Lords Sitting of 3 July 2003

Preamble
The House met at eleven of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.
Prayers—Read by the Lord Bishop of Portsmouth.

Local Government Bill
The Minister of State, Office of the Deputy Prime Minister (Lord Rooker): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the amendments for the Report stage be marshalled and considered in the following order:

Clauses 94 to 101,

Schedule 3,

Clauses 102 to 106,

Schedule 4,

Clause 107,

Schedule 5,

Clauses 108 to 121,

Clauses 1 to 19,

Schedule 1,

Clauses 20 to 42,

Schedule 2,

Clauses 43 to 93,

Clauses 122 to 126,

Schedules 6 and 7,

Clauses 127 and 128.—(Lord Rooker.)

On Question, Motion agreed to.

Speakership of the House
11.6 a.m.
The Lord President of the Council (Lord Williams of Mostyn): My Lords, I beg to move the Motion standing in my name on the Order Paper. The Motion has been agreed after the usual discussions, and I think that it explains itself.
Your Lordships will have seen that the noble Lord, Lord Elton, has tabled two amendments. Perhaps it may be convenient, when I sit down and the Question on my Motion has been put, for the noble Lord, Lord Elton—I have spoken to him about it—to move the first of his amendments and to speak to them both. After your Lordships have made contributions, I shall do my best to reply to the points made. The noble Lord, Lord Elton, will then come to a conclusion on what he wishes to do about his amendments. Finally, we will decide the main Question. I beg to move.
Moved, That it is expedient that a Select Committee of 11 Lords be appointed to consider the future arrangements for the Speakership of the House in the light of the Government's announcement that it is intended to reform the office of Lord Chancellor, and
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to make recommendations; and that the committee shall report by the end of the Session.—(Lord Williams of Mostyn.)
Lord Eltonrose to move, as an amendment to the Motion, after "Chancellor" insert "and any undertakings given by the Government as to the future allocation of places in the Cabinet to Members of the House of Lords".
The noble Lord said: My Lords, in moving the first amendment, I shall, as the noble and learned Lord the Leader of the House suggested, speak also to the second. Your Lordships will realise that the Motions deal with separate, distinct points, so the way in which we deal with them at the end of the debate may be different.
The issues to which I ask your Lordships to give some thought concern this House and the Government. By that, I mean the whole House and all future governments, as well as the present one—not just the one that we happen to have at the moment. The need for the Motion arises from the decision of the Government to reform the office of our present Speaker, the noble and learned Lord the Lord Chancellor. By virtue of his office as Lord Chancellor, our present Speaker has a seat in Cabinet, as well as one on the Woolsack. He is one of the distinguished voices linking the House directly with the top echelon of government. The strength of that link is important to the House as a whole and is also important to any government in office.
At present, we are richly endowed with voices: we have no fewer than four. It was not always so, nor will it always be so in the future. When there is suitable talent waiting hungrily for preferment in another place, no government will be over-keen to award Cabinet seats to Peers. In the past, as my noble friend Lord Carrington pointed out before the Motion was drafted, we have often been reduced to the bare minimum number of such voices. That number has for long been two: one for the Leader of the House for the time being and the other for the Lord Chancellor for the time being, who is, ex officio, our Speaker. That is no accident. It is because of the duties that they perform that both our Leader and our Speaker have had to be members of the Cabinet. Again, it is because of the duties that they perform that they have both had to be Members of this House.
We understand—not by way of a White Paper—that the Government's intention is that the greater part of our Speaker's responsibilities in his role as Lord Chancellor and of any successor in his office will be taken away from this House. If, for instance, the judiciary is to be separated from Parliament and, specifically, from the House of Lords, there will be no obvious call for the head of the judiciary to sit in either House. There will be no more reason for a Minister of justice to sit in this House than for a Home Secretary or any other Secretary of State. Be it whispered in his august absence, if the Secretary of State for Constitutional Affairs were to fall ill or, even less imaginable, if he were to be overtaken in brilliance and

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usefulness by someone in another place, that person could and, indeed, would take over the job without joining this House in order to do so.
The office of Speaker and the functions of Lord Chancellor are combined in one person. It is our Lord Chancellor's powers, not his person, that secure a Cabinet seat for our Speaker. Separate the office of Speaker from the powers of the Lord Chancellor and, no matter what happens to those powers or to whom they may be given, our Speaker's claim to that seat is gone, and the barest minimum representation of the House in Cabinet will be reduced to one.
No one who has sat in a Cabinet Committee as a Peer, as I have sometimes done, let alone in Cabinet itself, as my noble friend Lord Waddington has often done—he was about to put his name to my Motion, but, apparently, that is not how such Motions are attributed—can be under any illusion that it is a very hard job to make the rest of that committee or Cabinet understand or care how this House works, what it can and cannot be persuaded to accept, or to accord some of your Lordships' opinions the value—even, dare I say it, sometimes the political value—that they deserve.
With no second voice to back him up and bear him out, the noble and learned Lord the Leader of the House could not be even half as effective in Cabinet as he now appears to be to all of us. I say that with no disrespect to him. It is a fact of committee life. We are not concerned only with today's Leader of the House; these provisions will affect all our Leaders to come, even those less able than himself. The word "even" was slipped in by mistake; there was no intention to be pejorative in that remark. The Government—all governments—would lose by that, and so would this House, in all the Sessions to come.
Some of your Lordships still think that choosing some way—any way—of appointing a Speaker to do what any Chairman or Deputy Chairman can already do in this House and, perhaps, to dress up in fancy clothes and process on state occasions, is a freestanding decision; it is not. Once we acquiesce, without any compensating gain, in the separation of these two roles, we acquiesce in the downgrading of our Speaker and of this House. The Select Committee that we are about to appoint ought not to proceed without a clear statement of its freedom to consider the implications of this and to make recommendations in that light.
I have spoken of the powers, duties and privileges of the Lord Chancellor, and that brings me to my second amendment about which I can speak much more briefly because I believe that the point is already better taken. I hope that I have already shown that we cannot really come to a conclusion about what or who to replace our present Speaker with until we know how many, and which, of the powers, duties and privileges now vested in the holder of the combined office of Speaker and Lord Chancellor will remain with our Speaker when the Lord Chancellor has gone, or has been stripped of his power.
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I had thought that this would be information readily available, but I gather that the task of the Government informing themselves of what those duties, privileges and powers actually are has proved greater than they expected. There appears still to be some doubt as to what they are and some difficulty, therefore, in deciding what to do with them. I do not wish to tease the Government about this—that is not true; I do wish to but I shall refrain from so doing—but I suggest that surely at the least our committee must be given the full list of duties, privileges and powers before it is asked to come to a conclusion.
If, as is rumoured, that list runs to over a thousand in primary legislation and thousands more in secondary legislation, it may well not be ready before the end of the Session. My second amendment, therefore, seeks to delete the requirement to report before the end of the Session and to substitute it with a bar to reporting before the complete list of powers, duties and privileges has been published and considered.
My first amendment touches on the efficiency of parliamentary government and the power and authority of this House. The second addresses the need to ensure that the Select Committee is fully informed on the matter about which it is instructed to advise us before it gives that advice, which seems a pretty simple request. I await the advice of your Lordships on both matters, and I beg to move.
Moved, as an amendment to the Motion, after "Chancellor" insert "and any undertakings given by the Government as to the future allocation of places in the Cabinet to Members of the House of Lords".—(Lord Elton.)
11.15 a.m.
Lord Waddington: My Lords, I rise to speak briefly to the amendment moved by my noble friend, which I support. For some years, the Government seem to have devoted much effort to changing the working methods of the House of Commons, which has had the effect of greatly reducing its effectiveness. They have certainly succeeded to the extent that, as a result of government guillotines on all Bills, those Bills are coming over here after totally inadequate consideration in the other place.
Anyone who doubts this should look at the Criminal Justice Bill where, as was pointed out by my noble and learned friend Lord Mayhew of Twysden at Second Reading, four new clauses and two schedules received no examination at all in the other place. Let us consider the Northern Ireland Assembly Elections Bill, which received virtually no scrutiny in the Commons. As a consequence, we are left to do the work which should have been done elsewhere and we are told by Mr Hain that that is nothing to our credit, but is just an example of our filibustering habits.
I hope that, from time to time, the Leader of the House makes the point in Cabinet that we are performing an ever more important role, not least because of the dismal changes made in the Commons, and that it would be a sad and a bad thing—and

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inconsistent with what the noble and learned Lord the Leader of the House has said; he has spoken of his determination to see a renewal and invigoration of this place—if, having lost the Lord Chancellor—
Lord Dubs: My Lords, I thank the noble Lord for giving way. I understand what he is saying, but I cannot make the connection between his arguments and the amendment that we are now discussing.
Lord Waddington: My Lords, perhaps I may say that the noble Lord lacks patience. I have not spoken for very long and what that connection is will soon be made apparent to him.
It would be a very bad thing if, having lost the Lord Chancellor as a sturdy advocate of this place in Cabinet, we were to finish up with there being only one Member of this House in Cabinet; that is, the Leader of the House. This place would be seriously weakened vis-à-vis the Commons, and it is small wonder that my noble friend Lord Carrington expressed his concerns about this in his remarks on 25th June (at col. 298 of the Official Report). Given his wealth of experience, we should take heed of his wise words.
Of course I have no doubt that the noble and learned Lord, Lord Falconer of Thoroton, will remain in this place when his role changes. He has nowhere else to go. But there is no reason to think that a Secretary of State for Constitutional Affairs will always, or even normally, sit in the Lords. So we are entitled to some assurance from the Government that this House will not be left with only one Cabinet Minister.
Certainly the Select Committee, when considering what arrangements should be made for the Speakership of this place, should have regard to this important matter, which is the point of the amendment. With the Motion amended as suggested, the Select Committee would be able to report that, in its view, the noble and learned Lord, Lord Falconer, should continue to sit on the Woolsack until appropriate assurances are given by the Government.
Lord Craig of Radley: My Lords, first, perhaps I may welcome the proposal in the Motion in the name of the Lord President of the Council that the Speakership Select Committee should consist of 11 Peers. This will allow the Committee of Selection to consider nominations for three Cross-Bench Peers. Noble Lords will be aware that the Cross Benches have been arguing for some time that their numbers are not always fairly or proportionately represented on Select and other Committees of your Lordships' House.
The split of 4:4:2:2, or a 3:3:2:2 split, are still the default choices of the parties. But these no longer reflect the size of the Cross-Bench group and the increasing contribution to the work of this House made from these Benches or from the Bishops' Bench. I hope that your Lordships will agree that the move to form this committee of 11 members, split 3:3:2:3, is a sound one. It is right for this topic and sets a standard that should be considered and adopted on future
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occasions to enable the contributions that can be made from these Benches to be spread more equitably across the commitments of this House as a whole.
Turning to the amendments tabled by the noble Lord, Lord Elton, I share the concern that lies behind his first amendment. The major changes that have been made, and may continue to be made, in the functions and roles of the upper House can amount in sum to diminishing the standing and ethos of the House of Lords.
Whatever the political and legal arguments that favour a supreme court, the loss of the Law Lords as a part of this House would be highly symbolic. If the many changes made to, or in prospect for, the House are not to lead to a permanent degradation of its position as an authoritative and respected part of the legislature, of Parliament and of the nation, key features need to be identified and retained.
I share the view that for the House and Government to function in the interests of the Queen's subjects there need to be routes for the exchange of information and ideas. So I support the first amendment of the noble Lord, Lord Elton.
As to his second amendment, I take it as self-evident that the Select Committee should, as part of its remit, consider the points about the Lord Chancellor raised by the amendment. Their bearing, or their non-bearing, on the issue of a Speaker and the roles and responsibilities that go with that post should not be ignored in arriving at recommendations.
The other point in the amendment is that the time to report is no longer explicit, but is it not more important to have this major issue studied thoroughly and to get any changes right rather than to hurry it and fail to give it the consideration that it rightly deserves? We are contemplating a major change to longstanding arrangements that have stood the test of time and served the House well.
It might be that the approach that would find favour is to give the Select Committee the requirement to make a progress report to the House by the end of the Session and to estimate, if by then it is realised that it is necessary to carry out further work, how long before its complete report will become available. After three months it should be in a far better position than the House is in at the moment to judge the scope and scale of its task. I hope that the Lord President will not feel that timetable is more important than substance and will be minded to agree this modification to his approach for the Select Committee.
I remind the House that the estimate made for undertaking the Leader's Group review of working practices took more than twice as long to complete than had been originally envisaged by the Leader—and that was a far less complex task than the Speakership Select Committee is about to embark upon. The list of issues to be studied is already long and will no doubt grow as the work progresses. I wish the Select Committee well in its endeavours.
Lord Acton: My Lords, I wish to raise a point raised to me by the noble Lord, Lord Allen of Abbeydale, who has immense experience. He wanted to raise the point when the noble Lord, Lord Carrington, referred to the matter originally but he did not get to his feet.
The noble Lord tells me that it is not true that the Lord Chancellor is invariably a member of the Cabinet. When Viscount Simon, the grandfather of my noble friend, was Lord Chancellor, he was neither a member of the wartime Cabinet nor, after the coalition broke up, a member of the Churchill Cabinet thereafter. I thought it worth bringing this to your Lordships' attention.
The Earl of Onslow: My Lords, this issue is an example of the real back-of-the-envelope, cannot-think-of-anything-else-to-do syndrome, where the word "modernisation" flashed before the Prime Minster's eyes as he dashed from Iraq to Europe to somewhere else. There was no greater example of the lack of thought given to constitutional reform than the half-baked reform of your Lordships' House and the total failure to address the West Lothian question.
The brutal and licentious soldiery has a word which I would not dream of allowing to pass my lips in the House. It is a word which is used for thought or absence of thought. The Government, I suggest, use the word "modernisation" in exactly the way that the brutal and licentious soldiery use the word that I would not dream of allowing to pass my lips.
I beg the noble and learned Lord, please take a grip, agree with what my noble friend Lord Elton says and give this half-baked idea—as it seems to me at first sight—further consideration. It is unnecessary and there has been no pressure to introduce it. Perhaps the noble and learned Lord can tell us how many delegations have been banging on his door and saying, "Please, reform the Speakership of the House of Lords". Not very many, I suggest.
The noble and learned Lord said that it is unfair that he or other Ministers should say which Peers should speak. In all the 30 or so years that I have been in your Lordships' House, the late Lord Shackleton, Lord Shepherd, Lord Carrington—who is not late—the noble and learned Lord, Lord Williams, and his predecessors have all shown integrity and justice and regard for the interests of the House. There is no need for the Government now to come over all coy and introduce change for change's sake.
How many judges do the Government want to sack because they feel that the method of appointment has been wrong? Is the Bench of Judges rotten? Is it full of corruption and nepotism, with people putting fines into their own back pockets or Swiss bank accounts? Of course it is not. The Bench of Judges at the moment is of as high a standard—or so my judicial friends tell me—as it has been for 100 years. So, if it is, what on earth is wrong with the method of appointment? How many will be asked to leave because they will not be up to scratch when the supreme court is established? Could it be that when they speak on criminal matters the Government find it embarrassing to listen to views
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to which they are not well pleased to adhere? Is that one of the reasons they do not wish to have them in your Lordships' Chamber? The system works perfectly well. So, if we are to change it, let us give the issue proper thought and consideration.
I always know when the Government believe someone is talking right because their members start giggling between each other—and they have just started now.
After that diatribe, I welcome the support that I shall give to my noble friend Lord Elton.
Lord Dubs: My Lords, we laughed because we thought the noble Earl had made a good joke. We laughed in appreciation of his sense of humour. If that was misplaced, I owe him an apology, but that was the sense we had on these Benches.
The noble Earl having provoked me into intervening, perhaps I may very briefly make a comment. I do not understand—I bow to the experience of noble Lords who have been around a lot longer than I have and who have been in the House for many years longer—how any government can give an undertaking as to the future composition of their Cabinet. No government in history could have possibly done that. It seems to me that the first amendment is not on the mark in that respect.
As regards the second amendment, given that it refers to the office of Lord Chancellor and not to the way in which we conduct our arrangements in this House, it is a recipe for endless discussions dealing with the hundreds of years of history associated with the Lord Chancellor. The amendment appears calculated to delay matters indefinitely. I hope that the House will not be impressed by either of the amendments.
In any case, I suggest, very gently, that if we were dealing with these matters in another place—and I know that we are not—every speech, with the exception of that of my noble friend Lord Acton, and possibly mine, would have been out of order.
Lord Alexander of Weedon: My Lords, in that case I shall try to speak very briefly and mainly to the point, even in the high view of the noble Lord, Lord Dubs.
Let me make one point that I know will appeal—because I know him well—to the noble and learned Lord the Lord President. The most concerning point arising out of these proposed reforms—which I am sure all noble Lords will agree we should consider extremely carefully—is how we will preserve the independence of the judiciary. In the past that has been done—and done magnificently—by successive Lords Chancellor of each political party. No one has done that better, as I know from talks with the senior judiciary, than the noble and learned Lord, Lord Irvine of Lairg.
That will continue to be the position until we know what will be the form of any proposed independent commission on the judiciary and. crucially, which Minister will be responsible for appointing judges on the recommendation of the commission and what the criteria will be for the appointment both of the

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commission and the judiciary. Until that time, the Lord Chancellor carries that same responsibility. It is at least possible that some will, in time, want to explore whether a Lord Chancellor, who may not and probably should not be a Minister in the Cabinet, should still carry that responsibility.
The Lord President has spoken about reforming the role of the Lord Chancellor. We do not know what that reformed role will be. We know that his present role is complex and will have to be examined carefully before we know what the reformed role should be. I suggest to all colleagues in the House that on this crucial topic, we should not decide whether the Lord Chancellor should cease to be our Speaker until we know what responsibility he may continue to carry in the future for the independence of the judiciary and how that fits with his objective participation in the affairs of this House. That is why I passionately support the second amendment raised by my noble friend Lord Elton.
11.30 a.m.
Lord King of Bridgwater: My Lords, I pay tribute to the Lord President. He has inherited a situation that he did not create which has been quite uniquely criticised by three former Cabinet Secretaries as a disgraceful example of public administration. He has been very open to listening to views of Members of your Lordships' House and now presents a Motion which is the outcome of some of the representations made to him.
I do not know what attitude the noble and learned Lord proposes to take to the amendments to his Motion, but I urge him, in the spirit in which he has launched on the recovery programme to try to get this back on a sensible basis, to look at them very sympathetically. I say to the noble Lord, Lord Dubs, that the amendment does not actually ask the Government to come up with an answer for the Select Committee about how many members of the Cabinet shall sit in your Lordships' House. It suggests that the committee should be able to consider any representations that the Government may wish to make, although they may not make any. The committee may be able to make some helpful suggestions on this point.
I have a personal memory of this, because my own arrival in the Cabinet was postponed. The noble Baroness, Lady Thatcher, had it in mind to appoint me to a certain post in the Cabinet, at which moment those Members of your Lordships' House then present on the Government Benches deputed to the Prime Minister and said it was outrageous that their Lordships were under-represented, and I was invited to stand down while the noble Lord, Lord Cockfield, was promoted to that position. It was felt strongly at that time—and I therefore had to accept that it must have been a wise decision taken by a very intelligent Prime Minister—that your Lordships' House should be properly represented.
Having sat in the Cabinet, as I did for a number of years, and having come to your Lordships' House, I entirely accept the point which I think even the noble and
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learned Lord the Lord President has admitted at times—that there is a fairly stupefying ignorance in the Commons and among many Cabinet Ministers about the procedures, performance and significance of your Lordships' House. I certainly think that if there was any suggestion that the representation from this House should ever be reduced to one, that would make the position of the occupant of the post of Lord President—the Leader of the House—extremely difficult.
This is the most gentle of amendments which refers to considering any representations that might be made. It is a serious point, and I should have thought a listening government would be quite happy to hear the views of the committee. Those views will not be binding—the only suggestion the committee has to make is how that particular problem could be addressed.
Lord Peston: My Lords, I speak in support of my noble friend Lord Dubs. I had regarded myself as very open-minded on the Speakership until I heard the speeches from noble Lords opposite. I echo entirely the views of my noble friend. I am amazed that the two amendments are in order, but if the Clerks have allowed them to be put down, they must be. However, the speeches have not, in my judgment, been remotely in order. I entirely agree with my noble friend that if we had anybody resembling a Speaker, he or she would have been on their feet long before now, merely asking noble Lords to speak about the subject before them and not decide to have a major debate on a government policy which we are in no position yet to debate. I have no intention of responding to or criticising any of the speeches because that would be to add to the possibility that they were remotely within the scope of what we should be debating.
Secondly, I regard this as simply a delaying tactic to prevent the committee doing the quite minor technical job—
Noble Lords: Oh.
Lord Peston: My Lords, I notice the shaking of heads, but we have been asked to consider matters such as the independence of the judiciary, the composition of the Cabinet—I have a list of all the topics that have been raised. This is not a debate about those subjects. I would be very interested to have a debate on the Government's policy when they are ready to bring it before us, and many of us will take part. But this is about the setting up of a fairly simple committee. The one good bit about this is the recognition that we have an enormous number of Cross-Benchers and that, for once, there will be three on the committee instead of two. That is the only plus that I can see in the contributions.
Can we, for once, talk about what is before us? I think the noble Earl, Lord Onslow, said that the system works perfectly well. I do not know where he has been for the past two or three years, but the system is working badly and is getting worse. We are breaking all our rules of self-government and self-regulation, and we have been doing it for far too long. That is one

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of the reasons why we are considering these matters. Would noble Lords be good enough to talk about the subject before us, for once, and not use this occasion as a basis for talking about everything else under the sun that concerns them. I certainly think we should reject both of the amendments on the grounds that they are not helpful in any way whatever with regard to our making some progress. When the time comes, we might well get around to debating the substantive issue when, eventually, the Government put forward their proposals and we can look at them in detail.
The Lord Bishop of Portsmouth: My Lords, I am sure that many of your Lordships will, in spite of your reservations, want to wish the work and outcome of this committee well. I am grateful that the House is proceeding along the proper course. That will go some way towards reassuring those inside this House, in another place and in the country generally about the somewhat amateurish way—if I may put it so—that the announcement was made about the Lord Chancellorship at the time of the reshuffle. I congratulate the noble and learned Lord the Lord President on the way in which he has handled the matter since then.
There are wide-ranging constitutional and symbolic implications in the proposal to abolish the Lord Chancellorship. I do not naturally think, à la "Yes, Prime Minister", that nothing must ever be done for the first time. I hope all these issues have a full and proper airing in the deliberations of the Select Committee, and I am sure they will.
I sense a certain amount of resurgent frustration being expressed in this debate which goes back to the way in which things were handled originally. We are, as the noble Lord, Lord Peston, has said, beginning to have a debate prematurely. This is a matter of process, and I think the process should be allowed to go forward.
With regard to the amendments, I follow the view of the noble and gallant Lord, Lord Craig of Radley, that the first has some sense to it. However, I think that it would tie the hands of the Select Committee unduly and would not predispose it in any particular direction. My verdict, using my Scottish blood, is "not proven", which is a nice dodge in Scottish law.
The second amendment is implicit in any committee's work in looking at the future of the Lord Chancellorship. It will be recalled that when the Joint Committee was set up last year to take further the reform of your Lordships' House, my friend and colleague, the right reverend Prelate the Bishop of Guildford, spoke for these Benches in voicing our disappointment that there was no Bishop on it. If I may say so, that resentment still stands. On this Select Committee, however, these Benches are content to register our support for what is before us in principle without predisposing either what the Select Committee comes up with or indeed the proper debate that needs to take place at a future date, with the hope that we may be able to offer assistance in the usual way to the work of that committee.
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The assistance would be in two areas, the first of which would obviously be the ecclesiastical implications. I am interested to hear this gathering list of the Lord Chancellor's responsibilities, which includes patronage of 500 livings and 12 canonries—over which I doubt many noble Lords will want to lose much sleep. However, the list is quite long. I am guessing that the work of this committee will be quite onerous as the list will grow ever longer and all these issues will need to be examined, not in this debate but in the work of the committee. There are also wider implications to do with the constitution of this country. It is in that area that I hope that all Members of your Lordships' House will find ways of feeding their views into the committee's work.
I wish the Select Committee well. It feels a little like handling on the floor of a General Synod a motion about the future of the world. However, I hope that the committee comes up with some good proposals which we can then debate in the proper way.
Lord Strathclyde: My Lords, the noble Lord, Lord Peston, may have thought he was being helpful, but he has inadvertently put his finger on precisely what is the problem with this whole debate: we have not yet had a proper debate about the Government's announcement. We have had two Statements in which Back-Benchers were limited to only 20 minutes. This is the first opportunity that anyone has had to say anything outside the normal time limits. It is entirely appropriate for noble Lords on all sides of the House to wish to offer advice to the Select Committee when it is set up.
Having said that, when we debated this issue last week, I said that I greatly welcomed the decision by the noble and learned Lord the Lord President of the Council that there would be a Select Committee to debate this issue. That is infinitely preferable to setting up either a Leader's Group or a sub-committee of the Procedure Committee. That is the reason why we now have this Motion before us.
It is also a sign of the real concerns which many Members of this House have about the future role of the Speaker that so many have chosen to speak today, with perhaps even more to follow, and that two amendments have been tabled by my noble friend Lord Elton. I hope very much that the noble and learned Lord the Leader of the House will be able to give some comfort to my noble friend so that he will not need to press those amendments.
On the question of reporting back, I thought that my noble friend Lord Alexander of Weedon made a most important point. The Select Committee will be unable to come to a conclusion about all these matters until it has seen a full list of the duties and responsibilities of the Lord Chancellor. One cannot decide what the future role of the Speaker is unless one knows what the Speaker is supposed to do and what the Government intend to do with all the remaining roles of the Lord Chancellor. I therefore hope that the noble and learned Lord will be able to tell us when that list will be available and whether or not, when the Lord Chancellor comes to make his statements on the

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appointments commission and the future of the Lord Chancellor's role vis-à-vis the judiciary, a Statement will be made to this House.
Perhaps the noble and learned Lord can also confirm that much of this problem could have been solved if the Government had come forward right at the very beginning with a fully thought-through White Paper that could have been debated before being sent to a Select Committee.
Viscount Bledisloe: My Lords—
Lord Goodhart: My Lords—
Noble Lords: Cross-Bench!
Lord Williams of Mostyn: My Lords, I do not think that we have had a contribution from the Liberal Democrats, or if we did, I missed it.
11.45 a.m.
Lord Goodhart: My Lords, we have made clear from these Benches that we are entirely in favour of the principle of the changes which the Government are proposing to make; indeed, we suggest they do not go far enough in respect of the creation of a ministry of justice. At the same time, however, we have also made clear that we are deeply unhappy with the way in which the changes have been introduced. I therefore have some understanding of why the noble Lord, Lord Elton, has chosen to table his amendments and why they have received support from Members of the House.
Of those in favour of the amendments, the speech I found the most impressive, not unexpectedly, was that of the noble Lord, Lord Alexander of Weedon. I think he makes the entirely legitimate point that these reforms should include consideration of whether someone who is a Member of your Lordships' House is given a special responsibility to act as guardian of the independence of the judiciary. That matter certainly needs to be considered at some stage. However, I do not think that it needs to be considered as part of the responsibilities of this Select Committee. It seems to me that even if it is appropriate, as it may well be, to create the role of guardian of the judiciary, there is absolutely no reason why the person performing that role should also be required to preside for half an hour a day over the sittings of your Lordships' House.
The Earl of Onslow: My Lords, is not that man called the Lord Chancellor, and does he not do it rather well already?
Lord Goodhart: My Lords, that is entirely different. The Lord Chancellor has undoubtedly acted, as the noble Lord, Lord Alexander, said, in an outstanding role as the protector of the independence of the judiciary. However, I think that his role as Speaker of your Lordships' House is one that scarcely taxed his abilities. Indeed, I suspect that he may himself have regarded it as not the most important of his functions. I therefore believe that that is an issue for another time.
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On the first amendment, I understand that it is plainly desirable that the Cabinet should understand the workings of the House of Lords. It is of course true that many Ministers are Members of the House of Lords and will continue to be Ministers. I should also point out, first, as is already recognised, that the Government cannot bind any future government with any undertakings they give on this occasion. Secondly, it is also fair to point out that the role of Lord Chancellor has not always been a strongly political one. While some holders of that office such as the late Lord Hailsham had been very distinguished politicians with a previous history of sitting in the Cabinet in other posts, others such as the noble and learned Lord, Lord Mackay of Clashfern, have come with very little political experience and are widely believed to have played very little part in Cabinet outside matters of direct concern to their own department. So I do not think that what is proposed here will necessarily lead to a result that has not already happened.
On the second amendment, I agree with the right reverend Prelate the Bishop of Portsmouth, who made a very clear and very sensible speech. This proposal is, I think, necessarily implicit in the role of the Select Committee. I assume that it is not beyond the capacity of the Lord Chancellor's Department, as it was—or DCAFF, as I suppose we are now to call it—to produce a list of those functions in time for the first or at any rate the second sitting of the Select Committee.
So while we on these Benches have sympathy with the motives behind the amendments, we do not believe that they are necessary and we would not support them.
Viscount Bledisloe: My Lords, in a speech that was wholly in order and totally to the point, the noble Lord, Lord Elton, pointed out how intricately intertwined are all the various proposals that stem from the Government's desire to revise the various roles of the Lord Chancellor. I must confess that I fail to understand the urgency of changing the Speakership of the House which renders it necessary to come first. If the noble and learned Lord, Lord Falconer, is too busy to attend the House as regularly as his predecessor, no doubt leave of absence can more readily be given. However, to take that aspect on its own and sort it out without knowing where the Government are going on any of the other points is madness.
I accept that some of the points made by the noble Lord, Lord Elton, and other noble Lords relate to other functions of the Lord Chancellor. Until we know what the Government propose to do about those functions, we cannot know how they should be intertwined with the function not merely of sitting on the Woolsack, but of the representation of this House and so forth.
It is highly desirable that the Select Committee should not proceed too speedily. Not only should it wait until we have a list of the various things that the Lord Chancellor does; we should also have some idea of what the Government intend to do about those

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functions. Therefore, in its substance, I very much support the second amendment in the name of the noble Lord, Lord Elton.
I venture to suggest that the matter might not be as urgent as is suggested. Although the Motion in the name of the Lord President requires that the committee shall report at the end of the Session, it in no way has to be a final report. If the committee considers that it needs to investigate and know about the other functions, it can produce an interim report. The substance of the matter must be that we should not decide on the Speakership on its own until we know where the Government are going on the Lord Chancellor's other functions.
Lord Geddes: My Lords, when one rises in your Lordships' House, it is not unusual to say, "I shall be brief", only for the opposite to happen, but I shall be. I want to reinforce the points made by the noble and gallant Lord the Convenor of the Cross Benches and the right reverend Prelate the Bishop of Portsmouth.
We are talking about the role of the Speakership of the House. The present Speaker of the House is the Lord Chancellor, and I cannot conceive how we can talk about that role until we know what are the other roles of the Lord Chancellor in this context.
Lord Marlesford: My Lords, the noble Lord, Lord Dubs, will be rather pleased that I intend to focus wholly on the proposal in front of us. However, I did detect what seemed to me a rather ugly undertone in remarks made by some noble Lords suggesting that they would have liked a Speaker on the Woolsack who would have prevented this debate taking place.
Lord Peston: My Lords, I do not like the use of the word ugly, but being acerbic myself I never mind about the language. However, the noble Lord, Lord Marlesford, should not be in any doubt: I would like to have a Speaker who asks noble Lords to speak to the subject before us. That seems entirely reasonable.
Lord Marlesford: My Lords, that is what I am doing. The Motion says that the Select Committee should be set up in the light of the Government's announcement, and I quote the carefully chosen words of the Lord President,
"to reform the office of Lord Chancellor".
It does not talk of abolishing the office of Lord Chancellor. Therefore, the only relevance of having a committee on the Speakership of this House in that context is to consider whether the Lord Chancellor will be able to continue to perform the functions of Speaker.
The noble Lord, Lord Goodhart, made a good point when he said that we should consider the burden involved. I put down a Written Question to the Leader of the House to ask how many minutes in every hour that the Woolsack is occupied it is occupied by the Lord Chancellor. That seems to me quite relevant in trying to discover how much of a burden being Speaker is on the Lord Chancellor.
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Meanwhile, it is probably unnecessary to have an inquiry that goes any wider than the question of whether, while the office of Lord Chancellor exists, the Lord Chancellor will be able to continue to fulfil the functions of the Speaker. I suspect that the bigger and wider agenda is part of the general aim to disarm this House, just as the other place has been disarmed, and to have an end to the self-regulation of this House. I hope that that will not be part of the remit of the Select Committee.
Lord Ackner: My Lords—
Lord Williams of Mostyn: My Lords—
Noble Lords: Ackner!
Lord Ackner: My Lords, my timid and deferential observations will be very short. I back the first amendment for the reasons given by the noble and gallant Lord the Convenor. With regard to the second amendment, which, from my point of view is much more important, the Government have apparently decided not to set up a ministry of justice.
In a Written Question filed three days ago, I asked which of the Lord Chancellor's functions relative to the administration of justice—especially criminal justice—will be transferred to the Home Office or to the new Department of Environmental Affairs.
Noble Lords: Constitutional Affairs.
Lord Ackner: Constitutional Affairs, my Lords. That is of considerable importance, because there is a strong feeling, which was voiced very quietly by the noble Lord, Lord Alexander, in an admirable article three days ago in The Times supplement on the law, that one of the purposes—if not the main purpose of this legislation—is excessively to increase the powers of the Home Secretary. That is why we wish to know which of the Lord Chancellor's powers of a judicial or judicial and administrative type the Government propose to invest in either of those two departments. The second amendment really focuses very wisely on that point.
Lord Williams of Mostyn: My Lords, I am most grateful to your Lordships, not least, for the generous remarks of the noble Lord, Lord King. I shall focus on the Motion, which I know your Lordships will have read carefully. It is not, to use the phrase of the noble Lord, Lord Marlesford, my Motion. It was agreed in a meeting between the noble Lord, Lord Strathclyde, the noble Baroness, Lady Williams, the Convenor, and myself. I have been as open to views on the form of the Motion as anyone could reasonably expect.
It was also agreed that, unusually and without setting any precedent, because of the nature of this particular committee—I repeat, without setting any precedent—it would be appropriate that Cross-Bench representation should be three rather than the usual two.

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That Motion having been agreed—although not by your Lordships, of course—I come to the two questions that arise distinctly from the amendments of the noble Lord, Lord Elton. I am most grateful to him for giving me advance notice of them and for our private discussion about the troubles caused to him in putting down those amendments.
First, there is the question of the representation—if I may put it that way—of this House in the Cabinet. Your Lordships may not appreciate that, since the Government came into office in 1997, the Prime Minister has specifically invited the Chief Whip—formerly the noble Lord, Lord Carter, and now the noble Lord. Lord Grocott—to attend every Cabinet meeting. On every occasion, they are asked by the Prime Minister whether they would like to contribute anything about the workings of this House or the relationship of business management in both Houses. Therefore, at the moment, your Lordships have three Cabinet Ministers and the invariable attendance of the Chief Whip at every Cabinet. We have not had three Cabinet Ministers from the House of Lords since 1989. As the noble Lord, Lord Acton, indicated—with the benefit of information from the noble Lord, Lord Allen of Abbeydale—Viscount Simon, who was Lord Chancellor for five years, was not a member of the Cabinet at all.
I know that noble Lords wished to raise this matter but I am reasonably confident that no noble Lord expects me to give any undertakings about which Cabinet Ministers should come from the Lords. I do not believe that any Prime Minister would feel able to give those undertakings. I am grateful for the assent that I see being expressed by the noble Lord, Lord King. I do not believe that the Prime Minister under whom he served, the noble Baroness, Lady Thatcher, would have looked happily on his being asked to give such an undertaking.
I believe that noble Lords recognise—this is very important—that this must properly and inevitably be a matter for the Prime Minister of the day. However—this is meant to be helpful—on its present terms of reference, the Select Committee is amply entitled to consider the matter. Noble Lords with views about that will make them known; a number of noble Lords already have done so, including the noble Lords, Lord Carrington, Lord Trefgarne and Lord Waddington, and the noble and learned Lord, Lord Mayhew of Twysden. Any noble Lord can give oral evidence, written evidence or a combination of the two to the committee.
Incidentally, I should say that my noble and learned friend Lord Falconer and I have already made it plain that we are very willing and eager to give evidence if the committee would like to hear from us. The committee can attend to the point that lies behind the first amendment and it can express views on that. In due time, we shall obviously have a full debate on the committee's recommendations.
There is also the question of,
"the present powers, duties and privileges of the Lord Chancellor".
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I absolutely agree with the noble Lord, Lord Alexander—I believe that we always have agreed on this—on the necessity for judicial independence. That is the purpose of the intended reforms. It is easy for me to say that. We must be judged in practice on the delivered outcome. I agree entirely with what the noble and learned Lord, Lord Ackner, said; that is, that judicial independence is not an additional option but a fundamental basis of the society in which we wish to conduct ourselves.
Noble Lords will know, because it has been said on a number of occasions, that consultation papers on judicial appointments and the question of the supreme court will be out quite soon: this month. The Lord Chancellor has already said—this may not have been picked up by all noble Lords—that he will publish a consultation document in September setting out the issues to be addressed in relation to the Lord Chancellor's roles that do not relate to the speakership, his functions as departmental Minister or his judicial capacity.
I can set out at least 11 categories. I shall be as brief as I can but I know that the noble Lord, Lord Elton, and other noble Lords are concerned about this matter. The 11 categories to be considered appeared to us to be: Speakership of the House of Lords; judicial appointments, conduct arid discipline in England and Wales; judicial appointments, conduct and discipline in Northern Ireland; ministerial responsibilities in relation to courts and tribunals; legal and constitutional affairs in England and Wales; ministerial responsibilities in relation to courts and legal affairs in Northern Ireland; ministerial responsibilities in relation to the national archives—that is not perhaps something that immediately springs to mind when one considers the duties of the Lord Chancellor; ministerial responsibilities in relation to the Land Registry; and responsibilities in relation to the Great Seal. The next category relates to the comments of the right reverend Prelate the Bishop of Portsmouth, to whom I was grateful, as always, for his measured contribution; it involves ecclesiastical patronage and other ecclesiastical functions—"boggle" and "mind" perhaps come to mind there. The other categories are: visitatorial jurisdiction—that is not an adjective that I had previously encountered; academic responsibilities and those and relating to royal peculiars; and, finally, non-judicial appointments, such as school governors.
Those are significant categories. I simply set them out to indicate that I have. I hope, responded as fully and promptly as I can to the amendments of the noble Lord, Lord Elton, which, as I said, we discussed privately when he told me of his concerns. All of those matters—the noble and gallant Lord, Lord Craig, was quite right—are within the remit of the committee on the present terms of reference. I do not believe that the noble Lord, Lord Elton, has done us a disservice. He raised the questions and I hope that I have been able

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to give the undertakings and reassurances that noble Lords reasonably wished. That being so, I invite the noble Lord not to press the amendments.
Lord Roberts of Conwy: My Lords, before the noble and learned Lord sits down, will he deal with the point made by the noble Viscount, Lord Bledisloe; namely, that this could be a preliminary or interim report rather than a final report?
Lord Williams of Mostyn: My Lords, that is a matter for the committee in the usual way, and that is the conventional role of all committees. It appears that the end of the Session is not unduly taxing in terms of the timetable. I am sure that noble Lords will be content with the representation on the committee, form their own judgment and report back to the House, as I indicated on Wednesday last week. We shall then have a full debate on the substantive issues and not, as the noble Lord, Lord Strathclyde, said, on process, about which I thought there was general agreement.
Lord Elton: My Lords, I join my noble friend Lord King in complimenting the Leader of the House on the way in which he managed the affair since it went off the rails and I thank him for the way in which he handled today's debate. I also thank those who supported me in this debate and join them in wishing the committee well.
The only moment of sadness for me was when it appeared that I had totally failed to make myself clear to the noble Lord, Lord Peston. His claim that the debate has been out of order rested on his total failure to grasp the significance of the fact that the Speakership and the Chancellorship at present are unified in one person and that that is our way into the Cabinet for one person. The committee must consider that. I see that I have yet to convince the noble Lord but he would not want me to spend more time on that matter; nor, I assume, would other noble Lords.
The noble Lord suggested that the object of the debate is to delay—if I could have his attention. I know that there are other more interesting people to listen to around him but at the moment I believe that I have the Floor.
The noble Lord suggested that the object behind all of this was delay. He picked up on a few of the soundbites that had been used long ago in the debate on the abolition of the hereditary Peers. The dramatis personae are quite different in this regard and so are the issues. This is not a party political issue, nor is it an issue between one sort of Peer and another; it is an issue about the welfare of this House. I do not apologise for taking up the time of noble Lords because I can think of no better steer to the committee than the speeches that have been made. I am most grateful to noble Lords for them.
The second of my two amendments, which received the most support in the corridors, as it were, before the debate and which was warmly supported in this debate, was answered by the point that was made by
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the noble Lord, Lord Goodhart, and which was endorsed by the noble and learned Lord the Leader of the House. In fact, the report that the committee is required to make before the end of the Session can perfectly well be an interim report. The second amendment is therefore unnecessary and I shall not proceed with it.
The first amendment touches on the matter on which I was unable to convince the noble Lord, Lord Peston, who vigorously nods his head. Perhaps I failed to convince other noble Lords. The arguments in favour of it—I see three heads nodding opposite—were so strongly put by many noble Lords, notably so by my noble friend Lord Alexander of Weedon, that the point has been adequately made. While I know that there is an anti-climax when one has sat through a debate in the hope of a refreshing visit to the Lobby, we can rest on the assurances that have been given. I beg leave to withdraw the amendment.
Amendment to the Motion, by leave, withdrawn.
On Question, Motion agreed to.

Consolidated Fund (Appropriation) (No. 2) Bill
12.9 p.m.
Read a third time, and passed.

Co-operatives and Community Benefit Societies Bill
Read a third time, and passed, and returned to the Commons with amendments.

