Lords Sitting of 2 March 2004

Preamble
The House met at half-past two of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.
Prayers—Read by the Lord Bishop of Rochester.

  Aircraft Carrier Capability
  Lord Astor of Heverasked Her Majesty's Government:
  Whether, following the early withdrawal from service of HMS "Ark Royal", they are confident that there will be no gap in aircraft carrier capability should a future carrier be delayed into service.
  The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Bach): My Lords, before I answer the Question, I hope that the House will forgive me if I mention briefly Lord Vivian who, in the old days, would be asking the Question. He was my Front-Bench Opposition counterpart for all of the time that I have been in this job. He performed his job in a fair, gentlemanly and really gallant way. The noble Lord would never take any unfair criticism of the Armed Forces, in which he served with such distinction. The House will very much miss him.
  The decommissioning date for HMS "Ark Royal" has not been brought forward. On current plans it remains towards the end of 2013. The Government's intention is that there will be no gap in our aircraft carrier capability and that the future aircraft carriers will replace the Invincible Class ships, as expected, in a phased replacement programme. The target in-service date for the first future aircraft carrier remains 2012.
  Lord Astor of Hever: My Lords, I am grateful to the Minister for those gracious and generous word about my noble kinsman Lord Vivian. He worked tirelessly and effectively to represent the best interests of the Armed Forces. As the Minister said, the House will miss him.
  Regarding the Question, I am grateful to the Minister for his reply. Any gap would have serious consequences for the retention of naval and aviation skills, manpower and recruiting—and complete subordination to allied forces in operations. Can the Minister assure us that HMS "Ark Royal" and HMS "Illustrious" would be kept on in the event of delays?
  Lord Bach: My Lords, I give an assurance that we will never allow the position to develop whereby we do not have the aircraft carrier protection and force that we require. So I can give the noble Lord that assurance.
  Lord Boyce: My Lords, would the Minister add to his answer by giving us an assurance that there will be a carrier air group to go on board the carriers—the
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  ships? In other words will the Sea Harrier be able to run on, or will the new aircraft be available to ensure that there will not only be no gap in hulls but also no gap in carrier air group?
  Lord Bach: My Lords, I can also give the noble and gallant Lord that assurance. When the new aircraft carriers come on stream, it is essential that there is air group available because it is a crucial part of the force that it represents.
  Lord Tomlinson: My Lords, would my noble friend agree that, although his answer is welcome, if the public expenditure policies of the Conservative Party were put into effect it would imply a public expenditure cut in the defence budget of about £1.5 billion? If it proposes to defend the defence budget, that would mean even greater public expenditure cuts elsewhere, unless the right honourable Member for Folkestone changes his mind on public expenditure policy as rapidly as he changes his mind on participation in the Butler committee.
  Lord Bach: My Lords, having listened for a number of years to Opposition spokesmen who always genuinely ask for more resources for defence, it was a shock to the system to hear the right honourable Oliver Letwin announce his spending plans. I confirm that there would be a reduction in defence spending by having a standstill. I look forward to hearing in due course, perhaps later than sooner, where the Conservatives' defence cuts will be.
  Lord Redesdale: My Lords, I wish to associate noble Lords on these Benches with the comments made about Lord Vivian. He cared deeply about defence and the Ministry of Defence.
  I know that an overrun is unlikely in our wonderful age of procurement, as we have not seen overruns in other fields such as aircraft or radios. However, if there was an overrun in the carrier programme, would that mean that we would have to rely on the American or French carrier fleet to plug the gap in our defence capability?
  Lord Bach: My Lords, it would not mean that at all. We have successful aircraft carriers and we will continue to have them. I look forward to hearing where the Liberal Democrat cuts in defence will come. Will they involve an aircraft carrier or two?
  Lord King of Bridgwater: My Lords, following the answer given to the noble and gallant Lord, Lord Boyce, will the Minister confirm who will provide air cover on the carriers in advance of the time that the new carriers become available? There has been a suggestion that if the Sea Harriers are withdrawn it will be provided by frigates. However, there is now a suggestion that the frigate fleet may be reduced significantly. Will the noble Lord clarify the point he made about air cover for the carriers?
  Lord Bach: My Lords, the noble Lord need not concern himself too much on that. We will always

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  make certain that our carrier fleet is protected. While the existing carriers are still in operation, the GR7s and GR9s will take on the role that the FA2s maintained so well for so long.

  Prisoners: Gambling Addictions
  2.42 p.m.
  Lord Faulkner of Worcesterasked Her Majesty's Government:
  What assistance is available for prison inmates with gambling addiction problems.
  Lord Bassam of Brighton: My Lords, some prisons have established links with organisations such as Gamblers Anonymous and GamCare and provide assistance for prisoners with gambling addiction problems by individual referrals and occasionally through groups. The help provided is left to the initiative of individual prison establishments.
  Lord Faulkner of Worcester: My Lords, I thank my noble friend for that Answer. Has he seen the letter published in the latest issue of GamCare news from a gentleman who signs himself "Jack"? He is inside Wormwood Scrubs and describes in graphic detail how he went out on parole, borrowed £500 from a friend and put it on a horse which, he says, is still running. He was charged with theft and went back inside with an extended sentence. He says that had he been suffering from a drugs addiction he would have received immediate treatment, but that no similar treatment is available for gambling addiction. Will my noble friend ensure that standards are applied across the board and that as gambling addiction problems grow, as I fear they may with the passage of the proposed gambling Bill, cases such as this can be dealt with?
  Lord Bassam of Brighton: My Lords, I am grateful to my noble friend for that question. My gratitude extends to him for supplying me with a copy of the letter posted to GamCare by Jack. Facilities are available in Wormwood Scrubs and I have asked officials to ensure that the services of GamCare and Gamblers Anonymous are advertised more widely within the prison estate. They provide a valuable link and valuable support to those who identify themselves as having a gambling addiction problem.
  Baroness Trumpington: My Lords, are prisoners allowed to buy lottery tickets?
  Lord Bassam of Brighton: My Lords, prisoners are not allowed to buy lottery tickets in prison.
  Viscount Falkland: My Lords, as all those serving sentences in prison are probably no strangers to the world of betting, should not those whose crimes have resulted directly from their pathological gambling
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  addiction be of most concern to us? Does the Minister have statistics showing the number of prisoners whose crime is directly related to pathological gambling?
  Lord Bassam of Brighton: My Lords, there is no great wodge of reliable statistics on this issue. However, last year Oasis carried out a new offender assessment programme and identified from an assessment questionnaire involving 711 prisoners that just 14—approximately 2 per cent—said that gambling was a problem. Three of that number said it was linked to their offending.
  I ought to add the important caveat that that was not a highly representative sample, so the figures are only indicative. But it identifies a problem, which is small by comparison with many others that prisoners bring. It indicates there is a real need and the Prison Service provides access and facilities for contact with those organisations which can provide help and support to those who suffer from a gambling addiction problem.
  Baroness Walmsley: My Lords, in view of the fact that there are only 12 branches of Gamblers Anonymous in prisons, do the Government have plans to encourage the Prison Service to extend that number?
  Lord Bassam of Brighton: My Lords, I am grateful to the noble Baroness for making that point. It is important to remember that if there is an identified problem—if an individual prisoner reports it in his original assessment—the prisoner will be put in contact with Gamblers Anonymous or a similar organisation. The service is provided on demand. Some prisons provide self-help and support groups within the prison without that necessary contact first being made, but it depends on the pressure of demand. We try to ensure that there is appropriate support and care in each establishment when it is required.

  Train Overcrowding
  2.47 p.m.
  Viscount Allenby of Megiddoasked Her Majesty's Government:
  Whether the present state of train overcrowding meets the criteria for safety of staff and passengers laid down by the Health and Safety Executive; and what action they intend to take.
  Lord Davies of Oldham: My Lords, the Health and Safety Executive does not limit the number of passengers who can travel on trains. All train operating companies are required by their franchise agreements to address excessive crowding. Specific contractual limits are set in London and on some commuter routes into Edinburgh. Regular counts must be conducted to monitor compliance. The Strategic Rail Authority can require an action plan to be drawn up for dealing with any capacity shortfall.
  Viscount Allenby of Megiddo: My Lords, I thank the noble Lord for that Answer. I am certain that many noble Lords are well aware of the efficiency, cleanliness and reliability of the train services of our continental colleagues and wonder why our trains run so badly, break down and run against time. Is it the case that resources and finance have not been put into the system to make our train services more efficient and that it is high time that more resources were allocated? Can the Minister assure the House that any improvements envisaged will be properly funded and resourced as a matter of extreme urgency?
  Lord Davies of Oldham: My Lords, the noble Viscount has hit upon the salient point that there has been under-investment in our railway for several decades, and we shall not make up those deficiencies overnight. I want to bring to his attention the obviously welcome news that we are doubling investment in the railways from £2.1 billion as it was in 2001–02 to £4.3 billion in 2005–06. We are also ensuring that one-quarter of the rolling stock is replenished in the next few years. As the noble Viscount has rightly identified, the background to these improvements is the backlog to be made up.
  Baroness Oppenheim-Barnes: My Lords, given that crowding on trains is a problem, is there not an even greater problem with crowding on platforms, to such an extent that Victoria station has been closed for that reason at least twice in the past month?
  Lord Davies of Oldham: My Lords, crowding on platforms is a more acute problem for the London Underground than for surface trains. As the noble Baroness has indicated, there are several stations where access to the platform needs to be controlled. This is a reflection of the vastly greater use of our public transport system, demonstrated by the numbers seeking to get on our trains and Tube lines. The problem with regard to overland trains is largely restricted to where the trains are longer than the platforms at some stations. Special consideration is given to that, and it is monitored very carefully indeed, because it is an obvious safety problem.
  Viscount Tenby: My Lords, do the Government have any plans to remove the responsibility for safety on the railways from the Health and Safety Executive, and put that responsibility back—dare one say it—into the hands of the railways?
  Lord Davies of Oldham: My Lords, the noble Viscount will know that the Railway Inspectorate is part of the Health and Safety Executive's responsibility, and it is incorporated in that body. We are satisfied that railway safety issues are properly addressed. These issues are monitored by those people who have experience of our railways.
  Baroness Whitaker: My Lords, does my noble friend agree that it is clear under the Health and Safety at
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  Work etc. Act 1974 that it is the responsibility of the railway operators to implement all health and safety obligations themselves?
  Lord Davies of Oldham: My Lords, my noble friend is right; it is the responsibility of the operating companies. The original Question related to crowding. I make clear to the House that crowding is of great concern to our fellow citizens in terms of comfort and well-being on trains. It is not a particular safety concern. There is no indication that rail safety is compromised or that injuries are occasioned significantly by crowding on trains.
  Lord Bradshaw: My Lords, I agree with the noble Lord's last statement. Health and safety is not compromised, but there is grotesque overcrowding in a lot of our provincial cities, and it is not through lack of funding; it is due to the way that the money is spent. Will the Government address the subject of how the money devoted to our railways is being spent? It is a huge sum of money. Although the Minister speaks of more money being spent, value for money and the relief of overcrowding —which is the job of the SRA—need to be addressed.
  Lord Davies of Oldham: My Lords, the House will recognise that the noble Lord speaks with considerable experience on these matters. The Government are not prepared to see these large sums of public investment in the railways being used ineffectually. We are concerned about exactly the issue that he stated: the question of the value for money of this investment. We are carrying out a review—which will be concluded in June—of the overall structure and control of the railway system, to ensure that we have effective management to match the increased resources.
  Earl Peel: My Lords, does the Minister agree that if animals were subjected to the same level of overcrowding in transport as human beings are in the train service in this country, that would almost certainly be in breach of European regulations?
  Lord Davies of Oldham: My Lords, I have heard that point made on a number of occasions. I would not want to underestimate at all the discomfort caused—largely for commuters, but not solely for commuters—by excessive crowding, particularly on our peak travel services. That is why we are addressing the issue with these significant infusions of public money.
  Lord Hunt of Kings Heath: My Lords, has my noble friend noticed that as the nation seems to get fatter and fatter, the seats on our trains get thinner and thinner? Can he, as part of the this review, ensure that when new rolling stock is commissioned, rather than the train operators seeking to push as many people as possible into confined spaces, the operators will be reminded that the benefit of train travel is that we actually travel in comfort?
  Lord Davies of Oldham: My Lords, that is an interesting question, and I am grateful to my noble

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  friend for asking it. He is right that train design is subject to the most minute calculations in order to use the available space in the most effective way possible. The new rolling stock coming on stream is designed to improve the quality of the passenger experience, but that is measured overwhelmingly in one facet—the reliability of the train arriving on time at its pick-up points and its destination. That is why we must ensure that the ever-growing numbers of the travelling public are carried punctually by our trains.
  Baroness Thomas of Walliswood: My Lords, the Minister spoke of value for money. Does he think that the leasing charges charged by the rolling stock companies to the train operating companies amount to good value for money? I understand that some of them are as high as 20 or 25 per cent of the value of the train per annum.
  Lord Davies of Oldham: My Lords, several figures on the supposed profitability of these companies have been bandied about in recent months, and some of them are wildly exaggerated. Nevertheless, it is important that they give value for money. That is the role of the Rail Regulator, who has not felt the need to call into question the operating and charging systems of these companies, but would undoubtedly do so if he thought that excessive profits were being made.
  Lord Faulkner of Worcester: My Lords, can my noble friend assure me that the Government will not resort to the policy of their predecessors when dealing with the problem of' overcrowding and attempt to choke off demand for rail travel by fare increases far above the rate of inflation? He may recall that during one year in the 1970s fares rose on four occasions, putting the rate of fare increases far above the inflation rate of the time. Is it not much more sensible to invest in new capacity and to cope with the demands of' the travelling public who want to travel by train in a safe and efficient way?
  Lord Davies of Oldham: My Lords, I am grateful to my noble friend because it is recognised that wider society benefits from greater use of rail, which is the safest form of travel and the most convenient means of access to our city centres. We need this investment to guarantee that the journey is a good deal more comfortable than it is for some of our citizens at present.
  Lord Marsh: My Lords, does the Minister agree that fares went up so rapidly and to such a high level in the 1970s because throughout the 1970s first the Conservative government and then the Labour government continued between them to raise money by cutting the investment programme seven times in six years?
  Lord Davies of Oldham: My Lords, the noble Lord, Lord Marsh, who also has enormous experience of the railways, has been even-handed in his comment on
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  previous governments with regard to past fare rises. He was kept only by the brevity of our questions from adding that this Government are investing more heavily in the rail system than any other.
  Lord McNally: My Lords, is it not time that we ended the anachronism of first-class compartments, particularly on short-haul commuter travel? Nothing more enrages the commuter than being jammed in against the door of an empty first-class compartment.
  Lord Davies of Oldham: My Lords, I hope that the noble Lord is not speaking from bitter experience. It is for the train operating companies to judge whether they can raise sufficient revenue from their first-class provision. The noble Lord will recognise that the amount of such provision on commuter trains is limited. With the new rolling stock, it is likely to be even more limited, for the very factors that he identified.

  Munchausen Syndrome by Proxy
  3 p.m.
  Lord Clement-Jonesasked Her Majesty's Government:
  Whether they will review the scientific validity of Munchausen syndrome by proxy and factitious or induced illness and the protocols by which these conditions are diagnosed.
  The Parliamentary Under-Secretary of State, Department of Health (Lord Warner): My Lords, the Government have not initiated a review of the scientific validity of Munchausen syndrome by proxy and factitious or induced illness or the protocols by which these conditions are diagnosed. Our inter-agency guidance was published only in 2002, alongside the report of the Royal College of Paediatrics and Child Health. It sets out clear procedures for all agencies to follow and evidence-based decisions should be taken at each stage of the process by a multi-agency, multi-professional team.
  Lord Clement-Jones: My Lords, I very much regret the Minister's reply. We of course welcome the review of the care and criminal cases now being conducted, but the underlying cause of many of those injustices is a diagnosis of Munchausen syndrome by proxy. That has tragically deprived many parents of their children and led to parents being gaoled. Will the Government consider the more fundamental issue of whether that diagnosis—which is still given credence in both Department of Health and Department for Education and Skills documents—is fundamentally flawed?
  Lord Warner: My Lords, I draw the noble Lord's attention to paragraph 1.3 of the Department of Health's 2002 guidance, which I mentioned in my Answer. That will enlighten him on the fact that fabricating or inducing illness in children is referred to by a large number of names and that a variety of terms

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  are used to describe circumstances and clinical conditions relating to child abuse. We are trying to deal with the key issue, which is safeguarding vulnerable children.
  Lord Walton of Detchant: My Lords, as the Minister will agree, this is an exceptionally difficult and sensitive issue. There have even been suggestions in press reports that Munchausen syndrome by proxy does not exist. I well recall, from my personal practice many years ago, that a child of four was referred to my neurological department in Newcastle, having been admitted to a hospital in Cumbria on six occasions for unexplained attacks of coma. It was only when he was able to tell us that, when he was noisy or naughty, his mother attached a tube to the gas pipe, put it in his mouth and turned on the gas until he had calmed down, that we realised that that was a case of Munchausen disease by proxy.
  Regrettably, there are such cases, and their recognition depends on the most careful assessment by paediatricians and others. It is important to recognise that it exists and that the protection of children is one of the most crucial aspects of the problem.
  Lord Warner: My Lords, I am grateful to the noble Lord for his extremely authoritative remarks on the matter, to which we should all pay careful attention. As I said, the key is not what term we use to describe a wide range of different types of child abuse, but how we protect children. Paragraph 1.4 of the Department of Health's 2002 guidance makes that absolutely clear.
  Earl Howe: My Lords, is the Minister aware that whether or not Munchausen syndrome by proxy exists, the guidelines issued by the Department of Health two years ago contain almost no reference to the serious risk of misdiagnosing that condition and the grave consequences that can ensue—as evidenced by recent criminal cases? In view of that, is it not now appropriate for the Department of Health to review those guidelines?
  Lord Warner: My Lords, the key point is how we protect our vulnerable children through the child protection procedures. The whole basis of those procedures is that we bring the evidence and information from a wide variety of professionals together into a case conference to discuss and produce the most appropriate response. The noble Earl raises a separate set of issues, but that does not undermine the basic fact that multi-agency, multi-disciplinary work is the key to success in child protection.
  Baroness Masham of Ilton: My Lords, is Munchausen syndrome, with or without proxy, classified as a personality disorder? What is the best means of treating it? Is it not important that a review is carried out on the whole subject?
  Lord Warner: My Lords, I am happy to look into whether it appears in international classifications, but I repeat that this area of factitious and induced illnesses
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  among children covers a wide range of circumstances. Concentrating on the term "Munchausen syndrome by proxy" distracts us from the important issue of protecting children.
  Lord Blackwell: My Lords, does the Minister accept that, although the welfare of children must obviously come first, there is widespread concern in the country at large about the ability of designated experts to take decisions that affect children and parents, with little power for ordinary people to appeal in a sensible manner? Will he consider introducing an appeal process that involves lay people taking a view on what has been diagnosed?
  Lord Warner: My Lords, I can speak from my personal experience of running a large social services department. As I said, the key is bringing the information together on a multi-agency basis in a case conference. That can often involve a lot of information about parents involved in those cases. The care proceedings always go through the courts, so that there is judicial involvement before children are removed from their parents.
  Baroness Finlay of Llandaff: My Lords, are the Government considering a new term to define that kind of child abuse, given the difficult position in which paediatricians find themselves when trying to protect abused children, when the people on whom they depend for a history are the very people who have probably perpetrated the abuse? A total of 451 cases have been described in 154 different psycho-social and medical journals recently, published in more than nine different languages. So this is a worldwide problem. Another term might be more helpful to define such child abuse in future, because of the difficult position for paediatricians.
  Lord Warner: My Lords, the term that I was using was fabricated and induced illnesses; and I stand by that term.

