscation legislation did suffer from the sort of problem that the amendment seeks to deal with. The legislation always required the court to make the confiscation order before sentencing the defendant. Confiscation matters are often complex so defendants often had to wait for a long period before learning their sentence. That is a situation that I think we all agree must not be allowed to happen unnecessarily, as the noble Lord, Lord Goodhart, said.
The postponement powers were introduced largely to deal with precisely this problem. They give the court a wide discretion to sentence the defendant as soon as it has postponed the confiscation proceedings; and no doubt that often happens in practice.
As my noble friend Lord Rooker pointed out, we see no reason to impose fixed time limits on the court, given that it already has power to sentence the defendant quickly. It is also a matter of a little concern to us that the amendments import the question of exceptional circumstances and the issue of whether the defendant has been remanded in custody. We see no need for those complications. If the court postpones the confiscation proceedings, the powers to sentence quickly are there; and no one has complained that the courts are unable or unwilling to exercise them.
In short, we think that the provision is best left as it currently stands. We believe that the court has the necessary powers and is the best arbiter of how to exercise them in this context.
I hope that in the light of what I have said—I broadly seek to deal with the same problem as the noble Lord, Lord Goodhart—the noble Lord will be reassured and will feel able to withdraw his amendment.
Lord Goodhart: My Lords, I am grateful to the noble and learned Lord. I am reassured to some extent. I still have some concerns that problems could arise but in the circumstances I am happy to beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 18 [Provision of information by defendant]:
Lord Falconer of Thorotonmoved Amendment No. 19:
Page 11, line 28, at end insert—
"(8) No information given under this section which amounts to an admission by the defendant that he has benefited from criminal conduct is admissible in evidence in proceedings for an offence."
The noble and learned Lord said: My Lords, in moving Amendment No. 19, I wish to speak also to Amendments Nos. 52 and 77. These amendments bring us back to a point raised by the noble Lord, Lord Thomas of Gresford, in Committee.
Briefly, a defendant who responds to an order under this clause may make an admission that he has benefited from criminal conduct. The noble Lord suggested that the Bill should protect the defendant from self-incrimination in relation to these orders. The effect of the amendments is very much along the lines suggested by the noble Lord. Their effect will be to prevent the authorities from using the defendants admission to prosecute him or another person. In this way, we hope to encourage defendants to be more forthcoming about their benefit from criminal conduct.
However, I should make it clear that where the information provided exposes the commission of an offence, the protection we are creating here would not prevent the authorities from prosecuting the offence on the basis of some other evidence. It would be wrong to create a blanket immunity against prosecution. Accordingly, the amendment prevents admissions made under this clause from being used to prosecute the defendant or another person, but it does not prevent a prosecution from proceeding on the basis of other evidence.
There is one further point I should mention. During Committee proceedings the noble Lord, Lord Thomas of Gresford, asked whether failure to comply with a court order under Clause 18 would attract contempt proceedings. My noble friend Lord Rooker did not have an immediate answer and indicated that he would look further into the matter.
I have since written to the noble Lord but the position is the following. We want defendants to co-operate fully and frankly with the court. Where a defendant declines to respond to an order concerning the extent of his benefit, it will be open to the court by virtue of Clause 18(4) to draw inferences from his non-co-operation. We have to accept, however, that the fact that a court may draw inferences from a defendant's non-co-operation is unlikely to be of much help if a defendant refuses to provide information about the extent and whereabouts of his property.
Neither the CPS nor Customs is aware that contempt proceedings have ever been brought against a defendant who has declined to provide such information. Furthermore, we think that Clause 18, as it presently stands, is ambiguous as to whether contempt could be applied or not for non-compliance with the court's order to make information available. We therefore intend to bring forward an amendment

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at Third Reading to put the matter beyond any doubt. We have it in mind to qualify Clause 18(4) by stating that the power to draw inferences does not affect any other power of the court to give effect to its orders, so contempt proceedings would be available. I beg to move.
5.45 p.m.
Lord Goodhart: My Lords, on behalf of my noble and absent friend Lord Thomas of Gresford, I am grateful to the noble and learned Lord for having taken these points on board. We welcome the amendments.
On Question, amendment agreed to.
Clause 28 [Defendant neither convicted nor acquitted]:
Lord Goodhartmoved Amendment No. 20:
Leave out Clause 28.
The noble Lord said: My Lords, in moving Amendment No. 20, I wish to speak also to Amendments Nos. 53 and 78. This is another short point. English law and, as far as I know, Scots law have never accepted the principle of trial in absentia. Therefore, a defendant cannot be convicted unless he or she has been present at least at the start of the trial. Unless they have been convicted, they cannot, of course, be punished. But the clauses which we seek to leave out override that principle by allowing a confiscation order to be made where the defendant has absconded.
A confiscation order is a punishment. Under this clause it would be punishment where there has been no conviction. In effect, we would see a sentence where there had been no trial. That, I believe, is wrong; it is also unnecessary. The enforcement agency is likely to have obtained a restraint order. Indeed, if it has not obtained a restraint order, it has nothing left to confiscate. If the defendant absconds, the restraint order will, of course, stay in place. The agency can leave it until the defendant is apprehended and tried, or it can apply instead for a confiscation order or a civil recovery order. We believe that the clauses we seek to delete override a longstanding and entirely proper principle of the criminal law and do so without any pragmatic justification. I beg to move.
Lord Falconer of Thoroton: My Lords, the effect of these amendments would be to make it impossible for the court to make a confiscation order against a person who is charged with a criminal offence and flees justice before being convicted.
Similar amendments were tabled by the noble Lord in Committee. The debate is recorded in Hansard of 22nd April at columns 97 to 100. The matter was discussed extensively on that occasion and I do not intend to repeat all the arguments. There is perhaps one comment that I should make initially in elaboration of a point that was emphasised more than once. The provision in the Bill is not new. In Northern Ireland, it has already extended beyond drug trafficking to cover other criminal offences for some
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years by virtue of the Proceeds of Crime (Northern Ireland) Order 1996. So while it is true that the current provision is being extended in England and Wales and Scotland, the nature of that extension is not as revolutionary as might at first appear.
Our main reason for opposing these amendments was also touched upon by the noble Lord, Lord Rooker, and again his comments would benefit from a little further elaboration. While we accept that the possibility that applying for a civil recovery order might provide a solution in some cases, it would not always do so. As my noble friend pointed out, criminal confiscation and civil recovery are very different tools. In particular, to obtain a civil recovery order, the director has to prove the criminal origin of the recoverable property.
However, if the only property at issue has been legally obtained, there would be no possibility of obtaining a civil recovery order. For example, if a criminal inherits an amount of money, that money could be confiscated to enforce a criminal confiscation order that was made in absentia under the Bill but it would most certainly not be subject to civil recovery under Part 5.
So long as a theoretical gap in our armoury would be created by the removal of the powers, we wish them to remain in the Bill. It would be embarrassing and wrong if just one substantial confiscation order was lost as a result of their removal. As my noble friend Lord Rooker emphasised, there are adequate safeguards to ensure that they are not used inappropriately or oppressively. In those circumstances, I invite the noble Lord to withdraw his amendment.
Lord Goodhart: My Lords, I am less than fully satisfied by the answer of the noble and learned Lord. The issues that are raised in this regard go somewhat deeper than he suggested. In principle, I would have wished to press this point. However, I recognise that one has to be somewhat selective about the issues that one chooses to fight to a finish in your Lordships' House. This issue, I am afraid, is not one of them. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 31 [Appeal by prosecutor or Director]:
Lord Kingslandmoved Amendment No. 21:
Leave out Clause 31.
The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 22 and 23.
This matter was dealt with in Committee on 22nd April 2002 at cols. 101 to 103 of Hansard. I can deal with the matter fairly concisely by a process of selective quotation, which will of course be totally fair and balanced.
The two key parts of the Bill are Clause 32(2) and Clause 33(4). Clause 32(2) states:
"On an appeal under section 31(2) the Court of Appeal may confirm the decision, or if it believes the decision was wrong it may … itself proceed under section 6 … or … direct the Crown Court to proceed afresh under section 6".

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That is at the Court of Appeal stage. The stage involving the Judicial Committee of your Lordships' House is dealt with in Clause 33(4). It states:
"On an appeal from a decision of the Court of Appeal to confirm the decision of the Crown Court not to make a confiscation order or from a decision of the Court of Appeal to quash a confiscation order the House of Lords may … confirm the decision, or … direct the Crown Court to proceed afresh under section 6 if it believes the decision was wrong".
Subsection (5) states:
"In proceeding afresh in pursuance of this section the Crown Court must comply with any directions the House of Lords may make".
My observation on those two clauses at the Committee stage was that the individual who is the subject of the confiscation order has to go through no less than three stages as first instance hearings with, so far as I can see, the prospect of having to face, at each level, fresh injections of evidence by the prosecution or the director.
In dealing with my submissions, the noble Lord, Lord Rooker, said, inter alia:
"The appeal is, of course, concerned … not with the verdict of the jury or any matter underlying the conviction which preceded the confiscation hearing".
I entirely accept that. He then went on to discuss the purpose of the measures. He said:
"The purpose of this appeal is to deal with errors or law; for example, the sort of case where the court refuses to comply with a clear statutory requirement, not least the requirement to go through the confiscation procedures. Such instances are, regrettably, not unknown".
I should be most interested, incidentally, to hear whether the noble and learned Lord the Minister can cite any such instances. However, that is not germane to the point that I want to make which is that this issue is purely a matter of judicial review. The only expressed concern about the legal aspects of proceedings in the Crown Court or Court of Appeal is whether there has been an error of law. Surely that can be dealt with by constraining the appeal procedure to precisely that consideration.
The only other purpose identified by the noble Lord, Lord Rooker, that the appeal clauses should perform features in the next paragraph of his speech. He said:
"The appeal also covers factual mistakes such as adding up the benefit incorrectly or failing to take an item of property into account as realisable property which should be taken into account. The right of appeal is unlikely to be used frequently but we expect it to function as a valuable quality control mechanism in confiscation proceedings".—[Official Report, 22/4/02; col. 102.]
Once again, that is an extremely limited purpose, if that is, indeed, the purpose of the clauses.
If we are talking only about, first, judicial review and, secondly, factual error, surely that could be dealt with by a much more constrained text than the very broad text with which we are presented in the draft. I beg to move.
Lord Lloyd of Berwick: My Lords, I want to raise a point on Clause 33, which does not arise directly in
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relation to the amendment moved by the noble Lord. It is a question that has just occurred to me. Clause 33(1) appears to give an appeal as of right,
"to the House of Lords from a decision of the Court of Appeal".
I do not know whether that is the intention; if so, it would be the only such appeal of which I know. Surely the clause should say, "An appeal lies to the House of Lords with leave of the Court of Appeal or with leave of the House of Lords". Perhaps the Minister will consider that and deal with it if necessary.
Lord Falconer of Thoroton: My Lords, somehow, I was warned that this question was coming and I have been briefed on it. I shall deal with that point first. So uncertain of me are my officials that they have handed me a second copy of the note that sets out the position on this matter.
Clauses 89 and 90 deal respectively with the,
"Procedure on appeal to the Court of Appeal",
and with the Judicial Committee of your Lordships' House. Clause 89(1) states:
"An appeal to the Court of Appeal … lies only with the leave of that Court".
The noble and learned Lord, Lord Lloyd of Berwick, asked: why is there no similar provision? He referred back to Clauses 32 or 33 but the point arises precisely in respect of Clause 90; that is, why does not Clause 90 state that an appeal lies only with your Lordships' House with its leave? The answer is that leave to appeal to your Lordships' House may be granted either by this House or by the Court of Appeal. The procedure is accordingly more complex than that involved in appealing to the Court of Appeal. Clauses 89 and 90 contain an order-making power that specifically covers procedural issues. I make it clear that the order under Clause 90 will cover leave to appeal to the Judicial Committee of this House and therefore that the absence of a reference to the subject in Clause 90 is no cause for concern. In other words, we will use the order-making power to make sure that leave is required before an appeal is made to the Judicial Committee of this House. I am sorry that I took so long to get to that point.
I return to the points raised by the noble Lord, Lord Kingsland. He rightly accepts that we are not overturning juries' verdicts in this regard. As he said, the right of appeal is directed solely against errors of law and those made by judges. It is designed to redress the regrettable but inevitable fact that in any system of law, the courts have occasionally shown themselves capable of making irrational and perverse decisions in confiscation hearings. There is currently no remedy against such errors but there should be. It is precisely because such aberrations are rare that we do not expect the new right of appeal to be used frequently. Nevertheless, it will be an important quality control mechanism in confiscation proceedings, and it has been welcomed widely.
The noble Lord raised the concern that one person could be the subject of confiscation proceedings three times. He said that such proceedings would take place: first, in the Crown Court; secondly, in the Court of

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Appeal—with the court either hearing the case itself or directing it back to the Crown Court; and, thirdly, the House of Lords, which, because it cannot deal with the matter itself, would direct it back to the Crown Court. The error in that proposition is that the Court of Appeal and the House of Lords will not direct two hearings. In practice, if the Court of Appeal made an order and there was then an appeal to the House of Lords, between them, the Court of Appeal and the House of Lords could only ever order one rehearing.
However, it is unlikely that, in practice, there would ever be more than one confiscation hearing. I say that because the Court of Appeal will have the power only to hold a rehearing or direct the Crown Court to proceed afresh where the Crown Court has not made a confiscation order. In practice, the only circumstance in which the Crown Court is likely not to have made a confiscation order is where it has refused to hold a confiscation hearing in the first place.
The noble Lord, Lord Kingsland, also suggested that there was no precedent for the powers either in United Kingdom law or in the laws of continental Europe. I am not sure whether he intends to proceed with that point. If he does, a 1993 report by the Royal Commission on Criminal Justice entitled, Criminal Justice Systems in Other Countries, states that there are prosecutors' rights of appeal in the Netherlands and Italy. We are also aware of prosecutors' rights of appeal on a point of law against an acquittal in some other common law jurisdictions.
I believe that that deals with all the points raised by the noble Lord, Lord Kingsland. In the light of what I have said, I very much hope that, first, he will see the importance of the provision; secondly, he will see that he is wrong in relation to the issue of the three hearings; and, thirdly, in those circumstances, he will withdraw the amendment.
6 p.m.
Lord Kingsland: My Lords, the noble and learned Lord rightly indicated to your Lordships that I had said that I accepted that these measures were not connected with jury trial. However, I should not like the noble and learned Lord to think that I accepted the content of the latter part of the speech of the noble Lord, Lord Rooker, given on a previous occasion. The noble and learned Lord draws a number of parallels with the report of Sir Robin Auld. I must confess that I find some of Sir Robin's recommendations highly controversial.
However, so far as concerns the clauses at issue, and in response to the noble and learned Lord the Minister, I want to refer him again to Clauses 32(2) and 33(4). The final words of Clause 32(2) state:
"or … direct the Crown Court to proceed afresh under section 6".
Clause 33(4) includes the words,
"direct the Crown Court to proceed afresh under section 6 if it believes the decision was wrong".
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If it believes that the decision was wrong, it can refer to a whole range of considerations which go way beyond the two examples given by the noble Lord, Lord Rooker—which are judicial review or factual inaccuracy on the face of the record.
If these clauses are concerned only with judicial review and factual errors on the face of the record, and if the noble and learned Lord is prepared to accept that at the Dispatch Box, then I shall happily withdraw the amendment. But if the noble and learned Lord is not prepared to accept that, it suggests that a whole range of other issues may fall within the terms of the clause about which your Lordships have not been told. Therefore, I wonder whether the noble and learned Lord is prepared to stand up and say that the two examples given by the noble Lord, Lord Rooker, are the only matters to which these clauses are intended to refer.
Lord Falconer of Thoroton: My Lords, I would feel uneasy about committing myself to that now. It may be best to write to the noble Lord on the matter before Third Reading so that he can consider the position before then.
Lord Kingsland: My Lords, I am entirely happy with that suggestion by the noble and learned Lord the Minister. My concern is that, if he wishes to go beyond the confines of the speech of the noble Lord, Lord Rooker, in my respectful submission, your Lordships' House should be told about it. I see the noble and learned Lord nodding. In those circumstances, I beg leave to withdraw the amendment. No doubt we shall consider the matter again at Third Reading.
Amendment, by leave, withdrawn.
Clause 32 [Court's powers on appeal]:
[Amendment No. 22 not moved.]
Clause 33 [Appeal to House of Lords]:
[Amendment No. 23 not moved.]
Clause 41 [Restraint orders]:
Lord Goodhartmoved Amendment No. 24:
Page 29, line 4, at end insert—
"()make provision for the payment of debts of the specified person incurred for full consideration before the restraint order was made;".
On Question, amendment agreed to.
Baroness Buscombemoved Amendment No. 25:
Page 29, line 6, leave out subsections (4) and (5).
The noble Baroness said: My Lords, I must, first, apologise to the noble Lords, Lord Goodhart and Lord Thomas of Gresford, who tabled this amendment in Committee. I hope that they will forgive me for this plagiarism and bear in mind that imitation is the sincerest form of flattery.
The amendment relates to restraint orders under Clause 41. A restraint order will prohibit a person from dealing with any realisable property held by him in a way that will preserve that property pending some further order. There is a very low threshold for a restraint order. It need only be shown that a criminal

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investigation has been started and that there is reasonable cause to believe that the alleged offender has benefited from his criminal conduct. If that is shown, the Crown Court can make a restraint order that applies to all the realisable property held by the defendant.
There may, however, be exceptions to a restraint order, and specific exceptions are referred to in subsection (3). One of those exceptions is that the restraint order may provide for reasonable living expenses. However, subsection (4) provides that an exception to a restraint order must not provide for any legal expenses relating to the offences referred to in subsection (5), which are incurred by the defendant, or by the recipient of a tainted gift. The offences referred to in subsection (5) are entirely general.
We on these Benches are concerned that those two subsections will limit the quality of the legal representation available to a defendant. Although Criminal Defence Service funding is available to all criminal defendants, such funding is limited and may not be appropriate to the seriousness or complexity of the case against the defendant. It may be limited to junior counsel when a silk would be appropriate.
If a defendant cannot use any of his realisable assets to fund what he perceives to be the right level of legal representation, it is certain that he will feel that an injustice has been done, and there is a real possibility that that will, in fact, be the case. The most important person in any trial is the losing party and he must believe that he has been given a fair trial. If he cannot even use his own assets to oppose a restraint order, he will, quite rightly, feel that he has not been given a fair trial. I beg to move.
Lord Goodhart: My Lords, my noble friend Lord Thomas of Gresford and I put our names to this amendment, and we are happy to support it. It certainly seems to me that it is not justifiable at the stage when a restraint order is made, and when it is plainly uncertain whether a confiscation order will be made or how far it will extend, to deprive the defendant of the right to use the money that is subject to a restraint order on proper legal expenses. Of course, there are perfectly well exercisable methods by which one can prevent those costs being unreasonable.
If there were no limit on the costs, I accept that it would be possible for them to be inflated artificially and ultimately used for the benefit of the defendant. But provided that the costs are kept within the normal limits of tax costs, I do not see why they should not be payable out of the property, subject to the restraint order.
I shall add one point of detail. If a confiscation order is made but does not extend to the whole of the defendant's property—that is not infrequently likely to be the case—plainly, the costs will be borne by the defendant if he pays them himself because no order has been made for payment of his costs by the
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Government. However, if those costs are payable from public money, the result would be that public funds would bear the costs of the defence.
Lord Falconer of Thoroton: My Lords, it may be of assistance if I were to set out how the position has changed during the Bill's passage through both Houses. Before charge, the defendant must use his own unrestrained assets first and may then apply for civil public funding. After charge, the defendant will be entitled to criminal public funding regardless of his means. That will cover all the related restraint and confiscation proceedings. The recipient of a tainted gift from the defendant must use his own unrestrained assets at all times and may then apply for civil public funding. Other third parties—persons who are not recipients of a tainted gift but who hold an interest in property also held by the defendant—may still have funds released by the court for their legal expenses and may also obtain civil public funding when they have exhausted their own assets.
In effect, the essence of the amendments is that we should be able to use restrained assets to fund the relevant proceedings, whereas what is proposed if all the assets are restrained is that legal aid will be made available. The essence of the point raised by the noble Baroness, Lady Buscombe, is that defendants will not get the legal representation they want if it is paid for by the state as opposed to being paid for out of their own assets. It has always been a principle that the quality of legal advice should not depend upon who is paying for it. Our proposal seems to be a sensible way to ensure that huge amounts of costs are not incurred on legal proceedings. A Rolls Royce service may not be in the public interest; a reasonable service might he. In those circumstances we believe that the solution we propose is fair and sensible. I invite the noble Baroness to withdraw her amendment.
Baroness Buscombe: My Lords, I thank the Minister for his response, which was a predictable repetition of the response we received in Committee. That is disappointing. We believe that the Government run the risk of defendants feeling that they have not had a fair "outing" because they are being constrained by the Bill in terms of the quality of the legal advice which they will receive. I do not want to press the House on this amendment. However, we would ask the Government to reconsider the matter before Third Reading. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 43 [Appeal to Court of Appeal]:
[Amendment No. 26 not moved.]
Clause 47 [Supplementary]:
Lord Falconer of Thorotonmoved Amendment No. 27:
Page 31, line 13, leave out from first "The" to end of line and insert "registration Acts"
The noble and learned Lord said: My Lords, the amendments in this group are minor technical amendments. The main purpose of Clause 47 is to

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enable restraint orders affecting land to be given effect to at the Land Registry. The law on land registration has recently been updated in the Land Registration Act 2002, to which our Bill previously made no reference. The amendments simply modify our Bill to take account of the new arrangements in the 2002 Act. I beg to move.
On Question, amendment agreed to.
Lord Falconer of Thorotonmoved Amendment No. 28:
Page 31, line 18, at end insert—
"(1A) The registration Acts are—

(a) the Land Registration Act 1925 (c.21);

(b) the Land Charges Act 1972 (c.61);

(c) the Land Registration Act 2002 (c.9).

(1B) But no notice may be entered in the register of title under the Land Registration Act 2002 in respect of a restraint order."
On Question, amendment agreed to.
Lord Goodhartmoved Amendment No. 29:
After Clause 47, insert the following new clause—
"ORDER VARIED OR DISCHARGED
(1) This section applies if—

(a) the court varies or discharges a restraint order under section 42 otherwise than in consequence of the making of a confiscation order in the same proceedings; and

(b) an application is made to the court by a person who held realisable property and has suffered loss as a result of the making of the order.

(2) The court may order the payment to the applicant of such payment as it believes is just.
(3) Compensation payable under this section is payable by the Lord Chancellor."
The noble Lord said: My Lords, Amendment No. 29 requires a court to consider the payment of compensation where a restraint order is varied or discharged. We have debated the general principle of compensation for loss suffered by an innocent third party as a result of government action against a creditor, and I shall not repeat that argument.
However, I want to raise briefly a particular point. Compensation is provided for under the Bill where the confiscation order is varied or discharged. Why therefore is it not where a restraint order is made, varied or discharged without the case having proceeded to the making of a confiscation order? Surely, the arguments here are just as strong. I beg to move.
Lord Falconer of Thoroton: My Lords, we are opposed to the amendments in this group for the cogent reasons which my noble friend Lord Rooker expounded in Committee.
Restraint and receivership have always been treated as ancillary to a criminal proceeding. As a result, the criminal rules on compensation apply. That is to say, compensation is payable only where there is a serious default on the part of the enforcement authorities. It is interesting to note that that has always been the case even though restraint and receivership are currently
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High Court functions and thus technically civil. Now that those proceedings are being transferred to the Crown Court, the case for applying the criminal rule is stronger than ever.
It is also interesting to note that the courts have recently endorsed that approach in the case of Hughes and Another and R and Another, which was decided by the Court of Appeal at the end of last month. That case dealt with the issue of whether it was compatible with the European Convention on Human Rights that receivers should be able to pay their expenses out of the assets which they were managing. Lord Justice Simon Brown acknowledged that an acquitted or unconvicted defendant had for those purposes to be treated as an innocent person, but he did not accept that, for that reason, it had to be regarded as disproportionate to leave the defendant against whom restraint and receivership orders had been made uncompensated for such loss as they might have caused him.
He held that because acquitted defendants are not generally entitled to compensation for deprivation of liberty or other loss suffered through prosecution, they should not be entitled to compensation for loss suffered through restraint and receivership action. He stated
"In my judgement it is no more unfair, disproportionate or arbitrary that they should be uncompensated too for any adverse effects that restraint and receivership orders may have had upon their assets".
This Government have no intention of paying compensation to persons affected by the lawful exercise by the law enforcement authorities of their statutory responsibilities. We have serious concerns as to the potential implications of the amendments for the operation of the criminal justice system in general. If compensation was payable whenever the authorities started a criminal investigation or proceedings and then failed to secure a conviction, it would not be long before the criminal justice system ground to a halt.
As regards the specific point made by the noble Lord, Lord Goodhart, compensation is available only where a confiscation order made in absentia against an absconder is varied or discharged under Clause 73. In the light of those comments, I hope that the noble Lord will feel able to withdraw the amendment.
Lord Goodhart: My Lords, in the circumstances I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 75 [Criminal lifestyle]:
Lord Goodhartmoved Amendment No. 30:
Page 48, line 18, after "concerned" insert "is an offence punishable by imprisonment and"
6.18 p.m.
On Question, Whether the said amendment (No. 30) shall be agreed to?
Their Lordships divided: Contents, 114; Not-Contents, 122.

Division No. 3

CONTENTS

Addington, L.

MacGregor of Pulham Market, L

Alexander of Weedon, L.

Allenby of Megiddo, V.

Mackie of Benshie, L.

Attlee, E.

McNally, L.

Avebury, L.

Maddock, B.

Beaumont of Whitley, L.

Mancroft, L.

Blatch B

Mar and Kellie, E.

Boardman, L.

Miller of Hendon, B.

Brabazon of Tara, L.

Monro of Langholm, L.

Brigstocke, B.

Monson, L.

Brooke of Sutton Mandeville, L.

Montrose, D.

Burnham, L.

Murton of Lindisfarne, L.

Buscombe, B.

Newby, L.

Byford, B.

Noakes, B.

Northbrook, L.

Carlisle of Bucklow, L.

Northesk, E.

Carnegy of Lour, B.

Northover, B.

Clement-Jones, L.

Norton of Louth, L.

Colwyn, L.

O'Cathain, B.

Cope of Berkeley, L.

Oakeshott of Seagrove Bay, L.

Crickhowell, L.

Onslow, E.

Dean of Harptree, L.

Park of Monmouth, B.

Deedes, L.

Parkinson, L.

Denham, L.

Pearson of Rannoch, L.

Dixon-Smith, L.

Razzall, L.

Elton, L.

Redesdale, L.

Flather, B.

Rees, L.

Forsyth of Drumlean, L.

Rennard, L.

Fraser of Carmyllie, L.

Renton, L.

Gardner of Parkes, B.

Roberts of Conwy, L.

Geddes, L.

Rodgers of Quarry Bank, L.

Goodhart, L.[Teller]

Rogan, L.

Goschen, V.

Roper, L.

Gray of Contin L

Rotherwick, L.

Griffiths of Fforestfach, L.

Saltoun of Abemethy, Ly.

Hamwee, B.

Scott of Needham Market, B.

Seccombe, B.[Teller]

Hanham, B.

Sharman, L.

Harris of Peckham, L.

Sharp of Guildford, B.

Henley, L.

Shaw of Northstead, L.

Higgins, L.

Shutt of Greetland, L.

Hodgson of Astley Abbotts, L.

Skelmersdale, L.

Holderness, L.

Smith of Clifton, L.

Home, E.

Stem, B.

Hooson, L.

Strathclyde, L.

Howe, E.

Swinfen, L.

Howe of Aberavon, L.

Taylor of Warwick, L.

Hunt of Wirral, L.

Tebbit, L.

Hurd of Westwell, L.

Thomas of Gwydir, L.

Kimball T

Thomas of Swynnerton, L.

Kingsland, L.

Thomas of Walliswood, B.

Vivian L.

Lamont of Lerwick L

Waddington, L.

Lester of Heme Hill, L.

Wallace of Saltaire, L.

Lindsay, E.

Walmsley, B.

Linklater of Butterstone, B.

Weatherill, L.

Livsey of Talgarth, L.

Wilcox, B.

Lloyd of Berwick, L.

Williams of Crosby, B.

Lucas, L.

Willoughby de Broke, L.

NOT-CONTENTS

Acton, L.

Bernstein of Craigweil, L.

Ahmed, L.

Billingham, B.

Alli, L.

Blackstone, B.

Alton of Liverpool, L.

Blease, L.

Andrews, B

Borrie, L.

Ashton of Upholland, B.

Bragg, L.

Bach, L.

Brennan, L.

Bassam of Brighton, L.

Brett, L.

1256

Brooke of Alverthorpe, L.

Lofthouse of Pontefract, L.

Brooks of Tremorfa, L.

Mclntosh of Haringey, L.[Teller]

Campbell-Savours, L.

McIntosh of Hudnall, B.

Carter, L.

MacKenzie of Culkein, L.

Chandos,V.

Mason of Bamsley, L.

Clark of Windermere, L.

Massey of Darwen, B.

Clinton-Davis, L.

Merlyn-Rees, L.

Cohen of Pimlico, B.

Milner of Lads, L.

Craig of Radley.L.