Railways and Transport Safety Bill
12.11 p.m.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey): My Lords, I have it in command from Her Majesty the Queen and His Royal Highness the Prince of Wales to acquaint the House that they, having been informed of the purport of the Railways and Transport Safety Bill, have consented to place their prerogative and interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
Bill read a third time.
Clause 7 [Investigations]:
Lord Bradshawmoved Amendment No. 1:
Page 3, line 23, at end insert "not later than twelve months following an accident"
The noble Lord said: My Lords, in moving this amendment I wish to touch again on the question of the railway accident inspection branch furnishing its report within 12 months of an accident. At an earlier stage the Minister said that he believed that there were often technical and engineering investigations to be undertaken which may preclude the report being

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published. I believe that the whole tenor of the Bill is to get a report on an accident quickly into the public domain so that people may know what caused the accident and what steps are to be taken to prevent it happening again. I do not believe that it would very often be the case that a report need be delayed more than 12 months. In fact, I hope it will be published much more quickly than that.
I ask the Minister that we make sure that it is not likely to be delayed by the exercise of various judicial processes, departmental policy or ministerial convenience and that we quickly get to the truth. It is the fact that reports to the Government are often delayed by processes which have nothing to do with the incident being reported on, but because the courts require it, some kind of legal process is invoked to prevent publication, or because it is politically or administratively convenient for either the Minister or officials.
I am very anxious that reports are published quickly because if they are not, the whole of the railway accident investigation branch would be condemned extremely quickly and what we would hope would be a fresh start would cease to be so and we retire to a rather tired, old process which delays us in knowing what happened. I beg to move.
Lord Berkeley: My Lords, I support the noble Lord, Lord Bradshaw, and seek what further comfort my noble friend may be able to give us. Potters Bar is the latest in a series of accidents where no solution has yet been found. In the very well respected Modern Railways, under the heading "Informed Sources" by Roger Ford, there is the headline
"Potters Bar—criminal investigations frustrate search for truth".
That is exactly why the Government are setting up the railway accident investigation branch, which we have all welcomed. It is worth recording that the process being undertaken at the moment is led by British Transport Police, for whom the accident is a potential crime. As I believe I said at Report, 70 or so people in the Network Rail contractors have had notices of possible intended prosecution served on them, which does not help in getting to the cause of the problem.
The Health and Safety Executive is in the queue, as the accident is a potential breach of the Health and Safety at Work Regulations. Only when that is dealt with does the Railway Inspectorate become involved. To some extent it is overseen by an investigation board, none of whose members have any first-hand experience of working railways. As Mr. Ford concludes,
"The final HSE report will not be published until after the conclusion of any legal proceedings, or after they have been ruled out".
We still do not know the cause of the accident. We have not been told but perhaps the HSE knows, but it is not going to say for fear of legal proceedings. It is very important that not only is maximum support given to an independent accident investigation branch to conclude its report quickly into the causes of the accident, but that the department recognises that if
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anything has to be changed in the light of experience following the accident, it should be encouraged to take place with maximum speed.
Lord McIntosh of Haringey: My Lords, I believe that the noble Lord, Lord Berkeley, has set out exactly why we are setting up the railway accident investigation branch. Its purpose is to improve the safety of railways and prevent railway accidents and incidents. It will improve safety by reporting quickly. That is exactly the point that the noble Lord, Lord Bradshaw, makes.
What we are proposing is in conformity with the European Safety Directive. That states that reports would normally be published within 12 months. It states,
"the investigating body shall make public the final report in the shortest possible time and normally not later than 12 months after the date of the occurrence".
That is what the RAIB will do. But the directive does not say—and we are not proposing—that it must be forced to publish a report before it is ready. Surely, it is better to get a full and detailed report after 13 months than a hurried and incomplete report before 12 months has lapsed. The decision on the report should be for the chief inspector of rail accidents to make. As regards the point made by the noble Lord, Lord Bradshaw, that criminal proceedings brought by the police or Health and Safety Executive might be a harrier to publication of an RAIB report, the Government are firmly of the view that safety lessons and reports can still be published.
Clause 7(6) provides for the chief inspector to be able to publish even if criminal or civil proceedings are brought or are likely in connection with the accident. Similarly, the law of contempt of court will still apply to the RAIB, but in deciding when to publish a final report the chief inspector must always balance the public interest in publishing in order to share safety lessons against the public interest in people being brought to account for criminal behaviour and their right to a fair trial. It is perfectly legitimate for her to come down in favour of publishing.
The RAIB cannot prevent any person from inferring whatever they want from a report, but the Bill makes it very clear in Clause 7(5) that the RAIB itself,
"(a) shall not consider or determine blame or liability, but (b) may determine and report on the cause of an accident or incident whether or not blame or liability is likely to be inferred from the determination or report".
Pending the final report, it will be possible for the RAIB to publish an interim report, which sounds familiar from our last debate, to ensure that urgent safety lessons are promulgated. The Bill already makes provision for such reports in Clause 9(3). The existing AAIB and MAIB can and do publish interim reports and the RAIB should be able to do so as well.
Finally, I want to say to the noble Lord, Lord Bradshaw, that, if it becomes apparent that the publication of RAIB reports is being materially delayed,

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the Government will take the necessary action to ensure that the RAIB will be able to achieve its purpose and duties.
Lord Bradshaw: My Lords, I am grateful to the Minister for that statement. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 78 [Professional staff on duty]:
Viscount Astormoved Amendment No. 2:
Page 33, line 35, after "vessel" insert "or on a vessel with a crew of three or less"
The noble Viscount said: My Lords, I have tabled the amendment again as I found the Minister's argument slightly unsatisfactory. It is about the medical defence for fishermen. I do not see why it should not apply to small charter boats and similar vessels if it is to be in the Bill. After all, they go to sea from the same ports, often for similar length journeys in similar size boats with similar crews. Therefore, if one, why not the other?
I suspect that the answer is that the exemption for fishing vessels is an historical leftover, but it flies in the face of all modern health and safety legislation and rules. If we are to prevent the occasional but very sad accident and tragedies at sea, the subject needs careful scrutiny. If the Minister will give me the assurance that the Government, in consultation with the fishing industry, will consider those important safety issues, I may be satisfied. I beg to move.
Lord McIntosh of Haringey: My Lords, I am forced to say that the Government accept that there is a degree of irrationality and inconsistency in the way that the Bill provides a medical defence for fishermen but does not do so for other professional seamen in similar circumstances.
I do not believe that we would introduce the fishing vessel exemption now, nor can we agree to its removal at this stage—although we will look at it for the future. The exemption is long-standing and could not be removed without extensive consultation with the industry, something that has not taken place. The extension of the medical defence to other on-duty professional mariners is neither necessary nor welcome. It would set entirely the wrong precedent, not only for the shipping offence, but also for aviation and road offences. And it would go against our drive to improve transport safety.
Viscount Astor: My Lords, I am glad that the Minister and I are in agreement on the principles involved. I am grateful for his reassurance that the Government will look again at the matter in the future. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 83 [Specimens, &c.]:
Lord Mclntosh of Haringeymoved Amendment No. 3:
Page 35, leave out lines 19 to 44 and insert—
"Road Traffic Act 1988 (c. 52)

Section 6

Power to administer preliminary tests

In place of subsections (2) to (5) the power to require a person to co-operate with a preliminary test shall apply where—

(a) a constable in uniform reasonably suspects that the person is committing an offence under section 78, 79 or 80,

(b) a constable in uniform reasonably suspects that the person has committed an offence under section 78, 79 or 80 and still has alcohol or a drug in his body or is still under the influence of a drug, or

(c) an accident occurs owing to the presence of a ship in a public place and a constable reasonably suspects that the person was at the time of the accident a person to whom section 78, 79 or 80 applied.

Sections 6A to 6E

Preliminary breath test, impairment test, and drug test

In place of sections 6A(2) and (3), 6B(4) and 6C(2), a preliminary breath test, preliminary impairment test or preliminary drug test may be administered by a constable—

(a) at or near the place where the requirement to co-operate with the test is imposed, or

(b) at a police station specified by the constable. In section 6B(3) a reference to unfitness to drive shall be treated as a reference to having an impaired ability, because of drink or drugs, to do anything specified in section 78(2), 79(2) or 80(2)."

The noble Lord said: In moving the amendment I shall speak also to Amendments Nos. 4, 5, 6, 8, 12 and 13 and to Amendment No. 9, which I shall resist. Amendments Nos. 8, 12 and 13 add to the existing powers of the police to test for alcohol by giving them the powers to administer a test for impairment and a test for the presence of drugs by means of a sample of saliva or sweat.
They replace the existing powers in Section 6 of the Road Traffic Act 1988 that pertain only to the breath-testing of drivers for alcohol with comprehensive provisions that give the police powers to administer preliminary tests for alcohol, drugs and impairment. "Preliminary test" is the legal term used to describe a test to screen for alcohol, drugs or impairment. I

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emphasise that the new provisions do not diminish the powers currently available to the police for breath testing.
Clearly there is work to be done before the provisions can come into force. The development of procedures for the impairment test is well in hand but we shall have to await further progress in technology before a suitable drug screening test is available, which I think the noble Lord, Lord Dixon-Smith, recognises. Clause 118 sets out arrangements for commencement. It provides for the Secretary of State to make orders for specific provisions at the appropriate time by means of a statutory instrument. This is a difficult and complicated area of legislation, but we believe it will ensure that a comprehensive testing regime is available in respect of the battle against driving under the influence of alcohol and drugs.
Amendments Nos. 3, 4, 5 and 6 give the police powers to administer preliminary tests for alcohol, drugs and impairment in the marine and aviation fields. That will ensure that the aviation and maritime regime for alcohol and drug testing is equivalent to that on the roads. Amendment No. 5 will also give the police powers to administer preliminary tests automatically after an aviation accident, bringing the aviation regime into line with other modes.
I shall not comment on Amendment No. 9. What I want to say to the noble Lord, Lord Dixon-Smith, since it is in his name, is that he has won a great victory for the cause that he has been advocating so diligently over a number of a months. We have listened carefully to what he said. We are still sceptical about rapid progress towards testing for limits of drugs. He knows that, and I believe he agrees. But we have been able— and I am glad to pay tribute to him—to give effect to the arguments he has been putting forward. I beg to move.
Lord Dixon-Smith: My Lords, I informed the Minister of what I was doing when 1 tabled Amendment No. 9. In his immediate reply, he informed me in turn that his parliamentary draftsmen were working furiously in order to get the necessary amendments on the Order Paper for today's debate. All that is necessary for me to do at this point is to thank the Minister for the drive that he put behind the move once it got under way. In particular, I thank his staff and his draftsmen for tabling the amendments.
Although this is merely the legislative part of the procedure, and a great deal of work will have to be carried out by the police and others to make it effective, it would not happen if the legislative process had not been undertaken. I am grateful to the Minister for ensuring that that part of the process has happened and that this provision will be on the statute book. I hope, therefore, that the relevant authorities, such as the police and medical services will, where required, be put into motion to bring a greater degree of safety, especially in relation to drugs and driving on our roads.
Lord Faulkner of Worcester: My Lords, I echo my noble friend Lord McIntosh in congratulating the noble Lord, Lord Dixon-Smith, on his perseverance and on seeing this provision home in such a satisfactory way. I believe that I was the one who suggested to the noble Lord in the first place that he should attempt effectively to wrap his Private Member's Bill into this piece of legislation. That is exactly what he has done. All credit to him for effectively getting a Private Member's Bill turned into a government Bill; it is a remarkable undertaking and he should be congratulated.
Congratulations are also due to my noble friend for listening at every stage of the debate and for coming forward with the amendments in this way. As this is the only contribution I intend to make on Third Reading, I thank him for the way that he has handled the rest of the proceedings, particularly in relation to the powers of the British Transport Police and the other matters we considered earlier. The way my noble friend has handled the Bill has been fantastic.
Lord Berkeley: My Lords, I echo the comments of my noble friend Lord Faulkner on how the Minister has handled the Bill. I am pleased with all the amendments in this group, but I would like to place on the record my thanks for Amendment No. 5. I thank the Minister for meeting me with representatives of the Parliamentary Advisory Committee on Transport Safety and the Association of Chief Police Officers. He said that he would table a government amendment on the matter and he has done so; and they are very happy with it. I am grateful to him and fully support the amendment.
On Question, amendment agreed to.
Lord McIntosh of Haringeymoved Amendment No. 4:
Page 36, line 36, leave out "(and the definition of -drug" shall be disregarded)"
On Question, amendment agreed to.
Clause 96 [Specimens, &c.]:
Lord McIntosh of Haringeymoved Amendments Nos. 5 and 6:
Page 42, leave out lines 13 to 31 and insert—
"Road Traffic Act 1988 (c. 52)

Section 6

Power to administer preliminary tests

In place of subsections (2) to (5) the power to require a person to co-operate with a preliminary test shall apply where—

(a) a constable in uniform reasonably suspects that the person is committing an offence under section 92 or 93,

(b) a constable in uniform reasonably suspects that the person has committed an offence under section 92 or 93 and still has alcohol or a drug in his body or is still under the influence of a drug,

(c) an aircraft is involved in an accident and a constable reasonably suspects that the person was undertaking an aviation function, or an activity ancillary to an aviation function, in relation to the aircraft at the time of the accident, or

(d) an aircraft is involved in an accident and a constable reasonably suspects that the person has undertaken an aviation function, or an activity ancillary to an aviation function, in relation to the aircraft.

Sections 6A to 6E

Preliminary breath test, impairment test, and drug test

In place of sections 6A(2) and (3), 6B(4) and 6C(2), a preliminary breath test, preliminary impairment test or preliminary drug test may be administered by a constable—

(a) at or near the place where the requirement to co-operate with the test is imposed, or

(b) at a police station specified by the constable. In section 6B(3) a reference to unfitness to drive shall be treated as a reference to having an impaired ability, because of drink or drugs, to perform an aviation function or to carry out an activity which is ancillary to an aviation function."

Page 43, line 24, leave out "(and the definition of "drug" shall be disregarded)"
On Question, amendments agreed to.
Clause 105 [Railways safety levy]:
12.30 p.m.
Lord Bradshawmoved Amendment No. 7:
Page 46, line 38, after "43" insert—
"( ) the costs arising from a prosecution brought by the Executive or the Commission,"
The noble Lord said: My Lords, I tabled this amendment in order to seek some assurance from the Minister. He will remember that we debated who would meet the costs of the Health and Safety Commission. We talked about those costs falling on the train operating companies and being divided among them.
Since then, we have heard the outcome of the prosecution by the Health and Safety Executive of the Metropolitan Police over the issue of a police constable falling through the roof of a building. I believe that that should be described as a rather ill-considered prosecution. It failed completely and cost £3 million of public money.
I do not believe that train operating companies—freight or passenger—should be asked to pay the costs of speculative prosecutions by the Health and Safety Executive. The HSE is a guardian of public money and largely prosecutes public bodies. Therefore, the taxpayer pays both ways and thus, ultimately, the taxpayer fines the taxpayer. It is an enormous waste of public resource. I believe that a regulating body should look not to prosecution but to encouraging the regulated party to modify its behaviour. It should expend almost all its effort on that and prosecute only as a very last resort.
I ask the Minister whether he can give us some comfort that we shall not see the costs of speculative prosecutions by regulatory bodies visited upon the regulated parties. In the most part, those parties have not given rise to the complaints but, so far as I can see, they stand to bear the costs of them. I beg to move.
Lord Berkeley: My Lords, I support the amendment. I hope that in his reply the Minister will say that, following assurances which I believe were given at earlier stages of the Bill, whatever means the Health and Safety Executive has used to assess the charges on the railway industry—I declare an interest as chairman of the Rail Freight Group—this measure will not widen the scope of the activities and issues for which they make a charge. In other words, if the HSE does not make a charge for prosecution at present, it would not do so in future, even if the mechanism for charging were different.
The noble Lord, Lord Bradshaw, mentioned train operating companies, but I believe that the provision applies to anyone with a licence, which would include Network Rail as well. It is extraordinary that, in those circumstances, such organisations would have to pay for their own prosecution. That seems to be all wrong. Therefore, I trust that my noble friend will say that this provision is outwith the scope of any proposal for charging which the Health and Safety Executive may put forward.
Lord McIntosh of Haringey: My Lords, consideration of prosecution is one of a range of options open to Health and Safety Executive inspectors as part of their enforcement activities. Their responses to breaches of health and safety law are governed by the HSC's enforcement policy statement. Therefore, there is no question of the cost of prosecution being a consideration; the HSE must act objectively in accordance with its policy statement.
Work on gathering evidence to inform the decision as to whether or not to take a prosecution, as a routine enforcement activity of the Health and Safety Executive, is subject to the current charging regime and should properly be included under the railway levy. But that should not in any way distort the HSE's decision on whether or not to prosecute or, indeed, on the cost of gathering evidence.
Lord Bradshaw: My Lords, I consider that reply to be slightly unsatisfactory. I realise that at this juncture there is nothing further that your Lordships' House

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may do. As the Bill will not be going back to another place, this matter cannot be raised again. Therefore, I beg leave to withdraw the amendment, but I ask that serious thought be given to the implications of the Metropolitan Police case.
Lord McIntosh of Haringey: My Lords, I can certainly give the noble Lord that assurance. I believe he knows from the public prints that serious consideration is being given to that issue.
Amendment, by leave, withdrawn.

Iraq: Humanitarian Situation and Reconstruction
12.35 p.m.
The Secretary of State for International Development (Baroness Amos): My Lords, with the leave of the House, I would like to make a Statement about the humanitarian situation and reconstruction in Iraq.
I was in Iraq last week, in both Basra and Baghdad. I met representatives of the Coalition Provisional Authority, the United Nations, the military, Iraqi administrators, non-governmental organisations and UK civilian staff. I also visited a prison and water treatment plant in Basra and the British Office in Baghdad.
Progress has been made in Basra. Days after the end of the conflict, British troops took off their flak jackets and helmets and talked with civilians. That set the tone for a progressive return to normal life, with the military presence now relatively unobtrusive. Life has regained an air of normality: people are out in the streets; the markets sell fruit and vegetables; cars are on the streets; and shops and restaurants are open.
Quick impact projects, implemented by British forces, together with the United Nations, NGOs and local authorities, have made a visible difference. Basic services, including water and electricity, have been restored to pre-war levels. The prison has been rehabilitated. The courthouse has been refurbished and cases are now being heard. Work is under way to clean the city of solid waste and other health hazards. Medical services are functioning, albeit with localised shortages of specialist drugs and oxygen.
The House will want to pay tribute to UK forces for their significant contribution, often working in difficult and, at times, dangerous circumstances, as the deaths of the six Royal Military Police in Maysan last week all too clearly demonstrated.
The expectations of ordinary Iraqis are very high. The south suffered particular neglect under Saddam's regime and was starved of investment for years. We need to do better than just restore services to their pre-war levels. People expect more, and deserve more.
The situation in Baghdad is more difficult. Threats to security remain a significant obstacle to progress. Regrettably, attacks against the US military by ex-Ba'athists and criminals appear to have become more organised, as has sabotage of newly-restored
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infrastructure. And there are worrying signs of threats to international personnel and Iraqis working with the coalition, which could undermine the developing links between the Coalition Provisional Authority and Iraqi ministries. Worries over personal safety keep many Iraqis in their homes, rather than at work or school, and impact particularly on women and girls. Cuts in electricity and water supplies also disrupt everyday life. We are working to address those issues.
Some progress has been made on security. Thirty thousand Iraqi police officers have reported back to duty; a legal system is beginning to be re-established to control criminality; and the CPA has decided to pay stipends to ex-soldiers, which should help. But we are working to put in place the conditions for Iraq to be seen, by its own citizens, to be policing itself rather than being controlled by coalition forces. We attach a very high priority to the effective reform of the security sector.
Rapid and visible progress towards fully representative and democratic government is central to the future of Iraq. Iraqis must regain political control of their country as quickly as possible. While Iraqi-controlled local authorities are already working in a number of provincial towns, the process of establishing an Iraqi-led governing council is much more complex. That has to be done quickly, but it also has to be done right. The governing council needs to be representative, involving all the main parties and religious and ethnic groups, as well as providing for the efficient and effective involvement of women. The CPA is making progress on developing consensus among Iraqi representatives on the way forward. And, importantly, the United Nations is closely involved in this process.
Much has been made of the shortcomings in the CPA. That criticism has, in many cases, been overstated but clearly things could improve, and the CPA's leadership, with UK support, is working hard to improve the authority's performance. That includes establishing better communications between headquarters and the regions and, even more vitally, between the CPA and the Iraqi people. It is essential that the people understand what the CPA is doing, and why; and that the CPA can understand their wishes.
Almost 100 secondees to the CPA, from a wide range of UK government departments, are now in partnership with Iraqi ministries, our US colleagues and the humanitarian agencies, helping to get the Iraqi civil administration back up and running. The Department for International Development now has 27 advisers in Iraq, including the CPA's recently appointed director of operations.
We are also making a substantial financial contribution to humanitarian agencies working on the ground. Our total financial commitment now stands at £154 million, mostly channelled through organisations with the capacity and expertise to mount humanitarian operations quickly and effectively. I have today placed in the Libraries of both Houses details of the reconstruction work that has been undertaken so far by the agencies which we have been funding.

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We are also working to support the longer-term reconstruction of Iraq. Much of the finance for this will come from Iraq's own oil revenues, initially through the Development Fund for Iraq, and subsequently through Iraq's own budget. But the international community also has an important role to play. In New York last week, informal meetings including Iraqi representatives began preparations for a donors' conference which is expected to take place in October, and agreed details of the assessment that the World Bank, IMF and United Nations will carry out during the intervening months. DfID will consider how best we can contribute to this longer-term reconstruction effort in the light of this work.
Years of sanctions and mismanagement by the Saddam regime have left the Iraqi economy very weak. Even before the conflict only about half the Iraqi workforce was in full-time employment. Iraq's oil wealth, and its relatively well educated population, should enable it to grow rapidly once security has stabilised and a representative government is in place that can take long-term economic policy decisions.
Humanitarian agencies, with our support, returned to Iraq quickly after the conflict ended, and have helped the country recover from the conflict and the looting that followed it. Their ability to do this was strengthened by good preparatory work, in part financed by DIM, and supported by the Armed Forces. But continued threats to security, particularly in Baghdad, remain a very significant constraint. The coalition is working urgently to address this in order to build on the progress achieved so far, and make real, lasting and visible improvements to the lives of the Iraqi people.
12.45 p.m.
Lord Howell of Guildford: My Lords, your Lordships will be very grateful to the Secretary of State for making this Statement today. I am sorry that my noble friend Lady Rawlings, who usually deals with international development business, cannot be here.
Inevitably, our minds are still filled with sorrow at the murder in Maysan-al-Kabir of the six brave young solders whose bodies now return to their homeland. All of us want to be sure that their lives were given in a good and purposeful cause—the rebuilding of Iraq as a land of peace and order after the horrors of the past. That said, would the Secretary of State agree that the reports of recent progress in re-establishing the rule of law and security have been worrying? Does she agree that preparations—despite assurances—have clearly fallen far short of what is needed? We were told as far back as January that preparations to meet the post-conflict situation were going to be "as good as they can be".
It is true that there has been no major humanitarian crisis of the kind widely predicted by some experts. Neither has there been a refugee crisis nor, so far, a massive spate of revenge killings. However, it is also clear that the coalition provisional administration is facing many other problems of law-keeping, civil
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security and the laying of foundations of good governance by the Iraqi people themselves. Following her recent visit, can the Secretary of State tell us more about the role that her own department is playing in reconstructing the civil administration? What about basic services, power and water supplies and law enforcement training? Twenty-seven advisers do not sound a vast amount in such a huge country. Does the administration plan to keep the 18 regions of the country as they were before—14 of which were set up by the British in 1917–1921—thus avoiding dominance by any one sect or group? That is a very important principle on which to proceed.
Can the Secretary of State tell the House where the main expenditure of this £154 million has gone so far? Have the UN agencies, which received the bulk of it, spent the money effectively? If all of it is being disbursed—an eventual figure of 100 billion dollars is mentioned—is the guiding strategy in place for it to go to the right priorities? How is it intended to get from where we are currently to making the civil and public services in Iraq fully operative again? How does the noble Baroness propose to deal with members of the Ba'athist party? Not every member of that party can be dismissed; otherwise there would be no administration at all. Obviously, one has to concentrate on the real killers and top criminals. But how will that be done, and is progress being made?
Is the Secretary of State satisfied about adequate communication and open lines between our forces and the civilian groups which will eventually have to run things in Iraq? Does she feel that links between our superb forces and the American authorities are close enough? Everyone is inclined to agree that abruptly disbanding the Iraqi army was a mistake. Was our advice on this listened to and what steps are being taken to rectify the situation? Can we also play a stronger advisory role with our American friends in avoiding measures which increase local hostility, given our huge experience going back to 1917? Have we stressed the vital importance—as we did all those years ago—of respecting local customs and observing, as occupying power, the principle of usufruct?
Iraq is not Afghanistan. Does the Secretary of State agree that although there is much rural poverty Iraq is potentially a rich country with vast oil and mineral resources? It has a well-educated population with many very experienced women able to play a leading part. Indeed, the Iraqi people have some experience of running a democracy under a constitutional monarchy up to 1958. Has she studied current plans for distributing the ownership of the oil wealth of Iraq much more widely to the people? This would reduce the danger of corruption in state hands and help the seven million pensioners in Iraq.
The task of rebuilding Iraq as a force for good and peace in the region is not impossible. It is all the more frustrating that so far—I admit that these are early days—the problems are proving so intractable and the lack of preparation in meeting them so evident. We hope that what we have heard today will help carry things forward with our American allies and other coalition countries more steadily and in greater security. Our Armed Forces have performed brilliantly in war and

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peace. But the Secretary of State will be the first to agree that we must not let them carry an increasing burden for restoring the country to civil order which others should now be prepared and ready—more than ready—to shoulder.
12.50 p.m.
Baroness Northover: My Lords, I, too, thank the noble Baroness for making this Statement today. I echo the words of the noble Lord, Lord Howell of Guildford, regarding the military policemen who were lost in Iraq. We express our great sympathy to their families and friends.
The Secretary of State notes the welcome progress in Iraq and refers to difficulties and shortcomings, but I wonder what she makes of the view of those who do not yet see such steady progress. Thus, UNICEF stated last week that,
"the security situation in Baghdad and across the country is deteriorating".
It noted also that,
"the sharp reduction in the availability of electricity and water in most of Baghdad is exacerbating the frustration of the city inhabitants."
UN agencies and NGOs are experiencing attacks on their facilities and vehicles. The humanitarian community is concerned about the potential for civil unrest should the current situation continue.
Clearly, the situation in Iraq is very volatile. The key problem is lack of security. Some areas seem to have become more settled, while others which appeared settled now have problems. For example, Oxfam speaks of a worrying rise in violent crimes in Nassiriyah, which had previously seemed settled. Can the noble Baroness comment on whether the strategy of searching houses and removing small arms is seen as effective, or is it, indeed, causing widespread disquiet? What other measures are being taken to tackle that, and who is implementing them? Does the noble Baroness agree that we are now in a vicious cycle? Violence prevents reconstruction; no reconstruction breeds more discontent; and so on.
I know the Secretary of State is reluctant to put any timetable on this issue, but perhaps I may push her on it a little. Surely, the Government's planning has some kind of timetable. Will she indicate when she thinks Iraq will be sufficiently settled to enable it to elect interim authorities in Baghdad and Basra?
With the mounting casualty toll among authority troops, does she sense any changes in strategy by the Americans? If so, what are they?
Lack of security is holding up the restoration of basic infrastructure in the cities—water supplies, electricity, functioning hospitals, and so on. There is a high incidence of diarrhoeal disease, particularly among children, in Iraq.
Even food, which had seemed to be widely available, now appears to be in short supply. Oxfam reports that many families are surviving on bread and milk because the monthly food rations have stopped. Food prices have risen hugely. The price of a kilo of meat has doubled in recent weeks. Obviously, it is welcome that
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the Marsh Arabs, who were deprived, are now getting food aid, but the overall picture is surely a cause for concern.
There are reports of increased violence against women and girls. There are reports of threats made to Iraqi women and girls for not wearing clothing that is deemed modest. A UN worker has thus been threatened. The UN has also reported that in some cases girls in Basra not wearing headscarves have not been allowed into school. What strategies are being followed to address those problems?
The Secretary of State may remember that when we questioned her on Iraq last week I quoted a senior British official saying of the US-led administration that it was,
"the single most chaotic organisation I have ever worked for".
Does she know whether that official—perhaps she can say whether she met him in Iraq—sees anything coming down the track that would make him change his mind?
There seems to be some realisation among the Americans that although the war may have been prepared for, the peace was not. I note that R Duncan Hunter, the Republican chair of the House Armed Services Committee, stated:
"Occupation takes a lot of folks, probably takes a lot more folks than winning the war".
Will the noble Baroness comment on that shift?
It is clear that the humanitarian situation in Iraq remains very serious. As the UN put it the other day,
"the high levels of vulnerability and dependence on government services that existed before the conflict have increased further".
As the Government seek to stabilise things in Iraq so that there can be a transition to Iraqi rule, can the noble Baroness assure us that, unlike in the conflicts in Afghanistan and Kosovo, aid money will not come from the DfID budget, thus depriving other areas of the world?
Obviously, we welcome any progress that is being made. Clearly, the situation is volatile and the coalition partners will need to be engaged for a long time. Can the noble Baroness shed any light on what plans were worked out for post-war Iraq? Does she now feel that some of the assumptions made before the war have since proved untenable? If so, what is being done to learn those lessons?
12.55 p.m.
Baroness Amos: My Lords, I first thank the noble Lord, Lord Howell, and the noble Baroness, Lady Northover, for their comments on the Statement. I agree that we must pay tribute to our troops in Iraq. I met a number of them. They have done, and continue to do, a magnificent job.
I turn to the specific points. Both the noble Lord and the noble Baroness raised the issue of preparations, a subject on which I was also questioned by the International Development Select Committee earlier this week. I must say that I do not agree that our preparations have fallen short of what was needed. As to the different kind of scenarios for which we planned,

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we should be very pleased that those with respect to a wholesale movement of refugees being internally displaced did not happen.
What we could not plan for was the widespread looting that happened immediately after the conflict ended. I saw for myself the impact of the precision bombing in Basra and Baghdad. There is very little left that resembles what we would think of as a post-war situation. But what I found even more distressing were the many buildings which had been looted and then fired from inside, which means that Iraqi ministries cannot now function. They do not have the records, although some Iraqi workers took home discs and files of information. The looting has done considerable damage.
That has been followed by deliberate sabotage. There are miles of electricity cable. It is very difficult to have security along the entire length of that cable. Once an electricity supply is damaged, it has a knock-on effect, in particular on water because the water pumps cannot work. The coalition forces and the CPA are doing everything they can to get the situation back up and running. We are well aware that there are forces out there who do not want the coalition to succeed. There are rumours going around Iraq about what has happened to Saddam Hussein, which are leading to a fear culture among the people of Iraq. We have to deal with that as a matter of some urgency. We must find Saddam Hussein and his sons and we have to make sure that the constant threats being made to security are dealt with.
With respect to the CPA itself and the questions which have been asked with respect to its administration, I was very encouraged indeed by what I saw in Baghdad. The administration is functioning much more effectively. A relationship is developing between the CPA and the Iraqi ministries it is shadowing. A draft budget has been developed, not only for the CPA but also for those ministries. DfID staff are very much involved in making sure that that draft budget feeds down into Basra and other areas. They are giving support in areas that will eventually lead to greater revenue collection, such as customs; in giving advice on law enforcement and on security sector reform; and in giving support on basic administration across the whole range of issues.
The noble Lord, Lord Howell, asked whether it was the intention to keep the administrative regions of the country. That is a decision for the Iraqis. Once the governing council is up and running that will lead into a constitutional process, and Iraqis themselves will make decisions about what they would like to see with respect to the structure that is put in place. We very much see this as being something for Iraqis to decide.
The noble Lord asked about specific areas in which money had been spent by the Department for International Development. The figures have now been placed in the Library. We have spent £8·5 million on health and nutrition, £4 million on water and sanitation, £33·6 million on food, £1·5 million on agriculture, £7 million on power and fuel, and so it goes on. Of that money, UNICEF has been granted
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£3·19 million to re-establish immunisation services and £3·2 million to deal with water and sanitation. The United Nations Development Programme has been given £7 million to restore electricity supplies. A considerable amount— £16·5 million—has been given to the International Committee of the Red Cross, and £15·5 million to the International Federation of the Red Cross and Red Crescent Society. The UN agencies have a long track record of working in Iraq, particularly on the oil for food programme, but also in other areas. We are very satisfied with the work that they have been doing to restore basic services to Iraq.
Regarding the Ba'athists, the strategy has been clear. The top three layers in any ministry—that is the minister, the deputy minister and the director general—have been removed. Those who have been in senior positions in the party hierarchy have also been removed. However, exemptions can be asked for if any individuals occupy a particular position where it is considered that a service will be unable to be run if that individual were to be removed. That exemption would be considered.
The army are now receiving stipends. It is right that we move immediately to reforming the security sector. We need a police service that is not violent and repressive but sees its role as being to police the community. We also need a revamped Iraqi army and we are involved in developing training for that, as are our Armed Forces. I agree with the noble Lord that we need to respect local services and customs. I also agree that Iraq is a rich country with a well-educated population. That is why Iraqis are so keen to take control of their own situation. I do not agree with the noble Lord that the problems are intractable. We have seen difficult situations in other countries—Bosnia, Kosovo and Afghanistan, for example— but I feel that there are successes we should be proud of. There is no doubt that the security situation remains extremely difficult, not only for coalition forces, but for Iraqis themselves. We have to deal with it and we have to be seen to be dealing with it.
Regarding the questions raised by the noble Baroness, Lady Northover, I agree that the key problem is security. I have made that clear. We saw Saddam Hussein release 75,000 prisoners towards the end of last year, so sabotage plus crime from those criminal elements is having an extraordinary impact. Regarding the timetable, I cannot agree with the noble Baroness. It is important for Iraqis to also help set the timetable. We need to make clear that we want to see Iraqis taking control and that that is a process that we are seeking to support. We are not there to occupy Iraq for the long term; we need to communicate that. I agree with the noble Baroness about the need to make sure that those messages are communicated.
Regarding food, 760,000 tonnes of food were distributed by the end of June, reaching around 95 per cent of intended recipients. I shall look at the figures set out by the noble Baroness, but certainly my view from being in Iraq is that the food distribution pipelines were working quite well. Women to whom I

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spoke were concerned about the increase in violence towards women and girls. We are trying to ensure that women are actively engaged in the political process.
1.5 p.m.
Lord Maker: My Lords, what arrangements have been made by the Coalition Provisional Authority to broadcast to the Iraqi people, whether by radio or by television, information about current issues and also about the policies of the CPA? If those arrangements have been made, what is their effect?
Baroness Amos: My Lords, I discussed that area in some detail, because it is one in which we undoubtedly need to do better. There is now television and some radio. The UN are thinking about establishing a radio station. More and more newspapers are available and the coalition is putting out information, particularly to the newspapers, but also through television and radio channels. But we need to do more with respect to communicating who is responsible for the difficulties that we are seeing in terms of getting back electricity and water, and also communicating some of the significant successes that we have seen, particularly in the south where the security situation has improved enormously, and it has been possible to get basic services up and running again.
Lord Judd: My Lords, I thank my noble friend for her Statement. I am sure that others in the House, like myself, are reassured by the firm grip that she has on the situation, and her eye for detail as well as on the general policy.
Will my noble friend reassure us on two points? First, she spoke about the importance of civil police and it was good to hear that that was a priority. However, stability will also require a convincing system of justice administered by the Iraqis themselves. That will be highly expensive to develop. Can we hear more about the resources and arrangements being made to develop an Iraqi-based system of justice?
Secondly, regarding the political regeneration of Iraq—that of course is intimately related to social and economic reconstruction and rehabilitation—does she agree that there is a case for the authority for that process to be as widely based internationally as possible? Those of us who continue to argue for a key role for the UN are not making an ideological point in favour of that organisation, but a practical political point—that if the process is to have acceptability and credibility, not only in Iraq but in the wider world, the wider the degree of international authority for what is being done, the better.
Baroness Amos: My Lords, I thank my noble friend for those questions. Regarding the administration of justice, we are very conscious of the need to take a holistic approach. Courts are being refurbished in Basra and Baghdad; in Basra I met two judges who are already sitting. There is a police station, a prison and a courthouse next to each other, all of which have been refurbished. That means that the justice system can
1020
begin to operate effectively again. We are doing the same in Baghdad, where we are working with our Iraqi counterparts to help to rebuild the capacity of the courts and the prisons. It is a priority for us and we are working with Walt Slocombe, who is directing this on behalf of the Coalition Provisional Authority.
Regarding the role of the UN, I agree with my noble friend that the United Nations has to have a key role in the process. I met Sergio de Mello, who is closely involved in discussions with Iraqis, and Paul Bremmer and John Sawers, who is our personal representative to the CPA. They are discussing these issues with respect to the development of the governing council and the next steps for the constitutional process. The UN is also considering what role it can play in the medium term in putting in place the processes that will allow elections to take place in Iraq. So the UN is playing a key role, but I must also make clear that it has stated that there are limits to its resources and to the support that it can give in other areas. It sees security sector reform as a key area in which it can give support—that is most important—but it does not want to take over the whole process.
Lord Redesdale: My Lords, Iraq is rich in cultural and archaeological heritage. However, in the short term, many smaller sites are being looted by criminal elements that have been set free and by people after artefacts that they can sell to feed their families. Is money being provided from her budget or from other budgets to pay for guards for those archaeological sites? Without such guards, those sites will he looted and a long-term, sustainable area of the economy will be lost for ever.
Baroness Amos: My Lords, steps were taken in advance of the conflict to try to ensure that historic and cultural sites were secured. The Ministry of Defence consulted widely with the archaeological community to ensure that. We have been informed that there are guards at the Baghdad museum and that looting is now under control. I recognise the noble Lord's point about some of the smaller sites; I shall get back to him about that, because I cannot say absolutely that every small site has now been provided with security.
More than 40,000 manuscripts and 400 artefacts stolen from the museum have been retrieved. Noble Lords will know that specialists from the Department for Culture, Media and Sport, the British Museum and elsewhere have gone out to help the Iraqis in that area. One good thing is that a number of items that were thought to have been looted have been returned—or found, because they were found to have been put away for security and safety.
Lord King of Bridgwater: My Lords, the noble Baroness referred to the security situation, which is obviously serious. The opposition guerrilla war that is now being fought appears to be well organised. Against that background and given that it is obviously an irresistible requirement, if we are to have a general recovery programme, that that security situation is

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met, how much progress is being made in bringing other forces to bear? She may have heard the remarks of General McCaffrey, who fought in the previous Gulf War, who expected that American forces would need to be there for a decade. That is a daunting prospect and would certainly require the support of many other countries.
In connection with what is really going on and the media reports, what is happening in the north? We have heard about Baghdad and Basra, but does the noble Baroness have anything to say about what is happening in the Kurdish region?
Baroness Amos: My Lords, other forces are going to participate. For example, as the noble Lord may be aware, the Italians will be joining British forces in the southern region quite soon. A number of countries are now contributing to the coalition effort in a range of ways. I am happy to write to the noble Lord when that information becomes somewhat firmer, especially with respect to possible troop contributions.
With respect to the situation in northern Iraq, we have of course always supported the territorial integrity of Iraq; we have made that absolutely clear. We have welcomed the formation of interim councils in Kirkuk and Mosul, which comprise representation from all ethnic communities. The Kurds are now able to travel freely around Iraq and many of those living in the Kurdish-administered area in the north have for the first time been able to visit friends and family in areas formerly controlled by the Saddam Hussein regime. I am pleased to tell noble Lords that Kurdish officials are able to share their experience of government with their counterparts in Baghdad and other regions for the first time. So there is contact and communication, and we of course hope that that will improve.
Baroness Dean of Thornton-le-Fylde: My Lords, first, I apologise for not being present for the Statement. I was unfortunately delayed and did not make it. Three weeks ago, I spent three days in Iraq as chairman of the Armed Forces Pay Review Body. We went to Basra, but I spent a day approximately 100 kilometres north of Basra, in al Amara. We walked about both Basra city and al Amara freely; there was a small contingent with us. People came up to us to say, "Thank you", and, "We are glad you are here". I did not feel personally threatened at all; the atmosphere was relaxed. Our troops are doing a magnificent job out there in a social and civilian sense as well as in their key role.
What came through to me from talking with the young women officers—and, indeed, with some of the men—was concern about the role of women in society. Iraq has traditionally been not a fundamentalist state but a secular country, so the role of women is somewhat different from that in the rest of the Middle East. Their concern was that the view seemed to be gradually creeping in that women should not hold good positions in Iraq. In fact, people of that country saw it themselves, that was not just a Western point of
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view. Knowing that my noble friend has that issue at heart, perhaps she will comment on it, because it is of concern to a number of us.
Baroness Amos: My Lords, first, I endorse my noble friend's comments about the situation and the ability to walk around in some parts of the country. Basra was bustling when I was there, which I had not expected. Although the security situation is no doubt difficult, it is important for us to have a balanced view.
My noble friend expressed concern about what is happening to women. She is quite right. I met a group of women representatives of different women's organisations when I was in Baghdad. They were very concerned. They said that it was not so much that anyone was telling women that they had to wear particular clothing, but that a fear was emerging that was leading to women staying at home, not going out, fearful that they would need to cover up. Of course, concern about security does not help that situation.
The other issue raised with me was that there was a perception of increased violence against women—in the home but also in public. We are very concerned about that. We shall have to try to move from what we are hearing anecdotally to obtain some more concrete information and to consider what we can do.
We are working hard to ensure that women are an integral part of the political process. Women have been meeting on a regular basis. A representative from our Women's Unit is in Baghdad, working as part of the Coalition Provisional Authority with women's organisations. There is talk of a small conference later this month, which will lead into a bigger conference that the United Nations, UNIFEM, is hosting in Baghdad in August. At the meetings held with political parties in Baghdad, we have tried to ensure that women are included. I was pleased that at the most recent meetings, at least one woman was present.
Lord Sandberg: My Lords, it is nice to hear of the progress being made. However, against the backdrop of the recent murders of British soldiers and the continuing violence against American soldiers, it seems to me that the Statement is rather optimistic. Would the Minister confirm that there is no complacency about the problems that lie ahead of us?
Baroness Amos: My Lords, there is absolutely no complacency. I was trying very hard to strike a balance in the Statement and show the very real concern that I, the Government and the CPA have about the security situation. I was also trying to give noble Lords a sense of the progress that has been made. I feel that some of what we are seeing is very negative. I want noble Lords to have a more balanced picture. This in no way indicates that we are complacent, or that there is not a very serious recognition on the part of the coalition that a great deal more needs to be done.
We have to deal with the perception beginning to emerge among the Iraqi people that things were perhaps better before. Everybody I met is absolutely delighted that Saddam Hussein is gone. However, if basic services are not up and running and there is no

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water and electricity and day-to-day life is becoming a real drudge, people begin to ask questions such as, "Were we perhaps better off before?". That is because we all crave order and discipline in our lives.
I would like to assure noble Lords that I and other members of the Government will continue to be seized of the situation. As regards resources, we need to provide not only money but also expertise; that is, people who have experience of working in developing countries and experience in implementing programmes on the ground. As I said, security sector reform will be an absolute priority for us.
Baroness Crawley: My Lords, I beg to move that the House do now adjourn during pleasure.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 1.22 p.m. to 3 p.m.]

The Lord Chancellor: Leave of Absence
The Lord Chancellor (Lord Falconer of Thoroton): My Lords, may I take the opportunity to inform the House that I shall be undertaking a ministerial visit to Belfast on Tuesday, 8th July? Accordingly, I trust that the House will grant me leave of absence.

Drugs: Vulnerable Children
3.1 p.m.
Baroness Massey of Darwenasked Her Majesty's Government:
How many children they estimate to be living with parents who misuse drugs, and what account they will take of the recent report Hidden Harm from the Advisory Council on the Misuse of Drugs.
The Parliamentary Under-Secretary of State, Department of Health (Lord Warner): My Lords, the Advisory Council on the Misuse of Drugs estimates that some 90,000 to 130,000 children are living with a problem drug user. The council's report recognises some of the good work being undertaken to tackle drug problems and to protect vulnerable children, but also that more needs to be done. The Government have already increased by 23 per cent this year the pooled budgets available to drug action teams, which has improved access to treatment services for pregnant women and parents. The Department of Health is working with other departments on what further action is required.
Baroness Massey of Darwen: My Lords, I thank the Minister for that response. Is he aware that under these dreadful circumstances it is often the grandparents who end up taking care of the children? What kind of
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support, financial or otherwise, can grandparents expect to receive, and how are they made aware of their rights?
Lord Warner: My Lords, my noble friend is quite right to say that grandparents are a major source of support for young children in these circumstances. Around 50 per cent of the children whose parents were included in the advisory council's report were living elsewhere with family members or friends. Grandparents comprised the main family members looking after those children. The report highlights examples of local schemes that help the children of drug users and provide support for families, including grandparents. I am sure that, in her capacity as chair of the National Treatment Agency, my noble friend will encourage an extension of such schemes.
The Government will be taking forward improved support for all friend and family carers of children in these circumstances through its "Choice Protects" review, which was announced last year.
Baroness Walmsley: My Lords, what is being done about the barriers to parents with drug problems seeking treatment? For example, parents fear that their children may be taken away from them and there is a lack of residential mother and baby units for drug treatment and rehabilitation.
Lord Warner: My Lords, clearly, some parents in these circumstances will be worried about the removal of their children, but social services do have a responsibility to protect children. We are aware that support is required and, as I said in my earlier Answer, the Government are putting a lot more money into the pooled budgets of drug action teams which will improve access to treatment services for parents with drug problems.
Lord Rea: My Lords, my noble friend said that the Government are expanding the facilities for dealing with parents with drug problems. Can he tell us how many residential rehabilitation centres are in operation around the country which have facilities for mothers and children? Does he not agree that this is an area to which the Government should give priority?
Lord Warner: My Lords, I cannot give the exact numbers, but the Government are putting more money into treatment services at all levels; that is, from the primary level up to tier 4 services. However, I shall be happy to write to my noble friend with details of the exact number of centres.
Baroness Masham of Ilton: My Lords, if the parents are injecting drug users, is enough help being provided as regards hepatitis B and C? What counselling services are available if those parents test positive, and even if they are not positive, how are they counselled before they are tested?
Lord Warner: My Lords, I am sure that the noble Baroness will appreciate that she has strayed a little

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wide of the terms of this particular Question. I shall have to write to her with a detailed response on that issue.
Baroness David: My Lords, can the Minister tell me how the educational needs of children whose parents are drug addicts are met? So far as I can recall, very often those children do not get to school.
Lord Warner: My Lords, the Department for Education and Skills issued a government consultation draft entitled "Drugs: Guidance for Schools", which emphasised the importance of having a designated member of staff responsible for co-ordinating the school's response to drugs. It is also a key requirement of the national healthy schools standard to have a designated drug education co-ordinator. Moreover, training is available to support teachers in this particular role.
Ultimately, there is also the potential for social services to intervene. When a carer needs support and services for a child, in particular when problems are being encountered that centre on going to school, the carer can approach social services and sometimes voluntary organisations can help in this area.
Baroness Howe of Idlicote: My Lords, can the Minister indicate how uniform are local authorities in meeting the needs of children within the families being discussed?
Lord Warner: My Lords, I do not think that I can paint a national picture on this area by area, but we know that a growing number of local support services are being put in place for relatives as carers of children in the circumstances of this Question. A number of local authorities come to mind which have particularly strong support arrangements: Plymouth has had a support service since 1999; there are dedicated workers in Hampshire and Wandsworth, which are also using family group conferences to help families make the best decisions for those children who cannot remain with their birth parents.
Lord Elton: My Lords, does the noble Lord agree that this is largely a problem to be tackled locally? When the noble Lord writes to his noble friend with the details of those schemes which have central government support, can he make them more intelligible by revealing the location of those schemes? I do not mean that he should list them individually, but can he set out what criteria are used to ensure that these resources are put within reach of the people who need them?
Lord Warner: My Lords, the Government provide general guidance, but it is for local authorities to provide the responses because they have statutory responsibility in these areas. Of course their work is
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inspected under the various inspectorates. However, I shall take heed of the points made by the noble Lord in my response.
The Earl of Listowel: My Lords, is the Minister aware of the invaluable support provided to many children's homes, foster carer groups and schools catering for such children's complex needs by way of appropriately trained mental health professionals? Can he tell us what progress is being made towards making available that kind of highly skilled consultation to parents and carers working with these children?
Lord Warner: My Lords, believe it or not, we do not collect in Richmond House all the details of these consultations but, from my previous involvement in other work, I can say to the noble Earl that much is being done to expand the development of child and adolescent mental health services. As I recollect, the Government are putting into that area a 10 per cent increase over three years. I am sure that that will produce many of the kinds of services to which the noble Earl has referred.