  Pensions
  3.7 p.m.
  Baroness Greengrossasked Her Majesty's Government:
  What action they are taking to deal with the backlog in the payment of state pensions.
  The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham): My Lords, prospective pensioners are sent application forms four months ahead of their expected retirement date. Nationally, we are on target in meeting their claims. However, for complex or sensitive cases—for example, widows and divorcees approaching retirement, who may have issues concerning using their ex-husbands' national insurance records, and so on; or existing pensioners who become bereaved—there is a temporary backlog

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  at the Newcastle centre that will be overcome within three months. Even then, people should still continue to receive their money.
  Baroness Greengross: My Lords, I thank the Minister for that reassuring reply, but it is obviously unacceptable for so many people to wait a long time for their state pension to be calculated. Why has the delay occurred? Are there people who are not now receiving the money to which they are entitled? Has the department notified advice agencies such as Age Concern about those problems?
  Baroness Hollis of Heigham: My Lords, I entirely agree with the noble Baroness that it is not acceptable that people should have any worries about relying on payments that are due to them—especially if they have gone through difficult and fragile circumstances. We must certainly not add to that, so I entirely agree with the noble Baroness.
  As I understand it, the reason for the delays has been that some work—largely, converting existing order books into direct payment methods—was temporarily moved out of the 26 regional pension centres to the main centre in Newcastle while the local centres were bedding-in pension credit. As that work will shortly return to regional centres and as we have employed an additional 100 staff in Newcastle, I hope and expect to overcome that problem within the next couple of months.
  Lord Higgins: My Lords, has the Minister listened to the BBC "Money Box" programme, which apparently rang up the department and was told that the number of people not getting their pension on time was six times higher than it was two or three years ago. Currently there are something over 30,000 people not getting pensions on time. Will these people receive compensation? If not, will they receive interest payments, bearing in mind that some of them are being paid six months late?
  Baroness Hollis of Heigham: My Lords, I read the transcript of the "Money Box" programme. There will always be some situations where people get paid late. We ask people to notify us four months ahead when we send the papers out. Our target is to turn those claims around within two months in standard cases and within three months in complicated or difficult cases. If someone sends their papers in late or if the information is incomplete—perhaps because they are migrant workers where translation is needed—or if the case is complicated because we may be adding together a former husband's national insurance records and current records, there will be some cases that run late. However, that 30,000 figure is now down to 16,000 and coming down by 4,000 a month. We shall be through the backlog by June. New cases coming through are not being added to the backlog, but handled by staff in the ordinary way.
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  Should there be any problems about payments, we can and do make interim payments. We have the help of the advice agencies in doing that. Should there be any evidence of maladministration, obviously we will make payments to meet that.
  Lord Higgins: My Lords, do they receive interest if they are paid six months late in the same way that a taxpayer who pays late is charged interest?
  Baroness Hollis of Heigham: My Lords, I believe that, given the current interest rate, interest on the difference between a 60 per cent basic state pension and a 100 per cent state pension over six months will come to a very small sum. However, we certainly could make ex gratia payments in those circumstances.
  Lord Addington: My Lords, does the Minister believe that the idea of writing to four-fifths of pensioners before the new package was introduced was the right strategy? Would not the Government's current approach have been better and quicker? Have they any model for the introduction of new, more complicated benefits given the level of illiteracy in our population?
  Baroness Hollis of Heigham: My Lords, I accept the noble Lord's criticism. With hindsight one should have made greater provision for the expected backlog at Newcastle as a result of some work that was normally handled in regional centres going to the special centre at Newcastle which deals with complicated cases. My view is that had we foreseen the backlog, staff would have been employed earlier. However, apart from complicated cases, that even without a backlog may still run late, I repeat that I have no evidence that people are not being paid when they should be. We may not meet our targets but we still get the money out providing people get their forms back in the time allowed. As a result, nobody should suffer from not having the money to which they are entitled.

  Horserace Betting and Olympic Lottery Bill
  3.12 p.m.
  Lord Davies of Oldham: My Lords, on behalf of my noble friend Lord McIntosh of Haringey, I beg to move that this Bill be now read a second time.
  The Bill has two main purposes. First, it addresses the Government's remaining involvement in the financing and administration of horseracing. Specifically, it allows for the sale of the Horserace Totalisator Board and the abolition of the Horserace Betting Levy Board. Secondly, if London is chosen to host the 2012 Olympic and Paralympic Games, the Bill allows dedicated lottery games to be established as part of the National Lottery. The proceeds from these will be used to meet expenditure in connection with the staging of the 2012 Olympic and Paralympic Games.
  I am glad that so many noble Lords with experience and expertise in these areas will speak today. In particular, the noble Lord, Lord Moynihan, no doubt will contribute on the horserace aspects of the Bill.

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  However, we particularly look forward to his contribution on the Olympic bid and the necessary financial support for that.
  Turning to the detail of the Bill, Part 1 concerns the sale and dissolution of the Horserace Totalisator Board, the Tote. It provides for the vesting of the Tote's assets in a successor company wholly owned by the Crown and then the subsequent sale of that company. It also makes provision for the Secretary of State to require the Gaming Board to issue a seven-year licence to conduct pool betting on horse races. In the event that a seven-year licence is not issued or once the licence period comes to an end, the Bill provides for the future regulation of horserace pool betting by the Gaming Board. If during the licence period Parliament approves our plans to reform the general law on gambling, it will be for the new gambling commission to take over the job of regulation.
  The Bill before the House today will therefore enable the Government to deliver our commitment to sell the Tote to a racing trust and to do so in a way which is fair both to racing and to the taxpayer. In the course of my research I found out where the word -Tote" originated. Apparently "totalisator" is an Australian word for a complicated calculating machine which enabled pool betting to be developed. For that discovery I was grateful. I hope the House is too.
  The Tote was established in 1928 with an exclusive right to operate, or authorise others to operate, pool betting on horseracing in Great Britain. It was set up to provide an alternative to fixed-odds betting and to benefit horseracing. The Tote's profits over and above those required for reinvestment remain within racing, primarily through its contribution to the Horserace Betting Levy Board, payments to racecourses and its sponsorship programme. However, the Tote's present status as a public body is no longer appropriate or necessary. It is now an organisation with commercial ambitions that are likely to be inhibited by the financial constraints and accountability of the public sector.
  In March 1999 a review recommended that the whole of the Tote business should be sold as a single entity. The Government agreed and in March 2000 announced its intention to sell the Tote to a consortium representing British horseracing interests. As many of your Lordships will be aware from debates in another place, the Bill is drafted to give the Secretary of State discretion over to whom the Tote is sold. As we have stated on numerous occasions—I am happy to repeat it today—we intend to sell the Tote to a racing trust. However, we do not wish to specify details of the purchaser on the face of this Bill only to waste valuable parliamentary time bringing the issue back to Parliament if, for some unforeseen reasons, we are obliged to sell it in a different way.
  On the issue of the Tote's exclusive licence post-sale, we firmly believe it is in the public interest to open up the pool betting market to effective competition in the long term. We also believe a reasonable period of preparation is necessary to ensure that racing continues
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  to receive a reliable income stream from the Tote after its sale. Opening up the market benefits the public in terms of consumer choice and protection and benefits the betting market by safeguarding a competitive pool. That is why we announced on 27 November 2003 that, if we succeed with our plans to sell the Tote to a racing trust, we will issue the Tote's successor with an exclusive licence to operate pool betting on British racing for seven years. The seven-year figure now appears on the face of the Bill. This will give complete certainty to the racing industry, to the Tote and to Members of both Houses.
  This licence will not be extended and at the end of the seven-year transitional period, there will be a new regulatory regime that will also allow other bookmakers to provide pool betting. This regulatory regime is modelled on that which regulates the existing operation of pool betting on greyhound tracks, contained in Schedule 5 to the Betting, Gaming and Lotteries Act 1963.
  The Bill seeks to strike the right balance between providing a sensible level of certainty for racing and introducing a welcome element of competition into the pool betting market. I hope that noble Lords agree that it is the best way forward for racing, the betting industry and punters.
  I turn now to the abolition of the Levy Board. Part 2 of the Bill makes provision for the abolition of the horserace betting levy system, which includes the Levy Board and its associated levy appeals tribunals. It provides for the transfer of the Levy Board's assets and for the Gaming Board to take over from the Levy Board the function of approving racecourses.
  The Government undertook two consultation exercises in March and November 2000 to consider whether a statutory system for the funding of horseracing was necessary. While the levy has served a very useful purpose in the past 40 years, it is no longer appropriate to have a statutory scheme of that kind. It should not be for the Government or another body to dictate how much bookmakers should pay racing for the use of its product.
  The Bill will enable the Government to withdraw from their statutory involvement in the administration and financing of horseracing. We have taken steps to safeguard the important work that the Levy Board does to support veterinary research and the improvement of breeds of horses. We have always made it clear that the important work done by the Levy Board will not be neglected when it is abolished. We seek to ensure that these are maintained to at least current levels after the abolition of the Levy Board.
  We accept that the OFT inquiry has cast a shadow over commercial agreements based on the sale of racing data and media rights between the racing and betting industries. That is why we have announced that we will retain the Levy Board until September 2006. By that time, the final results of the OFT inquiry will be known, any outstanding legal action should have been resolved and, if necessary, new commercial agreements should be in place.

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  The other main area of the Bill is the Olympic lottery. Part 3 enables dedicated Olympic lottery games to be established as part of the national lottery in the event that London—of course, we all hope that it will be so—is chosen to host the 2012 Olympic and Paralympic Games. It also creates the necessary structures for holding the proceeds from these lottery games and a distribution mechanism that will enable the proceeds to be used to meet expenditure in connection with the staging of the 2012 Olympics.
  Only the wide-ranging benefits, the wholly exceptional scale and the one-off nature of staging the Olympics justify a separate funding scheme from the normal sports lottery. Staging the Olympic and Paralympic Games would lead to significant benefits extending across the United Kingdom. The Olympics has the potential to leave a lasting legacy of community facilities across the country, to inspire greater participation in sport and to increase the medal success of our elite athletes.
  Sport and the benefits of sport are not the only reasons for bidding. A London Olympics would also have a positive impact on investment, tourism and regeneration, leaving a lasting positive economic and cultural legacy for the whole of the United Kingdom. The establishment of new Olympic lottery games will be the first time that the national lottery has been dedicated to a specific cause in this way. People will be able to buy a ticket and know that revenues will go straight to the costs of staging the 2012 United Kingdom Olympic and Paralympic Games.
  Some people will choose to play Olympic lottery games instead of the existing national lottery games. However, Olympic lottery games, as part of a wider strategy for growth, have the potential to invigorate interest in the lottery in general and therefore benefit all the existing good causes. It is envisaged that new Olympic lottery games, as provided for in the Bill, would generate an estimated £750 million towards an overall £2.375 billion public package for the games. That total includes a substantial contingency.
  In addition to the £750 million from new Olympic lottery games, £340 million will be sought from the existing sports lottery distributors. How that is spent will be a matter of discussion with those bodies. Should it be required, up to a further £410 million could be met by changing the percentage shares going to the existing good causes after 2009. The balance of the £2.375 billion funding package will be met by money raised through a London council tax and, if required, funding from the London Development Agency. It is right that as a leading beneficiary, London should bear its share of the costs.
  Broadly speaking, the intention is that lottery funding should be directed to sports investment, Olympic facilities and events staging. Money raised from the Olympic council tax should address the capital requirements of the games, including transport infrastructure. The Bill will establish an Olympic lottery distributor to make grants and loans in connection with staging the 2012 Olympic and Paralympic Games if
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  London's bid is successful. The new distributor would be lean and focused with minimal bureaucracy and a small and expert board. A separate distributor is essential to ensure that effective and informed decisions are taken on Olympic expenditure.
  Everyone working on the bid believes that we have a very strong chance of success. London 2012 will be working to ensure that an extremely high standard bid meets all the criteria. So far it has done an excellent job. We are grateful for the efforts made. I should also like to take this opportunity to thank noble Lords for the immense support that the bid has received in this House so far. That support is vital to giving us the very best chance of winning and making the Games a resounding success.
  I look forward to the debate. When I wind up, I shall do my best to respond to the points made. In summary, as a result of the changes we are bringing forward in the Bill, the Government will no longer have direct involvement in the administration and financing of horseracing. Instead, racing will take responsibility for its own affairs and financing. In addition, if, as we all hope, London is successful in its bid to be selected host city for the 2012 Olympic and Paralympic Games, the Bill makes provision for Olympic lottery games to be established. They will make a significant contribution towards the staging costs of the Games.
  This Bill is a further demonstration of the Government's commitment to do everything possible to bring the Olympic Games to London. I commend the Bill to the House.
  Moved, That the Bill be now read a second time.—(Lord Davies of Oldham.)
  3.28 p.m.
  Lord Wakeham: My Lords, first, I thank the Minister for setting out the objectives of the Bill with such clarity for the benefit of us all. We appreciate that. Secondly, I should declare my various interests, which, as far as I am concerned, look rather like a history book. I used to be a director of the Tote. For a number of years, I was chairman of the British Horseracing Board. For more than 30 years, from time to time I have been a modest owner of racehorses and a great lover of racing. But I very rarely bet.
  I shall confine my remarks to the proposals for the Tote. I welcome the Bill, which, in effect, will nationalise the Tote prior to it being sold, we hope, to the Racing Trust. It is a technique that is not unknown. If I am right, it is the technique used when we were in government to deal with the problems of the Trustee Savings Bank; at the time, it was not absolutely clear who owned it.
  When I was chairman of the British Horseracing Board, a key objective was that the Tote should continue to be run for the benefit of racing. We would have preferred being given the opportunity to acquire the Tote, but in my view the Government's proposals go firmly in the right direction and they have my support.
  I have every confidence in the management of the Tote under the chairmanship of my old friend Peter Jones. He and his team are doing an excellent job in a very competitive world. I am delighted that my noble

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  friend Lord Carlisle of Bucklow is sitting in his place today. But for him we probably would not have a Tote to transfer to the benefit of racing. It was his initiative in the early 1970s which led to the introduction of a Bill to allow the Tote to engage in wider pool betting than just on course, which was an absolutely vital part of the finances of the Tote. It would have been a disaster without it. I hope that my noble friend can reflect on 30 years of a job well done.
  Lord Carlisle of Bucklow: My Lords, I say to my noble friend that the Bill belonged to the Home Secretary although I had the responsibility of taking it through Parliament. We had to pass it because at that stage the Tote was in financial difficulties. I hope that nothing in this Bill is going to damage the financial future of the Tote as an important part of the racing scene.
  Lord Wakeham: My Lords, I believe that we can all share those sentiments. I also believe that the Government are right in the way in which they have set up the shadow Racing Trust. I have every confidence in the noble Lord, Lord Lipsey, and in my noble friend Lady Noakes, who will be key members of the trust in getting the process through correctly.
  Having said that, I hope that the Racing Trust and the Tote will continue to be a force for good in what I call the minefield of internal racing politics. Racing is made up overwhelmingly of decent, likeable people, full of knowledge and experience of their sport. They realise that it is a very big industry with over 100,000 people employed in it. Six million racegoers attend race meetings every year at 59 different racecourses. It is a substantial industry and much bigger than a good many others. It has a massive amount of uncertainty. As I hinted, I fear that it gets itself into scrapes from time to time which it could have avoided.
  There are one or two further uncertainties in this Bill. There is the uncertainty about the seven years' exclusive licence and the price which the Government will demand for the Tote, which in the eyes of many will be too little and in the eyes of others will be too much, and the associated problems if for some reason the Government feel compelled to sell to someone other than the Racing Trust.
  Seven years for the exclusive licence seems to me to be about right. I do not underestimate the struggle that must have taken place within the Government to get agreement. But after seven years we cannot wash our hands of any issues which may remain. I do not expect the Government to say anything about that at this stage, but I hope that they will give it some thought, even if on a contingency basis.
  There is also the price. I suspect that the Government will find that there will be higher bids on the table than the Racing Trust is able to pay. If, quite rightly, they want to sell to the Racing Trust, the Government may find themselves in legal battles which they would prefer to avoid. Therefore, the Government may find it in their own best interests to have a clause in the Bill which
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  compels them to return to Parliament in the event that they are under great pressure to sell to someone other than the Racing Trust. I hope they will think about that.
  The whole climate of this Bill and the exercise may be overshadowed by the OFT challenge and the implications of the winding up of the levy, which is currently concerning many people in racing. However, I do not believe that these problems are insoluble. This is not the time or place to rehearse comprehensive solutions although they exist. I believe that the racing industry increasingly recognises that private negotiations are more likely to yield results than high profile public debates which merely harden attitudes. I wish the Bill well.
  3.34 p.m.
  Lord Addington: My Lords. I shall make most of my comments about the second part of the Bill relating to the proposed Olympic lottery. We approve of the aims of both parts of the Bill. My noble friend Lord Falkland will speak with considerably more knowledge than I have about the second part of the Bill. We approve of the sale of the Tote to a trust for the benefit of racing.
  My main home is now just outside Lambourn and at the top of the valley of the race horse. It is an area which I knew initially through my wife. In earlier days we used to walk around the area. I was struck by the number of horses wandering around with people of a stature rather different from mine sitting on them. My wife is rather a good horsewoman. She would say to me, "That horse will do for you". She would point to a field in which there would be a huge animal looking like a horse but, I suspect, related to a brontosaurus, either knocking over a tree or eating a hedge. She would say, "You could learn to ride on one of those". I would describe my reaction to the suggestion as being short, negative and in the vernacular. That is about as much as I know and am ever likely to know about racing.
  It is time that we glanced at the history of the lottery which is used for supporting fun. I looked up the initial actions taken as regards the lottery. Having a lottery or part of a lottery that will presumably be sold to the entire nation and not just to London—perhaps the noble Lord will confirm that point when he comes to reply—is probably a step forward.
  I looked up the initial debate in this House which took place just under 12 years ago. The noble Lord, Lord Richard, was in his place a moment ago. I believe that he took part in that debate. We heard that there were four good causes. I remember that initially there were supposed to be three and charities were put on the edge. We have sliced into a large cake vigorously over the years.
  I believe that on our Benches support was given initially because there was supposed to be additional funding to government money. That has fallen by the wayside with greater rapidity than anyone ever suspected. When there is a good cause reference is made to the national lottery, which has been described as a voluntary tax on the gullible, and the suggestion is then made that a slice should be taken from it.

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  With that in mind, I hope that the Government will make sure that they have their eye on the main task and ensure that the Olympic lottery takes place if we win the bid. It would not be necessary if sport had more of the money which the lottery was designed to raise. We shall have to create good stadiums for people to train throughout the country. If we had invested more in sport and ensured that funding was available for the groups it was designed for initially, we probably would not need to ask everyone for so much money. The main criticism will be about the other good causes which have been tagged onto the back of lottery funding. To criticise them is a little like asking whether one is against research for finding a cure for cancer. Who could possibly be against that?
  Initially, we had additional funding and not something which substituted government funding for universities and medical facilities. I hope that the Government will ensure that the idea of a legacy is worked well into the structure and planning of the funding. They should ensure that that legacy is directed to the Olympics and beyond, as mentioned in the government literature, so that we do not have the ridiculous situation of further slicing of the cake, and so that we ensure that we can go on.
  On sports medicine, if we are to get our nation active again we should recognise that repairing an elite-level hockey player's knee after a fall, for example, is the same as treating someone injured while kicking a football about on a Sunday. Non-elite athletes may not heal so quickly but the structure and mechanics involved are the same. Can the Government assure us that those projects will be set in place and that they will fit into what already exists? That is what I am calling for.
  I could discuss in great detail many other aspects of the problem that we are inheriting because of what has not been done or what has been moved away from. I shall leave noble Lords with this thought: unless we get absolutely right the sporting structures and cash in on the cultural good will that will remain, the idea of a legacy will be greatly reduced. Can the Government assure me that they plan to bring the new funding into line with the previous system and to merge them together? Can they further assure me that there will not be chipping away at the edges if we get slightly too much money, for instance, and that it will go towards the whole sporting infrastructure? If the Government can guarantee that, they may repair some of the damage caused by their simply saying, "We do not want to up taxes, let us take another slice of the lottery".
  3.41 p.m.
  Lord Judd: My Lords, at the outset I am sure that all noble Lords would like to say how exciting the prospect of the Olympic Games in London is. It is a possibility—we hope that it is more than that—that we must all relish. It would do a tremendous amount for London, the United Kingdom and the morale of the nation, and we must hope that it succeeds. In view of
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  what I am about to say—it will be very much in furtherance of the interesting arguments developed by the noble Lord, Lord Addington—I should stress that I am an honorary officer and trustee of a number of voluntary and charitable organisations. Today I want to speak about their concerns.
  I add in parentheses that more than 50 years ago I took a step regarding my own political future that has led to my being on these Benches today. One of the reasons that I took that step is that I believed in a society that got right the balance between private affluence and public expenditure, and believed that taxation, for example, was the membership fee of society. I believed that we should have wholesome and imaginative debates about what we wanted to do as a society, and then be prepared to fund them directly from taxation. That is a much bigger argument, but it is one that begins to go by default. It is time that we took the opportunity—in this House, perhaps, if nowhere else—to re-examine the principle of where in important national priorities we should strike the balance between the responsibility of direct taxation and other means of financing what we as a society want to do.
  The National Council of Voluntary Organisations is a very important gathering of all the principal active voluntary organisations in the country. It also has many smaller organisations in its ranks. Therefore, when the NCVO speaks powerfully, it is important to take seriously the arguments that it advances. The NCVO has prepared very interesting brief on the Bill. I do not, therefore, apologise for spending time referring to some of the salient points in that brief, as they are well researched and well put. The NCVO has profound doubts about the ability of the new Olympic lottery games to raise the estimated £750 million required to stage the Olympics, in addition to that which is committed to be raised for the existing good causes. It seems highly probable that such new games will eat into sales of other games thereby reducing returns to the existing good causes.
  The regulatory impact assessment of the Horserace Betting and Olympic Lottery Bill suggests that 59 per cent of the estimated £750 million to be raised by Olympic lottery games over their seven-year lifespan might come from sales diversion from existing games. Based on 2005–06 income forecasts, that would have an annual reduction to good causes of some £64 million, from a highpoint of £450 million in 1999–2000. Taking into account the decline in ticket sales over recent years, that would leave the community fund with only £198 million in 2005–06.
  The NCVO is also concerned about the powers in the Bill to permit the Culture Secretary to transfer funds from the National Lottery Fund to the Olympic Lottery Fund. The NCVO assumes that those powers would be used if the Olympic Lottery games failed to raise the required £750 million, or if the contingency of £410 million were required for any other reason. If that happened, it would further reduce returns to existing good causes. At present, a 12 per cent duty applies to each lottery ticket, bringing in some £549 million per