Mishcon, L.

Crawley, B.

Mitchell, L.

Darcy de Knayth, B.

Morgan, L.

David, B.

Morris of Manchester, L.

Davies of Coity, L.

Murray of Epping Forest, L.

Davies of Oldham, L.

Nicol, B.

Dean of Thornton-le-Fylde, B.

Orme, L.

Desai, L.

Parekh, L.

Dixon, L.

Patel of Blackburn, L

Donoughue, L.

Paul, L.

Dormand of Easington, L.

Peston, L.

Dubs, L.

Pitkeathley, B.

Eatwell, L.

Plant of Highfield, L.

Evans of Temple Guiting, L.

Prys-Davies, L.

Evans of Watford, L.

Radice, L.

Falconer of Thoroton, L.

Randall of St. Budeaux, L.

Farrington of Ribbleton, B.

Rea, L.

Faulkner of Worcester, L.

Rendell of Babergh, B.

Fyfe of Fairfield, L.

Renwick of Clifton, L.

Gale, B

Gilbert, L.

Rooker, L.

Golding, B.

Sainsbury of Turville, L.

Goldsmith, L.

Serota, B.

Gordon of Strathblane, L.

Sheldon, L.

Goudie, B.

Simon, V.

Gould of Potternewton, B.

Simon of Highbury, L.

Graham of Edmonton, L.

Smith of Leigh, L.

Grenfell, L.

Stone of Blackheath, L.

Grocott, L.[Teller]

Symons of Vernham Dean, B

Taylor of Blackburn, L.

Hardy of Wath, L.

Temple-Morris, L.

Harris of Haringey, L.

Thornton, B.

Hollis of Heigham, B.

Turnberg, L.

Howells of St. Davids, B.

Turner of Camden, B.

Howie of Troon, L.

Uddin, B.

Hoyle, L.

Varley, L.

Hughes of Woodside, L.

Walker of Doncaster, L

Irvine of Lairg, L.(Lord Chancellor)

Walpole, L.

Warner, L.

Islwyn, L.

Warwick of Undercliffe, B.

Jay of Paddington, B.

Whitaker, B.

Jones, L.

Whitty, L.

Judd, L.

Wilkins, B.

Kirkhill, L.

Williams of Elvel, L.

Lea of Crondall, L.

Williams of Mostyn, L.(Lord Privy Seal)

Lipsey, L.

Lockwood, B.

Woolmer of Leeds, L.

Resolved in the negative, and amendment disagreed to accordingly.
6.28 p.m.
Lord Goldsmithmoved Amendment No. 31:
Page 48, line 22, at end insert "and the defendant has benefited from the conduct which constitutes the offence"
The noble and learned Lord said: My Lords, these government amendments—one group of which discharges an undertaking that I gave in Committee— make detailed but worthwhile changes to the criminal lifestyle regime. Amendments Nos. 31, 59 and 85 make it clear that a defendant who commits an offence lasting six months or more must have benefited from the offence to be treated as having a criminal lifestyle.

1257
The six-month test is currently inconsistent with the other criminal lifestyle tests. In theory, it is possible for a person who commits an offence lasting six months or more to be treated as having a criminal lifestyle for the purposes of the Bill, even if there is no acquisitive element to the offence.
The principle underlying the Bill, however, is that a criminal lifestyle is a lifestyle of acquisitive crime. All the other criminal lifestyle tests either require explicitly that the defendant shall have benefited from the offences of which he or she has been convicted, or those offences are inherently acquisitive. We believe that it would be sensible to bring the six-month test in line and, in so doing, to correct an unnecessary anomaly.
Amendments Nos. 34, 62 and 86 bring us to the subject of terrorism. As some of your Lordships may recall, we made it clear in Committee that we did not think terrorist fund-raising offences should be defined as criminal lifestyle offences, because they were not normally indicative of a lifestyle of acquisitive criminality. While we must remain alert to the need to take any possible action against terrorism, that should not be at the expense of undermining the fundamental policy of the Bill.
However, as I explained in Committee, we have considered whether other terrorist offences might be specified. As your Lordships can see, we have reached the conclusion that those convicted of the offence of directing a terrorist organisation should be treated under the Bill as having a criminal lifestyle.
The offence has been selected after careful thought and consultation with the relevant enforcement authorities. The overwhelming majority of those convicted of this offence in the United Kingdom will have been involved in Northern Irish terrorism. With that in mind, we are satisfied that the offence falls within the concept of a criminal lifestyle offence, as understood by the Bill. It will be reasonable to assume that those convicted of the offence will normally have been involved in acquisitive crime for their own benefit. It is proposed, therefore, to add this offence to the list.
I hope, and am confident, that your Lordships will find both sets of amendments to the criminal lifestyle regime sensible. I commend them to the House, and beg to move.
On Question, amendment agreed to.
[Amendments Nos. 32 and 33 not moved.]
Schedule 2 [Lifestyle offences]:
Lord Goldsmithmoved Amendment No. 34:
Page 270, line 16, at end insert—
"Directing terrorism
2A An offence under section 56 of the Terrorism Act 2000 (c.11) (directing the activities of a terrorist organisation)."
On Question, amendment agreed to.
Clause 84 [Property: general provisions]:
[Amendments Nos. 35 and 36 not moved.]
Clause 92 [Making of order]:
Lord Kingslandmoved Amendment No. 37:
Page 55, line 35, at end insert "unless it is of the opinion that there are exceptional circumstances which justify its not doing so"
On Question, amendment agreed to.
[Amendments Nos. 38 to 40 not moved.]
Clause 94 [Accused's benefit]:
Lord Falconer of Thorotonmoved Amendments Nos. 41 and 42:
Page 57, line 7, at end insert—
"(2A) Subsection (2B) applies if—

(a) the conduct concerned is general criminal conduct,

(b) a confiscation order mentioned in subsection (3) has at an earlier time been made against the accused, and

(c) his benefit for the purposes of that order was benefit from his general criminal conduct.

(2B) His benefit found at the time the last confiscation order mentioned in subsection (2A)(c) was made against him must be taken for the purposes of this section to be his benefit from his general criminal conduct at that time."
Page 57, line 23, at end insert—
"(4) But subsection (3) does not apply to an amount which has been taken into account for the purposes of a deduction under that subsection on any earlier occasion.
(5) The reference to general criminal conduct in the case of a confiscation order made under any of the provisions listed in subsection (3)(b) is a reference to conduct in respect of which a court is required or entitled to make one or more assumptions for the purpose of assessing a person's benefit from the conduct."
On Question, amendments agreed to.
Lord Goodhartmoved Amendment No. 43:
After Clause 95, insert the following new clause—
"COMPENSATION OF CREDITORS
(1) Any person who was a creditor of the defendant at the time when the confiscation order was made may, within one year of the date of the order, make an application to the court for compensation.
(2) The court may require the enforcement authority to pay compensation to the applicant if it is satisfied that—

(a) as a result of the making of the order the defendant is wholly or in part unable to repay the debt;

(b) the debt was incurred for full consideration; and

(c) at the time the debt was incurred the applicant had no reason to believe that a confiscation order could be made against the defendant."

On Question, amendment agreed to.
Clause 96 [Assumptions to be made in case of criminal lifestyle]:
Lord Falconer of Thorotonmoved Amendment No. 44:
Page 58, line 31, at end insert—
"(8A) But if a confiscation order mentioned in section 94(2A)(c) has been made against the accused at any time during the period mentioned in subsection (8) —

(a) the relevant day is the day when the accused's benefit was calculated for the purposes of the last such confiscation order, and

(b) the second assumption does not apply to any property which was held by him on or before the relevant day."

1259
On Question, amendment agreed to.
Clause 98 [Disposal of family home]:
The Earl of Mar and Kelliemoved Amendment No. 45:
Page 59, line 35, at end insert—
"(ba) the needs and financial resources of a person of the same sex as the person concerned, who is and has been for a period of not less than six months living with the person concerned in a relationship which has the characteristics, other than that the persons are of the same sex, of the relationship between husband and wife, or if the person concerned is in custody, had so lived with the person concerned until the person was so remanded;
(bb) the needs and financial resources of any member of the person concerned's family who is and has been for a period of not less than six months living with the person concerned in the family home, or if the person concerned is in custody, had so lived with the person concerned until the person was so remanded;"
The noble Earl said: My Lords, Amendments Nos. 45 to 49 return us to the Scottish issue of who should have the right to be heard and to have their circumstances taken into account by the court when it considers the confiscation of the family home.
I have tabled the amendments again because the brief debate in Committee was inconclusive on the question of how the Bill might be amended after enactment. I also believe that the substance of the amendments—extending the range of residents to be considered—continues to be relevant.
I want to make two points: the first is substantive and the second procedural. The amendments would extend consideration to a more viable and practical range of related residents. The Bill allows consideration to be given to spouses, ex-spouses, children, step-children and grandchildren. The thinking behind the Bill is too conventional. The amendments would recognise brothers, sisters, parents, grandparents, aunts and uncles, and also partners of either sex of more than six months' continuous relationship.
In Committee, the noble Lord, Lord Rooker, told us that the Bill's limited range of accepted relatives was drawn from the Bankruptcy (Scotland) Act 1985 and from the Proceeds of Crime (Scotland) Act 1995. He argued that the Bill should stick to the same formula as those two Scottish Acts. He then told the Committee that the Scottish Executive planned to bring forward a draft family law Bill to be based on the Scottish Law Commission's report of as long ago as 1992.
The question is: should we wait for that possibility or should we give a lead? When the Scottish Parliament passed its Sewel motion, it granted complete and unrestricted consent to this Parliament to legislate for Scotland in this normally devolved area. In this instance, we should ignore this Parliament's residual right to legislate for Scotland without the Scottish Parliament's consent. It would be helpful if the Bill included a wider range of relatives whose home may be under threat. The two Scottish Acts could subsequently be amended once the Bill had shown the way.
1260
My second point concerns how the Bill when enacted might be amended by the Scottish Parliament, given that it is a United Kingdom Bill. The amendment would be necessary if the draft family law Bill were enacted by the Scottish Parliament. I suspect that the Scottish clauses of this Bill will he automatically devolved on Royal Assent, so amendments of any such future Act would be the work of the Scottish Parliament. That could be done through a further Criminal Justice (Scotland) Bill or by secondary legislation.
I should be grateful to hear whether the noble and learned Lord agrees with me about the Scottish Parliament's future powers over the Bill. If I am wrong—and I am happy to be wrong—perhaps he would identify what would be the procedure. I beg to move.
Lord Falconer of Thoroton: My Lords, as the noble Earl said, the amendments have previously been debated. We made clear that the Government and the Scottish Executive believe that any changes to that area of law should be made not in a piecemeal way but, rather, as part of a coherent consideration of all of the issues involved. The noble Earl said that ray noble friend Lord Rooker said that the Scottish Executive intended to issue a draft Bill based on the Scottish Law Commission's 1992 report on family law.
The noble Earl asked how Clause 98 might subsequently be amended, if, in due course, the Scottish Parliament enacted further legislation in this area. I have taken advice on the matter. The noble Earl will appreciate that the subject matter of the Bill covers areas that are devolved to the Scottish Parliament and some that are reserved to the Westminster Parliament. If any changes to Clause 98 were proposed as a result of wider changes to family law in Scotland and if they related to areas that fell wholly within the devolved competence of the Scottish Parliament, the Scottish Parliament would be able to amend the clause accordingly. However, if it were also proposed that the law relating to reserved matters should be changed, the Westminster Parliament would have to make the changes.
The noble Earl will appreciate that it is not possible to determine whether such changes would be devolved or reserved until the exact detail was known. Nevertheless, I hope that he will be reassured that, one way or another, Clause 98 could subsequently be amended. I hope that, in the light of those assurances, the noble Earl will withdraw the amendment.
The Earl of Mar and Kellie: My Lords, I am grateful to the Minister for that clarification. He certainly dealt with my second point. I was, more or less, right that the Scottish Parliament would be able to deal with Clause 98, which relates to an obviously devolved matter. I cannot say that I am very happy about having to wait until such time as a draft Bill may be introduced in the Scottish Parliament. However, I got half of it right, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
6.45 p.m.
[Amendments Nos. 46 to 49 not moved.]
Clause 99 [Postponement]:
Lord Falconer of Thorotonmoved Amendment No. 50:
Page 61, line 14, at end insert—
"(10) A confiscation order must not be quashed only on the ground that there was a defect or omission in the procedure connected with the application for or the granting of a postponement.
(11) But subsection (10) does not apply if before it made the confiscation order the court has—

(a) imposed a fine on the accused;

(b) made an order falling within section 97(3);

(c) made an order under section 249 of the Procedure Act."

On Question, amendment agreed to.
Clause 100 [Effect of postponement]:
[Amendment No. 51 not moved.]
Clause 103 [Provision of information by accused]:
Lord Falconer of Thorotonmoved Amendment No. 52:
Page 64, line 10, at end insert—
"(7) No information given under this section which amounts to an admission by the accused that he has benefited from criminal conduct is admissible in evidence in proceedings for an offence."
On Question, amendment agreed to.
Clause 112 [Accused neither convicted nor acquitted]:
[Amendment No. 53 not moved.]
Clause 120 [Restraint orders etc]:
Lord Goodhartmoved Amendment No. 54:
Page 77, line 26, at end insert—
"() make provision for the payment of debts of the specified person incurred for full consideration before the restraint order was made;"
On Question, amendment agreed to.
[Amendments Nos. 55 and 56 not moved.]
Clause 132 [Powers of court and administrator]:
Lord Falconer of Thorotonmoved Amendment No. 57:
Page 84, line 17, leave out "and 134" and insert ", 134 to 136"
The noble and learned Lord said: My Lords, Clause 132 sets out the general principles on which the court and the administrator are to exercise their powers in Scotland. Subsection (1) lists the powers to which the "legislative steer" applies. The clause sets out exactly the same principles for the exercise of the court's discretion in Scotland as Clause 69 does for England and Wales.
Clause 69 provides that among the powers to which the legislative steer applies are the powers under Clause 63 and the power under Clause 65 to decide an appeal against a decision by a lower court on the variation or discharge of a receivership or restraint order. The clauses equivalent to Clauses 63 and 65 for Scotland are Clauses 135 and 136. Those clauses are not referred to in Clause 132(1), and the amendment will rectify that omission. I beg to move.
On Question, amendment agreed to.
Clause 142 [Criminal lifestyle]:
[Amendment No. 58 not moved.]
Lord Falconer of Thorotonmoved Amendment No. 59:
Page 89, line 15, at end insert "and the accused has benefited from the conduct which constitutes the offence"
On Question, amendment agreed to.
[Amendments Nos. 60 and 61 not moved.]
Schedule 4 [Lifestyle offences: Scotland]:
Lord Falconer of Thorotonmoved Amendment No. 62:
Page 276, line 14, at end insert—
"Directing terrorism
2A An offence under section 56 of the Terrorism Act 2000 (c. 11) (directing the activities of a terrorist organisation)."
On Question, amendment agreed to.
Clause 150 [Property: general provisions]:
[Amendments Nos. 63 and 64 not moved.]
Clause 156 [Making of order]:
Baroness Buscombemoved Amendment No. 65:
Page 95, line 28, at end insert "unless it is of the opinion that there are exceptional circumstances which justify its not doing so"
On Question, amendment agreed to.
[Amendments Nos. 66 to 69 not moved.]
Clause 158 [Defendant's benefit]:
Lord Falconer of Thorotonmoved Amendment No. 70:
Page 96, line 33, at end insert—
"(2A) Subsection (2B) applies if—

(a) the conduct concerned is general criminal conduct,

(b) a confiscation order mentioned in subsection (3) has at an earlier time been made against the defendant, and

(c) his benefit for the purposes of that order was benefit from his general criminal conduct.

(2B) His benefit found at the time the last confiscation order mentioned in subsection (2A)(c) was made against him must be taken for the purposes of this section to be his benefit from his general criminal conduct at that time."
On Question, amendment agreed to.
Lord Falconer of Thorotonmoved Amendments Nos. 71 and 72:
Page 96, line 40, at end insert—
"(3A) But subsection (3) does not apply to an amount which has been taken into account for the purposes of a deduction under that subsection on any earlier occasion."
Page 97, line 9, at end insert—
"(5) The reference to general criminal conduct in the case of a confiscation order made under any of the provisions listed in subsection (4) is a reference to conduct in respect of which a court is required or entitled to make one or more assumptions for the purpose of assessing a person's benefit from the conduct."
On Question, amendments agreed to.
Lord Goodhartmoved Amendment No. 73:
After Clause 159, insert the following new clause—
"COMPENSATION OF CREDITORS
(1) Any person who was a creditor of the defendant at the time when the confiscation order was made may, within one year of the date of the order, make an application to the court for compensation.
(2) The court may require the enforcement authority to pay compensation to the applicant if it is satisfied that—

(a) as a result of the making of the order the defendant is wholly or in part unable to repay the debt;

(b) the debt was incurred for full consideration; and

(c) at the time the debt was incurred the applicant had no reason to believe that a confiscation order could be made against the defendant."

On Question, amendment agreed to.
Clause 160 [Assumptions to be made in case of criminal lifestyle]:
Lord Falconer of Thorotonmoved Amendment No. 74:
Page 98, line 14, at end insert—
"(8A) But if a confiscation order mentioned in section 158(2A)(e) has been made against the defendant at any time during the period mentioned in subsection (8) —

(a) the relevant day is the day when the defendant's benefit was calculated for the purposes of the last such confiscation order;

(b) the second assumption does not apply to any property which was held by him on or before the relevant day."

On Question, amendment agreed to.
Clause 164 [Postponement]:
Lord Falconer of Thorotonmoved Amendment No. 75:
Page 100, line 35, at end insert—
"(11) A confiscation order must not be quashed only on the ground that there was a defect or omission in the procedure connected with the application for or the granting of a postponement.
(12) But subsection (11) does not apply if before it made the confiscation order the court—

(a) imposed a fine on the defendant;

(b) made an order falling within section 163(3);

(c) made an order under Article 14 of the Criminal Justice (Northern Ireland) Order 1994 (S.I. 1994/2795 (N.I. 15)) (compensation orders)."

On Question, amendment agreed to.
Clause 165 [Effect of postponement]:
[Amendment No. 76 not moved.]
Clause 168 [Provision of information by defendant]:
Lord Falconer of Thorotonmoved Amendment No. 77:
Page 103, line 18, at end insert—
"(8) No information given under this section which amounts to an admission by the defendant that he has benefited from criminal conduct is admissible in evidence in proceedings for an offence."
On Question, amendment agreed to.
Clause 178 [Defendant neither convicted nor acquitted]:
[Amendment No. 78 not moved.]
Clause 190 [Restraint orders]:
Lord Goodhartmoved Amendment No. 79:
Page 120, line 15, at end insert—
"() make provision for the payment of debts of the specified person incurred for full consideration before the restraint order was made"
On Question, amendment agreed to.
[Amendments Nos. 80 and 81 not moved.]
Clause 223 [Criminal lifestyle]:
[Amendment No. 82 not moved.]
Lord Falconer of Thorotonmoved Amendment No. 83:
Page 139, line 14, at end insert "and the defendant has benefited from the conduct which constitutes the offence"
On Question, amendment agreed to.
[Amendments Nos. 84 and 85 not moved.]
Schedule 5 [Lifestyle offences: Northern Ireland]:
Lord Falconer of Thorotonmoved Amendment No. 86:
Page 278, line 5, at end insert—
"Directing terrorism
2A An offence under section 56 of the Terrorism Act 2000 (c.11) (directing the activities of a terrorist organisation)."
On Question, amendment agreed to.
Clause 232 [Property: general provisions]:
[Amendments Nos. 87 and 88 not moved.]
Clause 243 [Proceedings for recovery orders in England and Wales or Northern Ireland]:
Lord Lloyd of Berwickmoved Amendment No. 89:
Page 147, line 12, at beginning insert "Subject to section 243A,"
The noble and learned Lord said: My Lords, the substantive amendment is Amendment No. 92. I apologise for the length of that amendment, but it brings together several of the concerns expressed in Committee, including those expressed by the noble Lord, Lord Renton.
Noble Lords on the Government Front Bench will, by now, know that I do not like Part 5 of the Bill. I wish that it were not there. I have learnt, however, that one cannot always get what one wants in this world, so my amendment is an attempt to improve Part 5 in two ways. First, it would remove what seem to me to be the worst of the injustices that Part 5 will produce. Secondly, it would make Part 5 less vulnerable to attack under the Human Rights Act 1998.
The amendment acknowledges that there may be cases in which the civil burden of proof is justifiable and appropriate. I have in mind, in particular, cases—referred to so often at Second Reading and in Committee—in which the offender is dead or is beyond the seas or cannot be brought before the court for some other reason. The amendment yields to the Government's desire to introduce a civil burden of proof in such cases, but it preserves the ordinary criminal burden of proof in cases in which the defendant is before the court and denies his guilt.

1265
Ministers have said on many occasions that the first preference must always be for a criminal trial, followed by the procedure under Part 2. That is as it should be, and I have no difficulty with it. But if the offender is entitled to trial by jury in cases where the evidence against him is strong enough to secure his conviction, why should he be deprived of his right to trial by jury where the evidence is not so strong? Where is the justice in that?
Indeed, it might be said to be contrary to the document regarded as the foundation of our civil liberties; I refer of course to the Magna Carta. Chapter 39 provides:
"Nor will [we] proceed against"—
I invite noble Lords to bear those words in mind—
"or prosecute any free man save by the lawful judgment of his peers".
Yet that seems to be the effect of Part 5, under which the alleged offender will have no right to the lawful judgment of his peers. As I understand it, it is then said that that does not matter because proceedings under Part 5 will not result in the offender's conviction. But the proceedings will result in a finding of guilt. For unless the alleged offender before the court has been found guilty, the judge will have no power to make a recovery order against him. That follows as night follows day from the interaction of Clauses 241, 242, 243 and 301.
Therefore, as the Bill stands, a defendant can be found guilty of the most serious crimes in the calendar on the civil burden of proof without the option of trial by jury. That cannot be right. The distinction between a conviction and a finding of guilt by the High Court judge is simply illusory.
I am also concerned about how Part 5 will work in practice. Where the defendant's guilt is in issue, I presume that he will be entitled to call witnesses in his defence. I presume also that he will be entitled to all the normal safeguards of a defendant in criminal proceedings. I need not remind your Lordships that he is entitled to a fair trial whether the proceedings are characterised as civil or criminal. If he is to have a fair trial, I presume that the director of the agency will have to give full disclosure of all relevant material in the normal way in accordance with the Attorney General's guidance. I hope that the noble and learned Lord the Attorney General will confirm in due course that that is so.
What happens if the defendant is after all found guilty by the judge of the underlying offence? I presume that he is entitled to appeal, but to whom does he appeal? I may have missed it, but I can find no reference to an appeal in Part 5. I assume that that is an oversight. The question then arises: is the appeal to be to the Civil Division of the Court of Appeal? If so, will the Master of the Rolls find sufficient Lords Justices to decide the cases? I assume that he has been consulted on the matter.
What test will the civil Court of Appeal apply in those circumstances? Will it be a rehearing, as is normal practice in civil appeals, or will the civil Court
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of Appeal apply the criminal test and allow the appeal only if the judge's verdict is unsafe? Alternatively, will the appeal be to the Criminal Division of the Court of Appeal? I am sorry to ask so many questions, but surely we should be clear at this stage about where we are going.
I turn to the consequences of a finding of guilt by the judge. I shall take one illustration. Will the defendant, so convicted, have to declare that he has been found guilty under Part 5 when he fills out an application for a driving licence, or any of the innumerable forms that one has to fill in where one is asked whether one has been convicted or found guilty of an offence? I presume that the answer is yes, but surely that shows that we are in the field of criminal, not civil law. Surely it shows the difficulties that we shall get into if we try to make the civil courts do the work of the criminal courts, for which they are not fitted.
I remain to be convinced that the Government have considered those matters, as I hoped they would. I turn to another matter. It is said that civil and criminal proceedings often overlap in practice; for example, where a plaintiff brings civil proceedings for assault after being acquitted by a jury. Another example is civil proceedings for deceit or fraud.
There is a crucial and—to my mind—obvious difference between those cases and what will prevail under Part 5. In civil proceedings the basis of the plaintiff's claim is that he has suffered loss or damage. He is therefore entitled to take advantage of the civil burden of proof. But under Part 5 the plaintiff is the state. How can it be seriously argued that the state has suffered loss or damage by reason of the defender having stolen my motor car? If the state has not suffered loss or damage in those circumstances, the correct analogy is not a civil action for damages— whether for fraud or assault—but a fine, for which the burden should surely be the ordinary criminal burden of proof.
I turn to Amendment No. 92. Subsection (1) makes it clear that the amendment applies only to cases where the offender is before the court. It does not apply where the offender is dead, overseas, or otherwise unavailable. Subsection (2) entitles the defendant to go before a jury if he denies that he is guilty of the alleged offence. Subsection (3) is self-explanatory. Subsection (4) provides that the director must proceed under Part 2 if the offender is convicted. Where the question of guilt is decided by the judge, subsection (5) provides that he must apply the ordinary criminal burden of proof to that question, but that he may apply the civil burden of proof to all other questions. Subsection (6) is important because, if a defendant is found guilty, it ensures that the recovery order cannot antedate the Act's coming into force.
All retrospective legislation is undesirable. Retrospective penalties are more than undesirable; they are truly abhorrent. That is why they are forbidden by the second sentence of Article 7 of the convention. That merely puts into words what has always been the common law of England. I noted that when the noble and learned Lord the Attorney

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General was dealing with Amendments Nos. 7 and 8 today, he said that the defendant must always be entitled to know what the consequences of his wrongdoing will be before he commits the offence in question. Exactly the same reasoning applies here.
The noble and learned Lord said that Part 5 does not impose a penalty, but that is the very point which was decided against the United Kingdom in the case of Welch in 1994. It is said that Welch can be distinguished, for in that case the confiscation order was made after a conviction. That is true, but here it will be made after a finding of guilt by the judge and I ask where is the difference.
It is then said that in Welch it was a confiscation order and not a recovery order. That is true, but what kind of distinction is that? In both cases the state takes the defendant's money on the ground that it does not belong to him. One thing is absolutely clear from Welch and innumerable other cases at Strasbourg; that the enforcement of convention rights does not depend on distinctions of that kind.
Therefore, if in a case in which the judge has found the defendant guilty of the underlying offence, and if he goes on to make a recovery order against him, it is as certain as anything can be in law—and nothing is certain—that the Strasbourg court will follow its decision in Welch. That being so, a retrospective recovery order will surely be struck down.
I suggest, therefore, that it would be far better to confine the retrospective operation of Part 5 to those cases where the offender is not before the court—whether he is dead, overseas or whatever—because in those cases the retrospective order may at least stand a chance of being upheld. That will not be the case where the defendant has been convicted by the judge. That is what subsection (6) seeks to do.
I know that the noble and learned Lord the Attorney General takes a different view of Welch. He believes that the case can be distinguished. All I can say—and I say it with genuine respect—is that I feel bound to disagree with him. I beg to move.
7 p.m.
Lord Renton: My Lords, I warmly support the amendment moved by the noble and learned Lord, Lord Lloyd of Berwick. I do so mainly because it overcomes the deficiencies of Part 5, to which he referred in detail in Committee, but also because it goes a long way towards reducing the anomaly that I pointed out in Committee. The anomaly arises because Clause 240(2) refers to,
"any proceedings brought for an offence in connection with the property".
However, Clause 241 states that:
"The court or sheriff must decide on a balance of probabilities whether it is proved … that any matters alleged to constitute unlawful conduct have occurred, or … that any person intended to use any cash in unlawful conduct".
It seemed to me that there was an anomaly—different burdens of proof arising in only slightly different circumstances—and that we have a duty to try to overcome it.
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Having made that point in Committee, the noble and learned Lord the Attorney General kindly said that I had made a helpful and important observation. Although Amendment No. 89 does not go quite as far as I suggested, it goes a long way towards removing the anomaly. Therefore, I hope that the Government will accept it. I regard it as very important not merely in relation to the narrow point I have made but because it improves Part 5 of the Bill.
Lord Goodhart: My Lords, the noble and learned Lord, Lord Lloyd of Berwick, has done a great service by bringing forward the amendment. In Committee, the noble and learned Lord brought forward a much more radical proposal; to remove Part 5 altogether. We on these Benches were unable to accept that proposal because in certain circumstances we saw some merit in there being a civil recovery order, in particular where someone who had obtained a profit from crime had died or had taken refuge in a country from which he was unlikely to be extradited. However, today the noble and learned Lord, Lord Lloyd, has tabled a more limited amendment which in an ingenious way deals with what 'we see as the fundamental problems with Part 5.
In Committee, we attacked the Government's proposals on two grounds where we felt that they were inconsistent with the Human Rights Act. First, as regards the burden of proof, we thought they were probably inconsistent. Secondly, as regards retrospectivity, we felt that the Government's proposals were almost certainly inconsistent with the Human Rights Act.
We have not come forward with similar amendments on Report because we take the view that having pointed out the problems which the Government face we are prepared to let them stew in their own juice and face the problems which we believe they will almost certainly face under the Human Rights Act. If the Government turn out to be right, they will have shown that our views were mistaken. If the Government, as we expect, turn out to be wrong, one can say that no harm has been done because the court will be able to come forward with a holding of incompatibility which will in practice force the Government to change the legislation.
Nevertheless, our views are strongly in support of the noble and learned Lord's present amendment and we on these Benches are happy to give him our full support for that purpose.
Lord Kingsland: My Lords, in Committee our position, broadly speaking, was similar to that of the noble Lord, Lord Goodhart. On the one hand, we were clear that the purpose behind Part 5 formed an important part of the overall objectives of the Bill. On the other hand, we were extremely concerned that the draft itself would not stand up to the scrutiny either of our own courts or that of the European Court of Human Rights in Strasbourg.
During the debate in Committee, I was inclined to move closer to the absolutist position taken by the noble and learned Lord, Lord Lloyd of Berwick. Very