War Graves: Pilckem Ridge Road Plan
3.9 p.m.
Lord Faulknerof Worcester asked Her Majesty's Government:
Whether, in light of the results of the current archaeological excavations on the Pilckem Ridge battlefield, they will encourage the Government of Belgium to revise their plans for the extension of the A19 motorway across the Ypres Salient.
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Bach): My Lords, Her Majesty's Government continue to take a close interest in these proposals. However, the Belgian authorities are experienced and sensitive in dealing with the issues raised by such a project, including both the selection of the route and the handling of any remains discovered during the course of civil engineering work. They also have a good record of co-operation with the Commonwealth War Graves Commission in dealing with war graves. The commission is watching developments carefully and is confident that it will be consulted at each stage by the relevant authorities.
Lord Faulkner of Worcester: My Lords, I thank my noble friend for that reply. He will recall that he answered a similar Question which I tabled on this subject on 2Ist January last year when plans for the proposed road first came to public attention. Is he aware that the excavations carried out by a joint Belgian-British team under the direction of the Flemish authorities have been extraordinarily successful? They have unearthed a wealth of artefacts which have produced a unique picture of what life in the World War One trenches was like. Taking that into account, and in view of the fact that two bodies of

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soldiers, one French and one British, have already been found as a result of those excavations—and it is certain that many thousands more lie in the path of the proposed Al9 road if it were built—will he do his best to persuade the Belgian authorities that they should re-route the road?
Lord Bach: My Lords, I am aware that the archaeology in this area has been very successful. I pay warm tribute to the All-Party Parliamentary War Graves and Battlefield Heritage Group—of which my noble friend is chairman and the noble Lord, Lord Burnham, is vice-chairman—for the pressure it successfully applied to get the archaeology started and for the pressure it continues to apply to the relative authorities in this area. Any decision making will be for the Flemish regional government in consultation with the Belgian national government. The British Government will consider what role to play should it be necessary to do so.
Lord Burnham: My Lords, I thank the Minister for his remarks about the all-party war graves body. Can he assure the House that he will take the same attitude with regard to France? We are talking about Belgium at the moment but there will be many instances of roadbuilding and other developments in France where we will need the same kind of assistance from the Government.
Lord Bach: My Lords, I can give the noble Lord that reassurance. I am happy to say that, as we understand it, the latest French proposal to build a third airport for Paris in the area of the Somme—an issue raised previously by my noble friend—is, I choose my words carefully, in abeyance.
Lord Redesdale: My Lords, is the Minister considering a review of archaeological practices in regard to excavations on sites containing the remains of British service personnel? Further—although this may go a little wide of Belgium—is a review taking place in regard to HMS "Sussex" and whether proper practice has been followed? The remains of British service personnel will be recovered from that site if proper excavation techniques are undertaken. It is slightly worrying that a salvage operation is taking place in an area where lie the bodies of British service personnel.
Lord Bach: My Lords, some might say that the noble Lord's question goes slightly wide of the original Question. I shall not say that. I shall write to the noble Lord.
Lord Campbell of Croy: My Lords, is the Minister aware that military historians will be hoping that important features on the Ypres battlefields can be preserved, as will the families of those who were engaged in the fierce fighting on this vital part of the British front in World War One?
Lord Bach: My Lords, the noble Lord is right to raise the issue of the historical importance of the
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dreadful amount of killing that occurred on this battlefield. In 1915, as I understand it, 200,000 men of Kitchener's volunteer army were killed within 14 days. With this patch of land continuing to lie between the two sides, in 1917 in an offensive lasting 100 days—the figures are staggering—400,000 to 450,000 British soldiers were killed. The noble Lord can rest assured that the historical aspects of the issue will be kept well in mind.
Lord Morris of Manchester: My Lords, I declare an interest as honorary parliamentary adviser over many years to the Royal British Legion and as one, doubtless of a great many noble Lords, for whose kinsmen of an earlier generation the Pilckem Ridge battlefield was their final resting place. Is my noble friend aware that this issue is of considerable concern to the ex-service community as a whole? Is any ministerial visit to the excavations in prospect—I speak having recently been there—to see their scale of importance? And can the Government consider supporting efforts to make them a world heritage site?
Lord Bach: My Lords, I do not know whether a ministerial visit is forthcoming. If the noble Lord is inviting me, I shall of course accept. As to the second part of his question, we are aware that a proposal is currently being considered by the Flemish regional government to apply to UNESCO to have all the Great War battlefields in Belgium—not only this one—listed as world heritage sites. I cannot commit the British Government so far as the noble Lord's proposal is concerned, but I dare say that we will be sympathetic.
Earl Russell: My Lords, does the Minister agree that understanding the topography of a battlefield can be essential to historians in understanding what took place there? Does he further agree that although that interest can never be paramount, neither is it negligible? To assess it, it is necessary to weigh it against any loss of money and time in preserving the record. Does he agree that t o outweigh the loss of 2,000 lives the saving would have to be considerable?
Lord Bach: My Lords, I agree with all the sentiments that I am asked to agree to by the noble Earl. He is absolutely right. As someone who lives between Market Bosworth battlefield and Naseby battlefield, I certainly agree with him.

Iraq
3.17 p.m.
Lord Hurd of Westwellasked Her Majesty's Government:
What progress they have made with the other occupying powers and the United Nations in establishing a stable and democratic government in Iraq.
The Minister of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): My Lords, the shared aim of the coalition and the United Nations is to facilitate a representative Iraqi Government based on the rule of law as soon as possible. The coalition has organised two conferences—the first in Nasariyah, the second in Baghdad—and, with the UN, is intensively consulting a broad range of Iraqis on ideas to move the political process forward. These include establishing a governing council and a constitutional convention. We hope that these will be in place soon.
Lord Hurd of Westwell: My Lords, I am grateful to the Minister for that reply. Does she accept that there is growing unease that the brilliant military campaign which destroyed the dictatorship was not matched by a realistic plan for the future and that that has created a dangerous situation? But we are where we are. We cannot pull out. We are condemned to succeed. In that context, does the Minister accept that, even if we and other countries were willing, we could not solve the problem simply by piling in more troops? Following on from what she said in her Answer, can she say when Iraqis of substance in their community and communities will take charge of key civilian agencies and ministries in that country?
Baroness Symons of Vernham Dean: My Lords, I accept that there is a good deal of comment about there being unease. However, it is unrealistic to expect the coalition to put right in two months what has gone wrong over the previous 30 years. It is not only a case of what happened during the conflict but of not having the institutions in the country over a very long period. The noble Lord asked how we are moving forward. The governing council, which it is hoped will be in place during the course of July, will have, we hope, advisory powers while working with the coalition and the United Nations, and powers to appoint Ministers, to oversee the running of ministries and to set up commissions to review the cross-cutting issues such as justice reform and education. That is on the governing council side.
We hope that later in the month—probably towards the end of July—there will be a constitutional convention comprising 100 to 200 Iraqis, which will be charged with drafting a new constitution. Its members will be chosen from a wide range of groups in Iraq—Sunnis, Shias, Kurds, Christians—and we wish to ensure that women will also participate. So there will be two big staging posts, we hope, this month—first, slightly earlier, the governing council; and then, by the end of the month, we hope to have in place the constitutional convention.
Lord Judd: My Lords, does my noble friend agree that there is a difficult issue between choosing Iraqis who will participate in this process and Iraqis choosing for themselves the people who will participate in this process? It is a difficult issue, to which there is probably no completely satisfactory answer. But in these circumstances, does my noble friend agree that
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this is exactly why maximum global international authority for what is going on is essential so that it cannot be said that this is manipulation by the occupying powers?
Baroness Symons of Vernham Dean: My Lords, I agree that it is enormously important to have the broadest possible base. The noble Lord puts it very well: who does the choosing? That is why there was the first conference in Nasariyah and then the one in Baghdad. That is why there has been a women's meeting, with some 40 women drawn together to have their say about this. But I think that what the noble Lord is getting at is the role of the United Nations. I am happy to tell him that Mr. Sergio Vieira de Mello has indicated to John Sawers, the United Kingdom's representative, that he is very supportive of the coalition's plans and that our plans have broad support among Iraqis. That is a very important point. Kofi Annan's representative staff have been involved in the recent consultations, and he believes that they are going well. It is very important that Iraqi people feel that they have real ownership of this process.
Lord Quirk: My Lords, given the importance of education in the establishment of civilised values, although I know these are early days, can the Government say whether the United States is yet involving USIS in Iraq'? What plans do the Government have, in due course, for the British Council to return to the admirable role that it undertook in Mosul, Baghdad and Basra where, even at the present time, a Shia majority in the country could respond to British Council initiatives?
Baroness Symons of Vernham Dean: My Lords, of course education is an enormously important part of the process with regard to education of young children and cultural activities. We believe that about 90 per cent of Iraqi children have been able to return to school. But there is a real problem about education aids: the books used are written from a Ba'athist perspective and we do not wish to see their continued use in schools. So there is an enormous amount of groundwork to be done.
The noble Lord asks what further plans there are for the return of the British Council. Security on the ground would have to improve greatly before that could happen. My right honourable friend the Foreign Secretary has returned from Iraq and my noble friend the Secretary of State for International Development has also recently returned. From their reports, it is clear that it is still very early days. I agree with the noble Lord that we must set our sights on the future, and those are the sort of things that we want to aim for, but there is a little more groundwork to be done first.
Lord Wallace of Saltaire: My Lords—
Lord Williams of Mostyn: My Lords, I am sorry, but we have overrun the time.

DNA Database
3.24 p.m.
The Earl of Northeskasked Her Majesty's Government:
Whether the national DNA database complies with the provisions of the Data Protection Act 1998.
The Minister of State, Home Office (Baroness Scotland of Asthal): My Lords, it fully complies with the Act. The chief scientist of the Forensic Science Service is the custodian of the national DNA database under a memorandum of understanding with the Association of Chief Police Officers. DNA samples are collected from suspects and the personal data derived from them are loaded by the FSS on to the database. As an executive agency of the Home Office, processing of personal data by the FSS is within the Home Office notification to the Information Commissioner.
The Earl of Northesk: My Lords, I am grateful to the noble Baroness for that reply. Will she accept that I have no wish to underplay in any way the importance of DNA evidence as a potent weapon against crime? That said, is it really possible to square the fifth data principle, that:
"Personal data … shall not be kept for longer than is necessary"
with the proposition, as I understand it, advanced by the Home Secretary, that the police should have the power to take and retain indefinitely DNA samples from anybody who has been arrested and not just, as currently, those charged with an offence?
Baroness Scotland of Asthal: My Lords, we would say that it is. Noble Lords will know that there is a balance to he struck: they will also be aware that it has been possible for us to identify the perpetrators of crimes committed many years ago with the benefit of DNA samples taken recently. For example, a person was stopped for shoplifting a very small amount; the DNA sample indicated that, 25 years previously, he had been responsible for a series of sexual assaults. We believe it is critical evidence which is of great use to the public.
Lord Dholakia: My Lords, I was present at the Police Foundation lecture last week in memory of my noble friend John Harris, Lord Harris of Greenwich, at which the Home Secretary stated that there were now over 2 million DNA profiles on the database. Does that figure actually represent people convicted of a criminal offence?
Baroness Scotland of Asthal: My Lords, the noble Lord will know that the data are collected from those who have been charged and those who have been convicted, and I cannot tell him how many people fall into either category. It is only very recently that we have been able to retain samples taken from those who have not been convicted but who have been charged and prosecuted in relation to offences. It is true to say,
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however, that data collected in that way has been used to identify subsequent offences which have led to successful definitive convictions.
Lord Carlisle of Bucklow: My Lords, what is the position in relation to those who have been arrested but later not charged?
Baroness Scotland of Asthal: My Lords, your Lordships will know that it is being proposed that those samples will be retained so that they can be used in due course should they be necessary in relation to comparative samples. That proposal will have to be debated. When this matter came before the House, there was a question in relation to where the balance between public good and personal privacy should be struck. We have said very clearly that this is an implement which can be used to free people as well as to identify the perpetrators of wrongdoing. Those who have committed no offence need fear nothing from the retention.
Lord Campbell-Savours: My Lords, is it not true that there is overwhelming support for such a policy in the country, particularly in areas where there is crime?
Baroness Scotland of Asthal: My Lords, it is certainly true that the public are very anxious that those who can properly be identified as the perpetrators of crime should be so identified. Indeed, there is a very interesting document that I am very happy to put into the Library produced by the Forensic Science Service called Case Closed: 50 years of DNA—a gallery of cases involving DNA profiling, which demonstrates the utility of this procedure.
Lord Phillips of Sudbury: My Lords, is it not fair to remind the House that the Anti-terrorism, Crime and Security Bill contained a provision that retrospectively legalised the 50,000 or so illegal retentions of fingerprints and DNA samples? At the time, a great many of your Lordships felt that that was an improper way to proceed, but none the less, it became law. Can the Minister assure the House that, given public anxiety about these databases and that piece of history, the present collection and retention of DNA samples and fingerprints is strictly in accordance with the current law?
Baroness Scotland of Asthal: My Lords, I can certainly assure noble Lords that that is the position. Of course we are, as we have already said, going to debate more fully the issue of whether we should now be able to retain all the samples so obtained. However, I can certainly assure your Lordships that everything we have is in accordance with the rules and has been applied quite properly.
Lord Roberts of Conwy: My Lords, can the noble Lord say whether the national DNA database is in fact open to Interpol, Europol and other European criminal investigative organisations, and indeed, outside Europe,

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to American law enforcement agencies? What safeguards are there, particularly in relation to the unconvicted on the database?
Baroness Scotland of Asthal: My Lords, requests for a search of the national DNA database are channelled through the Interpol London Persons Desk. Those are processed only where it is clear that the request is in the interests of the prevention and detection of crime, national security or the data subject. Only a one-off speculative search of the database is made and information fed back via Interpol. A risk assessment on the dissemination of this information is then made, and the risk assessment will consider the justification and proportionality of the disclosure of the information. That does not tend to pose a problem with our other partners, the EEA countries, where similar DPA and human rights principles apply. All proper safeguards are put in place to ensure that this information is used properly and in accordance with the criteria that I have just outlined.

Railways and Transport Safety Bill
3.32 p.m.
Proceedings after Third Reading resumed.
Lord McIntosh of Haringeymoved Amendment No. 8:
After Clause 106, insert the following new clause—
"ROAD TRAFFIC: TESTING FOR DRINK AND DRUGS
Schedule (Road traffic: testing for drink and drugs) shall have effect."
On Question, amendment agreed to.
[Amendment No. 9 not moved.]
Baroness Scott of Needham Market Baroness Scott of Needham Market moved Amendment No. 10:
After Clause 108, insert the following new clause—
"THE NATIONAL TRAILS
(1) In the interest of public health and safety, subsections (2) to (4) shall have effect.
(2) The Secretary of State shall within one year from the coming into force of this enactment make a permanent Traffic Regulation Order to prohibit the use of non-essential mechanically propelled vehicles on the National Trails.
(3) Non-essential mechanically propelled vehicles shall mean all such vehicles but shall not include those driven by individuals with an estate or interest in land adjoining the Trail or their lawful visitors or emergency vehicles.
(4) A Traffic Regulation Order shall mean an order as defined in the Road Traffic Regulation Act 1984 and as subsequently amended."
The noble Baroness said: My Lords, Amendment No. 10 requires the Secretary of State to place a permanent traffic regulation order on national trails—routes such as the Ridgeway—which are designed primarily to provide access to the countryside and quiet recreation, particularly for those on foot, on horseback and on bicycles. These routes are unfortunately increasingly being used by off-road 4X4
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vehicles which are causing extensive damage to the surface. Environmental problems result in the form of damage to local flora and fauna. There is also the issue of amenity and the quiet use of these routes. However, as this is a safety Bill, I shall say no more now about those aspects.
However, damage to the surface does render the routes dangerous for other users. They become slippery during wet weather and rutted during dry weather. Indeed, I have anecdotal evidence of people who find that they cannot use the Ridgeway on foot, horseback or bicycle and have to go on to the local road network for part of their journey. That is clearly nonsensical.
As a county councillor in Suffolk I have chaired the rights of way committee for the past decade. I therefore have practical experience of just how difficult it is to deal with the problem of 4X4 vehicles on our public rights of way. Local authorities are able to use traffic regulation orders, but these are bureaucratic, time consuming and very expensive. In the case of the national trails, it is necessary for large numbers of local authorities to co-ordinate and develop together an approach that works along the whole route. Frankly, at the moment that is not working.
It seems to me that we have no trouble segregating walkers and cyclists from cars on the rest of the highway network. We provide cycleways and footways. Yet on ancient routes such as the Ridgeway we seem to think it acceptable for vehicles to share the way with walkers, cyclists and riders. I suggest that that does not make much sense at all.
So while generally having a slight abhorrence of any kind of centralising tendency, in the case of national trails I suggest that it would make much more sense to have the Secretary of State make an order for the whole of the trail network. I beg to move.
Earl Russell: My Lords, may I from memory—thank God not quite from painful memory—confirm that what my noble friend says about danger is true?
Viscount Astor: My Lords, I have put my name to this amendment. Indeed, I supported the noble Baroness both in Committee and at Report stage. The Minister has tried to be helpful in his answers. He understands the issues and problems in relation to the Ridgeway and other national trails. Indeed, it was the Government who invented the name and concept of national trails; previously we had only the name Ridgeway and the names of various other routes.
I declare an interest as I have done previously. I walk the Ridgeway most weekends. There is a voluntary code on the Ridgeway that bans cars and motorbikes at weekends. On Sunday morning, however, I was passed by 43 motorbikes all in a row. That represents a big safety problem as none of the motorbikes that passed me, all of which were off-roaders, were licensed. If they are not licensed, presumably they are not insured. If there were an accident, there would therefore be a problem. The people operating those

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vehicles do not think they are on a road. They say, "We can be here because it is a road", but they have met none of the requirements necessary to be on the road.
It is a problem within government. Although the Department for Transport, the Countryside Agency and the local authorities understand the problem, they are not moving at the same speed and sometimes not in exactly the same direction. Various local authorities are attempting to designate specific areas, but the attempts are not joined up. There may be local authority restrictions in some areas, but those could end a mile or so down the Ridgeway. The restrictions are therefore unenforceable. We do not want the problem solved on some parts of the Ridgeway but not on others. That would not work; it would bring chaos. The churning up of these ancient routes would accelerate.
I recognise that the Minister has tried to be helpful. However, there is a time problem between his former department, the Department for Transport, and the Countryside Agency. I therefore hope that the noble Baroness, Lady Scott, will press her amendment. The amendment would give the department time to make progress with the Countryside Agency. The problem is that it has not had time to make sufficient progress in reaching a workable relationship with the agency. When the Bill returns to another place, as it will have to do because of our amendments, the department may be able to offer a satisfactory result. Perhaps the Government will offer their own amendment or accept the noble Baroness's amendment. The Minister has been as helpful as he can but there is a logjam in the department. I believe that the amendment will enable the department to think again, to make some progress and to come back to Parliament with a solution. I strongly support it.
Lord Elton: My Lords, I stayed in the debate only when I heard the amendment moved by the noble Baroness. I simply wish to endorse what my noble friend has said from the Front Bench. I walk along the same Ridgeway, although a few miles further along, as my noble friend. I endorse that there is not only a nuisance but a considerable danger arising from this situation. I put in the Minister's mind the thought that if these 40 motorcycles were unlicensed, can he be confident that they did not cross any of the roads which intersect the Ridgeway? If so, what would happen to the safety of other people involved in an accident with an uninsured motorcycle?
Lord Berkeley: My Lords, I, too, support the amendment. Indeed, I put my name to similar amendments at previous stages of the Bill. The purpose of this amendment is similar to that of earlier amendments about pedestrians and cyclists. These proposals deal with the right of pedestrians and cyclists not to be subjected to nuisance or danger certainly in some parts of the country road and trail network.
The noble Baroness, Lady Scott of Needham Market, and the noble Viscount, Lord Astor, talked about 4X4s on the Ridgeway. I believe there were 43 of them. Of
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course, those drivers are not worried about pedestrians or cyclists are they? They are in their nice little tin boxes, uninsured and probably untaxed. They frighten people off.
It is pleasing to be told by the noble Baroness, Lady Scott of Needham Market, that pedestrians and cyclists are segregated on the highways. Sometimes they are, especially in towns. However, there are many roads in this country where there is no segregation for cyclists or pedestrians and walking on them is severely dangerous. It is perfectly reasonable that, occasionally, on such important paths as national trails, pedestrians and cyclists should have the right to enjoy them unimpeded by the nuisance and, most importantly, the danger. There is the added fear that, should they get hurt, they are unlikely to receive compensation, even if they could catch the person responsible because such people would not be insured and there would be no record of who they were.
The amendment is a good one. The problem has been around for many years. This seems the ideal opportunity to finally force the various departments involved to come up with a workable arrangement. I support the amendment.
Lord McIntosh of Haringey: My Lords, both the noble Baroness, Lady Scott of Needham Market, and the noble Viscount, Lord Astor, have acknowledged that we take this issue very seriously. As they know, I have facilitated meetings between them and Alun Michael, the Minister for Rural Affairs. I agree very strongly with all that they say about the condition of the Ridgeway in particular. The noble Lord, Lord Bradshaw, has shown me photographs. I happen to walk on Hampstead Heath rather than the Ridgeway, so I do not experience those problems personally. However, I have no doubt that this is an issue involving danger as well as amenity, so I do not criticise the amendment in that way.
I have serious problems, however, with the amendment. It is technically deficient, but, much more importantly, I believe it to be incompatible with the European Convention on Human Rights.
Section 22 of the Road Traffic Regulation Act 1984 already provides for the Secretary of State to make traffic regulation orders in relation to special areas of the countryside—including long distance routes--in the interests of conserving or enhancing their natural beauty, and affording better opportunities to enjoy their amenities for recreation or study. If the proposed amendment were agreed, it would override to an uncertain extent the existing provisions of Section 22 in relation to long-distance routes.
When the noble Baroness, Lady Scott of Needham Market, decides what to do about the amendment, I invite her to consider the extent to which the Section 22 powers could be used and to join me in urging that they should be used for this purpose. However, there is a profound difference between the Section 22 powers and what is proposed in the amendment. When a traffic regulation order is proposed under Section 22 powers, the procedures allow an opportunity for objections and, if necessary, a public inquiry before an

1037
independent inspector. We have a very serious problem with the proposed new clause because it would require the Secretary of State to make an order without any opportunity for objections or debate. I am sorry to say that we believe it to be incompatible with the ECHR.
As I said, the amendment is also technically deficient because it contains no definition of a national trail. It affords no opportunity for objections to be made to the proposed traffic regulation order, and it fails to recognise the existence of Section 22 of the Road Traffic Regulation Act 1984. It would extinguish long-standing public vehicular rights without any opportunity for objections to be heard. We believe that it is important for all sides to have an opportunity to put their views before a decision is taken on any traffic regulation order. Procedures should not be curtailed simply because they are inconvenient from the point of view of the desired end, even when I, and my colleagues in the Government, agree with the noble Baroness, Lady Scott of Needham Market, and the noble Viscount, Lord Astor, about the desired end.
We are talking about the Ridgeway in particular. The Government accept that its western section is infested with recreational vehicular use which results in damage to the surface and causes annoyance, inconvenience and danger to pedestrian users. The Countryside Agency, in partnership with the local highway authorities, is addressing those problems.
The Countryside Agency is drawing up a business plan for the Ridgeway which envisages a strategy of selective use of traffic regulation orders in combination with repairs to those parts that have been damaged. Funding for that work will be provided by the agency. If local authorities indicate that they are not prepared to make the required traffic regulation orders, the Secretary of State can exercise his powers to do so under the provisions of Section 22 of the 1984 Act. I am sure that there will be contact between the Minister for Rural Affairs and the Countryside Agency on that point.
We are prepared to look again at the traffic regulation order procedures to see if they can be simplified as part of our reform of the Road Traffic Regulation Act 1984. We would welcome any suggestions that noble Lords may have about changes, but they must recognise that people have a right to be heard if their interests may be affected by a traffic regulation order.
This is not the last opportunity for this matter to be debated. It is well known that the Department for Transport is working on proposals for wider traffic management regulation, which will be taken forward at the earliest opportunity, subject to the normal pressures on the legislative programme. Legislation on banning non-essential vehicles from national trails would fit much more naturally there than in this Bill, which I am sure your Lordships are anxious to see.
We should give the Countryside Agency's management plan for the Ridgeway a chance before rushing to legislate, especially as there are already
1038
appropriate powers on the statute book. Also, the amendment as drafted—although it cannot be undrafted or redrafted at this stage of consideration in the House—is profoundly defective in respect of flouting, although flouting implies intention, so perhaps I should say conflict with the ECHR.
Viscount Astor: My Lords, before the Minister sits down, I accept the notion that the amendment is not entirely satisfactorily drafted. However, if the amendment were agreed today the Government would have the opportunity of redrafting it in another place and it could be returned to us in a style that would please everybody, including the Minister.
Lord McIntosh of Haringey: My Lords, that is a very dangerous argument—that this House should pass a measure that contains elements we know to be unsatisfactory and in conflict with the ECHR. We should have enough pride in our proceedings to send a Bill back to the House of Commons which is correct. I believe that those who have a respect for the relationship between the two Houses and a respect for the European convention—however strongly they feel about the issue, as do I—should not agree to this amendment.
Lord Monson: My Lords, is the Minister seriously claiming that it is a fundamental human right to be able to drive a four-wheel drive vehicle along a bridleway for fun—not to get to one's place of business, but simply for fun? I find that hard to believe.
Lord McIntosh of Haringey: My Lords, I am not suggesting that for a moment. I am saying that when one extinguishes long-standing vehicular rights—because nobody has disputed that those rights are long-standing—there has to be an opportunity to object and the possibility of appeal to an independent tribunal. I would have thought that the noble Lord, Lord Monson, of all people—because he is a libertarian—would agree with that proposition.
Baroness Scott of Needham Market: My Lords, I am grateful to noble Lords who have supported me in this amendment—not only today, but in previous stages of the Bill. I am gratified to hear from the Minister that he supports the intention behind the amendment even if he is not able to support the amendment itself. That means that we do not have to spend any more time on the substance but can concentrate on the procedure.
We are in this situation because our rights of way law is outdated. We have a law that allows vehicular use on those routes. Three years ago, noble Lords tried hard to get changes to the law when the Countryside and Rights of Way Bill was going through your Lordships' House. The Government resisted at that point, so I find it difficult to accept that the amendment is premature and that we should wait for further legislation in the future. Noble Lords have been patient on the matter. More to the point, the people who live and use the routes have been very patient, even though they are being endangered.

1039
I make no claim to he an expert on human rights legislation or on the procedures of the House. I admit that the amendment does not contain requirements for public consultation, inquiries and so on, but, if the Government were minded to accept to accept it, they could build such things into guidance—they need not be in the Bill—or they could accept the principle and, as the noble Viscount suggested, move an amendment that was more suitable in their eyes, when the Bill reached another place.
I will not accept lectures from anyone on my commitment to human rights or to consultation. My record in Suffolk bears testament to that. However, there are clear examples here of how people's lives are being endangered, besides the question of the recreation and amenity of people who wish to use the routes. I am not happy, therefore, and I wish to test the opinion of the House.
3.51 p.m.
On Question, Whether the said amendment (No. 10) shall be agreed to?
Their Lordships divided: Contents, 132; Not-Contents, 110.

Division No. 1

CONTENTS

Addington, L.

Ezra, L.

Alderdice, L.

Falkland, V.

Astor, V.

Feldman, L.

Astor of Hever, L.

Finlay of Llandaff, B.

Attlee, E.

Fookes, B.

Avebury, L.

Freeman, L.

Barker, B.

Glentoran, L.

Berkeley, L.

Goodhart, L.

Biffen, L.

Greaves, L.

Blackwell, L.

Greenway, L.

Bradshaw, L.

Griffiths of Fforestfach, L.

Bridgeman, V.

Hamwee, B.

Brittan of Spennithorne, L.

Hanham, B.

Brougham and Vaux, L.

Henley, L.

Burnham, L.

Hodgson of Astley Abbotts, L.

Buscombe, B.

Hogg, B.

Byford, B.

Hooper, B.

Caithness, E.

Hooson, L.

Campbell of Alloway, L.

Howe, E.

Carlisle of Bucklow, L.

Howe of Aberavon, L.

Carnegy of Lour, B.

Howell of Guildford, L.

Chadlington, L.

Hurd of Westwell, L.

Chorley, L.

Jacobs, L.

Clement-Jones, L.

Jenkin of Roding, L.

Colville of Culross, V.

Kilclooney, L.

Colwyn, L.

King of Bridgwater, L.

Cope of Berkeley, L.

Laird, L.

Craig of Radley, L.

Lester of Herne Hill, L.

Craigavon, V.

Livsey of Talgarth, L.

Crickhowell, L.

Luke, L.

Cuckney, L.

Lyell, L.

Cumberlege, B.

McColl of Dulwich, L.

Dahrendorf, L.

MacGregor of Pulham Market, L.

Denham, L.

Dholakia, L.

McNally, L.

Dixon-Smith, L.

Marlesford, L.

Elis-Thomas, L.

Masham of Ilton, B.

Elles, B.

Mayhew of Twysden, L.

Elliott of Morpeth, L.

Methuen, L.

Elton, L.

Miller of Chilthorne Domer, B.

1040

Molyneaux of Killead, L.

Seccombe, B.

Monson, L.

Sharp of Guildford, B.

Mowbray and Stourton, L.

Shutt of Greetland, L.

Moynihan, L.

Simon of Glaisdale, L.

Newby, L.

Skelmersdale, L.

Nicholson of Winterbourne, B.

Smith of Clifton, L.

Noakes, B.

Soulsby of Swaffham Prior, L.

Northesk, E.

Stevens of Ludgate, L.

Northover, B.

Stoddart of Swindon, L.

Norton of Louth, L.

Swinfen, L.

O'Cathain, B.

Taverne, L.

Oakeshott of Seagrove Bay, L.

Taylor of warwick, L.

Palmer, L.

Thomas of Gwydir, L.

Pearson of Rannoch, L.

Thomas of Walliswood, B. [Teller]

Phillips of Sudbury, L.

Razzall, L.

Tope, L.

Redesdale, L.

Tordoff, L.

Trefgarne, L.

Rennard, L.

Trumpington, B.

Renton, L.

Vinson, L.

Roberts of Conwy, L.

Vivian, L.

Rodgers of Quarry Bank, L.

Waddington, L.

Russell, E.

Wakeham, L.

Russell-Johnston, L.

Walker of Worcester, L.

Saatchi, L.

Wallace of Saltaire, L.

Sandberg, L.

Walmsley, B.

Scott of Needham Market, B.[Teller]

Watson of Richmond, L.

Williams of Crosby, B.

NOT-CONTENTS

Acton, L.

Fyfe of Fairfield, L.

Ahmed, L.

Gale, B.

Amos, B.

Gavron, L.

Ampthill, L.

Gibson of Market Rasen, B.

Andrews, B.

Gilbert, L.

Archer of Sandwell, L.

Golding, B.

Ashton of Upholland, B.

Goldsmith, L.

Bach, L.

Goudie, B.

Bassam of Brighton, L.

Gould of Potternewton, B.

Bernstein of Craigweil, L.

Grocott, L. [Teller]

Billingham, B.

Harrison, L.

Borrie, L.

Haskel, L.

Brennan, L.

Hayman, B.

Brett, L.

Hilton of Eggardon, B.

Brooke of Alverthorpe, L.

Hollis of Heigham. B.

Brookman, L.

Howells of St. Davids, B.

Bruce of Donington, L.

Hoyle, L.

Campbell-Savours, L.

Jeger, B.

Carter, L.

Judd, L

Chan, L.

Layard, L.

Chandos, V.

Lea of Crondall, L.

Christopher, L.

Lipsey, L.

Clarke of Hampstead, L.

Lockwood, B.

Clinton-Davis, L.

Lofthouse of Pontefract, L.

Cohen of Pimlico, B.

McCarthy, L.

Crawley, B.

Macdonald of Tradeston, L.

Croham, L.

Mclntosh of Haringey, L.

David, B.

Mclntosh of Hudnall, B.

Davies of Coity, L.

MacKenzie of Culkein, L.

Davies of Oldham, L. [Teller]

Mackenzie of Framwellgate, L.

Dean of Thornton-le-Fylde, B.

Marsh, L

Desai, L.

Massey of Darwen, B.

Dixon, L.

Merlyn-Rees, L.

Donoughue, L.

Parekh, L.

Dormand of Easington, L.

Paul, L.

Dubs, L.

Peston, L.

Eatwell, L.

Pitkeathley, B.

Evans of Parkside, L.

Puttnam, L.

Evans of Temple Guiting, L.

Ramsay of Cartvale, B.

Falconer of Thoroton, L. (Lord Chancellor)

Rea, L.

Rendell of Babergh, B.

Farrington of Ribbleton, B.

Richard, L.

Faulkner of Worcester, L.

Roll of Ipsden, L.

Filkin, L.

Rooker, L.

Fitt, L.

Sainsbury of Turville, L.

1041

Sawyer, L.

Uddin, B.

Scotland of Asthal, B.

Warner, L.

Sewel, L.

Warwick of Undercliffe, B.

Sheldon, L.

Watson of Invergowrie, L.

Simon, V.

Wedderburn of Charlton, L.

Slim, V.

Whitaker, B.

Strabolgi, L.

Whitty, L.

Symons of Vernham Dean, B.

Williams of Elvel, L.

Taylor of Blackburn, L.

Williams of Mostyn, L. (Lord President of the Council)

Turnberg, L.

Turner of Camden, B.

Woolmer of Leeds, L.

Resolved in the affirmative, and amendment agreed to accordingly.
4.2 p.m.
Lord Bradshaw Lord Bradshaw moved Amendment No. 11:
After Clause 108, insert the following new clause—
"OPERATING CENTRES
In section 13(5) of the Goods Vehicles (Licensing of Operators) Act 1995 (c. 23) (determination of applications) after paragraph (d) there is inserted—
"(dd) in permitting goods vehicles operators to establish an operating centre the Traffic Commissioner is satisfied that the Centre is available, suitable and of sufficient capacity and must take into account the suitability of the local road network for the establishment of such a centre.""
The noble Lord said: My Lords, I do not intend to detain the House for long. We have previously discussed the question of operating centres and the Minister wrote to me on the subject and sent me a copy of the traffic commissioner's report, for which I thank him. We will not divide the House on this matter although I would have done if time had allowed, but it does not. However, I give him notice that we do not believe that the use of traffic orders is appropriate or that the police have anything like sufficient numbers of officers to enforce them. When the amendments to the Road Traffic Act, to which he referred, are considered by the department, it should turn its attention away from traffic orders to a more useful form of amendment, whereby when an operating centre licence is granted and access is agreed to the road network, the traffic commissioner should be permitted to take into account whether the road is suitable. Will the noble Lord seriously consider that suggestion? As a specialist, he knows what sort of vehicles are likely to use it and he can set the sort of operating parameters that are more suitable to that centre. I beg to move.
Lord McIntosh of Haringey: My Lords, I am relieved that the noble Lord, Lord Bradshaw, chose not to argue the case for the amendment because I have great difficulty with it as drafted. I do not believe that it meets his own concerns. He asked me for an assurance that when the issue of traffic regulation orders is considered, those issues should be taken into account. I can certainly give him that assurance.
Lord Bradshaw: My Lords, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 12:
After Schedule 6, insert the following new schedule—
"ROAD TRAFFIC:TESTING FOR DRINK AND DRUGS
1 For section 6 of the Road Traffic Act 1988 (c. 52) (testing for drink or drugs) substitute—
"6 POWER TO ADMINISTER PRELIMINARY TESTS
(1) If any of subsections (2) to (5) applies a constable may require a person to co-operate with any one or more preliminary tests administered to the person by that constable or another constable.
(2) This subsection applies if a constable reasonably suspects that the person—

(a) is driving, is attempting to drive or is in charge of a motor vehicle on a road or other public place, and

(b) has alcohol or a drug in his body or is under the influence of a drug.

(3) This subsection applies if a constable reasonably suspects that the person—

(a) has been driving, attempting to drive or in charge of a motor vehicle on a road or other public place while having alcohol or a drug in his body or while unfit to drive because of a drug, and

(b) still has alcohol or a drug in his body or is still under the influence of a drug.

(4) This subsection applies if a constable reasonably suspects that the person—

(a) is or has been driving, attempting to drive or in charge of a motor vehicle on a road or other public place, and

(b) has committed a traffic offence while the vehicle was in motion.

(5) This subsection applies if—

(a) an accident occurs owing to the presence of a motor vehicle on a road or other public place, and

(b) a constable reasonably believes that the person was driving, attempting to drive or in charge of the vehicle at the time of the accident.

(6) A person commits an offence if without reasonable excuse he fails to co-operate with a preliminary test in pursuance of a requirement imposed under this section.
(7) A constable may administer a preliminary test by virtue of any of subsections (2) to (4) only if he is in uniform.
(8) In this section—

(a) a reference to a preliminary test is to any of the tests described in sections 6A to 6C, and

(b) "traffic offence" means an offence under—

(i) a provision of Part II of the Public Passenger Vehicles Act 1981 (c. 14),

(ii) a provision of the Road Traffic Regulation Act 1984 (c. 27),

(iii) a provision of the Road Traffic Offenders Act 1988 (c. 53) other than a provision of Part III, or

(iv) a provision of this Act other than a provision of Part V.

6A PRELIMINARY BREATH TEST
(1) A preliminary breath test is a procedure whereby the person to whom the test is administered provides a specimen of breath to be used for the purpose of obtaining, by means of a device of a type approved by the Secretary of State, an indication whether the proportion of alcohol in the person's breath or blood is likely to exceed the prescribed limit.
(2) A preliminary breath test administered in reliance on section 6(2) to (4) may be administered only at or near the place where the requirement to co-operate with the test is imposed.
(3) A preliminary breath test administered in reliance on section 6(5) may be administered—

(a) at or near the place where the requirement to co-operate with the test is imposed, or

(b) if the constable who imposes the requirement thinks it expedient, at a police station specified by him.

6B PRELIMINARY IMPAIRMENT TEST
(1) A preliminary impairment test is a procedure whereby the constable administering the test—

(a) observes the person to whom the test is administered in his performance of tasks specified by the constable, and

(b) makes such other observations of the person's physical state as the constable thinks expedient.

(2) The Secretary of State shall issue (and may from time to time revise) a code of practice about—

(a) the kind of task that may be specified for the purpose of a preliminary impairment test,

(b) the kind of observation of physical state that may be made in the course of a preliminary impairment test,

(c) the manner in which a preliminary impairment test should be administered, and

(d) the inferences that may be drawn from observations made in the course of a preliminary impairment test.

(3) In issuing or revising the code of practice the Secretary of State shall aim to ensure that a preliminary impairment test is designed to indicate—

(a) whether a person is unfit to drive, and

(b) if he is, whether or not his unfitness is likely to be due to drink or drugs.

(4) A preliminary impairment test may be administered—

(a) at or near the place where the requirement to co-operate with the test is imposed, or

(b) if the constable who imposes the requirement thinks it expedient, at a police station specified by him.

(5) A constable administering a preliminary impairment test shall have regard to the code of practice under this section.
(6) A constable may administer a preliminary impairment test only if he is approved for that purpose by the chief officer of the police force to which he belongs.
(7) A code of practice under this section may include provision about—

(a) the giving of approval under subsection (6), and

(b) in particular, the kind of training that a constable should have undergone, or the kind of qualification that a constable should possess, before being approved under that subsection.

6C PRELIMINARY DRUG TEST
(1) A preliminary drug test is a procedure by which a specimen of sweat or saliva is—

(a) obtained, and

(b) used for the purpose of obtaining, by means of a device of a type approved by the Secretary of State, an indication whether the person to whom the test is administered has a drug in his body.

(2) A preliminary drug test may be administered—

(a) at or near the place where the requirement to co-operate with the test is imposed, or

(b) if the constable who imposes the requirement thinks it expedient, at a police station specified by him.

6D ARREST
(1) A constable may arrest a person without warrant if as a result of a preliminary breath test the constable reasonably suspects that the proportion of alcohol in the person's breath or blood exceeds the prescribed limit.
(2) A constable may arrest a person without warrant if—

(a) the person fails to co-operate with a preliminary test in pursuance of a requirement imposed under section 6, and

(b) the constable reasonably suspects that the person has alcohol or a drug in his body or is under the influence of a drug.

(3) A person may not be arrested under this section while at a hospital as a patient.
6E POWER OF ENTRY
(1) A constable may enter any place (using reasonable force if necessary) for the purpose of—

(a) imposing a requirement by virtue of section 6(5) following an accident in a case where the constable reasonably suspects that the accident involved injury of any person, or

(b) arresting a person under section 6D following an accident in a case where the constable reasonably suspects that the accident involved injury of any person.

(2) This section—

(a) does not extend to Scotland, and

(b) is without prejudice to any rule of law or enactment about the right of a constable in Scotland to enter any place."

2 In section 7(3) of that Act (provision of specimen for analysis) after the word "or" after subsection (bb) insert —
"(bc) as a result of the administration of a preliminary drug test, the constable making the requirement has reasonable cause to believe that the person required to provide a specimen of blood or urine has a drug in his body, or".
3 In section 9(1) of that Act (protection for hospital patients)—

(a) for "to provide a specimen of breath for a breath test" substitute "to co-operate with a preliminary test", and

(b) in paragraph (a), for "it shall be for the provision of a specimen at the hospital" substitute "it shall be for co-operation with a test administered, or for the provision of a specimen, at the hospital".

4 In section 10(1) of that Act (detention of persons affected by alcohol or drugs) in subsection (1) after "a person required" insert "under section 7 or 7A".
5 In section 11 of that Act (interpretation)—

(a) in subsection (2), omit the definition of "breath test", and

(b) in subsection (3) for "A person does not provide a specimen of breath for a breath test or for analysis unless the specimen" substitute "A person does not co-operate with a preliminary test or provide a specimen of breath for analysis unless his co-operation or the specimen".

6 In section 184(1)(f) of that Act (application of sections 5 to 10 to military personnel) for "in section 6(1) the reference to a traffic offence" substitute "in section 6 a reference to a traffic offence".
7 In Schedule 1 to the Road Traffic Offenders Act 1988 (c. 53) (offences to which certain provisions apply), in the entry for section 6 of the Road Traffic Act 1988 (c. 52) for the description of the general nature of the offence substitute "Failing to co?operate with a preliminary test".
8 In Schedule 2 to that Act (prosecution and punishment of offenders), in the entry for section 6 of the Road Traffic Act 1988 (c. 52) for the description of the general nature of the offence substitute "Failing to co-operate with a preliminary test".
9 In section 34A(1D)(a) of the Army Act 1955 (c. 18) (testing for drugs) for sub-paragraph (i) substitute—

1045
"(i) any provision of the Road Traffic Act 1988 (c. 52),".
10 In section 34A(1D)(a) of the Air Force Act 1955 (c. 19) (testing for drugs) for sub-paragraph (i) substitute—
"(i) any provision of the Road Traffic Act 1988 (c. 52),".
11 In section 12A(1D)(a) of the Naval Discipline Act 1957 (c. 53) (testing for drugs) for sub-paragraph (i) substitute—
"(1) any provision of the Road Traffic Act 1988 (c. 52),".
12 In section 34(6) of the Police and Criminal Evidence Act 1984 (c. 60) (arrest) for "section 6(5) of the Road Traffic Act 1988" substitute "section 6D of the Road Traffic Act 1988".
13 In section 32(8)(a) of the Armed Forces Act 2001 (c. 19) (testing for drink or drugs) for sub-paragraph (i) substitute—
"(i) any provision of the Road Traffic Act 1988 (c. 52),"."
On Question, amendment agreed to.
Schedule 7 [Repeals]:
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 13:
Page 75, line 8, at end insert—

"Road Traffic Act 1988 (c. 52)

In section 11(2), the definition of "breath test"."