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  year. The original rationale for that was to compensate the Treasury for duty lost from other forms of gambling as people switched to playing the lottery.
  The NCVO argues that the original rationale for that 12 per cent duty has become questionable because of recent changes in how other gambling activities are taxed and the growth that the market has since experienced. It believes that the time is now right to reassess the use to which that money is put, and suggests that the overriding aim should be to maximise return to good causes. In that context, the NCVO proposes that half of the tax take should be redirected into the lottery prize fund for mainstream games, thus helping to reinvigorate the lottery with more and bigger prizes, and in the long term increasing returns to good causes. The remaining half of the tax should then he redirected to the existing good causes in the same proportions as the proceeds from lottery gains. That would help to maintain returns to the existing good causes when Olympic lottery games are introduced, and it would go some way to protecting against the impact of a 59 per cent sales diversion from mainstream games to Olympic lottery games.
  That brings us to the Culture Secretary's powers to transfer lottery funds. The NCVO believes that the powers to permit the Secretary of State to make payments from the National Lottery Distribution Fund into the Olympic Lottery Distribution Fund set an unnecessary and worrying precedent. It proposes that the Secretary of State should instead be given powers to transfer unclaimed lottery prizes into the Olympic Lottery Fund. Total unclaimed prizes were worth more than £590 million at the end of 2003. That compares with the contingency of £410 million that would otherwise come from the National Lottery Distribution Fund after 2009, if that was required. The NCVO's proposal would allow for such a contingency without the need to raid the good causes. Unclaimed prizes are currently distributed to the existing good causes in the usual proportions. That money is additional to the 28 pence in each lottery pound that they already receive. In effect, it is a bonus.
  In preparing to take this Bill forward for this immensely important objective of the Olympic Games in London, I hope that the Government will take very seriously the considered and careful analysis by the NCVO of what, no doubt unintentionally, the adverse implications may be for the voluntary and charitable sector. I hope that my noble friend, on behalf of the Government, will be able to say very specific reassuring things about this matter in his winding-up speech; and that, as the proceedings on the Bill go forward, specific amendments—where necessary—may be brought forward by the Government to meet some of the genuine anxieties that exist.
  3.50 p.m.
  Lord Brooke of Sutton Mandeville: My Lords, as a former Member of Parliament for a London constituency. I join the noble Lord, Lord Judd, in expressing enthusiasm for our Olympic bid. I am old enough to have taken an informed interest in the 1948 Olympics, for which, of course, we volunteered rather
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  than applied. I shall speak about the first three parts of the Bill in that order, though reasonably briefly in each case.
  As for Part 1 on the Tote and its future, though a regular Tote customer on course, I am not qualified to speak in depth. I can still recall with pleasure the late Lord Woodrow Wyatt's annual lunches, though I doubt if I have to declare a retrospective gastronomic interest. I recall with even more pleasure his annual speeches thereupon. My other incidental Tote pleasure has lain in attending Arab horse racing, not in the Gulf but on the spacious racecourse attached to the Royal Artillery camp at Larkhill.
  Those of your Lordships who read 50 or so years ago the novel Mountolive by Lawrence Durrell—the third in that particular Mediterranean Quartet—will recall the marvellous description of a duckshoot in Egypt attended by the eponymous Mountolive, either the British ambassador or the commissioner, I cannot recall which. Some flavour of that Egyptian scene is mutatis mutandis transferred to the Larkhill course even if the purpose of the event is different. The occasional British spectators at Larkhill who are ignorant of the general Arab horse racing scene recognise fairly early on that the data which underlay Damon Runyan's famous aphorism put into the mouth of one of his more memorable characters—that the race is not always to the swiftest but that's the way to bet—are not so readily available in that exotic racing niche, but a worthwhile proxy is to see which Arab horses the more experienced jockeys have chosen to ride.
  If you ignore Damon Runyan altogether, and perversely turn the proxy alternative upside down by going for the outsiders, the Tote affords one the ineffable pleasure of seeing that more than £200 of potential winnings are available on first place for a particular outsider because you are the only person on the course who is backing that horse. It is, with experience, a temporary and expensive boost to one's ego, but briefly extremely pleasurable.
  On Part 2, the abolition of the horse race betting levy system, I suppose I should declare an interest as being related to my noble kinsman Viscount Brookeborough, for it was his side of our family that in 1934, also in Egypt, created the Brooke Hospital for Horses. Mentioning that interest is prompted by the letter others of your Lordships may have received from the League Against Cruel Sports evincing its concern about the welfare of a minority of retiring and retired race horses which may be affected by the abolition of the levy and thus its welfare contribution without cast-iron guarantees being expressed either by Ministers or in the Bill. However, that issue is for Committee. Incidentally, I am not in any way raising this issue in order to imply that horse racing is a cruel sport.
  I am more concerned by the anxiety expressed by the British Horseracing Board that if in the autumn of this year the European Court of Justice were to overturn the High Court judgment in support of the British Horseracing Board's database rights, which was referred to the ECJ by the Court of Appeal—and I should declare an interest in that my brother sits in that court—racing's ability to provide an adequate and sustainable

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  commercial replacement for the levy would suffer serious repercussions. Like others of your Lordships, I look forward to hearing what the Minister has to say in further comment on that.
  On Part 3, the national lottery and Olympic lotteries, I can comment most, at least at the generic level. I am delighted that the Government are seeking legislative cover for this project or projects. Because I was the "master mason" of the National Lottery etc. Act in 1993—I would not dream of calling myself an architect of it, though you could staff a decent-sized architectural practice with those who might make that claim—I was particularly preoccupied in the lottery's early days to sustain on behalf of the Government both the arm's length principle and the principle of additionality. I think it surprised the first holder of Oflot—I always personally regretted that his initials were not AER since he would then have become "AEROFLOT"—that I never showed the remotest interest in Oflot's progress in selecting the winner of the lottery licence competition until he told me who had won late on the eve of announcing the winner on the morrow, but I was anxious to stand absolutely apart from what was not my business. I mean no criticism of the then Prime Minister, but I did personally regret the moment when, understandably from his own enthusiasms, which I myself shared, he said that the sports distributor of lottery funds would support the new cricket academy, for that did imply some degree of ministerial intervention.
  I am, however, a little concerned about the implications of the new lottery purpose for the level of other funding of good causes, and in that I follow the noble Lord, Lord Judd. When we were rolling the pitch for the national lottery in the autumn and winter of 1992, concern was expressed by the NCVO that charities would suffer from funds that in a pre-lottery era might have come to them direct, being diverted instead by democratic choice to other good lottery causes and thus diluted. Our only direct paradigm for this particular dilemma at that stage was Ireland, and the evidence there was ambiguous because of the way it chose to distribute the residual proceeds of its lottery.
  We did, however, have a medium-term solution—an annual debate, if Parliament wished it, which could by statutory instrument have changed the precise lottery distributor shares, and the long stop—in due course—of the disappearance of the Millennium Commission and the availability of its share for redistribution including possibly to charities.
  The incoming Government in 1997 decided to change the distribution pattern through primary legislation. I regretted that this was sustained by a consultation dominated by other producer interests who understandably supported a redistribution to themselves. I subsequently had misgivings about the Government telling me of ventures in my constituency which the New Opportunities Fund had decided to support before the New Opportunities Fund told me so itself. That also smacked of too much government intervention.
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  However, that is all in the past. It is a privilege to be followed in this debate by the noble Baroness, Lady Pitkeathley, to whose speech I look forward. As the noble Lord, Lord Judd, foreshadowed in his speech, however, I am alarmed to see that the same anxieties that the NCVO expressed in 1992–93 are now being repeated by that organisation again a dozen years later in the context of this legislation. I am not aware of its having directly briefed me, but I was aware that the issue arose. I am not particularly attracted by any of the solutions suggested by the NCVO, but it implied further manipulations of the lottery which endanger yet again the principle of additionality, though the arm's length principle is more substantially protected by this Bill.
  I will utter one brief footnote to the speech of the noble Lord, Lord Judd, where he said that the 12p that the Treasury takes was to compensate for other gaming or gambling betting expenditure being switched into the lottery. The 12 per cent is a minor matter of history but was decided upon by my noble friend Lord Lamont, then Chancellor of the Exchequer, and myself in a room with no other official present. The noble Lord, Lord Lamont, is not present so I am the only witness who can describe the event—that was how the figure was reached. The degree of precision—in terms of compensating the Treasury for previous expenditure—was not really gone into.
  Lord Judd: My Lords, I am grateful to the noble Lord for giving way. Can we place on the record his charitable good will towards the interests of the Treasury, together with those of the noble Lord, Lord Lamont?
  Lord Brooke of Sutton Mandeville: My Lords, I am very grateful to the noble Lord for saying that. One of the potential beneficiaries of the lottery thought that I had won a significant victory. I told that beneficiary privately that it was a quite exceptional mistake to air that view because if the Treasury felt that it had not taken enough, it would certainly want to secure its revenge. However, the figure was reached between the two of us in private.
  The Minister and, possibly, the noble Baroness, Lady Pitkeathley, will have a chance to tell us more about this subject at a later stage. All in all, the Committee stage of this Bill promises to be both interesting and potentially rewarding if the draft gambling Bill and its prolonged pre-legislative scrutiny releases some of us in time to participate.
  Finally, as the only member of the Delegated Powers and Regulatory Reform Committee to be taking part in this debate, I hope that the Government will look favourably on our observations on this Bill.
  4.1 p.m.
  Baroness Pitkeathley: My Lords, I shall declare two interests. The first is as a part owner of an extremely unsuccessful steeplechaser. That is not of concern to noble Lords, especially if I offer a tip for when he next

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  runs. My most important interest is my position as chair of the largest of the lottery distributors, the New Opportunities Fund.
  The first point I want to make is that the good causes support London's bid for the 2012 Olympic Games. A range of New Opportunity Fund programmes across the United Kingdom will support community-based projects linked to the Olympic bid and we believe that the interest in that bid will inspire greater participation in sport and physical activity. We are all concerned about encouraging the people of the United Kingdom to take more exercise.
  All at the New Opportunities Fund understand that the implications of the new Olympic lottery games on existing good causes will be factored into calculations of future income and the funding available for programmes. We welcome that. However, noble Lords will appreciate that the good causes are worried that the amount of money they have will reduce as a result of the Olympic lottery games. We have to accept that some people will choose to play the new Olympic lottery games rather than the existing games, although we can only speculate on the potential impact. As we heard from the Minister, current estimates suggest that sales could lead to an average annual reduction in income of 5 per cent to the existing good causes over the period of the Olympic Games preparation; that is, from 2005 to 2012. These estimates have been taken into account for planning purposes.
  It is important to recognize—and we do—that these games have the potential to reinvigorate interest in the lottery in general and therefore to benefit existing good causes. We believe that Camelot should help to minimise the impact on the existing good causes and that that can be done by the company continuing to launch non-Olympic lottery games. Since it is intended that staging the Olympics should bring benefits across the range of funding sectors, the new lottery games should be seen as part of a wider strategy for growth seeking to reinvigorate interest in the lottery as a whole.
  I should make it clear that the New Opportunities Fund and the Community Fund are currently supporting the Olympic Games bid. The NOF is running a range of programmes that are directly relevant to it, including the new opportunities for PE and sport programme, school sports co-ordinators and Active England, which is a joint programme with Sport England. By funding new sports facilities and promoting activity across the country, these programmes will help to emphasise the regional dividend from London's bid for the Olympic Games.
  Noble Lords will be aware that a new distributor is about to be created as a result of the merger between the Community Fund and the New Opportunities Fund. While these are matters for the new distributor, I know that it will similarly be concerned about falling ticket sales. Recent forecasts for lottery ticket sales show a small but steady decline, suggesting a further 5 per cent fall as a result of the Olympic lottery game. But I assure noble Lords that these forecasts are built
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  into the spending plans of the new distributor. If there is no more than a 5 per cent fall, that should be manageable.
  So far, so good, but I must express two serious concerns about the provisions in the Bill. I and others such as the NCVO, as we heard, are concerned about the powers to be introduced that will permit the Secretary of State for Culture, Media and Sport to transfer funds from the National Lottery Distribution Fund to the Olympic Lottery Distribution Fund. We assume that those powers would be used if the Olympic lottery game failed to raise the required £750 million, or if the contingency fund of £410 million were required for any other reason. If that were to happen, it would reduce further the returns to the existing good causes, which would be a major source of concern. I hope that my noble friend on the Front Bench can assure me that if the current or any future Secretary of State took those powers, he or she would pay the closest possible attention to the effects on the good causes before he or she used them.
  The timing of the introduction of the Olympic lottery games is also of concern. A separate lottery funding stream can be justified only by the exceptional scale and one-off nature of staging the Olympics. The logic of that position is that the Olympic lottery games should not be launched unless and until the bid to stage the Olympic Games has been won. The contingency planning undertaken by all the UK and England distributors in conjunction with the Department for Culture, Media and Sport is based on the possible introduction of Olympic lottery games in July 2005.
  I have made it clear that the distributors are understandably concerned about the potential impact of the new games on their funding programmes which, in spite of what one may read about balances, are already substantially, though prudently, over-committed. Not only would an earlier launch of the hypothecated games be difficult to justify, it would exacerbate the negative impact on our programmes and beneficiaries across the country. My concerns are focused in particular on the credibility of the new distributor and its role in leading the reform agenda in relation to lottery distribution.
  I did not intend to comment on the dreaded problem of additionality, which always arises in discussions on lottery funding, but since it has been mentioned, I shall say a few words about it. I should not presume to speak on behalf of my fellow distributors, but I can assure noble Lords in the strongest possible terms that all the distributors are extremely concerned that what we fund is not a substitute for current or planned government expenditure. The concept of the added value of lottery programmes is dear to all our hearts. Should noble Lords want confirmation of that, I refer them to some of our recipients, those who receive and use the money so effectively. They will often emphasise strongly that lottery funding is different from statutory funding. Should noble Lords want any specific feedback, I volunteer to provide it.
  Since it was set up, through its distribution of funds to good causes the lottery has made a huge contribution to communities in the United Kingdom, especially to

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  disadvantaged groups. That contribution must continue and grow. Subject to the provisos to which I have referred, I believe that Part 3 gives us an opportunity to see that it does.
  4.8 p.m.
  Lord Soulsby of Swaffham Prior: My Lords, this Bill proposes to abolish the horse race betting levy system and to sell the Tote in order to raise money to make provision for hosting the Olympic Games in London in 2012. I am sure we all hope that the bid is successful and that we can celebrate holding the Olympics in this country.
  I declare an interest in that I have had a connection with the Horserace Betting Levy Board for several years. I was chairman of the Veterinary Advisory Committee to the board for some 12 years. This is an area on which I wish to comment, in addition to other matters that might be considered minor. However, I want to comment on them in case they become lost in the major exercise.
  Although the funding of the Veterinary Advisory Committee was only of the order of £1.5 million per year, it was the envy of many other countries where thoroughbred racing was practised but where no scheme such as the Horserace Betting Levy Board scheme was in operation. Over the years, it has funded research into important issues such as lameness and tendon injuries, and into infectious diseases such as flu, strangles, contagious equine metritis and grass sickness, which it is still investigating. It has also supported the training of research veterinarians and clinicians. Indeed, it was the only source of significant funding for equine research in this country as other organisations fund only non-invasive research, not the kind of research supported by the Levy Board.
  The abolition of the Levy Board has raised concerns about the security of this veterinary support as well as its other statutory responsibilities, namely the improvement of horse racing and the improvement of breeds of horses. It is important therefore that Clause 16(6) of the Bill includes a specific direction of support for these areas and that it is committed to the undertaking given by the Minister in another place on 22 January 2004. He stated:
  "We have always made it clear that the important work done by the levy board will not be neglected when it is abolished … The BHB, to whom the bulk of the assets will be transferred, has already given us an undertaking that it will continue to fund public-interest areas such as veterinary research and education. It will also continue to provide funding to welfare projects such as Retraining of Racehorses, which have in the past received levy board grants".—[Official Report, Commons Standing Committee D, 22/1/04; col. 074.]
  The noble Lord, Lord Davies of Oldham, has today reiterated that undertaking.
  An area of particular concern is that of the fate of animals after their racing life is over, which involves some 4,000 horses per year. Although the vast majority are well cared for and go on to productive and enjoyable careers, in some 300 or so cases per year there is a need for charitable intervention. The charity
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  Retraining of Racehorses serves this purpose well. It receives £50,000 per year from the Levy Board and, additionally, is well supported by charitable giving.
  However, that other racing animal, the greyhound, does not have such support and yet the issues are parallel to those of the thoroughbred. There is now an opportunity to attend to this deficit, again under Clause 16(6) of the Bill.
  There is concern that effective permanent arrangements are in place for the transfer of the Levy Board Capital Fund to a successor and that it continues long term to support investment in racegoer facilities, tracks, horse health and welfare and safety. The Racecourse Association proposes that to safeguard the capital fund a trust should be established to administer it which is independent of both the racecourse as beneficiaries and of racing's governing body.
  Finally, I wish to comment on an important though minor area of support given by the Levy Board—that is, to rare breeds of horses. It is a relatively small amount—£130,000 per year—but it is an important source of funding in this area. In this country we have more native breeds of horses than any other country world wide. Of the heavy horses, the Suffolk Punch is the rarest, but the Shire, Clydesdale, Cleveland Bay and the Irish Draft are all increasingly rare. Of the ponies, the Exmoor, Dales, Fell, Highland, Feral Welsh and even the Hackney horse are on the rare list.
  Support for the Rare Breeds Survival Trust would, to my mind, play an important part in maintaining our national heritage and we should not lose sight of that in this major reorganisation of the levy system. The new legislation does not specify what shall be funded, neither does it give any guarantee that funding will be safeguarded in either the short term or the long term. I hope that the Minister will comment on that point.
  The need for funds to support the bid for and, if successful, the 2012 Olympics in London is accepted. But what happens thereafter? The Olympics are only eight years away which, in terms of veterinary research on the horse, represents only two tranches of approved studies and training for clinical research veterinarians.
  I believe that many individuals associated with the numerous aspects of the racing of horses and greyhounds, both of which generate vast sums from betting, would wish to see these funds used to support the Olympics bid. But they would also wish to be assured of a fair deal for the animals that generate the funds and bring so much pleasure to the public.
  4.17 p.m.
  Lord Lipsey: My Lords, I declare a double interest. First, like the noble Baroness, Lady Pitkeathley, I own part of a horse—in my case, a very useful horse—but, before my noble friend drools too much in envy, I should inform her that it is only half-way through two years off the course with a tendon injury.
  My second interest is a more serious one. As the noble Lord, Lord Wakeham, mentioned, I am chair of the shadow trust set up as a precursor of the trust that the Government intend will own the Tote on behalf of racing should the Bill become law. I have a strong