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tellingly, he pointed out the central threat posed by the Bill to the right of trial by jury. Today he has put that essential question, most felicitously, to the Government once again by asking why a defendant should be denied trial by jury for an offence when the evidence is not strong enough to convict him of it. Surely that is the central criticism with regard to Part 5.
However, I am delighted that the noble and learned Lord has produced this quite ingenious draft which I fervently hope the Government accept.
7.15 p.m.
Lord Goldsmith: My Lords, since Second Reading the noble and learned Lord, Lord Lloyd of Berwick, has made clear his opposition to the civil recovery scheme set out in Part 5 of the Bill. I had thought that the Opposition Front Bench supported this part of the Bill. Later in my remarks I shall come back to the comments made by the noble Lord, Lord Kingsland. We have debated this point on the Floor of the House and I have had the benefit of twice discussing these matters with the noble and learned Lord. I hope that he too feels that those discussions have been of some benefit. However, I have to say to him that we do not agree.
We do not agree on the question of whether the courts will decide that this is a civil and not a criminal process for the purposes of the European Convention on Human Rights. I have always made it clear that it will be for the courts to decide that question. I have also repeatedly made clear our view that the civil recovery process set out in Part 5 of the Bill will be found by our courts and by Strasbourg to be a civil matter. I draw much support and comfort for that view from recent decisions of the highest standing reached by the judicial Committee of your Lordships' House, of the Privy Council and of Strasbourg itself. I also draw comfort from a decision of the highest court in Ireland, the Irish Supreme Court, upholding a similar scheme.
The noble and learned Lord and I have crossed swords previously on this issue and I know that he takes a different view. I respect that entirely, but I must tell him that he has not budged me one iota to change my view during the course of our debates. We did not agree whether Part 5 would be an effective tool in putting out of circulation the working capital of crime; namely, the money that fuels a criminal system. That money has rightly been described by the noble Lord, Lord Kingsland, as having a corrosive effect.
The Government continue to believe, and had understood until now that they were joined in that belief by the Opposition Front Benches, that having a civil recovery procedure was essential in order to be able to deal with the corrosive effect of the working capital of crime. However, I note that, even if he is not persuaded on that point, the second part of the amendment tabled today by the noble and learned Lord no longer resists that proposition. That is because in all cases but one his amendment accepts that the civil recovery scheme will proceed in all respects.
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Let me cite an example. If the wife or associate of a person involved in organised crime holds the proceeds of crime but is not actually said to have committed the unlawful acts, then the amendment proposed by the noble and learned Lord would enable the entirety of the process under Part 5 to proceed. Property would be held to be recoverable in civil proceedings in accordance with the standard of proof applicable under the Bill—I shall return to that point: it is not a question of the burden of proof, but of the standard of proof—going back 12 years. That person would have to give up the proceeds that he or she was holding.
But the noble and learned Lord takes the position that if the person declares, "I am someone who ought to be suspected of being a criminal. I am the person who committed the crime rather than an accomplice or spouse holding the money. Thus I am entitled to be treated in an entirely different way", then the amendment would ensure the following. The spouse or accomplice would not have the right to insist on going to the Crown Court. The noble and learned Lord's amendment states that,
"he shall be entitled to have the question whether he is so guilty determined in a separate trial by the Crown Court".
By what process? Is that to be a criminal trial in the ordinary way? From what the noble and learned Lord said in previous debates, I understood that it would be. But we must bear in mind that, by this stage, the prosecution will have considered whether it is proper to bring criminal proceedings against the defendant. It will have decided that it is not proper because there is no realistic prospect of conviction. Perhaps the evidence does not demonstrate sufficiently the person concerned, who may have successfully distanced himself from the actual crimes while in fact being at the centre of the criminal web. The prosecution will have already decided that that person should not be prosecuted.
Under the terms of the amendment, I presume that the prosecutor would have to say, "I cannot proceed with a prosecution against this person because I have had to conclude that there is insufficient evidence". So, under the amendment, that person will be entitled to be acquitted. It will follow as night follows day that he will then escape Part 5 of the Act altogether.
Let us look at why there may not be sufficient evidence. I could cite many examples, but I shall take only one, which I am sorry to say is not an unusual case. Someone at the centre of a criminal organisation may succeed in distancing himself sufficiently from the criminal acts themselves so that there is not sufficient evidence to demonstrate actual criminal participation on his part. Witnesses may decline to come forward because they feel intimidated. Alternatively, there may be strong evidence that the luxury house—I shall not mention in which part of the country it might be—the yachts and the fast motor cars have not been acquired by any lawful activity because none is apparent.
It may also be plain from intelligence that the person is someone engaged in criminal activity, but it may not be clear what type of crime. It could be drug trafficking, money laundering or bank robbery. However, the prosecution may not be able to say

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exactly what is the crime, and thus the person will be entitled to he acquitted of each and every offence. If, in a criminal trial, the prosecution cannot prove that the person before the court is in fact guilty of this bank robbery or that act of money laundering, then he is entitled to be acquitted. Yet it is as plain as a pikestaff that his money has been acquired as the proceeds of crime.
We would see the extraordinary result whereby the spouse or associate—the "little man" in the circumstances—would be subjected to the full vigour of Part 5, but the person suspected of being guilty of far worse crimes, even though it cannot be proved, would go scot free. What drives us forward to that extraordinary result? Two reasons have been put forward by the noble and learned Lord and I must respond by saying that, with respect, I believe both of them to be plain wrong.
The first is an appeal to Magna Carta, to say time and again that the person will be convicted of a crime. Perhaps I may take a moment to remind the House exactly what Part 5 provides. Under Clause 264, the court seeks to answer the question whether particular property is recoverable property. The question is directed at the property, which is defined in Clause 301 as,
"Property obtained through unlawful conduct".
That is defined in Clause 241, but we need not go into that because everyone would understand what that may be. It is directed at the property and not at the individual. 1t is not a conviction.
I answer the noble and learned Lord's questions without equivocation. If in the course of civil proceedings a judge finds as a fact that someone has been guilty of criminal misconduct, it is not a conviction and he does not go to gaol. Mr. Oscar Wilde did not go to gaol as a result of losing the libel action but because he was subsequently prosecuted. They are quite different things. It does not have to be put on the driving licence application because it is not a conviction. It is a commonplace in the civil courts that serious and sometimes criminal misconduct is tried in civil proceedings and determined by High Court judges.
I wonder whether the noble and learned Lord recalls an occasion when he was still a puisne judge and I was an even punier barrister—if noble Lords will forgive the pun—in a case called The Good Helmsman. That case concerned a Greek shipowner and a brother-in-law who was said to have chartered a vessel. The noble and learned Lord may recall that after 50 days his judgment began by saying that it was a case in which it was plain that both sides were lying. What the noble and learned Lord had to decide was which of them was lying most. But not only did he find, plainly rightly, that both of them were lying, he also found that my client was guilty of forgery, that he was also guilty of putting forward a document to a bank with the intention of deceiving it and obtaining property by deception and that the other side was party to that, too. So in the course of that judgment the noble and learned Lord found crime, misconduct and most
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serious moral turpitude on the part of both parties. It happens also in libel actions; it also happens in claims where people seek to recover their property.
Lord Lloyd of Berwick: My Lords, I am grateful to the noble and learned Lord for giving way. I do not have much recollection of the case, but I do recollect that the state was not a party to those proceedings.
Lord Goldsmith: My Lords, indeed it was not, but that does not detract one jot from the argument which is that it is not a criminal proceeding and neither is it a conviction or holding somebody guilty of an offence when in the course of civil proceedings these matters are dealt with.
What is the standard of proof by which those issues are determined? As I said on a previous occasion—I hope that the noble Lord, Lord Renton, may find it helpful—as the noble and learned Lord, Lord Nicholls, said in the case of In re: H, and as I have repeatedly noted, when the courts are faced with a question of serious misconduct or criminal misconduct, while they apply what is still termed "the balance of probabilities", they apply it in a way which recognises that the stronger and more serious the allegation, the less likely it is that the event occurred and hence—I quote the words of the noble and learned Lord, Lord Nicholls,
"the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability".
The Government have consistently said that this flexible standard on the balance of probabilities is what judges will apply when dealing with this procedure.
The first argument that is put forward is that this is a conviction and that there ought to be a trial by jury. It is impractical and divisive. It produces an extraordinary differential result between people who are more guilty who get away with it and those who are less guilty and do not.
The second argument that the noble and learned Lord puts forward, which he and I discussed, is his reliance on the case of Welch. Article 7 of the European Convention prohibits someone being guilty of a criminal offence on account of an act or omission which did not constitute a criminal offence when it was committed. It continues by saying that it also prohibits a heavier penalty following a criminal conviction for a criminal offence than the one applicable at the time. The Welch case makes it plain that Article 7 applies only in circumstances where one is looking at a penalty following a criminal conviction for a criminal offence. I do not say that it is distinguishable, but that it does not have anything to do with this issue. 1t is not following a criminal conviction, but in the course of a civil procedure. That is the very important difference between them.
Mr Welch was charged with a number of counts of conspiracy to supply Class A drugs. He was convicted on five counts and sentenced to 22 years' imprisonment. In addition to that, the penalty of a confiscation order was imposed. The court said that

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that was a penalty following his conviction and so it was. That is not the same situation as when, in the course of civil proceedings, a question is raised as to whether or not recoverable property is the proceeds of crime and whether the person guilty of the crime or someone else ought to be allowed to keep it.
In that case the court in Strasbourg also identified five features which it said made it a penalty. I do not want to weary your Lordships about some of them, but there is no room for argument about three of them. First, the penalty in the Welch case led to imprisonment in itself if the confiscation order was not paid. That does not happen under this part of the Bill. If the civil proceeds that the court adjudges should be paid are not paid, it is a civil debt like any other. It does not lead to imprisonment.
Secondly, in that case there were statutory assumptions to which the court referred. There are no such assumptions in Part 5 of the Bill. Thirdly, the court noted that there was a discretion in the court to adjust the order depending on its view of the culpability of the person involved. That does not arise under Part 5. The only question is whether the High Court judge is satisfied that the property is the proceeds of crime, but it is recoverable property. If it is, it goes back because the person has no right to keep it. The key point is that in Welch that was post the conviction. It was part of the process of sentencing, but that is not what is happening under Part 5 of the Bill.
For those reasons I respectfully say that the noble and learned Lord is wrong in the amendment which has been put forward. It is an unworkable, impractical and a nonsensical amendment to draw the distinction between the person who is suspected of serious conduct but who gets away with things and the person who is accepted to be lower down the food chain and who does not.
I say to the noble Lord, Lord Kingsland, on the Benches opposite that if the Government were forced to an amendment which accepted that it would not be possible—that would be the effect of this amendment—to pursue by the civil recovery route people who were suspected themselves of criminal misconduct, that would blow a huge hole in this Bill. It would be the exact opposite of the assurance given by the noble Baroness, Lady Buscombe, at Second Reading that it was the intention of the Benches opposite to make this legislation work.
I have spoken directly in relation to this amendment. I hope that the noble and learned Lord will accept the spirit in which I did so. However, the Government cannot accept the amendment and I invite him to withdraw it.
Lord Kingsland: My Lords, as the noble and learned Lord made a reference to the Opposition Front Bench, I would point out that it wants this Bill to work. That is precisely why we have made the speeches we have about Part 5 of the Bill.
Lord Lloyd of Berwick: My Lords, I am grateful to those noble Lords who have given me support. The
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noble and learned Lord the Attorney-General is perfectly right to point out that in this amendment I have abandoned my preferred position. I believe he knows what that is. The amendment was put forward in a spirit of compromise in the hope that the Government might be able to accept it as an improvement to the Bill. That has not proved to be the case so I leave it there for the moment. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Bassam of Brighton: My Lords, I beg to move that consideration on Report be now adjourned. In moving this Motion, I propose that the House be re-convened not before 8.30 p.m.
Moved accordingly, and, on Question, Motion agreed to.

Foot and Mouth Disease
7.30 p.m.
Lord Willoughby de Brokerose to ask Her Majesty's Government on what basis they believe that the contiguous cull policy carried out during last year's foot and mouth epidemic was legal.
The noble Lord said: My Lords, my reason for introducing this Unstarred Question is that while the legality of the contiguous cull has often been questioned in the House in our debates on the Animal Health Bill and the livestock industry, as well as in the debate on a Starred Question brought forward by my noble friend the Duke of Montrose, we have not yet had a satisfactory answer to the questions put forward.
When challenged as to the legality of the cull, the Minister has given two answers. His most recent answer was in a reply to a Written Question from my noble friend Lady Byford, where he stated:
"The Animal Health Act 1981 provides for the slaughter of animals which are infected with foot and mouth disease (FMD) or suspected of being so infected and of animals which have been in contact with affected animals or which appear to the Minister to have been in any way exposed to the infection of foot and mouth disease. This is the legal basis of the contiguous cull".—[Official Report, 20/5/02; col. WA80.]
The Minister has accurately summarised the provisions of the Act but his conclusion is quite wrong. The Act deals very specifically with animals that have been "exposed" to foot and mouth disease, not with the possibility of animals being exposed at some remote time in the future. On the best available scientific evidence, much of it from the Pirbright Institute, which is part-funded by MAFF—or DEFRA now—the vast majority of animals slaughtered under the contiguous cull policy could not have been so exposed. That is the clear result of the evidence.
Of course, that is precisely why the Minister introduced the Animal Health Bill, the amendment to the Animal Health Act, to give him the power, which was not given under the Animal Health Act, to slaughter any animal the Minister thinks should be

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slaughtered, whether or not the animal had been exposed to foot and mouth disease. In other words, the power to carry out the contiguous cull.
The Minister also based his assertion that the contiguous cull was legal on two court cases. In his response to a debate on the livestock industry in April, the noble Lord said:
"Various issues were raised in the debate, the most acute of which was the legality of the cull. I shall cite just two cases: MAFF v Winslade, which we won in the English courts; and Westerhall Farms v Scottish Ministers, which we won in the Scottish courts … The legality of the cull is not in doubt".—[Official Report, 17/4/02; col. 983.]
Again, that conclusion is wrong. Both decisions were badly flawed because of the lack of scientific evidence presented in those court cases.
The real problem with the Winslade case—and the problem that goes to the heart of the Minister's assertion that the contiguous cull has been tested in the courts—is that, for whatever reason, not all the relevant scientific evidence was made available. The most persuasive evidence, which was later to blow the Government's case completely out of the water in MAFF v Upton, was two articles written by Dr Donaldson of the Institute of Animal Health at Pirbright. The institute is one of the foremost establishments in the world dealing with foot and mouth research, and Dr Donaldson is an acknowledged expert on the subject.
Dr Donaldson's papers concerned the risk of airborne spread, which was central to the Winslade case. The Donaldson papers confirmed, first, that infected sheep could not spread infection more than 100 metres, even downwind; and, secondly, that intensified clinical surveillance would be an appropriate alternative to immediate culling. It is highly likely that had this evidence been presented to the court, the judge in the Winslade case would have come to a very different decision.
Why was this evidence not available to the court? MAFF was seeking an emergency injunction, and thus counsel for Mr Winslade had only a few hours notice to prepare her case, and Mr Winslade was virtually a prisoner on his farm because he had been served with a movement restriction notice. In cases where applications for injunctions are made and inadequate notice is given to the defendant—I understand that the relevant time period is three days—the applicant for such an injunction is obliged under the rules of civil procedure to make full and frank disclosure of all relevant facts, even if they are unfavourable to the applicant's case.
The Donaldson papers were published in the British Veterinary Record on 12th May, but had been seen by senior MAFF officials in late April. The Winslade case was heard on 22nd May, so there was plenty of time for the ministry to have put that scientific evidence to the court. Why was this crucial evidence not made available to the court? Was it because of simple incompetence, or was it deliberate? Why was I told in a Written Answer from the Minister that the ministry had complied with the civil procedure rules when submitting evidence in the Winslade case?
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The critical importance of this scientific evidence was shown in the Upton case in June last year—the case of Grunty the pig, as it is known—when it led to the judge finding against MAFF, refusing it the right to appeal and awarding costs to the defendant, 'The Minister shakes his head, but all he has to do is to read the transcript of the trial to see that that is what swayed the judge, Mr Justice Harrison, in that case. Thus, in the absence of that scientific evidence, the Winslade decision cannot possibly be viewed as authoritative and certainly cannot be taken as the bedrock case which legalises, once and for all, the contiguous cull.
The Westerhall case, the second of the cases referred to by the Minister, gives even less support to his contention that it legitimises the contiguous cull. That decision was given on 25th April, before Dr Donaldson's papers had been published—although, again, it is likely that senior MAFF officials had seen that evidence. Dr Donaldson's research is, after all, part-funded by MAFF so they would certainly have seen drafts. In any case, the Westerhall case was dealt with as a three-kilometre cull case. Without the benefit of the Donaldson scientific evidence, again it is extremely doubtful whether the Westerhall case can be cited as justifying the contiguous cull policy.
The real bedrock case—if the Minister is looking for a bedrock case for or against the contiguous cull—was the Upton case, where Dr Donaldson's scientific evidence was produced by the defending solicitors. This won the day for the defendants and, as I said, costs were awarded against the ministry with no right of appeal. The proof of that pudding as that following the decision in the Upton case—the first case based on correct science—the ministry, when faced with a legal challenge on the contiguous cull, almost invariably backed down, confining itself to blackguarding the farmers and lawyers concerned.
The contiguous cull was a vastly expensive and unnecessary disaster. As Dr Donaldson said last week when giving evidence to the EU inquiry:
"There was no justification for the 3Km or the CC policy, which were both novel and untested".
When giving evidence at the same inquiry, Professor Fred Brown, also recognised throughout the world as an expert on foot and mouth, who used to be head of the Pirbright Institute before moving to America, said that,
"the barbaric conduct in Britain last year was a disgrace to humanity".
It now appears that that "barbaric conduct" was not sanctioned by law and that the legal bases which the Minister cites as justifying the contiguous cull in fact do nothing of the kind.
I conclude by asking the Minister to answer the following simple questions. First, whether he accepts that relevant scientific evidence was not put before the court in the Winslade case, even though that evidence was available to and read by the ministry. Secondly, why that evidence was not put before the court in the Winslade case. Thirdly, whether that evidence had been received before the decision in the Westerhall case. Fourthly, whether he now accepts that those

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decisions would not have gone the ministry's way had that evidence not been suppressed. Fifthly, and finally, can the noble Lord say why the ministry never fought a case for an injunction to enable a contiguous cull to proceed after the decision in the Upton case?
If the Minister is unable to answer these questions today, perhaps he will at least undertake to write to me and put a copy of his answers in the Library of the House.
7.40 p.m.
Lord Monro of Langholm: My Lords, I am glad that my noble friend Lord Willoughby de Broke has given us this opportunity to raise yet again the problems of foot and mouth. Farming is still in crisis. The price of milk is going through the floor, and the price of lamb, beef and grain is at rock bottom. Generally, farmers have a great lack of confidence in the future, with a Secretary of State who is so keen to adjust the CAP—which inevitably means that there will be less for farming but more for the environment. No one understands how we shall get the same amount of money out of the environment as we do out of production.
One cannot condense into the seven minutes allowed all the recent reports on foot and mouth: the results of the European Union inquiry, the report of the Royal Society which is to be published next month, and particularly the National Audit Office report which is so damaging to the Government. The NAO report is critical of the Government for not having made sufficient contingency plans for a major outbreak such as we had to put up with last year.
I farm in Scotland, at the very heart of the area in the Borders where foot and mouth broke out. I lost my sheep flock under the three-kilometre cull. Like all my neighbours, we practised isolation—biosecurity, as it is termed. We locked the gates, the children did not go to school, and we hoped that we should all survive. But on Easter Saturday last year, the ministry vet telephoned, in the afternoon my own vet came to inspect the sheep and the valuer arrived. On Easter Sunday, the sheep were all killed—the ewes, the tups and the lambs. It was sympathetically and humanely done, but it was a great personal disaster for the farm.
All this happened too quickly for us to protest. Indeed, none of us would have protested—we believed that this was being done on ministry advice in order to help to stop the spread of foot and mouth as quickly as possible. However, it is important to note the difference between the contiguous cull—a cull that takes place next door to an infected farm: just over the farm dyke, the fence or the hedge—and the three-kilometre cull, where the farm could be two to three kilometres away from an outbreak of the disease.
The National Audit Office has described both decisions-on the contiguous cull and on the three—kilometre cull—as "highly controversial". I hope that in replying the Minister will expand on how he treated the differences between the two categories.
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Under the Animal Health Act 1981, the Minister has a power to slaughter under four headings. The first three are: infected animals—of course, I agree; animals suspected of being infected—I agree; and animals in contact with infected animals—I accept that all those would have to be slaughtered. But the fourth ground—which the Minister set out in a letter, for which I am grateful—is if animals,
"appear to the Minister to have in any way been exposed to infection".
That is a highly subjective reason for culling animals. I should like a little more information from the Minister as to how he came to a decision, with the ministry vets, on this very subjective basis.
This is an important point. Of the 650,000 head slaughtered in Scotland, 77 per cent were slaughtered under the terms of the three-kilometre cull; 20 per cent under the terms of the contiguous cull—animals right next door to the infection; and 3 per cent on a suspicion. So the vast majority of the stock killed in Scotland were killed as a result of a decision under the Animal Health Act and were not, in fact, next door to farms that had foot and mouth.
My noble friend mentioned the Westerhall case. The farm was very near to my home, and the case involved a hefted flock on a hill farm. As the Minister knows, hefted flocks stay put on their area of land on a hill farm. They do not wander over the march fence or the march boundaries. They know where they live and they stay there. Westerhall was on the opposite side of the hill to a farm where there was a contiguous cull. In the view of all the local farmers there was only the remotest chance of that hill flock having been in contact with another flock. The decision of the Court of Session in Scotland was that they had to be culled. That is the kind of case that we need to examine carefully to see whether we got it right. The majority of practical farmers thought that in that case we got it wrong.
In all of this, the State Veterinary Service is desperately important. It is unbelievable to me that the Government are cutting back on this UK issue. The Minister is responsible. According to the National Audit Office report, the Animal Health Act is devolved to Scotland—except, according to Appendix 5 of the report, the State Veterinary Service, which is on a UK basis as animal disease is no respecter of national boundaries. So the Minister at DEFRA is responsible for the National Veterinary Service. I want to know what the position is in Scotland and in England relative to the reduction in the National Veterinary Service as reported widely in the press a week or so ago.
It is important that the United Kingdom co-operates and co-ordinates throughout on the issue of foot and mouth. At present, there is something of a split between Scotland and England. Last week, Scotland produced a consultation document which all farmers in Scotland feel is far too complacent. For instance, the Army is to be called in only as a last resort. Yet if the Army had not been called in belatedly by the Government during the last outbreak, heaven knows where the outbreak would have ended up. The

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Army saved the Government, and saved farming, from a real crisis last year. That should be recorded. The Scottish Executive is very wrong if it tries to make the Army merely a backstop in relation to foot and mouth.
I hope that the Government will think closely about the distribution of information during a foot and mouth outbreak. Last time, there were a number of holes in the information that people received. That must never happen again. Lastly, I hope that the Minister will say something about exports to this country. The Government continue to say that they are doing something, but, so far as we know, nothing is happening at ports and airports. So let us have a response on that point and let us never have foot and mouth in this country again.
7.47 p.m.
The Duke of Montrose: My Lords, coming from north of the Border, my approach is perhaps slightly different from that of my noble friend Lord Willoughby de Broke, but many of our questions focus on the same kind of issues. First, I declare an interest as someone who has a livestock farm and who spent only 18 hours under the terms of a Notice A form when my farm was a suspected infected place. We were very relieved to have that restriction lifted. When it came to establishing the view of the courts in the latest outbreak, the Scots may not have been the first to go to law, but they did so quite early on—on 25th April. My noble friend Lord Monro referred to the Westerhall case. It turns out to be important, because much of that judgment was relied on in the further case used by the Government; namely, the Winslade case.
My noble friend Lord Monro described the situation on Westerhall farm: the fact that the boundary it shared with the infected farm at Bush of Ewes was a 400-metre high piece of boggy ground known as Meg's Shank. The owner was very nearly certain that there was no chance that any sheep were likely to have been in that area given the time of year and the management of sheep at that time. Furthermore, at the time in question the infected farm was to the north east of the farm and the wind was blowing from the south west, away from Westerhall.
This case, as my noble friend Lord Willoughby de Broke pointed out, pre-dated the publication by Professor Donaldson on 12th May in the Veterinary Record concerning wind-borne infection. But, on the evidence produced, the judge came to the view that the Secretary of State "had grounds to believe" that infection could have occurred and that was why he gave the judgment that he did.
The important point about the Westerhall case was that the judge did attempt to sort out some of the other issues raised. One was that European Directive 85/511 laid down control measures which were not,
"intended to be comprehensive and exhaustive".
Therefore, further actions by the Government under the Animal Health Act 1981 were allowed.
The other critical point made in that judgment was that, however rigorously enforced the policy was, it should not be so rigid as to be incapable of delivering
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a proportionate response in a particular case. The fact that the petitioners had been given the opportunity to argue for an exception was regarded as sufficient proof that there was flexibility. The judgment also ruled out any infringement of the European Convention on Human Rights in the implementation of the cull if, as the judge considered at that point, it was carried out legally. Of course, if it turned out that the cull was carried out illegally, the human rights question would be thrown open again. However, there was no examination in that case of whether the Minister's judgment on whether there was a risk should be subject to inquiry by the courts. That may need to be looked at a bit more carefully.
While referring extensively to Lord Carloway's judgment, the Winslade case seems much more particular, centred around whether the Minister had grounds to suspect infection in certain named circumstances, so it does not produce a great deal of precedent for other cases.
The Grunty the pig case came back to the position that contiguous cull cases must be considered on their own merits, particularly if the farmer questions the position. It does not seem to me that the whole cull was illegal and that every farmer had the right to go to law in his own case. With the powers that these cases regard as legitimate, I find it difficult to see why the Government do not find that they have sufficient powers at present for executing a proper control of foot and mouth disease.
I have a question for the Minister arising out our debate on 8th May. It is very similar to a point made by my noble friend Lord Monro. Is it the Government's view that the contiguous cull was somehow under different rules from what was described as "slaughter within a 3-kilometre radius", which was used in the Westerhall case—the 3 km cull, in shortened form—or are the two terms interchangeable?
The Animal Health Bill, which we considered recently, contained a vast extension of the Minister's powers, as if that was where the fault lay. The fault was much more that the rules for the cull were badly judged. The policy was too widely and unthinkingly drawn up and was bound to lead to irrational and over-vigorous application by field operatives, even those of a fairly high level of authority. History can now tell what it was like when let loose by those charged with implementing it at each farm.
The Minister has argued recently in this House that many of the powers envisaged in the Animal Health Bill were necessary for carrying out the Government's responsibilities on the control of TSEs. Foot and mouth disease is very different, in particular as, with TSEs, the Government seem to see no practical difference between an EU regulation concerning suspect animals and a UK one concerning susceptible ones.
Having got that element out of the way, why does the Minister still think that additional powers are necessary for controlling foot and mouth disease?
7.54 p.m.
Lord Pearson of Rannoch: My Lords, I have little to add to the three erudite speeches that have cast such doubt on the legality of the so-called contiguous cull—or mass slaughter, as it obviously was—so I shall go a little further and ask what would have been the point of the slaughter even if it had been legal. It is surely not right to do something incredibly cruel and ruinously expensive just because one believes—wrongly, as it appears in this case—that one has the legal power to do it.
As I understand it, there are two official answers to my question. I should like to check them with the Minister. The first is that we are in the European Union, so we must obey its common agricultural policy and all its rules about meat exports and imports and we must respect its dislike of vaccination. Will the noble Lord confirm that that is the legal position?
The second official answer is that our meat exports are so valuable to our farming industry and to the national economy that they must be protected at almost any cost.
We now know from the National Audit Office that these two policies cost the British taxpayer £8,000 million in last year's foot and mouth epidemic—£3,000 million to our farming industry and £5,000 million to our tourism industry. Are our meat exports so valuable? Not according to Written Answers that I received from the Minister on 24th April and 25th March this year. They reveal that the total value of our exports of meat and meat preparations, including poultry meat, amounted to a mere £615 million in 2000, which was before the foot and mouth epidemic started. The Minister also revealed that the value of our corresponding meat imports for 2000 was almost four times greater than our exports, at £2,417 million. The answer that the Government refused to vaccinate and embarked on such costly and cruel mass slaughter to protect our meat export trade does not appear to stand up. I repeat, in a normal year we spend roughly four times as much on meat imports as we get from our meat exports—about £1,800 million more. Rather than going through all that misery and expense again, would it matter if we vaccinated, even at the cost of some of our exports, which we could presumably eat here and import correspondingly less?
What about the other official answer, to the effect that we had to avoid vaccination and inflict all that immense damage on our farming industry and economy because we have to obey EU law in this as in every other way? What is the legal position? Here again, the Government's figures make our continued adherence to the common agricultural policy look crazy. Your Lordships are aware that the burden of the CAP falls on our consumers through higher food prices and on our taxpayers through tax-financed support. The net annual cost of the CAP is therefore the difference between the sum of those two costs and what our farmers get back from the CAP. On that basis, the Government's Answers in another place—for instance, on 25th November 1999 and 8th January 2001—indicate a minimum net annual cost to the
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British taxpayer of the CAP in 1998 of £6,600 million. The OECD put it rather higher, at £9,400 million. Even those figures include a credit from the EU of £2,400 million, which was part of the £5 billion-odd repaid by the EU from the £10 billion-odd gross that the UK paid to the EU.
Let us settle for the minimum figure of £6,600 million per annum, as calculated by the Government. Let us even concede—although I have no reason to do so—that the cost of the CAP may have come down since 1998 and may now be, shall we say, a mere £5,000 million per annum. That is still a colossal figure. To get it into perspective, £5,000 million would pay for about eight new district hospitals—the land bought and the hospitals built, equipped and staffed to run indefinitely. That is the sort of money that we are throwing away every year on the CAP alone. If we did not do so, surely we could use at least some of the resulting saving to look after our farmers and our environment, with several thousand million pounds per annum to spare.
Against such figures, why is the meat export trade held to be so valuable? Why do the Government think it is worth staying in the common agricultural policy? In short, why do we not get out of the CAP and why do we not vaccinate?
7.59 p.m.
Lord Livsey of Talgarth: My Lords, I shall not follow the noble Lord's remarks about the CAP. If we boil down the debate, it is about whether the contiguous cull was legal. The noble Lord, Lord Willoughby de Broke, has given a forensic analysis of the court cases. I cannot argue because I do not have the detailed information. However, it seems that the interpretation of words such as "infected" and "affected" is a part of the maze of information surrounding the regulations made possible originally by the Animal Health Act 1981.
The fact is that 6.5 million animals were destroyed, about 1.25 million as a direct result of the contiguous cull. Depending on how one interprets the figures, it is possible to claim that a larger number of animals were destroyed. We lost a large proportion of our ewe flock and a massive number of animals, the cost running into many billions of pounds. In my part of Powys we lost 155,000 animals; 66,000 were contiguously culled. The interesting question is how those animals will be replaced. Much more dependence will be placed on meat imports as we no longer have our own animals. Although I am a firm supporter of the EU, I am very alarmed by its proposals to increase, for example, the quotas of Argentinean beef. As we know, foot and mouth is endemic in many parts of Argentina. I do not believe that those proposals should be given effect. Surely, we must maintain precautionary measures in relation to any country where foot and mouth is endemic.
The 2001 foot and mouth outbreak was a very traumatic time. The outbreak was UK wide, but the worst hit areas were probably Cumbria, Devon and Dumfriesshire, with my own area of Powys fairly close