On Question, amendment agreed to.
Lord McIntosh of Haringey Lord McIntosh of Haringey: My Lords, I beg to move that the Bill do now pass.
Moved, that the Bill do now pass.—(Lord McIntosh of Haringey.)
On Question, Bill passed, and returned to the Commons with amendments.

Licensing Bill [H.L.]
4.5 p.m.
Lord McIntosh of Haringey: My Lords, I beg to move that the Commons amendments be now considered.
Moved, That the Commons amendments be now considered.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

COMMONS AMENDMENTS IN LIEU OF A CERTAIN COMMONS AMENDMENT NOT INSISTED UPON, COMMONS INSISTENCE UPON A CERTAIN COMMONS AMENDMENT AND A COMMONS AMENDMENT IN LIEU OF A CERTAIN LORDS AMENDMENT DISAGREED TO
[The page and line refer to Bill 73 as first printed for the Commons.]
COMMONS AMENDMENT
21 Clause 47, page 27, line 33, leave out from "practitioner" to end of line 35

LORDS REASON
The Lords disagree to this Amendment for the following Reason—
21A Because the Bill should make provision about the registration of prior and paramount interests in registered premises.

COMMONS AMENDMENTS IN LIEU
The Commons do not insist on their Amendment to which the Lords have disagreed, but propose the following Amendments to the Bill in lieu of that Amendment—
21B Page 5, line 41, leave out paragraph (d)
21C Page 16, line 17, leave out from "he" to end of line 21 and insert "may give the relevant licensing authority a notice to that effect"
21D Page 19, line 22, leave out subsections (6) and (7)
21E Page 27, line 31, at end insert "or"
21F Page 27, line 33, leave out from "practitioner" to end of line 35
21G Page 85? line 24, leave out "or"
21H Page 85, line 25, at end insert ", or
(e) a notice within section [Right of freeholder etc to he notified of licensing matters](1) (notice by freeholder etc conferring right to be notified of changes to licensing register)"
21I Page 97, line 35, at end insert—
"Rights of freeholders etc.
Right of freeholder etc. to be notified of licensing matters
(1) This section applies where—

(a) a person with a property interest in any premises situated in the area of a licensing authority gives notice of his interest to that authority, and

(b) the notice is in the prescribed form and accompanied by the prescribed fee.

(2) The notice has effect for a period of 12 months beginning with the day it is received by the licensing authority.
(3) If a change relating to the premises to which the notice relates is made to the register at a time when the notice has effect, the licensing authority must forthwith notify the person who gave the notice—

(a) of the application, notice or other matter to which the change relates, and

(b) of his right under section 9 to request a copy of the information contained in any entry in the register.

(4) For the purposes of this section a person has a property interest in premises if—

(a) he has a legal interest in the premises as freeholder or leaseholder,

(b) he is a legal mortgagee (within the meaning of the Law of Property Act 1925 (c. 20)) in respect of the premises,

(c) he is in occupation of the premises, or

(d) he has a prescribed interest in the premises.

(5) In this section—

(a) a reference to premises situated in the area of a licensing authority includes a reference to premises partly so situated, and

(b) "register" means the register kept under section 9 by the licensing authority mentioned in subsection (1)(a)."

Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 21B to 21I en bloc in lieu of Commons Amendment No. 21, to which the Lords have disagreed.
These amendments were made in the Commons further to the undertaking that I gave in particular to the noble Baroness, Lady Buscombe, and the noble Lord, Lord Redesdale, in the House on 19th June. They were drawn up following consultation with those involved from the industry and they meet the concerns that they had in relation to the important issue of the registration of interests. I hope that the House will agree with the Commons in their Amendments Nos. 21 B to 211. I beg to move.
Moved, That the House do agree with the Commons in their Amendments Nos. 21B to 211 in lieu of Commons Amendment No. 21, to which the Lords have disagreed.—(Lord McIntosh of Haringey.)
Baroness Buscombe: My Lords, I rise simply to say that we welcome the amendments.
Lord Redesdale: My Lords, we also welcome the amendments.
On Question, Motion agreed to.

COMMONS AMENDMENT
62 Schedule 1, page 112, line 31, leave out paragraph 12

LORDS AMENDMENT IN LIEU
The Lords disagree to this amendment hut propose the following amendment in lieu thereof—
62A Page 112, line 30, at end insert—
"Small evens: live music
(1) The provision of entertainment consisting of the performance of live music is not to be regarded as the provision of regulated entertainment for the purposes of this Act where—

(a) the number of listeners or spectators present does not exceed 200 at any one time, and

(b) the entertainment ceases no later than I 1.30pm.

(1) The provision of entertainment facilities solely for the purposes of entertainment described in sub-paragraph (1) is not to be regarded as the provision of regulated entertainment for the purposes of this Act.
(2) Nothing in this paragraph shall be read as rendering invalid or otherwise affecting any provision of, or any regulation made under, any other legislation that applies to the entertainment, the entertainment facilities or the premises on which the entertainment is to take place."

COMMONS INSISTENCE AND AMENDMENT IN LIEU
The Commons insist on their Amendment No. 62 to which the Lords have disagreed, and disagree to the Lords Amendment (No. 62A) proposed in lieu of that Amendment, hut propose the following Amendment to the Bill in lieu of Amendment No.62A—
62B Page 97. line 35, at end insert—
"Special provision for pubs etc.
Dancing and live music in pubs etc.
(1) This section applies where—

(a) a premises licence authorizes—

(i) the supply of alcohol for consumption on the premises, and

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(ii) music entertainment, and

(b) the premises—

(i) are used primarily for the supply of alcohol for consumption on the premises, and

(ii) have a permitted capacity of not more than 200 persons.

(2) At any time when the premises—

(a) are open for the purposes of being used for the supply of alcohol for consumption on the premises, and

(b) are being used for music entertainment, any condition of the premises licence which relates only to the music entertainment, and is imposed by virtue of section 19(3)(b), 35(3)(b), 52(3) or 166(5)(b). does not have effect unless it falls within subsection (3) or (4).

(3) A condition falls within this subsection if the premises licence specifies that the licensing authority which granted the licence considers the imposition of the condition necessary on one or both of the following grounds—

(a) the prevention of crime and disorder,

(b) public safety.

(4) A condition falls within this subsection if, on a review of the premises licence,—

(a) it is altered so as to include a statement that this section does not apply to it, or

(b) it is added to the licence and includes such a statement.

(5) This section applies in relation to a club premises certificate as it applies in relation to a premises licence and, in the application of this section to such a certificate, the reference in subsection (2) to section 19(3)(6), 35(3)(b), 52(3) or 166(5)(b) is to be read as a reference to section 72(3)(b), 83(3)(b) or 86(3).
(6) In this section—
"music entertainment" means—

(a) the provision of entertainment of a description falling within, or of a similar description to that falling within, paragraph 2(1)(e) or (g) of Schedule 1. or

(b) the provision of entertainment facilities falling within paragraph 3 of that Schedule, in circumstances where the conditions in paragraph 1(2) and (3) of that Schedule arc satisfied;

"permitted capacity", in relation to any premises, means—

(a) where a fire certificate issued under the Fire Precautions Act 1971 (c. 40) is in force in respect of the premises and that certificate imposes a requirement under section 6(2)(d) of that Act, the limit on the number of persons who, in accordance with that requirement, may be on the premises at any one time, and

(b) in any other case, the limit on the number of persons who may be on the premises at any one time in accordance with a recommendation made by, or on behalf of, the fire authority for the area in which the premises are situated (or, if the premises are situated in the area of more than one fire authority, those authorities); and

"supply of alcohol" means—

(a) the sale by retail of alcohol, or

(b) the supply of alcohol by or on behalf of a club to, or to the order of, a member of the club."

Lord McIntosh of Haringeyrose to move, That the House do not insist on its disagreement to Commons Amendment No. 62, do not insist on Lords Amendment No. 62A, and do agree with the Commons in their Amendment No. 62B, but do propose Amendments Nos. 62C to 62J to Commons Amendment No. 62B and do propose Amendment No. 62L in lieu of the words left out of the 13111 by Amendment No. 62—
62C Line 4, leave out "This section" and substitute "Subsection (2)"
62D Line 7, after "(ii)" insert "the provision of"
62E Line 12, leave out from "when" to end of line 18 and insert—

'(a) the premises—

(i) are open for the purposes of being used for the supply of alcohol for consumption on the premises, and

(ii) are being used for the provision of music entertainment, and

(b) subsection (2B) does not apply, any licensing authority imposed condition of the premises licence which relates to the provision of music entertainment does not have effect, in relation to the provision of that entertainment, unless it falls within subsection (3) or (4).

(2A) Subsection (2B) applies where—

(a) a premises licence authorises the provision of music entertainment, and

(b) the premises have a permitted capacity of not more than 200 persons.

(B) At any time between the hours of 8 a.m. and midnight when the premises—

(a) are being used for the provision of music entertainment which consists of —

(i) the performance of unamplified, live music, or

(ii) facilities for enabling persons to take part in entertainment within sub-paragraph (i), but

(b) are not being used for the provision of any other description of regulated entertainment, any licensing authority imposed condition of the premises licence which relates to the provision of the music entertainment does not have effect, in relation to the provision of that entertainment, unless it falls within subsection (4)."

62F Line 30, leave out from "licence" to end of line 32 and insert "except that, in the application of this section in relation to such a certificate, the definition of "licensing authority imposed condition" in subsection (6) has effect as if for "section 19(3)(b)" to the end there were substituted "section 72(3)(b) (but is not referred to in section 72(2)) or which is imposed by virtue of section 83(3)(b) or 86(3)"."
62G Line 33, at end of line insert—
""licensing authority imposed condition" means a condition which is imposed by virtue of section 19(3)(b) (but is not referred to in section 19(2)(a)) or which is imposed by virtue of 35(3)(b). 52(3) or 166(5)(b) or in accordance with section 21;"
62H Line 35, leave out "the provision of"
62J Line 38, leave out from "(b)" to end of 41 and insert "facilities enabling persons to take part in entertainment within paragraph (a);"
62L Schedule I, page 112. line 12, at end insert—
"Morris dancing etc.
The provision of any entertainment or entertainment facilities is not to be regarded as the provision of regulated entertainment for the purposes of this Act to the extent that it consists of the provision of—

(a) a performance of morris dancing or any dancing of a similar nature or a performance of unamplified, live music as an integral part of such a performance, or

(b) facilities for enabling persons to take part in entertainment of a description falling within paragraph (a)."

The noble Lord said: My Lords, this is a matter on which there has been what I could almost describe as incessant' to-ing and fro-ing between various outside interests and this House and the House of Commons for a number of months. I hope that at what I hope is the final stage, we can have a sensible debate on the issues.
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There has been an awful lot of fundamental misunderstanding of the issues, particularly outside the Chamber. I think that that misunderstanding can be summed up in just a few words: generally speaking, nothing that does not need a licence now will need one under the Bill. Even the so-called two-in-a-bar exemption needs a justices' licence. What the Bill does is to make it much cheaper and easier to get a licence where one is needed. As the Joint Committee on Human Rights stated in its seventh report, it is legitimate to say that there is a pressing social need for regulation in this area. It is not legitimate to claim that, for example. the Bill will spell the end of folk clubs. If they need a licence now, they will need one under the new system, but at much reduced cost and bureaucracy.
For the first time the provision of entertainment in a school and sixth form college by the school or college will be free of charge from the licensing fee associated with that provision and we are maintaining the current exemption from the payment of fees for entertainment in every village hall, church hall and community building. which is the position outside Greater London now. It will cost nothing extra to get permission to put on live music in pubs. So this Bill is good news for live music. It sweeps away bureaucracy and slashes through cost.
However, we recognise that some people are very worried that licensing authorities will try to sting venues for thousands of pounds worth of unnecessary conditions, even though the Bill as drafted makes that illegal. The charge is that this will discourage venue operators—notably publicans—from applying for permission to put on live music.
It is interesting to note that the people who are really concerned about this are the performers, who will not actually have to get licences, rather than the publicans or organisers, who are largely content. However, we are alive to those concerns. That is why in another place we made a concession to the effect that where a pub with a capacity of up to 200 wanted to put on live music of any kind, any conditions imposed on the licence by the licensing authority would be suspended except where they related to public safety and crime and disorder.
We kept public safety because we are simply not prepared to put lives at risk. No responsible government could act otherwise. Noble Lords might already know that in 2001 there were over 1,500 fires in pubs and clubs in England and Wales. Licensing provides a means of ensuring that experts such as the Fire Safety Authority can check premises to see that the customers will be able to get out quickly and safely if problems occur. This is a more effective regime than the health and safety and public safety regimes to which the noble Baroness, Lady Buscombe, in particular, referred when we debated this matter before.
We kept crime and disorder because of public concern over drugs, guns and extreme right-wing bands who excite the audience to racist violence as part of their act. It does happen. Unfortunately, live music is not madrigals on a summer evening on the village green: I wish it were. It still provides a major advantage for operators and organisers of small venues, in terms of

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public nuisance. Those people can forget the rumours about being made to install thousands of pounds worth of sound-proofing or double glazing.
The Government have provided a failsafe position. The licence remains reviewable so that those who exploit the concession and behave inconsiderately towards their neighbours can be brought to book. Another place agreed to that concession. Predictably, however, the Opposition in another place were not happy. They gave the powerful arguments put forward by the Association of Chief Police Officers short shrift. They prompted the association to write to all noble Lords yesterday. I hope that they have had the letter from the Association of Chief Police Officers and one from the Local Government Association on this issue.
However, in the light of debate in another place, we have brought forward a further package of measures to lighten the load on pubs and clubs and organisers to provide the opportunity to open up the market to a wide range of performance. That package consists of four elements. First, we have tabled amendments to provide a significant concession on unamplified music. I shall explain that in more detail in a moment. Secondly, I can give today a firm undertaking that the Government will review the existing descriptions of entertainment in the Bill six to 12 months after the end of the transition period.
If it proves that the Bill has had an unintended, disproportionate, negative effect on the provision of live music, we will use the powers already in the Bill to modify the position through secondary legislation. I say now that the Government are convinced that the Bill will already provide a real shot in the arm for entertainment and allow it to thrive.
Thirdly, and in response to concerns put to the Government most effectively by the noble Lord, Lord Redesdale, we have tabled manuscript Amendment No. 62K which will exempt morris dancing and dancing of a similar nature from the entertainment requirements of the Bill. Furthermore, the review I have just mentioned will cover all aspects of regulated entertainment. It will place particular emphasis on other forms of traditional entertainment. If there is a case for further liberalisation we will respond to it.
I am sorry that I have had to table a manuscript amendment on this occasion, but the noble Lord, Lord Redesdale, will confirm that this is a topic on which we were negotiating late in the evening.
Fourthly, the Department for Culture, Media and Sport will convene a forum comprising representatives of performers, venue operators, local authorities and others, whose task it will be to maximise the take-up of the reforms.
I return to the main legislative element of the package. There have been calls in both Houses and elsewhere for the Government to introduce a de minimis measure to protect unamplified music in small pubs. Our starting point is that the Bill already provides such protection.
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Spontaneous performances will not be licensed, so if one arrives unannounced with one's dulcimer and begins to play medieval music with bagpipes—no, perhaps that is a bad example—but any instrument and plays Scottish airs, one runs no risk of offence, certainly in the legal sense of the word. In response to this House, we have exempted incidental live music already.
However, today's amendments go one step further. Their effect will be to suspend conditions attached to a licence which have been imposed by a licensing authority in respect of unamplified live music in any premises with a capacity of no more than 200, where it is performed between the hours of 8 a.m. and midnight. To protect local residents and control those few inevitably unscrupulous or irresponsible operators, the licence will remain reviewable.
I believe that this removes all concerns that have been raised about low-level unamplified music like folk guitarists, for example, in small premises. I know that some people have raised the issue of instruments which require amplification in order to be heard such as an electric base guitar or an electric piano. They cannot benefit from the concession.
There are important points to be made here. First, the Bill's baseline is that it makes it easier and cheaper to put on any form of regulated entertainment. We have exempted incidental live music, whether amplified or not. That is a very powerful concession. We intend to retain the concession made in another place last week which lightens the load on amplified music in small pubs and we will work with our partners to maximise the take-up of the reforms on offer.
Perhaps I may say something about Amendment No. 62A, although there is not much more to be added to the lengthy debate we have had. This amendment is dangerous and misguided. The police find it totally unacceptable, and every Member of this House has had a letter to that effect. The Local Government Association finds it unacceptable as do residents' associations. It compromises public safety. It hamstrings the ability of the police to clamp down on drugs, guns and acts which incite the audience to violence. No responsible government could accept such an amendment. The noble Baroness, Lady Buscombe, is amused. I do not believe that, if our positions were reversed and she was at this Dispatch Box, the noble Baroness would be saying anything different.
This Bill is a manifesto commitment. We are determined to see it through, but not at the expense of endangering public safety or encouraging crime and disorder.
Moved, That the House do not insist on its disagreement to Commons Amendment No. 62, do not insist on Lords Amendment No. 62A, and do agree with the Commons in their Amendment No. 62B, but do propose Amendments Nos. 62C to 62J thereto, and do propose Amendment No. 62L in lieu of the words left out of the Bill by Amendment No. 62.—(Lord McIntosh of Haringey.)

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4.15 p.m.
62K Baroness Buscombe rose to move, as an amendment to the Motion in the name of the Lord McIntosh of Haringey, leave out from "62" to end and insert "but do insist on their Amendment No. 62A to which the Commons have disagreed and do disagree with the Commons in their Amendment No. 62B".
The noble Baroness said: My Lords, I make it absolutely clear that I take this issue extremely seriously. I am sorry to say that I remain in fighting mood on this issue. We must disagree with the Minister that we have what we require for the future of musicians. Before we had the two-in-a-bar rule; now we have effectively none-in-a-bar if there is minimal amplification.
The Bill continues to penalise those who play live music by imposing extra bureaucracy and financial burdens on them. Why is live music the only form of entertainment that is being regulated in this way? We simply do not understand or accept this differentiation. Why are the same rules not being applied to the screening of football matches, stand-up comedians, sword-swallowers, etc? If the Government believe that these provisions are necessary then they should have had the courage to apply them to all these forms of entertainment. Indeed, ACPO, which featured heavily in the debate, has previously stated,
"Very often such events, usually football matches, are accompanied by drinks promotion, they attract large crowds and are quite frequently the source of disorder … Because of these issues we are of the opinion that the applicant for a premises licence should be required to specify the intention to host such events within the operating plan. This would allow the licensing authority, taking into account police representation, the opportunity to impose conditions on the premises licence pursuant to the licensing objectives".
There are also key safety issues; for example, during the World Cup a pub in Bristol had to be evacuated as football supporters jumping up and down on the first floor caused the ceiling plaster below to crack and fall on people in the ground floor bar—nothing to do with music. The Bill as drafted favours premises devoted solely to the consumption of alcohol and what is called "vertical drinking" over a more civilised social drinking environment that includes live music.
Ministers have raised bogus points about health and safety, noise and fire risks, which are already covered by existing regulations. That view is supported by an official at the Health and Safety Executive, who has said that the issue of electric cables should be covered by existing safety provisions, irrespective of the licensing regime.
The police already have extensive powers to intervene where there is a risk of public disorder. The idea of a notification system has been put forward to the Government to ensure that they would have had such powers in all premises even if there were an exemption.
Ministers clearly regard the playing of live music in local communities as a potential danger rather than a cultural and social benefit. As well as the community and social inclusion role of live music performance, the
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opportunity to perform live is regarded by all in the music industry as a crucial component of building future talent.
The Government are just plain wrong to assert that, in the words of Richard Caborn,
"nothing that does not need a licence or other authorisation now will need one under the Bill".—[Official Report, Commons, 24/6/03; col. 1004.]
The Government seek to regulate all live music on the grounds that a few heavy metal bands in the North East espouse extremist views. The Department for Culture, Media and Sport—the very ministry designed to support and nurture our musical talent, and indeed a highly successful creative industry—has managed as never before to alienate artists, musicians, songwriters and composers, and the audiences that support them, throughout the country.
Today we are fighting again for freedom of thought in live music, which is seriously under threat. The Government are about to do so much damage to the music industry for no good reason. As I have said, the Government are happy to allow big-screen broadcast entertainment to be exempt, no matter how noisy and large the audience is. Yet one guy with an acoustic guitar or double bass, with minimum amplification equipment, must be licensed. Where is the logic in that?
I turn to the government amendments. Our interpretation is that as they apply only where a premises licence, entertainment permission and a safety capacity limit are in place, they are of little use and there are no details on how, where and when the safety capacity limit can be imposed and where it cannot. If all premises had a safe limit imposed, any legal activity could take place as long as the limit was not exceeded, without any need for additional entertainment permission or conditions.
This proposal in practice will make no difference at all, except still to require all entertainment permissions to require a safe capacity limit to be imposed just to see if that pointless exemption to the condition applies and for no other reason. How is overcrowding to be prevented in premises not providing entertainment? The fact will still remain that if premises do not apply for the optional entertainment licence, any live music will be criminal without it—and the Bill being able to increase the take-up figure from the current 5 per cent is still a gamble.
Almost 90 per cent of musicians use some form of amplification. While we are grateful that the Minister has made some considerable movement on the issue, we do not believe that the Government have gone far enough. I make it absolutely clear to the House that I am grateful to the Minister and the Secretary of State for providing me with the opportunity to debate some of those issues during what we know as "ping pong" between the two Houses. But we do not feel that the concession goes far enough.

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I finish by quoting a musician from Gloucester who emailed me today:
"Do not he bullied into giving up the fight. It cannot be right in principle that live music, even unamplified, should require licensing when the provision of big screen broadcast entertainment or jukeboxes can be exempt no matter how powerfully amplified".
A musician from the Portland folk club said:
"The provision of one or two musicians performing in 110,000 liquor licensed premises has been exempt since 1961 not 1964 as the Government often claims. But the Licensing Bill now does away with this deminimus and now will ensnare these performances, with no evidence provided for this. For as this exemption applies only where a licence is held—it simply reflects the control already in place in the 95% of licensed premises currently without additional Public Entertainment Licenses".
The Bill was supposed to make so much difference and to free us all from unnecessary regulation. It has failed comprehensively to do so. I beg to move.
Moved, as an amendment to the Motion in the name of the Lord McIntosh of Haringey, leave out from "62" to end and insert "but do insist on their Amendment No. 62A to which the Commons have disagreed and do disagree with the Commons in their Amendment No. 62B".—(Baroness Buscombe.)
Lord Redesdale: My Lords, there is a danger in listening to debates in this House, especially debates initiated by the noble Baroness, Lady Buscombe. The noble Baroness made a powerful case—one that might have changed my mind if it could have been changed at this late stage.
The Minister could have changed my mind the other way. It is a worry when he speaks because he puts a powerful but slightly dangerous case in that he paints the bleakest of pictures of our intentions in the amendments we have tabled.
Lord McIntosh of Haringey: No, my Lords, that was not the intention. I try very hard—I failed yesterday once—never to impute motives.
Lord Redesdale: My Lords, I thank the Minister. I start with an interesting matter, which has not been part of the long and arduous debates on the Bill: Amendment No. 62L. Although it causes a massive degree of hilarity, the issue of morris men, folk dance and traditional dance is one in which we on these Benches believe passionately.
It should be remembered that there are 14,000 morris men in the country. Some people have expressed the view that that is quite a scary thought. However, all those people take part in something that has gone on for many years and is part of the traditions of this country. They take part in 11,000 events that could have been licensable. The concession made on that basis means that a possible 11,000 licensable events will be taken out of the licensing regime, which will save them a great deal of money and will save all local authorities time, effort and money.
We are in the third stage of ping pong. I still hold dearly to many of the arguments that led us to reject the Government's arguments. We cannot dismiss the issue that the Bill could infringe on Article 10.2 of the
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European Convention on Human Rights. It is a question of proportionality over introducing regulation. At what point do we say that rights and freedoms have to be limited by consideration for other issues?
Some of the examples given for why we should introduce legislation have gone from the rare to the bizarre, especially the skinhead punk bands in the Midlands, who I do not believe ever use unamplified music. However, putting that aside, there is a history to why we have pushed so hard on the issue and why the noble Baroness, Lady Buscombe, has worked so hard: the history of problems with allowing live music in pubs. It is an issue that only 5 per cent of licensed venues put on live music. If we went to Dublin, it would be unthinkable that only 5 per cent of pubs would have music on.
The Government have said that the purpose of the legislation is to deregulate and to make it easier. The reason we have put forward such a staunch argument and gained so many concessions from the Government is that so many councils in the past have abused the privilege of the public entertainment licence and made it difficult for live music to be heard. Frankly, I find it unacceptable that one is unable to listen to live music in many pubs unless one really hunts down such places.
I also want to raise the "two in a bar" issue. I wondered whether we should press the amendment further and go for grandfather rights in relation to the "two in a bar" rule. I have campaigned over a number of years against that rule. I have supported the Musicians' Union and those who have worked so hard for the union in attempts to remove it. I do not consider it acceptable to return to having the rule. It would introduce a limit on numbers which would become fossilised in the way we regard music. I believe that far more people should be allowed to play music in a pub. At an earlier stage of the Bill, the Minister said that a whole orchestra could be fitted into a pub to play music. Rather than seeing it as dangerous. I rather like that idea.
There is incompatibility in this legislation. On the one hand, large-screen televisions are exempt and, on the other, three people, say, with guitars are seen as a danger to the public. A large-screen television, especially when a cup match is broadcast, draws into a pub vast numbers of people whose primary aim is to watch football. They become excited and drink a great deal of beer. That could have some implications for public disorder. However. it is my understanding that, on many occasions, three musicians playing in a pub tend to empty the place rather than fill it.
That being so, I find it rather strange that if those three musicians went in front of a video camera, videoed their performance and then put it on the large screen, just as many people could watch them doing exactly the same thing, if not in person. Therefore, an issue does arise in that respect.

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Having said that, it is not my intention to reject this measure. Many musicians will believe that I am betraying them by not throwing this matter back to the Commons. I, together, I believe, with other Members of the House, do not consider that the amendment would pass as it stands. We pressed for amendments from the Government and they have come forward with a number of concessions.
The most recent concession concerns unamplified music. I have a problem with the concept of the unamplified music exemption because, in order to obtain the concession, a licensed premises must first obtain the licence for the provisions of the licence to be made exempt. I take on board the Minister's view that that gives the police a backstop to remove the licence, but it seems a rather strange way of going about the matter.
I am supporting the Government because I believe that they have put forward these amendments in good faith. They have made two more concessions. One is the review which will take place after a period of between six and 12 months to ascertain the effect of the measure. If there is an outcry and vast numbers of music venues start to close, I very much hope that the Minister will move as soon as possible to reverse any difficulties caused by the Bill. Although I know that it will be difficult to do so, I hope that the Minister will be able to give an undertaking now that a debate will be held in this House about the outcome of such a review. The concept of putting forward a forum to promote live music is also to be welcomed.
I believe that the measures could still lead to a flourishing of live music. We very much hope that the provisions of the Bill will not be affected by over-zealous interpretation of the law.
I have one question for the Minister. It is on the issue of incidental spontaneous music, especially if it is amplified. Earlier, the Minister implied that, so long as spontaneous music, even if amplified, did not break health and safety requirements, it would not fall within the ambit of the Bill. I should like clarification because I believe that it would help to ease the minds of many musicians worried by this measure.
I still hold true to the belief that the provision could have a detrimental effect, although I take on board what the Minister said, and I very much hope that the amendment clarifies the situation.
4.30 p.m.
Lord Lester of Herne Hill: My Lords, my noble friend has fought such a long and determined battle for live music to be performed in pubs without unnecessary regulation that it would be churlish not to support him in accepting what he regards as a fair compromise. I shall therefore do so, but I hope that he will not mind my saying that, having thought about the matter and listened carefully to the enormously powerful speech made by the noble Baroness, Lady Buscombe, I very much regret that we must accept this compromise. I want to say in a few words why I have that regret.
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For me, the starting point is John Stuart Mill's injunction that one does not regulate unnecessarily unless a particular activity causes serious harm to other people. It seems to me that the amendment that we should like to be able to maintain is proportionate. It keeps in place fully the general law—the criminal law and the law relating to public nuisances and so on—and it does so expressly. It limits the time and number of persons and, as my noble friend said, it simply does for live music what is done for large screen television in pubs and what has been done for places of worship and religious occasions.
I find the distinction drawn between live music in pubs and dead music or dead entertainment on mass television in pubs arbitrary and somewhat discriminatory. Perhaps it reflects some kind of cultural bias. I believe that it shows a complete lack of proportion to insist on unnecessary regulation in licensing. I should be interested to know how the Minister, for whom I have such high regard, would explain, if he had to do so in a court of law, how this kind of regulation is proportionate and how it satisfies the basic principle of proportionality. Are the means being used really necessary to achieve the Government's legitimate aims, or would some lesser sacrifice of free expression be proportionate?
My own view—to some extent, this was considered by the Joint Committee on Human Rights when we examined the issue in another manifestation—is that, if necessary, the courts will have to use the principle of proportionality in Article 10 of the European Convention on Human Rights if unnecessary and heavy-handed use of regulation takes place in this area. Therefore, although it is always excellent when there is a fair compromise, I simply wish to express my general support for what the noble Baroness, Lady Buscombe, said in her speech.
Lord Clarke of Hampstead: My Lords, I hope that the House will not have to divide on the amendment moved by the noble Baroness, Lady Buscombe. It was nice to hear her declare herself once again in fighting mood. I submit that, over the weeks that it has been discussed by the House, the Bill that we now have has been much improved by those fighting qualities.
Noble Lords who have taken an active interest in the Bill and who have participated in the many debates will surely agree that, as the noble Lord, Lord Redesdale, said, many accommodations have been arrived at. We certainly have a far better proposition in front of us today than we had when we started down this road. If the amendments were agreed by the House, that would cause further delay and further disagreements with the other place. Members there would inevitably insist on the "ping" becoming a "pong" and the "pong" becoming a "ping" again.
However, my main reason in rising to oppose the amendment is to draw attention to the Local Government Association's clearly stated support for what has come out of these deliberations. After all, it is local government that will have the major part of enforcing this Bill in their localities. I recognise the wonderful contributions made through the passage of

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the Bill by the noble Baroness but the time has come when we should bring these proceedings to an end. I admire those who have fought the good fight on this issue but we should now reject the amendment and carry on with the business.
Lord Phillips of Sudbury: My Lords, my particular interest in this Bill has been public amenity. It was notable that in the speeches of the noble Baroness, Lady Buscombe, and my noble friend Lord Redesdale, not one word was spoken about public local amenity. The position that we have reached in this Bill is a most bizarre one. For my money, we are dealing with the lesser of evils. Amendment No. 62 which the amendment from another place seeks to overturn requires no licence at all for amplified live music in pubs where there are up to 200 people present at the knees-up. I have to tell those who think I pursue an esoteric case, that the number of people potentially affected by the huge noise such music often gives rise to will far outstrip the 200 which is the limit of the amendment to be overturned. However, we have the Government proposing an alternative that, frankly, is even more bizarre. Their amendment requires a licence for live amplified music where numbers are up to 200 but then allows the playing of that music to go on 24 hours a day. There is no time restriction at all on a licence granted for the playing of live amplified music under the government amendment. At least the amendment that this House put into the Bill has a requirement that the entertainment ceases no later than 11.30 p.m.
Even more extraordinary is that Amendment No. 62B says that of the four licensing objectives around which this Bill is supposed to revolve the one that deals with amenity—very inadequately—is not even allowed to hold sway with regard to music licences granted under this amendment. One has the extraordinary situation that local residents may protest against the noise consequences of the licence being applied for. Their local authority say they will impose a restriction on live amplified music beyond midnight and yet subsection (3) of the amendment strikes down that condition as being unallowable and unlawful. I find that bizarre. In either case, with either amendment, the only remedy that residents have in the case of Amendment No. 62 is to pursue a private nuisance action or a public nuisance action. That is also the case under Amendment No. 62B. This House knows what a massive enterprise it is to pursue a private or public nuisance action. It is long-winded, complex, expensive and uncertain. The alternative would be for them to call for a review of the licence. That, I would concede, is marginally better as a remedy than being forced into the courts.
I am sorry to sound a discordant note. At least I can support my noble friend Lord Redesdale and congratulate him on the morris dancers. I am sure that is an achievement that he will cherish to the end of his parliamentary days. But for the rest, I believe this House and the other place have ill served the people of this country. Amenity in this age, noise pollution in
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particular, is of huge concern to millions of our fellow citizens. We have heard a debate today where that did not seem to be an issue in our lives.
Lord Monson: My Lords, before the noble Lord, Lord Phillips of Sudbury, sits down, is it not the case that the government Amendment No. 62E does specify a time limit between 8 a.m. and midnight? So it is not the case that music could go on for 24 hours as he claimed.
Lord Phillips of Sudbury: My Lords, to which amendment is the noble Lord referring?
Lord Monson: My Lords, Amendment No. 62A.
Lord Phillips of Sudbury: My Lords. I was referring to Amendment No.62B—sorry, 62E.
Lord Colwyn: My Lords, I was going to start by saying I felt sure that the Minister would have an answer to the points made by the noble Lord, Lord Phillips of Sudbury. It looks like it has been answered already. I support my noble friend Lady Buscombe. It still makes no sense that small groups of musicians should he penalised and yet large widescreen TVs and sound systems are exempt. The Government have made concessions and I am grateful for those. But I am still concerned about the interpretation of the word "unamplified". I thought for one moment that the Minister was going to address it but he did not go into detail on it. I have a note here from Ken Dibble, a well-known expert in court cases involving noise nuisance and a member of the Institute of Acoustics. He says:
"The ambient noise level in a bar, just from general talking, is about 75 to 80 decibels".
A jukebox is not much louder. He goes on to say:
"Musical instruments cover a huge range of natural loudness. An unamplified singer is typically 70 to 75 decibels. An unamplified guitar about 70 to 80 decibels. A trumpet—."
I play one myself—
"105 to 110 decibels. A flute 85 decibels. A drum kit 105 to 110 decibels.
It follows, that unless the voice, the guitar or a flute are amplified, they will not be heard against other instruments or against crowd noise. To sing in a bar without amplification, will result in a sore throat after about 10 minutes simply because of the effort involved. Also the performance is marred because everything must be sung forte in order to be heard.
Modern music making in any event increasingly relies on electronic instruments—electric piano, electric keyboard instruments, rhythm machines, electric guitars and basses, none of which could be used if such an absurd provision were introduced.
In essence, the proposed exception would still preclude live music. A better provision would be to permit live music subject to the music not being audible at any residential or noise sensitive premises and subject to time limits".
That would cover the points made by the noble Lord, Lord Phillips. Ken Dibble goes on to say:
"I accept that there will need to be a limit on crowd numbers otherwise one would find full-scale concerts and rave events held in pubs without the necessary controls. There should be a requirement that any pub or restaurant intending to put on live music should be fitted with a volume restriction device which

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could be set up to the satisfaction of the local environmental health officer before any amplified music is played. There are some sophisticated devices available".
I have been shut down myself on many occasions by these machines. We are getting closer but we still do not have it right.
Lord McIntosh of Haringey: My Lords, I am sorry that at such a late stage there are still things being said which do not reflect the provisions of the Bill. I fully accept that that must be my fault. The contrast was made by the noble Baroness, Lady Buscombe, between provisions in the amendments. She used the example of widescreen television and football matches. She, like me, has had a letter from the Association of Chief Police Officers. It takes the view that widescreen television, pool competitions, quiz nights, theme food evenings and so on tend to be in various venues with similar events which dilute their impact. ACPO says it can handle that. It says, on the other hand, that live amplified music can generate a leisure magnet even in smaller venues. It goes on to state:
"Live music always acts as a magnet in whatever community it is being played. It brings people from outside that community and having no connection locally behave in a way that is inappropriate,"—
it says, "criminal". I think that is a bit strong—
"and disorderly. The public expect the police to be able to deal with these incidents and the powers as outlined"—
that is, the concessions the Government have made—
"would seem to be a sensible way to do just that".
The noble Lord, Lord Redesdale, said: "Well, only 5 per cent of pubs put on live music". That is exactly the case. That is why we are making it so much easier for pubs to put on live music. That is why we have made the concession to the effect that should a pub with a capacity of up to 200—even the noble Lord, Lord Colwyn, agreed that there should be a capacity limit—want to put on live music of any kind, any conditions imposed on the licence by the licensing authority would be suspended except those which relate to public safety or crime and disorder. Can anyone seriously disagree with that?
The noble Lord said that if these live musicians were to put the music on a video they would evade the requirement for a licence. That is not the case. The showing of a video, as he described it, would be a licensable activity. Only simultaneous live broadcasts are excepted.
Coming back to the noble Lord's 5 per cent point, yes, of course, the existing system is expensive and bureaucratic. We are making it cheaper and easier. We are knocking down the hurdles. I would be astonished if there were not a significant increase in the proportion of pubs putting on live music as a result of this Bill.
The noble Baroness, Lady Buscombe, talked about juke boxes. I think she has been answered by the noble Lord, Lord Colwyn, who gave the decibel limits for juke boxes. But they are not exempt. They are like live music; they are exempt if incidental. Recorded music is licensable.
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The noble Lord, Lord Redesdale, talked about spontaneous music. Spontaneous music, whether or not it is amplified, is not licensable. He asked, in the case of the review we have undertaken, whether it would be debated in this House. I cannot give that assurance. That is a matter for the usual channels, of which I am glad to say I am no longer a member.
The issue of human rights was raised, notably by the noble Lord, Lord Lester. There is no greater authority than he on that matter. The Joint Committee on Human Rights, on which we must rely, agreed that there has to be a balance between the right of freedom of expression and the legitimate aim of public safety and the right of peaceful enjoyment of property. In its seventh report, it said:
"The licensing regime serves legitimate aims, namely the protection of public safety, the protection of the rights of others and the prevention of crime and disorder. It is legitimate to say that there is a pressing social need for regulation".
Of course there will be cases at the interface. Wherever we draw the line, there will be the possibility of litigation. I do not think that there will be what the noble Lord, Lord Phillips, always describes as a "bonanza" for his profession because there will always be some place where there will be dispute about whatever rules apply or do not apply. We are indeed, I believe, properly respectful of human rights and properly respectful of the view of the Joint Committee on Human Rights.
The noble Lord, Lord Phillips, raised a completely new red herring about 24-hour live music. The noble Lord, Lord Monson, pointed out the provisions in Amendment No. 62E. In any case the licence remains reviewable. One can have the position of "one strike and you are out". That is the protection for residents, other interested parties and responsible authorities.
When we come down to it, I have two things to say: first, I have huge respect for musicians from Gloucester or Portland, particularly if, as I hope, they are good musicians, but I have to put that against the views of those who are responsible for public safety and the interests of residents—"public amenity" if one wants to use the words of the noble Lord, Lord Phillips. The Association of Chief Police Officers, on behalf of the interests of public safety and crime and disorder, and the Local Government Association, which will be responsible for these licensing activities and has as its interest the protection of residents, are firmly against the amendment tabled by the noble Baroness, Lady Buscombe. I have to put that against the views of individual musicians, much as I wish to respect and accommodate them.
I also have to say that, as the noble Lord, Lord Redesdale, said, we are at the third stage of disagreement between this House and another place. Yes, of course, it is legitimate for this House to continue to insist on matters of high import—for example, Lloyd George's People's Budget of 1909 and matters of profound conscience such as the War Crimes Bill—but ambient unamplified bass guitar? I

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suggest that the Government have gone as far as they can in meeting the legitimate concerns of those who have been expressing those concerns. Without abandoning our profound duty to preserve public safety and to prevent crime and disorder and public nuisance we can go no further.
Baroness Buscombe: My Lords, I thank the Minister for his very full response. I think that he has sensed that I am not willing to step down at this stage. I want first to thank all noble Lords who have contributed to the debate. First, and most notably, I thank the noble Lord, Lord Redesdale. It is right: we have both worked hard on this to improve the legislation. I believe that we have made some considerable progress. However, other noble Lords have encouraged me to believe that it is right to press on.
There is no question: I am extremely grateful to my noble friend Lord Colwyn who put the question of noise in its real context. He has introduced a sense of reality as to what we are talking about with acoustics and what that means in terms of realistic parameters for live music.
The noble Lord, Lord Phillips of Sudbury, suggested that in proposing the amendment I and the noble Lord, Lord Redesdale, had not mentioned the word "amenity". I fought with the noble Lord, Lord Phillips of Sudbury, on the question of amenity during earlier stages of the Bill. We care very much about local residents. We believe it is important to strike a balance, but we do not believe that this Bill as currently drafted does.
I hear what the noble Lord, Lord Clarke of Hampstead, said—that he respects what I have done thus far and believes that enough has been done. I have to disagree. I do not care to disagree with him, but not enough has been achieved today.
The noble Lord, Lord Lester of Herne Hill, succinctly put the argument on behalf of our amendment. He quoted John Stuart Mill that one does not regulate unnecessarily. Our amendment does not conflict with general law, as the noble Lord said. There are time limits and limits on the number of persons. The regulation proposed is not proportionate and it is not, in our view, consistent. While we are grateful for the concessions for incidental music and for unamplified music, there continues to be this enormous problem for most musicians who need some form of amplification.
We have come a long way, but I remain convinced that I must test the opinion of the House.
5 p.m.
On Question, Whether the said amendment (No. 62K) shall be agreed to?
Their Lordships divided: Contents, 75; Not-Contents, 145.
Resolved in the negative, and amendment disagreed to accordingly.

Division No. 2

CONTENTS

Astor, V.

Kilclooney, L.

Astor of Hever, L.

King of Bridgwater, L.

Attlee, E.

Lane of Horsell, L.

Baker of Dorking, L.

Luke, L.

Blackwell, L.

Lyell, L.

Bridgeman, V.

McColl of Dulwich, L.

Brougham and Vaux, L.

MacGregor of Pulham Market, L.

Buscombe, B.

Byford, B.

Marlesford, L.

Caithness, E.

Mayhew of Twysden, L.

Campbell of Alloway, L.

Molyneaux of Killead, L.

Carlisle of Bucklow, L.

Mowbray and Stourton, L.

Carnegy of Lour, B.

Moynihan, L.

Chadlington, L.

Newton of Braintree, L.

Colwyn, L.

Noakes, B.

Cope of Berkeley, L. [Teller]

Northbrook, L.

Craig of Radley, L.

Northesk, E.

Crickhowell, L.

Norton of Louth, L.

Cumberlege, B.

O'Cathain, B.

Denham, L.

Palmer, L.

Dixon-Smith, L.

Pearson of Rannoch, L.

Elliott of Morpeth, L.

Renton, L.

Elton, L.

Roberts of Conwy, L.

Erroll, E.

Seccombe, B. [Teller]

Finlay of Llandaff, B.

Sheppard of Didgemere, L.

Fookes, B.

Skelmersdale, L.

Freeman, L.

Soulsby of Swaffham Prior, L.

Glentoran, L.

Stern, B.

Griffiths of Fforestfach, L.

Stoddart of Swindon, L.

Hanham, B.

Strathclyde, L.

Higgins, L.

Swinfen, L.

Hodgson of Astley Abbotts, L.

Taylor of Warwick, L.

Hooper, B.

Trefgarne, L.

Howe, E.

Trumpington. B.

Howe of Aberavon, L.

Vinson, L.

Howell of Guildford, L.

Vivian, L.

Hurd of Westwell, L.

Waddington, L.

Jenkin of Roding, L.

Wakeham, L.

NOT-CONTENTS

Acton, L.

Chorley, L.

Addington, L.

Christopher, L.

Ahmed, L.

Clark of Windermere, L.

Alderdice, L.

Clarke of Hampstead, L.

Alli, L.

Clement-Jones, L.

Amos, B.

Clinton-Davis, L.

Andrews, B.

Cohen of Pimlico, B.

Archer of Sandwell, L.

Colville of Culross, V.

Ashton of Upholland, B.

Crawley, B.

Avebury, L.

Dahrendorf, L.

Bach, L.

Davies of Coity, L.

Barker, B.

Davies of Oldham, L. [Teller]

Bassam of Brighton, L.