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  personal interest in the Bill. I have spent much of the past three or four years agitating, behind the scenes and in front of them, in favour of this legislation. So this is an exciting day for me.
  Although confining my remarks to the part of the Bill concerned with the Tote, perhaps I may set the Bill in a wider context. My excitement goes wider than the effect the Bill will have on horse racing. It is a major step forward in public policy in a way that is frequently not mentioned.
  The Bill represents a rare occurrence—that is, a measure of nationalisation without compensation. There is nothing in the Bill about Tote trusts and so on; it is merely a measure to nationalise the Tote without compensation.
  For a great deal of my time in the Labour Party, such measures have been one of the main subjects of discussion. Until recently, the party was committed to nationalising everything under Clause 4 and the lefties—my noble friend Lord Smith will remember this—were calling for the nationalisation without compensation of the 250 major monopolies. I am sure they are surprised that a government under the leadership of Tony Blair should produce a measure of nationalisation without compensation, but I am not sure that they are quite so pleased that this has been done for the benefit of horse racing,
  I say this because it is quite significant how swiftly nationalisation—at one point the central objective of one of the major parties of state—is now accepted to be an inefficient way of running industry. I do not want to go through all the reasons why that was so—the lack of incentives, state interference and so on—but there are no advocates of nationalisation left; we are all privatisers now.
  On the other hand, recently we have observed a certain discomfort—I put it no higher than that—with some of the forms that privatisation has taken; for example, some of the huge windfall profits that have resulted for the City and some of the salary increases that have been granted to the people concerned. There is a feeling that there might be something other than full, red-in-tooth-and-claw privatisation as an alternative to nationalisation which combines the best of both worlds.
  In the Bill before us, or at least in the Government's intention about what should happen once the Bill is passed, we see just such an alternative. On the one hand, we shall get the benefits of privatisation. It will no longer be the case that the state can interfere with the development of the Tote. The management will be left to get on with the job and will be incentivised to do so. If it fails, it will be got rid of without any need for Ministers to be involved. Much as I too loved Lord Wyatt, I do not think that if he had been appointed by the Tote shadow trust his tenure as chairman would have been as long as it turned out to be under the patronage of successive Tory Home Secretaries and Prime Ministers.
  That is one side. On the other hand, the Bill is not to create a bonanza for the City or to make a few men very rich. It is to benefit and enrich an industry that is, as the noble Lord, Lord Wakeham, said, central to our
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  national life as an industry and as a sport. That is the wider picture that we should bear it in mind. We must not forget it as the Bill goes through.
  Having wasted too much time in partisan wrangling over ownership, I take great comfort in the fact that, as a pragmatic way forward, I understand that the Bill has the support of the Government, the Official Opposition, the Liberal Democrats, the many Cross-Benchers who have spoken on it and of men and women of all parties and none.
  I welcome the principle of the Bill very much but I want to raise two caveats. I must tell the Minister that we shall come back to them ad nauseam in Committee. The first is the price. How much will the Tote be sold to the racing trust for? If it is to be sold at full value, it will not be of much use to racing. Racing would find its present income taken away from it to service the necessary debt.
  I have no doubt that the correct price is zero. The Government did not set up the Tote. It was set up by a Private Member's Bill in 1928 with no help from government. The Government have not put one penny into the Tote. They insist that they do not stand behind the debts of the Tote. Throughout the Tote's history, governments have inhibited its development. It was prevented from betting on other sports. It was prevented from having betting shops. It was prevented from having fixed-odds betting—the noble Lord, Lord Wakeham, referred to the work of the noble Lord, Lord Carlisle of Bucklow, on that point. More recently, the Tote was unable to move into the offshore on-line betting market because it was state owned—a company whose board was appointed by the state, to be accurate—and that was not the sort of thing such a company was allowed to do. The only positive contribution of government to the Tote is the exclusive licence, which we will lose in fairly short order, although we are glad of the seven-year concession. So the Government have no right to a penny for the Tote and I insist on that as a principle.
  Having said that, I am a pragmatist and I know that the Government would not bring the Bill forward unless they get some consideration. I know that there are European state aid considerations that have to be weighed. I therefore know that the price will not be zero, much as I would love it to be. But it is essential that the price should be reasonable. It should be based, not on the open market value of the Tote, but on its value in a sale from a single seller to a single buyer—namely, the trust—and it should make full allowance for certain things in the Tote's balance sheet which reduce that value, such as its pension fund liabilities. In other words, the price must be reasonable.
  That will be negotiated after the Bill has gone through. There is a hazard there and that is what I turn to next. The Bill simply nationalises the Tote. There is nothing in it about selling it to a racing trust, although I noted the reassuring words of the Minister. But what would happen if the day after Parliament passed the Bill we had a change of Secretary of State or a change of Government? Perhaps the Treasury gets into an unusually greedy—perhaps a usually greedy—mood and the Government suddenly decide that they would

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  rather sell the Tote to Ladbrokes for loads of money than sell it to racing for a more reasonable sum. I do not believe that the Government are planning any such thing and I believe their assurances in this regard, but life changes in politics.
  As the Bill is drafted, there is nothing to stop the Government. They could go ahead the day after Parliament has passed the Bill and flog the Tote to the highest bidder to line the pockets of the Treasury or for whatever reason. That is not the Government's intention, but intentions can change. I think that it is crucial that, before the Bill leaves this House, a clause should be inserted that says that the Government may sell other than to a body standing for racing only with the permission, by vote, of both Houses of Parliament.
  Note what I am not saying. I am not saying that if the Government want to sell to someone else they have to pass a new Bill. That would be too much. I chair the Racing Trust and, angelically as we have behaved until now in a spirit of perfect amity, I can imagine circumstances in which it falls apart and it was therefore impossible to go ahead with that sale. Racing has been known to fall apart as the noble Lord, Lord Wakeham, also pointed out. In that case it would be perfectly reasonable for the Government to come back to Parliament and say that the Racing Trust cannot buy the Tote and so they are going to flog it to A, B or C and for Parliament to approve that. So we are not asking for a new Bill, but we are asking, and will ask, for an affirmative resolution of both Houses before that happens.
  I was surprised and disappointed by the Minister's remarks on this point because he said that it would be a waste of scarce parliamentary time to require such a procedure. What is this Parliament for? We would be talking about a government who were attempting to do something that was in direct contravention of the understanding on which they had put through the Bill. It would be a government who were proposing to do something that was a direct breach of an explicit manifesto commitment and were attempting to do it without parliamentary approval. If to debate and vote on that is a waste of parliamentary time, we waste a lot of parliamentary time in this place. It is essential that such an amendment is made to the Bill and we shall press that point until we are satisfied.
  This is a good Bill. The minor change that I am proposing, to which there can be no reasonable objection, will make it a better Bill. After that, it will be the duty of the Tote and the trust, which I have the honour to chair, to turn the Tote, which is a much-loved British institution, into an institution that is also a powerhouse of British bookmaking, so that the great horse racing industry of our country can flourish and prosper.
  4.28 p.m.
  Lord Glentoran: My Lords, I must declare two interests. First, I am a still serving member of the Millennium Commission; and, secondly, I am a living Olympian.
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  Unlike the previous speaker, the noble Lord, Lord Lipsey, I shall not talk about the Tote. I wish to make a few comments about the forthcoming Olympic bid. On 15 May last year, the Secretary of State made a Statement announcing that the Government had decided to back a bid to host the Olympic Games and the Paralympics in London in 2012. The Government and the Mayor of London have agreed a funding package of up to £2.375 billion to help to meet the costs of staging the Olympics in London in 2012, including support for elite sport and associated sports events. Under the plan, the national lottery will contribute £1.5 billion, primarily from new Olympic lottery games, to be provided for by the Bill and the existing sports lottery streams.
  I am pleased to assure the House that I wholeheartedly support London's bid for the 2012 Olympics. Indeed, I expect and hope that a Conservative government will have the pleasure of being in power during the planning stage and the hosting of the Games. A successful London bid would provide huge benefits for the people, not only of London, but of the UK as a whole. It would lead to regeneration, providing jobs and prosperity in London and beyond. It would further reinvigorate British sport, and increase the active participation of young people in particular. It is a fantastic opportunity, and I am delighted that there is support across the political divide for the London 2012 bid.
  The main provisions of the Bill concerning Olympic Lottery games provide for the regulator—the National Lottery Commission—to license Olympic Lottery games; the establishment of a fund to hold the proceeds generated by those games; and the establishment of a body to distribute money held in the fund. I shall say a little more about that in relation to the future of the Millennium Commission. The Bill also provides that the money held in the fund is to be distributed to meet expenditure in connection with staging the 2012 Olympic and Paralympic Games in London.
  I want to impress on the Minister how important I believe it to be that the Government are seen to give their wholehearted support to the Olympic bid. So far, the Government have done quite well in that respect. However, I believe that the Bill offers an additional opportunity to demonstrate the Government's total and unimpeded commitment.
  The Government's decision to keep the tax that will be generated by the new Olympic Lottery games for the Treasury, rather than hypothecate it for the Games, was referred to earlier. As my noble friend Lord Brooke pointed out, that relates to 12p in the pound, or 12 per cent. I believe that the Government should hypothecate that tax so that the extra funds can go directly to the staging of the Games. At the current 12 per cent rate of tax, that would raise about £320 million over the seven years, which equates to about half the amount that it is anticipated will be raised by the precept on London council tax payers, which I am sure that noble Lords will agree is not unreasonable.
  I am aware that, so far, Her Majesty's Government have shied away from making that commitment. The Chancellor has been wielding the big stick. I am sure.

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  I hope that the Minister will be able to have a little influence on the Chancellor of the Exchequer on that point; I wish him luck in the attempt. Apart from the financial situation, such a commitment would, most importantly, send another powerful message to the IOC of Britain's determination to host the Games.
  I want the Olympic Lottery games to be successful. In a time when lottery sales are in decline, it is vital that the games are publicised and supported. Surely the forthcoming Athens Olympics this summer represents the perfect opportunity to launch the lottery games. I am aware that the IOC has ruled that a lottery which funds the Games cannot be launched before the winning bid is announced. However, it is perfectly possible to start the games this summer. That is where my ideas about the future of the Millennium Commission come into play.
  The Millennium Commission is already a distributing body; it is in being. It has a remit, which admittedly is running out, to celebrate 2000. I suggest that it would not take a very large piece of legislation to change that remit to celebrating 2012. I know from tests that we have done over the years, within the department and outside, that the Millennium Commission is highly thought of by the general public and the lottery players in this country for what it has done.
  Using the Millennium Commission, we should be able to start to turn the clock back. My noble friend Lord Brooke made a clear distinction about "arm's length" and "not for use by the Government". It was for such projects that the lottery was originally set up. When I first joined the commission and when my noble friend set it up, 50 per cent of lottery funds went to good causes. That is not so any more—they go to a number of government initiatives in various disguises. It is high time to return lottery funds completely and wholeheartedly to good causes and arm's-length issues. What better cause than promoting the 2012 Olympics?
  I would be interested to hear from the Government what private sector involvement they expect, and what steps are being taken to stimulate such involvement. The bid currently has all the appearance of a public sector activity funded by lottery funds, council tax payers and even—dare I say it?—national taxpayers through the London Development Agency. Many successful recent Olympic Games—certainly the past two—have harnessed the resources of the private sector to deliver considerable income for expenditure on facilities and infrastructure for the Games. I hope that the Minister can reassure the House that the Government intend that the private sector will support the public funds that will be available from the Olympic Lottery games and council tax.
  4.35 p.m.
  Lord Smith of Leigh: My Lords, I also broadly support the Bill. I am sure that the Minister must be overwhelmed by the amount of support that he has had today. When one makes the final Back-Bench contribution, it is always difficult to find something fresh to say, particularly when one follows the noble
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  Lord, Lord Lipsey. However, I shall speak from a different perspective on the Tote, as I own no racehorses but only two cats. I intend to speak largely on Part 1, but I would like to make some brief comments on Part 3.
  From my perspective, coming from the north-west, I want to say that the bid is not a London bid, but a UK bid. We should all get behind it. One of the successful aspects of the Games these days is to make sure that there is provision of training camps at different locations at which the teams can prepare and acclimatise prior to the Games themselves. Such camps will obviously need to be spread around the country and based on existing facilities. I ask my noble friend to clarify whether Clause 30, which provides for facilities outside London to be paid for as part of the lottery, can be used for training facilities as well as for direct facilities to do with the Games. If he cannot do it today, I ask him to write to me, and I hope that he answers in a positive way.
  My interest in Part 1—the sale of the Tote—stems from my main job, which is leader of Wigan Council. I want to praise the late Lord Wyatt. He came up to Wigan in the mid-1980s and, following a meeting with the council, decided to move the Tote's credit division up to Wigan. Being Lord Wyatt, he wanted it done there and then, so the council had to vacate an office block to facilitate the Tote's move to Wigan. I hope that it has been a terrific move for the Tote; it has certainly been terrific for us. The number of staff employed by the Tote in Wigan has trebled from its original number to more than 600, making it the second-largest private sector employer in the borough. The Tote's business plan proposes that it transfer the remainder of its operational divisions to the borough, bringing in more than 250 additional jobs.
  In Wigan, the Tote does not simply provide jobs. It is an excellent employer, working with the council on a green travel plan, and is recognised for the work that it does in employing disabled people. Both its managing directors who have worked at the Wigan site have contributed their skill, time and experience to help to regenerate the borough. I hope that noble Lords can understand why I am so concerned that the changes proposed by the Bill make sure that the Tote and its successor continue to operate successfully. For 75 years, it has been a remarkably successful organisation, providing a fair deal and a wider choice for punters, and reinvesting the surplus into racing, to the tune of more than £100 million in the past decade.
  Much has been achieved despite the Tote's current status with government supervision, which has not been conducive to releasing the entrepreneurial and innovative skills of its staff. The noble Lord, Lord Lipsey, alluded to the matter and gave the example of the technology, saying that it was opening up new ways of betting and gambling but that the Tote was forced to follow. It could not lead on this. It was playing "catch-up" because permissions were slow in coming from government departments.
  The Bill implements the 2001 Labour Party election pledge. It has great support from the House, the industry, and the Transport and General Workers

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  Union, which represents the staff employed. That is a remarkable consensus. I pay tribute to the Minister for Sport who was present earlier. His personal lead has been important.
  However, there are two matters of concern—they have been raised by other noble Lords—which I must again raise with the Minister. It is much appreciated that the Government have now confirmed in the Bill the seven-year exclusive deal. Seven years is the minimum period for the protection of the Tote's successor before opening up to full competition. That period has been accepted by all concerned. We must now work to ensure a successful transition. In a Statement in November, repeated at Second Reading in another place, the Minister for Sport was adamant that there could be no extension. The Minister in this House made the same statement earlier. However, there may be some circumstances in which the interests of the racing industry, the punters and the Tote as an organisation may benefit from such an extension. I do not know what they could be, but it is important never to say "never" in politics. The Government should allow themselves more flexibility.
  As my noble friend Lord Lipsey made clear, the key is the price at which the Tote is sold and the process by which that is achieved. The price must be fair to the successor trust, reflecting the minimum period of the exclusivity agreement. It must not saddle the trust with a debt which takes money out of racing. I believe that the Minister for Sport will be reasonable but we know that other pressures prevail in government. As the noble Lord, Lord Lipsey, stated so eloquently, the Exchequer has not contributed to the Tote as an organisation. It has not put taxpayers' money into it. Nor does it at present receive any income from the Tote. Therefore, anything it receives from the sale is an unexpected bonus.
  I hope that when the Minister sums up, he will outline what the Government intend to do if they cannot over time reach agreement with the Racing Trust. That matter concerns us. I fully support the nature and intention of the Bill. It will sell the Tote to the Racing Trust, which will operate in the interests of racing. It will have the freedoms and flexibility to compete effectively but will be good for an organisation that I want to succeed. However, I do not necessarily support a sale to the highest bidder. I hope that the Government realise that they have the backing for their manifesto statement but I hope that the Minister can assure the House as regards anything else that may occur.
  4.43 p.m.
  Viscount Falkland: My Lords, I wish to deal with the part of the Bill which deals with the transfer of the Tote to a private trust. My noble friend Lord Addington dealt admirably with the part of the Bill which deals with the Olympic lottery.
  As no one else has done so, perhaps it is appropriate to sketch the background of racing against which the proposals are set. Racing in Britain is some 250 years old. I think that I am accurate in saying that it has set the pattern and standard of thoroughbred racing around
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  the world. Today racing is in a very good state. The component parts of racing—it is now a complex industry—have gone through a period of unprecedented squabbling, argument and discussion, but we are seeing a resolution of that. Life is far more complex with the advent of new technologies, the number of horses that run, security problems and so on. A number of areas of racing are becoming more efficient. When the grandees and the super rich of the early 18th century raced their prized thoroughbreds against each other on pieces of land which became the racecourses of England, 59 of which survive today, racing was a fairly simple matter. As we came into the 19th century, it managed to garner interest from the public at large. It was, and I maintain still is, one of the linchpins of a relationship between urban and rural Britain—a relationship which has become strained in recent times.
  The racing and bloodstock industry accounts for 60,000 jobs. A further 40,000 jobs in the betting industry are related to racing. The development of betting has again been a model to the world, although we have taken a somewhat different course from most other countries. In most other countries one finds a tote monopoly. Monopoly is a difficult word to use. From the Government's point of view, it is easier to run racing in a country with a tote monopoly. It is a dirigiste way of doing so. It is easier for the Government to extract what they require and to disperse for the benefit of the industry.
  However, in this country in the 19th century, bookmakers fell in step with the new laws governing betting. Those who did not wish to do so went to France. That again was a contributory factor to the French going for the pari mutuel system. They did not want what they understood as bookmaking, having seen the disreputable part of our industry which had emigrated to France. That is one of the circumstances of history.
  Bookmakers in this country have worked responsibly to the benefit of racegoers in a fairly liberal regulatory environment. In 1928 the Tote was created for those who did not want to bet with bookmakers. There are still those who do not want to bet with bookmakers. It is noticeable that the biggest tote pools in racing are on those occasions which are largely social by nature. At Royal Ascot and Cheltenham people may have difficulty in moving around, apart from anything else; but people who are new to racing prefer to bet in the pool rather than with the fixed-odds bookmakers. That has not been to the benefit of the Tote because it has had to compete. Although the Tote is a monopoly of the pool betting, for which it was given a licence, it has had to compete with the bookmakers—and not altogether successfully.
  As the noble Lord, Lord Wakeham, said, the noble Lord, Lord Carlisle, was instrumental in bringing about the change which allowed the Tote to buy into fixed-odd bettings through betting shops. It became de facto a bookmaker because the majority of its profits came from those shops which ultimately kept the Tote alive and enabled it to run the tote pool even though it was often a difficult part of the operation to run. Today 22 per cent of its turnover is related to the Tote; the remainder is fixed-odds

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  bookmaking in a considerable chain of betting shops. Because they came late on the scene, many of them have not been easy places from which to generate profits but they have done extremely well and all their profits have gone back into racing after the usual deductions.
  The Minister gave a clear exposition of the proposals. However, I detected from his tone of voice, although he spoke somewhat sotto voce, that he rather favoured the ruling of the Office of Fair Trading that the Tote is a monopoly; it is not competitive.
  It is a curious argument. Why is the Tote pool something that we should allow on sufferance only for the seven years, although I am grateful for that, when the Lottery is allowed to continue? Is that not anti-competitive?
  A successful Tote needs a large pool to satisfy those who bet into it. The more the pool is diluted the less successful it will be. That is a reality of life which seems to have gone over the heads of the staff of the Office of Fair Trading, who are probably better educated than I am. That unreality regarding racing passes over into the group selling of media rights and so forth. Again, they are not worried about the group purchase, but the group selling. They do not seem to be aware, or have a sense of history, of the uniqueness of the sport. It is a sport which, because of the looseness and the poetry of the English language, is called the "sport of kings". Rather, it should be called the sport of the common man and has been an example to the world.
  I do not wish to talk about my misspent youth but, from my own experience, there is no place like a racecourse for class differences quickly to disappear. Everyone there speaks and mixes together, whatever their background or economic circumstance. I know of no other such place, except possibly the House of Lords.
  The noble Lord, Lord Lipsey, sells himself short by saying that he has been agitating for a number of years. He has not been agitating, he has been persuading and explaining his case to everyone, and I congratulate him. I was one of the thorns in his side, because I have been, and still am, fearful of the potential ultimate demands of the Treasury in the sale to the private sector. I do not believe that we have heard the end of that, although I accept the good faith of the Government and that they intend to carry out the sale for the benefit of racing.
  However, questions have to be asked and I agree with the noble Lord, Lord Lipsey. He has persuaded me that I need have no fear regarding the retention of the betting shops—my original criticism was over how one could obtain a reasonable price if the main value of the sale was in the betting shops. For their own reasons, the bookmakers echoed my concerns in that regard. The noble Lord explained that it was necessary for the Tote to be transferred as a whole, because the betting shops are a useful part of its organisation. It is probable that new technologies will allow an enlargement of pool betting if more people from other countries are tempted to enter our pools. It is unrealistic to break up the Tote pool into pieces
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  because we have on our doorsteps a possibly flourishing Tote pool which will draw in betters and punters from other countries.
  The transfer process is an anomaly and I do not expect to understand it, even when the Bill is completed. I accept all of the comments made by the noble Lord, Lord Lipsey. It seems that the transfer will be quick. When I saw the Minister outside the Chamber he told me that an effort of political will was initially driving the Bill. I am cheered to know from the noble Lord, Lord Wakeham, that there is a precedent for it in the TSB sale. I hope that the Tote will ultimately go to the trust. The shadow trust, chaired, as it should be, by the noble Lord, Lord Lipsey, is admirable. There is no man who better understands the subject. I hope that he will bring pressure on the Government regarding the matters that concern him.
  If the sale falls through, for whatever reason, the Government should come back to both Houses and explain what they intend to do and obtain approval for it. Whether that should be on the face of the Bill, I leave to others who better understand parliamentary procedure.
  The price is still the main stumbling block. I met the Sports Minister, Mr Caborn, at a film awards ceremony last week and told him that I intended to speak on the Bill and was still concerned about the price. He said. "Well, so am I, but it is up to the Treasury and you know what the Treasury are like". I do know what the Treasury are like. It is talking about a 50:50 sale—50 per cent for the Government and 50 per cent to the trust, and I hope that will be raised in Committee.
  I shall mention other areas of racing in passing. For example, the National Stud was an extraordinary operation. At one time it was the only profitable nationalised industry. It was enormously successful and an important part of the racing scene, even when it was not particularly profitable. I understand that it may also be subject to a transfer of some kind. My noble friend Lord Addington seemed doubtful where I stood on this issue—since I left the Front Bench as a Whip I hope that I have not gained the reputation of a maverick or a wild card—but I assure him and the noble Lord, Lord Lipsey, that I am in favour of the proposed transfer and have utmost confidence in the shadow trust. I hope that it will be transformed into the permanent trust and that the Tote will grow, contribute to racing and will be at arm's length, if not, racecourse length, from political interference.
  To coin a phrase, there is much to be taken on trust, but I wish the Bill well.
  4.57 p.m.
  Lord Moynihan: My Lords, this House has a proud tradition of cross-party work for the benefit of sport and I sense and trust that that will continue with the Bill.
  Her Majesty's Opposition welcome it in principle and pay tribute to the work done in another place, not least by our colleagues, the honourable Members for South East Cambridgeshire, Jim Paice, and Surrey