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behind. A massive number of sheep were culled in our hills, many of them in contiguous culls. I shall give but one example of my worries about the contiguous cull.
One cull was conducted primarily at the Royal Welsh Showground, but subsequently the sheep proved not to be infected. The suspicion arose that they had the disease because of a visual assessment by a 25-year-old South African veterinarian. I can just about accept that. What I cannot accept is that the animals of two neighbours on the other side of the river were consequently contiguously culled. The cull spread to Mynydd Eppynt, which was then declared an infected area. It was then decided to establish a mass burial site at Mynydd Eppynt. We fought that plan for a fortnight and were eventually successful. The fact, however, is that the area had no foot and mouth. The case shows how a contiguous cull can move sideways until a much more serious situation develops.
We shall have to consider not only the powers in the Animal Health Act 1981, but the recent outbreak and what other powers are needed. In their new Bill, the Government are requesting increased powers of entry which could be quite traumatic for farmers. As has been said, animals which appear to have been exposed to foot and mouth disease are subject to culling. The Minister has said that the contiguous cull was "necessary to contain" the disease and that "apparently" healthy animals were culled on neighbouring farms to prevent the disease spreading. In an outbreak as large as that in 2001, such a policy becomes a very emotive issue. I say that as one who lived through the 1967 outbreak in the north of England. In the legislation proposed this year, the Government are asking for the power to slaughter and for increased powers of entry and enforcement. However, the 1981 Act already allows the Government to slaughter any animals appearing to have been exposed to foot and mouth.
In June 2001, the policy was to slaughter infected animals within 24 hours of confirmation and contiguously culled animals within 48 hours. Animals on holdings that had close contact with infected holdings were slaughtered as dangerous contacts. There were 69 appeals against slaughter, most of which were on the basis of misdiagnosis. Although the main slaughter criteria were based on controlling the disease among animals at risk, I believe that that is a subjective interpretation of the law. The legislation provides that such action can be taken "if he"—the Minister—"thinks fit".
The new Bill seeks to address the issue of whether the action in 2001 was taken on a satisfactory legal basis—namely the previous Act. As we have heard, the point was tested in the courts, although I shall not address that issue now. The Government say that they require greater enforcement powers in relation to future foot and mouth outbreaks. That suggests to me that they were already sailing very close to the wind in the 2001 crisis.
According to the criteria, vaccinated animals can in future be slaughtered. The Government also require the ability to take fast-track action. The main objective
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is to eliminate disease. However, the culling of apparently healthy animals as a firebreak is very difficult for farmers and their families. There are some very important points to consider. Why do we not have a method to test instantly? Although it would be a technological breakthrough, why cannot we ask Pirbright to devise a way of determining within an hour whether an animal is positive? If we could do that, we should certainly be able to slaughter infected animals well before the 24-hour limit. Things got out of control in 2001.
Surely, we also need a major contingency plan that includes a sufficient number of vets. However, I do not blame the Government for the shortage. In 1980, there were about 623 vets, whereas, as we know, there were just under 300 in 2000–01. Most of those vets were lost in the 1980s and early 1990s. We need to return that number to 620 to 700 to be able to tackle loot and mouth. About six years ago, I said that we would not be able to cope with a foot and mouth epidemic. Unfortunately, that turned out to be true.
Lord Willoughby de Broke: My Lords, I am sorry to interrupt the noble Lord, but I remind him that he has exceeded the time limit. He is now in the tenth minute of his speech.
Baroness Farrington of Ribbleton: My Lords, as the Whip on duty I accept that rebuke. However, there is a little extra time. I hope that the noble Lord, Lord Livsey, will finish now.
Lord Livsey of Talgarth: My Lords, I thank the noble Baroness. I shall finish very quickly. We need enough vets, a contingency plan, a crackdown on meat imports, proper surveillance and a large increase in regional rendering capacity. If all that were done, contiguous culls would not be so necessary.
8.9 p.m.
Baroness Byford: My Lords, I am looking at the Whip and thinking, "May I have my minutes too?" However, I shall try to stay within the seven minutes.
I thank my noble friend Lord Willoughby die Broke for securing this debate. The Government's contiguous cull policy during last year's foot and mouth outbreak caused great consternation when it was introduced and resulted in thousands of uninfected animals being killed. At the time the Government failed to convince those who questioned the legality of a contiguous cull. This debate gives the Minister an opportunity to consider the many questions posed then and raised again tonight. I hope that he will fully respond.
I again remind the House of my family's fanning interests, although we were not directly affected by the outbreak.
My questions to the Government are fairly simple. On what basis were the Government convinced that their contiguous cull was legal? Did the Government seek approval from the European Commission as to its legality and, if so, when was it given?

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On 23rd March 2001, the Chief Scientific Adviser recommended that, following modellers, animals on contiguous premises where it was believed that animals had been exposed to infection should be culled. But some vets and scientific advisers argued that local circumstances and adequate biosecurity measures should be taken into account before a contiguous cull was carried out.
As others have said, on 12th May Dr Alex Donaldson of the Institute for Animal Health considered that action taken on contiguous premises should be determined by the species at risk on those premises—sheep are at risk due to the difficulty of diagnosis and cattle should be subjected to intensified clinical surveillance. On 26th April 2001, more veterinary resources were made available for patrolling. That was welcome.
As I said, vets were allowed to give greater consideration to cattle, especially milking cows. After much argument in this House, the Government acknowledged that rare breeds should be assessed separately rather than be automatically included in a contiguous cull. Will the Minister clarify how and when that decision was taken?
At the time the NFU accepted the necessity for the contiguous cull and the three-kilometre culls but welcomed greater flexibility. What made the Government change their mind about fully applying a total cull on contiguous farms, as they did in the early stages? Were the Government given new legal advice that made them change their mind and, if so, when was that advice received and from whom did it come?
My noble friends have referred to the Rosemary Upton case. It is the only case in which the judge based his evidence on the scientific evidence that was available. It swayed him to come down in favour of Rosemary Upton. On previous occasions when we have raised the matter, the Minister has not responded fully. I hope that he will respond fully tonight as it is an extremely important matter. I have considered other cases but the Rosemary Upton case stands alone. If the Government were so rigid about the matter, why was Phoenix the calf spared? What scientific reason was there for the decision taken by the Prime Minister?
By the end of April 2001, Clarke Wilmott Clarke argued that the contiguous cull was illegal within EU law. Directive 85/511 stated that only infected animals could be killed. William Neville from Burgess Salmon argued that the Government withdrew from seven out of the nine cases that he represented. Why did that happen? What was the reason for the Government not pursuing those seven cases? How did the Government decide which cases to proceed with and which ones to withdraw from?
On 6th November 2001, Mr Morley was challenged in the House of Commons Select Committee on the legality of the contiguous cull. He responded that the Government were confident that the culling had been absolutely legal and that a court ruling had not challenged that. So how does the Minister explain the ruling of the judge in the Rosemary Upton case? I refer
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also to the Exeter based solicitor, Alayn Addy, who represented 200 farmers, none of whose livestock subsequently developed the disease. I am pleased to see that the noble Baroness, Lady Hayman, is present. She and the noble Lord, Lord Whitty, have argued that the fact that livestock did not develop the disease did not mean that they did not run a risk of doing so. To a certain extent I accept that. However, I need to push the Minister further rather than accepting a rather broad brush approach. I hope that he will discuss that matter when he responds to the debate.
I understand that MAFF stated that it was not confined by EU directive 85/511 but was overruled by the Animal Health Act 1981 which widened out the matter to include animals which a veterinary official might, on his discretion, have reasonable grounds for supposing had been exposed to infection. Did the Government raise that issue with the European Commission and, if so, when? My noble friends the Duke of Montrose and Lord Monro raised the whole question of the balance and the difference between the contiguous cull and the three-kilometre cull. I hope that the Minister will comment on that.
On 26th March this year the noble Lord, Lord Whitty, following my question about the need for additional powers in the Animal Health Bill, said,
"The issue is whether the House wishes to deprive the Government of powers which in their judgment the Government consider are wanting for the period between the passage of this Bill and a point at which we can further legislate".—[Official Report, 26/3/02; col. 195.]
I hope that the noble Lord will define what those powers are that he felt that he did not have and that he sought in the Animal Health Bill. The noble Lord went on to say that,
"in particular in carrying out a contiguous cull … we do not have adequate powers of entry or rapid enough powers for enforcing entry in order to contain the disease".—[Official Report, 26/3/02; col 196.]
We need to have that matter clarified.
As others have said, the farming industry is still in deep crisis. The Government must appreciate that there are still concerns and doubts about the contiguous cull. Tonight the Minister has the chance to redress the situation. I express my concern in regard to the cut in finance allocated to animal health research. There may be a misunderstanding as regards the figures that were mentioned in another place. I hope that the Minister will clarify the position.
8.16 p.m.
Lord Whitty: My Lords, I am to some extent grateful for having the opportunity to clarify the position yet again. A number of the points raised by noble Lords addressed concerns in the farming community and beyond. Others slipped into paranoia and conspiracy theories. I should have thought that by now we would have moved away from that. As I have said before in this House, it is quite understandable that within the farming community there was much confusion and mistrust and that allegations were made during the course of the epidemic which overwhelmed us all. It is understandable that such allegations were

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made in the heat of the moment. However, it is not reasonable that some of those allegations should be repeated several months later when we have had time to reflect on the disease and are in the process of receiving a number of well founded inquiries into how well or how badly the Government dealt with the outbreak and how well or how badly the farming community dealt with it.
However, this debate is focused on legality. I make it quite clear—as several noble Lords have almost explicitly said—that the basis of the contiguous cull rested on paragraph 3(1)(b) of Schedule 3 to the Animal Health Act 1981 which states,
"animals … which appear to the Minister to have been in any way exposed to the infection of foot-and-mouth disease".
As noble Lords rightly said, that is a subjective judgment. The issue of the law is clear: we have the power to slaughter animals where that judgment is made. The issue of the law in a particular case or a particular campaign must concern whether that power was exerted reasonably.
I shall refer to particular cases in a moment. However, as regards the situation in general, throughout the epidemic Ministers—like the noble Baroness, Lady Byford, I am glad to see that my noble friend Lady Hayman is present—acted on the clearest veterinary and epidemiological advice, all of which indicated that the highest risk of exposure would occur on premises situated close to the premises where an infected case had been found. I refer in that connection to the contiguous cull which was operated for the most part in the whole of England and to the three-kilometre cull which was operated for the most part in Scotland. However, due to the overlap of certain premises in Cumbria, we also operated a three-kilometre cull in Cumbria as well as across the Border in Dumfries.
Both the contiguous cull and the three-kilometre cull were based on strong advice received from vets on the ground and from epidemiological modellers. We were advised that the best way to contain the disease was automatically to presume that the contiguous premises, or the premises three kilometres away, could have been exposed to it. That stance was not adopted from the beginning of the outbreak. We reached that conclusion through our experience during the first few weeks of the disease when it became clear that infectivity was primarily local. The overall indications are that during the course of the disease 80 per cent of cases were transmitted by local infection.
The noble Lord, Lord Willoughby de Broke, asked whether the Donaldson report was before the Winslade case. So far as I am aware, that report was not before the judge. The judge, as I said in an earlier debate, had before him the same information that Ministers had before them, including an assessment of all forms of transmission. The Donaldson report dealt with only one form: airborne transmission. Most local infectivity occurred as a result of direct contact of animals or direct contact with human beings who had been in contact with animals, or it resulted from vehicles. That is the way in which the infection spread. Airborne infection was only one element. That is why
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the Donaldson report was not of itself a determining factor; in that regard we should refer to the combination of all the matters that were in affidavits before the judge in that case. It is therefore not relevant whether the Donaldson report was before the judge. I believe that that was also referred to by the legal representation on the other side at that case.
The noble Lord also asked whether we had effectively suppressed the Donaldson report. That has never been the case. We have always been as open as possible about the advice received by the Government during that period. I therefore do not accept his argument that those cases would have led the judge to a different conclusion had that information been before him.
The noble Lord, Lord Willoughby de Broke, the noble Baroness, Lady Byford, and others referred to the Upton case, the case of Grunty the pig. That judgment found against the Government. However, that was not a contiguous cull case and is therefore completely irrelevant to the legality of the contiguous cull. It was a direct contact case and has no bearing on any individual contiguous cull case or on the overall approach of the contiguous cull. In that case, the judge was absolutely supportive of the Government's policy and stated that, in his opinion, the action of MAFF in carrying out the contiguous cull operation was reasonable.
I have started to explain the distinction between the three-kilometre arrangement and the contiguous cull; both were based on the same veterinary advice. That advice was going to Scottish Ministers with regard to the three-kilometre cull arrangements—that was because of the structure of farms in Scotland and the logistics of the situation there—and it was available in England and led to the adoption of the general contiguous cull arrangements.
DEFRA and the United Kingdom Government have a responsibility for the state, size and operation of the State Veterinary Service but the detailed application of animal health matters are a matter for Scottish Ministers under the devolution of those powers within Scotland.
On the size of the State Veterinary Service, various erroneous figures are floating around. The figures quoted by the noble Lord, Lord Livsey, are misleading. Although the numbers have come down significantly in total, that is largely because of managerial changes, a reduction in the number of regions, the switch of some of the veterinary service's activities to the Meat Hygiene Service and the Food Standards Agency and the fact that the research side has moved to the Veterinary Laboratory Agency. The figures do not compare like with like.
On the Veterinary Field Service, the figures have not changed significantly during the past 10 years. There have been some ups and downs but broadly they have been in the low 200s. That service is mainly responsible

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for dealing with animal disease. The inquiries are currently considering whether that is an adequate level.
Lord Livsey of Talgarth: My Lords, I received a Written Answer when I was a Member of the other place that indicated that during the first 10 years and on a like with like comparison, there was a reduction of 300 in the number of field vets.
Lord Whitty: My Lords, if the Answer referred to field vets, it was misleading. The total number came down from just under 600 to just under 300. However, that was mainly the result of a loss of management and research jobs and the transfer of responsibilities to other agencies, not because of a reduction in the number of field vets. It is true that some of the figures are a little obscure for the years 1967 to 1981 but the position from 1981 to the present is fairly clear. That is the pattern.
I turn to the question of whether the European Union was in support of, or had cleared, the Government's policy. I have to be careful with my terminology because the noble Lord, Lord Pearson, is clearly against the European Union having any role in this respect. Some are concerned about the fact that the endorsement or otherwise of the EU was not clear and that that cast doubt on the legality of the situation. However, that view is not well based. The European Commission was well aware of the situation throughout. There was constant communication with the European Commission and almost constant activity from the standing veterinary committee of the EU.
The Commission was well aware of the UK's culling policy and approved of that approach. The recitals to Commission Decision 2001/257/EC, which permitted a programme of vaccination in the UK, specifically acknowledged the existence of the contiguous cull policy in the UK. It stated:
"In addition to the measures within the framework of Directive 85/511/EEC"—
that has already been referred to—
"the UK apply the pre-emptive killing of susceptible animals in holdings in close proximity to infected or suspect holdings".
It therefore explicitly recognised that that was allowable within EU law.
The number of so-called healthy animals destroyed during the cull has been raised. It is deeply distressing that 1.2 million animals were slaughtered under the contiguous cull. It is more distressing that people are now told that it was unnecessary to slaughter those animals. However, it is misleading to tell them that that was unnecessary because the majority of those animals proved to be healthy. As I have made clear previously, the more effective the contiguous cull policy, the less likely animals are to prove positive on testing. If the disease has just been discovered and the cull of contiguous premises is carried out immediately, there will be no testable sign of the disease among those animals. It is also true that a large proportion of
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those killed during the epidemic were never tested because the pressure on resources meant that efforts concentrated on detecting the disease in new outbreaks. Any figures that are used in this regard are deeply misleading.
It is also important to recognise that there was some discretion in the operation of the approach. Although there was a presumption, there were also a number of areas of discretion for local vets to be involved; that is why the courts could be brought in to judge whether we were being reasonable or not. The local inquiries will consider whether that discretion was adequate and whether there should have been greater discretion.
The fundamental issue is that the legality or validity of the contiguous cull strategy is well established in case law and European law.
Lord Willoughby de Broke: My Lords, will the Minister please undertake to answer the five questions in writing and put a copy in the Library of the House? He has partly answered three of them but he still has two others to answer.
Lord Whitty: My Lords, I thought that I had answered all five questions; I may have missed one. I believe that two of them were collated.
I have to finish at this point. I should be delighted to debate further the future of the CAP on a different occasion with the noble Lord, Lord Pearson. I shall elaborate on my answers in writing when I have read the rest of the debate.

Proceeds of Crime Bill
8.29 p.m.
Consideration of amendments on Report resumed on Clause 243.
Lord Goldsmithmoved Amendment No. 90:
Page 147, line 17, at beginning insert "unless the court dispenses with service".
The noble and learned Lord said: My Lords, in moving Amendment No. 90, I shall speak also to Amendments Nos. 91, 93, 107 and 138. These are technical amendments to provisions in the Bill relating to jurisdiction. Amendments Nos. 90, 93 and 107 relate to the requirements that a claim form must be served on the respondent to proceedings and any holder of relevant associated property.
It has always been our intention that the provisions on the service of process in civil recovery litigation should be very much in line with the usual rules in civil litigation. As such, we had always had it in mind that the usual residual discretion for the court to dispense with service would apply. We became aware that there was a risk that the express provision we had made about service in the Bill could be read as absolute and as displacing that residual discretion. The amendments redress that position.

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I should perhaps emphasise that the discretion to dispense with service exists to deal with exceptional circumstances only. Bearing in mind their paramount obligations to the interests of justice and the protection of human rights, the courts can be expected to be very hesitant in permitting civil recovery, or any other, proceedings to progress without service of process.
However, sometimes in the run of civil proceedings there are cases where a respondent, or potential respondent, is fully aware of the nature of the process but deliberately takes steps to evade service. In such circumstances, it is not appropriate for respondents to be able to hide behind a technicality. The residual discretion of the court is there to see that that does not happen. We do not wish to disable the court from dealing appropriately with any such circumstances if they arise in civil recovery proceedings.
Amendment No. 91 will bring the provision on initiating proceedings for a recovery order in England, Wales and Northern Ireland into line with that for Scotland. It makes clear that the obligation to serve the form applies wherever the person is domiciled, resident or present. We wish to ensure that the court in a civil recovery case is, so far as possible, unrestricted in the reach of its jurisdiction. We had intended that to be the implicit effect of the Bill as previously drafted. Ultimately, we did not think that we could be sure of that. Therefore, this amendment puts the matter beyond doubt.
Finally, Amendment No. 138 will restrict the scope of Clause 283(1) to Scotland. Subsections (2) and (3) are already so restricted. There is no difference in the effect that we intend to achieve in the various jurisdictions; it is simply a matter of how, technically, that is done. We have come to the conclusion that none of the provisions in Clause 283 is necessary for England and Wales or Northern Ireland. The Bill does not need to make that type of explicit provision because the same effect is achieved by a combination of the general provisions on property at Clause 311 and the general rules on the jurisdiction of our civil courts. I beg to move.
On Question, amendment agreed to.
Lord Goldsmithmoved Amendment No. 91:
Page 147, line 18, at end insert—
"wherever domiciled, resident or present".
On Question, amendment agreed to.
[Amendment No. 92 not moved.]
Clause 244 [Proceedings for recovery orders in Scotland]:
Lord Goldsmithmoved Amendment No. 93:
Page 147, line 31, at beginning insert "unless the court dispenses with service".
On Question, amendment agreed to.
Clause 245 ["Associated property]:
[Amendment No. 94 not moved.]
Schedule 6 [Powers of interim receiver or administrator]:
Lord Goldsmithmoved Amendment No. 95:
Page 280, line 15, leave out sub-paragraphs (6) and (7).
The noble and learned Lord said: My Lords, Amendment No. 96, which is grouped with Amendment No. 95, provides that an interim receiving or administration order which makes any provision in relation to obtaining information or entering premises must also make provision in respect of legal professional privilege. That overtakes the current provisions in paragraph 2, which provide for legal professional privilege in relation to powers to obtain information. Those are consequentially deleted by Amendment No. 95.
The noble Lord, Lord Kingsland, tabled an amendment in Committee which would have extended the protection of legal professional privilege to the powers of the interim receiver or administrator to enter and search premises. The Government indicated that it was our intention that those powers should respect legal professional privilege, and we said that we would consider whether the Bill should be amended to ensure that. These amendments are the result of that consideration.
The conclusion is that the current provisions in the Bill require some adjustment. In particular, the protection for legal privilege at paragraph 2(7) is not appropriate when the proceedings themselves are in the High Court.
The amendments would require that provision would have to be made in an interim receiving or administration order in respect of legal professional privilege. In adopting that approach, the Government have taken into account two factors. The first is the civil law precedents, including the standard way that the matter is dealt with in the context of search orders, formerly called Anton Piller orders. The other is recent House of Lords case law, which positions the protection of legal professional privilege squarely in the context of human rights obligations on the courts.
Consideration is now being given as to whether it would be appropriate to set out, perhaps by way of a practice direction, a standard form of civil recovery interim order, including suitable safeguards for legal professional privilege.
I hope that the noble Lord, Lord Kingsland, in particular, and other noble Lords will accept my explanation as to why we have decided to proceed in this way. I hope that the noble Lord will welcome the amendments as meeting the concerns that he expressed in Committee. I beg to move.
Lord Kingsland: My Lords, I thank the noble and learned Lord very much for reflecting so maturely on this matter. I am most grateful for the proposals that he has made.
On Question, amendment agreed to.
Lord Goldsmithmoved Amendment No. 96:
Page 280, line 41, leave out "The order" and insert—
"() An order making any provision under paragraph 2 or 3 must make provision in respect of legal professional privilege (in Scotland, legal privilege within the meaning of Chapter 3 of Part 8).
() An order making any provision under paragraph 3".
On Question, amendment agreed to.
Clause 248 [Registration]:
Lord Goldsmithmoved Amendment No. 97:
Page 149, line 43, leave out "a restraint" and insert "an interim receiving".
The noble and learned Lord said: My Lords, the amendments in this group would bring certain provisions of the Bill relating to Scotland and Northern Ireland in line with those for England and Wales, and would make one drafting amendment. I need to weary your Lordships for just a few moments in order to explain and place on the record what the amendments seek to achieve.
Amendment No. 97 is a drafting amendment, correcting the reference to a restraint order. Amendment No. 98 would replicate for Northern Ireland the provisions of Clause 248 so as to allow that a person applying for an interim receiving order is treated as a person with an interest in the land concerned. The land registrar would then enter the interest in the register against that land so that the land could not be dealt with without the leave of the High Court.
The new clause that would be inserted by Amendment No. 101 is designed to enable the interim administrator or enforcement authority in Scotland—that is, of course, the Scottish Ministers—to apply to the Court of Session for an order to arrest or attach moveable property which is subject to an interim administration order but is in the hands of third parties. It is needed to ensure that the provisions of an order bind a third party.
The most likely example of that would be a person's bank account. The "warrant of arrestment" would enable the bank account or other assets to be frozen, thus preventing their being moved or dispersed before a final recovery order was made vesting the property in the hands of the trustee for civil recovery. Similar provision is already made in respect of confiscation orders in Scotland under Part 3 by Clause 124.
No similar provision is needed for England and Wales in Part 5. The position of property held by third parties is already provided for by normal civil procedures. An interim receiving order will be similar to a standard civil freezing order in that it may prohibit any person from dealing with property to which the order applies. The order will be able to provide for any person who has been notified of the order, including any third parties, to be in contempt if they knowingly assist in, or permit a breach of, the order.
Amendments Nos. 102 to 105 make a technical addition to Clause 264 to ensure that it fits in with the slightly different terminology used in Scots civil law. The key amendment is Amendment No. 104; the other amendments are consequential.
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Subsections (3) and (4) of Clause 264 currently set out the circumstances in which a court may not make a recovery order. The defence in subsection (4) is that the respondent received the property in good faith and has taken steps on the strength of his ownership of the property as a result of which he would suffer detriment if it were recovered. This is a standard defence in civil law in England and Wales and Northern Ireland, referred to as the "bona fide change of position" defence. The language used in subsection (4) as currently drafted is the language that will be familiar to the courts in those jurisdictions.
A similar defence also exists in Scotland. However, the necessary elements of the defence that require to be established are slightly differently expressed. In particular, the term "notice" does not have the same technical meaning. Instead, it is necessary to establish that the person had no reasonable grounds for believing that the property was recoverable. So, for example, if any reasonable person might have had a suspicion that the property was the proceeds of crime, it could not be said that there were no reasonable grounds for believing that the property was recoverable and the defence would not succeed. Amendment No. 104, therefore, makes similar provision for Scotland but using language that will be familiar to the Scottish courts.
Amendments Nos. 108 and 141 are minor amendments designed to take account of the fact that the concept of joint tenancy is not a part of Scots law. Clause 268 sets out the categories of cases that come within the procedure in Clauses 269 and 270 for dealing with associated property and property held by joint tenants. As currently drafted, those allow the director, or in Scotland the Scottish Ministers, to reach agreement with the holder of associated property or with an excepted joint tenant, or for the court to decide how such property should be treated in the absence of an agreement.
However, the concept of joint tenancy is not relevant to Scots law. Amendment No. 108 provides simply that subsections (3) and (4) of Clause 268 do not extend to Scotland. Amendment No. 141 is a consequential amendment to Clause 295.
Amendment No. 132 would make reference in Clause 280 to the Northern Ireland equivalent of the Financial Markets and Insolvency Regulations so that a recovery order could not be made in respect of any property which is subject to a system charge in Northern Ireland.
Finally, Amendment No. 137 would insert a new clause, which is designed to clarify the relationship in Scots law between the vesting of recoverable property in the hands of the trustee for civil recovery and any other action that might be taken by a creditor against the property to enforce a court order that he has obtained against the respondent.
The new clause makes clear that any such action against property once it has been vested in the trustee for civil recovery is ineffectual. In other words, once recoverable property is vested in the trustee, any other enforcement action, or diligence, in relation to that

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property must fail. Similar provision is already made in Schedule 3 in relation to Scottish confiscation orders under Part 3. I beg to move.
On Question, amendment agreed to.
8.45 p.m.
Lord Falconer of Thorotonmoved Amendment No. 98:
After Clause 248, insert the following new clause—
"REGISTRATION: NORTHERN IRELAND
(1) A person applying for an interim receiving order must be treated for the purposes of section 66 of the Land Registration Act (Northern Ireland) 1970 (c. 18 (N.I.)) (cautions) as a person interested in relation to any registered land to which—

(a) the application relates, or

(b) an interim receiving order made in pursuance of the application relates.