Dean of Thornton-le-Fylde, B.

Berkeley, L.

Desai, L.

Bernstein of Craigweil, L.

Dholakia, L.

Billingham, B.

Dixon, L.

Borrie, L.

Donoughue, L.

Bradshaw, L.

Dormand of Easington, L.

Brennan, L.

Dubs, L.

Brett, L.

Eatwell, L.

Brooke of Alverthorpe, L.

Evans of Parkside, L.

Brookman, L.

Evans of Temple Guiting. L.

Campbell-Savours, L.

Falconer of Thoroton, L (Lord Chancellor)

Carter, L.

Chan, L.

Falkland, V.

Chandos, V.

Farrington of Ribbleton. B.

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Faulkner of Worcester, L.

Parekh, L.

Filkin, L.

Paul, L.

Gale, B.

Peston, L.

Gavron, L.

Phillips of Sudbury, L.

Gibson of Market Rasen, B.

Puttnam, L.

Gilbert, L.

Ramsay of Cartvale, B.

Goldsmith, L.

Redesdale, L.

Goodhart, L.

Rendell of Babergh, B.

Gould of Potternewton, B.

Rennard, L.

Grocott, L. [Teller]

Richard, L.

Hamwee, B.

Rodgers of Quarry Bank, L.

Harris of Haringey, L.

Rooker, L.

Harris of Richmond, B.

Russell, E.

Harrison, L.

Russell-Johnston, L.

Haskel, L.

Sandberg, L.

Hayman, B.

Sawyer, L.

Scotland of Asthal, B.

Hilton of Eggardon, B.

Scott of Needham Market, B.

Hollis of Heigham, B.

Sewel, L.

Hooson, L.

Sharp of Guildford, B

Howells of St. Davids, B.

Sheldon, L.

Hoyle, L.

Shutt of Greetland, L.

Hunt of Chesterton, L.

Simon, V

Jacobs, L.

Smith of Clifton, L.

Janner of Braunstone, L.

Stone of Blackheath, L.

Jeger, B.

Strabolgi, L.

Judd, L.

Symons of Vernham Dean, B

Layard, L.

Taverne, L.

Lea of Crondall, L.

Taylor of Blackburn, L.

Lester of Herne Hill, L.

Thomas of Walliswood, B.

Lipsey, L.

Tope, L.

Lockwood, B.

Tordoff, L.

Lofthouse of Pontefract, L.

Turnberg, L.

McCarthy, L.

Turner of Camden, B.

Macdonald of Tradeston, L.

Uddin, B.

McIntosh of Haringey, L.

Wallace of Saltaire, L.

McIntosh of Hudnall, B.

Walmsley, B.

MacKenzie of Culkein, L.

Warwick of Undercliffe, B.

Mackenzie of Framwellgate, L.

Watson of Invergowrie, L.

McNally, L.

Weatherill, L.

Marsh, L.

Wedderburn of Charlton, L.

Massey of Darwen, B.

Whitaker, B.

Merlyn-Rees, L.

Whitty, L.

Mishcon, L.

Williams of Crosby, B.

Newby, L.

Williams of Elvel, L.

Nicholson of Winterboume, B.

Williams of Mostyn, L. (Lord President of the Council)

Northover, B.

Oakeshott of Seagrove Bay, L.

Woolmer of Leeds, L.

On Question, Motion agreed to.

European Union (Accessions) Bill
5.10 p.m.
Baroness Symons of Vernham Dean: My Lords, I beg to move that this Bill be now read a second time.
This is a short but momentous Bill. Three months ago, heads of state and government from the 15 member states of the European Union and 10 new members from central, eastern and southern Europe signed a new accession treaty. Following that event, this Bill paves the way for the Union's largest ever expansion on 1st May next year.
The Bill has two main purposes. First, it implements our obligations under the accession treaty by amending Section 1(2) of the European Communities Act 1972 and by approving the treaty's provisions on the European Parliament. Among other things, those set out the numbers of Members of the European Parliament in all 25 member states for the parliamentary term starting in June 2004.
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Secondly, the Bill provides a power to grant nationals of Estonia, Latvia, Lithuania, Poland, Hungary, the Czech Republic, Slovakia and Slovenia the same rights to work in the UK from 1st May 2004 as are currently enjoyed by nationals of existing member states, and will be enjoyed automatically under the accession treaty by Cypriot and Maltese nationals from the date of accession.
Let me start with Clause 1, by saying a few words about the accession treaty and the principles underpinning it. As in all previous accessions, the new member states have undertaken to take on board the full body of Union and Community laws, subject to transitional measures of limited duration and scope. The accession treaty, which we have published as a Command Paper, sets out exhaustively the terms of accession and the necessary, consequential adjustments to the founding treaties.
Unlike the Bill, the new treaty is an enormous document: more than 5,000 pages long. It is testimony to an extraordinary volume of work: five years of hard labour and preparation by the candidates themselves, by successive presidencies and by the European Commission. But the scale of the treaty, while exceptional, merely reflects the unparalleled historic significance of this enlargement, which promises to transform the face of Europe strategically, economically and politically.
Strategically, enlargement will complete the transition of Europe from a continent scarred by warfare, national and personal tragedies and ideological divisions to a strong Union of nation states, secure in their borders, sharing the same democratic and humane values, and enjoying peace, prosperity and stability.
Since the end of the Second World War, statesmen on both sides of the Atlantic have dreamt about achieving security in Europe. With this enlargement, we shall finally achieve that dream. There has been nothing inevitable about that. The creation of the Marshall Plan; the foundation of the North Atlantic Treaty Organisation; the signature of the treaties of Paris and Rome; and, later, the rise of Solidarity in Poland, the collapse of the Berlin Wall and the fall of communism were all events central to the evolution of the Bill that were brought about by the courage, idealism and determination of successive generations of peoples and their representatives across Europe and in the United States.
The enlarged Union will be a more secure Union. Eight of the new member states have joined, or are due to join, NATO. Accession to the EU will complement and reinforce the benefits of NATO membership across the continent. But, as with the accessions of Greece, Spain and Portugal in the 1980s, we also expect EU accession to produce a dividend through stabilising and strengthening democracy in new member states.
Enlargement will also help us address new challenges to our security, such as global terrorism, the proliferation of weapons of mass destruction and the chaos caused by failed and failing states. New

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partnerships in Europe will help us to confront those threats. We will need to build on the tried and trusted EU methods: co-operation across borders; intelligence sharing; and joint law-enforcement operations.
Economically, enlargement will give the new and current member states new opportunities: opportunities for greater trade; to invest and attract investment; and to widen markets for producers and consumers alike. Since 1989, reforming governments in central and Eastern Europe have pursued the goal of EU membership with remarkable determination. In little more than a decade, failed command economies have given way to functioning market economies. Enterprise and entrepreneurship have been liberated. Successful economic reforms and restructuring in those countries have given the whole of Europe food for thought and laid the foundation for a prosperous future. We need the economic dynamism of the new member states.
Integrating the accession countries into the Union will, of course, entail costs. The financial package agreed at last year's Copenhagen Council amounted to £26.6 billion between 2004 and 2006. But that is well within the overall budgetary ceilings for enlargement agreed at Berlin in 1999. Between 2004 and 2006, the EU budget is expected to commit an annual amount equivalent on average to 3 per cent of the gross domestic product of the new member states. Given the disparities in wealth between new and current member states, that amounts to a total cost to the EU 15 of only 0.1 per cent of EU gross national product in any one year.
The costs of expansion are far outweighed by the benefits. Studies estimate that enlargement could increase the UK's GDP by £1.75 billion in the medium term and create up to 300,000 jobs across the Union. Our workers will enjoy freedom of movement across the world's largest trading bloc. Our companies will enjoy unfettered access to a market of some 450 million consumers.
Politically, enlargement will stimulate and, in some cases, necessitate further reform and modernisation across a range of Community policies. It will also change the way we do politics in the EU. In this new Europe, decision-making will be more fluid and alliances more diverse. Through the interim arrangements now in place, the new member states are already active participants in the Council and the European Parliament. Although they cannot vote, they can speak. We are working productively with them, collaborating on matters of joint concern. It is already clear that the UK's support for enlargement and our excellent relationships with the new members make us well placed to act as a pivot of influence.
If the EU is to make the best use of enlargement, the institutions originally designed for six founding members will have to be reformed. All advocates of EU expansion on all sides of the House would, I hope, accept that institutional reform is necessary. The task of agreeing such a reform now falls to the intergovernmental conference beginning in October.
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This is not the time to comment on the work of the Convention on the Future of Europe; we shall have the opportunity to do so in the weeks ahead. For the moment, suffice it to repeat the words of the European Council in Salonica: the Convention's work is a
"good basis for starting in the Intergovernmental Conference".
Final decisions on the new treaty will depend solely on the governments of the 25 member states, meeting together in the IGC and taking decisions only by unanimity.
The 10 new member states will participate fully on the same basis as the EU 15. Bulgaria, Romania and Turkey will be observers. The new treaty will he signed
"as soon as possible after I May 2004".
Entry into force of this Treaty would then be subject to ratification by the constitutional procedures of the member states. In the United Kingdom such procedures are parliamentary procedures. Ratification by the Crown takes place only after full and proper scrutiny by Parliament, which is the case with the treaty and the Bill that we are considering today.
I turn to clause 2 of the Bill. Under the Accession Treaty, nationals of all the new member states have the right, immediately on accession, to enter and reside in any member state for all purposes envisaged by the founding treaties—except for work. Rights of nationals of the eight central and eastern states to work in the current member states are covered by optional restrictions for up to a maximum of seven years after accession. Under the Treaty of Accession, these restrictions do not apply to Cypriot or Maltese nationals.
Clause 2 will grant nationals from the eight central and eastern European accession countries the same rights to work in the UK from 1st May 2004 as are enjoyed by nationals of the existing member states.
This measure is patently in the national interest. It would attract the workers we need in key sectors, such as hospitality and construction. It will ensure that they contribute to the national exchequer and are subject to decent minimum standards at work, such as the national minimum wage. It will remove the temptation to work illegally and to claim benefits and it will cut through unnecessary red tape. It will help us focus resources on real immigration problems, rather than trying to stop EU citizens enjoying fundamental EU rights.
Recent studies, including research published by the Home Office, suggest that we will not see a substantial increase in immigration from the accession countries. We should look at the experience of Spain and Portugal. Following their accession to the European Community, Spanish and Portuguese workers actually returned home as economic prospects and standards of living improved. When Spain joined the European Community in 1986 there were 109,000 Spanish workers in France. Within eight years that figure had fallen to just 35,000.
However, if such a threat were to emerge—contrary to this experience and all of the available evidence—we would be able to introduce restrictions until the end of April 2011.

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Sweden, Denmark, Greece, Ireland and the Netherlands have taken the same decision that we have taken. Many of the other member states are still deciding what to do. However, we expect some of them to follow our lead. Our current estimation is that at least half of the EU 15 will lift restrictions on 1st May 2004.
The Government regret that in Cyprus it did not prove possible for a settlement to be secured before Cyprus signed the Treaty of Accession, despite the exceptional efforts of the UN Secretary-General and his team. Again, I would like to pay special tribute to the Government's Special Representative on Cyprus from 1996 to 2003, the noble Lord, Lord Hannay, who was indefatigable in the search for a solution.
The EU has repeatedly made it clear that it will accommodate the terms of a settlement—most recently at the European Council in Salonica. We now call upon the two sides to negotiate a comprehensive settlement, based on the United Nations' proposals, so that a reunited island can join the EU in May 2004 and all Cypriots can enjoy the benefits and rights of EU membership.
The Government very much hope to introduce a Bill during the next Parliament that would endorse the accession of Bulgaria and Romania in 2007. Turkey should follow thereafter.
The prospect of accession is also helping to stabilise the western Balkans. The Government will continue to encourage and support all the countries of the region as they move towards eventual accession.
The United Kingdom's strong support for enlargement is well recognised—not least by the new member states themselves. Many in this House—on all sides of this House—have played important roles in bringing us to this point. We should be in no doubt that this enlargement is a real success for United Kingdom policy. It is a success for this Government and for the policy of this Government's predecessor. I am sure that all of us here today would wish, in the clearest possible terms, to welcome the 10 new member states as our equals and partners. I commend the Bill to the House.
5.25 p.m.
Lord Howell of Guildford: My Lords, we are grateful to the Minister for moving the Second Reading of this Bill, which is, in her words, one of "unparalleled historical significance". Indeed, why we should be tackling it at rather a late hour on a Thursday evening baffles me. I shall never understand the ways of the usual channels in these things but that is because I have never been a Whip. I would have thought it deserved a greater prominence. There lie ahead vast and very important debates that your Lordships will have about the changing nature of the European Union, to which these countries are seeking accession.
Perhaps I may put four points before your Lordships. First, we support this Bill. We support it very strongly. In our view it carries far forward a brave story and the ambitions of past generations. It is part of that dream of a Europe of free and independent
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republics and monarchies for which our parents fought and sometimes died. In the eyes of some of us it is already years overdue. However, we are nonetheless thankful that at last the moment has arrived when these vigorous and independent states, many of which have been through terrible trials and experiences, join the enlarged European Union.
This is not a story that ends there. I would advise against the use of the words "completion" or, as is sometimes said, "final settlement". This is because, as the Minister just reminded us, there is further expansion ahead of an open Europe, with more members queuing up. These include Bulgaria and Romania, which are aiming for 2007 and after that Turkey. Those three will change the character and structure of the Union again. Further ahead there are the Maghreb countries and the Ukraine and other nations seeking to join the enlarged and open structure of which the original European Economic Community was the embryo and the seed.
From now on, we can be sure that the whole treaty structure of Europe—of which the accessions treaty is a part and, in a sense, of which this Bill is part—will be under more or less permanent renegotiation. We are not afraid of that. In or out of government, we on this side shall be there, urging and nudging the Union in the direction of greater democracy, much more accountability, much less centralisation of powers and free markets. That is the kind of Union we seek and so do many of the accession states.
This is a highly positive approach and no one should say this is being anti-European —that charge will not stick. Wanting reform of the EU and wanting a larger more flexible European Union that is adapted to the new global conditions is being the best kind of European. To deny that is, in our view, an insult to the public intelligence.
Secondly, the new members epitomise what is being called "the new Europe". They are largely pro-American and Atlantic-minded. They were almost universally appalled at the anti-American stance taken in some Western European member states during the recent hostilities.
We particularly welcome Poland as a major new balancing factor in the European equation. I believe we should lose no time in developing the warmest links with the Poles and with all the central Europeans. These are nations that have suffered terribly. They used to regard Britain as their champion. In some instances, they have been saddened to see us in recent years seemingly siding too much with the big boys in the playground and being too focused on the Paris-Berlin agenda rather than being fully sympathetic to their needs and concerns.
As I have said before and will say again, a change of emphasis in our European policy is very badly needed. Mr Straw, the Foreign and Commonwealth Secretary, has said that we "need more partners in Europe". He is absolutely right. So let us hope that that period is now over and that we shall seek a more equal Europe in which all nations, large and small, have a full voice.

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Like the noble Baroness, I too am sad that we are to see Cyprus come in while it is still in a divided state. Let us hope—against hope, I am afraid—that progress can soon be made in the ways that the noble Lord, Lord Hannay, and others have worked so hard to achieve.
Thirdly, the Union to which these new countries are acceding is undergoing huge internal change even while we speak. Indeed, in the language of some, it is in turmoil. If only half the new proposals from the European convention are agreed, the new countries will join next year and then be asked to approve a very different Union from the one to which they originally applied for membership. The noble Baroness has urged that this is not the time to enter a long debate on all that, although she did have something to say about the convention proposals. However, I agree that we do not want to have that debate during this one, although we shall certainly need many hours in debate to consider those issues.
I simply want to say briefly that the new countries will be asked to sign up. Although they will have taken part in discussions beforehand, as soon as they become member states, they will be asked to sign up to a very complex new written constitution; a large accretion of executive, legislative and judicial power to the central EU institutions; a large new charter of rights, applying in theory only to the Union hierarchy itself, but in practice going much wider; a President of the Council, which many of them dislike intensely—and have said so; and a Foreign Minister who will report, in part at least, to the Commission. It will be a Union of weakened states and stronger, more remote central institutions if that kind of agenda goes through. Obviously, we hope that it will not do so.
Qualified majority voting may help from time to time. Ministers often remind us of how it can help this country's interests, but it is a fact that every step in this direction must be a step away from intimate and direct national accountability. Moreover, I reject the rather bullying point of view, which I have not heard expressed on these shores, but I have elsewhere in Europe, that QMV is a necessary instrument to crush the recalcitrant smaller nations even when their crucial national interests are threatened.
Nothing has been done to unwind the 97,000 pages of accumulated powers at the centre of the Union, the acquis communautaire, to which these new countries have been compelled to sign up, or indeed to give back either to the existing or the new states a single competence. So I believe that a huge opportunity has been missed, one that if at all possible should again be seized by us and by the new members, in the near future. It is no wonder that the Czechs, to take one new applicant, are planning a further referendum on the prospective new constitution over and above their recent referendum on the accession treaty. The vote was strongly in favour and I welcome that. It brings the Czechs into line with up to eight other existing member states which have planned, rightly, to hold referendums. The most glaring exception, to which the noble Baroness so candidly drew attention, is that of the United Kingdom.
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I am sure that that is a debate for another day, but I note in passing the views of President Chirac, who has not been the most popular figure on this side of the Channel over recent months. He has said that:
"I am logically in favour of a referendum. It is the only legitimate way".
I leave the issue there, but no doubt many of our debates will return to it.
Finally, on the question of the new countries that are about to join the new Union, I would say that to refer to this set of proposals for major change as an exercise in "tidying up" is ridiculous. That must be one of the most stupid statements uttered by a Minister of the Crown in modern times. I hope that we shall see a much more refreshing candour, frankness and honesty in the many debates ahead on this matter.
In the meantime, the Prime Minister of Poland resents and has spoken out strongly against the downgrading of his country in the draft constitution, which he thought had been settled at Nice, as did many others. So that matter will certainly have to be reopened.
The draft constitution has nothing whatever to do with enlargement. It is a quite separate project and I do not understand what the Prime Minister sought to suggest the other day when he appeared to link the two. It is a separate matter, but it has an influence—one that I believe will be largely negative. As the Economist magazine put it—it is not a tabloid and not a hysterical, isolationist or nationalist journal—the draft constitution is,
"a blueprint for accelerated instability".
It will not be a great help to all these bright new nations.
My fourth point is that we have to face the fact that enlargement will not please everyone. There are dangers which we have a duty to monitor extremely carefully. The first of those is that it will intensify competition. The noble Baroness spoke bravely and positively about new trading opportunities, but there are some in the manufacturing sector who see a rather different side. They certainly believe that accession will intensify competition. Personally, I welcome that because competition is always good when it operates within the proper rules and a market framework. But undoubtedly that will be tough for some.
The new nations joining the Union, after years of suppression, are now very sparky and dynamic. Their workers have high skills—an oddity of the communist legacy is that, while most of it was hideous, it left behind quite good educational and skills structures—and low labour costs, so long as they are not tied down by EU red tape and asked, as they have been in some cases, to implement new regulations, controls and tariffs in their existing free markets. Those countries already are and will continue to be tough competitors, which will mean that adjustments will have to be made on our side.
The second issue to which the noble Baroness rightly referred concerns freedom of movement. With the accession, some 73 million more people will be joining the EU, and that is good. Obviously, only a tiny

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fraction of those millions will contemplate moving westwards. But there is bound to be some increase in migratory pressures, a fact recognised in a number of countries of the Union. Many of the people from central European countries are among the most creative and hard working of all and this nation has benefited vastly from their arrival in the past. I make it absolutely clear that, in my view, if the creative and hard-working ones choose to come here they should be nothing but welcome. However, we must be realistic and acknowledge that there are less-desirable elements. That explains why many member states—like the noble Baroness, I am not quite sure how many at this stage—will apply national restrictions after the accession date for anything between two and seven years to ensure that their labour markets can digest the newcomers smoothly. That is a legitimate aim.
I hope that the Bill will allow the United Kingdom the right to consider restrictions if necessary. I hope that they will not be necessary. Studies have been published since the Second Reading of the Bill in another place which indicate that the impact will be minimal. I hope that is correct. But, if there are doubts, we shall need strong assurances—otherwise we shall need at the Committee stage a further explanation of the United Kingdom stance, which is in contrast to that of several other member states. I hope that is a reasonable way of approaching what we hope will not be a problem.
Thirdly, there remains the question of the common agricultural policy. It now looks at last—one has to cross one's fingers—to be in a process of reform. But it is a very slow reform which still leaves a vast number of farmers of the new states—especially Poland, where the number of farms is larger than in the whole of Germany and France put together—facing competition from imports from French farmers and others who are receiving subsidies four times as high as theirs at the beginning of the transition period. That will not be good news for some of those people. It is bound to cause problems of unemployment and perhaps problems of migration. We shall have to wait and see.
These brave countries—eight of which threw off tyranny only a short while ago—are joining a Union which has still very uncertain ideas on how to organise its future security and foreign policy, and, therefore, their future security and foreign policy.
Most of the newcomers have no difficulty at all with the concept of a reformed NATO, of which most of them are already members, or with a much stronger European branch of NATO, or with a NATO which is developing a global role, an out-of-theatre role, in peacemaking and peacekeeping. Unfortunately—and we have to face this—some of the so-called "core" countries of the existing Union—notably France, Germany, Belgium and Luxembourg—have recently proclaimed a quite different idea. They want a separate command structure and a separate force, and their language is redolent with anti-Americanism. Where Her Majesty's Government now stand on this I have
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no idea—they seem to have moved—but these are matters on which the accession countries will want great clarity and I am not sure that they yet have it.
At the heart of the Franco-German ambitions, which have been pronounced at various meetings and in documents, lies a flawed concept—the Prime Minister made the same point the other day—that the EU must somehow be a rival and counterweight to the United States rather than a partner. I believe that, for all its technological might, the United States cannot go it alone in the world. The so-called neo-conservatives—the "Neo-cons"—in Washington are wrong about that. Even if it is tired of alliances, the United States needs willing allies, especially in intelligence and nation building. I fervently hope that we will now work with the new accession states, not to form a rival bloc or super-power—heaven preserve us from that utterly false ambition—but to be effective partners in the global security network of which the United States is inevitably the senior partner.
I have one final concern. At the Laaken summit the European leaders called for measures to bring the great EU institutions closer to the people. The draft constitution now before the inter-governmental conference per contra calls for the people to be brought closer to the institutions. In that small inversion lies all the real seeds of wrong thinking which, if not weeded out, will bring a choking crop of measures which may be good for bureaucrats but bad for a truly democratic and flexible Europe and bad for the new partners and new members of the Union. The best news about the Bill is that it may at last bring us lively democratic allies who will help us to change the course of the European Union away from many damaging trends and towards a much better Europe.
5.43 p.m.
Lord Wallace of Saltaire: My Lords, we on these Benches welcome this Bill—a very short Bill summarising a very long treaty. Not thinking carefully, I made the mistake of going into the Printed Paper Office yesterday and asking for Command Paper 5805. The ever-helpful staff said, "You don't want that, you couldn't carry it out of the room, but we'll give you the summary".
The underlying principle of west European integration was, after all, to share security, prosperity and democracy, and in that it has been resoundingly successful. At the end of the Cold War, we found ourselves with a choice of importing insecurity and instability from eastern Europe or taking the opportunity to extend our zone of democracy, prosperity and security eastwards and southeastwards. That is what this now achieves. It has a number of consequences, noted only briefly in the Bill. There are clearly institutional consequences, many of which are dealt with in the convention. I am rather puzzled that the noble Lord, Lord Howell, does not see the link between the convention and enlargement. It was inherent in all the discussions at Laeken and before.

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The treaty has a number of financial consequences. If I am not wrong, 0.1 per cent of the EU GDP is very nearly 10 per cent of the current EU budget. That is a not insubstantial figure, particularly if it is going to rise and, as I shall expand on later, if more funds will necessarily have to be transferred to the next neighbours—the ones that are both candidates next in line and those, like Ukraine, Belarus and, of course, Russia, with which we will have to have increasingly complex relationships as an enlarged European Union.
The treaty says a great deal about extending the Schengen arrangements to the new borders and the problems of making sure that co-operation with the police forces and judiciary authorities of these new members are operated according to the highest possible standard. I was privileged to be chair of your Lordships' EU sub-committee when we looked at the eastern border controls of an enlarged European Union two years ago. It was an encouraging and interesting study.
The Bill goes into more detail on the free movement of labour. I see that noble Lords on all three Benches are agreed that this ought not to be a substantial problem for Britain or, indeed, for the EU 15 as a whole. The Minister remarked on the experience with the Mediterranean countries of Spain, Portugal and Greece after they joined. Rising prosperity at home led to a return of not just Spanish farmworkers but also Portuguese and Greek farmworkers. Indeed, those three countries have gone through a very rapid transition from being countries of emigration to countries of substantial immigration as they have become more prosperous over the last few years.
I recall that immediately after the dismantling of the Berlin wall, a number of western European studies by the OECD, the Council of Europe and others suggested that up to 25 million people would move from the former socialist states into western Europe. There was a real fear, mostly in Germany, that there would be a mass migration west.
I still recollect with amusement a conference in 1987 at which a young Russian said to a number of French participants, "We all think Paris is the centre of civilised Europe, and as soon as the wall comes down, we shall move to Paris". They did not, and people have not. All the evidence we have is that as prosperity extends across eastern Europe, so people will be happy to stay there and work there. Indeed, people from further east are moving in to add to their working population. The problems of migration from further afield, which raise awkward questions of border controls and co-operation with the neighbouring countries, are ones to which we should pay more attention in future.
I was fascinated to read in some detail, in the note on the treaties of the implications of the common agricultural policy, the transition period for Czech hen cages, Latvian animal waste plants and Maltese raw milk. It increased my sense that the common
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agricultural policy is the most amazingly over-complex set of centralised institutions which we all encourage Her Majesty's Government to do their utmost to decentralise as far as possible.
I note that there are implications for Cyprus, as the noble Lord, Lord Howell, remarked. There is a sad possibility—still not necessarily an inevitability—that Cyprus will join as a divided state. I note that there are some very difficult issues about the future of the sovereign base areas whether or not Cyprus enters as a divided island or a united island. My heart sinks at the thought that the United Kingdom may be about to add to the anomalous position of Gibraltar and the Crown dependencies a third anomalous area, half in and half out of the European Union, in which, if I understand correctly, farmers inside the sovereign base areas will he entitled to benefit under the common agricultural policy but will not otherwise be members of the European Union, et cetera, et cetera, et cetera—the sort of thing that only the noble Lord, Lord Williamson, will ever understand.
The weight of interconnected European business in both Houses over the next six to nine months will he considerable. We have this Bill, which I hope will not detain us too long; we have the proposals from the convention to discuss; and then we will wish to follow the intergovernmental conference in some detail. It is very important that we have a proper and informed debate on the convention, which seems to many of us very closely linked to the institutional implications of enlargement. Indeed, those of us who remember the Laeken declaration in detail recall that the greater involvement of national parliaments was one of the underlying points in the entire convention exercise.
I wish that I were more confident that the Government were yet doing enough to encourage an informed national debate. I look forward to seeing a good and well-informed White Paper. I do not know when it is going to be published. I regret that there will not be an opportunity to have a proper debate in this House before the Summer Recess. I trust that there will he adequate time for a proper debate and inquiry when we return in September.
It is also important, I think, to maintain the traditional good humour and tolerance of this House in an area where opinions differ passionately. I came in last Friday to the debate on the Second Reading of the European Union (Implications of Withdrawal) Bill which in many ways lacked that tradition of good humour and tolerance. There were references to the "corrupt octopus of Brussels". There were suggestions that any British citizen who has ever been in the paid employment of the European institutions must unavoidably be tainted by that corruption—which seemed to me to cast unworthy aspersions on a number of Members of this House. There were suggestions that the referenda undertaken by some of the applicant states were not really with the full consent of the population because the turnout had been relatively low. There were, not to put too fine a point on it. undertones of paranoia, even xenophobia, in the belief that there is a vast and malign conspiracy against honest Englishmen.

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There were, in a number of the final speeches, some aggressive and repeated interruptions which I felt were a threat to the tradition of self-regulation of this House. I wish to say that because we will be having a number of further debates within the next few months on these issues and I think it extremely important that we maintain the traditions of this House and not allow them to slip.
The Minister said in her opening speech that the process of enlargement will continue—to Bulgaria and Romania, which we may hope will hit the date of 2007, although current developments suggest real problems in reaching that date; and then to Turkey and the western Balkans.
Policy towards the remaining neighbours of the European Union requires much more active attention. I was struck when I read the Commission paper of March 2003, clumsily entitled Wider Europe—Neighbourhood: A New Framework for Relations with Our Neighbours, at the ambitious agenda it was setting out for further extending the zone of security and stability beyond our present boundaries. The Thessaloniki European Council repeated the phrase that we do not wish to draw a new dividing line in Europe. If we are not to draw a new dividing line in Europe, our relations with Ukraine, heaven knows our immensely difficult relations with Belarus and our relations with our neighbours on the Mediterranean are going to have to be a matter of much greater priority. The response of the Foreign Ministers Council to the Commission paper in June was, I thought, flabby and mean. It suggested that our Foreign Ministers are more concerned with haggling among themselves about benefits within the current EU than with thinking about the broader set of issues of Europe's responsibility to the wider world.
I would also like to ask the Minister about the paper that Javier Solana, the High Representative on Common Foreign and Security Policy, presented to the European Council at Thessaloniki which is entitled A Secure Europe in a Better World. I am not entirely sure about the status of this paper. It appears not to have been published exactly, but lots of copies were available in Washington when I was there last week, and lots of people in Washington have written about it. So it is certainly being circulated, but not exactly pushed for larger consumption here. A member of Mr Solana's secretariat, however, told me that it had been put out with the intention of promoting a broader debate on a wider European international strategy intended to lead up to the European Council in December. If that is the case, it would be helpful if it were easier for Members of this House and of the other place to get hold of a copy. I quote from that paper:
"It is not in our interest that enlargement should create new dividing lines in Europe. We need to extend the benefits of economic and political co-operation to our future neighbours be the East—Ukraine, Moldova. and Belarus—while resolving political problems there … We need to extend the zone of security around Europe".
I agree strongly with that view. The deal is a welcome start to extending that zone of security and prosperity. In the next few months beyond this Bill, I
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urge the Government to provide the maximum amount of information and political leadership for the lengthy debate to come, with all the misperceptions, myths and deliberately misleading arguments that that will sadly include.
5.56 p.m.
Lord Williamson of Horton: My Lords, I intervene in today's debate because the approval by the United Kingdom Parliament, when this Bill is passed, for the enlargement of the European Union by the membership of 10 sovereign states in central, eastern and southern Europe is a political event of the highest importance. I do not wish this occasion to pass without having the opportunity personally to salute it. It is indeed a great event in European history.
I have two reasons to welcome this Bill wholeheartedly. First, there is the substance of the decision. It is evident that the EU will be strengthened by the new members in terms of its common purpose as a community of sovereign states, because the new member states will bring their distinctive contribution in terms of their national attitude to the many questions that will probably confront us for many years to come. For example, I cite: the protection of the environment and the sustainable use of natural resources; the responsibilities of richer countries for development and humanitarian aid elsewhere in the world; the use of energy from fossil fuels, nuclear or renewable sources; and the balance between centralisation and regional policies within the EU itself.
Your Lordships will note from those examples that I look forward to constructive co-operation with the new member states over a long-term perspective. This Bill, by endorsing their membership, sets up that long-term vision. I am relatively indifferent in the context of this important enlargement to some of the minor issues that sometimes cause commentators in the United Kingdom to fret, such as the precise number of full or associate European Commissioners. Nor do I have any particular anxiety about problems that some have signalled about the EU budget for the enlarged union. There will, of course, be some modest re-balancing of the budget in favour of the new member states so that each would be better off after this enlargement.
The transfer of funds between 2004 and 2006, as the Minister mentioned, will be about 3 per cent of the new member states' gross national product. In due course—which I believe is rather too slowly—the costs for agriculture and rural development in the EU as a whole will fall, certainly in real terms. It is also important to bear in mind that total EU expenditure is definitively capped by unanimity, and can only be increased with the agreement of the UK Parliament. Also the budget of the enlarged EU proposed for next year will still be below 1 per cent of the enlarged EU's gross domestic product and probably only just over 2 per cent of total public expenditure in the EU.
The second reason for my wholehearted support is an unashamedly personal one. Over very many years, I have supported the enlargement of the Union, which

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I believe will add to the voice of reason in international affairs and to a higher quality of life within the Union itself. When I worked in Brussels I made some personal contribution to the basic document "Agenda 2000", which sets out the case for a stronger and wider Union, the challenge of enlargement and the European Commission's opinions on the applications for accession. It effectively launched the negotiations on the basis of a first assessment of what the applicant countries might need to do and, more importantly and wisely, what the existing European Union might need to do in respect of its own policies.
I participated in one way or another in the negotiations for the United Kingdom's accession, together with Ireland and Denmark, and for the Greek, Spanish, Portuguese, Austrian, Finnish and Swedish accessions, so your Lordships will understand that I did not want to stand on the sidelines in this debate. I wanted a royal flush.
Although I believe that the most important gain from enlargement—for existing member states, particularly the United Kingdom, and the new member states—is based on the long-term perspective of a fair and wealthier Europe, better equipped to fight crime, drugs and some of the other problems of modern society, I shall also say a word about the short-term perspective, which I also believe to be favourable.
It is important to realise that, in trading terms, the new member states are already closely tied into the European Union and that the almost complete opening-up of bilateral trade has already shown advantages. United Kingdom trade with the new member states has increased in a little over 10 years by over 400 per cent; over 10,000 United Kingdom firms trade with them. The growth in the exports of the new member states, some of it directly beneficial to our consumers, has been substantial—for example, it has been over 200 per cent for the Czech Republic, 290 per cent for Hungary and 250 per cent for Slovenia. About 67 per cent of the exports of the new member states go to the European Union. For some, the percentage is as high as 77 per cent, as in Estonia, or 75 per cent, as in Hungary. That has contributed to a big increase in wealth. There has been growth of about 40 per cent in the gross domestic product of the former Soviet zone countries. If we believe in a European economic community, this is surely it. In today's terms and in trading terms, we are in an area of mutual benefit.
What of the future for trade, inward investment and the capacity of the new member states to compete in the single market? Many of their exports are highly competitive. In the other direction, substantial improvements in banking and financial services have been introduced, following the arrival of western banks and financial institutions. Despite the element of disruption that goes with the opening-up of markets, such as has taken place, growth has been good. I am sure that the new member states will compete effectively in the single market.
As well as trade liberalisation, direct foreign investment has played a part. The central and eastern European countries have had about 120 billion dollars
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of foreign investment in the past 10 years. I expect substantial foreign direct investment to continue, although there may he a slight pause for breath, while investors look to see how wage levels, currently about one third of the European Union average, develop.
There has been some concern that the enlargement of the Union will give rise to increased migration into western Europe. That was mentioned by earlier speakers. It is thought that it might exacerbate public disquiet here about illegal immigration and the inflow of asylum seekers. The two questions must be separated. The treaty grants nationals of Cyprus and Malta the same right to work in another member state as is currently enjoyed by nationals of existing member states—that is simple. For the other eight new member states, the Bill provides a power, as the noble Baroness made clear, to grant the same right to work in the United Kingdom as is enjoyed by nationals of other member states.
The treaty would have allowed the United Kingdom to defer the application of that right up to 2009 or, in exceptional circumstances, 2011. The United Kingdom Government have decided not to do so, but to grant it from 1st May, 2004. On balance, I think that this decision is right—although controversial, perhaps—and that the British public will understand that we are speaking of legal entry to work that we are granting, not of illegality or lack of control. It is important to make that point. I put it in that simple form and do not go back to the precedents about migration to or from Spain because I do not wish to enter into any further discussion about Mr Beckham. Furthermore, there will, if I understand the position correctly, be a safeguard power in the regulation to reapply some control if necessary. It is a satisfactory situation, although a little controversial, and I support it.
It is very pleasing that the European Union at this time is dealing with the two big issues of enlargement of the Union and the preparation of a better basic treaty as a result of the consultation of national parliaments and others in the convention. I am very glad that enlargement will be speeded forward in the House today.
6.5 p.m.
Lord Harrison: My Lords, as a prologue, I must say that I deplore what happened in the European Parliament last night. While the Italian presidency got off to an inauspicious start, I hope and believe that the Italians will recover their poise. They are taking up the presidency at a very important time. I say that with all the more feeling because I and the noble Baroness. Lady Crawley, in an earlier incarnation, were friends and colleagues of Martin Schulz, who deserves respect, not insults.
Like Julius Caesar's Gaul, my contribution is divided into three parts. First, I draw attention to the astounding fact that 10 more countries are freely and keenly joining the European Union. That is astounding because for many of us who have lived in the shadow of the Iron Curtain the prospect of a

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Europe whole and free has always been but a distant hope. However, as each accession occurs, that hope is being gradually realised. It is also astounding because the change has been effected without one applicant country turning down the chance to join the EU. Indeed, eight out of the 10 countries that have already decided did so by handsome majorities in referendums: in Poland and the Czech Republic by about 77 per cent, in Hungary by 84 per cent and in Slovenia and Slovakia by 90 per cent or more. Equally astounding has been the lukewarm—indeed, curmudgeonly—reception given to those countries by our own Eurosceptic press and the Europhobic members of the party opposite. Instead of a fanfare proclaiming the unification of Europe, the Eurosceptic press resorts to belittling the turnouts of the referendums held in the accession countries. It is its last gasp of ill will towards the European project. In turn, it is supported by the politicians who campaign for the United Kingdom to secede from the European Union. That was exemplified in your Lordships' House last Friday in the form of the Bill promoted by the noble Lord, Lord Pearson of Rannoch.
I am constantly amazed by the desire of some noble Lords to leave the European Union while the rest of Europe and beyond knock on the door to come in. I am reminded of the old riddle:
"As I was going to St Ives, I met a man with seven wives".
Like the man bound for St Ives, the Eurosceptics march off into their self-imposed internal exile in the mistaken belief that others in Europe support their vain charge of the lightweight brigade. However, how should we think differently of the party opposite, which is led by the Europhobic lain Duncan Smith, a man who by conviction would prefer Britain to be left abandoned on the continental shelf? I understand that when the noble Lord, Lord Howell of Guildford, makes criticisms, he does so from a positive stance; we always listen to and welcome his criticisms as we advance further down the road.
Lord Howell of Guildford: My Lords, the noble Lord was very kind in his remarks about me but he cannot pick and mix in that way. I speak for the Conservative Party as a whole and the proposition that we are Europhobic or anti-European is completely untrue and should not be asserted, whether in relation to myself or any other member of my party.
Lord Harrison: My Lords, looking at the Benches opposite and after listening to the debate last Friday, pick-and-mix is characteristic of the party opposite.
My second point is that I support the accession of these respected countries. It will be good for them and us. My confidence in this matter is bolstered by the experience of the earlier accessions of Ireland, Spain, Greece and Portugal. For those states joining the European Union meant anchoring democracy, securing human rights and promoting market economies. Prosperity has taken root in those countries aided by the
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European regional and cohesion funds, which have succeeded in boosting their economies despite their geographical peripherality.
My confident prediction is that the new batch of accession countries will considerably benefit over time. Indeed, independent research suggests that those countries may expand their GDPs by some 20 per cent in the medium term as a result of joining while Britain's own economy will also benefit to the tune of £1.75 billion. In this Eurovision contest of expanding economies, everyone can be on song. I reject the fears of those like David Heathcoat-Amory MP, the Conservative representative on the recently completed Convention on the Future of Europe. He told BBC Radio 4 that he is very worried about enlargement when we try to absorb a lot of other countries with different cultures for which our judicial and legal systems are quite unprepared. He continued by saying that it is also going to be very expensive. What a relief that Great Britain never tried to establish an empire and that the East India Company so quickly faded.
The truth is that we all stand to gain culturally and politically and also in terms of promoting peace, improving the environment and deepening democracy. But the grouting of the Union, which binds it together, is the establishment of the world's richest and largest market which, in May 2004, will swell to about 455 million people. I make that point because all too frequently the disciples of Mr Heathcoat-Amory complain that the single market was all that Britain signed up to back in the 1970s. They scarcely acknowledge that it is the market which has been the engine of the Union and, moreover, that their constant backbiting undermines the efforts of British entrepreneurs seeking to penetrate that widening single European market. If one keeps trying to tell British business people that Europe is the home of red tape, foreign tongues and funny money, then one cannot be surprised if they stay at home. The Europhobes are the very worst ambassadors for Britain backing Europe.
That brings me to my third and final point, which is the Government's wise and intelligent decision in Clause 2 of the Bill to grant immediate free movement for workers from the accession countries to ply their trades and skills in Britain. Not only is that in conformity with the single market's four freedoms of free movement of people, capital, goods and services, but it will also allow Britain to fill the current skills gap in the British workforce. Indeed, I ask the Minister whether the Government are devising any specific strategy to welcome and place such skilled workers when accession takes place in May 2004.
There is one further point as to why the Government's move is both astute and intelligent. By offering freedom of movement to workers from accession countries right at the outset, we immediately stake our claim to be first, firm and fast friends of the accession countries. Such an act of spontaneous friendship will store up for us a pool of goodwill towards Britain, capable of being called on for many years to come as Europe new and old unites in common purpose.