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  Heath, Nick Hawkins. After hearing the opening remarks of the noble Lord, Lord Lipsey, I am tempted straight away to quote from the speech made by my honourable friend, the Member for South East Cambridgeshire at Second Reading, who said:
  "There is nothing in the Bill about future ownership of the Tote; there is not even a requirement for it to be sold to someone with an interest in racing or horses. I hope that the Minister will understand that despite his assurances the industry is a bit distrustful of the Government for not dealing with the question of the shadow Racing Trust and the future ownership of the Tote in the Bill. Under the Bill there would be nothing to stop the Secretary of State or any future Secretary of State deciding to sell the successor company to the highest bidder—someone who may have no interest in racing or in putting the profits back into racing".—[Official Report, Commons, 8/1/04; col. 449.]
  Some improvements have been made since that speech, but I agree with the comments of the noble Lord, Lord Lipsey, that not enough have been made to allay the concerns expressed in the House today.
  However, I shall return to 30,000 foot. All three core elements of the Bill—the nationalisation and subsequent sale of the Tote, the eventual abolition of the Levy Board, and the establishment of the Olympic lottery—have our support. However, as I have stated, we will look to improve some of the measures outlined in the Bill.
  We welcome the improvements made in another place, particularly regarding the seven-year period and trust that the Government will continue to listen to the arguments. As we have heard this afternoon, the House is blessed with many noble Lords with an expert interest in sport, particularly horseracing.
  While sport is important in its own right, it is also big business and we must be particularly aware of that during our discussions on the Bill. Some 100,000 jobs, as the noble Viscount, Lord Falkland, said, are directly or indirectly dependent upon horseracing—including bookmakers, groundsmen, vets, saddlers, stable staff and others. Horseracing is also a major contributor to the rural economy. The Olympics is the biggest sporting event in the world and the Government's analysis shows a budget in excess of £4 billion, with a public subsidy of up to £2.375 billion. That would be required for London to host the games in 2012. By any measure, this represents big business.
  Members will be aware that the Conservative Party fully supports the London bid. Indeed, we came out in support of the bid before the Government. At its best, sport cuts across party divides and we should be loath to forget that for every page of politics in the national newspapers there are some five of sport.
  I move to Part 1, the sale of the Tote. I am sorry that my noble friend Lord Astor cannot be with us today. He has prior commitments and much regrets not being able to be with us. In his absence, I want to pay tribute to his Private Member's Bill, the Horserace Totalisator Bill, which would have brought forward the sale of the Tote in 2000. Having perused the discussions in another place, the Minister for Sport and Tourism seemed to be unclear as to whether the Bill enabled or committed the Government to sell the Tote. Similarly, does the Bill require the Government to abolish the levy in September 2006 or does it enable
  580
  the Government to do so, if they so desire? I would be grateful for further clarification from the Minister on those points.
  The mechanics of the sale are that the Government will nationalise the Tote with the promise that it will then be sold to a racing trust. Ideally, this would be the Shadow Racing Trust under the able chairmanship of the noble Lord, Lord Lipsey, equally well assisted by the noble Baroness, Lady Noakes, and his team. There was much debate about the word "promise" in another place. Understandably, the Government are being pressed again today.
  We have a duty to ensure that this Bill puts in place safeguards for the Tote's continuing contribution to racing. However, there is nothing in the Bill about the future ownership of the Tote. There is no requirement for it to be sold to the Shadow Racing Trust or, indeed, to any racing trust. It is crucial that the clauses sought by the noble Lord, Lord Lipsey, are agreed, for despite government assurances we are uneasy that the Government are not dealing with the question of the Shadow Racing Trust and the future ownership of the Tote in the Bill.
  I repeat that under the Bill there will be nothing to stop any future Secretary of State deciding to sell the successor company to the highest bidder with no requirement to put any of the profits back into racing. It surely cannot be a waste of parliamentary time to hold the Government to their promises. We believe that the Bill needs explicitly to state that the Tote will be sold to a racing trust that is committed to returning any surplus of income to racing. It would be helpful to learn from the Minister whether the constitution of the Shadow Racing Trust is a not-for-profit body or whether it should be one of the new community interest companies.
  As Members will be aware, we have a clear and unambiguous government statement that the Tote assets are owned by the Tote and that the Tote is owned by no one. The Bill creates the power for the sale of those assets first by nationalising them and then by privatising them, leaving the Chancellor with a tidy cash sum. It has been suggested that it is wrong for the Government to make any money from the sale of something that they do not own, as the noble Lord, Lord Lipsey, argued with his characteristically incisive eloquence.
  No doubt the Government will tell us that their hands may be tied and that they have been in discussions with the European Commission over the proposed transfer. It seems as though the 50:50 arrangement referred to by the noble Viscount, Lord Falkland, will be agreed. If so, can the Minister confirm that? If he can confirm it, is he willing to put on the face of the Bill the sale price or, more important in the context of time, at least the formula for determining the price? This is the most important point I want to make in my remarks on Second Reading. The price charged by government for the Tote is vitally important.
  The racing trust will have to borrow money to pay for the Tote, thereby reducing the money that can be returned to horseracing. The more the Government

  581
  charge, the less will be returned to horseracing. That is fundamentally at the centre of Part 1. It requires greater clarification and, I would argue, specific amendment in Committee to ensure that the fundamental principle, which I am sure the Government are willing to stick with, is not only a promise and based on trust but also on the face of the legislation.
  The Minister for Sport and Tourism in another place worked hard to ensure that the Tote retained a seven-year exclusive licence for pool betting. We are grateful for that, in particular for the fact that the Government listened to the arguments in another place and have now included it on the face of the Bill. We believe that there is a strong case for the detailed consideration of the benefits or otherwise of the points also referred to by the noble Viscount, Lord Falkland; namely, the retention of an exclusive pool betting arrangement at the end of the seven-year period.
  I am open to persuasion, but I calculate that the efficiency of pool betting is determined in part by the size of the pool. The more pools there are the smaller they will be and hence the less efficient each pool will he, with horseracing being the loser—particularly the smaller tracks. The potential downside of such a monopoly is kept in check by the availability of fixed-odds betting. But the Bill as it stands is committed to ending the exclusive pool betting licence in seven years' time and we believe there is a case for leaving future governments with the discretion to extend the exclusive licence should this prove to be the best thing for racing in 2011. We make no judgment as to whether the exclusive pool betting licence should be extended or whether it should remain with the Tote. However, we are saying that we should not tie our hands today to a decision which should be made in 2011.
  Part 2 of the Bill covers the abolition of the Horserace Betting Levy Board with the transfer of this property primarily to the British Horseracing Board, with a few notable exceptions referred to; for instance, the National Stud which is due to become a stand-alone trust. It is important and proper that we pay tribute to the work of the Betting Levy Board under the chairmanship of Robert Hughes and in particular the dedicated work of its staff under chief executive Rodney Brack.
  I agree with the Minister that in today's world, the levy is anachronistic, especially in respect of the Government's role in determining how much the bookmakers should pay to racing in the event of an impasse in the bookmakers' committee. We do, however, note that the bookmakers are keen to retain the levy and we must take note of that in our deliberations.
  It is clear from discussions that the Treasury will also benefit substantially from this arrangement as well as the sale of the Tote. Can the Minister confirm that the market sale of data rights will be subject to VAT? This is likely to reduce the moneys to racing by 17.5 per cent or roughly £15 million each year. In addition, the change in the administration of the levy's capital credit grants is likely to generate an extra £10 million a year to the Treasury.
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  We fully support the concept of commercial arrangements as the proper means for the racing industry to sell its rights. But, as the great comedian Jack Benny once said, "Timing is everything". It is a period of great uncertainty for the racing industry, with both Office of Fair Trading and European Court decisions outstanding. These decisions could have a fundamental impact on racing, as my noble friend Lord Brooke of Sutton Mandeville mentioned.
  There is particular concern that the OFT may not understand racing properly and about the interdependence of its many elements. The European Court of Justice is considering a reference by the Court of Appeal following a robust High Court judgment in support of the British Horseracing Board's database rights. Yet the judgment is not expected until autumn, so the issue may not be resolved until late this year.
  These investigations are undoubtedly complex and it is unclear how they will report. What is clear is that they could have a significant impact on the amount of money that the bookmakers return to racing. Lest we forget, the levy's expenditure in support of racing was £84.6 million. This is a significant investment in racing and needs to be safeguarded.
  We welcome the one-year extension to the levy until September 2006, but we are slightly concerned that it looks as though the Government are still committing themselves to the abolition of the levy before they know what will replace it. This could be a recipe for disaster and we will need to address the issue in Committee.
  Among the projects the levy operates are not only the centres of support for rare breeds, about which my noble friend Lord Soulsby spoke so eloquently—and I agree with him—but also the ownership of the Horserace Forensic Laboratory; the anti-doping agency for horses. The HFL is one of the most experienced and best equipped laboratories in the field of animal drug detection in the world. The HFL provides a comprehensive drug surveillance and research service for British horseracing, as well as the equine sports, with clients around the world. Thanks to the investment of the Levy Board, we have a world-leading anti-doping agency for horses, but further progress can still be made. The horses in racing are the elite performance athletes. In the context of anti-doping measures, we should be freezing samples to enable future tests accurately to discover currently undetectable doping agents. Our interest, apart from fair competition in racing, must focus on the integrity of the breeding lines.
  This Bill provides an opportunity to make sure that the transfer of the assets to the levy protects and promotes the UK's role as a leader in the fight against drugs in equine sports. Noble Lords involved in the parliamentary proceedings of the Gender Recognition Bill and the Anti-Social Behaviour Act will be aware that I strongly believe in the wider merits of an independent anti-doping agency for sport, if necessary backed by statutory powers. Best practice in anti-doping in sport requires that the anti-doping agency is independent, transparent and accountable. I stress that there is no

  583
  question over the competence of the British Horseracing Board, which is due to inherit the HFL. However, when a national governing body of sport owns the anti-doping agency, there will always be a concern about potential conflicts of interest, in exactly the same way that UK Sport is in an untenable position of both funding elite athletes and running doping tests on them. I urge the Government to resolve that situation at the Sports Cabinet meeting on 20 April, when a long-overdue commitment to an independent anti-doping agency must be made.
  The debate is particularly timely. In today's Daily Telegraph, Sue Mott highlights the concern that drugs may be creeping into three-day eventing. Some prominent names in the sport are worried that illegal tranquillisers are being fed to horses to calm them down for dressage events. I stress that so far there have been no positive tests, but there is now a real concern and the sport must remain vigilant.
  During the passage of this Bill, we will be looking to press the Government for an independent anti-doping agency responsible for all equine sports. The role of the HFL goes further. Only this weekend, the BBC reported that UK Sport, the Government's much-conflicted anti-doping agency for sport, has agreed to start sending some of its samples to the HFL in Newmarket for analysis. It is expected that the HFL will receive clearance from the World Anti-Doping Agency in May to start testing human samples. The case for combining the work of anti-doping in equine sports and for British sportsmen and women in an overall, independent anti-doping agency is cast iron. During the passage of the Bill, we will be tabling a series of amendments to that effect, thus leading the way with the establishment of an independent anti-doping agency to include equine sports. We owe it to horseracing in particular, and sport in general, to seize this opportunity.
  The final section of the Bill details the setting up of a dedicated lottery to fund the staging of the 2012 London Olympic Games. This is a piece of enabling legislation, which is dependent on London winning the right to stage the Olympic Games. Conservatives, and all parties, are strongly supportive of the London Olympic bid. I pay tribute to my noble friend Lord Coe, and the noble Lord, Lord Paul, who are both members of the board for the London bid.
  While we strongly support the principle of an Olympic lottery fund, we would like to see a number of improvements made to the Bill. First, it may help to set out our general approach to the costs of staging the London Olympics. Just as the Government are committed to review the funding arrangements when we win the bid, we are also committed to reviewing the finances. In particular, we would like to see far greater emphasis on the role of the private sector. It is right that our bid should include the regeneration of the Lower Lea Valley, but the bid must not become Ken Livingstone's Lower Lea Valley regeneration bid. This is a bid to host the greatest sporting event in the world, in the greatest city in the world, while providing a much-needed fillip to British sport.
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  Unlike the noble Baroness, Lady Pitkeathley, we believe that there is a strong case for starting the Olympic lottery game this summer, on the back of the popular appeal of Athens 2004. The case was made superbly by my noble friend Lord Glentoran, an outstanding Olympic gold medallist, in comparison to the rather humble silver that I took. I will for ever respect everything that he says on matters regarding the Olympic Games. We also recognise that the IOC rules would prevent a lottery game being set up exclusively to fund the cost of staging the games, but it permits—and the Minister for Sport finally, not before time, recognised this point in another place—an Olympic lottery game to be held in advance of the success of our bid in July 2005. Just as the Government have been forced to admit that the IOC would permit the lottery to start early, we will show in Committee that this would actually save money for other good causes. That would be an interesting and detailed debate, and I hope to bring forward figures to satisfy the noble Lord, Lord Judd, and others who have raised the important point about the impact on other good causes. I am conscious of time, so I will move on.
  The second major area where we disagree with the Government is tax. I promise to avoid political point scoring, but we believe that as much money as possible from a hypothecated Olympic lottery game should go to the Olympics. The Government are committed to the proposed lottery raising £750 million towards the Olympics, but a staggering £340 million would go to the Treasury. At the Culture, Media and Sport Select Committee inquiry into the operation of the national lottery, we were told that the Treasury is in "listening mode" about the tax take on the lottery. We intend to develop this further during the passage of the Bill.
  The other major improvement that we would like to see on the Olympic lottery clauses is far greater recognition of the Paralympics. Everyone in the House will be aware of the great success of our paralympians in Sydney 2000, when we came second in the medal table. We wish them well in achieving even better results in Athens this summer. To recap on our sporting history, a British neurosurgeon, Sir Ludwig Guttman, invented the Paralympics. A sports competition for 200 World War II veterans with spinal cord injuries was held at Stoke Mandeville to coincide with the London Olympic Games in 1948. These special games went on to become the modern Paralympics. It is unfortunate that the Bill does not explicitly refer to the necessary support that we should be giving to the British Paralympic Association, and we will seek to correct that.
  I pay tribute to the Department for Culture, Media and Sport for persuading the Government to find parliamentary time for this Bill. We welcome the Bill, and in principle we support all three parts. There is cross-party support for the Bill, and we look forward to working with the Government to improve the Bill for the benefit of horseracing and the wider interests of sport.
  5.17 p.m.
  Lord Davies of Oldham: My Lords, we have had a wide-ranging debate. I am grateful for the contributions of all noble Lords who have spoken and who have

  585
  indicated that there are points that they intend to pursue in Committee, which we recognise is bound to be the case. I want to concentrate overwhelmingly on the main principles behind the Bill, as that is the basis on which it gets its Second Reading. However, I take on board the clear signals that have been sent from all parts of the House that there are issues to explore in detail in Committee. I am grateful for the widespread consensus that has developed in the House for the principles underlying the three main parts of the Bill. It is important that we make progress on the Bill as rapidly as we can.
  A number of specific issues were raised, to which I need to return. First, I was glad that the debate on the Back Benches was opened by the noble Lord, Lord Wakeham, with his extensive experience of horse racing. It also gave him the chance to refer to the noble Lord, Lord Carlisle of Bucklow, who I see in his place. We recognise the issues with regard to the Tote and the situation of the racing industry, which is in a far healthier position than it would have been had appropriate action not been taken.
  The purpose of this Bill is to guarantee appropriate action to safeguard the sport for the future. Horse racing ought not just to be regarded as the sport of kings, as the noble Viscount, Lord Falkland, suggested. He is, of course, right about that. All of us are able to lose money on the race track, whether we are kings or paupers. Most of us succeed in doing that and still have an enjoyable day at the races in the company of our fellow citizens.
  I appreciated the points made by the noble Lord, Lord Addington, and the general welcome that he gave to the Bill. He lamented the fact that certain aspects of our supporting provision and current facilities for the Olympic hid were not totally in place. He will recall that even a country such as Australia, often set up as the absolute beacon of countries in its commitment to sport and sporting facilities, found it necessary to build extensively and specifically—and needed money to do so. If we are to make an Olympic bid and certainly—I think that this was the burden of his remarks—if we are to ensure that our young people have the opportunity to develop their talents and training prior to the Olympic competition, substantial investment is obviously necessary.
  I heard what my noble friend Lord Judd said about the anxieties of the National Council for Voluntary Organisations, which was amplified by my noble friend Lady Pitkeathley, with her particular interest in lottery distribution. We should recognise that important issues are involved. My noble friend Lord Judd suggested that unclaimed prize money might provide additional funding for the Olympic Lottery Distribution Fund. We welcome the work that the NCVO is doing creatively at present on funding, with its obvious interest in safeguarding the funding that it receives from lottery sources. We will consider that proposal in further detail and decide on the extent to which it could be employed. I am grateful to my noble friend for having brought that to our attention.
  As for transfer or raiding of lottery funds for the Olympics, both my noble friends are right to draw attention to the power in the Bill, but I would have to
  586
  define it as a precautionary measure. We have no intention of raiding good causes to provide for the Olympic Games. That is why there is specific provision in the Bill for money from the alternate structure. However, we must bear in mind that, should we win this bid—every noble Lord who spoke expressed the hope that we be successful—we will then be committed to substantial expenditure. Especially as this is likely to be the only legislation that will underpin the Olympic Games bid—it is certainly the only Bill that will be passed in time for the long run-in to the games that is necessary—it would be remiss of us not to include a reserve power in the Bill for alternative funding. However, I think that my noble friends will recognise that we would regard the use of that power as being only for dire extremis concerning receipt of lottery funds from the Olympic Games lottery.
  The noble Lord, Lord Brooke, raised a number of interesting points. In particular, he raised the issue of the role of the Delegated Powers and Regulatory Reform Committee, in which he plays a significant part. We are indeed giving careful consideration to the committee's report and will bring forward in Committee proposals to address the points it raises.
  On the issue of the European Court of Justice, which the noble Lord raised—which I think brought a slight frisson and shadow to the House as we recognised the difficulties that can be caused when questions are referred there—the Court of Appeal will take into account the answers in reaching a final decision on the data rights issue. It will be for the horseracing industry to work out the implications of a decision adverse to the British Horseracing Board, but my right honourable friend the Secretary of State will take into account all relevant circumstances when exercising her powers under the Bill—for example, concerning the abolition of the levy system. So we will need to take into account any such judgment. We recognise the strength of the noble Lord's point and are grateful to him for drawing the House's attention to that important matter.
  The noble Lord, Lord Soulsby, referred to the crucial role of the levy board. We recognise the validity of his points about the significance of the levy hoard in its support for rare breeds of horses. That is a crucial function; that is why it is necessary. We fully intend to take on our responsibilities to ensure that the development of proposals under the Bill fully takes into account that crucial role which the levy board has until now been performing.
  Several noble Lords referred to another matter—most dramatically, my noble friend Lord Lipsey who, in suitably challenging mode, suggested that the only price that ought to be placed on the sale of the Tote was zero. That is a good bargaining start; no doubt we will have an interesting Committee debate on such a concept. It is unlikely that that proposal commands the widest assent. What has been expressed in the House is how important it is that any sale of the Tote should be fair to the horse racing industry; that we should recognise the crucial role that the Tote has played in enhancing and developing horseracing in this country; and that that should not be put in jeopardy.