(2) Upon being served with a copy of an interim receiving order, the Registrar must, in respect of any registered land to which an interim receiving order or an application for an interim receiving order relates, make an entry inhibiting any dealing with the land without the consent of the High Court.
(3) Subsections (2) and (4) of section 67 of the Land Registration Act (Northern Ireland) 1970 (c. 18 (N.I.)) (inhibitions) apply to an entry made under subsection (2) as they apply to an entry made on the application of any person interested in the registered land under subsection (1) of that section.
(4) Where an interim receiving order has been protected by an entry registered under the Land Registration Act (Northern Ireland) 1970 (c. 18 (N.I.)) or the Registration of Deeds Acts, an order setting aside the interim receiving order may require that entry to be vacated.
(5) In this section—
"Registrar" and "entry" have the same meanings as in the Land Registration Act (Northern Ireland) 1970 (c. 18 (N.I.)), and
"Registration of Deeds Acts" has the meaning given by section 46(2) of the Interpretation Act (Northern Ireland) 1954 (c. 33 (N.I.))."
On Question, amendment agreed to.
Clause 251 [Restrictions on dealing etc. with property]:
Baroness Buscombemoved Amendment No. 99:
Page 150, line 43, at end insert "if and so long as the legal services for such person are funded as part of the Community Legal Service or such person has sufficient assets to meet all legal expenses in respect of such proceedings"
The noble Baroness said: My Lords, in moving Amendment. No. 99, I shall speak also to Amendment No. 100. Under Clause 246 of the Bill, an enforcement authority may apply to the court for an interim receiving order when it intends to take proceedings for a recovery order. An interim receiving order is an order for the detention, custody or preservation of property or the appointment of an interim receiver, and maintains the status quo until the enforcement authority is granted a recovery order. The purpose of an interim receiving order is to freeze the position so that as and when a recovery order is made there is some property to recover. An interim receiving order removes the risk of a defendant dissipating his assets and ensures that there is some property left to recover under the recovery order.
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An interim receiving order is, as its name suggests, an interim measure and there is no need for the enforcement authority to prove conclusively that the property is recoverable property, but merely that there is a good arguable case that the property is recoverable property. It may turn out that the enforcement authority is wrong, but that is irrelevant as regards an interim receiving order: all the enforcement authority needs to show is a good arguable case and no more.
Clause 251(2) allows exclusions to be made when an interim receiving order is made. Subsection (3) gives two examples: there may be an exclusion to meet reasonable living expenses or to carry on any trade, business, profession or occupation. Those exclusions are necessary because an interim receiving order may well turn out not to be justified, and it is important to provide for reasonable living expenses and the necessary expense of carrying on a trade, business, profession or occupation. Indeed, there are similar provisions for Scotland in Clauses 255 and 260.
Unfortunately, Clauses 251(4) and 260(4) provide that an exclusion may not be made for the purpose of enabling any person to meet any legal expenses in respect of proceedings under Part 5. In Committee I proposed an amendment leaving out subsection (4) in order to meet the serious risk of injustice if a defendant could not otherwise meet his legal expenses.
The noble and learned Lord the Attorney-General dealt with my amendment by informing the Committee that costs should be met out of assets not subject to the receiving order or that funding would be made available to respondents in civil recovery proceedings. However, he pointed out that, in order to be granted public funding, they would need to satisfy the standard means test. The noble and learned Lord then concluded his argument by saying that there should not be a problem because legal costs would then be met out of assets which were not subject to a receiving order or through legal aid.
However, I believe that the noble and learned Lord the Attorney-General was being unrealistic. The standard means test is set at a low level. Funding for legal service is not available if an applicant's gross income exceeds £2,034 per month; his disposable income exceeds £695 per month or his capital exceeds £8,000. If any one of those limits is exceeded, funding for legal services is not available. If someone has a disposable income of £700 per month but no capital whatever, he or she is ineligible for funding under the Community Legal Service scheme. Indeed, only the very poor will qualify.
I am concerned about those with modest means but who are not very poor. They will not qualify for funding under the Community Legal Service scheme but will not have enough money to pay lawyers. They will not be able to defend the proceedings, and the enforcement authority will succeed merely because it has obtained an interim receiving order thereby preventing the defendant from using the property subject to the interim receiving order for the purpose of funding his legal expenses. That has to be unjust. The arguments put forward by the noble and learned

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Lord the Attorney-General in Committee do not deal with the defendant with modest means who cannot get funding under the Community Legal Service scheme, and who does not have other assets available to meet his legal expenses.
However, I have re-drafted my proposed amendment to meet the points made by the noble and learned Lord the Attorney-General. The current amendments provide that if a defendant is given funding under the Community Legal Service scheme, an exclusion cannot be made for the purpose of enabling him to meet his legal expenses. Similarly, if he has other assets which are sufficient to pay his legal expenses, again such an exclusion cannot be made. However, the absolute prohibition on an exclusion for the purpose of enabling defendants to pay their legal expenses should not apply where a defendant is not eligible under the Community Legal Service scheme or he does not have other sufficient assets. The amendments have those qualifications.
However, I should add that where a defendant is not eligible under the Community Legal Service scheme, nor does he have other sufficient assets, it does not necessarily follow that an exclusion must be made for the purpose of enabling the defendant to meet any legal expenses. In such a case the judge will decide whether or not there should be an exclusion. The effect of the amendment is simply to qualify the absolute prohibition on an exclusion for the payment of legal expenses. The court should have a discretion when a defendant is not otherwise able to pay his legal expenses. I beg to move.
Lord Goldsmith: My Lords, with respect to the noble Baroness, her amendment seeks to challenge the reasonableness of the means test in relation to public funding. Perhaps I may explain how the position will work. The starting point—and the amendment does not, or should not, challenge this starting point—is the important principle that assets are frozen under an interim order because they are the subject of dispute between the state and the holder of the assets; and because a judge has been satisfied on the test put forward in the Bill that those may well be assets to which the holder is not entitled but to which the state is entitled because they are the proceeds of unlawful conduct.
Therefore, the purpose of the order is to freeze the position while that dispute is resolved and to preserve the assets so that in the event of a recovery order being made property still remains for the enforcement authority to recover. If the holder of those assets were permitted to dissipate them on legal expenses, swhich potentially could be substantial—indeed, the amendment proposed by the noble Baroness has absolutely no limit on legal expenses—there is a risk that the property that ought to come to the state could be dissipated.
Under the arrangements that will be in place, in all cases where respondents cannot afford legal representation from their other assets they will be funded through the Community Legal Service scheme.
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I believe that I made it clear in Committee that, although under normal circumstances it is necessary to satisfy both a means and a merits test, the merits test will be relaxed to the extent necessary to ensure that everyone who needs it and who qualifies financially has access to legal funding.
Either the respondent will be in receipt of public funding, or, if not, it is because the scheme of our public funding accepts that such a person is in a position to pay legal expenses. Of course, if the case is lost, the director will be liable to pay the costs and the person will be reimbursed. There are also certain provisions for compensation.
Therefore, as it stands, the scheme already provides—indeed, because of the relaxation that I have referred to, generously provides—that legal expenses will be met if the person does not have sufficient assets. It is neither necessary nor appropriate to put in the exception from the exclusion proposed by the amendment of the noble Baroness.
It is important—I repeat—to maintain the principles that as long as these assets are frozen they are not dissipated. The state is prepared to ensure that the person is able to meet legal expenses by the relaxation of the merits test and by allowing public funding in those cases. Further than that, in my view, it is not necessary to go.
I suspect that the noble Baroness will not find that explanation wholly satisfactory because, to some extent, it is a repeat of what I have said before. Be that as it may, I invite her to withdraw the amendment.
Baroness Buscombe: My Lords, I thank the noble and learned Lord the Attorney-General for his response. He is entirely right: I am not satisfied with it. I accept that assets are frozen because they are the subject of a dispute. That is clearly taken as read. However, we are talking about individuals who are caught between a rock and a hard place in terms of their ability to obtain legal expenses under the Community Legal Service scheme. They are not so poor as to qualify under the Community Legal Service scheme. Therefore, they have to spend money on legal expenses which, I suggest, does not leave them with reasonable expenses.
I was interested to hear the noble and learned Lord the Attorney-General refer to the expenditure on legal expenses as dissipation, as if spending money on lawyers is a waste of money. It is an interesting point. I heard what the Minister said: it can be a waste of money. But clearly the noble and learned Lord the Attorney-General in his response to these amendments presents a regrettable view that it is generally the case that expenditure on legal expenses is dissipation.
I am not happy with the response. We have tried this issue on previous occasions. I appreciate that I shall get no further on the point. With regret, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 260 [Restrictions on dealing etc. with property]:
[Amendment No. 100 not moved.]
Lord Goldsmith Lord Goldsmith moved Amendment No. 101:
After Clause 263, insert the following new clause—
"ARRESTMENT OF PROPERTY AFFECTED BY INTERIM ADMINISTRATION ORDER
(1) On the application of the enforcement authority or the interim administrator the Court of Session may, in relation to moveable recoverable property to which an interim administration order applies (whether generally or such of it as is specified in the application), grant warrant for arrestment.
(2) An application by the enforcement authority under subsection (1) may be made at the same time as the application for the interim administration order or at any time thereafter.
(3) Such a warrant for arrestment may be granted only if the property would be arrestable if the person entitled to it were a debtor.
(4) A warrant under subsection (1) has effect as if granted on the dependence of an action for debt at the instance or the enforcement authority or, as the case may be, the interim administrator against the person and may be executed, recalled, loosed or restricted accordingly.
(5) The execution of an arrestment under this section in respect of property does not prejudice the exercise of an interim administrator's powers under or for the purposes of this Part in respect of that property.
(6) An arrestment executed under this section ceases to have effect when, or in so far as, the interim administration order ceases to apply in respect of the property in relation to which the warrant for arrestment was granted.
(7) If an arrestment ceases to have effect to any extent by virtue of subsection (6) the enforcement authority or, as the case may be, the interim administrator must apply to Court of Session for an order recalling or, as the case may be, restricting the arrestment."
On Question, amendment agreed to.
Clause 264 [Recovery orders]:
Lord Goldsmith Lord Goldsmith moved Amendments Nos. 102 to 105:
Page 156, line 21, after "(4)" insert "or, as the case may be, (4A)"
Page 156, line 25, at beginning insert "In relation to a court in England and Wales or Northern Ireland"
Page 156, line 34, at end insert—
"(4A) In relation to a court in Scotland, the conditions referred to in subsection (3)(a) are that—

(a) the respondent obtained the recoverable property in good faith,

(b) he took steps after obtaining the property which he would not have taken if he had not obtained it or he took steps before obtaining the property which he would not have taken if he had not believed he was going to obtain it,

(c) when he took the steps, he had no reasonable grounds for believing that the property was recoverable,

(d) if a recovery order were made in respect of the property, it would, by reason of the steps, be detrimental to him."

Page 156, line 36, leave out "those conditions" and insert "the conditions in subsection (4) or (as the case may be) (4A)"
On Question, amendments agreed to.
Clause 265 [Functions of the trustee for civil recovery]:
Lord Goldsmithmoved Amendment No. 106:
Page 157, line 19, at end insert—
"() References in this section to a recovery order include an order under section 274 and references to property vested in the trustee by a recovery order include property vested in him in pursuance of an order under section 274."
The noble and learned Lord said: In moving Amendment No. 106, I shall speak also to Amendments Nos. 118 to 128, 133, 147, 209 and 210. These amendments slightly adjust the provisions relating to consent orders in Clause 274. Rat her than consent orders being in the form of recovery orders on terms agreed by the parties, the court will instead follow the usual procedure in civil litigation and simply stay—or in Scotland sist—the proceedings on such agreed terms. That will dispose of the proceedings.
The main aim of the consent order provision is to enable property to be recovered without the expense of unwanted and unnecessary litigation. Most civil proceedings are settled out of court, and it seems likely—if the experience in other jurisdictions is mirrored here—that respondents in civil recovery cases may often prefer to settle without a full court hearing.
The amendments will bring the provisions on consent orders more into line with the usual practice in civil procedure. In particular, under the Bill as currently drafted, it seemed inevitable that the court would always have to make a formal adjudication on the recoverability of the property concerned. That will not be appropriate or necessary in every case involving a consent order. A consent order is intended to be a substitute for an adjudication on the merits by the court, where it can be agreed by all parties. Of course the agreement will still be enforceable by the court.
The number of amendments required to make this change arises from the fact that many references to a recovery order needed to be adjusted to reflect the fact that a consent order will no longer technically he included in that expression. I beg to move.
On Question, amendment agreed to.
Clause 268 [Associated and joint property]:
Lord Goldsmithmoved Amendments Nos. 107 and 108:
Page 158, line 12, at end insert "or the court has dispensed with service"
Page 158, line 20, at end insert—
"(5) Subsections (3) and (4) do not extend to Scotland."
On Question, amendments agreed to.
Clause 271 [Payments in respect of rights under pension schemes]:
Lord Goldsmithmoved Amendment No. 109:
Page 160, line 7, leave out "an amount" and insert "within a prescribed period the amount determined by the trustees or managers to be"
The noble and learned Lord said: My Lords., in moving Amendment No. 109, I shall speak also to Amendment Nos. 110 to 117, 215 and 216. These

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amendments make some detailed improvements to the clauses dealing with recovery orders affecting rights under a pension scheme. They arise out of further detailed consideration of the pension provisions in the Bill. The amendments do not reflect a change of policy, but we believe that they will ensure that the provisions work as intended.
Amendment No. 109 will provide for a recovery order involving rights in a pension scheme to require the scheme trustees to pay an amount determined by the trustees as being equal to the recoverable pension rights to the trustee for civil recovery. The clause as drafted refers to the trustees being required by the court to pay an amount equal to the value of the rights, which might have implied that it was for the court to specify the amount payable.
It became clear that the current wording would not be consistent with normal practice. If the court were to require an amount to be paid that was based on a calculation made some time prior to the court hearing, that amount might well bear no resemblance to the value of the pension rights on the day that they were actually recovered from the scheme.
The Government are basing the recovery provisions on legislation recently introduced to allow pensions to be shared on divorce. Under that legislation, the court decides the proportion of the pension to be shared. The pension scheme then values that proportion, taking account of the market values that pertain on the valuation day.
The amendment will provide much the same where a recovery is made of the proceeds of crime. The new formulation will require the court to identify the recoverable pension rights, but the scheme must then value those rights on a particular day within a prescribed period.
Amendments Nos. 112, 113 and 115 make some changes to Clause 272, which provides for the consequential adjustment of pension scheme liabilities. The current wording requires liabilities to be reduced by the amount paid. We considered that formulation further in the light of concerns expressed by the pensions industry. It became clear that a better formulation would be to require the scheme to reduce liabilities to the extent necessary because of the payment made under Clause 271, and in particular for the scheme to provide for liabilities arising out of the recoverable rights to cease.
Amendment No. 117 will simply combine in a single provision the regulation-making provisions currently contained separately in two other clauses. It is therefore not a change of substance. Amendments Nos. 111 and 114 are consequential amendments leaving out separate provisions. Amendments Nos. 110 and 116 delete provisions that are unnecessary.
Amendments Nos. 215 and 216 make some technical changes to the Pensions Schemes Act 1993 and its Northern Irish equivalent in respect of guaranteed minimum pensions and other safeguarded pension rights. Those changes simply ensure that if such rights are found to be partly or wholly
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recoverable, any liabilities arising are to be adjusted accordingly. Similar provision is made in the legislation to which I referred dealing with pensions being shared on divorce. I beg to move.
On Question, amendment agreed to.
Lord Goldsmithmoved Amendments Nos. 110 and 111:
Page 160, line 12, leave out subsection (3).
Page 160, line 35, leave out subsection (7).
On Question, amendments agreed to.
Clause 272 [Consequential adjustment of liabilities under pension schemes]:
Lord Goldsmithmoved Amendments Nos. 112 to 116:
Page 160, line 38, leave out from "must" to "that" in line 40 and insert "require the trustees or managers of the pension scheme to make such reduction in the liabilities of the scheme as they think necessary in consequence of the payment made in pursuance of"
Page 160, line 41, leave out subsection (2) and insert—
"() Accordingly, the order must require the trustees or managers to provide for the liabilities of the pension scheme in respect of the respondent's recoverable property to which section 271 applies to cease."
Page 161, line 1, leave out subsection (3).
Page 161, line 4, leave out subsection (4) and insert—
"(4) So far as the trustees or managers are required by the recovery order to provide for the liabilities of the pension scheme in respect of the respondent's recoverable property to which section 271 applies to cease, their powers include (in particular) power to reduce the amount of—

(a) any benefit or future benefit to which the respondent is or may be entitled under the scheme,

(b) any future benefit to which any other person may be entitled under the scheme in respect of that property."

Page 161, line 7, leave out subsection (5).
On Question, amendments agreed to.
Clause 273 [Pension schemes: supplementary]:
Lord Goldsmithmoved Amendment No. 117:
Page 161, line 13, leave out from beginning to "to" in line 14 and insert—
"(1) Regulations may make provision as to the exercise by trustees or managers of their powers under sections 271 and 272, including provision about the calculation and verification of the value at any time of rights or liabilities.
() The power conferred by subsection (1) includes power to provide for any values"
On Question, amendment agreed to.
Clause 274 [Consent orders]:
Lord Goldsmithmoved Amendments Nos. 118 to 121:
Page 162, line 4, after "make" insert "an order staying (in Scotland, sisting) any proceedings for"
Page 162, line 4, after "parties" insert "for the disposal of the proceedings"
Page 162, line 5, leave out from beginning to "to" in line 23 and insert "each person to whose property the proceedings, or the agreement, relates is a party both to the proceedings and the agreement.

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(2) An order under subsection (1) may, as well as staying (or sisting) the proceedings on terms—

(a) make provision for any property which may be recoverable property to cease to be recoverable,

(b) make any further provision which the court thinks appropriate.

() Section 278 applies"
Page 162, line 24, leave out "they apply" and insert "it applies"
On Question, amendments agreed to.
Clause 275 [Consent orders: pensions]:
Lord Goldsmithmoved Amendments Nos. 122 to 126:
Page 162, line 29, leave out "A recovery" and insert "An"
Page 162, line 29, leave out "by virtue of" and insert "under"
Page 162, line 30, leave out from "not" to "but" in line 31 and insert "stay (in Scotland, sist) the proceedings on terms that the rights are vested in any other person"
Page 162, line 39, leave out from "into" to end of line 41 and insert "an agreement in respect of the proceedings on any terms on which an order made under section 274 may stay (in Scotland, sist) the proceedings"
Page 162, line 42, leave out from "of" to "section" in line 43 and insert "an order under"
On Question, amendments agreed to.
Clause 276 [Limit on recovery]:
Lord Goldsmithmoved Amendments Nos. 127 and 128:
Page 163, line 17, leave out from "where" to "in" and insert "such an order, or an order under section 274, has previously been made"
Page 163, line 26, at end insert "or order under section 274"
On Question, amendments agreed to.
Clause 278 [Applying realised proceeds]:
[Amendment No. 129 not moved.]
Clause 280 [Other exemptions]:
Lord Goldsmithmoved Amendment No. 130:
Page 165, line 39, leave out from "person" to "an" in line 40 and insert "in circumstances of a prescribed description; and the circumstances may relate to the person himself or to the property or to any other matter.
In this subsection, prescribed means prescribed by"
The noble and learned Lord said: My Lords, the amendment would make some adjustments to the order-making provisions in Clause 280. Those currently allow orders to be made preventing proceedings for a recovery order being taken against certain categories of person and certain types of property. On reflection, it became clear that the order-making powers were not quite right.
Amendment No. 130 will make clear that, in relation to persons, the power can be exercised by reference to any sort of description of the person and by reference to specified circumstances. That will include a description in terms of the status of persons as holders of certain property.
As far as property is concerned, we have come to the view that Clause 280 does not work satisfactorily in technical terms. Although it makes sense to say that proceedings may not be brought against certain persons, it does not make sense to say that proceedings may not be brought in relation to certain exempt
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property, when the exempt status of the property may not be apparent at the outset. Proceedings may be necessary precisely to establish whether or not the property is properly exempt. In cases where the proceedings have already started, a prohibition on bringing them plainly would not work.
The solution proposed is to convert the power in subsection (2) into a power to specify that certain property is not to be "recoverable". That revised power is contained in Amendment No. 145, which will insert a new clause in Chapter 4 of Part 5, which deals generally with the definition of "recoverable property". Amendment No. 145 makes clear that the power could be used to exempt classes of property identified by any appropriate description.
Clause 280(2) and (3) are therefore no longer needed, and are deleted by Amendment No. 131. Your Lordships will want to note that the new version of the power would remain subject to the affirmative resolution procedure by virtue of Amendments Nos. 228 and 230. Your Lordships will know that the Government have submitted a supplementary memorandum to the Delegated Powers and Regulatory Reform Committee about these revised order-making provisions, and it has not expressed any objection. I beg to move.
On Question, amendment agreed to.
Lord Goldsmithmoved Amendments Nos. 131 and 132:
Page 166, line 1, leave out subsections (2) and (3).
Page 166, line 24, at end insert "or the Financial Markets and Insolvency Regulations (Northern Ireland) 1996 (S.R. 1996/252)"
On Question, amendments agreed to.
Clause 281 [Compensation]:
Lord Goldsmithmoved Amendment No. 133:
Page 166, line 39, leave out from "makes" to "section" and insert "an order under"
On Question, amendment agreed to.
Baroness Buscombemoved Amendment No. 134:
Page 166, line 40, leave out subsections (3) and (4) and insert—
"(3) The application for compensation must be made before the expiration of the period of three months beginning with the date on which the application for a recovery order is finally disposed of.
(4) The reference in subsection (3) to the date on which an application for a recovery order is finally disposed of shall be construed as a reference to the earliest date by which the proceedings on the application for a recovery order (including any proceedings on or in consequence of an appeal) have been determined and any time for appealing or further appealing has expired, except that if the application is withdrawn or an appeal is abandoned the reference shall be construed as a reference to the date of the withdrawal or abandonment."
The noble Baroness said: My Lords, Clause 281 gives a person whose property is subject to an interim receiving order or an interim administration order a right to apply for compensation if it turns out that the property is not recoverable property or associated property. However, the application for compensation must be

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made within a short period. An applicant has only three months from the decision of the court to make that application.
In Committee, I was concerned that subsection (3) as drafted was not clear as to when the three-month time period began to run in the event of an appeal of the original decision. If one reads subsection (3) in its present form, it appears perfectly reasonable to argue that an applicant has three months from the decision at first instance and one simply ignores any appeal. That would be unfair and, indeed, unreasonable because it may turn out that an appeal by the enforcement authority is successful, with the consequence that costs of the application for compensation would have been completely wasted. If, on the other hand, the three-month period were to run from the date on which any appeal was finally disposed of, there would be no confusion.
The Attorney-General agreed with the thrust of the comments and accepted that time should not run out while an appeal was taking place. The time should run from the time at which the appeal is determined. He kindly proposed to consider my amendment and whether it would be sensible to put the issue beyond doubt, notwithstanding the existing wording.
I hope that the noble and learned Lord will forgive me if I propose that my amendment is correct. It adopts the wording of Section 64 of the Landlord and Tenant Act 1954. That Act has not only stood the test of time but has given rise to a body of case law that has clarified the wording in the section. My amendment adopts the relevant words from the section almost word for word. To that extent, my amendment removes any doubt about when a defendant must make an application for compensation.
We were pleased to note that the Government had tabled Amendment No. 135 and, in so doing, had put forward a different solution. At first sight, that solution seemed fine, but it does not deal with a case in which an application for leave to appeal is made but is subsequently withdrawn or abandoned. Our amendment does not refer to applications for leave to appeal; it refers only to appeal. The Government's amendment is more narrowly defined. It is too narrowly defined and too careful to define the position precisely. It fails to include a situation in which an application is withdrawn or abandoned.
I must also respectfully point out that, following the reform of civil procedure rules, it is no longer right to refer to "leave to appeal", as Amendment No. 135 does. These days we refer to "permission to appeal", although we all know what "leave to appeal" means and have done for over a century. Apparently, the words "leave to appeal" are not user-friendly. I beg to move.
Lord Goldsmith: My Lords, I had hoped that the noble Baroness might have accepted with more enthusiasm the amendment that was tabled to meet the point she raised in Committee. The intention behind Amendment No. 135, to which I speak along with
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Amendment No. 134, is the same as that behind the amendment proposed by the noble Baroness. However, there is a difference between the two amendments.
The intention in the Bill is that there should be a three-month period from the date of the decision during which an application for compensation is to be made. The noble Baroness asked what would happen if there were an appeal. I accept—our amendment accepts—that, in those circumstances, the intention is that the time should take account of the appeal. How is that to be achieved? The Government's view is that Amendment No. 135 adequately and aptly deals with that situation.
There is a difference between our amendment and what is proposed in the amendment proposed by the noble Baroness which stipulates an extension that is longer—inappropriately longer—than that in the Government's amendment. The noble Baroness's amendment extends the time further because it makes the final point not the decision, but the decision plus the time for appealing. If someone does not appeal, there is no reason why it should be extended in that way. If they do appeal, the rest of the provisions will kick in, and the period will be extended until the proceedings are finally determined. I beg to differ with the noble Baroness who says that her amendment is better. In my respectful view, it is not, and it does not meet the objective that we both had in mind.
The noble Baroness raised two technical points about the Government's amendment. She said that it was no longer right to use the expression "leave to appeal" rather than "permission to appeal". I am happy to examine that question. If the noble Baroness is right and a small change is necessary, that should not prevent your Lordships accepting the Government's amendment. A small textual change to bring the Bill up to date can, if necessary, be made at Third Reading.
I doubt that it is necessary to deal with the other issue that the noble Baroness raised, although I am happy to consider it. Our amendment says:
"the date on which the application is refused or (if the application is granted) on which any proceedings on appeal are finally concluded".
If somebody withdraws an application, that situation must be comprehended in the reference to the refusal of an application. That is what would happen to the application. It is a small point. If the noble Baroness is right, it can be corrected at Third Reading, if necessary, to put the matter beyond doubt.
The critical point is that the Government's amendment is right in taking the starting point as the decision, or, if there is an appeal, the moment that it is finally concluded without adding on the extra period of time for appeal. On the basis that I will look at the two points the noble Baroness made and return to them at Third Reading if necessary, I invite her to accept the Government's amendment, which meets her objective, and not to press Amendment No. 134.
Baroness Buscombe: My Lords, I thank the noble and learned Lord for his response. Forgive me if I

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failed to sound enthusiastic. I am encouraged that the noble and learned Lord clearly listened to our concerns in Committee and responded with Amendment No. 135. I am grateful to him for agreeing to look at the two points I raised in relation to applications for permission to appeal that are subsequently withdrawn or abandoned. On a minor technicality, I agree with the language used in the noble and learned Lord's amendment. Given that he has agreed to look at those points I accept with great pleasure his amendment. On that basis I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
9.15 p.m.
Lord Goldsmithmoved Amendment No. 135:
Page 166, line 42, leave out "with the decision" and insert—

"(a) in relation to a decision of the High Court in England and Wales, with the date of the decision or, if any application is made for leave to appeal, with the date on which the application is refused or (if the application is granted) on which any proceedings on appeal are finally concluded,

(b) in relation to a decision of the Court of Session or of the High Court in Northern Ireland, with the date of the decision or, if there is an appeal against the decision, with the date on which any proceedings on appeal are finally concluded."

On Question, amendment agreed to.
Lord Goodhartmoved Amendment No. 136:
After Clause 281, insert the following new clause—
"COMPENSATION OF CREDITORS
(1) Any person who was a creditor of the respondent at the time when a recovery order was made may, within one year of the date of the order, make an application to the court for compensation.
(2) The court may require the enforcement authority to pay compensation to the applicant if it is satisfied that—

(a) as a result of the making of the order the respondent is wholly or in part unable to repay the debt;

(b) the debt was incurred for full consideration; and

(c) at the time the debt was incurred the applicant had no reason to believe that a recovery order could be made against the respondent."

On Question, amendment agreed to.
Lord Goldsmithmoved Amendment No. 137:
After Clause 282, insert the following new clause—
"EFFECT ON DILIGENCE OF RECOVERY ORDER: SCOTLAND
(1) An arrestment or poinding of any recoverable property executed on or after the appointment of the trustee for civil recovery is ineffectual in a question with the trustee.
(2) Any recoverable property so arrested or poinded, or (if the property has been sold) the proceeds of sale, must be handed over to the trustee for civil recovery.
(3) A poinding of the ground in respect of recoverable property on or after such an appointment is ineffectual in a question with the trustee for civil recovery except for the interest mentioned in subsection (4).
(4) That interest is—

(a) interest on the debt of a secured creditor for the current half yearly term, and

(b) arrears of interest on that debt for one year immediately before the commencement of that term.