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Those with the gall to oppose these beneficial changes prefer to leave Europe a divided trinity. The Bill signals their defeat and provides for a better Europe. I, for one, applaud it and encourage the Minister to proselytise for the Bill as part of the Prime Minister's campaign to promote Europe in Britain and Britain in Europe.
6.15 p.m.
Lord Dahrendorf: My Lords, like the noble Lord, Lord Williamson, I have a personal reason for wanting to say at least a few words in the debate. I cannot claim to have had any practical input into the process of the accession of new countries, but ever since the heady and memorable days of what I call the revolution of 1989, which put an end to communist rule in east-central Europe and beyond, I have been a staunch and firm advocate of enlarging the European Union and having our European friends and neighbours inside.
The result is the present slim Bill, which the Minister has rightly called momentous. It is probably more momentous—if that is not offensive to anyone—than some of the massive tomes that come our way for scrutiny every now and again, and particularly in recent months. It marks a change in the face of Europe and in the direction of peace and liberty.
I said that I had no practical input into the process this time. I had a slight practical input into an earlier process of enlargement of the European Communities, as they were then called, when I was commissioner for foreign trade and foreign affairs at the time of Britain's application for membership. Even at that time I strongly opposed a view widely held in Europe that there is a conflict between deepening European co-operation and enlarging the European Union. I do not believe that that conflict exists. Every time the EU has seen enlargement it has also seen a process of intensified co-operation within. I am convinced that enlargement this time will have the same effect.
The accession comes later than some of us—including, I am glad to observe, Her Majesty's Government—would have wished. It is also rather less generous than the new members deserved, since they nearly became net contributors to a wealthy European Union on entering it. But at least enlargement will now be a fact. Europe is, in the words of President Bush the father, "whole and free"—nearly whole, as several noble Lords have rightly emphasised, for even apart from Norway and Switzerland, much of south-eastern Europe remains outside for the moment. The question of the open borders beyond is one of the major issues ahead of us.
Still, enlargement is a fact. While the United States of America and NATO remain crucial to Europe's security, the level of political and economic co-operation achieved in the European Union puts an end to centuries of internecine struggles and establishes—indeed to some extent guarantees—the constitution of liberty over an entire continent. Apart from North America, no other part of the world has managed such a feat.
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The European Union will be different once the enlargement has happened. Even without using the language of an "old" and a "new" Europe, one can predict that what some called "core Europe"—that is, essentially France and Germany—will no longer necessarily be the engine of closer co-operation. What may geographically seem the periphery is in fact the set of countries whose governments signed the "Letter of the Eight", affirming the Western alliance in the face of the Iraq war. After 1st May 2004, their view will be the majority view of the Union, and it is one which we should welcome.
The Bill before us emphasises one of the four liberties of the single market: the freedom of movement for workers. Perhaps it needs to be stressed, as others have done—and the House seems to be largely united on this point—that there is nothing to worry about in this prospect. My own hope is that the new members, especially those in east-central Europe, will begin a process of catching up economically, following in some ways the Irish model. However, it must be said that they would engage in this process at a time when the general economic climate is less favourable to rapid catching up by any country than it was at the time of Ireland's accession.
Workers may come to the old member states in the near future and help to provide essential services, for which we should be grateful. But, judging from the Polish experience—I agree very much with the noble Lord, Lord Howell, that Poland is not only the largest new member but the most significant country among those acceding—the people who come to us are just as likely to go back before long to help to create a sustainable economy of prosperity at home.
In short, the Bill sets the seal on one of the great steps forward in European history. I, for one, support it and its implications wholeheartedly.
6.22 p.m.
Lord Kilclooney: My Lords, I also welcome the Bill and especially the principle of enlargement of the European Union. I am delighted to see that, of the 10 new member nations, two are from the Commonwealth: Cyprus and Malta. I note also that all 10 are republics and, of course, that changes the happy balance between seven constitutional monarchies and eight republics in the present membership of the European Union.
But most important is the fact that eight out of the 10 new members are former communist countries. It is great to see them now becoming integrated as free, independent sovereign nations within the European Union. They are, of course, already all members of the Council of Europe and many are already within NATO. I recall revisiting Warsaw two years ago, having been there previously when the communists were in power. The most dramatic impact for me was walking past the ministry of defence headquarters in the centre of Warsaw and finding the NATO flag flying over the building. That is the kind of impression that one receives and the impact that is made as Europe comes closer together. In trade, we are creating

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a market of 450 million people. That must be good for United Kingdom business. It must increase the opportunities for trade.
However, the EU is a political, as well as an economic, union. I hope that the 10 nations from the new Europe will be more supportive of a union of independent sovereign states than a federal European Union. Here, I shall say something that may not be welcomed. In Europe, the British—or the English, as they call us—are not particularly popular. That is not because of the behaviour of some louts who follow the English football team—far from it. It goes much deeper. For example. in France, at most levels of society, there is a jealousy of the United Kingdom. In Europe there is resentment of Britain; a perception that the English are arrogant, behave as if they are superior and claim to know better. To deny this is to avoid the reality of politics in Europe. I have witnessed this over the past 17 years in European politics, 10 years as a Member of the European Parliament and seven in the Council of Europe. This perception of the United Kingdom is totally unfair. In the European Parliament and in the Council of Europe, United Kingdom politicians—Labour and Conservative—are among the most hard working and efficient. They make a major contribution to a peaceful and better Europe.
I hope that the accession of the new European nations will strengthen the role and the respect for the United Kingdom in Europe, as the noble Lord, Lord Dahrendorf suggested. I agree that it gives us greater opportunity and support within a larger Europe. But it would be unwise to imagine that the United Kingdom will have no difficulties with old Europe so long as these perceptions exist.
With these 10 new members, the majority of the European Union, like the United Kingdom, will not have the euro as their national currency. I live in the only part of the United Kingdom having a land boundary with a euro-land country—the Republic of Ireland. I say "Long Live The Euro" so long as the Republic of Ireland has it and Northern Ireland does not. As chairman of a family business employing 250 people in five of the six counties of Northern Ireland, I know at first hand the impact of the euro.
The Republic of Ireland has suffered from one of the highest rates of inflation across Europe. In the past year it has had a 15 per cent currency appreciation against sterling, yet it is powerless to address these problems. Both industry and agriculture based in the republic are finding it more difficult to export to countries such as the United Kingdom and the United States. Businesses are being forced to close down and unemployment is increasing. This week alone, some 500 jobs in the Republic of Ireland were lost in long established companies such as Navan Carpets and Powerscreen. Both companies closed their plants and both blamed currency exchange rates—the euro—for their demise. Northern Ireland gets brisk business as a result. Thousands of Republic of Ireland citizens visit
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us each week to make purchases of food, drinks and household goods which are all much cheaper in Northern Ireland.
I am delighted that in addition to the 10 countries now joining the European Union, there is reference to Bulgaria, Romania and Turkey. I consider the accession of Turkey to the European Union to be of great importance. I despair when I see some people opposing Turkey because its citizens are Moslem. If Turkey does not move towards integration with the European Union, it will go in the other direction towards Islamic fundamentalism. Anyone who knows that country knows that over the past 30 years there has been a tremendous growth in Islam throughout that land—not just secular, but fundamentalist Islam. Mosques have appeared at almost every crossroads. Europe faces a great challenge in how it reacts to Turkey. Reforms are taking place in that country but more have to come. Interestingly, its GDP per capita is higher than some of the 10 included in this Bill. I hope that a more favourable approach towards Turkey's membership of the European Union will continue in the years ahead.
The problem of Cyprus has been mentioned. I fear that we, within the European Union and its institutions, are now about to absorb the problems of that island. With regard to the negotiations, over the past few years I have always stated that we should not have given a blank cheque to the Greek Cypriots and said: "You can join the European Union whether or not there is a settlement". By taking that approach we were not giving the Greek Cypriots any incentive to reach an agreement because they knew they were going to get in without an agreement.
It has been said that the Turkish Cypriots should have accepted the United Nations proposals—proposals which were not even submitted to them in their own language, Turkish. They were asked to accept something which was not in their language. That was not a good start. Then 100 pages in the United Nations proposals, which have been praised by some colleagues, were blank. How can one accept proposals with 100 blank pages? Of course those pages which were not blank involved the movement of 60,000 Turkish Cypriots, who would again become refugees for the second time in 30 years. They included unfair boundaries for the two new entities and, worst of all, they abandoned the idea of partnership between the Turkish and the Greek Cypriots, as was involved in the original constitution of the Republic of Cyprus. Instead, the UN proposals created majority rule of the Greek Cypriots over the Turkish Cypriots. I hope that those who praised the United Nations proposals will read the hundreds of pages in them before they reach the bland conclusion that President Denktash should have accepted those proposals. It would have been great to get a settlement, but certainly the current UN proposals in my opinion are not very fair.
However, congratulation must be given to both Turkish and Greek Cypriots for the changes which have taken place in the island in recent months. Following the decision of President Denktash to open the Green Line, there has been positive movement in

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the island. Although the Greek Cypriot Government initially opposed that initiative by President Denktash, I am glad to say that the Greek Cypriot people voted with their feet and within 24 hours were moving in their thousands into northern Cyprus.
Greek Cypriots now spend three days per week in northern Cyprus, whereas Turkish Cypriots are still only allowed to spend one day in southern Cyprus. In recent weeks there has been a retrograde step in that the Greek Cypriot authorities are seizing all purchases made by Greek Cypriots returning from the north to the south. Such petty obstacles do not contribute to improved relations between the two communities. Let us see the positive side; that is, Greek and Turkish Cypriots are now allowed to go into each other's territory and they are learning to live with each other again.
In contrast to the opening of the Green Line, however, Her Majesty's Government, after 29 years, have now decided to close the border between the Dhekelia base and northern Cyprus. So United Kingdom citizens who live in northern Cyprus can no longer enter the British sovereign base territory to the east of the island, a territory which is mostly surrounded by northern Cyprus.
Within the sovereign base area, as has been mentioned, Greek Cypriot farmers will now benefit from European Union agricultural policies. All Greek Cypriots on the base will benefit from the European Convention on Human Rights. But, at the same time as movement across the Green Line begins, United Kingdom residents in northern Cyprus resent the decision by Her Majesty's Government to stop them entering their own British territory, having had that facility for the past 29 years. It is extraordinary. I ask Her Majesty's Government to explore an alternative which would allow UK citizens in the north to enter the sovereign base but not to use it as a means of access to the Greek Cypriot territory to the south. That is the issue which must be addressed. With that qualification, I welcome the enlargement of the European Union and support the Bill.
6.35 p.m.
Lord Stoddart of Swindon: My Lords, I have listened very carefully to the debate and so far there seems to have been a unanimous welcome for the Bill. However, I fear that I shall have to shatter that unanimity, because I do not welcome the Bill. Many of your Lordships who know me will understand why. I shall explain, as briefly as I can, why I do not support the Bill.
Before I do so, I say to the noble Lord, Lord Wallace, that I regret that he criticised our debate last Friday, because I do not believe that the people who took part went outside the traditions of this House. Those are to debate freely, forthrightly, rather than to make set speeches. Last Friday's debate was in the best traditions of this House. It was the epitome of decorum, decency and good order, compared with the deplorable and insulting behaviour of the President of the European Council towards the
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European Parliament yesterday. I am glad that the noble Lord, Lord Harrison, raised that point rather than myself, because I cannot now be accused of being a Europhobe simply and solely because I mention the bad behaviour of the President of the European Council.
The noble Baroness, Lady Symons, in introducing the Bill—as she always does with lucidity and clarity—said that the Bill had far reaching implications over how we are governed, and for the institutions of Europe. She said that it was a small Bill, but the treaty involved 5,000 pages, and there was to be a White Paper. Why did we not have the White Paper before the introduction of the Bill? Would it not have been sensible to have seen the detail of the treaty, and to have had it explained to us, before we and the House of Commons were asked to pass a Bill to ratify the treaty? I wish that that had occurred. We are now being asked to agree to the Bill before we have seen that White Paper. The noble Lord, Lord Howell, supported the Bill and said that it was part of the dream to realise the union of European nations. I hope that that dream will not turn into a nightmare; I fear that it may.
I have opposed all enlargements of the European Union, because I believe that they would lead inevitably to greater centralisation and eventually to a single European super-state—a united states of Europe. Noble Lords have heard me say that before. I have always believed that and I still do so. That is why I oppose the Bill. I have taken issue with those who believe that enlargement would lead to widening but not deepening. I have always believed that widening would always lead to deepening and centralisation. In the light of developments following previous enlargements—the Single European Act and the Maastricht, Amsterdam and Nice treaties—and the new constitution proposed by the Convention on the Future of Europe, my view has been proved to be correct. Widening inevitably means deepening and centralisation. We cannot get away from that; it will not work otherwise and it is absurd to say that it will not occur. Many people who previously took a different view from mine are now coming round in the light of our experience.
So I say again: I am opposed to the Bill, first and foremost because I believe that it is the enemy of freedom and democracy, not its friend, and the friend of undemocratic centralism and the corporate state. It undoubtedly paves the way—perhaps with the best of intentions—to a destination that is bound to lead to the destruction of the nations of Europe. Many European leaders say that that is their aim; they believe that that is desirable. They are entitled to that opinion, but it is not my opinion. That would lead to the destruction of the nations of Europe as we know them and the construction of a new European empire, whose power and impact we cannot foresee at present.
We are told—we have been told this afternoon—that the people of the 10 new countries are desperate to join the European Union. The referendums that have been held so far certainly seem to show that a majority of people are in favour of joining, although one must

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temper that by saying that the turnout in some countries has not been brilliant. The people of those countries have been promised great benefits from membership of the European Union by their own leaders and by the ubiquitous propaganda machine of the European Commission.
What will happen when those people find that they must submit to the 97,000 pages of the acquis communautaire and the 104,000 regulations that must be implemented, I simply do not know. Nor do I know how they will react when the promised financial, social and economic benefits do not immediately materialise. Many of them will not be theirs for many years—or perhaps at all. The accession states may also reflect that, because they must absorb and implement that mass of regulation, especially as it applies to industry and commerce, they may find themselves much less attractive places for inward investment, which may very well adversely affect job prospects and living standards. They should concern themselves with that.
Many entrant countries have a large agricultural component to their economies. That of Poland is 20 per cent. They will be required to modernise their agricultural methods quickly, but—as I understand it; I may be wrong—not receive subsidy until 2013. So people are likely to be driven from the land into towns and cities that will have difficulty in finding jobs, housing and services for them. As the United Kingdom is allowing free movement of labour immediately, are those poor people not likely to want to come here? That must be considered.
As to any benefits to Britain of this accession treaty, they are hard to find. We already trade freely with all the accession countries. We already have that market. It is not an addition to our export market; it is already there. That is not such a great thing, especially as their combined GDP is quite modest and barely more than the Netherlands. It is unlikely to give a great boost to trade for this country, if any at all. In the short-term, accession could cause a loss of manufacturing jobs in Britain, which also has to be taken on board.
There could be adverse consequences in some areas of Britain. As it is likely that enlargement will divert EU Structural Funds to the entrant countries which are poorer than we are, it is virtually certain that the four regions of the United Kingdom at present enjoying Objective 1 status—Merseyside, South Yorkshire, West Wales and the Valleys, and Cornwall—will have to lose that status after 2006. That is a legitimate concern which the British people might have about this accession treaty.
Where do we go from here? We know that Romania and Bulgaria are now on the invitation list to join. But what about Turkey? That has been raised previously in this debate. Turkey is an Asian country—we cannot get away from geography. It is an Asian country with a large and increasing population. That population has a great propensity to grow because it is a young population at present. The projected population of Turkey by 2050 is 110 million. At the same time the population of many of the Western European countries will be falling. For example, the projected population of Germany will be 60 million. Therefore
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there are great implications in allowing Turkey to join: first, because of its population growth and, secondly, because it is an Asian country.
What are the limits of a European Union? If we go into Turkey, it will no longer be a European Union, it will be a Eurasian Union. How much further do we intend to go?
This is a very important Bill. I am only sorry that the maximum number of people in this Chamber to listen to the debate—and I have been counting—has been 18. The Bill has huge and wide implications, as was pointed out by the Minister at the beginning of the debate. Matters of such great import should not be relegated to a comparatively late hour on a Thursday evening, as the noble Lord, Lord Howell said. However, there will be other stages and no doubt we shall have further debate about it.
Finally, it would be nice if we could have the White Paper before we deliberate further on the Bill.
6.50 p.m.
Baroness Symons of Vernham Dean: My Lords, I welcome the spirit in which this debate has been conducted and hope it indicates that the new member states can be sure that this country will warmly welcome them to the European Union as our partners in future years. I am also enormously grateful to the noble Lords, Lord Howell of Guildford and Lord Wallace of Saltaire, for both speaking so forcefully on behalf of their respective parties.
Britain has prominently and consistently supported this enlargement. After the convulsions of 1989, this country—and, let it be said, under a Conservative government—was one of the first to grasp fully the implications of the emergence of liberal democracies and market economies on the borders of the Union; one of the first to understand the aspirations of peoples newly freed from authoritarian control.
John Major argued as early as 1991 that the ultimate destiny of eastern Europeans was membership of the Community. The last Conservative government, supported by us when we were in opposition, pushed hard to make that enlargement central to EU policy. Since 1997, this Government have carried forward energetically the British commitment to enlargement. Negotiations began under our presidency and we have encouraged successive presidencies to keep them on track.
Next year's enlargement of the Union is, first and foremost, a credit to the vision, energy and determination of the peoples and governments of central and eastern Europe, Malta and Cyprus, while the successful conclusion of the negotiations last year is witness to the skill of the Danish presidency and that of the Commission.
However, we should not understate our own role in this. Enlargement is a good news story for British policy in Europe. Our advocacy, under both Conservative and Labour governments, leaves us well placed to mould the shape of Europe in the years

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ahead. Our debate today has roamed around a number of issues and I shall do my best to answer the points which have been made.
I turn first to the question of freedom of movement in Europe. Although the noble Lord, Lord Howell, certainly did not oppose freedom of movement in principle, he raised some concerns about it. Other noble Lords, the noble Lords, Lord Wallace of Saltaire and Lord Williamson of Horton, and my noble friend Lord Harrison also touched on the subject. The free movement of persons is one of the Community's fundamental principles. The accession treaty grants citizens of all the new member states the right to move freely within the Union for most of the purposes envisaged by the EC treaty. We believe that it would have been quite wrong to deny citizens of the new member states such a fundamental right. While I understand that it is a difficult and sensitive issue, it was very much the view taken by the Government.
Such restrictions on free movement as the accession treaty creates relate only to freedom of movement for the purposes of work. However, as I indicated earlier, Malta and Cyprus are not covered by those restrictions.
Let me make it clear why the United Kingdom Government want to waive their right to impose restrictions on other states. We believe that it is in the interests of the United Kingdom to do so. It makes no sense to refuse to allow those who have a right to enter and reside in the UK the right to work here. Those who can work legally do so in the open market. They make a positive contribution to the national tax base and they do not undercut the decent minimum standards of statutory protection that apply to United Kingdom workers.
We took the decision on the basis of a series of independent studies which argued that free movement will not cause large influxes of people into our labour market. Those who argued that the Iberian accession in the mid-1980s would have that effect were proved quite wrong. As a result of joining the European Union, more Spaniards returned home than moved abroad.
If our expectations are confounded, we will be able to repeal or amend the regulations made under this Bill. We will retain this right—and in saying that I respond to a point specifically raised by several noble Lords. I want to make it absolutely clear: we will retain the right, through the safeguards provided by the accession treaty, until the end of April 2011. So we have retained a flexibility of approach from 2004 through to 2011. The noble Lord, Lord Williamson of Horton, was right to seek clarity on this point. I hope that what I have said reassures those noble Lords who were concerned about this.
My noble friend Lord Harrison asked whether the Government would devise a specific strategy to welcome workers from the accession countries. Employers in the United Kingdom already enjoy good relationships with workers in the new member states through schemes such as the Seasonal Agricultural Workers Scheme and the Work Permits Scheme. We
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expect those relationships to continue and to strengthen after accession. They will continue to ensure that we attract skilled workers, many of whom are very much needed in the United Kingdom to fill our vacancies. But that is not devising new schemes; it merely takes forward the schemes we already have in place.
I shall turn to the points made about the European Convention. Several noble Lords touched on this subject, although I was grateful to noble Lords for not going too far into a convention debate. However, I take the point made by the noble Lord, Lord Howell of Guildford, that he looked forward to a debate. I very much look forward to the debate. The noble Lord quoted from an article in the Economist in regard to concerns about where the convention was taking us. Let me quote from Le Monde of 29th May 2003. In contrast to the article from which the noble Lord quoted, it states:
"The British Government is pleased with the Convention and has every right to be so. The text meets virtually all its expectations and allays most of its fears".
The noble Lord juxtaposed the position of Poland and other eastern European countries with what he described as the Paris/Berlin agenda. But, as he said, we are very much on the same side as the accession countries in the argument over Iraq. We are very much not on the Paris/Berlin agenda and have been severely criticised in many quarters for not being on it. The UK Government have taken the right decision in that regard and we have the common-sense to ensure that we will be strong allies and supporters of the rights of the accession countries to make up their own minds on where they stand on such issues in the future.
The noble Lord was concerned about the new countries not having a voice at the IGC. The new countries will be a negotiating party at the IGC and will therefore take part in deciding which of the convention proposals go forward. They are not being asked to sign up to anything upon which they will not have a say, and any of them can use their veto during the course of the IGC. It is important that I make that point to the noble Lord because I gained the impression that he was implying they would be faced with a fait accompli at the IGC that they would have to pick up as accession countries. That is not the case. They will be full participating members in the negotiations at the IGC.
I turn now to the reform of the common agricultural policy, a point raised in particular by the noble Lord, Lord Howell. Many Members of your Lordships' House have been strong critics of the common agricultural policy in its current form. The Council of Agricultural Ministers last week reached an agreement that I believe will set a new direction for European agriculture. It will simplify the common agricultural policy, reduce the burden on farmers through a single farm payment and free farmers to produce what the market wants, to optimise their production and to cut their costs. It also has the enormous benefit of giving the EU a strong negotiating position in the WTO negotiations.

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I mention this because one cannot say often enough how important this shift is on the common agricultural policy. We shall have to work very hard to ensure that it brings forward the benefits we need, but we have seen an important shift. I believe that the advent of the accession countries was one of the drivers in ensuring that we will go forward and at least reach the beginning of some of the new understandings.
The noble Lord was worried about the farmers in the new states not being able to compete without 100 per cent of direct payments. Even without direct payments, the common agricultural policy will provide guaranteed higher prices for most products, raising the incomes of those farmers. They will also benefit from lower costs, particularly in terms of land prices.
Many noble Lords referred to the issue of finances. The noble Lord, Lord Williamson of Horton, is right. The financial package for new member states is generous and very fair. It grants a significant amount of money to the new member states—some £26.6 billion between 2004 and 2006, which, as I have stated already, is 3 per cent of their GDP. The noble Lord, Lord Williamson, is also right that this has been achieved within the overall budget ceilings for enlargement which were agreed in 1999 at Berlin.
My noble friend Lord Harrison referred to the issue of economic benefits. The impact of enlargement on the existing EU member states is difficult to quantify but recent studies estimate that enlargement will add 0.2 per cent to EU GDP growth overall and that the UK's share of that will be about 14 per cent and worth about £1.75 billion. I stress that that figure is at 1999 prices.
I agreed very strongly with the remarks of the noble Lord, Lord Williamson, about trade. The economic benefits of EU enlargement arise from substantial extra opportunities for trade in goods and services, rooted in the expansion of the single market. The UK's total trade with the candidate countries has grown at a faster rate than our total trade elsewhere. Since 1990, UK trade with new member states has increased by some 400 per cent compared with a 43 per cent increase in our trade with the rest of the world. Those figures speak very ably for themselves.
The noble Lord, Lord Stoddart of Swindon, cast doubt on the economic benefits for the accession countries. The noble Lord is a clever man, a sensible man and a logical man. Does he really believe that 10 accession states in Europe have simultaneously been struck by an aberrational desire to wreck their economy? Or does he believe that, after five years of painstaking negotiations, they have not realised that other countries which have joined the European Union enjoy an increase in their living standards as a result?
Some of your Lordships spoke about future accessions. In particular, the noble Lord, Lord Wallace of Saltaire, was concerned about not achieving the target dates for Bulgaria and Romania. The Prime Minister has publicly offered our support for closure of negotiations with Bulgaria and Romania, and has offered specific
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help. We have 20 and eight consultants and pre-accession advisers assisting the Romanian and Bulgarian Administration respectively to prepare for their EU accession. We realise that there is a lot of work to be done but we are doing what we can to help.
The noble Lords, Lord Kilclooney and Lord Stoddart, raised the question of Turkish accession although, I am bound to say, from very different perspectives. Of course the United Kingdom strongly supports Turkey's EU candidature, as confirmed at the Helsinki European Council in December 1999 and subsequently at the Copenhagen European Council in 2002. Like all other candidates, Turkey must meet the political criteria for membership agreed by heads of government at the 1993 Copenhagen European Council before opening accession negotiations. These include the existence of stable institutions guaranteeing democracy, the rule of law, human rights and respect for the protection of minorities. So in answer to the points raised by the noble Lord, Lord Stoddart of Swindon, we have long been a supporter of Turkey's EU candidature, and under this Government we shall continue to be so.
Questions were raised about what could be described as wider Europe. The noble Lord, Lord Dahrendorf, touched on this point, as did the noble Lord, Lord Wallace of Saltaire. There are a number of countries which aspire to join us—Ukraine and Moldova, as European states, aspire to membership of the European Union, in line with Article 49 of the Treaty of the European Union. But we have a long way to go down the path of reform with those countries.
Albania, Bosnia-Herzegovina, Croatia, Macedonia and the Union of Serbia and Montenegro are considered to be potential candidates, and the UK Government strongly support each country's aspirations. But I stress that, like any other aspirants, they must meet the objective criteria for membership.
The noble Lord, Lord Kilclooney, raised the issue of Cyprus, as he has on previous occasions. Under the terms of the accession treaty Protocol 10, the acquis communautaire will be suspended in the north of the island if there has been no political settlement by 1st May 2004. But if a settlement is reached, the Council will decide, by unanimity, first to lift the suspension and secondly on the terms of the accession for a united island. Whether divided or not, Cyprus will accede on 1st May 2004.
The noble Lord, Lord Wallace of Saltaire, referred to the SBAs. I repeat that under the EC treaty it is clear that the SBAs are outside the EU. I recognise that that may cause him one or two difficulties. No doubt we can discuss this further.
We have a great deal of work before us. I hope that this Second Reading debate and the spirit in which it has been conducted is an indication of the way in which we will be able to take forward its Committee and further stages. Sadly, I did agree with the noble Lord, Lord Wallace of Saltaire, that today's debate has been in stark contrast to that which we had on Friday. It is not that there was disagreement on Friday—of course there is going to be disagreement in

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your Lordships' House; it is right and proper that there should be—but what I think was a little tricky was the note of somewhat sneering derision about the motives of those with whom some of your Lordships disagreed. I suggest that that was not helpful to debate and was not really in the best traditions of this House.
I should like to pick up on a point of confusion, I think, with the noble Lord, Lord Stoddart, in regard to the White Paper. I am sure that it is my fault and that I have not been clear enough. The White Paper which is being discussed is a White Paper on the IGC, not on the accession treaty. I think that they are two different issues. The White Paper that is planned is on the intergovernmental conference. I also say to the noble Lord that I understand—none of your Lordships can fail to understand—his concerns about federalism and a superstate.
Lord Stoddart of Swindon: My Lords. I am most obliged to the noble Baroness. I did misunderstand her. I believed that she was promising a White Paper on the accession treaty.
Baroness Symons of Vernham Dean: My Lords, I wanted to clarify the point. The White Paper is not on this but on the IGC. However, on the question of the superstate, not only members of Her Majesty's Government but members of the French Government and the German Government have repeatedly said that some sort of federal superstate is certainly not in their vision of the way to carry forward the European Union.
I agree with what the noble Lord, Lord Dahrendorf, said. This Bill will change the face of Europe and the EU will indeed be very different. The Bill sets the scene for one of the greatest steps forward in European history. I was enormously grateful to him for his, as always, very thoughtful contribution.
We have spoken today about the historic nature of this enlargement, but I hope that we are now in a position to look forward. In Brussels the new member states are already making their presence felt as active participants in the Union's institutions. We are working with them on a variety of shared interests—of course on the common agricultural policy reform, on economic reform, and on institutional reform. Enlargement really is a success story for United Kingdom policy, but we do not always recognise that enough. The knowledge of enlargement remains low—yes, I think that it is too low—across the United Kingdom as a whole. I hope that we will be able to address those issues. The Government are committed to doing what we can to rectify that.
Enlargement offers new opportunities for all sections of our country—for businesses, for civil society and for our citizens alike. I should like to see this country seize those opportunities. I think that enlargement is good for Europe and that it is right for the United Kingdom. So I urge your Lordships to grant this Bill a Second Reading.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Finance Bill
7.8 p.m.
Lord McIntosh of Haringey: My Lords, I beg to move that this Bill be now read a second time. I shall also be speaking to the Motion to approve Her Majesty's Government's assessment in the Budget 2003 for the purposes of the European Communities (Amendment) Act 1993, and of course the report of the Economic Affairs Committee on the Finance Bill 2003 is also being considered today. Noble Lords will know that the Government have not yet had the opportunity to respond to the report, and so I shall be constrained in anything I might say.
It is appropriate that these three measures are considered together. The information that the Government report each year to the Commission on our main economic policy measures is based on the Financial Statement and Budget Report, and the Finance Bill underwrites the Government's agenda, outlined by the Chancellor in his Budget Statement, of building a Britain of economic strength and social justice. The procedure is set out in Articles 99 and 104 of the European Communities treaty, which relates to the broad economic policy guidelines, convergence and stability programmes and the excessive deficits procedure. Section 5 of the European Communities (Amendment) Act 1993, usually known as the Maastricht Act, requires Parliament to approve the information sent by the Government to the Commission in order to ensure that member states' economic policies are consistent with the goals of the treaty. Sharing the information in the Budget with our European partners allows us to influence the development of the EU, bringing enhanced employment and growth to Britain and other member states. The information we are sharing confirms that we meet the Maastricht criteria for deficits and for gross debt.
As we set out clearly in Budget 2003, both the treaty reference values of 3 per cent of GDP for the deficit, and 60 per cent of GDP for gross debt, are achieved throughout the projection period.
It is thanks to the economic stewardship of the Chancellor of the Exchequer and because we as a Government have been resolute in our commitment to stability, that we are able to increase public expenditure on health, education and our anti-poverty programmes, while meeting our fiscal rules at every stage of the economic cycle, including in the cautious case.
We meet the golden rule over the cycle, not merely achieving a balance, but with an estimated surplus at £32 billion, showing that it is right and prudent to borrow at this time, the right stage in the economic cycle. Adjusted for the cycle we meet the golden rule this year and we meet it every year to 2008.
We also meet the sustainable investment rule that debt should remain below 40 per cent of national income, with debt set to stabilise at 34 per cent of GDP, the lowest in the G7, among the lowest in the EU and down from 44 per cent in 1996–97.

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The context for this Finance Bill has been the world economic downturn that in recent years has affected Europe, North America and Asia simultaneously. Now, with sound economic fundamentals and, above all, low inflation—unlike in the early 1980s and the early 1990s—it is right that this Finance Bill is targeted at promoting enterprise and productivity, helping UK businesses to succeed as the world economy returns to trend.
Over the past six years, we have reformed the tax system to create an environment friendly to enterprise and entrepreneurship, promoting investment, innovation and skills. The OECD has said that the UK is the best place to start out and succeed in business, and its latest figures show that our corporate income taxes plus employer social security contributions as a percentage of GDP in 2000 were the third lowest in the EU, lower than France, Germany and Italy.
Our changes have already helped small businesses to employ almost 400,000 more people than they did in 1997. But we are not complacent: the Government are working to make the process easier still, and we have identified more than 500 regulations introduced by previous governments for reform or abolition. This Finance Bill, building on the Budget that introduced it, marks the next stage of reform, to give greater flexibility in capital markets, product markets, housing, planning and the labour market.
Clause 136 provides support for those who regularly work at home under flexible working arrangements. Employers will be able to meet some or all of the incidental household costs incurred by employees who work home without it giving rise to a tax charge.
The Finance Bill contains measures to tackle abuses of the system by non-compliant employers who gain unfair competitive advantage through deliberate late payments. Mandatory electronic payment for large employers is consistent with the VAT system in which the largest traders are required to pay electronically. The surcharge for non-compliance has been modelled, in part, on the VAT default surcharge.
Clauses 158 to 161 simplify capital gains tax, including an extension of business assets taper relief to improve access to let property for unincorporated traders. This continues the Government's strong record of simplifying the tax system for compliant traders and individuals. Clause 164 extends the 100 per cent first year allowance available to small businesses for spending on information and communications technology for a further year to March 2004.
Clauses 138, 139 and 140 simplify and modernise employee share schemes to make them easier for companies to administer. They give employees in such schemes more flexibility, remove anomalies and provide a statutory corporation tax deduction for contributions to employee share schemes. The zero per cent starting rate for corporation tax means that 150,000 companies pay none. At 30 per cent, the main rate is lower than in any other major industrialised country. Clauses 132 to 134 freeze those rates.
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The Bill improves the way in which the research and development tax credit works, helping to take us towards the American spend on research and development—about 2.8 per cent of GDP. We will continue to consult business on improving the definition of research and development to make sure that it keeps up with technological developments and remains internationally competitive.
Economic dynamism and participation in enterprise is central to tackling social exclusion. To reduce the costs to business of locating and investing in disadvantaged areas and to support the regeneration of brownfield sites, we announced in the Budget the removal of stamp duty from all non-residential property transactions in the 2,000 disadvantaged areas. That measure, which is covered by Clause 57, is part of our package of measures to encourage business investment in our most disadvantaged communities. Such measures, supporting enterprise, underpin our priorities of creating full employment, tackling child and pensioner poverty and delivering high quality public services through investment and reform. Spending Review 2002 set out our plans for an extra £61 billion of spending on public services by 2005–06. Three-quarters of the additional spend will go on health, education, transport, housing and the fight against crime.
That unprecedented programme of investment depends on a tax system in which everyone pays their fair share. Taxpayers rightly expect the Government to close tax loopholes and tackle tax fraud, so that the burden is not unfairly placed on normal taxpayers because a minority abuse the system. This year's Budget included a compliance and enforcement package to enable the Inland Revenue to counter direct tax avoidance and contribute an additional £1.6 billion over three years. Measures in the Finance Bill tackle missing trader fraud, which cost the UK exchequer between £1.7 billion and £2.75 billion in 2001–02. The fraud is largely run by organised crime gangs that also traffic drugs, contraband and stolen goods. Customs has deployed around 400 staff to tackle such fraud, and a nationally co-ordinated strategy has stabilised it. The House may have heard that, yesterday, Customs arrested 39 people in connection with an alleged major missing trader fraud estimated at £120 million.
The measures in the Finance Bill complement the strategy by curtailing the activities of businesses that allow themselves to be sucked into fraudulent supply chains and are complicit in or turn a blind eye to such fraud. We do not take the powers lightly, and they are balanced by comprehensive and effective safeguards to protect the innocent. Through such compliance activity, Customs aims to reduce the fraud by at least £750 million by the end of the current financial year.
The Finance Bill also includes a wider package of measures to ensure that there is a level playing field for taxpayers who fulfil their obligations. There are measures to close down other schemes that a minority of businesses and individuals have used to avoid paying their fair share of tax. There is action to prevent tax avoidance through the manipulation of share

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schemes, coupled with support for companies that want to implement employee share schemes in line with the legislation, and there are clarifications that we have included because we listened to business.
There is action to counter capital gains tax avoidance through offshore trusts and second-hand life insurance policies and to close a loophole in the controlled foreign company rules, which allow some companies to escape UK tax on profits from extended warranties and credit protection insurance.
One of the most important elements of this year's Budget was the comprehensive modernisation of stamp duty to counter widespread tax avoidance, which distorts the commercial property market, distorts business decision making and has given rise to complex and artificial vehicles for transferring property. The reforms will create a level playing field, to the benefit of all taxpayers who cannot engage in highly complex artificial arrangements to avoid paying.
The Government have listened to the representations that were made to us and accepted a number of important amendments during the Bill's passage. On other areas, where the issues were more complex, we agreed to consider the further changes that were debated in the House of Commons. In particular, on the charge of sub-sales, we listened carefully to the concerns that were expressed and, as a result, made changes to ensure that intermediate contracting purchasers are chargeable to stamp duty land tax only if the contract between them and the vendor is substantially performed.
We also took note of the concerns that were expressed about those who enter into contracts before Royal Assent and have made changes to ensure that no one who sub-sells or subsequently performs a contract on or before Royal Assent will be subject to an SDLT charge. We also agreed with the concerns that were expressed that the relief for those who part-exchanged their houses with builders should be extended to those, especially elder people, who "trade down" to a house of lower market value.
Of course there were areas in which we were not convinced by the arguments offered. In particular, we believe that reliefs targeted to where there is most need are preferable to across-the-board increases in thresholds. We have debated those issues thoroughly. However, we recognise that consultation and discussion do not stop when a Finance Bill receives Royal Assent. Over the next few months, we shall be continuing to consult with interested parties to ensure a smooth implementation of stamp duty land tax on 1st December. That is backed up by a comprehensive education programme for solicitors, licensed conveyors and other interested professionals.
On the environment, the Finance Bill takes forward the agenda of using well-designed economic instruments to achieve environmental objectives. Clause 4 establishes a duty differential for sulphur-free fuels of 0.5 per cent per litre relative to ultra-low sulphur fuels from 1st September 2004. We have also announced that from 1st January 2005 bioethanol will be subject to a rate of duty 20 per cent lower than the
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prevailing rate for sulphur-free petrol. We must also correct for market failures that send the wrong signals on waste management. Clause 184 of the Finance Bill provides for an increase in the landfill tax rate of £1 per tonne for this year and next to provide business certainty. The Government have also now introduced changes to the landfill tax credit scheme so that spending on waste is managed through a new public spending programme. Transitional arrangements for ongoing waste projects from the previous scheme are in place.
The Government have demonstrated their commitment to supporting those in need at home and abroad. The Chancellor, backed by all the main parties, proposed an international finance facility of 50 billion dollars a year to fund primary education, healthcare and lifesaving drugs for HIV, malaria and TB. Clause 167 makes changes to vaccine research relief to encourage further research and development into vaccines and medicines for the prevention and treatment of the killer diseases of the developing world. The 10 per cent government supplement on gifts to charity through the payroll is extended for one further year to April 2004 in the Bill to encourage employees further to make donations to UK charities working at home and abroad and builds on the success of the scheme, which has seen payroll giving increase to more than £70 million a year.
We also recognise in the Bill the important role of those who provide care and support to vulnerable children and young people through fostering. Clause 175 introduces an income tax exemption for foster carers to support their recruitment and retention by ensuring that they are not unfairly taxed on the expenses that they incur in making their valuable contribution to society. Clause 174 takes action to ensure that payments made to adoptive families under the Adoption and Children Act 2002 will continue to be free of tax.
In conclusion, this Finance Bill meets our responsibilities. We remain steadfast for stability, enterprise and employment, while tackling inequality and renewing public services. That is the programme set out in the 2003 Budget and that, with the approval of the House, is the programme that we will send to the European Commission. We are fulfilling our commitment, under the Maastricht Act, to report on our main economic policy measures, and maintaining our position, developed by this Government, at the heart of the EU policy process. I commend the Bill to the House.
Moved, That the Bill be now read a second time.—(Lord McIntosh of Haringey.)
7.25 p.m.
Lord Peston: My Lords, I shall concentrate entirely on the report of your Lordships' Economic Affairs Committee. I am not proposing to make a second speech winding up at the end as a chairman often does.
I am puzzled by one matter. I thought I heard my noble friend say—presumably because of the shortage of time—that he could not reply to the specific report of the Economic Affairs Committee. Unless the rules

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of the House have changed in the past few minutes, I believe that my noble friend is absolutely obliged to reply. In so far as he has mentioned matters such as stamp duty land tax, VAT and many other things, I say in terms to him that he is absolutely obliged to respond to whatever noble Lords say about those matters and that it would be very serious if, for reasons about which I know nothing, he were to ignore all our remarks on those topics.
I remind noble Lords that what the committee did resulted from a decision of the Procedure Committee on 24th July last year. The recommendations of that committee were unanimously accepted by your Lordships' House. Unless something has happened in the past few minutes, all Ministers and members of the Government Front Bench are Members of your Lordships' House and therefore part of the "all" of "unanimous" and therefore they too are fully committed to what we have done on your Lordships' behalf.
I say that just to make very clear, leading up to the main point I wish to make, the complete legitimacy of what your Lordships' committee has done. We received advice at the highest level, and I underline those words. Everything we have done is within the Erskine May conditions that limit what noble Lords can do. Indeed, we were advised even more strongly that the specific remit we were given was narrower that we were entitled to have, according to Erskine May. I cannot emphasise strongly enough that as chairman at no point did I allow your Lordships' committee to drift away from the remit or to get into an area which might affect financial privilege. I am quite certain that I, others who take over this job and your Lordships' House will never move in the wrong direction in terms of offending another place. That is a matter of great importance.
If your Lordships' committee had not been set up there was nothing to stop your Lordships investigating these topics in, for example, the Economic Affairs Committee. To take a specific example in terms of the narrowness of the remit, I felt as chairman that although a stamp duty land tax is an enormously important new tax, which I support very strongly, believing that it is long overdue for reform, the one thing we could not look at was the economic effects because that carried us into the incidence question.
But if I, as chairman of the Economic Affairs Committee, had simply said to the committee that I would like to look at the economics of the stamp duty land tax, and it had agreed, there was absolutely nothing to stop us doing that. In other words, that brings out very clearly what we could have done, but for the sake of this year's good behaviour, we did not. I found that very frustrating because I believe that we would have shown many of the very good economic effects that would have followed, and will follow, from such a tax.
Again, to emphasise the point, it was my noble friend Lord McIntosh who introduced the topics of stamp duty land tax and all the other interesting topics in the Finance Bill. We can debate those topics at any
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length we like, although I hope not at great length, since I at least am rather tired. The difference, in so far as there might be controversy, is that we can do it ex post facto—in fact we have been doing it for years ex post facto when the Commons have already finished their deliberations.
What may have got up one or two people's noses is the suggestion that we might do it in time to make a useful contribution; namely, a contribution that the Commons could take into account. All that is by way of background to say that I think we did the job that your Lordships wanted us to do. We stayed totally within the rules and I remind your Lordships that it was a two-year experiment that will take place again next year. As always within the tradition of your Lordships' House, the committee operated in an entirely non-party political way. Other members of the committee will confirm that. We viewed the matter dispassionately and so long as I am chairman we will continue to do so.
We heard a great deal of extremely interesting evidence. We adopted our normal approach, which is that everything we say is evidence based. At no point did we simply say off the top of our heads, "We think this". That is very important. We had two excellent expert advisers in Leonard Beighton and Brian Shepherd, both senior Inland Revenue officials. So we were acting on the most informed basis possible. We are also enormously indebted to our Clerk, Gordon Baker, without whom I am certain the report would never have been written.
That is the background. There are three specific areas about which I want to speak. First, I think we would overwhelmingly agree that the Government are to be congratulated on the reform on stamp duty land tax. I started from a position of ignorance. I had no idea that the existing stamp duty was a purely optional tax. It was not optional for ordinary people such as many Members of your Lordships' House. When we buy a house we are told by our lawyers, "This is your stamp duty". It turns out that for many big businesses the idea that they might pay any stamp duty is inconceivable.
One point of the tax, which we strongly support—as your Lordships know, it is the oldest tax in our tax system and has not been consolidated for over 100 years—is that it a tax that bites and is fair. Speaking for myself—other noble Lords will say what they think—this is a tremendously good step forward. Our criticisms were not ones of fundamental principle. I understand—former Treasury Ministers will be speaking in a moment—that when Ministers decide they want to do something they want to get on with it. I am greatly in favour of that. Our main comment for those who read the report was to say, "Yes, we're sympathetic to that, but are you sure you want to get on with it at quite that rate, which means some errors might be made?".
Government did consult. My noble friend is right about consultation. But we received at least some evidence to suggest that they might have consulted more. I can see that the Government are always in

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difficulties on the issue. No matter how much one consults there is always someone who says, "Consult more". Sometimes their motives are not entirely because they want us to get it right; they have other reasons. None the less, we offer a word of warning that we should be absolutely sure before the tax gets going that it will work. Although all your Lordships are totally devoted to the interests of accountants and lawyers, in this case job and income creation for accountants and lawyers should not be uppermost in our minds.
Secondly, I turn to the subject of VAT abuse. Again, until I became involved in this matter, I had no idea of the scale of the problem. It is an absolutely fascinating fraud. Wearing my economics hat, I have always been interested in the economics of illegal behaviour and fraud. But this one is so clever that how several of us did not become involved in it ourselves and then retire overseas to a tax-free haven I do not know. But, again, we support the fact that the Government are trying very hard to sort out the problem once and for all. Noble Lords should have no doubt about that.
We are concerned with the detail of how one proceeds in dealing with such fraud. Our genuine question, which I put to my noble friend merely as a question, is whether at this stage we are offering enough protection to entirely innocent parties. I can see a problem of balance here. I do not argue that Customs and Excise will inevitably get that balance wrong. However, I believe that it is well within the remit of your Lordships, and very much in the tradition of your Lordships' House, to ask the Government at least to reassure people that this matter will be dealt with in an open and generous way and that an innocent party, who has behaved properly but is still innocent, will have some degree of protection. On the other hand, we want the bad boys and—as I am non-sexist—girls to be caught. Therefore, I do not believe that anything I say should be interpreted as suggesting that the Government should weaken in their determination to act in this area.
Thirdly, I turn to the subject of mandatory electronic payment. I have to tell your Lordships that this issue stayed on the agenda solely because of me. I am not sure that anyone else on the committee was very keen on it, but I am immensely keen on mandatory electronic payment. I believe I heard my noble friend say, more or less, that he is also keen on it and that, in particular, the Treasury will go ahead on the matter. I can say only that it will clearly not cause a problem for larger employers and, as a minimum, I believe that we should work the system so that smaller employers get into the habit of using electronic payment.
That covers most of the ground I had set myself. However, I should like to return to one point. We did the best we could in a very short period of time. At the beginning I was very doubtful that we could do anything useful, but I was wrong. I am convinced that we have done something very useful. But, again, speaking for myself and making the assumption that I
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shall be involved in part two of the experiment next year, I have to say that next year we cannot work under the kind of pressure that we have experienced this year.
Therefore, if I remain chairman of your Lordships' Economic Affairs Committee and chairman of the sub-committee, I propose to set up the sub-committee very early in the next Session so that we can work at a far more measured pace. Given that, in any event, the Government are rightly consulting on their tax reforms, we would become informed about that consultation process so that we, too, would know what was going on. Thus, having said that I thought we had done a good job, I believe that next year we could do a better job still and genuinely establish a role for your Lordships in this dispassionate, non-party but expert way of scrutinising the Bill.
Of course, I support my noble friend. Although I have not made a speech on the state of the economy, I do not disagree with one word he said. However, in particular, I want to commend the Economic Affairs Committee report to your Lordships.
7.38 p.m.
Lord Higgins: My Lords, it is a pleasure to follow the noble Lord, Lord Peston, and to congratulate him and the members of his committee and sub-committee on the report we are debating this evening. Certainly it was not only a very expert sub-committee but also a very distinguished one. I believe that the innovation which has been made as part of this experiment is important and particularly well timed, for reasons which I shall mention in a moment.
As the Minister pointed out, we are debating three things, which are related but separate. The first is the Finance Bill, and I want to say something about the question of scrutiny. The second is the Economic Affairs Committee report, and I want, in particular, to take up some points which the noble Lord has just made on value added tax. The third is the Motion relating to the European Union and the associated legislation, and I want to say a word or two about forecasting.
I believe that there is a growing concern in this House and, indeed, in Parliament generally at the way that the process of scrutiny in Parliament is being undermined. The process of so-called modernisation in another place, and the process of programming, is working in such a way that it is absolutely clear that on many Bills the House of Commons is not doing the job which traditionally it has done. This is crucial if it is to hold the Government to account. This is a matter of the gravest concern. Perhaps the worst case was the Pensions Credit Bill. It arrived in your Lordships' House in a totally unworkable state and had to be rewritten almost from beginning to end. One part of the Bill was unconnected with the other. There are many other examples, such as the question of the Speakership. The list is getting longer and longer. Perhaps one should put down a Question as to how many government amendments are put down in this place to clauses in Bills which have not been debated