  587
  However, to go into a marketplace and suggest, first, that there should be only one potential buyer and, secondly, that that buyer have the facility at nought seems an extraordinary proposal when entering any marketplace that I recognise. Perhaps my noble friend fails to recall that, in the past, governments have been used to cashing in their monopoly power and, when they have granted monopolies to others, had no hesitation in recognising that a cash value attached to the laws of the land, which had placed restrictions on people. They had enhanced the position of some people—the monopoly holders—against those of the general citizenry. It was therefore only right that monopoly holders should recognise that there was a price on the privilege accorded them.
  The 16th century state would not have survived without that concept. In a sense, the Tote has an element of that theory behind it. I am merely telling my noble friend that he is not the politician I take him for if he would cast aside an important public asset without recognising its value to the wider community, as well as to the monopoly enjoyer of that right—the Tote. I thought that I might provoke my noble friend.
  Lord Lipsey: My Lords, I am most grateful to my noble friend for giving way. Before he adumbrates further on the absurdity of my proposition—which, incidentally, has the support of the entire horse racing industry and, in fact, everyone who has considered the matter except the Government and the bookmakers—does he agree that the closest analogy is the sale of the Trustee Savings Bank, where the price was zero: it was rightly given to the depositors? That is the analogy that should apply in this case, not those that my noble friend suggests.
  Lord Davies of Oldham: Well, my Lords, I hear what my noble friend says. I have no doubt that he will advance that position in Committee—he has already said that he will—where we can cross swords fruitfully. He will forgive me if I do not go into too much detail on the issue now.
  The noble Lord, Lord Glentoran, concentrated his remarks overwhelmingly on the Olympic Games. I listened carefully to his point about the constructive role and high reputation of the Millennium 2000 body and its potential role for 2012. That is not directly within the Bill's framework but there is no reason why the Bill should not be a vehicle for such constructive thoughts. I am glad that the noble Lord took the opportunity to voice that point which the Government will take very seriously as we develop our strategy for tackling Olympic issues.
  The noble Lord, Lord Moynihan, who followed the noble Viscount, Lord Falkland, raised various issues. I very much appreciated his enthusiastic commitment to horse racing of which we are all aware. I recognise the validity of the points he raised. This is an area where we need to tread very carefully. There is a fine balance to be achieved with regard to these changes. I notice that noble Lords are very much in favour of coming back to issues of primary legislation again in
  588
  the future. A far-sighted administration always seeks to provide that framework in a Bill which covers all eventualities. I hope I shall be able to reassure the noble Lord that the provisions in the Bill safeguard and advance the interests of horse racing while meeting the points he raised in his speech.
  The noble Lord, Lord Moynihan, produced a wide-ranging speech of very great force. Some of his points had been made by other noble Lords but several were highly specific. I should like to respond to those. He is right to raise the issue of doping. We cannot come before this House and discuss any sport without recognising this immensely significant issue—we are all mindful of recent developments in athletics. I give the noble Lord the assurance that the Government are active on this front. A committee is currently looking into this question and intends to report on doping issues in the summer.
  We have to be at the forefront of dealing with this issue. I am grateful to the noble Lord for having raised it today. If doping is not stamped out in sport, then it is guaranteed utterly to devalue the Olympic ideal and ruin the Olympic Games wherever they are held. It would also destroy public regard for what sport represents. It would be a tragedy for us all. The noble Lord raised a number of other points that will be considered in Committee. I am well aware that there are several significant clauses in the Bill on which we will engage in fruitful debate.
  Having spoken a little longer than I should have done, I shall conclude on this fact. This constructive Bill deals with developments in two very important aspects of our national sporting life. There are the issues relating to horse racing and all the challenges that currently face it and the importance of guaranteeing that there is a proper relationship between the betting industry and its clients. There is also a need for proper support for a sport which is enormously expensive to pursue. It may not be the sport of kings or not always the sport of billionaires but there is no doubt it is an extremely expensive sport and one which needs very considerable resources to underpin it.
  The other issue of the Olympic Games is one which has produced a unanimous response in this House. The Government are grateful for that level of support. I should like to respond to the point made by my noble friend Lord Smith of Leigh. I was grateful that he had a particular locale in mind on horse racing when he talked about Wigan and the Tote. He also emphasised in this debate that the Olympic bid is not a London bid but a United Kingdom one. It is designed to produce benefits for the whole country and it will do.
  If we are successful in this bid, it will stimulate sport and sporting activity among our young people and an interest in sport among others. I am grateful to my noble friend for emphasising the fact that not only does the rest of the country stand to benefit from the bid, but that it supports the bid. We have made a good start with this. There is an immense distance to go but it is important to have a structure in place to finance

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  the bid well in advance of 2012 and as soon as we possibly can after the bid has proved a success as we all hope it will do.
  Lord Judd: My Lords, before my noble friend sits down, he kindly referred to one point put forward by the National Council for Voluntary Organisations on the possible use of unclaimed prize money. That was part of a very carefully considered package of proposals to protect the interests of the voluntary sector. Can he assure the House that the Government will look at the total package and not cherry pick those which are the most amenable from the Government's point of view?
  Lord Davies of Oldham: My Lords, I apologise to my noble friend if he thought that I was cherry picking. That was not my intention. I was seeking to illustrate the constructive way in which my noble friend had advanced his case without repeating his speech which I would not wish to do. Of course we recognise that there are constructive ways in which additional resources can come. However, this must not be at the expense of good causes. I am happy to give him that assurance.
  I am grateful to noble Lords for their support in the debate. I commend the Bill to the House.
  On Question, Bill read a second time, and committed to a Grand Committee.

  Single Market for Finance (EUC Report)
  5.38 p.m.
  Lord Woolmer of Leeds Lord Woolmer of Leeds rose to move, That this House takes note of the Report of the European Union Committee, Towards a Single Market for Finance: The Financial Services Action Plan (45th Report, HL Paper 192).
  The noble Lord said: My Lords, in moving the Motion, I must first extend my thanks to all those who gave oral and/or written evidence to Sub-Committee B; to our Clerk, Patrick Wogan, for his sage advice and counsel; to our advisers, Graham Bishop and Tom Troubridge; to Her Majesty's Ambassador in Paris and his staff; and to the UK Permanent Representative in Brussels and his staff for so efficiently organising our working visits to Paris and Brussels. I also thank members of Sub-Committee B for the enormous amount of time and careful reflection they gave to this important inquiry. Last but not least, I thank the Financial Secretary to the Treasury for the written and oral evidence we received from her and for the positive and helpful government response to our report.
  We reported on 18 November 2003. The Minister responded on 13 January. Things have moved on since then, and I trust that the Minister will not mind if, in my remarks, I seek an update on some matters. As he knows, I sought to give him notice of those points.
  In May 1999, the Commission first published a financial services action plan aimed at securing a single market in financial services. In 2000, the Lisbon
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  European Council named the FSAP as a key component of broader EU economic reform as a means of making the European Union more competitive in a global economy. We agree with those sentiments. It set a timetable for adopting financial service action plan measures by 2005. In October 2003, the European Council confirmed that deadline.
  From the first, the stated objectives of the European Council have been high-level objectives aimed at reducing the cost of capital in the Union and allocating capital more efficiently. The key markets here are wholesale markets, but when the discussion got down to the detail and member state level, focus frequently shifted to the impact of change on the individual consumer investor and to a retail focus. The result has been a degree of confusion between wholesale and retail market objectives.
  Quantified estimates of the impact on GDP arising from integration of wholesale and retail markets are quoted in our report in paragraphs 14 to 16. It is disappointing that this theoretical measure of the benefits of a single market has scarcely, if ever, been carried through to justify specific directives. Sadly, directives rarely set out targets for achievement in terms of measurable outcomes.
  It was recognised that the target date of 2005 for the adoption and implementation of the action plan would not be met unless a new approach was adopted towards a legislative process in the Union. Baron Lamfalussi chaired the committee charged with addressing that problem. The resultant four-tiered decision-making process for EU legislation affecting the securities market was adopted by the Stockholm Council in March 2001. It is set out and examined in some detail in our report.
  When your Lordships' committee examined subsequent progress on these matters, a number of points appeared important in order to understand progress to date and the challenges ahead. First, there is the position of the financial services industry in London within the EU and globally. My noble friend Lady Cohen, who contributed forcefully to the sub-committee's discussions, will no doubt contribute equally powerfully on those important matters today. Therefore, my remarks are brief, but no less strongly held for that.
  Far more than 400 foreign companies are listed in London, second only to New York. Around 50 per cent of all global trading in companies with overseas listings takes place through London. Seventy per cent of trading in the international bond market is based in London, reaching 31 trillion dollars in 2002. The City in London employs some 310,000 people. Non-UK European-owned banks operating in London employ nearly 30,000 of those people, managing assets worth more than £1,000 billion from London. Without London as a major financial centre, there would be a net loss of almost 200,000 jobs throughout the European Union, especially in Luxembourg, the Netherlands, Germany, France, Belgium and Italy.
  What are the implications for the financial services action plan? At all times and with the greatest of care, proposals for the regulation of financial services in the

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  European Union should reflect on the international dimension. Wholesale, professional global markets are very important. They are critical to the Lisbon agenda. They are not the same as retail markets: the difference is not one of scale, it is a difference of kind. Because of different circumstances, much of the European Union did not—in some cases perhaps still does not—fully understand the position and role of London in global markets. London is a European Union asset. Loose legislation can damage that asset.
  Some of the directives passed or proposed to date have failed that test. More damage could be caused in level 2 legislation unless greater understanding and care is taken. Partly because of the global role, the UK was initially slow at fully appreciating the perspective and priorities of many other member states. Typically, they are much more retail-driven. Wholesale markets in most member states are very much smaller. Protection of the consumer is often the defining objective.
  The move to get all primary legislation in place by 2005 was driven by a desire to reduce the cost of capital and to make business more competitive. Those are wholesale market issues. Domestically, politicians and business interests have often reflected domestic agendas and culture; hence retail consumer focus, sometimes with protectionist business agendas. Despite the stated intention of the Lamfalussi process, much primary legislation has been too detailed, as bureaucrats and politicians have tried to square the circle of different agendas of wholesale and retail markets.
  Some primary legislation has significant defects. Some legislation has been pushed through in haste, perhaps to meet deadlines. Yet, other legislation appears likely to miss the same deadlines. Some member states have occasionally dug in their heels to protect their perceived national interests. There has often been a move too far towards uniform, over-specified primary legislation.
  Some of the draft directives causing specific concerns for your Lordships' committee in November had moved on by the time the Government responded in January. Today, it would be helpful if my noble friend could update the House on matters that were still outstanding in January.
  With regard to the Transparency Directive, at that time we were concerned at the proposed requirement for quarterly reporting. We were pleased that that was subsequently dropped. We were also concerned that the directive might significantly extend the liability of directors and auditors beyond that to shareholders. The Government sought to reassure us that they had secured drafting changes to help address their concerns about these matters, but the committee was not entirely convinced. Can the Minister confirm whether the Transparency Directive, as it is now agreed, extends the liability of directors and auditors beyond that to shareholders?
  Agreement was reached on the Takeover Directive at the December council. The Minister told us in her response that the eventual compromise that made key
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  articles dealing with barriers to takeovers optional for member states was disappointing because certain genuine liberalising advantages of the directive had been lost. But she felt that improvements had been secured that laid down minimum standards for regulation of takeovers and enhancing minority shareholder protection across the European Union. We agree both with the Minister's pleasure and her disappointment.
  I turn briefly to the proposed Risk-Based Regulatory Capital Directive. When does the Minister expect the Commission to bring forward its revised proposals in the light of the Basel II negotiations? Will the directive apply to every firm that falls within the scope of the Investment Services Directive or only to a much smaller number of substantial firms?
  Your Lordships' committee regards agreement on international accounting standards or international financial reporting standards as a core objective of the action plan and central to lowering the cost of capital for European business and central to ensuring that the Union is fully integrated into global financial markets. There has continued to be opposition to articles 32 and 39 of the accounting standards, especially from French banking and insurance. What is the Government's current position on the importance of this potential directive and on the issues of articles 32 and 39? When we reported on that, the other unresolved issue was whether non-EU issuers would be allowed to use their own accounting standards to raise capital in the European Union. Can the Minister update your Lordships' House on this important point?
  On 7 October, the Council voted to amend Article 25 of the Investment Services Directive, which would have allowed major investment banks to continue to do business direct without having to use local stock exchanges. The amended rules on pre-trade transparency will, in our view, have a negative impact on the willingness of firms to trade with consequential effects on the cost of raising capital in the European Union. It is a spectacular own goal by the Council. Your Lordships' Committee regrets that an issue of this importance was decided uniquely in the Council by qualified majority vote, in the face of opposition from the important financial centres of the United Kingdom and Luxembourg. That is a deeply disturbing precedent and does not bode well for level 2 negotiations or for securing future reviews of ill drafted directives.
  In her response to the committee in January, the Minister explained how the Government were seeking to secure changes to the amended directive. We wish the Government well in those efforts. I shall be grateful if the Minister can update your Lordships today on the recent developments and on the remaining timetable and prospects for securing the important and necessary changes.
  There will undoubtedly be problems in future with the implementation and enforcement of some ill drafted level 1 legislation. We must hope that between them the Commission and the European Securities Committee, with the advice of CESR, make a better job at level 2 of producing what was intended as

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  detailed regulations to put flesh on the bones of the framework directives. This will all be done under comitology procedures, but will be dealing with issues of major importance beyond that normally associated with comitology.
  Can the Minister confirm that should there be votes in the European Securities Committee they will be under qualified majority voting? Does he regard the use of QMV on the Investment Services Directive as an example of good practice when considering how to take forward important financial regulation? How do the Government intend to ensure that the financial community in London is fully engaged in level 2 discussions?
  Given the large volume of secondary legislation to be dealt with, is the 2005 deadline for implementation still realistic? What issues in particular do the Government regard as important to achieve in level 2 negotiations? The noble Lord, Lord Williamson of Horton, whom I am delighted to see in his place today, has long reminded us of the importance of keeping a close eye on the use of comitology in Brussels. The House might wish to reflect with care on the way in which it can exercise rigorous scrutiny of level 2 legislation under the financial services action plan.
  The Committee of European Securities Regulators (CESR) will have a vital role to play at level 3 in ensuring a consistent, timely and common approach to implementation by regulators of member states. We arc pleased to hear that the process of transparency and consultation with the practitioners in the market place has been formalised, seeking to ensure that the markets themselves are now part of the process of implementation. However, we were concerned by the sheer size of the task of implementing the 42 or more directives and their associated secondary legislation, against a deadline of 2005.
  We were concerned about the burden on the industry and on the regulatory authorities at all levels. We agree with the Government's response on this point that there is a careful balance that has to be struck here. We agree that Brussels must bear in mind proportionality and use all the policy levers at its disposal, including competition policy, with a view to avoiding future legislation whenever possible.
  In their response, the Government told us that the Treasury was working with industry in identifying, listing and categorising reported problems in cross-border provision of financial services and the establishment of financial services firms throughout the European Union. Is the Minister able to tell us today what arrangements are made for that important work? Will it result in a published report and if so, when?
  Today's debate deals with issues of importance to this country and to the European Union. The European Council has been right to aim for a single market in financial services. It has been ambitious in its deadline for implementation by 2005. Much has undoubtedly been achieved in pushing through ELI-wide framework legislation. We hope that our reservations about some of
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  the detail are greatly outweighed by the positive benefits that can be secured in the form of lower costs of capital and more choice and better returns for investors.
  Moved, That this House takes note of the report of the Select Committee on European Union on Towards a Single Market for Finance: The Financial Services Action Plan [45th Report, HL Paper 192].—(Lord Woobner of Leeds.)
  5.55 p.m.
  Baroness Cohen of Pimlico: My Lords, I should like to thank the noble Lord, Lord Woolmer, for introducing this debate and for his expert chairmanship of the committee's inquiry. I was a member of Sub-Committee B, which produced this report. I must also declare an interest. As set out in the Register, I am a director of LSE plc, the company which owns and operates the London Stock Exchange. For 18 years before I came into your Lordships' House I worked in an investment bank, Charterhouse, and then as an advisory director at HSBC.
  So I am parti pris, but indeed such is the importance of the financial services industry to our economy that everybody who lives in the United Kingdom, as well as those who work in the industry, has good reason to be a supporter of this industry and to be interested in the rather difficult and technical provisions of the financial services action plan.
  Overall, the financial services industry contributes a net £18 billion to the UK trade balance, making it the world leader, Switzerland, unsurprisingly, ranks second and the mighty USA third in the world. In addition, another net £6 billion comes from the earnings abroad from the likes of Barclays and HSBC even after netting off the payments going out of the country from foreign banks, which gives us a total bottom line contribution to the United Kingdom economy of £24 billion. By comparison, our tourist industry and our airline industry, which get a great deal more publicity than financial services, bring in huge revenues, but have even larger outflows, so that at the net level the balance of payments for these two industries shows a loss.
  The other truly remarkable statistic for the financial services industry is that it pays 27 per cent of the UK's corporation tax and the people in it are responsible for 14 per cent of the UK's pay-as-you-earn taxes. Your Lordships will understand therefore the particular enthusiasm with which I participated in this inquiry.
  Indeed, it is pleasing that despite the wide variety of evidence from a wide variety of people, there was no real dispute about the importance of the FSAP initiative itself. In principle, it is perfectly easy to support; it is in practice that it becomes much more problematic. But unless we succeed in delivering a more efficient financial market we have no hope of achieving the Lisbon commitment to make the EU the most competitive economy in the world by 2010.
  How will we know when we have got there? One key test has to be to compare the cost of capital available to Europe's companies with the cost of capital available to companies from outside the EU and, most

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  important, with the companies in the US. Such measures are important. It is not just enough to complete a market that is internally efficient unless it also makes the whole of the European Union competitive in global terms.
  It is this concern with the cost of capital that goes to the heart of some of the UK's reservations about aspects of the financial services action plan. For many years the City of London has been a global financial centre and its success is based in part on its ability to attract international investors and companies as well as on its capacity to serve UK plc.
  The City of London is not of course reliant solely on the UK domestic economy. There are 450 non-UK companies from almost 60 countries whose securities are traded on the markets of the London Stock Exchange. Two-thirds of the institutions that issue debt are from outside the EU but 70 per cent of global turnover in internationally traded bonds takes place in London. London is also home to the world's biggest pool of investment funds and liquidity amounting to more than £260 billion, far more than Paris or Frankfurt, and even more than New York. That is a huge vote of confidence in the quality and integrity of London's markets, underpinned by a carefully balanced package of regulation.
  It is against that background that we have to assess the FSAP and its emphasis on harmonising standards and creating an integrated market based on a new regulatory framework. It also explains some of the tensions that the project has produced among policy makers and between national governments. I believe that most of those tensions have been founded on a false premise; namely, that we are here in a zero-sum game, and that London's loss will be Frankfurt's or Paris's gain. To believe that is not to understand the nature and mobility of financial markets. Electronic trading and remote access to exchanges make it possible to transfer funds at hardly imaginable speeds. The largest investment banks have access to all the world's financial centres and trade 24 hours. They owe no allegiance other than to seek out the best deals for their customers. That means that markets can move to different centres almost overnight, and when they move they cannot always be lured back.
  If Europe cannot meet firms' needs for capital raising and customers' needs for investment products, increasingly business will go elsewhere. A supportive fiscal and regulatory framework is needed to retain and grow international markets. The wrong policy decisions can prove very expensive; for example, the huge Eurobond and Eurodollar markets were first created in the sixties in Europe, principally in London, because the USA imposed a 15 per cent tax that hit overseas issuers. Although the US government repealed the tax shortly afterwards, the damage was done and the market stayed in London, never moving back to New York. There are more recent examples. In 1987, when the German government imposed a 10 per cent withholding tax on domestic interest income, it led to massive sales of German government bonds by
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  foreign investors. The German government were forced into an embarrassing U-turn within four months.
  The mistaken belief in some member states that services could somehow be repatriated from London threatens a similar outcome. The most recent Centre For Economic and Business Research report demonstrates that the City of London brings benefits to the whole European economy, as my noble friend Lord Woolmer explained. Without the cluster of global financial services companies in London. 18 per cent of City-type business would be lost, not to the rest of Europe, but to competitors outside the EU—New York, Tokyo or Switzerland—and a further 12 per cent would be lost altogether as higher costs made transactions unviable.
  There is a current and worrying example in the Investment Services Directive, on which negotiations have reached a very delicate stage. The main issue is the extent to which investment firms are permitted to conduct business off-exchange and how transparent they should be in disclosing that business prior to trades taking place—the extent to which they are obliged to disclose the price before trade—or so-called pre-trade transparency. Since internalisation is already a feature of the London market, we do not believe that the pre-trade transparency requirements should be made too onerous. Liquidity providers will be deterred if the quote obligation—the level at which they must guarantee to conduct business—is set too high. The London position is that investors should have more choice about the execution services that they want.
  As I understand it, the current text of the Investment Services Directive, as approved recently by the Parliament's Economic and Monetary Affairs Committee, offers a much better balance than the alternative text, preferred by the Council of Ministers, which was approved despite the strong opposition of the UK and four other member states. Our view is that unless the European Parliament's text—or something pretty close to it—is approved, serious damage will be done as business moves elsewhere, with substantial financial loss not only to London but to the whole of the EU. Like my noble friend Lord Woolmer, I should be very glad to hear the Government's understanding of the current position during the winding-up speech.
  So let us be clear: damaging London does not mean that Frankfurt or Paris will gain. Put in wider economic terms, almost 200,000 European jobs could disappear and seven member states would see a fall in GDP. Perhaps that is the real problem with the financial services action plan. Certainly the UK Government and UK-based financial services providers must communicate more effectively the benefits that the City of London delivers to Europe as a whole. As Dr Ruben Lee said to us in his evidence, what is good for the UK is good for Europe. I must say that, on the whole, Europe hates being told that sort of thing. It is difficult for Europe to face up to people who tend to say, "We have been there before, we did that and it proved a disaster". We are often, justly, accused of arrogance in those negotiations. However, the fact is that we have been there before; we must just find a more careful way of saying it.