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(5) On and after such appointment no other person may raise or insist in an adjudication against recoverable property or be confirmed as an executor-creditor on that property.
(6) An inhibition on recoverable property shall cease to have effect in relation to any heritable property comprised in the recoverable property on such appointment.
(7) The provisions of this section apply in relation to—

(a) an action of maills and duties, and

(b) an action for sequestration of rent,

as they apply in relation to an arrestment or poinding "
On Question, amendment agreed to.
Clause 283 [Scope of powers]:
Lord Goldsmithmoved Amendment No. 138:
Page 167, line 23, after "made" insert "by the Court of Session"
On Question, amendment agreed to.
Clause 293 [Interest]:
Lord Goldsmithmoved Amendment No. 139:
Page 175, line 2, leave out "to be held in" and insert "at the first opportunity to be paid into"
The noble and learned Lord said: My Lords, Amendments Nos. 139, 140 and 143 make minor adjustments to the provisions that require that cash detained for more than 48 hours following an order of the court should be held in an interest-bearing account. At the moment Clause 293(1) simply says that if cash is detained under Section 292 for more than 48 hours,
"it is to be held in" an interest-bearing account.
Clause 293(3) makes it clear that that provision does not apply if the cash is required as evidence.
The Government believe that the existing formulation left some uncomfortable room for doubt as to the nature of the obligation to pay cash into an interest-bearing account, as opposed to the duty to hold it there. The intention has always been that cash not required as evidence should be paid into an interest-bearing account as soon as practicable. In other words, account needs to be taken of instances when there may have to be some delay in paying cash into an account because of bank opening hours.
We want to leave no room for argument that cash should be released, or compensation paid, in circumstances where bank holidays make it impossible in practice to place the cash on interest-bearing deposit within or immediately after the 48-hour period. The amendments would put that intention beyond doubt.
Amendments Nos. 139 and 140 clarify that the cash is to be placed in the interest-bearing account at the first opportunity, and held there. The amendment to Clause 299 makes a related amendment to the provision for compensation in subsection (2). That subsection currently provides that the court or sheriff may order compensation to be paid if cash is not held in an interest-bearing account after the initial detention for 48 hours. The amendment simply makes it clear that the court should consider compensation only from the point at which it was practicable to pay the cash into an account.
Amendments Nos. 217 and 218 and 224 to 226 are minor technical amendments to Schedule 11, which deals with amendments to other legislation, and

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Schedule 12, which sets out the repeal arrangements. They ensure that relevant sections of those schedules work properly for Scotland and Northern Ireland. They include the repeal of the cash recovery scheme in the Drug Trafficking Act 1994, which is to be replaced by the one in this Bill. I beg to move.
On Question, amendment agreed to.
Lord Goldsmithmoved Amendment No. 140:
Page 175, line 3, after "account" insert "and held there"
On Question, amendment agreed to.
Clause 295 [Forfeiture]:
Lord Goldsmithmoved Amendment No. 141:
Page 175, line 35, leave out "or sheriff"
On Question, amendment agreed to.
Clause 297 [Application of forfeited cash]:
[Amendment No. 142 not moved.]
Clause 299 [Compensation]:
Lord Goldsmithmoved Amendment No. 143:
Page 177, line 14, after "period" insert "beginning with the first opportunity to place the cash in an interest-bearing account"
On Question, amendment agreed to.
Clause 305 [General exceptions]:
Lord Goodhartmoved Amendment No. 144:
Page 179, line 28, leave out "based on the defendants' unlawful conduct" and insert "made in good faith"
The noble Lord said: My Lords, Clause 303 is an extreme example of the Government's overriding of the rights of third parties. In general, if A obtains a judgment against B and B satisfies that judgment, repayment can be ordered only if the judgment is set aside on the ground of fraud. Of course in this case, collusion to frustrate bankruptcy or a civil recovery order would be fraud.
Clause 305(3), as it now stands, assumes that money which was originally in the hands of the defendant can be traced into the hands of a satisfied judgment creditor if the payment has been made out of a recoverable property, even if there is no fraud or collusion between the creditor and the debtor. The only exception to that is if the claim is based on the unlawful conduct of the defendant.
Under Clause 241(1), "unlawful conduct" for the purposes of Part 5 of the Bill means "criminal conduct". Let us assume that damages were awarded and paid in an action against a defendant for personal injuries and that that defendant was subsequently made subject to a recovery order. If the injury was caused by the careless driving of the respondent, it seems—I am not sure whether this is the Government's intention—that the damages recovered by the plaintiff are protected under Clause 305(3)(b) because the claimant's claim is based on the defendant's unlawful conduct. The conduct of the defendant not only caused injury to the plaintiff but was no doubt the offence of driving without due care and was therefore criminal as well as being tortious.
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It may be that the government actuary intends paragraph (b) of subsection (3) to refer to the specific unlawful conduct on which the claim to a recovery order is based. If so, that has not been made clear and that would make the situation even worse. But in any event all kinds of personal injury can be caused by negligence which is not a criminal offence. In such cases, if the damages are paid out of the recoverable property, they can be clawed back by the trustee for civil recovery. Indeed, it seems that the trustee has a positive duty to do so.
The fact that there is intended to be a claw-back of damages from an innocent victim of a negligent injury by the defendant seems to me to be absolutely astonishing. It is even worse than the subject we have already debated; that of frustrating creditors' claims for their debts. It seems to me to be plainly incompatible with the right to property under Protocol 1 to the European Convention on Human Rights.
The issue was debated in Committee and the noble and learned Lord the Attorney-General will no doubt remember that among other things he referred to an order for the transfer of property in matrimonial proceedings as being the kind of transfer of property—the kind of judgment—to which the clause was intended to apply. I accept that there is some justification for that, but it is a special case. If Clause 303 was limited to recoveries or clawbacks of that kind, then I would not object to it. But plainly it goes much wider than that.
The noble and learned Lord then suggested that a plaintiff with a bona fide claim would be protected under subsection (1) as being a,
"person who obtains [the money] … in good faith, for value and without notice that it was recoverable property".
I do not believe that that view was correct. The plaintiff in a personal injury case who is awarded damages has not given value; he is simply being compensated for his injury. It is true that, if the case is settled out of court, the plaintiff may have given value because he would have given up his claim for damages in exchange for payment of the money agreed under the settlement. But that argument certainly would not apply where damages were awarded by the court. On any footing, therefore, we have an anomalous situation in which a plaintiff will be protected if he settles out of court, will apparently be protected if his injury is also a criminal offence such as careless driving, but will not be protected in other cases where he has obtained damages for negligence.
I simply cannot believe that the Government really intend to claw back moneys recovered by innocent plaintiffs under a judgment for damages. If that is their real intention, then I believe it to be monstrous. But that will be the effect of Clause 305 as it stands. Our amendment would exclude from clawback any case where judgment is obtained in good faith, which is the right, proper and fair way to proceed. I beg to move.
Lord Goldsmith: My Lords, as the noble Lord has indicated, we discussed in Committee the effect of Clause 305(3)(b). It is and remains the Government's

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view that the general purpose of the exceptions in Clause 305 is to ensure that the schemes are proportionate and fair.
I shall come back to subsection (1), referred to by the noble Lord. First, however, I turn to subsection (3). This subsection relates to property, including money, that has been awarded by a court in previous civil proceedings. As the Bill stands, the noble Lord recognises that the exception applies only to civil proceedings based on the unlawful conduct of the defendant. In response to the question put by the noble Lord, it is not intended to restrict that to unlawful conduct which is the same as that alleged in the Part 5 proceedings. From what the noble Lord has said, I am sure that he will welcome the fact that it is not restricted in that way. I can give him at least that degree of comfort.
Of course, unlawful conduct is as defined in Clause 241. Thus we are referring here to criminal conduct and not conduct which is tortious alone. The example I gave to explain why this provision is needed was exactly that referred to by the noble Lord. It would be possible for recoverable property to be transferred from one spouse to another as a result of divorce proceedings. Those assets would then be put beyond the reach of the director, even though—and this is the predicate of the case—those assets would be recoverable property; that is, property which the holder should never have had.
As I understand it, the noble Lord accepts that that is a justifiable case, but his proposed amendment, which is to substitute the words "made in good faith", would not comprehend that exception. I believe that the noble Lord will accept that on his amendment the justifiable case, as he acknowledges it to be, would result in this property being put beyond the reach of the director. Because he describes it as "justifiable" I assume he accepts that that is not a desirable result.
I said previously that Clause 305(1)—the exception for people who obtain in good faith, for value and without notice, something which is recoverable property—would cover many of the cases that the noble Lord had in mind. That is an important exception because essentially if one satisfies those requirements then it is only going to be in cases where a successful litigant is on notice that the property in question is recoverable that a problem arises. I suggest that it is going to be extremely rarely that a litigant would be on notice that the property is recoverable.
The noble Lord gave the example of someone who sues for careless driving. In almost all cases the money coming is not going to be recoverable property because it is insurance companies who meet such claims. Only exceptionally are they met by individual litigants, let alone individual litigants out of the proceeds of crime. The mere fact that the event might be tortious conduct does not cover the question as to whether it is also unlawful conduct.
I have considered this matter again. I do not see that there is any necessary limitation on the word "disposal" which we looked at in Committee under Clause 305(1). I continue to believe that that will be an important safeguard for many litigants.
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One returns to what the noble Lord proposes. As I understand the way in which his amendment would work, it would not rule out the case which he accepts is justifiable. I suggest that it is not going to work. It is possible that there may be evidence in court that a claim is not being brought in good faith, but that is very rarely an issue which a court has to look at. Such a case only arises in very few instances indeed. Normally, a case is brought, the court looks at its merits, and that is all. As my noble and learned friend the Minister said in another debate, it is inevitably the case that where one has action taking place between two parties, the director or anyone else is not privy to the transaction, the circumstances, and is not in a position to raise the question as to whether the matter has been brought in good faith or not. I suggest that it would not be a workable limitation.
As I made clear about anti-avoidance, there is a difference of principle between us on this issue. The intention is that the benefit of the exception in Clause 305(3)(b) should be extended only to those whose basis for a successful claim is in the same general category as that for civil recovery proceedings. We do not intend to extend it to wholly unconnected proceedings. The Government's view is that that is not required and is not logical or appropriate having regard to the principles behind the Bill.
I know that the noble Lord will not be enthusiastic about that reply, but following the debate in Committee and having looked again at the issues raised in the noble Lord's amendment, which we do not believe would work, I press the noble Lord to withdraw it.
Lord Goodhart: My Lords, I find the noble and learned Lord's response disappointing. In particular, he did not seem to appreciate that there is a significant difference between an order made in a matrimonial case and a claim for damages.
I am inclined to accept the principle that a criminal should not be able to confer a benefit on his family, whether it is done by way of a gift or by way of an order in matrimonial proceedings. An order in matrimonial proceedings is based on what is understood to be the value of the defendant's assets. If the defendant's assets are criminal property, there are reasonable grounds for saying that the matter should be reconsidered because the assets on the original review were wrongly calculated. I had hoped that the Government would have taken this matter away and come back with a much more limited clause that would have enabled money to be clawed back where it had been transferred under a matrimonial settlement, or a similar kind of arrangement.
We are left in a highly anomalous situation: in some circumstances damages that have been paid cannot be clawed back while in other circumstances they can, with no logical justification for the distinction between the two. They cannot be clawed back in cases where the damages have resulted from an act which is not only tortious but criminal; they cannot be clawed back where they fall within subsection (1).

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My concern with subsection (1) is not so much whether the property has been disposed of—I can see that there are arguments either way on that—but much more whether it has been disposed of for value, which involves the assumption that there is some consideration moving from the defendant. In an action for damages for tort, that seems to me not to be the case.
Lord Goldsmith: My Lords, I am grateful to the noble Lord for giving way. I ask him, in a genuine spirit of inquiry into his thinking in relation to this issue, to reflect on whether the concept that the cause of action is merged in a judgment, and therefore disappears in place of the judgment, may be a part of the answer to the question that he poses. He may not want to respond to that at this stage, but I invite him to reflect on it.
Lord Goodhart: My Lords, that is the highly technical doctrine which I tried to persuade the Appellate Committee of your Lordships' House to scrap last October. Unfortunately I failed. It is something that is so technical that it is unlikely. It is a possible argument but it is not one that is certain to succeed. If "for value" means that the cause of action has merged in the judgment, then it may well apply also to a matrimonial order because there is equally a cause of action there which becomes merged in the judgment. The noble and learned Lord is shaking his head. It is a little too late to pursue that particular argument, interesting though it is.
It seems that we are ending up with a situation which is not only anomalous and illogical but highly unfair to the plaintiff who has succeeded in recovering judgment. Even if successful, he may find that his costs are not fully recompensed and that he may have to pay his own money in order to get a judgment, which he then loses. That is seriously unfair.
Obviously, I do not wish to divide the House at this late hour. We shall take this matter away and consider whether or not to bring it back for a final attempt. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Goldsmithmoved Amendment No. 145:
After Clause 305, insert the following new clause—
"OTHER EXEMPTIONS
(1) An order may provide that property is not recoverable or (as the case may be) associated property if—

(a) it is prescribed property, or

(b) it is disposed of in pursuance of a prescribed enactment or an enactment of a prescribed description.

(2) An order may provide that if property is disposed of in pursuance of a prescribed enactment or an enactment of a prescribed description, it is to be treated for the purposes of section 276 as if it had been disposed of in pursuance of a recovery order.
(3) An order under this section may be made so as to apply to property, or a disposal of property, only in prescribed circumstances; and the circumstances may relate to the property or disposal itself or to a person who holds or has held the property or to any other matter.
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(4) In this section, an order means an order made by the Secretary of State after consultation with the Scottish Ministers, and prescribed means prescribed by the order."
On Question, amendment agreed to.
Lord Goldsmithmoved Amendment No. 146:
After Clause 308, insert the following new clause—
"RESTRICTION ON PERFORMANCE OF DIRECTOR'S FUNCTIONS BY POLICE
(1) In spite of section 1(5), nothing which the Director is authorised or required to do for the purposes of this Part may be done by—

(a) a member of a police force,

(b) a member of the Police Service of Northern Ireland,

(c) a person appointed as a police member of the National Criminal Intelligence Service under section 9(1)(b) of the Police Act 1997 (c. 50),

(d) a person appointed as a police member of the National Crime Squad under section 55(1)(b) of that Act.

(2) In this section—

(a) "member of a police force" has the same meaning as in the Police Act 1996 (c. 16) and includes a person who would be a member of a police force but for section 97(3) of that Act (police officers engaged on service outside their force),

(b) "member of the Police Service of Northern Ireland" includes a person who would be a member of the Police Service of Northern Ireland but for section 27(3) of the Police (Northern Ireland) Act 1998 (c. 32) (members of that service engaged on other police service)."

On Question, amendment agreed to.
Clause 311 [General interpretation]:
Lord Goldsmithmoved Amendment No. 147:
Page 184, line 5, leave out from "264" to end of line 6.
On Question, amendment agreed to.
Clause 325 [Failure to disclose: regulated sector]:
Lord Goodhartmoved Amendment No. 148:
Page 192, line 43, after "he- insert "or an employee of his"
The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 150 to 152 and to Amendment No. 154. These were all originally tabled in the names of my noble friend Lord Thomas of Gresford and myself, but the noble Baroness, Lady Buscombe, and the noble Lord, Lord Kingsland, have added their names to the amendments.
The amendment raises an important issue which we debated in Committee. It was also debated at great length in Committee in another place. On that occasion it caused concern not only to the opposition parties but to government Back-Benchers, some of whom were distinguished lawyers.
As the Bill now stands, an employee or any person who fails to make a disclosure of circumstances which give reasonable grounds for suspicion of money laundering commits a criminal offence even if he or she did not suspect that anything was wrong. The criminal penalty for negligence or stupidity is a severe one—it is punishable by up to five years' imprisonment. The only defence available to an employee who has not realised what he should have realised is that he has not been provided with training.

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We believe that it is wrong that an employee should be faced with being charged with a serious criminal offence on the basis of negligence or stupidity. We accept that if the Bill were changed so as to require actual knowledge or suspicion, and that was the only change that was made, the Bill would indeed be seriously weakened, because it would become much more difficult to obtain convictions.
By means of the amendments, we propose to strengthen the Bill by imposing strict liability on the employer. We believe that that is a more effective way of ensuring that disclosures are made when they should be made than making an employee liable to negligence. If an employer is liable for the employee's negligence, that will ensure not only that the employee is given proper training, but that the employer will be anxious to employ only people with the necessary ability to do the job; the employer will ensure proper internal monitoring processes to see that employees carry out their job properly; and the employer will impose pressure on employees to disclose or to refer the matter to more senior staff in any case of doubt.
The prospect of a large fine will make the company or firm take effective steps to ensure that its employees comply with the law. That is on the same basis as health and safety laws. Employers must not only provide hard hats for builders, but make sure that they wear them. People who are not employees—for example, a partner in a firm—would remain liable for the negligent failure to disclose. That seems reasonable. By the time somebody becomes a self-employed partner in a business, he ought to have the knowledge and skills that would enable him to see what it is reasonable to see.
The amendments would remove the injustice of prosecuting employees for negligence or stupidity and would strengthen the Bill by giving employers an incentive to ensure that their staff are properly trained and properly monitored and make the proper disclosures. I beg to move.
9.45 p.m.
Lord Falconer of Thoroton: My Lords—
Lord Kingsland: My Lords, I shall be most telegraphic. In Committee, we were also extremely concerned about negligent acts leading to imprisonment. Our approach was different from that of the noble Lord, Lord Goodhart. We tabled an amendment to reduce the penalty for the offence to a non-custodial one. However, having reflected in the intervening weeks, we have decided to line up behind the noble Lord. We support the noble Lord's amendment for the reasons that he has given.
Lord Falconer of Thoroton: My Lords, I apologise for trying to cut the noble Lord off in his prime. I am grateful to the noble Lord, Lord Goodhart, for explaining the reasons behind the amendments. It is evident that we are not of like mind on where responsibilities should ultimately lie in the event that blatant examples of money laundering are disregarded. As the noble Lord said, and as the noble
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Lord, Lord Kingsland, implicitly acknowledged, they are not seeking to relieve the negligent employee from the criminal consequences of what the Bill proposes. They are trying to create a landscape in which the employer is more vigorous in ensuring that the employee is not negligent.
I agree that employers should be subject to a greater responsibility than employees. That is why we have introduced the training defence and clarified the obligations of nominated officers. However, I do not agree that employees in the regulated sector should not be subject to the offence of negligent failure to disclose. We must recognise the importance of their role in the financial sector's defences against money laundering. I think that both noble Lords accept that.
We consider that the negligence element of the failure to disclose offence should be applied directly to individual employees, as do both noble Lords. We must have provisions in place that serve to deter competent employees from exercising wilful blindness, particularly, as is often the case, when they are under pressure to maximise profits.
In practice, we cannot see that responsible employees will be placed under any special threat by this offence. All employees will be able to seek advice from and report any suspicions to their nominated officer. This would immediately provide them with a defence to the commission of the offence. Secondly, the clause envisages that all employees will be issued with guidance about money laundering in order to ensure that they are aware of situations in which money laundering can occur. Any such guidance must be considered by the court if a prosecution is undertaken. There is also the additional protection that if they have not been given training, as specified by the Secretary of State, they will not be penalised for failing to make a report. There are already considerable protections.
The test of "reasonable grounds" on individuals is important, because it will help to raise awareness of and compliance with anti-money laundering controls throughout the regulated sector. That will be especially important when the range of regulated activities is widened following the implementation of the second European money laundering directive. We do not believe that the offence acts unfairly because we have built in sufficient safeguards to ensure that those who have a valid reason for failing to spot a suspicion are not improperly brought before the courts.
I have already mentioned that one of the amendments in this group would remove the defence for employees who have not received the specified training. I think that removal of this defence would be an unwise and unfair step. Throughout the debate on the Bill we have listened carefully to the representations of key interest groups from the sectors that will be affected by its provisions, and have acted on those representations where we felt it would be appropriate to do so. This is one such instance of our support for the representations that we have received. It is only fair that an employee who has not received the appropriate training on money laundering should

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not be penalised. In those circumstances, it is quite clearly the employer who is at fault and should be penalised accordingly.
Finally, I should like to re-emphasise that the Government believe that strong anti-money laundering measures, including the new negligence test, are fully justified against the background of several money laundering cases that have taken place in the City but were not reported to law enforcement. In the City's financial reputation and standing both here and overseas, it is of utmost importance that the United Kingdom should be seen to demand the highest standards of diligence. I trust that the noble Lords do not want to weaken this country's defences against money laundering. In the light of what I have said, I hope that noble Lords will feel reassured, and that the noble Lord, Lord Goodhart, will withdraw his amendment with the full support of the noble Lord, Lord Kingsland.
Lord Goodhart: My Lords, we believe that our amendments, far from weakening the campaign against money laundering, would strengthen it. We believe that nothing will be achieved by prosecuting employees, particularly junior employees, for committing a criminal act that they had no idea they were committing. We believe that we shall be far more effective in stopping money laundering if employers are aware that, if their employees do not do their job properly, employers themselves will face the risk of prosecution. We believe that it is not just a matter of training, but that the employer's responsibility extends to ensuring that they employ people who can do the job and to monitoring to ensure that those people work properly, to minimise the chances of anything slipping through the net of their system.
We therefore believe that our group of amendments both removes a potential injustice to employees and would be more effective than the Government's present proposals at actually stopping money laundering. It is with regret that I find that the Government are not accepting these proposals. Although I shall ask leave to withdraw the amendment, I think it very likely that we shall come back with the proposal for a final hearing. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Noakesmoved Amendment No. 149:
Page 193, line 1, at end insert "and has carried out at least one transaction intended to conceal criminal property"
The noble Baroness said: My Lords, I should first declare that I am speaking with the benefit of briefing from the Institute of Chartered Accountants in England and Wales, of which I am a member. The Institute of Chartered Accountants is more than happy for its members to play a full part in the fight against money laundering, but it has some practical issues about how the Bill will work in practice.
Amendment No. 149 is fundamentally designed to eliminate the need to report trivial money laundering offences. It is not an exclusion solely for accountants.
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However, once accountants are covered by Clause 325 when the second money laundering directive is implemented, the possibilities of reporting trivial offences will multiply many times. As I explained in Committee, there is a very large number of accountants in the UK—well over 200,000—and their work exposes them to a mass of small transactions that will be treated as money laundering offences under this Bill.
Accountants are involved in the smallest details of businesses and therefore have an unenviable exposure to the existence of minor offences. In Committee I gave examples of the kind of minor offences that we are talking about, such as shoplifting and minor staff defalcations. Like it or not, those offences are common throughout the business world. They will be treated as money laundering offences under the Bill. Accountants, far more than any other professionals, will become involved in issues of disclosure.
There are around 3 million businesses in the country. Do the Government really want minor money laundering offences to be reported on that scale? In Committee, the noble Lord, Lord Rooker, seemed to suggest that he wanted lots of reporting so that the people in NCIS could pick up patterns of money laundering. If NCIS thinks that it can pick up patterns of money laundering from reports of shoplifting or of staff theft, possibly from petty cash, I think that we must have doubts about whether NCIS could properly handle the kind of reports that would arise under the money laundering provisions.
The simple solution would be a de minimis exclusion. However, I understand that the Government have set their face against that which is why this amendment comes from a different direction. It removes from the ambit of the disclosure provisions money laundering which is not accompanied by a subsequent attempt at concealment of criminal property.
I should emphasise that chartered accountants take their responsibilities under the current law seriously and will be prepared to do so under future law. However, the problem lies in the scale of reporting that will be required. It seems that it will become a daily part of accountants' lives to send a long list of trivial offences to NCIS.
The Home Office has in effect tried to put the onus on accountants to decide what is trivial and not worth reporting by saying that accountants are unlikely to be prosecuted for failure to report trivial money laundering offences. However, that causes difficulties for chartered accountants. If they turn out to have judged incorrectly and are prosecuted successfully, the ethical requirements of the Institute of Chartered Accountants will come into play and it is quite likely that they would be excluded from membership and thereby lose their ability to earn a living as qualified accountants for the failure to disclose a potentially trivial amount. But if they play safe and report everything that comes to their attention, NCIS could be overwhelmed with volume. The noble Lord, Lord

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Rooker, gave figures for the extra resources to be allocated to NCIS which sounded very thin in the context of the disclosures that I have discussed.
As I said, chartered accountants wish to play a full part in the fight against money laundering. I hope that the Minister will be able to accept the amendment. If not, will he say something about how the measure will work in practice, including the resourcing of NCIS? I beg to move.
Lord Falconer of Thoroton: My Lords, the effect of the amendment would be to exclude from the failure to disclose offence those cases where money laundering is committed but where there has been no concealment transaction. So it would exclude a case where an accountant had reason to believe that there was a large amount of money gained from drug dealing in the bank account of his client. That is plainly not what the noble Baroness or the Institute of Chartered Accountants intends.
As I understand it, the noble Baroness's aim is simply to deal with the trivial transaction, as she put it. But, unfortunately, her amendment is drafted so as to cover major transactions as well. Therefore, it plainly does not work as an amendment. The noble Baroness kindly acknowledged that this is another attempt to try to reduce the burden on accountants who will come within the regulated sector. The noble Baroness is perhaps not thinking about the bigger picture but about accountants only. I am afraid that we remain unpersuaded that we should make the change that the noble Baroness seeks if for no other reason than that it would exclude that huge area which I know that she would want to catch.
We cannot consider this amendment simply in the context of what effect it might have on certain sections of the financial sector. In 1999, the Financial Action Task Force—which is based in Paris under the umbrella of the OECD and which is the leading authority on money laundering—reported an estimate provided by the International Monetary Fund that money laundering accounts for between 2 and 5 per cent of the world's GDP. The good reputation of the UK as an international financial centre means that, once accepted into UK financial institutions, funds are generally perceived to be clean. For that reason, the United Kingdom, and the City of London in particular, are attractive targets for launderers.
We make no excuse, therefore, for taking strong measures to discourage criminals from using the UK financial services sector, thereby protecting our reputation for clean dealing and reducing the risk of market distortion and instability in our financial markets.
Despite our efforts to date—there has been a succession of legislation on money laundering in recent years—significant sums of money have continued and no doubt are continuing to be laundered through the London markets. That is why we consider that the police and Customs should be strongly encouraged to investigate money laundering
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offences wherever appropriate and prosecutors should recognise the clear public interest of bringing forward money laundering prosecutions.
Close scrutiny of our legislation has demonstrated that there are in fact very few successful prosecutions each year for money laundering. Provisional figures for 2000, for example, show that, in England and Wales, there were only 16 convictions arising from 73 prosecutions for drug money laundering and for other crimes there were only 23 convictions out of 45 prosecutions. In Scotland to date, no prosecutions have come to court for alleged money laundering offences; hence there have been no convictions. When one considers that London is one of the major financial markets in the world, the number of prosecutions was very much on the low side.
It is against this background that I have examined the noble Baroness's Amendment No. 149. I reiterate that we have overhauled all the offences that now appear as Clauses 322, 323 and 324 and we consider that their overall effect will be to make it much more difficult for those who are engaged in money laundering to escape the consequences of their actions. We have taken a deliberate decision in respect of Clause 324 that there should be no distinction between the possession of one's own proceeds or another's proceeds and that, in keeping with international obligations, that offence should be classified as a money-laundering offence under Part 7. As a consequence of that deliberate extension, the reporting offence at Clause 325 includes knowledge or suspicion, or reasonable grounds to know or suspect, that another person possesses criminal proceeds, whether those proceeds are his own or another person's proceeds.
I agree with the noble Baroness that the effect of the changes that we have made to Clause 324, together with the reporting obligation in Clause 325, will increase the number of reports that are made to the National Criminal Intelligence Service. Furthermore, I also accept that the number will increase still further once auditors, accountants and tax advisers are brought within the regulated sector for the purpose of Clause 325.
The key question, looking at the whole picture, is whether the right policy is that under which a person within the regulated sector who knows or suspects, or has reasonable grounds to suspect, that another person has possession of criminal property that has been obtained either through his own or another's criminal conduct should have to report that fact to the National Criminal Intelligence Service irrespective of what sum is involved or whether some sort of concealment has been involved. We have considered that point very closely indeed in our discussions with the National Criminal Intelligence Service and the Treasury, and the overwhelming advice has been that it is far preferable for the National Criminal Intelligence Service to be in possession of all such disclosures irrespective of the sum involved because only NCIS is best placed to evaluate whether or not there is underlying money laundering activity. Experience has often shown that it is not the size of the