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at all in another place. This is happening more and more. We really ought to be profoundly concerned about this.
This is an issue which it is right to raise, but it is of particular relevance as far as concerns the Finance Bill. This was spelt out very clearly in the Third Reading of the Finance Bill. The time available was restricted to a single day—nine hours. The Shadow Leader of the House—with whom I do not always agree; our views on the reform of your Lordships' House differ greatly—said this:
"As we know, their Lordships do a wonderful job of scrutinising legislation. They sit for more hours and more days than we do, and they do the job that we should be doing".—[Official Report, Commons, 1/7/03. col. 179].
He then went on to point out that the problem with scrutiny of the Finance Bill in these circumstances is that there is no longstop. We do not have the opportunity to pick up the fact—except in the limited context of the Select Committee report, which I shall come to—that the House of Commons has not scrutinised the Finance Bill properly.
This is a long way from the experience of the noble Lord, Lord Sheldon. He, together with the noble Lord, Lord Barnett, sat on one side on Finance Bill committees. My noble friend Lord Jenkin of Roding and I were on the other. Sometimes we were on one side of the House and sometimes the other. Unlike the House of Commons now, the question was whether we stop at 7 o'clock in the morning rather than seven o'clock in the evening. One would go all night. We scrutinised every line, and that is a huge advantage to Ministers. It means that mistakes in legislation come out if the draftsman got it wrong. Nowadays that simply does not happen. That is a real problem as far as drafting is concerned. The report of the Select Committee has done something to pick up some of the points which have not been given as much attention as they warranted in another place. Obviously this is not an alternative to what ought to happen. We may be able to sort this out with a Joint Committee of both Houses to agree on how legislation should be handled. But it is a particular problem as far as Finance Bills are concerned.
This Finance Bill will be administered by the Treasury, the Inland Revenue and Customs and Excise. This again gives one cause for concern. Mistakes in legislation may not come out until years later when some case arises. But it is still an underlying problem. We cannot be sure it has been scrutinised properly. There are reports in the Financial Times today about:
"Taxing times for the 'serial bungler'"—
I am not sure where the quotes come from—referring to the Inland Revenue. There is a suggestion that it and Customs and Excise might be amalgamated or taken over by the Treasury. Many of the problems we face—I shall not list the whole series of bungles the paper mentions—result from the present Chancellor's empire-building. He has certainly taken over large chunks of work and pensions.
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The Inland Revenue has been burdened with a huge amount of work in relation to tax credits. That is not just the Contributions Agency, but it is paying out tax credits, which is really part of the distribution of social security rather than otherwise. All that gives one cause for concern as to whether the complex measures in this particular piece of legislation we are debating today will operate properly.
I turn to the Select Committee report. It could not be more timely because it coincides with a situation where scrutiny otherwise is deteriorating. No doubt we should perhaps consider whether the historic division of powers, which goes back to the beginning of the last century, is right. I shall not suggest that your Lordships should examine Finance Bills in great detail. We have huge expertise, but I have some doubts as to whether we have the stamina.
The Select Committee concentrates in particular on the question of value added tax. Since I had the responsibility for steering that original legislation through the Commons, I was very annoyed by an article in The Times of 1st April. I do not think that it was intended as an April fool joke. It was an article by a Mr Waller, which said:
"The House of Commons has seen some outrageous statements, but few can match the claim in 1973 by Anthony Barber … in that year's Budget statement: 'VAT will be a simple tax'"—.
It was then a simple tax. It was a standard rate of 1 per cent with a zero rating for essential items of expenditure. Once we had debated every conceivable borderline case it was simple. Since then—and I speak with some hesitation as there are various former Treasury Ministers sitting on the Benches—successive Chancellors have not simply upped the rate but have greatly complicated it.
The Select Committee report deals particularly with the question of fraud, which itself is vastly more complicated. It has taken them 30 years since the tax was introduced to work up a fraud which is this sophisticated. The committee is right to draw attention, as did the noble Lord, to the importance of balancing the powers of the Revenue and whether people who are not really guilty of any offence may be dealt with too harshly.
When I introduced the enforcement clauses in relation to Customs and Excise in the original Bill, I received a massive deputation from more senior colleagues in the House, saying, "You cannot possibly do that". All we had done was to re-enact powers which Customs had had since time immemorial. They are of course very great powers. But it is important, as the Select Committee, pointed out, that that balance should be achieved as far as concerns the Customs and Excise operation.
The hour is late and I do not want to go on for much longer. I am not entirely clear from what the Minister said exactly what is submitted for the purposes of the European legislation requirement. I presume that essentially it is table B.10 in what used to be the Red Book—it is no longer a Red Book but is largely a large chunk of propaganda—and perhaps the Minister will

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confirm whether that is so. If so, is it updated between the date it is produced at the time of the Budget and the date it is submitted to the European Community?
One should consider whether the vast mass of paper on the Chancellor's advice in relation to the euro will also be submitted. The noble Lord shakes his head. It seems a shame because some of it is extraordinarily good. I refer, for example, to an article by Mr Peter Kenen, professor at Princeton University, on optimum currency areas. I think that it would be wise if some of this documentation were sent to the other members of the European Community. They might realise not only why there is a very strong case—in my view—for not joining the euro, but also what the dangers might be to the stability of the euro-zone itself as there are already great strains on the "one size fits all" monetary and fiscal policy.
I shall not go into the detail of that article. One needs a blackboard and a great deal of algebra. None the less these documents that were produced in conjunction with the Budget and the Finance Bill are valuable, and I hope that we can give them further consideration. Those are the main points that cause me concern. They are serious, and we have to make sure that our parliamentary system is not undermined in the way that it is at the moment.
7.50 p.m.
Lord Oakeshott of Seagrove Bay: My Lords, if the House feels a little strange to some this evening, that is understandable. Like Snow White, we are waking from almost a century of slumber so far as concerns detailed discussion of the Finance Bill. As we rub the sleep from our eyes, perhaps even flex our muscles a little, let us resolve to make this a refreshing and a constructive process, not a destructive one. We do not seek, as the noble Lord. Lord Peston, said, to reopen the financial settlement between the Houses, dating from 1671 and 1678—that was sealed after this House's futile defiance of Lloyd George's great people's Budget of 1909.
The sub-committee's terms of reference are clearly limited to issues of administration, clarification and simplification. Heaven knows, there are plenty of those in this Finance Bill, rushed as it was through the other place with enough knives and guillotines to satisfy Robespierre, Danton and the tricoteuses all rolled into one. The new stamp duty land tax is one striking example. It was described to our sub-committee by the Institute of Chartered Accountants as,
"the most significant new tax for 30 years".
Yet it received not a single minute of scrutiny or debate in Committee, and only two and a half hours on its final day in the Commons on Tuesday.
As the noble Lord, Lord Higgins, said—I was struck by the comments of his right honourable friend in the Commons—the Finance Bill is in a special category, because there is no safety net and no alternative to the scrutiny that the Commons can bring to bear. As the Liberal Democrat shadow Chief Secretary to the Treasury said:
"This is the fourth longest Finance Bill on record".
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He was also concerned that the Commons was,
"faced with an accelerated timetable in circumstances in which we cannot rely on the other place to mop up some of the aspects that we are unable to cover".—[Official Report, Commons, 1/7/03; col. 181.]
Frankly, that process is a denial of democracy. It is also a shame that the Minister feels constrained in replying tonight, because the Government have not yet responded to our sub-committee's report. The Government should have tried harder—we did. Can the Minister assure us that next year the Government's response will be ready in time for this debate?
As the sub-committee report states, there are substantial criticisms of the way the stamp duty land tax is being rushed through, and the "abrupt halt" in the consultation process. Our private sector witnesses believed that the tax would not be in a fit state to introduce on 1st December. We report a wide range of outstanding problems to be solved on the stamp duty land tax, covering property purchases and new leases, such as,
"the lack of certainty over potential tax liability for commercial property transactions, lease duty provisions that are still to be decided, difficulties of fair assessment where lease revenues depend on turnover … potential inflexibility over reclaiming tax releases that are terminated",
and,
"apparent inconsistencies over the qualifications for disadvantaged area relief".
How much notice have the Government and the Inland Revenue taken of the criticisms that we made? They were based on a thorough examination of eminent expert witnesses, and of both the timing and the substance that we were criticising of the consultation process on stamp duty before the Budget. Not a lot. In passing, I declare my interest as an investment manager, responsible for the past 22 years for property investment for institutional investors, such as pension funds, investment trusts and charities. The property industry remains deeply critical of the consultation process on the new lease duty. At a meeting of the lease duty discussion group with the Inland Revenue on 19th June, the Inland Revenue said that interested parties must submit alternatives backed by numerical evidence by 5th July. That is the day after tomorrow. Industry bodies such as the British Property Federation believe that that is an impossibly tight deadline, given the lateness of the announcement and the work that needs to be done.
What is the rush? Surely, as our report states, it is more important to get the tax right and as fair and simple as possible than to meet an arbitrary target date. Otherwise, the so-called consultation process will appear more and more one-sided—or simply a sham.
I ask the Government to think again about two particular dangers in their proposed new lease duty that could distort competition and undermine the security of property as a long-term investment for pension funds and insurance companies. Perhaps I can clarify the issues for them.
First, on competition, stamp duty on new leases is to be increased substantially in three-quarters of the country and abolished in one quarter. The boundaries

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for that feast or famine are based on residential micro-statistics and completely ignore the wider catchment areas of commercial property. For example, lease duty will be abolished on Harvey Nichols in Leeds, on offices in Holborn, or, to take two vast regional shopping centres serving similar populations—Lakeside in south Essex and Bluewater on the other side of the Thames, in north Kent—one will pay stamp duty but the other will be exempt, giving Lakeside a considerable competitive advantage.
The second threat lies in the way that the new lease duty discriminates against long leases—especially those running for more than 15 years—which many retailers, hoteliers, nursing homes and leisure sector operators typically sign to secure the future of their business and justify the investment that they need in equipment, fixtures and fittings. In recent weeks, we have spoken a good deal about pub tenants. They especially need the security of a long lease and will be hit especially hard by the new duty.
To return to what the noble Lord, Lord Peston, said, I of course agree that the Government are fully entitled to raise more revenue in total from lease duty. It is not up to us to argue with that. But why the penal increases—typically more than 1,000 per cent for tenants taking 20 or 30-year leases? The Treasury seems to think that taking a lease on a property is a form of tax avoidance. It is not. It is merely the normal way in which most commercial occupiers pay each year for that space, which is just another factor of production, no different from labour or power supplies. Because leases in one quarter of the country will be exempt from duty, the rise in the rest of the United Kingdom will be one-third higher still.
Attacking long leases in particular could deal another hammer blow to the solvency of pension funds, which have increased their weighting in property to recoup the loss of income that they suffered from the withdrawal of dividend tax credits. Institutional investors set great store by what we call the "bond element" of rental income, which is a much better match for pension fund liabilities if it is secured for 20 or 30 years, rather than just for five or 10.
Anything, such as this biased lease duty, which undermines that key prop for pension fund property investment, could hardly be worse timed. The Government may raise the duty by all means, but fairly, across the board, on short leases as well as long and over the whole country. There is still just time for the Government to listen.
I end with a suggestion that would be especially helpful for us in our work next year. The second latest spring Budget for 20 years, which we received this year on 9th April, made the timetable for our work eye-wateringly tight. Perhaps next year, the Chancellor will give us and the Commons more time to read the small print, to help to improve the Bill. Dare I even suggest that it would be simpler for business and Parliament to plan the year ahead if we had a fixed annual date for the Budget—say the second Tuesday in March? Or is that a modernisation too far?
7.59 p.m.
Lord Sheldon: My Lords, first I must express my appreciation for the work of my noble friend Lord Peston, who chaired the committee's investigation of certain aspects of the tax system that had not been examined for more than 90 years. We are setting quite a precedent—a useful one—and the way in which we limited our operations was valuable. Those matters were all within the limited powers of the House of Lords—we did not exceed them in any way.
As my noble friend mentioned, it is a two-year experiment. I hope that next year will be rather better, because we shall have more time. It was hurried; we met more frequently than almost any Select Committee meets, day after day, to ensure that we established a sensible and thorough examination of what we were investigating.
We have certain advantages over the House of Commons. Our committee is non-party political and there was no party political aspect to our aim of trying to improve the areas of the tax system we were able to examine. We know, as the noble Lord, Lord Higgins, knows, that the House of Commons does not proceed in this way: it is extremely party political and party politics are the main arguments made use of.
A different method of examination is used here compared to the House of Commons. That is necessary because, as the noble Lord, Lord Higgins, pointed out, the House of Commons is not doing its job. There was a time, as he and I recall, when we worked through the night on crucial matters, which were exhaustively examined. At that time nearly everyone who got into the Government and the Opposition at very senior levels was handpicked for the job. It was recognised as a very important job.
I do not see the same attitude today. Perhaps the noble Lord, Lord Higgins, and I do not have the same stamina today we possessed at that time, but at least we have the experience, which is valuable in looking at these matters in a slightly different way from the House of Commons.
In our examination of taxation we must accept that the House of Commons is not only predominant but exclusive in the matter of rates of tax and other matters. This is the first time that we have looked at these matters. We have to make sure that we get it right so that we can come back next year with a greater appreciation of what we have in this House—expertise and experience. I do not want to make too much of it, but it is a difference between ourselves and the House of Commons and making use of it is of great value.
We took evidence in a way that the House of Commons does not. We heard from very senior people who came to be questioned by us. They added to our knowledge, which, although largely based upon the past, is still of great relevance. We were only able in the time allowed to select a limited number of issues. I think the ones we selected were the right ones. We picked on three taxes: the new stamp duty land tax; the VAT provisions against evasion; and electronic payment of tax.

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I agreed with the need to bring in these three taxes. My concerns were whether they were being introduced sensibly, whether the right attitudes were prevalent and whether the detail was properly examined by the House of Commons. My remarks on these matters will be largely on the VAT proposals in the Bill.
The stamp duty land tax deals with the changes to the tax system. The noble Lord, Lord Oakeshott, mentioned some of them. Many witnesses said the tax would not be in a fit state to be introduced on 1st December 2003. That is despite the view of the Inland Revenue that the tax would be ready in time.
I am sorry that parts of the tax legislation went through in Committee in the House of Commons without being discussed or scrutinised: that could never have happened in the past. Minor matters of legislation one might concede—although not happily—but not on the Finance Bill where we deal with matters of great importance to certain individuals. If their tax matters are not properly discussed, that is quite wrong. We recommended that early in the autumn of 2003 the Government should review whether the tax could be put right in time. It is an important aspect that needs to be looked at.
My main contribution to the debate concerns VAT. Clauses 17 and 18 deal with the situation where a business receives a supply of specified goods or services in circumstances where the person had reasonable grounds to suspect that the VAT on those goods or services would go unpaid. The person would then he held liable for the tax due in the event of a default by the supplier.
Here we are dealing with very serious matters. I was surprised by the size of the Revenue losses. I had no idea that we would be dealing with losses of between £1.7 billion to £2.7 billion. Indeed, I wish that I could be convinced that those figures are correct; no doubt that will come out in due course. What is obvious is that the figures are extremely large and need to be dealt with properly.
The proposed legislation deals with the "missing trader problem" where a trader charges VAT to a customer but does not then pay that VAT over to Customs and Excise. We have seen that the estimates of the losses to the Revenue are extremely serious. At present it is by far the biggest single fraud confronting the tax authorities. So there is no question about the fact that it needs to be dealt with.
What we are dealing with here is a "simple acquisition" fraud where a trader imports goods free of VAT from another European Union state, sells them on in the United Kingdom, charging VAT, and then "goes missing" and does not account for the VAT charged. At a rate of 17.5 per cent, a large amount of money is involved. The new proposals will allow for a proportionate security requirement from each business that together would protect the total tax at risk in a VAT supply chain.
In evidence to us, high-level officials from the Treasury came willingly to give their views in a proper and sensible manner. We were most appreciative of
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that. They did not accept that volatility of prices meant that it was difficult for a trader to recognise when a deal offered to him was "absurdly good". They thought that traders would know that the market value of the goods they were buying was too low and that they should be suspicious. Their conclusion was that if a business had taken all reasonable steps, then they would accept that it was not involved in a fraud.
I have difficulty with that view. What is being asserted is that if a buyer is offered a certain batch of goods or services at a price much lower than normal, then that is an indication of fraud. I thought that that was a simplistic view. There are many articles which can command a wider range of price than Customs and Excise seem willing to accept. They may be surplus to requirements, in which case they have to be disposed of; there may be a weakness in demand, in which case again they have to be disposed of; or it may be felt that they have been superseded by more recent models. Occasions may arise where a seller has financial problems and would be willing to accept prices a little cheaper for a certain and speedy cash sale than that seller might otherwise have accepted.
Under the clause there is inadequate protection for the legitimate trader. One needs to understand the mentality of both buyer and seller over a whole range of different circumstances where the new arrangements might be unfair to the legitimate trader. We considered that part of the solution might lie in a suggestion from the Institute of Chartered Accountants: that before taking steps to require security, officers of Customs and Excise should be obliged to seek leave from a tribunal chairman. We recommended that consideration be given to creating statutory safeguards for legitimate traders which would ensure that the conclusions arrived at by the investigating officer would be reviewed at board level within the department and by an external judicial authority before the power to require security was exercised.
Before you can or should take action against a trader, you should seek leave from the chairman of the VAT and duties tribunal. Before giving leave, the tribunal chairman would have to be convinced by Customs and Excise of the case against the trader and that the business was involved or was complicit in the alleged fraud.
Our view was that the concerns expressed to us by witnesses about the creeping widening of the categories of goods or services would be much allayed if the system of enhanced safeguards for the legitimate trader which we commended for consideration were to be adopted.
We had very limited time in which to examine all of these matters, but the ones we did examine we examined adequately in the very short time we had. I look forward to being able next year to deal with one or two other matters, which I think will be of use to the Treasury, to Customs arid Excise, to the Inland Revenue and to the Government as a whole.
8.10 p.m.
Lord Howe of Aberavon: My Lords, I thank the Minister for his presentation of the Finance Bill. I offer him some sympathy because his noble friend Lord Peston has rather stolen the limelight for today's debate, and quite rightly so.
I intend to focus on exactly the same problem. The whole process of considering and enacting tax legislation still cries out for further examination, all the more so—as speakers on all sides of the House have said—as a result of the total disintegration of the House of Commons in this field. It is easy for us to stand like antique figures looking back nostalgically on those splendid nights, but, as the Shadow Leader of the other place, Mr Forth, said, and as another Member, Andrew Tyrie, said in this booklet about two years ago, the House of Commons has virtually abdicated from this field alongside a mounting clamour from the tax industry, from the lawyers and the accountants for the process to be improved. One message that must be driven home yet again to the Treasury—and above all to the Chancellor—is that this topic will require a huge, sustained, concentrated examination for a long time to come.
I am not going to say anything about policy simplification, about the volume of legislation, although that is equally daunting, or about the surging growth in the number of Inland Revenue officials. It is the procedure that needs to be examined. I welcome enormously the report prepared with such skill by the noble Lord's committee. It respects absolutely the boundary of propriety and indicates a huge field for further examination.
The report is one of two documents that have appeared within the past three or four months on this subject. The other report is from the Institute of Fiscal Studies working party under the chairmanship of Sir Alan Budd. It is entitled Making Tax Law and is closely related to the work of the committee of the House. Indeed, the noble Lord's committee examined as witnesses almost every member of the Budd working party and the ubiquitous noble Lord, Lord Barnett—who astonishingly is not in his place today—was a member of both committees.
This area requires a huge concentration of study. Both reports, this debate and the evidence given to the committee of the House should be required reading for the Chancellor and other Treasury Ministers.
My concern is about the process of making and shaping our new law. I start with an issue to which reference has already been made, the manifest failure of the process of consultation in relation to the Bill. Consultation is not something that the Revenue and the Treasury are entitled to expect. It is carried out through a huge effort of concentration by people doing work alongside their normal jobs. I was struck by the evidence from the representative of PriceWaterhouseCoopers, who said:
"My feeling about the consultation process is a little bit coloured because it was abruptly cancelled in January by the Financial Secretary. It was done in a very peremptory fashion and
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it did cause quite a lot of disenchantment amongst those professionals who had devoted considerable time and effort trying to assist the Revenue in getting matters right".
That is not something we notice en passant. It is something for which Mr David Hartnett, the vice-chairman of the Inland Revenue, and a member of the tax law steering committee, specifically apologised. It is not for an Inland Revenue official to apologise for something of that kind; it is something for which Ministers have to accept responsibility because it is at the heart of the tax-making process.
It is most important in this area to avoid focusing all—or, indeed, almost any—of the criticism on the Revenue. I have been working closely enough with them for the past several years on the rewrite project to be able to say that the last thing we should do is to shoot the pianist. He and they are working enormously hard and are trying their best.
Another piece of evidence given to the Select Committee came from Mr. Haskew from one of the other accountancy firms. He says on page 64:
"I think we should say here and now that the Revenue have tried very hard in I would say the last four or five years to consult openly and fairly and the result of things like the stamp duty consultation is particularly disappointing because I think they have been trying very hard".
We have to make a success of that. The Law Society made very similar observations on page 120, which are worth quoting. It, too, pays tribute to valiant work done by the Inland Revenue but says that despite that,
"there are significant areas that have not been properly thought through and that little more than lip service appears to be paid to the authority of Parliament".
I come to the other aspect which, perhaps understandably, concerns me even more—the extent to which this pattern of behaviour is challenging almost directly the work being produced by the Tax Law Rewrite Project. The repeal by Clause 139 of Schedule 22 of our second statute is astonishing. The Law Society says:
"Clause 139 and Schedule 22 was introduced without any warning and inadequate explanation in the Budget Day Press Release. Over 80 pages of legislation completely re-write rules which have developed over the last 15 years and more. That legislation had been re-written in the 'tax law re-write' style (which we fully support) in the Income Tax (Earnings and Pensions) Act 2003, which came into force on 6 April 2003".
Yet within eight days, on 14th April, a press release comes along, rewriting 80 pages of it. As the Law Society says:
"It is particularly unfortunate that that this Finance Bill replaces extensive tranches of that newly re-written legislation with some extremely opaque drafting, most of which is not in the new style".
It defeats the object of the exercise and is unforgivable. It is not the officials one should complain to in such a matter. What happened rightly caused huge dismay among those people from the Tax Law Rewrite Project, the Inland Revenue and the Parliamentary Counsel Office who had sweated their guts out to produce that material. The process of the tax law rewrite group is still developing. It is an extraordinarily sensitive, iterative process, in which draft succeeds draft.

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When I first encountered this at a meeting to consider it shortly after the Finance Bill was published, I wondered whether the Parliamentary Counsel Office had somehow reverted to an antique style out of tiresomeness or bloody-mindedness. Far from it. The very counsel who had been concerned at the coalface in helping us develop the new tax law rewrite style was grappling with this, doing what he could to put it into better form, but it simply could not be done.
This is what the chartered accountants have to say about it:
"This poor redrafting of a large section of newly rewritten provisions is disappointing. We are concerned that our members will start to question our commitment of time and resources to the"—
Tax Law Rewrite Project—
"if all that happens is that, within a few weeks of the legislation being enacted, the Government makes wholesale amendments to it with no consultation.
The result is that the case for us continuing our involvement in the Rewrite of the UK tax rules is undermined. We would welcome clarification as to the Government's policy concerning the Tax Law Rewrite Project given the above comments".
Noble Lords may think, perhaps understandably, that I have become obsessed in a proprietorial sense with this tax law rewrite process. I have not. It is only part of the whole exercise of trying to raise the quality of the way in which our tax law is prepared. When we considered it in the Tax Law Rewrite Steering Committee only a few weeks ago, we were very emphatic that if this is not taken seriously, it will undermine the morale of people inside and outside the Revenue who are trying to get this right. But it is not just that. It is the fact that in the stamp duty land tax section, one of the other official organisations complains, a huge chunk of antique legislation is left unamended, when the opportunity could have been taken had more time been devoted to it for a proper rewrite of it in a proper fashion.
I return for a moment to the Tax Law Rewrite Project. Ever since that started, we have been functioning by reference to what are listed in Appendix A to our latest plans as factors critical to the success of the process. However, those factors have been there since we started. One factor states:
"The lessons learned from the experience of successfully rewriting the legislation should be developed, in close consultation with the users, into new best practice for producing tax legislation in the future".
That is not being done in this case. The second factor, the important one, states:
"The operational implications of the rewrite work for the Inland Revenue must be identified and properly addressed".
That is not being done.
One has to look to Ministers to take responsibility for this. We have an opportunity to enhance this House's contribution to the process, if the committee proceeds as the noble Lord, Lord Peston, has suggested. On that point above all I think they need to concentrate.
There is one other feature. Do we have to accept that the other place should, as it were, be allowed to abdicate from this process altogether? I think that it is
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being unfair to them to say that they are abdicating. The Public Administration Committee, for example, has looked very carefully and very critically at many of its own procedures. I think that we should at least look for an opportunity for both Houses, or committees of both Houses, to get together to see whether we cannot harness the talents in both Houses. That is another agenda item for the noble Lord's committee in the year ahead. I am delighted, of course, that he will be able to start his work on the volume of legislation that is already coming forward in so many different ways.
I close by repeating myself yet again. So many people have studied these mechanical processes with dismay and concern for so long, but it is an issue that has to be taken much more seriously by the Chancellor and his colleagues in government. We value the fact that we have been given the resources, and we are still getting the resources, to keep the tax law rewrite process going. But there is a huge challenge if we are to begin recovering this mountain of tax legislation into a form that can be understood and accepted by the people. Nothing, I think, could be more important than that. I am delighted that this House now has a committee that is able to work on it. I congratulate the noble Lord on the tact and skill with which he has got it under way. I am sure that we can look forward to even more exciting things in the future.
8.24 p.m.
Lord Jacobs: My Lords, being neither a former Treasury Minister nor a member of the current excellent sub-committee, I trust that your Lordships will forgive me if I deal with some, I hope, important or different issues. This is an account of how a Member of your Lordships' House discovered something seriously wrong and tried to have it corrected. It is, broadly speaking, a story of failure that may possibly have a happy ending. All the economists—I am sure that there are many here—will probably say that these are matters with which they are familiar. They may have recognised that there was a problem, but, if they did, they certainly did nothing about it.
The issue relates to the retail prices index, the RPI or, more precisely, the RPIX, which excludes mortgage interest. In 1995, a new component was added to the index—the depreciation of owner occupied houses. Your Lordships may say that surely house prices have not been depreciating since the war. Indeed, you would be right. The average rate of appreciation of houses is approximately 6 per cent a year, so why would it be necessary to charge depreciation as a cost in the retail prices index? This component was not in the index for 50 years—from 1945 to 1994—and we managed pretty well without it, so why would we need to include depreciation of one's home now?
First, let me explain—and I speak as an accountant—that depreciation effectively means setting aside a sum of money, in this case presumably weekly, in order to replace or reconstruct one's home within the next 100 years. If this is done properly, when one sells one's home, one would expect to hand over to the buyer a sum of money being the depreciated sum that one has reserved.

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I hope that your Lordships are following this and do not think we are in "Alice in Wonderland". Your Lordships may argue, "What is the harm in including this in the index?" Primarily, because it has the effect of increasing the rate of inflation. One of the main economic levers based on the rate of inflation is interest rates. First, the Bank of England and the Monetary Policy Committee set interest rates, taking the RPI into account. When I met the new Governor of the Bank of England, Mr Mervyn King, he assured me both at the meeting and subsequently in writing that the MPC would take note of the effect of this depreciation component.
I will give an example of how distorting the component can be. I have taken the figures that I quoted to all members of the MPC when I wrote to them in February. I took as an example the RPIX for November 2002. In that month, inflation was 2.8 per cent. But if the new component of depreciation of homes had been excluded as it had been for the previous 50 years, the RPIX would have been 2.1 per cent—no less than 25 per cent lower. In other words, inflation would be much lower without the component being added. While the MPC and the Governor of the Bank of England certainly understand the issue very clearly and can make allowances for it when setting interest rates, that surely does not apply to employers and employees when negotiating wage increases.
It has always seemed to me that the depreciation of homes should never have been added to the index. However, having added it, at least its weighting should be adjusted as it is having a very adverse effect on the rate of inflation. When I first raised the issue with the head of the Office for National Statistics, a meeting was arranged to discuss the issue at my request. That meeting was also attended by a Treasury Minister. It was explained that, although mortgage interest and home repairs were included in the index, nothing was provided for the replacement of homes which might occur between 50 and 100 years hence. It was also explained that the decision to put this item into the index occurred because a committee was appointed to study the issue and it was the committee's decision.
What was not mentioned, of course, was that the minority report of the commission, which was led by known none other than Sir Samuel Brittan, opposed the addition to the index and, indeed, thought that it was a great nonsense.
Your Lordships may recall that I said that the story might possibly have a happy ending. In the past few weeks, the Chancellor of the Exchequer has announced that he will meet the Governor of the Bank of England to discuss bringing in a new index to be known as the—wait for it—harmonised indices of consumer price indices, or HICPs for short. I hope that Europhobes will forgive me for saying something good about the European Union, but the fact is that the HICPs are calculated in each member state of the European Union for the purpose of European
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comparison as required by the Maastricht treaty. Noble Lords will not be surprised to learn that that does not include any depreciation in owner-occupied homes. I am not sure that the present Governor of the Bank of England would not believe that to be a serious omission.
The HICP index is to be brought in in November. Currently, it would show a rate of inflation in this country of about 1.2 per cent, compared with about 2.9 per cent under our present RPI. Perhaps that explains why today in the United States the federal fund rate is 1 per cent. The equivalent rate in Europe is 2 per cent, and Britain's base rate is 3.75 per cent. It is good to know that the financial authorities are content with our relatively high level of interest rates. Presumably, they believe the economy is growing at a satisfactory rate. Would the MPC feel so alarmed about further reducing interest rates, if the rate of inflation, as indicated by the HICP index, were less than 1.5 per cent?
Let us assume that the new index is brought in. Is there anything to worry about? There is just one issue. Will the Government continue to publish the present inflation index alongside the new one? I am not worried about the Bank of England or the MPC having a problem with that, but it is certain that, in every employer-union wage negotiation, people will argue intensely about which index to follow. The Government will no doubt deny that there is a problem, but I cannot believe that there is a union leader worth his salt who would not go to the negotiating table and base his negotiations on the present retail prices index. He would want nothing to do with the new-fangled HICP index, which has been imported from the Continent. That is a problem that the Government have yet to grasp. Lest I be unfair, I ask the Minister whether, if the HICP index is introduced in November, the Government intend to continue to publish the present retail prices index each month.
We all recognise that the level of interest rates is determined by the state of the economy and by the rate of inflation. We all agree that the economy at present is not in growth mode and that lower interest rates could be the appropriate incentive to move things forward. Europe has the equivalent base rate of 2 per cent, and the latest figure for the rate of inflation under the HICP index for Europe is 1.8 per cent. In France, it is 1.8 per cent, and, in Germany, it is 0.6 per cent. The latest figure for the HICP index in the UK is 1.2 per cent. That would surely justify a significant reduction in base rate from 3.75 per cent.
We have a lower rate of inflation than many of the countries in Europe, yet we are forced to have interest rates at nearly twice their level. The Governor of the Bank of England and members of the Monetary Policy Committee should actively consider not a 0.25 per cent reduction in rates, not a 0.5 per cent reduction in rates, but a full 1 per cent. Might it happen? Perhaps—but then pigs might fly.
8.32 p.m.
Lord Freeman: My Lords, I declare an interest as an accountant and a consultant to PricewaterhouseCoopers. I shall concentrate my remarks on the report of the Select Committee on Economic Affairs, chaired by the noble Lord, Lord Peston. Because the hour is late, I intend to be brief. Much of what I was going to say has already been excellently and comprehensively said by my noble friend Lord Higgins and my noble and learned friend Lord Howe of Aberavon.
In the press release for the Select Committee's work, it was reported—correctly—that the report was timely and constructive. There are two reasons why your Lordships should agree. First, as my noble friend Lord Higgins explained, the Bill was timetabled in another place, which, incidentally, gave each line of the Finance Bill exactly 10 seconds of debate. That is a disgrace. It is difficult to argue that the provisions of 100 years ago relating to the powers of this House should continue, while debate in another place is curtailed. Those two things are mutually incompatible. The work of the Select Committee has been very valuable.
The second reason is that, if we read volume II—second volumes are not normally read—we must congratulate the committee on the number of witnesses and the quality of the evidence. The document produced by the Treasury Select Committee—chaired many years ago by my noble friend Lord Higgins— was not quite as thick as the volume produced by the committee chaired by the noble Lord, Lord Peston. I very much hope that this exercise will continue beyond the two-year experiment and that the Government will reply. We must admit that the Government do have a weapon in dealing with Select Committees: delay in response. It has always existed, continues to exist and probably will exist in future, but if a timely response from government is lacking, that does not help debate or help to reflect the value of reports such as this one. I suspect that Her Majesty's Treasury and Ministers in the Treasury have been slightly resistant to the whole notion of the committee of the noble Lord, Lord Peston. I hope that they will regret what appears to me to be a lack of cooperation with and response to the report.
I suggest with all due deference to the noble Lord, Lord Peston, that although he may be reluctant to take on the burden in future years, he should add one remit next year; that is, to look at the cost and effectiveness of implementing tax measures. I do not believe that that would be out of order and it would be very important. Someone must address the central issue: does the revenue raised justify the administrative burdens of specific taxes? Such issues are not regularly addressed—certainly not in another place—but the committee of the noble Lord, Lord Peston, is ideally suited to discharge that.
The noble Lord, Lord Peston, hinted at starting the sub-committee's work earlier, perhaps even at the commencement of a Session. That must be right because some tax legislation—perhaps not enough—is
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exposed for consultation and the issues, which are trailed sometimes by the Chancellor in the preceding Budget, bear analysis and examination at the commencement of the Session.
The committee's terms of reference included tax clarification and simplification. The two are very different; they are separate issues, as my noble and learned friend Lord Howe said. On the clarification of tax, the Tax Law Rewrite Project, under the eagle eye of my noble and learned friend Lord Howe of Aberavon, has done excellent work and made marvellous progress since the Finance Act 1995. I only add that we had enacted on 6th April the Income Tax (Earnings and Pensions) Act 2003 on clarification and rewrite. What happened? A matter of days later, we had 75 pages in the Finance Bill—Schedule 22—full of amendments to that very Act, although much work had gone into it in terms of clarifying tax law.
On simplification, which is a separate issue, I have another suggestion that the noble Lord, Lord Peston, might care to consider carefully. My suggestion reflects what the Tax Law Review Committee recommended; that is, that there should he a tax structure review project. That examines old legislation. Why should not a Select Committee of your Lordships' House perform that task? It would be all-party and I cannot see how Treasury Ministers could argue that in any way there was interference with tax policy. It is a very important area—granted, it is right on the cusp of tax policy as opposed to a legal clarification of the law. However, the Select Committee could and should take that on.
I turn to new legislation and the need to expose draft legislation properly to those involved in its implementation. There is a well established code of practice on consultation and, as other noble Lords have already pointed out, in relation to stamp duty land tax. I believe that my noble friend Lord Caithness, who will speak later, might dwell on that in view of his vast experience in that regard. As the noble Lord, Lord Oakeshott of Seagrove Bay, correctly asked, why the rush? The Select Committee stated in the executive summary:
"we think it is more important to get the tax right, and as fair and simple as possible, than to meet an arbitrary target date".
It is clear what happened. The consultation process was halted in January doubtless because the Treasury thought that anti-avoidance measures were a central part of the new stamp duty proposals in the Budget and the Finance Bill. Now we have a promise to resume negotiations very shortly. Could the Minister kindly enlighten us as to whether those further consultations, which must be about the regulations in relation to stamp duty, will commence—perhaps they have already commenced—and will they be as fair and constructive as noble Lords would wish?
I end on perhaps a slightly discordant note by disagreeing with the Select Committee's observations on mandatory electronic payment of tax. I believe that the Select Committee came to a conclusion too quickly on that point. I object to the idea of compulsion We already have compulsory filing for large companies and now we are moving to compulsory electronic

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payment of tax by large companies. I believe that the Inland Revenue should adopt a much more user-friendly approach: I regret the conclusions of the committee on this particular point. I congratulate the noble Lord, Lord Peston, and his committee. It is an excellent start and I hope that the committee continues its existence.
8.40 p.m.
Lord Northbrook: My Lords, I declare an interest as an investment fund manager. I shall concentrate more on the Finance Bill, but I will make a few remarks on the excellent Select Committee report and join other noble Lords in praising it.
This year I feel a little less lonely than last when I was the only Back-Bench speaker. Looking back at that speech I make no apologies for putting forward several of the same points again a year later. First, the length of the Bill: last year it was 500 pages; this time it is a mere 447 pages; 214 separate clauses and 43 schedules. The noble Lord, Lord Oakeshott of Seagrove Bay, said that it is the fourth longest Finance Bill, even though, as stated by the Financial Times,
"the measures were seen as a non-event by many economists and tax experts".
Half the Bill by volume deals with just two areas. The first is a new stamp duty tax and the introduction of a lease duty which comprises 139 pages. The second is the issue of employee share schemes and the major changes to the law on employee share acquisition, which amounts to 91 pages. I shall come to the stamp duty area later. Overall it is again another very long Bill.
The Chancellor's economic forecast does not seem to have been covered very much by previous speakers. The Chancellor's prediction in last year's Budget was a growth rate of 2 per cent in 2002 and an increase in the expected growth rate from 3 per cent to 3.5 per cent in 2003 and to 2.5 per cent to 3 per cent in 2004. I was concerned about the optimism of those forecasts then; my concern was justified as the 2002 out-turn was 1.75 per cent. The 2003 forecast made this time last year has been downgraded for the second time since to the current range of 2 per cent to 2.5 per cent.
However, the first quarter revised GDP figures shows growth of only 0.1 per cent. The estimates now given for 2004 and 2005 of 3 per cent to 3.5 per cent make the celebrated Iraqi information minister appear a relative pessimist. The respected economic team at DKW Research are currently forecasting GDP growth of only 1.9 per cent in 2003 and 2.2 per cent in 2004, the latter in particular being well below the Chancellor's forecast. Indeed, the Treasury's own summary of independent forecasts made in March 2003 quotes an average of 1.9 per cent for 2003 and 2.3 per cent for 2004. Thus the Chancellor's forecast of 3 per cent to 3.5 per cent growth for 2004 is seen as optimistic by all bar six of the 35 independent forecasters surveyed by the Treasury in March.
The Chancellor has decided on another ruse to try to counter lower growth prospects, cloaking this as a measure to improve his European credentials. As the
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noble Lord, Lord Jacobs, said, he has decided to change the basis for his inflation target from RPIX to the HICP basis used in Europe. HICP, as I understand it, excludes housing costs and council tax. At the stroke of a pen that cuts the current inflation rate by about 1.5 per cent, bringing it down to 1.6 per cent—not 1.2 per cent as the noble Lord, Lord Jacobs, said—which is well below the Bank of England's new target, which could be set at about 2 per cent.
That will put pressure on the Monetary Policy Committee to cut interest rates further to try to stimulate growth in order to save face and make the Chancellor's growth forecasts more realistic. Furthermore, once council tax has been removed from the calculation of the inflation rate, that will enable the Chancellor to introduce yet another stealth tax. In my opinion, council tax is set to soar, not only in London—thanks to Mr Livingstone's efforts—but nationwide, due to the reduction I predicted in central government support as the PSBR inexorably increases.
Can the Minister possibly disagree with that view? Lower growth results in lower tax revenues and higher borrowing. The Chancellor has been forced to apply the revisions he made to growth forecasts also to public sector net borrowing forecasts. They have all been revised upwards since the Pre-Budget Reports for the years until 2006–07 by an overall 20 per cent. I ask the Minister whether health and education services have improved by the same amount.
If funds for the above two areas continue to be needed at such a rate, will they come from increased borrowing, or does the Minister agree with the Leader of the House of Commons that the top rate of tax must rise, and, if so, by how much? Or will national insurance rates be raised further?
I turn to the Budget details. Last year I welcomed the cuts in corporation tax and capital gains tax for business assets. This year there is no repeat, but I applaud the extension of the research and development tax credit scope, the extension of IT investment allowances for another year and the lower rate of vehicle excise duty for environmentally friendly cars. However, nothing has been done to help pension funds. Indeed, as the noble Lord, Lord Oakeshott, stated, stamp duty land tax would further damage them.
I turn to the Select Committee on Economic Affairs' most welcome report on the Finance Bill for a few cross-party observations. As many noble Lords have stated, the committee first focused on the stamp duty land tax. To repeat the words of other speakers:
"The early stages of pre-legislative consultation were widely welcomed by the professional and trade sectors involved. But the process was abruptly halted leaving some of the main provisions and a great deal of important detail to be worked out and implemented by secondary legislation by December 1 this year".
The committee went on to criticise that haste. Its private sector witnesses generally argued that the timescale was much too short, and that they would prefer its introduction to be delayed until next year while the legislation is redrafted to take more account of market factors. The committee also rightly argued

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that far too much was being left to regulation-making powers without proper parliamentary scrutiny. It gave a detailed list of concerns about the measure, which the noble Lord, Lord Oakeshott, described clearly and with which I shall not detain your Lordships.
But I repeat that this part of the Finance Bill takes up 139 pages, which is over 30 per cent of the total. I agree with the committee's conclusion that the Government should carry out a review this autumn to assess whether there is sufficient time for the task to be completed properly by 1st December 2003.
The second area the committee concentrated on was the VAT anti-abuse provisions, which were well covered by the noble Lord, Lord Sheldon. I was surprised, as he said, that such abuse costs the Government between £1.7 billion and £2.5 billion in the UK alone. Like the committee I fully support the Government's effort to crack down on those abuses. But, as the committee states, a proper balance must be struck between those efforts and the need to safeguard the rights of legitimate traders. The committee's recommendation that enhanced safeguards should be considered to protect the interests of legitimate traders unwittingly caught up in an artificial supply chain without weakening the attack on fraud is most welcome.
With regard to the third area of examination—the mandatory electronic payment of PAYE—I am afraid that I disagree with my noble friend Lord Freeman. I believe it very sensible that large companies should operate on this basis.
I warmly welcome the conclusions in chapter 7 of the report—particularly paragraphs 7.7 and 7.8. I agree that the sub-committee should be set up as soon as is convenient in the new parliamentary Session to review the outcome, as it emerges, of the ongoing consultations on the present Finance Bill and the pre-legislative consultation leading to next year's Finance Bill as well as considering the Bill itself, once published. I also support the recommendation that the terms of reference of the sub-committee be broadened so as to increase the scope of potential inquiry open to it. I agree that no issue of financial privilege arises.
One Budget measure that members of the committee might have considered if they had had more time was the proposal for the new child trust fund and how it will be administered. Will it be possible for it to be merged with existing funds, particularly accumulation and maintenance settlements? That would save many administration costs. Will separate trustees be required? Will a trust form have to be submitted to the Inland Revenue? I ask the Minister what the cost and extent of the Revenue's extra work in overseeing the scheme will be. We know that it is at its limits already with the extra work of the tax credits regime.
Therefore, in summary, the Chancellor continues to gamble on a quick recovery for the economy this year. But if that does not happen, we could see a ballooning deficit in the coming years and not a sinking one. People are waking up to the stealth tax system that he has been using and they are becoming more aware of the risks that the Chancellor is taking. Last Friday, a
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YouGov survey showed that, for the first time since 1992, the Conservatives are ahead of Labour on the central issue of economic competence. Increasingly, public mistrust of Labour's economic policies may prove well founded.
8.52 p.m.
The Earl of Caithness: My Lords, I start by congratulating the noble Lord, Lord McIntosh of Haringey, on retaining his position as Treasury spokesman in the reshuffle. I am sure that, had he retained his position of Deputy Chief Whip, the Government would not have made such a mess of the timetable today as they have done. I believe that he would have guided them away from the pitfalls of trying to cram too much into a Thursday.
I declare an interest as a surveyor, and I want to concentrate my remarks on the stamp duty tax. The noble Lord, Lord Peston, in his excellent report, covered that subject fully, and he also explained to your Lordships why the committee could not look into the economic effects of the tax. I consider that to be a pity, but I thoroughly agree with him that it was correct that he did not do so. I believe that it would have helped his report but it would also have led to other huge problems.
I also agree with the noble Lord, Lord Peston, that stamp duty needed reform, but surely not in the way that is proposed. This tax is being presented as an updated and improved stamp duty, whereas I believe that it is really nothing of the kind. By taking land transactions out of the stamp duty regime, there is scope for completely different tax rates to be applied at some time in the future, with differentials between residential and commercial property or land. It will apply equally to agricultural land if the length of lease or the amount of rent brings it within the scope.
Should it be called "stamp duty land tax"? Perhaps a better name for it is "son of development land tax". Son of development land tax, like development land tax, is a tax based on land transactions. It replaces stamp duty on those transactions but otherwise has only a partial resemblance to it, principally in so far as concerns the presently proposed rates of tax. It is, however, a tax on transactions, not documents. It is less complicated than DLT because there is no attempt to strip out development value from other aspects of value. But like DLT, it treats capital value of the right to receive rent in lease transactions as taxable at the effective date. However, in the case of SDLT the taxpayer is the tenant or purchaser of any land transaction.
I, too, would like to comment on the size of the Bill—Clauses 42 to 124 and Schedules 3 to 18. On Page 11 of the Select Committee report Mr McKie states it is the most significant new tax for 30 years. Surely that warrants a separate Bill in its own right. I should like to ask the noble Lord, Lord McIntosh of Haringey, why it has not been given its own separate piece of legislation.