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  In that sense, the City must be seen more as a European asset to be prized and valued. That does not mean that we should expect the EU as a whole to agree to adopt UK standards. It means, however, that the leaders of Europe's member states should be focused on the bigger prize to Europe's economy of an efficient and competitive financial services market. That is not an easy concept. In areas more familiar to European negotiators, such as the common agricultural policy, it is a zero-sum game, where one European nation's gain really is another European nation's loss. We hope that in the end our expertise can serve the whole EU.
  There is also a strategic choice facing the accession countries, particularly those from central and eastern Europe, which are, to put it kindly, newly embracing the demands of competition and the market economy. Their companies need access to the low cost of capital that only an efficient financial market can provide. The Centre for Economic and Business Research report also shows that in the EU now the costs of doing financial services business in other member states are on average almost 25 per cent more than they would be if the equivalent business were done in the City. Given that the accession countries tend to be smaller, the costs of doing that business in those states may be even higher, which should give all policy-makers pause for thought.
  As my noble friend Lord Woolmer outlined, the other major problem dogging the implementation of the FSAP is the question of distinguishing between retail markets—to you and me, the sale of financial services products such as pensions and life insurance and savings products—and the EU's wholesale markets, which are largely centred in London. There is a tendency among some of our European partners to feel that the same regulation should apply to the sale of products to individuals as to dealings between the likes of HSBC, Citibank and Deutsche Bank, to name but three.
  The UK's record on regulation of sales of financial products to individuals is not unblemished, and our difficulties have been made very public, as with the mis-selling of personal pensions that surfaced in the 1990s. But we have successfully managed to avoid measures that damage wholesale business, and we recognise the concept of the sophisticated private investor who may be able to opt out of investor protection legislation. We have also recognised that without a successful wholesale market there will be no retail business to regulate. It must be right that different standards can and should be applied to protection of the individual consumer from the standards that obtain in dealings between the global investment banks that we hope and expect will want to go on doing business in the European Community.
  Some difficulties are being experienced because some countries have not acknowledged fully the distinctions between individuals and financial institutions, or because historically they have different regimes. French opposition to the internalisation provisions of the Investment Services Directive, which enable institutions to deal off-market, partly stems from their objection that individual investors might be disadvantaged if all prices
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  are not fully transparent before any deal took place. There is no evidence that individuals are so disadvantaged. If the theoretical needs of the investor consumer were to be given primacy in that way, internalisation of orders would have to cease in European markets, only to re-appear, with the same players acting on behalf of the same individuals, in an offshore centre.
  I wish to comment briefly on the Lamfalussy process, led by the eponymous Baron Lamfalussy. The problems of the FSAP do not end when the principles of the various directives have been agreed at Community level. The difficulties of getting through the huge amounts of material contained in the various directives were understood almost from the beginning, which is why the Lamfalussy process was set up. In evidence we had various predictions about the success or otherwise of the process. The concern is that probably still too much detail appears in level 1 of the directive because nobody really trusts each other to fix the problems at level 2, the implementation stage. Levels 3 and 4 simply remain unknown. Level 4, on enforcement, is particularly worrying. The omens are not good. The Commission's latest report on infraction proceedings shows that the incidence of failure to implement or weak implementation of internal market directives is worsening. That does not auger well for the future of the FSAP. On the other hand, this group of directives is new, and we must all hope that, as the benefits become more evident, enforcement will follow.
  There remains also a key missing piece of the jigsaw which is not even part of the FSAP. As our report notes, for a market to function effectively there needs to be an unimpeded system for cross-border clearance and settlement. There are, as I speak, around 20 separate systems for 15 domestic markets in the European Union, compared effectively with one in the United States for a market of about the same size. Domestic settlement in the EU is cheap and efficient, while cross-border settlement, unsurprisingly, is expensive and inefficient. This is a barrier to a single market in financial services and, vitally, a barrier to getting a low cost of capital into Europe. It may even be that legislation is the only way to force reform in this area, but the jury is out and at the moment we rest our confidence in the Giovannini Group and a joint working party of central bankers and security regulators. It is a vital step and it will be quicker and better if market players could resolve the problem.
  I fear that this speech has sounded a little pessimistic about what has been achieved already by the financial services action plan and what can still be achieved. Harmonisation of financial services was always going to be difficult given the different stages of development of the European countries' markets, but the great prize of a cost of capital as low as anywhere in the developed world is there for the taking, and I remain encouraged.
  6.11 p.m.
  Lord Shutt of Greetland: My Lords, after half an hour or so, the wind-up starts. I am also a member of Sub-Committee B and therefore have been associated with the production of this report. I am glad to be

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  associated with giving thanks to the Clerk, the advisers, the givers of evidence and fellow members of the committee.
  This subject is complicated. Therefore, I have tried to reduce it to its simplicity. First, we are talking about a genuine, single, European market for those who want to borrow money or raise equity funds. Secondly, we are talking about an open market in what we call retail; that is, the man or woman in the street achieving their savings and other people being able to promote the ways in which they may save. Thirdly, within all this there is a level playing field, lightly refereed, because the rules are understood and accepted.
  That is what this is about, but then the complications start. It is called an action plan, but this is the plan, and the action is to follow. The noble Lord, Lord Woolmer, has given a very proper abridged account of the report, as I knew he would. He set out in some brevity that which is available for everybody to read.
  On the other hand, the noble Baroness, Lady Cohen, with her own expertise and knowledge of London and the markets in London, has made it clear that London equals Europe in a world context. It was very helpful for us to glean the fact of UK-Switzerland-USA; it is a batting order that I have never seen before and I am grateful to have that. I understand how that can well be the case. Even more importantly, came the knowledge of how important this whole area is to the economy in terms of the 27 per cent corporation tax take and the 14 per cent pay-as-you-earn take. She also stressed the importance of the Lamfalussy process and that we are supposed to be talking about the framework, yet much has to follow in these other areas of what might be called lower-degree decision making.
  It is interesting in responding to only two speakers that there is no entrant from what we have come to see in this House as the "octopus tendency". One could have expected that we would have had entrants from that tendency today. However, the issue is about an open market and in this instance what is a clear opportunity here in the United Kingdom. The committee's work is but a small cog in the European-wide debate, but our Government are involved and the Minister is here to respond. I hope that he will let us know where we are now. The committee is a piece of history; we have the document; yet the debate still goes on. Where are we with clearance and settlement procedures? Where are we with accounting standards? Will there be a reversal of the ISD? Where are we in terms of deadlines? We were told about the deadlines when we took evidence and went to Paris, yet we are also keen that this issue is got right. What is there that is still outstanding? Can quality overcome speed?
  Overall in Britain over the past few years we have not been very good at raising the flag for Europe; we have been far keener to moan; but I would commend the point made about the benefits of the single market being worth 130 billion euros over 10 years. That amount is very important, as was indicated earlier; it is very important for the UK. There can be a tremendous
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  benefit for both the UK and Europe, and even if benefits are only half as good as this, it is a very good catch.
  6.17 p.m.
  Baroness Wilcox: My Lords, I thank the noble Lord, Lord Woolmer, and the European Union Sub-Committee B for their terrific work. It made me feel very nostalgic. The first six years that I was in this House I served on Select Committees and particularly on the European Union Select Committee Sub-Committees D and C. Terrific work is done for this House and for the other place because there is no level of scrutiny like this in the other place on European directives. Tonight it was evident that it is important that we have such knowledge here in this House, so I thank the noble Lord, Lord Woolmer, and the committee very much indeed.
  As the noble Lord said, a single market in financial services has been a key part of the moves towards the single market which began with the Treaty of Rome nearly half a century ago, and was cemented by the Single European Act 1986. In the Conservative Party we support these moves. While we do not believe that a single market requires a single social or industrial policy or a common taxation policy, we strongly support the four basic freedoms of the single market—free movement of goods, services, people and, most relevant to today's debate, capital.
  In 1999 the European Commission put together a financial services action plan, with its plans for improving the single market in financial services. Your Lordships will know that the plan has three strategic objectives—the single market for wholesale financial services; open and secure retail markets, and state-of-the-art prudential rules and supervision.
  The plan also has a tight deadline, as we have heard. In Lisbon in March 2000, the European Council affirmed that the FSAP should be adopted by the end of 2005. For this to be achieved, the measures must be fully adopted at the European level by next month.
  The report states that at present there are three outstanding measures under negotiation. As we have heard, those are the take-over directive, the investment services directive and the transparency directive—in addition to the 10th and 14th company law directives which have yet to be brought forward by the Commission. Can the Minister tell the House what progress has been made on these issues? So far as I am aware, in the case of the transparency and investment services directives, the co-decision process is still ongoing. Is that the case? What of the takeover directive? Moreover, what progress has been made on the company law directives?
  I am also aware that the Commission is currently preparing legislation on Basel capital adequacy rules for financial institutions, Solvency 2, cross-border payments and reinsurance. Do these measures form part of the FSAP and what progress has so far been made?
  The purpose of the sub-committee's report was to investigate the effect on the quality of legislation of the tight deadline for the FSAP. In particular the report

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  raised the issue of the "retrogressive" vote in ECOFIN to amend Article 25. That would have allowed major investment banks to do business direct without having to use local stock exchanges. The Chief Secretary to the Treasury estimated the potential cost of the amendment to be as much as £300 million, and the Government have stated their wish to see the decision reversed. What steps are being taken to alter the investment services directive before it is adopted? I understand that compromise on the ISD was accepted in committee last week, but can the Minister tell us what is his assessment of the chance of a satisfactory outcome in ECOFIN?
  This is a key item of legislation which will impact on the whole framework of financial services regulation in Europe. It has been described by many as the constitution for the European capital market. Getting the ISD right will be crucial for the UK's financial industry. It is important to ensure that a proper distinction is made between professional and retail investors, and that it does not burden wholesale markets with regulation designed to protect consumers. That point was also made by the noble Baroness, Lady Cohen. Rules relating to the conduct of business and marketing should not be used to protect markets. In addition, it is important to ensure that the ISD is not used to create more complication and costs for investors, for example by adding further costs and bureaucracy to execution-only services, nor should it impose unnecessary burdens on independent financial advisers and small firms involved in financial services business.
  I return to the FSAP. The sub-committee claims that the Lisbon European Council in March 2000,
  "gave new impetus to the Financial Services Action Plan as a key component of broader EU economic reform".
  It would be interesting to hear the Minister's comments on this statement. In the four years since the Lisbon summit, the Government have published annual progress reports. In the first, in 2001, the Prime Minister wrote:
  "Reform, while underway within the European Union, must move forward with speed"
  In the second, the Prime Minister commented that,
  "progress has not always been smooth. Much more remains to be done".
  In 2003, the Prime Minister said:
  "There remains a daunting amount to be done".
  This year, the Prime Minister said that progress "is not good enough" and added,
  "we need to go further to meet the standards being set by our competitors elsewhere in the world".
  How much progress does the Minister believe is still necessary in order to create a single market in financial services?
  As we have heard tonight, while I shall not cite such superb figures as the noble Baroness, Lady Cohen, financial services form a hugely important part of the UK economy, accounting for 5 per cent of UK gross domestic product. So it is vital that we get the single market and the financial services action plan right. Opening up access to European markets will provide
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  huge opportunities for the City but, at the same time, an overly prescriptive and bureaucratic approach from the European Union poses severe dangers. It is therefore important that we heed the warnings given by the noble Lord, Lord Woolmer, and the sub-committee regarding,
  "the balance to be achieved between speed of implementing legislation and the quality of that legislation".
  I would welcome the Minister's comments on how the Government intend to use their influence to achieve such a balance.
  I want to raise one remaining issue, again vouched on by the noble Baroness, Lady Cohen. European Union enlargement begins on 1 May with 10 new member states joining the European Union. What discussions have the Government had with the European Commission regarding the extension of the single market for financial services to the enlarged European Union? What steps does the Minister believe are necessary?
  I close for these Benches by welcoming the detailed and painstaking work of the members of Sub-Committee B under the wise guidance of its chairman, the noble Lord, Lord Woolmer. We have listened with great interest to two members of the sub-committee. The noble Baroness, Lady Cohen, set out a wonderful range of figures, drawing on her great experience as a banker in the City of London. The noble Lord, Lord Shutt, addressed the House with the clarity one would expect of a chartered accountant of his standing.
  I thank all the members of the sub-committee for the report. We look forward to the Minister's response.
  6.26 p.m.
  Lord Davies of Oldham: My Lords, I join all noble Lords in expressing my thanks to my noble friend for chairing the sub-committee. Its members have all played their part, but my noble friend's chairmanship certainly ensured that we have the benefit of cogent and relevant reports which raise all the crucial issues. As my noble friend indicated in opening the debate, what he really wants is not answers to the report which has already been presented, but an update on our progress on these issues since its delivery. I shall do my best to respond to those questions. However, I want to put on the record the gratitude of the House to the members of the sub-committee.
  I was grateful for the rather pessimistic stance adopted by my noble friend Lady Cohen, to which she herself admitted. It was enlivened at the end of her remarks by one or two moments of encouragement and appreciation of progress being made. I am sure that she will forgive me if the general tone of my remarks is almost the exact opposite. I shall be buoyant about areas in which we are making some degree of progress while not being so unrealistic as not to recognise that there are very real reasons for concern and areas in which a great deal of work still needs to be done.
  The project, achieving the ambitious strategy of the financial services action plan, will produce very significant gains both for us and for other member

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  states in the Community. But we cannot fulfil those ambitions at any cost. Although it is important to make progress, we must also recognise that we cannot rush into legislation. It is crucial to focus on the principles of better regulation and proper consultation to ensure that the quality of financial services legislation is not compromised, in particular given the high standards we maintain in our own country.
  I want to reassure my noble friend on what was probably the easiest question he put to me: the extent to which the Government are involved in consultation with crucial players in the industry. The Government make strenuous efforts to ensure that not only do they take those crucial players with them, but also that they benefit from the wisdom they can provide by warning us of the implicit dangers of taking inappropriate action. All noble Lords have stressed that point, and no one better than the chairman of the sub-committee, my noble friend Lord Woolmer. These issues are vitally important for the City of London, given the role it plays not only in terms of enhancing the prosperity of our own people, but in its crucial role in the global context.
  One of the crucial issues that we have to face in a rather more dramatic way than several of our partners in Europe is that our financial services industry has a global reach, a global importance and a global significance. This means that we must have strategies which are not only entirely relevant for the Community but are also appropriate for enhancing London and the City in its role across a whole range of world services.
  Great benefits can flow from an enhanced market. A recent report from the London School of Economics on behalf of the European Commission calculated that the creation of a single EU market in financial services would by itself reduce the real cost of capital by 50 basis points for European businesses and result in a one-off 1.1 per cent increase in GDP over 10 years for the European Union as a whole. Those are very significant figures indeed. In a sense, it is a measure of the prize for which we are striving in regard to the development of a single market in this area.
  Such benefits will not of course be forthcoming in terms of better regulation without accompanying economic reform across the EU. The issues will be made that much more complex by enlargement, a subject introduced late in the debate by the noble Baroness, Lady Wilcox. She asked what discussions the Government have had with the Commission about enlargement and this project. We are seeking to develop relations with the accession countries to ensure that they play a full part in developing this single market. They, too, have their contribution to make. However, it is important that they should appreciate fully how important this development is for the whole of the European market they are about to join.
  The Government believe that the process of economic reform is necessary if Europe is to meet the strategic goal agreed at the Lisbon European Council and confirmed at Stockholm and Barcelona. Moreover, as the committee's
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  report identifies and as the Government have previously agreed, we need to improve the quality of regulation at European as well as at national level. Better regulation disciplines are beginning to develop in Brussels. The better regulation action plan introduces extended impact assessments for all new significant legislation; an eight-week consultation period for new legislation; and a programme of simplification of existing legislation. It is early days but it is clear that this is a genuinely welcome initiative.
  However, as we have found in the UK, we need to maintain constant pressure to keep driving forward regulatory reform. That is why the theme of my noble friend's opening speech was, "How much momentum do we have in terms of this development at the present time?" The Government are working with the Irish, Netherlands and Luxembourg Governments to implement a further programme of regulatory reform over their presidencies to further strengthen impact assessments—including through a specific test of the effect on competitiveness—and we are looking at alternatives to regulation. This initiative has been welcomed also by the President of France and the German Chancellor. So initiatives in which we have played a full part and taken key steps are being buttressed by support elsewhere.
  My noble friend Lady Cohen emphasised the global dimension. It is essential that the global characteristics of financial services are taken into account when developing and implementing the EU's strategy for them. The EU's policy must encourage further liberalisation of the EU market and greater integration generally. The EU and the US are the world's leading financial services markets. More efficient and integrated EU-US financial markets would benefit everyone. We can of course improve our relationships with the United States by having clarity, consistency and effectiveness across the European Community.
  There remains, however—this reflects the element of pessimism in the speech of my noble friend Lady Cohen—a great deal to be done. In following up the financial services action plan we intend to ensure that any official action is carefully targeted to address specific market failures and barriers; that when community action is necessary the Commission should use all the policy levers at its disposal and avoid legislation whenever possible; to encourage all those participating in the decision-making process to act to improve the quality of legislation with rigorous cost-benefit analysis, better regulation principles and consultation with all stakeholders; to ensure that there is effective implementation of FSAP measures by member states and effective and consistent enforcement of these measures by the Commission; and to ensure that the global dimension features prominently in our thinking.
  Considerable effort is being put into the identification of barriers to financial market integration. The Treasury is working closely with the industry in attempting to list and categorise reported problems in the cross-border provision of financial services and the establishment of financial services firms throughout the EU.

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  The Government have encouraged the Commission to tackle its task of completing the single market by using all available policy tools. In the 2003 Budget Statement, the Chancellor encouraged the Commission to make more proactive use of its competition powers to investigate financial services markets that appear uncompetitive.
  I have been asked about a number of points, which I shall address in the remainder of my speech. I can assure my noble friends Lord Woolmer and Lady Cohen that we are trying to reach the April 2004 deadline. After that date, we foresee that issues such as enlargement will create greater difficulties, which will have to be overcome.
  But we cannot do this at any cost. This is shown in our firm opposition to the services directive compromise proposed at the last ECOFIN council. We shall continue to encourage sustained progress towards the completion of this plan but remain wary of the attempt to rush legislation. We cannot, as my noble friend Lord Woolmer indicated in his opening speech, do anything except seek to guarantee that the City, in its crucial role, does not lose out as a result of these developments.
  My noble friend asked about the transparency directive. It is too early for me to give a definitive response. The noble Baroness, Lady Wilcox, referred to the co-decision aspect of the work in this area. Negotiations are ongoing between the Council and the European Parliament and I am unable to give a definitive reply on that front.
  As to the issue of international accounting standards, we are strongly supportive of their adoption—including IAS 32 and 39, although we recognise their contentious aspects. The standards are not perfect but their adoption will bring great benefits. We welcome the continuing dialogue between the International Accounting Standards Board and other stakeholders.
  I am afraid that I have to say to my noble friend that in regard to non-EU issues countries will be able to use their own accounting standards until 2007. We cannot see that we can make progress faster than that. In the meantime, agreement will have to be reached within the EU as to which accounting standards are considered of sufficiently high quality to be acceptable as international accounting standards. A great deal of work has been carried out but all noble Lords who have participated in the debate will recognise the challenges represented by that work.
  My noble friend also asked whether CAD 3, the capital directive, will apply to every firm that falls within the scope of the investment services directive. The answer is broadly "Yes". I can reply affirmatively on that.
  He asked about the takeovers directive. Again, I lapse into a slightly pessimistic stance. I cannot pretend that the current directive is anything other than a disappointment. It does little to address harriers to takeovers in the EU. We have concluded that at
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  present we have no other basis on which agreement can be reached. It is this or nothing. We shall bring benefits to the single market. There will be better protection for minority shareholders, which will result from minimum standards being laid down, and there will be greater transparency, which will enable the markets to identify unaddressed defensive corporate strategies across the EU. But I cannot help but indicate to the House that this directive is not what we would wish. I think that my noble friend is all too well aware of that, but it is right that the Government's response should be put on the record.
  On the question of the investment services directive in general, we were encouraged by the strong vote last week—my noble friend asked for an update and I cannot do much better than to quote last week—by the European Parliament's Committee on Economic and Monetary Affairs in favour of positive amendments to the directive. As I indicated earlier, we are urging fellow council members to reach a compromise with the Parliament to allow the ISD to be agreed in April. Progress is being made. The European Parliament is on the side of the angels. There is a negotiating position that can be exploited and we hope to see it exploited along the lines that we have been pursuing. We hope for an early conclusion.
  Four directives are caught by level 2 of the Lamfalussy process. Work on three has commenced. The Government's priority is to ensure that, in general, level 2 work achieves proportionate, consistent and timely legislation with better regulation outcomes so that changes in technology and market practice can easily be accommodated in a way hat is consistent with protecting the consumer. My noble friend will recognise that in that area I have to be slightly elliptical in my response. I can tell him one other fact. It is the case that European Securities Commission votes on level 2 are undertaken by qualified majority voting, which gives some flexibility.
  Both my noble friend Lady Cohen and the noble Lord, Lord Shutt, raised points about cross-border clearing issues and settlement in the EU. We believe that the Giovanni reports were helpful and we are looking forward to the commissioner's forthcoming communication on this subject. The Government do not have a view on whether clearing and settlement services are best provided by a single provider or by multiple providers. We believe that market structure is best determined by the market participants and we will be pursuing the discussions along those lines.
  I was also asked whether the Government supported a directive on clearing and settlement. We can see some possible benefits in a directive, in terms of creating certainty about the regulatory environment and ensuring open access to providers and markets, but also potential risks. There is not yet a common view among member states about the scope and content of any possible directive. This may result in overly

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  complex, rigid legalisation that stifles innovation. Suffice it to say that we have distinct reservations in this area at present.
  On the company law directive, the noble Baroness, Lady Wilcox, asked me a specific question about the cross-border mergers directive proposal launched by the Commission in November 2003. This is now under discussion in the Council and Parliament.
  She asked another question to which I can reply directly. There is no proposal as yet from the Commission on Basle 2 or Solvency 2. These measures are not formally part of the FSAP. She asked an interesting question and I can say only that at this stage no proposals have emerged.
  I have been asked a series of interesting questions, born out of a report that was clarity itself. But in being clear, it did what I think my noble friend and all the other noble Lords who contributed to this debate expected. There are areas in which we can see the potential for significant progress, but there are causes for real anxiety where barriers exist. We are all aware of the fact that issues in the European Community do not become easier against a background of enlargement. We all recognise that and that is why it is important that the established part of the Community, with economies that have been functioning against many of these parameters for a considerable period of time, makes progress on integration and the creation of the single market in the period immediately prior to enlargement.
  As I hope noble Lords will recognise, I have been as open and frank as possible about the areas where the Government share elements of pessimism. I am able to confirm to the House that we are making significant progress. The committee identified some areas of that progress and it is something that we can take pride in, while redoubling our efforts to raise the pace and to make additional progress.
  6.46 p.m.
  Lord Woolmer of Leeds: My Lords, this has been a brief but important debate. I thank most warmly all those who contributed. It is invidious to pick out my noble friend the Minister to thank him, but I know that he stood in for my noble friend Lord McIntosh of Haringey. I am grateful to him for producing some answers, notwithstanding the fact that a few days ago he could not have been expecting to have to respond. He has responded with his usual mixture of well judged gloom and considerable optimism. I thank him for that. Occasionally, what he thought was welcome news to me was not, and in other places he thought that the news would be unwelcome, and I was actually quite pleased. So between us we shall go away from this debate extremely pleased. I thank everyone for contributing.
  On Question, Motion agreed to.