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sum involved in a suspicious transaction report that is important. We understand that in 2001, 10 per cent of all suspicious transaction reports made to NCIS were in respect of transactions of £500 or less. What may seem like an insignificant issue not worth reporting to, or by, an accountant could, for NCIS, be the missing item that would enable it to link various other pieces of information and consequently to pursue a worthwhile investigation.
There are more than 200,000 accountants in the UK, and they are involved in every business in the country. However, I remind your Lordships that those accountants currently make only 0.35 per cent of all reports received by NCIS. That is a very low figure for such a large number of professionals. If, as we would hope, the provisions in the Bill have the effect of making the accountancy profession more aware of its obligations in the field of money laundering, I believe that that will provide welcome reassurance that the profession takes its responsibilities seriously.
The noble Baroness's amendment would, for example, require the accountancy profession to decide whether or not the person on whose affairs advice was being given had, first, carried out more than one transaction in respect of property under scrutiny; and, secondly, if he had, whether it was done with the intention of concealing his property. I simply do not see how that would work. It seems to me an easy defence for the accountant simply to say that, although he suspected that money laundering was taking place, nothing gave him grounds to suspect that a specific transaction had been carried out with the intention of concealing criminal property. It would be very difficult for the prosecution to establish that there were reasonable grounds for suspecting an intent to conceal property in order to secure a successful prosecution against a person who had not reported in circumstances that others might consider to be very suspicious. Further down the line, we would be saying, once again, that the money laundering legislation contained too many loopholes.
We should also consider the central point of what would happen if a person had every reason to believe that his client's bank account contained money which resulted from drug trafficking, human trafficking or money laundering itself. There would be no obligation to report under the noble Baroness's amendment. With the greatest respect to the Institute of Chartered Accountants for England and Wales, the amendment does not seem to have been remotely thought out.
So much for the principle. I now turn to the practical question raised by the noble Baroness of whether the National Criminal Intelligence Service could cope with the increase in reports. During the debate in Committee—I refer noble Lords to the Official Report of 27th May, col. 1075—my noble friend Lord Rooker spoke of the fact that extra resources have been made available to NCIS. He also said that resourcing will be kept under review as the Bill comes into force to ensure that NCIS has the means to cope with the increased level of reports that it will receive. I shall briefly remind your Lordships of where things stand.
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In the financial year 2000–01, the Home Office made an extra £250,000 available to the National Criminal Intelligence Service to fund additional staff for the Economic Crime Branch, which handles suspicious transaction reports. That additional funding was increased to £1.8 million last year and will continue this year. NCIS increased the staffing of the branch from 24 in August 2000 to 66 in December 2001, and a further increase of up to 20 staff is planned for the financial year 2002–03.
Once again, I can confirm to noble Lords that, following commencement of the new money laundering offences in the Bill, the Home Office and the National Criminal Intelligence Service will keep under review the service's capacity to deal with suspicious transaction reports with a view to ensuring that an effective service is maintained.
Finally, I ask your Lordships to reflect on this. Experience has shown that the more impediments we build into the principal offences, including Clause 325, the less likely it is that we shall be able successfully to prosecute offenders. We need to ensure that reports of knowledge or suspicion of all three principal money laundering offences are made.
If Clause 325 is to be successful in achieving its aims of combating money laundering within the regulated sector, it is important that reports are made not only where a concealing offence has taken place under Clause 322, as sought by the amendment, but also where there is a suspicion, or grounds for suspicion, that either of the other two principal money laundering offences have taken place or, indeed, may be taking place. We have taken steps to ensure that the National Criminal Intelligence Service is geared up to cope with the anticipated increase in reporting, and we shall keep the position under review. I hope that the noble Baroness will feel able to withdraw her amendment.
Baroness Noakes: My Lords, I thank the Minister for that reply. I accept that the amendment does not meet the point regarding suspicion about a major transaction. As I explained, the amendment, though defective, was directed at avoiding the reporting of trivial transactions, and that remains its thrust.
The Minister referred to low reporting under the existing money laundering rules. I asked the noble Lord, Lord Rooker, in Committee whether there was evidence of non-reporting of accountants which caused concern and he could not give any. The existing law makes it relatively unlikely that accountants would be involved in money laundering transactions because they are not typically involved in handling cash. Indeed, they would most likely be avoided by money launderers because of the existing ethical rules to disclose unlawful acts regardless of any specific statutory requirements.
I do not believe there is evidence that accountants do not want to play their part in money laundering; all the evidence is that they do. The noble and learned Lord referred several times to the City. Accountants are not

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just in the City; they are in every high street in the land. That is primarily where accountants are and where the thrust of my remarks was directed.
The Institute of Chartered Accountants will want to consider the Minister's remarks regarding the conditions under which a successful prosecution could take place. The institute will need carefully to consider what guidance it gives to its members. I know that it will want to avoid seeking to overwhelm NCIS with trivial reporting. However, equally, it must have regard for the ability of its members to continue successfully to operate as chartered accountants within the limits of the law. I shall withdraw the amendment. However, I shall read carefully in Hansard what the Minister has said, as will the Institute of Chartered Accountants. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 150 to 152 not moved.]
Baroness Noakesmoved Amendment No. 153:
Page 193, line 16, at end insert—
"(ba) he is an auditor, external accountant or tax adviser and the information comes to him in the circumstances set out in subsection 10A);"
The noble Baroness said: My Lords, in moving Amendment No. 153, I shall speak also to the other amendments in this group. Under Clause 325(5)(b) there is a familiar exemption for legal professional privilege. Amendment No. 153 introduces a similar but certainly not identical exemption for auditors, external accountants and tax advisers.
The second European directive on money laundering clearly contemplates that exemption should be available for auditors, external accountants and tax advisers with regard to the information they obtain from a client in the course of ascertaining the legal position for the client. The amendments are designed to ensure that when that directive is implemented, accountants, auditors and tax advisers will he fairly treated.
For the avoidance of doubt, the intention of the amendment is not to extend legal professional privilege to chartered accountants. It is designed to introduce a limited exemption where information comes to an auditor, external accountant or tax adviser in the course of his profession for the purposes of ascertaining the legal position of the client.
Amendments Nos. 157, 159 and 160 give a similar protection in the context of the tipping-off provisions, allowing, obviously, for advice to be given following the ascertainment of the client's position. These sets of amendments are considerably narrower than legal professional privilege but seek to relieve accountants from the disadvantage which they would otherwise suffer. I suggest to the Government that there are public policy reasons for this limited set of exemptions.
The first public policy reason is fair competition. That is because in some areas—general business advice and tax advice—lawyers operate in essentially the same territory as external accountants and tax advisers. Therefore, if the Bill gives a competitive
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advantage to lawyers, that would operate unfairly. I do not expect many lawyers here today to have any sympathy for that, but I expect the Government to take seriously the unfair impact on competition that the Bill could have.
My second public policy reason relates to the position of the audit and auditors. Here the issue is slightly different. The audit process depends crucially on information flowing freely to auditors so that they can reach the required judgments under company law. If company directors thought that auditors might be under an obligation to go to NCIS every time they discussed a transaction that might be considered to be on the borderline of money laundering, there is a real concern that the flow of information would dry up.
Auditing is hard enough—I speak from bitter personal experience—without the law setting up any barrier to a company's directors and senior staff providing the information and explanations that auditors need in order to do their job.
So on those public policy grounds of promoting fair competition and of enhancing the audit process, which is important in assuring credibility of financial information to the business community, I beg to move the amendment.
10.15 p.m.
Baroness Buscombe: My Lords, I rise to support my noble friend Lady Noakes on this group of amendments which we believe to be entirely sensible and reasonable.
Lord Falconer of Thoroton: My Lords, the noble Baroness, Lady Noakes, proposes a limited but fairly significant extension of legal professional privilege to accountants, tax advisors and auditors when acting in comparable situations to lawyers. She also suggests that legal professional privilege should be extended to the situation where accountants are acting in their capacity as auditors.
Your Lordships will know that in Committee my noble friend Lord Rooker acknowledged that further work may be needed on this issue. I have listened carefully to the points made by the noble Baroness and can well understand her concerns. However, we need to bear in mind that, hitherto, the courts have not chosen to extend legal privilege to accountants and tax advisers. They have been pressed on many occasions to do so.
Those points aside, we have made clear on previous occasions that we intend that full consultation should take place later this year on the United Kingdom's implementation of the new money laundering directive.
The possibility of some extension of professional privilege to accountants has not been ruled out. But we think that it would be wrong to do that in isolation. If any changes are to be made, those should be in the context of our detailed consideration and wider consultation on the implementation of the directive, which will commence shortly. It will be important not least to obtain the views of the judiciary and the legal

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profession on such a proposal. It is important, therefore, that we do not try to pre-empt the outcome of the proposed consultation exercise. That would obviously consider the point that the noble Baroness made about auditors.
I make one final point. We understand that the accountancy profession is also concerned that lawyers who can claim legal privilege may be at a competitive advantage when offering tax advice to clients who are unsure of their legal position. However, questions of competition and commercial advantage must in this instance be considered separately from the interests of those clients for whose protection the common law concept of legal privilege has evolved.
Legal professional privilege is most certainly not there for the protection of the professional person; it is there for the protection of the client. Therefore, to advance arguments about competition in relation to accountants is not particularly powerful. I am not at all persuaded that honest people and businesses will be deterred from seeking professional advice because of the provisions in the Bill. Again, that can be dealt with in the light of the consultation exercise. In the light of what I have said, I hope that the noble Baroness will feel able to withdraw her amendment.
Baroness Noakes: My Lords, I thank the noble and learned Lord for his response. I should emphasise that I was not seeking through the amendment to extend legal professional privilege. Legal professional privilege is a concept that runs wide. The amendment would provide a specific exemption from these provisions. I had hoped that it would have been considered in that light and not as a major attempt to take legal professional privilege beyond the class to which it belongs—that is, lawyers. It was in those terms that I sought to advance it. In that sense, I am unashamed about raising competition issues, which are properly to be taken into account in designing the working of a whole system.
I take on board what the noble and learned Lord said about consultation later this year prior to implementation of the second money laundering directive, in the hope that that consultation process will be full, open and involve all parties—before, doubtless, a long piece of subordinate legislation is rushed late at night through your Lordships' House. For the time being, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 154 to 156 not moved.]
Clause 328 [Tipping off]:
[Amendment No. 157 not moved.]
Lord Goodhartmoved Amendment No. 158:
Page 195, line 29, at end insert—
"(d) he has been instructed to carry out a transaction which he is unable to carry out because the appropriate consent has not been given and he has been requested by or on behalf of the person giving the instruction to explain why the transaction has not been carried out"
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The noble Lord said: My Lords, I should begin by saying that I am afraid that there is a typographical error in the amendment as it appears on the Marshalled List. In the first line of proposed new paragraph (d), the words, "able to carry out" should of course read, "unable to carry out".
Clause 328 states:
"A person commits an offence if … he knows or suspects that a disclosure"
which, under the Bill, is either a protected or unauthorised disclosure, has been made, and he then proceeds to tip off someone else in a way that is likely to prejudice any investigation that may be conducted following the original disclosure. Clause 328(2) sets out certain circumstances in which an offence is not committed. We propose by the amendment to add as a fourth exception that,
"he has been instructed to carry out a transaction which he is unable to carry out because the appropriate consent has not been given and he has been requested by or on behalf of the person giving the instruction to explain why the transaction has not been carried out".
The Bill will leave professionals in the regulated sector in an impossible position. That has caused the Law Society serious concern. If people are in the regulated sector, they will be not merely authorised but required to report suspicions about their clients' affairs to the nominated officer. Such a disclosure made in discharge of that obligation would, as I understand it, be an authorised disclosure under the Bill.
Professionals may be instructed to, let us say, make a payment on the following day from their clients' fund that they hold in their current account. They will be unable to do so because they will not have received the consent that would authorise them to proceed. A client may discover that the payment has not been made and ask why his instruction has not been followed. Surely, it cannot be intended that the professional involved should make up some kind of bogus excuse. All that the professional can do is either tell the truth, which, it would appear, would be an offence under Clause 328, or say, "I am afraid that I cannot tell you why the payment has not been made." Of course, if the professional says that, any client who is, in truth, a money launderer will know at once why that answer has been given.
The best course is to allow the professional to say, "I'm sorry. I had to disclose it, and there is a legal ban on carrying out the transaction unless and until consent is received." That would put the professionals in a more reasonable position and would not lead to an increase in money laundering. I beg to move.
Baroness Buscombe: My Lords, I support the amendment.
Lord Falconer of Thoroton: My Lords, the amendment is neither desirable nor necessary. In all cases in which consent decisions are sought, it is open to the person who made the disclosure or the

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nominated officer to liaise closely with the National Criminal Intelligence Service to consider how to avoid committing a tipping-off offence and agree a form of words that might be used to respond to any queries about the delay in carrying out a transaction. Your Lordships will be interested to note that that is already standard practice and will continue to be so once the new legislation is in force.
The amendment would mean that, if the United Kingdom, for example, were being used as a conduit for large sums of suspect money and if the financial institution in question came under fire to explain why a client's instructions to transfer the money to some other country had not been carried out, the financial institution could pass information to the client without committing the offence. The noble Lord, Lord Goodhart, will be better able than I to say what the legal position of the financial institution would be vis- à-vis its client. There should be some way of allowing law enforcement agencies to take action to restrain the funds and prevent their dissipation. The time limits are designed to give law enforcement precisely that opportunity.
The rationale for the suspicious transaction reporting regime is to assist the law enforcement authorities to combat money laundering. I am far from persuaded that the noble Lord's amendment would help; in fact, the reverse would be the case. The amended provision would invariably be used as a pretext for giving information whenever a client exerted the slightest pressure. I remain of the view that there should be close dialogue between law enforcement agencies and financial institutions so that we can maximise our efforts against those who seek to use the financial system to launder their ill gotten gains.
I hope that in the light of what I have said the noble Lord will feel able to withdraw the amendment.
Lord Goodhart: My Lords, can the Minister explain what form of words could be used that, on the one hand, would not involve telling an untruth and, on the other, would not alert a money launderer to the fact that the authorities were looking at him?
Lord Falconer of Thoroton: My Lords, it happens in practice at the moment, although I do not know what the standard advice is. It would not be right for me to speculate on that, given the consequences to which the noble Lord referred. However, it is not beyond the wit of man to think of something that achieves both the aims to which the noble Lord referred.
Lord Goodhart: My Lords, the Minister's answer will not be entirely satisfactory to the Law Society or other professional groups. We will consider what the Minister said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 159 and 160 not moved.]
10.30 p.m.
Clause 332 [Protected disclosures]:
Baroness Noakesmoved Amendment No. 161:
Page 198, line 7, at end insert ", or is a matter relating to that knowledge or suspicion"
The noble Baroness said: My Lords, the amendment seeks to protect disclosure of information related to knowledge or suspicion of money laundering but not disclosure of the actual information on which the knowledge or suspicion is based. In Committee the noble Lord, Lord Rooker, said that he would look again at the matter. I see that the noble and learned Lord, Lord Falconer, has tabled Amendment No. 162 in this group, which I believe is directed at the same point. If he can tell the House that his amendment achieves the result I sought I shall be delighted to withdraw the amendment, but until then I beg to move.
Lord Falconer of Thoroton: My Lords, I fully support the intention behind the Opposition amendment. The noble Baroness is correct: our amendment in the same group seeks to deal with the same point. We believe that it deals with the issue more comprehensively in the context of the extended provisions introduced to Part 7 in Committee. In the light of that assurance, I hope that the noble Baroness will withdraw her amendment.
Baroness Noakes: My Lords, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 334 [Form and manner of disclosures]:
Lord Falconer of Thorotonmoved Amendment No. 162:
Page 199, line 3, at end insert—
"(2) An order under this section may also provide that the form may include a request to the discloser to provide additional information specified in the form.
(3) The additional information must be information which is necessary to enable the person to whom the disclosure is made to decide whether to start a money laundering investigation.
(4) A disclosure made in pursuance or a request under subsection (2) is not to be taken to breach any restriction on the disclosure of information (however imposed).
(5) The discloser is the person making a disclosure mentioned in subsection (1).
(6) Money laundering investigation must be construed in accordance with section 336(4).
(7) Subsection (2) does not apply to a disclosure made to a nominated officer."
On Question, amendment agreed to.
Clause 335 [Interpretation]:
[Amendments Nos. 163 and 164 not moved.]
Clause 341 [Requirements for making of production order]:
Lord Thomas of Gresfordmoved Amendment No. 165:
Page 203, line 25, at end insert—
"() There must be reasonable grounds for believing that the making of a production order is in the public interest having regard to—

(a) the benefit likely to accrue to the investigation if the material is obtained; and

(b) the circumstances under which the person in possession of the material holds it."

The noble Lord said: My Lords, when I spoke to this amendment in Committee the noble Lord, Lord Rooker, said at the end of the debate that he agreed with me and that he would look again at the matter. Within days he was reshuffled. I am not sure whether there was any connection between his agreement with me and his reshuffling. I hope that the noble and learned Lord, Lord Falconer, will permit me to rehearse my arguments once more.
When applying for a production order, the application is made through a judge. Certain information has to be given under Clause 340 (2) and (3). It is inevitable in the machinery that the judge hears the application ex parte. Under Clause 341 he has in effect a tick list of requirements on which he must satisfy himself before he can make the order. Nothing in Clause 341 requires him to carry out a balancing exercise between the public interest and the convention rights of the individual concerned, or any of the other circumstances set out in my amendment.
Amendment No. 165 has not been cobbled up just for the Bill; it appears in earlier legislation dealing with similar circumstances. Its purpose is for the judge, in making the order on an application, to consider where the public interest lies. The answer given to that suggestion in Committee was that the judge has to take into account the individual's convention rights in any event.
However, there is nothing in the clause to remind him of that fact and in any event the question is different. Under the convention, the question would be: is this application a disproportionate interference in the right to respect for privacy, family life, home and correspondence, or perhaps to his property rights? That is a different matter from the broad circumstances which we have set out in the amendment. It is our view that in this and the like provisions which are set out in Amendments Nos. 166 and 167 there is a need to remind the judge of the public interest and the balancing exercise that he must carry out.
As regards Amendment No. 167, to which I am also speaking, the numbering is wrong. The account monitoring order is dealt with in Clause 366. The page numbers in the amendment refer to Clause 360, which
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deals with customer information orders. I am obviously speaking to the principle that applies to both the orders made in that regard. I beg to move.
Lord Falconer of Thoroton: My Lords, the point was raised in the Commons, where there was a Division on it, and it was raised in Committee in this House. My noble friend Lord Rooker agreed to reconsider the matter and one imagines that even as we speak he is still doing so. I am sure that it had nothing whatever to do with his move.
As explained in the Explanatory Notes accompanying the Bill, the Human Rights Act 1998 requires a judge not to act in a way that is incompatible with the convention rights. After reconsidering the matter, we think it unnecessary to retain the present "public interest" test contained in the Criminal Justice Act 1998, the Drug Trafficking Act 1994 and the Proceeds of Crime (Northern Ireland) Order 1996 as one of the requirements for making a production order, or to include it as a requirement for an application for a disclosure order and an account monitoring order.
Certain doubts have been raised that the Human Rights Act provided the same safeguard or, if it did, that this justified the removal of an express safeguard to which the noble Lord, Lord Thomas, referred. However, Section 6 of the Human Rights Act would require a court to comply with all the safeguards which are provided by the convention when deciding whether or not to make an order or warrant.
We are satisfied therefore that the application of the Human Rights Act removes the need for the public interest test. Article 8(2) of the convention provides that there shall be no interference by a public authority in respect of the right to private and family life, home and correspondence, except where necessary for the prevention of disorder or crime. Although the public interest test is not worded in these precise terms, we cannot think of any situation where the public interest test would prevent an order or warrant being made but Article 8 would not.
Furthermore, the equivalent customer information order and account monitoring order provisions in recent legislation—the Terrorism Act 2000 as amended by the Anti-terrorism, Crime and Security Act 2001—does not contain the public interest test. In those cases the judge would also have to consider the application against his obligation to consider a person's rights under the convention. This is a parallel to the position under the Bill. Therefore, one should be straightforward and clear. In the light of that, we do not believe that the incorporation of the public interest test is sensible or necessary to provide the kind of protection the noble Lord seeks.
I hope that in the light of my comments the noble Lord will feel able to withdraw his amendment.
Lord Thomas of Gresford: My Lords, where I draw a distinction between the ordinary hearings before a judge, in which both parties are represented, and this situation is in the fact that the judge is acting on his

1331
own. He has before him an application and he must make a decision on that application. No one is arguing the provisions of the Human Rights Act before him.
The situation will be rather different where the judge should have in mind not only the other requirements explicitly set out in the clause, but also the public interest test as defined in earlier legislation. I urge the noble and learned Lord to join with his noble friend, in whatever limbo he may be at the moment, further to consider the matter before we return to it on Third Reading. In the meantime, however, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 353 [uirements for making of disclosure order
[Amendment No. 166 not moved.]
Clause 359 [Meaning of customer information]:
[Amendment No. 167 not moved.]
Lord Falconer of Thorotonmoved Amendment No. 168:
After Clause 370, insert the following new clause—
"Evidence overseas
(1) This section applies if the Director is carrying out a confiscation investigation.
(2) A judge on the application of the Director or a person subject to the investigation may issue a letter of request if he thinks that there is evidence in a country or territory outside the United Kingdom—

(a) that such a person has benefited from his criminal conduct, or

(b) of the extent or whereabouts of that person's benefit from his criminal conduct.

(3) The Director may issue a letter of request if he thinks that there is evidence in a country or territory outside the United Kingdom—

(a) that a person subject to the investigation has benefited from his criminal conduct, or

(b) of the extent or whereabouts of that person's benefit from his criminal conduct.

(4) A letter of request is a letter requesting assistance in obtaining outside the United Kingdom such evidence as is specified in the letter for use in the investigation.
(5) The person issuing a letter of request must send it to the Secretary of State.
(6) If the Secretary of State believes it is appropriate to do so he may forward a letter received under subsection (5)—

(a) to a court or tribunal which is specified in the letter and which exercises jurisdiction in the place where the evidence is to be obtained, or

(b) to an authority recognised by the government of the country or territory concerned as the appropriate authority for receiving letters of request.

(7) But in a case of urgency the person issuing the letter of request may send it directly to the court or tribunal mentioned in subsection (6)(a).
(8) Evidence obtained in pursuance of a letter of request must not be used—

(a) by any person other than the Director or a person subject to the investigation;

(b) for any purpose other than that for which it is obtained.

(9) Subsection (8) does not apply if the authority mentioned in subsection (6)(b) consents to the use.
(10) Evidence includes documents and other articles."
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The noble and learned Lord said: My Lords, the effect of this amendment is that the ARA will be able to request evidence from overseas relating to confiscation investigations which the director is conducting. The person under investigation will also be able to request such evidence for use in his defence. As the Bill stands, the director would have to rely on the prosecuting authorities to make requests on his behalf. That would seriously impair his operational efficiency. We expect there to be many cases where the defendant has assets abroad and the director needs to be able to make inquiries to ascertain the full extent of those assets.
This new clause makes provision enabling the director himself to request evidence from overseas. It closely follows the established and successful model of Section 3 of the Criminal Justice (International Co-operation) Act 1990. The new clause limits the director's power to request evidence to evidence for use in confiscation investigations and proceedings relating to the making of a confiscation order. It would be outside his powers to request evidence relating to wider issues.
There are other international instruments which are available to the director for requesting evidence for his civil recovery investigations such as the Hague convention of March 1970. It is anticipated that he will make use of these for his civil recovery investigations.
It has come to our attention very late that an amendment will be required to this new clause at Third Reading. That is because applications under this clause will be made to a judge and not to a court. We will therefore require a specific rule-making provision within the Bill to make rules of court for such applications. We shall table such an amendment at Third Reading. I beg to move.
On Question, amendment agreed to.
Clause 377 [Further provisions]:
Lord Falconer of Thorotonmoved Amendment No. 169:
Page 221, line 31, leave out from "any" to end of line 33 and insert "restriction on the disclosure of information (however imposed)"
The noble and learned Lord said: My Lords, this is a drafting amendment designed to bring the wording of Clause 377(2) into line with the corresponding provision for England and Wales—Clause 343(4)—and indeed with the wording of the other equivalent Scottish provisions on disclosure orders—Clause 389(2)—and customer information orders—Clause 396. I beg to move.
On Question, amendment agreed to.
Clause 379 [Government departments]:
Lord Falconer of Thorotonmoved Amendment No. 170:
Page 222, line 17, leave out subsection (3).
The noble and learned Lord said: My Lords, Clause 379(3) presently requires that in Scotland a production order in respect of material in the possession or control of an authorised government department must be served as if the proceedings were civil proceedings

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against that department. This means that service can be effected only by recorded delivery post or by a sheriff officer.
In practice, what is done at present is for a law enforcement officer to leave an order at the office of a nominated person. By deleting subsection (3), the amendment will enable the present practice to continue.
We do not need to make similar provision for England, Wales and Northern Ireland where Section 18 of the Crown Proceedings Act requires notice to be served on the Treasury Solicitor. Section 18 does not, however, apply to Scotland. I beg to move.
On Question, amendment agreed to.
Lord Falconer of Thorotonmoved Amendment No. 171:
Page 222, line 26, leave out "(4)" and insert "(5)"
The noble and learned Lord said: My Lords, this is purely a drafting amendment designed to correct an erroneous cross-reference. I beg to move.
On Question, amendment agreed to.
Clause 406 [Interpretation]:
Lord Falconer of Thorotonmoved Amendment No. 172:
Page 236, line 11, leave out "Part" and insert "Chapter"
The noble and learned Lord said: My Lords, this is a purely technical amendment to make it clear that the definitions in Clause 406 relate only to Chapter 3 of Part 8—Investigations Scotland—rather than the whole of Part 8 as currently drafted. I beg to move.
On Question, amendment agreed to.
10.45 p.m.
Clause 408 [Property]:
Lord Falconer of Thorotonmoved Amendment No. 173:
Page 237, line 20, leave out paragraph (a).
The noble and learned Lord said: My Lords, this amendment would amend Clause 408(3). That subsection sets out certain definitional rules that apply in relation to references to property for the purposes of Part 8. We have been reflecting on the question of the Part 8 definitions following the debate in Committee on 27th May.
Clause 408(3)(a) is relevant only to investigations for the purposes of civil recovery, as all the references to holding property in Part 8 are in the context of provisions relating to civil recovery investigations. Moreover, each reference to holding property in Part 8 occurs in the context of holding recoverable or associated property. There is no power to investigate for civil recovery purposes unless there is an issue as to whether property is recoverable or associated.
Recoverable property and associated property are in turn defined at Clause 408(2) by direct reference to their meanings in Part 5. That part makes clear, through the definitions of recoverable property in
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Clauses 301 to 306, associated property in Clause 245 and in the general definitions of property in Clauses 311(4) to (7) on which they in turn rely, that references to property in these contexts already include references to interests in property. We have therefore concluded that Clause 408(3)(a) is not needed for the effective application of Part 8 to civil recovery investigations. I beg to move.
On Question, amendment agreed to.
Clause 411 [Modifications of the 1986 Act]:
Baroness Buscombemoved Amendment No. 174:
Page 239, line 6, leave out subsections (2) to (4) and insert—
"(2) If an order has been made under section 41, 50. 52, 120, 128(3), 190, 198 or 200 and is in force at the date on which the petition in which the person is adjudged bankrupt is presented, the prosecutor, the Director or the accredited financial investigator who applied for any such order shall be entitled to prove in the bankruptcy of the person adjudged bankrupt for—

(a) the amount such person is required to pay for any confiscation order, and

(b) the costs of obtaining the order under section 41, 50, 52, 120, 128(3), 190, 198 or 200 and any such confiscation order.