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I move to some of the detail. I particularly wish to concentrate on the consultation process. Before Christmas 2002, it was quite obvious that two major planks of the modernising stamp duty programme had not been resolved in consultation discussions. These included complex commercial structures and lease duty. On both these subjects those concerned submitted to the Government that they must consult further before drafting and introducing legislation. Not long after this, as many of your Lordships have commented, consultation in these areas was abruptly suspended with effect from 21st January on the initiative of Ministers. It was done not by telephone, not at a meeting but by e-mail.
One consultative committee was established to examine the highly complicated and controversial area of lease duty. The committee met on only three occasions. Tonight, the noble Lord, Lord Peston, very skilfully tore a strip off his Government for the lack of time for his committee to do its work. He did so very cleverly without appearing to be disloyal to his party. Like my noble and learned friend Lord Howe of Aberavon, I do not blame my old department, the Treasury. The fault is entirely at the hands of Ministers.
What about parliamentary scrutiny? Stamp duty was not discussed in the Commons at any length. When he introduced the Bill, the noble Lord, Lord McIntosh of Haringey, said that the Government were not convinced by arguments for change. I am not surprised. There was not time for any arguments, so how could they have been convinced? Worse is to come. There will be extensive use of regulatory powers. Finance Act orders are not laid before the House and therefore are not subject to our scrutiny. This is taxation by stealth and diktat—something which this Government promised they would not do but they have reneged on that promise. Any tax should be fair, transparent and easy to administer. SDLT, like DLT before it, is a complicated and sophisticated taxing mechanism and will undoubtedly involve a lot of extra fees and professional advice. It should also be a tax based on a proper valuation technique. This one is not.
I turn now to the system of lease duty reform proposed by the Chancellor. It has two main tenets. A new formula based on a net present rental value—NPRV—of the lease over the life of its term or duration charged at a flat rate of 1 per cent and an exemption from lease duty up to an NPRV of £150,000. The first significantly increases the cost of lease duty for businesses. The legislation also makes it clear that the duty will fall on the lessee or sub-tenant. The increase is equivalent to a tax hike of roughly five times the current lease duty levies on equivalent transactions, though that changes according to the exact term of the lease in question. Generally, the longer the lease length, the higher the lease duty imposed, as the noble Lord, Lord Oakeshott of Seagrove Bay, mentioned. Retailers will be particularly hard hit owing to the rental values of their market sector. Indeed, they have argued that the lease
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duty reform could cost up to £130 million per year for their sector alone. This at a time when consumer spending is falling.
The second tenet of the Chancellor's reform has been to exempt all commercial property transactions under consideration of £150,000, whether freehold or leasehold. Leases will be exempt if their NPRV is below £150,000. That is welcome but it is likely to apply only to those in small properties and on short tenancies. Again, even small retailers in premises of 100 square metres across London, Leeds and Glasgow are likely to be liable for increased lease duty under the system.
I give a couple more examples. B & Q has estimated that the new lease tax may cost it £5 million a year and may cause it to review its future business plans. Another example given to the RICS is based on a real office rent cost to a medium-sized company in the West End of London, which pays £142,000 per annum on a five-year lease. That shows an increase in liability of 450 per cent for lease duty charges from £1,420 to £6,411. Many relatively smaller businesses—for example, pub lessees—will pay above £18,000 a year in rent and the new lease duty will be a relatively significant new burden for them.
Leases will be assessed on the net present value of the rental stream over the length of the lease, using a Treasury fixed discount rate—3.5 per cent in the Bill—without regard to the market value of that stream. Therefore, an office in the City of London let to the Government is assessed on exactly the same basis as the lease of a factory in the provinces which is let to a highly risky covenant, if the rent and the length of the lease are the same.
Furthermore, if the tenant goes bust, there is no ability to recover any of the tax which has been levied on the assumption that rent would be paid throughout the lease. There is no provision for repayment if the lease is terminated earlier by the landlord exercising a break clause, the prospect of which would have been ignored when the tax was assessed. There is no provision for repayment if the rent is reviewed downwards. There are nasty traps in assignments where there is a value in that assignment.
Another practical difficulty of the lease duty charge is its application to turnover rent where the rent is linked to the business turnover. This has many merits for a business but makes the calculation of lease duty difficult. With lease duty having been of limited importance before the proposed reforms, which greatly extends the amount liable for occupiers, this was not of major concern. Under the new lease duty legislation a charge will be payable by an occupier, who will be obliged to make a reasonable estimate of the turnover his business is expected to achieve. The Bill views this as unascertainable rent. To a degree, that will of course be a highly subjective estimate and may result in either significant overpayment or underpayment.
The compliance legislation on "unascertained rent" goes even further. There will be a requirement on the taxpayer that whenever the taxpayer is made aware of

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an increase in liability he must notify the Inland Revenue. For retailers on turnover rent, that could mean returning lease duty on a monthly or quarterly basis, which is a significant and onerous burden for the taxpayer.
The RICS in particular believes that the Government are opening a Pandora's box in reforming lease duty in this fashion. It has concerns over the use of the Treasury Green Book to calculate the discount rate for NPRV of leases. Companies undertaking an NPV analysis of their rental show little consistency over the discount rate they apply, and private practice has tended to use the borrowing costs of capital as a benchmark. Viewed in that light, the rate of 3.5 per cent is therefore low, as interest rates are between 4,27 per cent and 4.65 per cent.
The Government are effectively penalising smaller companies for imposing the smaller discount rate rather than relating the discount rate to the actual interest rate a small business would pay when borrowing capital.
I move quickly to the private finance initiative: do the Government agree that private finance initiative contracts should be exempt from stamp duty land tax? We fear that the Bill as drafted may inadvertently catch certain PFI contracts for SDLT. There is no specific exemption for them, even though certain PFI contracts will require the provision of land to a contractor for the purpose of the service required by the public authority. There may have been an intention to exempt PFI contracts within the Bill, but it has not been sufficiently well drafted, even when one looks at the definitions in Clause 48(1)(b).
What is the cumulative effect of the son of development land tax? Lease duty in 2001–02 brought in £282 million for the Government. The Government expect this to increase by £190 million in 2003–04 as a result of the new charge. Based on an average increase of liability to tenants of four to five times the current lease duty take, the RICS believes that this sum of £190 million may seriously underestimate the cost to occupiers of a new lease duty charge.
In conclusion, the Budget notes said that the son of development land tax would close loopholes, remove distortions and enhance the sector's contribution to economic growth, development and regeneration. That is rubbish. It is pernicious, it is contrary to other government policies, it is distinctly anti-business, it will create a substantial increase in tax, it is ill-considered and unfortunately creates a lawyers' paradise as well as, in due deference to my noble friend Lord Freeman, an open season for tax advisers.
9.6 p.m.
Lord Wakeham: My Lords, I am the last member of the Select Committee to speak from the Back Benches, and I am encouraged by the reception that our report has received. Therefore, I do not have to put into my speech the putting right of any misapprehensions that there might have been. The Minister and others will be delighted that I shall be considerably more brief than I had anticipated. All members of the Select Committee
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who paid tribute to the noble Lord, Lord Peston, were right. He handled the committee with considerable skill, and got the best out of us all. It was a pleasure to serve on the committee with him.
I am also delighted to follow my noble friend Lord Caithness, because I have a debt that I have wished to repay him from about 10 years ago, when he held a position on the Front Bench when I was Leader of the House. He was making a speech on the Finance Bill and I was sitting next to him. He made a brilliant speech. Afterwards I saw the briefing that he had received from the Treasury on which to make the speech. I put the whole of the briefing in a brown paper bag and sent it to the Permanent Secretary at the Treasury, saying that I did not think that it was an adequate supply of information to enable a Minister to make a speech. My noble friend made an extremely good speech and the Permanent Secretary was gracious enough to apologise to him, and say, "I will see that we get better people on the job from now on." I think that that is now so. The noble Lord, Lord McIntosh, made an extremely comprehensive speech, even though I might not agree with him. I have always felt that the annunciators should say, "all Questions in this House are answered by Lord McIntosh, unless otherwise indicated". I hope that that little episode ten years ago helped to improve the respect in the Treasury for this House.
When I was chairman of the Royal Commission on reform of this House, the area in which people felt that we had expertise and value was that we were able to revise and to scrutinise legislation in a way that the House of Commons did not. That reputation has been built up over the years—almost entirely excluding Finance Bill matters. That is quite right. I believe that it is vital for our democracy that we do not try in any way to infringe that division of responsibility. But that Select Committee work is a start on improving the scrutiny of legislation by Parliament as a whole, because there are helpful things that we can do.
When I first entered the House of Commons about 30 years ago, the scrutiny of Finance Bills was just about adequate, but it has steadily worsened from that date. That has been well ventilated in the debate and I do not need to add more to it. However, there was always a second problem, which I am not sure has been as well dealt with as it ought, although I suspect that the tax law rewrite project of my noble and learned friend Lord Howe will help in this respect.
That problem is that there was never room in the Finance Bill to put right a whole range of relatively minor but nevertheless important tax changes, because the Bill got bigger and bigger. This Government have a little more nerve about the size of Finance Bills than we had, but, nevertheless, there is always a whole bunch of things that should be done but cannot. When I was a Treasury Minister under my noble and learned friend Lord Howe, with his agreement I tried to devise a way in which we could address that problem. We thought seriously about whether we could try to persuade our colleagues to have a second Finance Bill—a technical one—probably introduced in the autumn, which would include all such measures.

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The problem was that it was simply impossible—this is not a party point—for an opposition to go along with that project, because they had to agree that whatever happened in the world, whatever circumstances occurred, they could amend it in only a minor way on detailed matters and not introduce anything controversial, important or significant. If there had been a major change in the world currency markets, the reality of the House of Commons is that the Opposition would have wanted to have done so. There was simply no way to solve that. So there are still matters at which we must work to try to improve how we do business. But there is clear agreement that we need better scrutiny, and the Select Committee exists to provide that.
The issue with which we had continually to deal was the age-old problem of taxation in a civilised society: the balance between the 99 per cent of people who want to discharge their liabilities with the minimum of inconvenience and the 1 per cent who would like to find every wrinkle in and way round the tax system. Over the years, if there is a criticism of our tax system, it is that there has been a slight over-concentration on the 1 per cent at the expense of the 99 per cent. But that is a matter of balance and judgment.
As the noble Lord, Lord Peston, and others said, we discussed those matters totally impartially with no partisanship. My colleagues had no idea when we discussed stamp duty—when we all took the view that the Government were right to do what they proposed, with some criticism of how it was to be implemented—that when I was a Minister of State at the Treasury, I wrote a forward to an Inland Revenue discussion document on stamp duty in March 1983. I stated:
"stamp duty is a bad tax which ought to be abolished, because it is a tax on change, and the Government seeks to promote change rather than discourage it".
However, I know that I was strongly advised to include, and there was no way that I would not, the words:
"But it should be recognised that the loss of nearly £1,000 million of revenue will never be easy to bear".
I think that the revenue from stamp duty is now in excess of £4 billion a year, so whatever pious hopes I may have had of trying to persuade people that that is a bad tax are now part of history and unlikely to come to pass.
I need not detain the House any longer. I am very pleased with the response to our Select Committee Report. The committee has done a valuable job. The committee is only a small part of the improvement in the scrutiny of finance legislation and I hope nobody will be under any misapprehension that it should be considered as a rival to the work of the House of Commons. The committee has to be seen as an attempt by Parliament as a whole to try to improve the scrutiny of our financial legislation for the benefit of everybody.
9.15 p.m.
Lord Newby: My Lords, at this late hour I would like to concentrate my remarks on the process of scrutiny of the Finance Bill and on the Government's economic assessment. I agree with the comments of my noble friend Lord Oakeshott on the substance of our report, not least on the issue of stamp duty.
The Economic Affairs Committee's detailed examination of a number of major issues about how tax is administered was the first time in over 90 years that your Lordships' House had had the opportunity to do anything more than nod the Finance Bill through.
There was some concern, not least on the committee itself, that our extremely tight timetable would mean that we had too little time to do anything useful. We were concerned that we would find it difficult to get to the bottom of extremely complicated issues about which none of us was the greatest expert at the beginning of the process.
We were very fortunate in receiving detailed and thoughtful evidence from a wide range of bodies who put a lot of work into producing evidence at extremely short notice. It is a measure of the attitude of professional bodies towards your Lordships' House that these bodies were prepared to put in this tremendous amount of detailed work to make our work possible. I thank them very much for that effort.
As a result of a combination of the excellent chairmanship of the noble Lord, Lord Peston, and the extremely assiduous work by our Clerk and our specialist advisers, we managed to make sense of the material and produce sensible and constructive proposals. I believe we achieved what we set out to do.
However, what we set out to do was very narrow, partly because of the time we had and partly because of the remit we were given. It was interesting to find that because the committee was making recommendations about what was in the Finance Bill rather than attempting to amend it the question of financial privilege did not arise. It would not arise for a wide range of other issues besides the narrow range we looked at. That being so, I strongly support the final conclusion in the report, which is that if a subcommittee is established next year to look at the Finance Bill its terms of reference should be broader than those under which we operated this year.
I agree strongly with noble Lords who have said that our role is not to usurp or challenge the role of the Commons. I do not think there would be any point in your Lordships' committee spending most of its time arguing about whether income tax should be increased or whether duty should go up and down. I believe there are broader issues within the Finance Bill which we could look at and I hope we might be able to do so next year. Obvious questions arise after undertaking such a very intensive piece of work. They are questions that often arise in your Lordships' House. Was it worth the effort? Is anybody listening? And will it have any consequences?

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There are four reasons why it was certainly worth the effort and, arguably, it has made a difference. The first reason stems from the point made by many noble Lords, not least by the noble and learned Lord, Lord Howe. The recent record of the Commons on the scrutiny of financial legislation is poor. Whole sections, such as those covering stamp duty, of this Bill went through the Committee stage undebated. To quote one of many external pieces of evidence in support of that comment, the Tax Law Review Committee, which has been prayed in aid on a number of occasions, recently set out the case most succinctly when it stated:
"The truth of the matter is that the House of Commons has neither the time nor the expertise nor, apparently, the inclination to undertake any systematic or effective examination of whatever tax rules the government of the day places before it for its approval".
So undoubtedly there is a gap in the market.
Secondly, it may be hoped that, if we make recommendations, either the Government or, more likely, the opposition parties could then table amendments on Report in the Commons and debate what we have proposed. I was interested to hear the Minister say in his opening remarks that it was quite impossible to have expected the Government to respond to our report at such short notice; I parody him only slightly.
In effect Ministers have responded to a number of the principal proposals set out in our report because they have formed the basis of opposition or Conservative Party amendments to the Commons Report stage of the Finance Bill. Ministers then made detailed speeches on why they thought that reviews would not be possible within a certain timescale and on other matters. So I do not believe that that it is sufficient for the Minister to say that the Government could not have looked at our proposals by this stage.
The whole point of our undertaking this work was in order that both the Government and the opposition parties could consider it before the Commons Report stage and then, if they agreed with the proposals, put down amendments. If the Government do not agree, it would be helpful if they were to produce a quick response by Commons Report stage saying why our proposals are not matters they are prepared to take on board. I believe that it is valuable to bring to the attention of the Commons matters which they can look at again on Report. As we have seen already this year, amendments have been introduced based specifically on proposals made in our report. I found that extremely encouraging.
The third reason for hoping that this process will have a positive outcome is that while I have the highest regard for officials in the Revenue and in Customs and Excise, if they believe that what goes into the Bill is virtually unexamined and unamended in Parliament, then they know that they can take less care with the content of the legislation. They also know that, to the extent that they may be unhappy about what is set out in the legislation, they can deal with that by using what we discovered to be virtually catch-all clauses to the
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effect that—again, I parody only slightly—if the legislation proves to be practically unworkable it can be amended by statutory instrument.
That is a highly unsatisfactory method of producing legislation. More than almost anything else I learnt from our hearings that the growing practice of slipping in clauses that allow for huge rafts of secondary legislation is a most unsatisfactory way to proceed. If a Bill containing such clauses were anything other than a Finance Bill and so went before your Lordships' Select Committee on Delegated Powers and Regulatory Reform, the members of that committee would come down on it like a ton of bricks.
Finally, if officials and Ministers believed that the burgeoning annual taxation offering was likely to be critically scrutinised the Government might think twice about including some of the provisions at all. If the effect of a threat on the part of your Lordships' House to scrutinise legislation might be to reduce their willingness to put certain matters into Finance Bills, that in itself would justify our work.
I say that because tax legislation grows like Topsy. The noble Lord, Lord Higgins, remarked that when VAT was introduced, it was a simple tax. My first job in Customs and Excise was to file all the original documents on VAT. I joined in the autumn of 1994 when the note about VAT from the Chancellor to the chairman of Customs and Excise was contained literally on one side of a sheet of A4. Three years later I was private secretary to the chairman of Customs and Excise, Sir Ronald Radford, whose greatest claim in his official career was that he had introduced VAT. He was then the only person left standing saying that VAT was a simple tax because, even within that three-year period, there had been an accretion of further legislation, detailed rules and regulations and codes of practice which meant that it had ceased to be a simple tax.
Let me sum up on this section of my remarks. It would be sensible to establish the sub-committee as soon as conveniently possible after the House reconvenes to enable it to start its work in advance of the Finance Bill itself. I hope that the Liaison Committee will treat this proposal favourably.
As to the question of the economic assessment, I was relieved when the noble Lord, Lord Northbrook, raised the matter because, other than by the Minister, very briefly, the issue has not been discussed at all. The main thing one sees in looking again at the assessment—which is not very old—is that the growth forecasts look incredible. Growth in the first quarter was virtually nil and the growth forecast of 2 to 2.5 per cent for the year now looks unattainable. The forecast of 3 to 3.5 per cent for subsequent years also looks very unlikely.
The main consequence is that the Government's balance of expenditure is unlikely to be met and the Government will almost certainly borrow significantly higher sums than set out in the assessment. When Peter Hain suggests that there should be an intelligent debate on taxation, one knows that there will have to be one—it is to be hoped that it will be intelligent—

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before very long because the likelihood is that with lower growth rates either expenditure levels will have to be cut back or taxation increased.
The evidence about growth is mixed but, on balance, it is rather depressing. We have read today that HSBC has cut 1,400 jobs, as a result, in no small measure, of a reduction in activity among the manufacturing businesses that it serves. Therefore, manufacturing having contracted over a long period, we are now seeing the continuing knock-on effect in terms of job losses in the service industries that supply it.
I would like to have time to respond in some detail to the comments of my noble friend Lord Jacobs on the harmonised index of consumer prices. This was one of the big things that the Chancellor said when the economic assessments were announced, but, because it sounded very technical, everyone thought that it was a little matter. Introducing HICP within the course of this financial year will enable the Bank of England substantially to reduce interest rates in a way that would be completely impossible under the current target. I welcome that, but it has been a big change slipped through under the guise of a technical adjustment. No doubt we shall have plenty of opportunities to discuss that issue in future debates.
If I were in Brussels and receiving the Government's economic assessment, I would see it, metaphorically at least, as bearing a major health warning. But I suspect I would do the same with most other members of the EU.
9.29 p.m.
Lord Saatchi: My Lords, I congratulate the Minister on piloting no fewer than three Bills through your Lordships' House in a single day. It must be a record.
It was surely an act of disinterested statesmanship by the noble and learned Lord the Leader of the House to open doors that were closed for a century and, on behalf of the Government, to invite your Lordships' House to consider the Finance Bill at a much earlier stage. We now have our new committee and I am sure that everyone with an interest in the effective administration of the national finances will want to join me in thanking the noble Lord, Lord Peston, and all the members of his committee for what they have done, and the noble and learned Lord the Leader of the House for putting them in a position to do it.
With only two months from Budget day to complete their hearings of expert witnesses and to make recommendations, as the noble Lord, Lord Sheldon, said, they had to work hard; they had to concentrate on technical detail, as the noble Lord, Lord Newby, said; and they also had to focus, as they rightly did, on the new stamp duty land tax. On that, their wise advice, which I hope that the Minister will shortly heed, was to delay implementation to allow fuller consultation on a tax which the noble Lord, Lord Peston, called enormously important. It is also a very complicated tax which, as we heard from the noble Earl, Lord Caithness, and others, has caused uncertainty throughout the property and retail sectors.
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On the committee's work as a whole and its report, I do not think I can put it better than the noble Lord, Lord Oakeshott, who said:
"We will not roar; we will not have teeth; but we will speak with authority … and we will be heard".—[Official Report, 4/7/02; col. 427.]
That, my Lords, should make us all very happy.
However, I fear that there may be one Member of your Lordships' House who is not so happy tonight—and that is the Minister. I think the noble Lord may need cheering up, and therefore we should share his pain. The Finance Bill arrives in your Lordships' House today just as the Government's reputation for economic competence has unfortunately disintegrated. As my noble friend Lord Northbrook told us, a 26-point lead on this matter at the last election has become a three-point deficit today. At that election, 60 per cent of the public said that the Government were honest. Now 60 per cent say they are not honest.
Doctors apparently say that depression can be lifted if the patient can be brought to understand how he got into a sorry state. Is the Minister sad because the Government's future borrowing forecast has gone from £34 billion 18 months ago to £118 billion today? Or is it because the Chancellor's future tax receipts forecast reveals a chronic misunderstanding of the elasticity of tax revenues, so that while tax receipts have been rising by only 1.5 per cent recently, it is incredible—I think that was the word used by the noble Lord, Lord Newby—that the Chancellor now forecasts tax receipts to rise by 7 per cent each year for the next three years? The reality is that the Government now have five times more money going out every month than they have coming in.
Or is the Minister glum because the Chancellor has had to issue three warnings of lower growth, yet is still, as my noble friend Lord Northbrook, said, too optimistic according to 20 of the 26 independent forecasts surveyed by the Treasury? As the noble Lord, Lord Newby, said, the latest quarter's GDP growth was the slowest for 10 years. Or is it simply this? The bottom line is that people are actually worse off than they were a year ago. There has been a 0.3 per cent fall in real terms in earnings in Britain over the past 12 months.
We all value the Minister's sunny and cheery disposition, and we must not let these things get him down. Fortunately, help is at hand, in the unlikely form of a Treasury document which unites the two aspects of today's debate—the Finance Bill and the EU. Before this document, any impertinent functionary in the Treasury who embarked on the route of justifying tax rises by the composition, perhaps, of a page of prose of engaging frankness, would have found that a thunderbolt struck the ballpoint from his hand. No longer, my Lords. I stress that the document I am describing is not produced by Mr Hain or what he called "a Cabinet full of Kinnockites". The Treasury issued this document— the Chancellor himself. It goes under the innocent name of Fiscal Stabilisation and EMU, and it reveals that the Government are considering using tax rises to

1135
manage the economy after they have stripped the Bank of England of its power to set interest rates on the basis of Britain's economic needs.
Here are some extracts, some titbits. On page 85, it states:
"Investment in housing is relatively lightly taxed".
It continues:
"One option would be to extend the regulator power to additional taxes, such as stamp duty".
Over the page, it goes on:
"Tax instruments affecting the housing market have"—
chilling phrase, this—
"some immediate appeal".
It goes on:
"Stamp duty could be raised during a period of rapid house price increases".
The Treasury's fiscal stabilisation document proposes the most radical shake-up of tax policy in Britain for at least a generation. It warns us to be prepared for wholesale changes in the way that a huge range of taxes—from VAT to stamp duty to capital gains tax—are set. Changes in tax would have to be used to control the economy to compensate for the fact that interest rates, set by the ECB, would often be at inappropriate levels for Britain. So, yes, my Lords, you will be able to tune in to quarterly announcements from the Treasury such as, "VAT up to 22 per cent for three months. Stamp duty doubled for six months", and so on.
So, for example, the Government are planning to control the housing market with a tougher capital gains tax regime, or perhaps even the Danish-style property wealth tax system. Currently, any gains on one's principal private residence are tax free—an asset increasingly seen as a cashpoint machine from which people can borrow to fund their current spending.
To reduce lags in the system, both in the recognition of the need for tax rises and then in their implementation and taking effect, the document alarmingly suggests that taxes would have to be changed by the Chancellor reviving the long unused powers offered by "tax regulators", first introduced in 1961 to vary taxes overnight without recourse to Parliament. Chillingly, the document acknowledges that the scope for tax changes afforded by those regulators is only "quite large". So, it says:
"These limits could potentially constrain the ability of the existing regulators to offset large shocks by themselves".
So what it proposes is, yes, "widening the limits". When the existing regulator powers allow the Chancellor to increase VAT to almost 22 per cent, raising just under £16 billion annually, we can only pray that the widening is not too great.
The history of this sort of fiscal fine-tuning is a dismal one. By the time the Treasury got round to pressing on the accelerator and the effects fed through to the economy, it was time to apply the brakes, and vice versa.
The Chancellor's solution to these problems is a quarterly report on the so-called "output gap". That puts at the heart of Britain's economic policy a
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concept, a phenomenon, which—unlike the rate of inflation—is unobservable and theoretical. That was the sort of reason for the failure of "stabilisation" policy in the 1950s, which in practice tended to exaggerate rather than smooth the economic cycle, with intervention tending to be both too late and too great. Harold Macmillan as Prime Minister famously complained in 1956 that, since the figures always came too late to be useful,
"We are always, as it were, looking up a train in last year's Bradshaw".
The experience of economic upswings sharply cut off by credit squeezes and international borrowing came to be known as stop-go. By the early 1960s, stop-go had been identified as a significant constraint on economic growth and as a major failure of post-war economic policy. Yet, incredibly—again to take the word of the noble Lord, Lord Newby—apparently that is the model of inefficiency to which the Government plan to return.
We heard earlier about the lack of scrutiny of the Finance Bill and of the stamp duty land tax itself. We heard from my noble friends Lord Higgins, Lord Caithness and Lord Wakeham about their concerns, and from the noble Lords, Lord Oakeshott, Lord Sheldon and Lord Newby. My noble friend Lord Freeman actually described it as a disgrace. My noble and learned friend Lord Howe hoped that the Chancellor would read the excellent IFS/Budd report on how these procedures are failing. However, although the unanimous view of every noble Lord who spoke in this debate is that the scrutiny of finance matters is inadequate, today would seem a golden age of scrutiny and consultation compared with the massive extension in the Treasury's discretionary power and the massive reduction in parliamentary scrutiny which would result if the document I described were ever put into practice.
The Minister will shortly deny that Her Majesty's Government have any such tax plans. He will speak of Aunt Sally and straw men, but the Prime Minister does want to take us into the euro. He does say that it is our destiny. We must never forget that the Prime Minister's promises on tax have proved no guide to the actions of his Government. Before he was elected he declared—and we should all pause for a smile— "We have no plans to increase tax at all", but since then, as we know, he has raised tax not once but 60 times—10 times a year to be exact.
After the old Keynesian consensus broke down in the 1970s, monetary policy came to be accepted as the principal tool of macro-economic management, with fiscal policy aimed mostly at securing sustainable public finances and delivering the tax incentives and spending levels judged to be appropriate. Our political parties may have disagreed over the details, but not, for some time, over the objectives. That consensus, which has brought such benefits to Britain, would be the first casualty should the Government decide that taking us back 30 years to the failed and long-abandoned policies of the past is a price worth paying for their euro ambitions.
9.41 p.m.
Lord McIntosh of Haringey: My Lords, this has been a very interesting debate. I came here prepared to defend the Government's economic policies and the Finance Bill and, in very large part, neither has been challenged. With the noble exceptions of noble Lords, Lord Northbrook and Lord Saatchi, and, to a lesser extent, the noble Lord, Lord Newby, we have had a series of speeches in praise of the Economic Affairs Committee and its work. Therefore, since my noble friend Lord Peston started a rather threatening part of his speech by reminding me of my obligation to reply to the debate, I will do just that.
I remind the House of what I said at the beginning. In my opening speech I said that the Government have not yet had the opportunity to respond to the report. What I can now say—and I hope that this will show that I am responding effectively to the debate—is that the Government will now have the benefit of today's proceedings in your Lordships' House in any response that they make. I hope that that satisfies the question asked by the noble Lord, Lord Newby, "Is anybody listening?"
I start with the most important part of the subcommittee's report, which is the issue of stamp duty land tax. The claim has been made by the noble Lords, Lord Peston, Lord Oakeshott of Seagrove Bay, Lord Freeman, and others that the reform has been rushed through. The reform in this Finance Bill follows a consultation document at the time of the 2002 Budget. Since that time, there have been extensive consultations from a wide range of representative bodies and professionals. At the time of the Pre-Budget Report in November 2002, a further consultation document was published exposing in draft form 62 clauses and four schedules. Many representations were received and they helped to improve the legislation.
As far as the Government are concerned—and we have not heard anything other than speculation to the contrary—the commencement of stamp duty land tax is on track for 1st December 2003. Powers have been taken in the Bill to allow changes after Royal Assent in the run up to implementation and we are consulting with representative bodies on the modifications that we need to find through the law. The main charge that is made in the committee's report does not actually stand up. On the charge that this is a stealth tax, I can assure the House that is not our intention to widen the charge before it has even been implemented. Any measures introduced as a result of consultation are likely to take the form of additional targeted reliefs. That is certainly not to be described as a stealth tax.
The Government will continue to listen. In direct answer to the noble Lord, Lord Freeman, I can say that we continue to listen. We have started consultation again. We have already had two meetings on lease duty and complex commercial transactions. Of course, we broke off consultation during the purdah period before the Budget; we always do that, when rates are in question. It has been an accepted procedure and not one, I venture to suggest, introduced for the first time by a Labour government.
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The noble Lord, Lord Oakeshott of Seagrove Bay, made a point about the definition of disadvantaged areas. He has made much of that point in the press in recent weeks, and I have had the advantage of reading it. He contradicted the noble Lord, Lord Saatchi, who claimed that there was an uncertainty about it. There is a certain amount of crudeness about it, and there are anomalies. However, those anomalies arise because we have been determined to have criteria that are clear to everybody and can be used.
The noble Lord, Lord Oakeshott of Seagrove Bay, and the noble Earl, Lord Caithness, said that the lease duty rates were too high. The new system removes the jumps in the rates of tax built into the existing system. It puts all leases on an economically level playing field. The length of commercial leases is distorted by the present rates structure, and the reform removes that distortion. Commercial leases with a net present value of less than £150,000 will escape tax, and many in disadvantaged areas will pay no tax.
The noble Earl, Lord Caithness, asked about turnover leases and how they would be taxed. We have had many representations from a small minority with commercial leases for which rent is calculated as a proportion of turnover. We have no intention of requiring businesses to submit monthly or even annual returns on changes in turnover. The policy intention is to minimise the compliance burden and provide certainty on the charge.
The noble Earl asked why net present value was lower than market interest rates. The net present value is set to exclude inflation; rent reviews in line with RPI are ignored in the net present value calculations. He asked why the net present value formula for leases did not take into account the circumstances of the tenant. The principle of taxation is that tax rates are always the same for all taxpayers.
The noble Earl asked about PFI. In fact, he slated us about PFI contracts and asked why they should be exempt from stamp duty land tax.
The Earl of Caithness: My Lords, with respect, I say to the Minister that I did not slate the Government for that. I said that I thought that they ought to be exempt from development land tax. It is not clear in the Bill whether they are.
Lord McIntosh of Haringey: My Lords, I beg the noble Earl's pardon. I misheard him. We continue to consult on that and other complex commercial transactions, in order to make the tax fair. I hope that I have covered some of the detailed points made on stamp duty land tax.
I shall comment on the missing trader fraud issue, which surprised my noble friend Lord Sheldon, among others. My noble friend asked whether the amount of fraud could be as great as £1.7 billion to £2.75 billion. The fact that, as I said, we have discovered only today a fraud of £120 million shows the seriousness of the problem.
The question raised by the committee chaired by my noble friend Lord Peston was about safeguards to protect legitimate businesses. Those safeguards

1139
include the right to appeal Customs decisions to the VAT and duties tribunal; and a requirement for Customs to prove that the business knew or had reasonable grounds to suspect that VAT had gone unpaid or that evasion was likely to take place. Those legal safeguards are backed up with statements of practice that set out clearly how and in what circumstances the measures will be applied. There have been representations about a two-stage review but we do not want a delay that will allow fraudsters to continue in their fraud; we want to crack down on those frauds as quickly as possible.
It has been suggested that it is difficult for legitimate businesses to recognise a dodgy deal. One example was that of mobile telephones. Those who trade in those sectors are surely aware of market prices from day to day. In most cases of fraud, transactions take place significantly below market value. That is similar to buying cigarettes on the street, as one can near where I live in north London, for significantly less than one pays in the shops. One entertains the fond delusion that one is not buying smuggled cigarettes but all those selling and buying them know that smuggled cigarettes are involved. If businesses have a legitimate low-price deal, they can produce evidence of it and the disputes will be considered by an independent tribunal.
Few comments were made on the electronic VAT issue, although the noble Lord, Lord Freeman, referred to it. However, even he was not particularly critical of the Budget's proposals.
I have given much consideration to the matters raised by the Select Committee. I turn to the wider issues, the first of which is that of parliamentary scrutiny. Several noble Lords—even such experienced people as the noble and learned Lord, Lord Howe of Aberavon—described parliamentary scrutiny of the Finance Bill in another place as a disgrace or as having seriously deteriorated. The total time available for scrutiny of the Bill this year has been comparable with that for Finance Bills over many years under governments of both parties. When there was a complaint about that this year, further Standing Committee time was allocated. Within the total time, the allocation was agreed by the usual channels and I am not aware that there was a particular dispute about that because the Opposition always lead in deciding which issues are to be scrutinised.
On stamp duty land tax, twelve and a half hours were spent on it in Standing Committee and two and a half hours on Report. That is a substantial amount of time. The noble Lord, Lord Higgins, and others, who raised criticisms in that regard, seemed to think that something sinister had been going on in the House of Commons. I do not believe that that is the case. The freedom within a fixed allocation for the opposition parties to decide what they want to debate is the right way to proceed, given that the Government have embarked on programming of government business. It is not for me in this House—or, I suggest, for anyone else—to criticise that.
Lord Higgins: My Lords, the fact is that that was programmed and was not agreed by the Opposition.
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The Minister should read Hansard of 1st July. It was suggested by the government spokesman that that was the case, but it was not true, as Hansard clearly indicates.
Lord McIntosh of Haringey: My Lords, the total amount of time was not agreed by the Opposition but the allocation of time within the programme was agreed by them.
Lord Higgins: My Lords, that is the point. The total amount of time was not agreed. The amount of debate was curtailed. There was not adequate time to debate the details of the Finance Bill. That is clear from the fact that many clauses were not debated at all.
Lord McIntosh of Haringey: No, my Lords, that is not clear from the fact that many clauses were not debated at all. There have been guillotines on business in the House of Commons for many years under governments of both parties, but it really is not our business to debate that. Within the allocated time, which is always a matter of controversy, which clauses are debated and which are not is a matter largely for the Opposition to determine.
Lord Northbrook: My Lords, the time may be the same but the Bills themselves are so much longer.
Lord McIntosh of Haringey: My Lords, I was going to come to that. It is true that the Bills are longer although the Bill this year, as has been pointed out, is shorter than last year. Why are they longer? Interestingly, they are longer for the reasons which the noble Lord, Lord Wakeham, suggested, which is that 99 per cent of the people of this country are not interested in the detail and 1 per cent are passionate about it. A great deal of the detail of any Finance Bill is, as the noble Lord suggested, directed to that 1 per cent. Why? If we do not direct the detail to that I per cent it will cost the Exchequer billions of pounds in lost revenue. It is the unfortunate fact that there is an industry comprising no more than 1 per cent of the population who are very well heeled and spending a great deal of time and money trying to ensure that they pay less tax. The Revenue has to respond, quite rightly, in our interests.
I do not know whether I can respond effectively to much of the remainder of the debate. I will deal with particular questions. The noble Lord, Lord Higgins, asked me what the Section 5 submission contains. In this case it contains the whole of the Financial Statement and Budget report. Section 5 contains the submission which we shall make later in the year on the pre-Budget report. We do it twice a year and the whole document is included.
The noble Lord suggested that the review of the Revenue departments was because of bungles. The Chancellor has paid tribute to the Inland Revenue and Customs and Excise for their modernising agenda and for building in tax credits. The purpose of the review is not to deal with bungles but to build on success.

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The noble Lord, Lord Oakeshott, asked me whether in future the Government's response will be ready in time for debate. That depends when the debate takes place, which is a matter for this House and not for the Government. I do not see how I can possibly answer that. He asked how much notice will be taken of the conclusions and gave his answer in advance, not a lot. I hope that I have indicated in my speech today that I have taken a great deal of notice of the conclusions. He suggested that there should be a fixed Budget date because it would bring certainty for business. I believe that that certainty is given not so much by a particular calendar date, but by the fact that we now have two Statements a year—the pre-Budget report, which introduces very effective consultation on Budget matters, and the Budget itself. I know that business organisations appreciate that greater degree of consultation.
Lord Oakeshott of Seagrove Bay: My Lords, I also suggested that it would be easier for Parliament and one might be able to get the response in time.
Lord McIntosh of Haringey: My Lords, I hear what the noble Lord says. The noble Lord, Lord Freeman, made a point about electronic payments. The coercion which is being introduced in this Budget is consistent with the VAT system as it is, including surcharges for default. It is necessary to stop abuse of cheque payment rules and to ensure that large employers pay on time. It will remove the unfair competitive advantage that non-compliant large employers currently enjoy over compliant ones. There will be a later date due for electronic payments, which will ensure that large employers do not lose cash flow. But we must deal with those who use the defects of the bank clearing system—if I may be so bold—to benefit themselves.
I was very interested in the speech of the noble and learned Lord, Lord Howe. I always listen to him with great respect, not least because of his work on the Tax Law Rewrite Project. The Finance Bill reflects lessons from the rewrite Bills, but the Tax Law Rewrite Project takes place within tightly defined guidelines that prevent changes of substance being made. That is why it is necessary to make the changes in Schedule 22.
The proposed new rules follow the structure set down by the Income Tax (Earnings and Pensions) Act 2003, which has been referred to. That structure is the way forward and replacement of blocks of legislation is much preferred to numerous amendments. The Finance Bill builds on the work of the Tax Law Rewrite Project because the tax system keeps moving, as it must. It does not undermine that work, the continuation of which we strongly support.
The noble and learned Lord asked about consultation, about which I want to make a general point and a particular point. We consulted on more than a third of the contents of the Finance Bill. We consulted formally on, among other matters, stamp duty land tax, offshore funds, first-year allowances for environmentally friendly equipment, non-resident
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companies, companies owning their own shares and many other points. There was also a great deal of informal consultation.
I point out to the noble Lord, Lord Freeman, who asked about consultation on stamp duty land tax, that the consultation is still going on. We had to have a break in SDLT consultation because we cannot consult on rate settings. But apart from that, consultation has been extensive.
The noble Lord, Lord Jacobs, and the noble Lord, Lord Northbrook, asked about RPIX and HICP. I am sure that the noble Lord, Lord Jacobs, will know that it was made clear when the EMU assessment was made on 9th June—and I made it clear in this House—that the intention is that HICP will be used for monetary policy purposes only, and it will certainly not be used as the basis for calculation of changes in pensions or index-linked gilt. I made that point to the noble Lord, Lord Northbrook, in response to a Starred Question after 9th June.
Yes, of course we will continue to publish the retail prices index: we will need it for those purposes. The Monetary Policy Committee remit continues to be RPIX; any move to the HICP target will build on the success. In response to the noble Lord, Lord Saatchi, we have after all the longest period of sustained low and stable inflation since the 1960s.
Lord Howe of Aberavon: My Lords, I appreciate with due modesty the noble Lord's tribute to my tenacity. Would he be kind enough to undertake, when he goes home tonight or preferably tomorrow morning, to look at the evidence given to the committee under the chairmanship of the noble Lord, Lord Peston, by the professional bodies on the particular example that I cited in my speech, which depicts a scene wholly different from that which he has described so benignly in terms of consultation and satisfaction?
If we look in particular at the judgment they offer on Schedule 22, it is not a sufficient response to produce a bland, characteristically impressive, benign answer at this time of night and to believe that that has dealt with the problem. Will he undertake to look at it in that way?
Lord McIntosh of Haringey: My Lords, I have read the evidence. I will not undertake to do any more reading tonight, but I will undertake to look back at it again.
The noble Lord, Lord Freeman, made an interesting point about the tax structure review project to which I would like to respond. He said that a new tax structure review project should be established to simplify the structure of the tax system. The issue is that there cannot be a clear distinction between the structure of the tax system and the policy decisions about tax. That is the difficulty which the committee chaired by my noble friend Lord Peston has had in defining the limits of its remit. That has been commented on by a number of speakers. The structural design of a tax system is largely a reflection of the functional necessity of policy

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implementation. It is difficult to see how changes to the structure could be enacted in a way that would not distort the implementation of policy. I am afraid that that is a very general point.
I would like to respond in more detail to the noble Lord, Lord Northbrook, and there are things that I would like to say about public borrowing and growth. In all cases, those comments are consistent with what we have said in the past. In response to a point made by the noble Lord, Lord Newby, our growth in the first quarter, although low, is fully consistent with our forecast of 2 to 2.5 per cent for 2003.
The noble Lord, Lord Northbrook, criticised public borrowing. At its peak this year, that borrowing is likely to be 2.5 per cent, compared with 8 per cent of GDP in the early 1990s. The noble Lord criticised the revision of the forecasts. Those are based on finances which are sound and sustainable and they remain fully affordable. I must confess that, if I had known he was going to make the same speech as the one he made last year, I would have looked up that speech and checked whether his predictions for the coming year have, in fact, been borne out. I suspect that they have not. I shall certainly be more prepared if he makes the same speech next year.
I have exceeded the time available. I am sorry if I missed out any of the significant points made. I can assure noble Lords that all their points will be taken into account in future policy-making.
On Question, Bill read a second time; Committee negatived; then, Standing Order 47 having been dispensed with (pursuant to Resolution of 2nd July), Bill read a third time, and passed.

Finance Bill 2003
10.9 p.m.
Lord Peston: My Lords, I beg to move the Motion standing in my name on the Order Paper. It falls to me only to thank noble Lords for taking part in the
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debate, which I, at least, have found extremely interesting. In particular, I thank my noble friend Lord McIntosh. I was not threatening him, although, as he knows, I am quite capable of doing so; I was simply reminding him of the job that I thought he was going to do. Perhaps I may say to him that I believed he did exactly the job that I wanted him to do. What I cannot understand is the whole rigmarole of the difficulties that the Treasury has in replying to our committee. As my noble friend mostly did that, he could have done the whole job with no trouble whatever. But, subject to that, I consider that he did an admirable job and I thank him very much.
Moved, That this House takes note of the report of the Select Committee on Economic Affairs on the Finance Bill 2003 (3rd Report, HL Paper 121).— (Lord Peston.)
On Question, Motion agreed to.

Business of the House: Taxation (Information) Bill [H.L.]
Lord Saatchi: My Lords, I am glad to say that the usual channels have agreed that I can move this Bill on Wednesday, 9th July. Therefore, for tonight, I shall not move that the Bill be read a second time.

Financial Statement and Budget Report
Lord McIntosh of Haringey: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That this House takes note with approval of the Government's assessment as set out in the Budget 2003 for the purposes of Section 5 of the European Communities (Amendment) Act 1993.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.
House adjourned at ten minutes past ten o'clock.