(3) Any dividend payable under subsection (2)(a) shall be paid after all other creditors have been paid the full amount of their debts and such interest to which they are entitled.
(4) The costs referred to in subsection (2)(b) shall be treated as a preferential debt for the purposes of section 328 and the 1986 Act."
The noble Baroness said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 181, 182, 189, 190, 192 and 193, 201, 202, 204, 205, 207, 208, 212, 213 and 214. I proposed very similar amendments to this part of the Bill at the Committee stage. A number of criticisms were made of the drafting with which I believe we have now dealt.
However, the noble Lord, Lord Rooker, made a number of points of principle, which we believe are without substance. I therefore propose to deal with each of these points and show why they are without substance. The first point which the noble Lord made was that the legislation needs to address the risk of criminals attempting to manipulate their proceeds into the hands of creditors who are, in reality, their associates. The noble Lord said that the amendments would open up the legislation to that possibility.
We believe that what the noble Lord was saying was that criminals will incur debts payable to their associates who will be able to prove for their debts in an insolvency. This argument pre-supposes that associates will lend money to the criminal or otherwise create a liability owed by the criminal to the associates.
If those steps or those liabilities are not genuine, the associates will not be able to recover anything in the insolvency of the criminal. Under the Insolvency Act 1986 and the Insolvency Rules of the same year, there is a procedure whereby creditors prove for their debts in the insolvency of the bankrupt. This procedure involves the creditor submitting a proof of debt which is either accepted or rejected by the trustee in

1335
bankruptcy or, in the case of the company, the liquidator. His decision is subject to challenge in the courts by the bankrupt or any other creditor.
Lord Falconer of Thoroton: My Lords, can the noble Baroness indicate the effect that her successful amendment has had on this amendment?
Baroness Buscombe: My Lords, I am talking about the priority in terms of insolvency. As regards the success, I am grateful that the noble and learned Lord has raised it. I believe that the success of the earlier amendment impinges on these amendments and I hope that the Government will accept them in the light of that success.
I believe that it is important that we state why we believe that the noble Lord, Lord Rooker, was incorrect at Committee stage. We shall also consider why these amendments should now stand at Report stage, particularly in the light of the amendment agreed earlier today.
This procedure involves the creditor submitting a proof of debt which is either rejected or accepted by the trustee in bankruptcy or, in the case of a company, the liquidator. His decision is subject to challenge in the courts by the bankrupt or any other creditor, which will include the prosecutor, the director or the accredited financial investigator. They will be able to challenge the evidence relied upon by these associates and show that these debts are not genuine. In those circumstances, these associates will not recover anything in the insolvency of the criminal. There is no issue about priorities because these particular creditors, whose debts or liabilities are not genuine, will not get anything.
If, on the other hand, those debts or liabilities are genuine, these associates will have lent money or created a liability knowing that they will recover only a dividend or nothing at all, with no conceivable benefit to the criminal. The associates will have lost money, the criminal will be no better off, and the whole point of the exercise by these criminals of attempting to manipulate their proceeds into the hands of creditors who are their associates will achieve nothing. It is an entirely pointless exercise from their point of view.
The conclusion that the amendments would open up the legislation to that possibility is, we respectfully suggest, absurd or, if not, to be encouraged: the associates would lose money.
The second point made by the noble Lord, Lord Rooker, was that criminals could run up large amounts of genuine debts so as to leave as little as possible for confiscation. He went on to say that the director, the prosecutor and the other authorities would not pursue cases if they had to operate against the real prospect of the assets disappearing to satisfy the criminal's debts. This argument presupposes the existence of genuine debts.
We still believe that genuine creditors should be paid before the Consolidated Fund. The fact that these innocent creditors are paid before the Consolidated
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Fund is not something that troubles us. Looking at it from the point of view of the creditors, they are entirely blameless. If a criminal makes a decision to run up large amounts of genuine debt, it would be quite wrong that the innocent creditors should suffer for the conduct of the criminal. We made a similar point on earlier amendments.
Lord Falconer of Thoroton: My Lords, the way that the noble Baroness is putting this would indicate that it is fairly redundant. She can go on, but she must think about the relationship between these amendments and the ones with which she succeeded.
Baroness Buscombe: My Lords, I entirely accept what the noble and learned Lord is saying, but I wish to clarify why we believe that the noble Lord, Lord Rooker, was incorrect in Committee in relation to these amendments, which are entirely associated with Part 9 and insolvency. That said, principles similar to the ones set down in earlier amendments apply. I do not believe that the success of our earlier amendments makes these amendments redundant; or perhaps the Minister is about to say that he will accept these amendments.
Lord Falconer of Thoroton: My Lords, the amendments moved earlier by the noble Baroness, as I understand it, mean that a creditor can apply to the court for compensation under the new clause if there is insufficient money to pay him in any bankruptcy caused by the making of a confiscation order. Why is the noble Baroness continuing to move these amendments?
Baroness Buscombe: My Lords, I accept what the noble and learned Lord is saying, but believe that this is important. I am sorry if he feels that I am wasting the time of the House but I should like to set out the case properly. It is important for those who are involved on a day-to-day basis in the issue of insolvency. I feel strongly that I should be allowed to respond to the points made in Committee.
To be fair to the noble Lord, Lord Rooker, he went on to say that this would disrupt the activities of the enforcement authorities because cases would not be pursued unless the assets available for confiscation ultimately justified the outlay of time and effort in bringing a confiscation action. I can see that, but we are not happy that innocent creditors should suffer as a result.
We therefore do not feel that it is appropriate for the enforcement authorities to look upon this new procedure as a profit-making enterprise which will prejudice innocent creditors. The object of the exercise is to ensure that crime does not pay, and that should be the aim of the enforcement authorities rather than making a profit for the Consolidated Fund. Genuine debts must be paid first. Those were the two main points made by the noble Lord in Committee.
I have further notes on this point. However, in the circumstances, it is perhaps unnecessary to delay the House further. I feel strongly that the amendments

1337
stand by themselves and I wait to see whether the Minister will respond favourably to them. I beg to move.
Lord Falconer of Thoroton: My Lords, I cannot see how the amendments do stand by themselves. I assume that the noble Baroness is proposing them on the basis that if something happened to the amendment on which she has proceeded, she would like the others to be considered. I shall therefore deal briefly with the point to which she has referred.
We recognise that the Opposition have made some attempt to accommodate in these amendments one particular concern which my noble friend Lord Rooker registered in Committee. He raised the point that the enforcement authorities would be unlikely to pursue confiscation if, at the end of the day, their efforts could be trumped by the creditors—a point that the noble Baroness made in relation to the first tranche of amendments, where she was successful, and makes again today.
The first group of amendments gives the authorities a preferential claim over property tied up in bankruptcy or insolvency proceedings in so far as their costs are concerned. Thus, although a confiscation might be lost because moneys were passed to creditors, the authorities would at least be able to recover any costs they had incurred in bringing restraint or receivership proceedings against the property. The noble Baroness dealt with that point, which was raised by the noble Lord, Lord Rooker.
Unfortunately, as she said, the noble Lord, Lord Rooker, expressed a number of other practical and principled objections to these amendments which have not been satisfactorily resolved.
Let us assume for a moment that creditors always took precedence as is proposed and that the long-standing system of priorities was abolished. As soon as criminals became aware that action against them was likely, they might be tempted to run up debts with a view to leaving nothing available for confiscation. As I understand it, that is the intention behind the amendment.
This is a real danger. From the criminals' point of view, anything that prevents the authorities from confiscating their assets is a victory. From the criminals' point of view, it is better to borrow, live the high life and lose their assets to creditors than it is to surrender them to the authorities. We see no reason why they should be given the opportunity to frustrate the recovery of their assets in this way—as is proposed by the amendment and as indeed would be the effect of the noble Baroness's amendments which succeeded earlier.
Even if the authorities were able to recover their costs, as has now been conceded, we remain of the view that these amendments would deter them from pursuing confiscations. We made that point previously. Nor are we persuaded that account has been taken of our concern that criminals would find it easier to manipulate their proceeds into the hands of creditors who were in reality their criminal associates.
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The present system, which essentially brings the drawbridge up on the assets as soon as the authorities obtain a restraint order, is largely immune to abuse of this kind. We believe that the amendments would invite it—just as the amendments which succeeded invite it. We remain convinced that the bigger and more sophisticated criminal gangs in particular are capable of producing persuasive evidence from front companies and other purported creditors.
In practical terms, therefore, these amendments would in our view risk seriously undermining the operation of the legislation—as we have said in relation to those amendments moved by the noble Baroness that were successful. Nor do we agree as a matter of policy that creditors should be afforded any priority in terms of these assets.
Creditors have no right to be paid out of the proceeds of crime. The proceeds of crime belong to victims, where they can be identified, and to society where they cannot. If a criminal steals a car, it would be ludicrous for the car to be given to the criminal's debtors to satisfy his debts, whether in the event of his bankruptcy or under any other circumstances.
If the victim of the theft is known, the car should go back to the victim. If the particular victim of the theft is not known, then society as a whole, in the victim's stead, should have the assets. The fact that a victim is unknown does not justify keeping the proceeds of crime in circulation by giving them away to the defendant's creditors, as the noble Baroness would have it. Once again, I urge her to reconsider—
11 p.m.
Lord Goodhart: My Lords, would the noble and learned Lord apply that order to someone who had made money from drug dealing? Is he suggesting that those who had bought the drugs would have a right to get their money back?
Lord Falconer of Thoroton: No, my Lords, quite the reverse. I am saying that it is quite wrong that, having made lots of money from drug dealing, the drug dealer should be given the opportunity to spend all that money by incurring debts with unsecured creditors, who would come first under the noble Baroness's amendment. The criminal would get the benefit of the drug dealing, which we are seeking to prevent, and, because of the noble Baroness's amendment, the state can do nothing about it.
Lord Goodhart: My Lords, the criminal has already had the benefit of the drug dealing, because he has got his property, or whatever, and has drunk the champagne that he has bought with his ill-gotten gains. It is not he who suffers.
Lord Falconer of Thoroton: My Lords, there could be a number of debts. Money that was lent would be an unsecured debt that would have to be paid first.
Baroness Buscombe: My Lords, I thank the Minister for his response and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 412 [Restriction of powers]:
Lord Falconer of Thorotonmoved Amendment No. 175:
Page 239, line 31, leave out "134" and insert "136"
The noble and learned Lord said: My Lords, Amendments Nos. 175, 183, 191, 194, 203 and 206 are technical amendments designed to bring the Scottish provisions on insolvency into line with their equivalents for England and Wales and Northern Ireland. Clause 415 restricts the powers of the court under the Bill where an award of sequestration has been made. The powers that are restricted are specified at Clause 415(2). Subsection (2)(b) refers to the powers conferred on the court by Clauses 120 to 134. The English equivalent of Clause 415, which is Clause 412, refers to Clauses 41 to 67. The Scottish equivalent of Clauses 63 and 65 are Clauses 135 and 136, which are not presently covered in Clause 415. Amendment No. 183 adds them to Clause 415. The remaining amendments in the group make similar additions to Clauses 412, 418, 420, 422 and 424. I beg to move.
On Question, amendment agreed to.
Clause 413 [Tainted gifts]:
Lord Falconer of Thorotonmoved Amendment No. 176:
Page 240, leave out lines 30 to 33.
The noble and learned Lord said: My Lords, the amendments in this group are substantially technical. The group does not currently cover Northern Ireland. We intend to table the remaining amendments in the group at Third Reading.
As your Lordships are aware, Part 9 establishes a system of priorities between confiscation and insolvency proceedings. The factor that determines whether confiscation takes precedence is whether a restraint or receivership order has been obtained at a specified time.
Clauses 413, 416, 419, 421 and 423 deal with the narrower situation in which the same property may fall to be treated as a tainted gift under the confiscation legislation and as a voidable transaction under the insolvency legislation. These clauses apply a slightly different test as to whether confiscation has precedence. They refer to the application for a restraint order and the institution of proceedings rather than to an application for a restraint or receivership order, as elsewhere in Part 9. We cannot see any reason for the discrepancy. The amendments accordingly apply the same test to the gift provisions as is applied elsewhere in Part 9; namely, whether an application has been made for a restraint or receivership order.
I should add an explanation on two of the amendments made for Scotland. Clause 416(2) refers to a decree granted under the Bankruptcy Act 1621, the Bankruptcy (Scotland) Act 1985 or otherwise. The
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purpose of the reference to "or otherwise" is to cover decrees granted at common law in Scotland. However, as currently drafted, Clause 416(3) refers only to decrees granted under the 1985 Act. Amendment No. 186 is designed to include the three decrees mentioned in Clause 416(2).
The same point arises with Amendment No. 194. As your Lordships will see, this is a tidying up exercise. I beg to move.
On Question, amendment agreed to.
Lord Falconer of Thorotonmoved Amendments Nos. 177 to 180:
Page 240, line 35, at end insert ", or
(ca) there is in force in respect of such property an order under section 50, 52, 128(3), 198 or 200."
Page 240, line 36, leave out from "after" to "must" in line 37 and insert "an order mentioned in subsection (2)(c) or (ca) is discharged"
Page 240, line 40, leave out subsection (4).
Page 240, line 46, leave out subsections (6) and (7).
On Question, amendments agreed to.
[Amendment No. 181 not moved.]
Clause 414 [Modifications of the 1985 Act]:
[Amendment No. 182 not moved.]
Clause 415 [Restriction of powers]:
Lord Falconer of Thorotonmoved Amendment No. 183:
Page 242, line 10, leave out "134" and insert "136"
On Question, amendment agreed to.
Clause 416 [Tainted gifts]:
Lord Falconer of Thorotonmoved Amendments Nos. 184 to 188:
Page 243, leave out lines 4 to 7.
Page 243, line 9, at end insert "or
(ca) there is in force in respect of such property an order under section 50, 52, 128(3), 198 or 200."
Page 243, line 10, leave out from "under" to "must" in line 11 and insert "the Bankruptcy Act 1621 (c. 18) or section 34 or 36 of the 1985 Act, or otherwise, after an order mentioned in subsection (2)(c) or (ca) is discharged"
Page 243, line 14, leave out subsection (4).
Page 243, line 20, leave out subsections (6) and (7).
On Question, amendments agreed to.
[Amendment No. 189 not moved.]
Clause 417 [Modifications of the 1989 Order]:
[Amendment No. 190 not moved.]
Clause 418 [Restriction of powers]:
Lord Falconer of Thorotonmoved Amendment No. 191:
Page 244, line 22, leave out "134" and insert "136"
On Question, amendment agreed to.
Clause 419 [Tainted gifts
[Amendment No. 192 not moved.]
Clause 420 [Winding up under the 1986 Act]:
[Amendment No. 193 not moved.]
Lord Falconer of Thorotonmoved Amendment No. 194:
Page 246, line 43, leave out "134" and insert "136"
On Question, amendment agreed to.
Clause 421 [Tainted gifts]:
Lord Falconer of Thorotonmoved Amendments Nos. 195 to 200:
Page 247, leave out lines 42 to 45.
Page 248, line 2, at end insert ", or
(ca) there is in force in respect of such property an order under section 50, 52, 128(3), 198 or 200."
Page 248, line 4, after "Act" insert ", or otherwise,"
Page 248, line 4, leave out from "after" to "must" in line 5 and insert "an order mentioned in subsection (3)(c) or (ca) is discharged"
Page 248, line 8, leave out subsection (5).
Page 248, line 14, leave out subsection (7).
On Question, amendments agreed to.
[Amendment No. 201 not moved.]
Clause 422 [Winding up under the 1989 Order]:
[Amendment No. 202 not moved.]
Lord Falconer of Thorotonmoved Amendment No. 203:
Page 249, line 8, leave out "134" and insert "136"
On Question, amendment agreed to.
Clause 423 [Tainted gifts]:
[Amendment No. 204 not moved.]
Clause 424 [Floating charges]:
[Amendment No. 205 not moved.]
Lord Falconer of Thorotonmoved Amendment No. 206:
Page 251, line 4, leave out "134" and insert "136"
On Question, amendment agreed to.
Clause 426 [Insolvency practitioners]:
[Amendments Nos. 207 and 208 not moved.]
Schedule 10 [Tax]:
Lord Falconer of Thorotonmoved Amendments Nos. 209 and 210:
Page 285, line 19, after "order" insert "or in pursuance of an order under section 274"
Page 285, line 26, after "provides" insert "or (as the case may be) the terms on which the order under section 274 is made provide"
On Question, amendments agreed to.
[Amendment No. 211 not moved.]
Schedule 11 [Amendments]:
[Amendments Nos. 212 to 214 not moved.]
Lord Falconer of Thorotonmoved Amendments Nos. 215 to 218:
Page 302, line 31, at end insert—
"Pension Schemes Act 1993 (c. 48)
(1) The Pension Schemes Act 1993 is amended as follows.
(2) In section 10 (protected rights and money purchase benefits), after subsection (5) insert—
"(6) Where, in the case of a scheme which makes such provision as is mentioned in subsection (2) or (3), any liability of the scheme in respect of a member's protected rights ceases by virtue of a civil recovery order, his protected rights are extinguished or reduced accordingly."
(3) In section 14 (earner's guaranteed minimum), after subsection (2) insert—
"(2A) Where any liability of a scheme in respect of an earner's guaranteed minimum pension ceases by virtue of a civil recovery order, his guaranteed minimum in relation to the scheme is extinguished or reduced accordingly."
(4) In section 47 (further provisions relating to guaranteed minimum pensions), in subsection (6), after "but for" insert "section 14(2A) and".
(5) In section 68B (safeguarded rights), at the end insert "including provision for such rights to be extinguished or reduced in consequence of a civil recovery order made in respect of such rights".
(6) In section 181(1) (general interpretation), after the definition of "Category A retirement pension" insert—
""civil recovery order" means an order under section 264 of the Proceeds of Crime Act 2002 or an order under section 274 imposing the requirement mentioned in section 275(3)"
Page 302, line 31, at end insert—
"Pension Schemes (Northern Ireland) Act 1993 (c. 49)
(1) The Pension Schemes (Northern Ireland) Act 1993 is amended as follows.
(2) In section 6 (protected rights and money purchase benefits), after subsection (5) insert—
"(6) Where, in the case of a scheme which makes such provision as is mentioned in subsection (2) or (3), any liability of the scheme in respect of a member's protected rights ceases by virtue of a civil recovery order, his protected rights are extinguished or reduced accordingly."
(3) In section 10 (earner's guaranteed minimum), after subsection (2) insert—
"(2A) Where any liability of a scheme in respect of an earner's guaranteed minimum pension ceases by virtue of a civil recovery order, his guaranteed minimum in relation to the scheme is extinguished or reduced accordingly."
(4) In section 43 (further provisions relating to guaranteed minimum pensions), in subsection (6), after "but for" insert "section 10(2A) and".
(5) In section 64B (safeguarded rights), at the end insert "including provision for such rights to be extinguished or reduced in consequence of a civil recovery order made in respect of such rights".
(6) In section 176(1) (general interpretation), after the definition of "Category A retirement pension" insert—
""civil recovery order" means an order under section 264 of the Proceeds of Crime Act 2002 or an order under section 274 imposing the requirement mentioned in section 275(3)."
Page 303, line 12, at end insert—
"() in section 68(2) (extent - Scotland), paragraphs (a) to (c) and in paragraph (g) the words "1, 41, 62" and "64",
() in section 68(3) (extent - Northern Ireland), paragraph (a) and in paragraph (d) the word "64"."

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Page 304, line 14, at end insert—
"() In section 68(2)(d), for "59(10)" substitute "59(11)"."
On Question, amendments agreed to.
Lord Falconer of Thorotonmoved Amendments Nos. 219 and 220:
Page 305, line 34, leave out "which by virtue of" and insert "specified in"
Page 305, line 36, leave out from "2002" to end of line 37.
The noble and learned Lord said: My Lords, these are purely drafting amendments designed to bring the terminology used in paragraph 27 of Schedule 11 in line with that used elsewhere in Schedule 11. I beg to move.
On Question, amendments agreed to.
Lord Falconer of Thorotonmoved Amendments Nos. 221 and 222:
Page 305, line 40, at end insert—
"Police Act 1996 (c. 16)
27A (1) Section 97 of the Police Act 1996 (police officers engaged on service outside their force) is amended as follows.
(2) In subsection (1) after paragraph (cc) insert—
"(cd) temporary service with the Assets Recovery Agency on which a person is engaged with the consent of the appropriate authority;".
(3) In subsection (6)(a) after "(cc)" insert "(cd)".
(4) In subsection (8) after "(cc)" insert "(cd)"."
Page 308, line 32, at end insert—
"Police (Northern Ireland) Act 1998 (c. 32)
30A (1) Section 27 of the Police (Northern Ireland) Act 1998 (members of the Police Service engaged on other police service) is amended as follows.
(2) In subsection (1) after paragraph (c) insert—
"(ca) temporary service with the Assets Recovery Agency on which a member of the Police Service of Northern Ireland is engaged with the consent of the Chief Constable;".
(3) In subsection (5)(b) after "(c)" insert "(ca)".
(4) In subsection (7) for "or (c)" there is substituted "(c) or (ca)"."
On Question, amendments agreed to.
Lord Falconer of Thorotonmoved Amendment No. 223:
Page 309, line 41, at end insert—
"Financial Services and Markets Act 2000 (c. 8)
33A In Schedule I to the Financial Services and Markets Act 2000 (provisions relating to the Financial Services Authority) after paragraph 19 insert—
"19A For the purposes of this Act anything done by an accredited financial investigator within the meaning of the Proceeds of Crime Act 2002 who is—

(a) a member of the staff of the Authority, or

(b) a person appointed by the Authority under section 97, 167 or 168 to conduct an investigation,

must be treated as done in the exercise or discharge of a function of the Authority."
The noble and learned Lord said: My Lords, this amendment addresses the system of accrediting civilian investigators who may have access to the investigation and restraint powers under the Bill. We
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are referring specifically here to investigators employed or appointed by the Financial Services Authority.
The amendment provides that if investigators of the FSA are carrying out investigations using the powers in Parts 2 or 8 of the Bill as "accredited financial investigators", they will be deemed for the purposes of their parent legislation to be exercising functions under that legislation. A clear implication for an accredited financial investigator employed by the FSA is that he would need to have funds raised in order to cover the costs of the relevant investigation. However, paragraph 17(1 )(a) of Schedule 1 to the 2000 Act allows the FSA to charge fees only to meet expenditure incurred for purposes of or incidental to carrying out its functions conferred by or under the Financial Services and Markets Act 2000.
Without this amendment there would be doubt as to whether the FSA and the investigators it appoints could therefore incur expenditure to perform functions under Parts 2 or 8 of the Bill. Therefore, the FSA would not be able to charge fees for any investigations that a staff member or other appointed investigator carried out in their role as a financial investigator unless those functions were deemed to be conferred under the Financial Services and Markets Act 2000.
This issue of fee income is the major concern, but there may be more general problems should the powers not be regarded as functions under the Financial Services and Markets Act 2000. For example, there may also be problems in relation to gateways and information provisions, the FSA's statutory immunity from prosecution and accountability provisions such as the jurisdiction of the statutory Complaints Commissioner appointed under the Financial Services and Markets Act. These provisions refer to any of "the Authority's functions" conferred by or under the FSMA. We need to ensure that acts carried out by FSA accredited financial investigators fall within these provisions.
This appears to be a peculiarity to the FSA due to its unusual position of being a body funded by the industry it regulates. I should also add that this amendment does not mean that FSA investigators will automatically be accredited to have access to functions under the Bill. They will still have to satisfy the director of the assets recovery agency that they meet the standards required for accreditation. I beg to move.
On Question, amendment agreed to.
Schedule 12 [Repeals and revocations]:
Lord Falconer of Thorotonmoved Amendments Nos. 224 to 227:
Page 313, line 27, column 2, at end insert—
"In section 68(2), paragraphs (a) to (c) and in paragraph (g) the words "1, 41, 62" and "64".
In section 68(3), paragraph (a) and in paragraph (d) the word "64"."
Page 313, line 35, column 2, leave out "paragraphs 4(2) and 69" and insert—
"paragraph 4(2).
In Schedule 4, paragraphs 69 and 94."

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Page 315, line 15, column 2, at end insert "and 18"
Page 315, line 42, at end insert—
"Land Registration Act 2002 In Schedule 11, paragraphs 22 (c. 9) and 32."
On Question, amendments agreed to.
Clause 453 [Orders and regulations]:
Lord Falconer of Thorotonmoved Amendment No. 228:
Page 265, line 9, after "289(4)," insert "(Other exemptions)"
On Question, amendment agreed to.
Lord Goodhartmoved Amendment No. 229:
Page 265, line 10, at end insert—
"(ab) an order under paragraph 5 of Schedule 9 to amend Part I of that Schedule;"
The noble Lord said: My Lords, Amendment No. 229, and its associated Amendment No. 232, are almost the last group of amendments on the groupings list, but they are not by any means the least.
Paragraph 1 of Schedule 9 identifies businesses which are in the regulated sector for the purposes of the legislation on money laundering. At present, paragraph 1 makes only financial services businesses subject to the rules that apply to the regulated sector. But paragraph 5 gives the Treasury power to amend Schedule 1. That, of course, is what is known as a Henry VIII power. We all know that the Government intend—as they have indeed declared—to extend the regulated sector to cover businesses such as lawyers, accountants and estate agents. Indeed, the Government will be required to do so by the second European directive on money laundering. We welcome that extension of the regulated sector and we certainly support it. But, at the same time, it imposes serious burdens on a wide swathe of professional firms and businesses. We believe that that is something which should not happen without being properly debated in Parliament. We believe therefore that the procedure should be affirmative, not negative.
That was the view of the Delegated Powers and Regulatory Reform Committee of which I am a member. The Government, somewhat unusually, rejected that provision of our report. When the issue was debated in Committee, the noble Lord, Lord Rooker, said that it would be a waste of time to debate minor changes to paragraph 1. I have to say that I doubt that it would be because, of course, the normal practice in your Lordships' House is that uncontroversial orders go through in a couple of minutes. Then it was said that in any event the order could be put through by the negative procedure under Section 2 of the European Communities Act 1972. That in fact is not true as that could be done only if the maximum sentence for non-disclosure was limited to two years. In fact, it is five years. Section 2 of the 1972 Act allows statutory instruments to be put through only if they impose penalties for offences limited to two years' imprisonment. In any event, the European Communities Act gives the Government the option to
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use either the affirmative or negative procedure. It would surely therefore be appropriate in this case to use the affirmative procedure.
Any order which amends primary legislation in order to impose serious new burdens on thousands of law firms, accountancy firms and other professional businesses, should be debated, however justified those new burdens may be. I beg to move.
11.15 p.m.
Baroness Buscombe: My Lords, we support the amendment.
Lord Falconer of Thoroton: My Lords, it is late but in view of what was said on in Committee, we should recognise that this is an important issue. I shall discuss it for slightly longer than one would expect at this time of night.
It is anticipated that the order-making power will be used to keep the scope of the legislation in line with future extensions of the regulations, which may bring in other sectors that are not presently regulated. I note that the noble Lord's main concerns, which are similar to those of the Delegated Powers and Regulatory Reform Committee, are mainly due to the fact that the intention is that the power will be used to implement the necessary changes following on from the implementation of the 2nd European Money Laundering Directive. Implementation of the directive will bring the activities of accountants, auditors, tax advisors, lawyers (except in circumstances of legal privilege), real estate agents, casinos and dealers of high-value goods within the scope of Schedule 9 and the provisions of Part 7.
The noble Lord will of course be aware that the regulations (and hence the criminal law) will be amended simply in order to fulfil our international obligations as set out in the directive, which has of course been considered and cleared by scrutiny committees in the Commons and the Lords.
I make it clear from the outset that, for that and other reasons, we are still not minded to accept the noble Lord's amendment or the recommendations of the Delegated Powers and Regulatory Reform Committee in this respect. My noble friend Lord Rooker wrote to the noble Lord, Lord Dahrendorf, setting out our position on this issue on 30th April. A copy of his letter has been placed in the Library of the House.
As set out in paragraphs 84 and 85 of the Home Office's memorandum to the Delegated Powers and Regulatory Reform Committee, the Treasury can currently change the definition of business in the regulated sector, which is set out in the Money Laundering Regulations 1993 by order subject to the negative resolution procedure under the European Communities Act 1972. That covers issues such as the requirement to establish systems for suspicious transaction reports, keeping records, undertaking training and appointing designated money laundering reporting officers.

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The point has been made in Committee by the noble Lord, Lord Thomas of Gresford, and, today, by the noble Lord, Lord Goodhart, that the European Communities Act cannot he used to create offences where the penalties are more than two years and that we should therefore not argue that the Schedule 9 power should have the same procedure as the money laundering regulations that are made under the European Communities Act and which contain penalties of only two years. However, we disagree with that line of argument. We are not trying to say that the provisions in the Bill are the same as the Money Laundering Regulations. Nor are we creating offences by way of secondary legislation—we would be making changes to what constitutes the regulated sector for the purpose of the Act and changes to the list of supervisory authorities. The important point to bear in mind is that we need to ensure that the two definitions of the regulated sector are kept the same for practical purposes.
We do not think that it would be sensible to have one definition of the regulated sector for the purpose of the Money Laundering Regulations and another definition for the requirement in the Bill to make suspicious transaction reports when there were "reasonable grounds to suspect" involvement in money laundering. That is the outcome that we risk if we make one order subject to affirmative resolution because there would be the potential for the definitions to get out of step while waiting for the affirmative order to be approved.
Minor, technical changes to the Money Laundering Regulations have been required relatively frequently and will in future be replicated by amendments to Schedule 9. We do not consider it to be an appropriate use of valuable parliamentary time to require a debate every time such technical changes to the wording of the regulations prove necessary.
In the light of my explanation, I hope that the noble Lord will feel able to withdraw his amendment and not press it at a later stage.
Lord Goodhart: My Lords, I am somewhat disappointed. Some of the arguments of the noble and learned Lord are incorrect. For example, he said that it does not matter that there is a five-year penalty under the new money laundering legislation, that the provisions do not introduce a new offence and that they simply include additional people under the scope of the old offence. On the use of the powers of the European Communities Act, that is a distinction without a difference. What matters here is that the regulations are being used to extend what is possibly an existing offence to a new group of people. It seems to me that that cannot be done where the maximum penalty for the offence is more than two years.
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So far as concerns the issue of the two definitions getting out of step, that argument was raised in Committee. However, frankly, it is not an argument that I find of much assistance here. If the Government felt that it was that important to keep the two definitions in step, surely they could do so under the procedure for introducing an affirmative resolution which takes effect immediately but is discontinued unless it is approved by a resolution of both Houses within a 40-day period. Therefore, I do not view that as a serious argument.
I am concerned at the Government's attitude. I know that the provision is made in pursuit of our international obligations, but not all of it is subject to the necessity to accept those obligations. For example, I do not believe that the directive lays down a requirement as to the period of sentence. In those circumstances, I regret that the Government have not seen fit to accept the amendment. It would certainly have no effect on the substance of the Bill but would provide an appropriate opportunity to debate what will be a very important order. It will have more effect on more businesses than do many forms of primary legislation.
We shall consider what the noble and learned Lord has said but may well return to the matter. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Falconer of Thorotonmoved Amendment No. 230:
Page 265, line 21, after "289(4)," insert "(Other exemptions)".
On Question, amendment agreed to.
Lord Falconer of Thorotonmoved Amendment No. 231:
Page 265, line 21, after "289(4)," insert "359(4).".
The noble and learned Lord said: My Lords, this amendment makes the order-making power to amend the definition of "customer information" subject to the affirmative resolution procedure, as recommended by the Delegated Powers and Regulatory Reform Committee of this House in its 16th report. I beg to move.
On Question, amendment agreed to.
[Amendment No. 232 not moved]

Export Control Bill
Bill returned from the Commons with certain amendments disagreed to with reasons for such disagreement, with other amendments agreed to with amendments, and with the remaining amendments agreed to.
House adjourned at twenty-three minutes past eleven o'clock.