  Prison (Amendment) (Northern Ireland) Order 2004
  6.47 p.m.
  The Lord President of the Council (Baroness Amos)rose to move, That the draft order laid before the House on 9 February be approved.
  The noble Baroness said: My Lords, I beg to move that the draft Prison (Amendment) (Northern Ireland) Order 2004 be approved. The order introduces a range of miscellaneous provisions requiring amendment to the Prison Act (Northern Ireland) 1953 that, in large part, will serve to provide the Northern Ireland Prison Service with powers that are already available to its counterparts in Great Britain.
  The draft order provides for enabling powers for the mandatory testing of prisoners for the presence of drugs and alcohol in their body, which is a development objective of the Northern Ireland Prison Service drugs strategy. The provisions replicate enabling powers already taken by Her Majesty's Prison Service and the Scottish Prison Service in the 1990s. They provide that where the Secretary of State has authorised the commencement of testing in either case in Northern Ireland, any designated person authorised by the governor to do so may require a prisoner to provide a sample of urine or other non-intimate sample for testing for drugs or alcohol.
  Mandatory drugs testing of prisoners is already a well established procedure in England and Wales and in Scotland. The Northern Ireland Prison Service has for many years been tackling its drugs problems through voluntary drugs testing arrangements. This does however have its drawbacks. There are prisoners who systematically side-step voluntary testing and thus avoid detection of possible drug misuse. The availability of the powers will act as a platform for the development of the necessary operational systems that will support the implementation of mandatory drugs testing at the appropriate time. Both mandatory and voluntary testing arrangements will act as complementary components of a comprehensive strategy aimed at reducing drugs misuse in prisons.
  Many would argue that alcohol is an equally harmful drug. Recent research undertaken by Queen's University, Belfast, at Hydebank Wood Young Offenders' Centre reported that 61 per cent of inmates felt that excess alcohol had caused them to engage in the behaviour that led to their incarceration. Therefore, mandatory alcohol testing will be targeted largely at those who, as part of the rehabilitative process, become eligible for periods of temporary release from prison. Mandatory alcohol testing on return to custody will identify those individuals who have breached the conditions of their temporary release and affect consideration of future applications. It will also identify individuals who require further assistance with their dependency problems.
  A further key provision in the draft order is one which affirms that a police constable may hold in his custody any person committed to prison by the court, where it is impracticable to secure that individual's

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  immediate admission to prison. That is essentially a contingency planning measure intended to provide appropriate interim custody arrangements for prisoners in circumstances where severe operational difficulties, such as a fire or other disturbance, experienced by the prison service at any of its establishments may temporarily preclude the normal admission of prisoners.
  A similar provision has been in force in England and Wales for some time. It is a sensible and practical solution to deal with any exceptional circumstances which may arise at a prison. Both the Northern Ireland Prison Service and the Police Service of Northern Ireland welcome the provision as a means of formalising existing contingency arrangements. Its use is expected to be exceptional and, where deployed, will be of limited duration.
  The remaining provisions are minor amendments and repeals removing existing statutory obstacles to the full implementation of policies which promote equality of opportunity in public appointments to boards of visitors, and limit the opportunities to smuggle drugs, alcohol or other illicit substances into prisons in prisoner parcels.
  The primary intent of the draft order is to provide the Northern Ireland Prison Service with powers which are already available to prison services in other parts of the United Kingdom. Indeed, each of the provisions will play a role in enabling the Northern Ireland Prison Service to meet the challenges which confront it, and to continue to operate as a modern and professional prison service. I commend the order to the House.
  Moved, That the draft order laid before the House on 9 February be approved.—(Baroness Amos.)
  Lord Glentoran: My Lords, I thank the noble Baroness for explaining the order to us so clearly. It is a broadly based order that covers a number of issues that basically, as I understand it, tighten up the prison regime and its disciplines, and try to bring Northern Ireland more into line with the rest of the United Kingdom. But is it real for Northern Ireland today? How will the prison service enforce drug testing and so on for paramilitary prisoners? How will it cope, with the resources that it has, which are already under stretch?
  The Northern Ireland Affairs Committee of the House of Commons made some quite relevant comments on the report by Mr Steele, a highly respected gentleman but not a politician. The committee stated:
  "The Government's decision to implement separation, which we believe to have been taken for political reasons, was largely unwelcome to staff within the Prison Service. It was not believed that separation would result in greater safety either for prisoners or staff. It was feared that the paramilitaries would seek to take control of the separated areas as they had previously done at HMP Maze".
  Nothing has been learnt. The committee continued:
  "Within the temporary arrangements which have preceded establishment of the permanent regime, there has been significant evidence of prisoners continuing to resist and challenge the management of their wings. Outside the prison, attacks on the homes of prison officers—primarily by Loyalist organisations—have continued at a high level.
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  The report recognises that, having made the decision to implement separation, the Government cannot now turn back from it. But it asserts that the Government must pay the full cost which arises from the decision in terms of support for the prison and for its staff. The Government must 'hold the line' within the prison and ensure that no concessions are ever made to the separated prisoners which might undermine or diminish the control exercised by prison officers. Recommendations are made on a number of subjects, such as the procedure for identifying prisoners eligible for separation, and the exercise of sanctions, where questions about the operation of the proposed new regime remain".
  I suggest that that was a serious retrograde step.
  Where are we? A website on 1 March stated that:
  "Real IRA prisoners are believed to be on the brink of another 'dirty protest'".
  Marian Price of the Irish Republican Prisoners' Welfare Association commented further on that protests were always on the cards. The article continues:
  "Hitting out at the Government's response … the DUP's Ian Paisley Jnr accused the Minister of showing 'extreme weakness and failure' in the face of pressure from dissident republican prisoners".
  The result of all that is that the prison service and the prisons are overstretched. As I understand it, we passed legislation to allow us to house difficult prisoners in England, but the English prisons are full. The Government's prison strategy for Northern Ireland is currently a shambles. Having said that, I see nothing in the order to which I wish to object.
  Lord Shutt of Greetland: My Lords, I, too, thank the noble Baroness for explaining the order to us. From these Benches, I support the order. The noble Lord, Lord Glentoran, may well have made good points about the way in which activities take place at present hut, in terms of laying down the rules, I am pleased to be able to support the order and the fact that it puts Northern Ireland on the same footing as the rest of the United Kingdom.
  Lord Maginnis of Drumglass: My Lords, although the order is largely uncontroversial and is to be welcomed in principle, it raises a number of quest ions, some of which have already been touched on in quite some detail by the noble Lord, Lord Glentoran. I do not intend to repeat what he said; I merely endorse his points about our prison service and the interests of those who work in it being damaged to some extent and endangered by some of the concessions made of late.
  We are in a difficult situation; I suppose that we are always in a difficult situation in Northern Ireland so far as prisoners are concerned. There is influence from paramilitary organisations and other highly organised groups of people who have connections with the drugs trade in Northern Ireland. In the context of the heightened tension, we then have to ask ourselves whether the introduction of mandatory drug and alcohol testing is likely to be used to orchestrate protest or to enflame an already volatile situation.
  We know that it is only too easy in Northern Ireland for those who are organised within the prison and who have been, as the noble Lord, Lord Glentoran,

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  suggested, assisted in their organisation to call on the help of friends outside, in order to intimidate prison officers. An already volatile and fragile relationship exists in our prisons, and I am not absolutely sure from what the noble Baroness told us what procedures and regulations will apply to testing. Will prisoners be selected at random? Will testing be on a rotational basis? Will prisoners be tested weekly or monthly? Will they have advance notice that they are going to be tested?
  If that is the way of it, those factors will obviously make the whole process quite predictable and hence self-defeating. For example, what happens when a prisoner refuses to co-operate with regard to the testing? The offence is indicated clearly enough but are the penalties for refusing to participate in the mandatory testing undefined and too vague to be a real deterrent? Is the Minister satisfied that the physical deterrent which exists in our prisons is adequate to deter those who seek to introduce alcohol or, more specifically, drugs to prisoners?
  As well as considering the difficulties which exist, can the noble Baroness tell us what drug rehabilitation programmes are in place for prisoners? While the ultimate aim must be to rid our prisons of drug and alcohol abuse, once and for all, the cure for those who are addicted is every bit as important as the deterrent. What education programmes are in place to help prisoners to come off, and to stay off, drugs not just in prison but also when they are discharged?
  My final point may not seem to be of great importance but it disturbs people in Northern Ireland. I refer to the removal of the justices of the peace as members of the boards of visitors. Perhaps the noble Baroness can clarify whether justices of the peace who are at present on hoards of visitors are to be quietly and surreptitiously removed. If that is so, who is that intended to flatter? It is not welcomed by those of us who have over the years seen our justices of the peace contribute effectively as members of the boards of visitors.
  In general, I support the order. However, I look forward to the Minister's reply to the several questions that I have posed.
  7 p.m.
  Lord Hylton: My Lords, perhaps I may mention to the noble Lord, Lord Glentoran, that Maghaberry and the Maze are very different kinds of prisons. The former is cellular whereas we all know that the Maze is constructed on H-block lines. Therefore, I hope that the fears expressed about loss of control in Maghaberry may be a little exaggerated.
  I urge the Government to do everything in their power to insulate Northern Ireland from current trends in English and Welsh sentencing and imprisonment. These are a disaster from the point of view of rehabilitation and the prevention of re-offending. In the past five years the incarceration rate in England and Wales has gone up from 125 to 141 per 100,000 population. Yet three-quarters of young offenders return to crime while
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  seven out of 10 burglars and eight out of 10 shoplifters re-offend within two years of release. England and Wales have more life sentence prisoners than the whole of the rest of the European Union.
  Because Northern Ireland is a small jurisdiction, it has a good chance of achieving co-operation between police, prison, probation and other services. Because of its lively local community groups, it has a better chance of success in crime prevention compared with England. I urge the Government, therefore, to devote energy and resources to training the front-line statutory services and to promoting statutory and voluntary co-operation. I commend the finding of the Carter report, Managing Offenders, Reducing Crime. It said:
  "There is no convincing evidence that further increases in the use of custody would significantly reduce crime".
  I turn, first, to Article 3 of the order. It is most important that both magistrates and judges should continue to visit prisons to see conditions for themselves and to ask relevant questions. Some magistrates could continue to be members of boards of visitors on their own merits and because of their interest in the well being of prisoners. Will the Government confirm that they will do everything possible to encourage magistrates and judges to continue to visit prisons?
  Article 4 makes possible temporary detention in police cells. We have had far too much of that already in England. Police cells are not satisfactory for holding people for anything except the briefest of periods. Holding prisoners, whether on remand or after sentence, is an unnecessary and counter-productive burden on the police. It should be avoided like the plague.
  Articles 5 and 6 provide for drug and alcohol testing. As did the noble Lord, Lord Maginnis, I believe that even more important is the question of treatment for all addictions and forms of compulsive behaviour, including gambling. Can the Government assure us that effective forms of treatment are available, both in prison and post-release, for all prisoners willing to make use of them? Can the noble Baroness give some information or figures on the take up of the available forms of treatment?
  Article 7 removes a provision allowing the sending in of food to remand prisoners. Is that really necessary? Remand prisoners are quite often acquitted and should not be deprived of the privilege unless there is clear evidence that it is being abused—for example, for the purpose of smuggling in drugs or other illegal matters. Can the noble Baroness throw some light on that? She dealt with the matter fairly briefly in her introductory remarks.
  Lord Kilclooney: My Lords, the order addresses two subjects. On the participation of justices of the peace on the boards of visitors, I agree with my noble friend Lord Hylton that justices of the peace will now be removed from those boards. If they are not to be there as of right, I hope, as did the noble Lord, that they will at least be there on merit and they will continue to have a participatory role in the boards of visitors.

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  On the issue of prisons, I find myself in total agreement with the noble Lord. Lord Glentoran. He flagged up concerns which are being stated increasingly across Northern Ireland. He did so with the background that the Provisional IRA is increasingly active in the Province. Only a weekend ago, the chief constable confirmed that four members of the Provisional IRA were involved in capturing a member of the Real IRA. In that context the Government decide that the prisons should revert back to a policy of separation of republican prisoners from loyalist prisoners. In the way in which they are able to spin their message from time to time, the Government have said that it is separation but not segregation. We in Northern Ireland find it difficult to understand the difference between separation and segregation.
  However, now that that is the Government's policy, I join those who have warned that we are going down a dangerous road as regards prison regimes in Northern Ireland. We have different types of republican prisoners—Real IRA; Continuity IRA; and Provisional IRA. I understand that already they have united with a single spokesman to deal with the Prison Service for all the different republican groups. Again, we are moving down a dangerous path. As the noble Lord, Lord Maginnis, said, if one of those people decides not to comply with a request for testing for drugs or alcohol, what does one do when all the republican prisoners are now united in a separated part of the prison under a united leadership? Does that united leadership tell them all to go on a dirty protest? Or shall it move once again to having hunger strikes in the prisons of Northern Ireland? I believe that the Government have decided on a change of policy which is dangerous for Northern Ireland as we prepare ourselves for increased republican terrorism in the Province.
  7.11 p.m.
  Baroness Amos: My Lords, I first thank all noble Lords who have spoken and who have welcomed or supported the order in principle. A number of broader questions have been raised about what is happening in the Prison Service in Northern Ireland as well as specific questions about how the order will operate. I shall address the wider questions and then move on to the more specific issues.
  The noble Lord, Lord Glentoran, referred to the Steele review and its recommendations. The Government have accepted its recommendations that republican and loyalist paramilitary prisoners should be accommodated separately from each other and from the rest of the prison population on a voluntary basis. Our decision is in no way a reflection on the professionalism and dedication of Northern Ireland Prison Service staff in pursuing a normal, integrated regime. Indeed, noble Lords will be aware that the majority of prisoners are held in integrated conditions and we still believe that integration is the safest regime for prisoners and staff when prisoners conform and co-operate. However, we have to deal with the small minority of prisoners who now refuse that co-operation.
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  I reassure noble Lords that accepting those recommendations does not constitute a return to the conditions that existed at the Maze prison; and we cannot allow that acceptance to become a staging post on the road to Maze-style segregation. No one wants a return to the conditions that pertained at the Maze, where staff were threatened, intimidated and subjected to brutal attacks; and where prisoners could threaten and intimidate other prisoners with impunity.
  The noble Lord, Lord Glentoran, was also concerned about the resources available to the Northern Ireland Prison Service. The additional costs relating to improvements in safety for prison officers and prisoners have been met from redeployment of existing Northern Ireland resources. Some £28 million has been committed to providing a safer home environment for officers, £7 million has been provided to support safety arrangements in Maghaberry Prison and an additional £7 million a year will be invested in supporting officers to achieve the objectives of safer regimes in that prison. So we are conscious of the need to ensure that we give full support.
  Regarding the order and the concerns that were raised about co-operation, it is important that republicans have already agreed to drug testing. We really have to see how that operates before we go down the road of suggesting that it does not work.
  The noble Lords, Lord Maginnis, Lord Hylton and Lord Kilclooney, raised some specific questions about how the order will apply. Testing will be random, targeted and intelligence-based. Any prisoner who fails or refuses a test will be placed on report and undergo the disciplinary process. Trained prison staff will conduct tests and samples will be analysed by an accredited laboratory. The detailed procedures and protocols for testing are still being developed and will be provided for in prison rules. I am happy to write to noble Lords when we have more information regarding those procedures and protocols.
  A positive test will first be a disciplinary matter, as it is an infringement of prison rules. But, it is also an opportunity for prisoners to confront their problems and the Prison Service will want to engage with prisoners who seek support for their dependency problems. It is important to say that drug testing is part of an overall strategy. It is just one component of a comprehensive drugs strategy which will have four strands: control measures, including physical and passive dog searches and drug testing; care provision that identifies and offers support to those with dependency problems—I shall say more on that in a moment; education, in raising prison and staff awareness of the risks of drug misuse; and information-gathering and sharing, for example, monitoring drug trends in prison and the community and liaising with the police and other statutory agencies.
  Initially, medical staff will be able to provide symptomatic relief of the problems that alcohol-dependent prisoners may experience through alcohol withdrawal. Prisoners will be offered opportunities to

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  participate in drugs and alcohol programmes and Alcoholics Anonymous will provide sessions in each prison to provide ongoing support to prisoners coping with dependency problems.
  Regarding drugs, we want to build a partnership approach with the community. The Northern Ireland Prison Service has appointed three community drug organisations to assist with the delivery of a range of programmes in the three prison establishments. In all prison establishments prison staff would have contact with community drug workers and it is important that the matter is not just about support while people are in prison, but about maintaining a relationship after a prisoner's release to help them to continue to live drug free. It is all about a partnership between the prisons and the voluntary drug agencies.
  I was also pressed by the noble Lords, Lord Maginnis and Lord Hylton, on the question of JPs. I stress that the intention of the amendment is not to preclude JPs from appointment to the boards—applications from JPs will still be welcomed—but rather to reflect that all appointments to boards of visitors will be made solely on merit, following a competence-based selection process. Eight of the 51 members currently appointed to boards of visitors are justices of the peace.
  The noble Lord, Lord Hylton, asked about burdens on the police. I assure him that the exercise of that power will be kept to a minimum. The Prison Service does not intend to impose upon police resources unnecessarily and without justifiable reasons. Visits to prisons have long been a feature of judicial services training. So the Prison Service will welcome interest from the judiciary in the work which prisons undertake and will facilitate visits from any interested individuals from the wider criminal justice community.
  The noble Lord, Lord Hylton, also raised the issue of food parcels. Close examination of foodstuffs and fruit received in parcels revealed drugs secreted in confectionery and alcohol in fruit—particularly oranges. That has been identified through random searching. Therefore, the removal of the provisions permitting remand prisoners food stuffs in parcels will close another opportunity for drugs to be smuggled into prisons.
  The noble Lord, Lord Kilclooney, pressed me on the issue of one spokesperson for republican prisoners. There is one spokesperson for RIRA and CIRA prisoners and PIRA prisoners are using their own spokesperson, so there are two spokespersons. However, the Northern Ireland Prison Service refuses to recognise these spokespersons and continues to deal with all prisoners, integrated or separated, as individuals.
  I hope that I have answered the specific points that have been raised. I commend the order to the House.
  On Question, Motion agreed to.

  Firearms (Northern Ireland) Order 2004
  7.21 p.m.
  Baroness Amosrose to move, That the draft order laid before the House on 9 February be approved.
  The noble Baroness said: My Lords, the draft order follows a major review of Northern Ireland's firearms legislation, the aim of which was to assess whether the legislation remained relevant, effective and proportionate and whether it struck the right balance between public safety and the reasonable expectations of shooting enthusiasts.
  The suspension of the Assembly in October 2002 prevented it from making its views known to government, although a number of Assembly Members responded in a personal capacity. The draft order was, however, scrutinised by the other place as part of its inquiry into Northern Ireland's firearms control. The Government welcomed the inquiry as a useful addition to their own in-depth review and wide-ranging consultation.
  The central tenets of the 1981 order—that, with some exceptions, anyone who has a firearm must have a firearm certificate for it and that responsibility for firearms licensing is vested in the Chief Constable—are carried forward in the new order under Article 3.
  The licensing system, under Article 4, is strengthened by adopting some of the recommendations contained in the report of the noble and learned Lord, Lord Cullen, into the fatal shootings at Dunblane Primary School in 1996. The first is the requirement for firearm certificate applicants to provide two referees. The second is the requirement that the applicant should give his permission to the Chief Constable to approach his GP to obtain factual details of his medical history which the GP considers relevant to the application.
  The system is further strengthened by the replacement of the system of firearm certificate renewals with one of ongoing grants. This reflects the concerns of the noble and learned Lord, Lord Cullen, that certificate renewals were invariably subjected to a lesser degree of rigour than grants of new certificates.
  Another notable provision is the extension of the Chief Constable's delegation powers to include police support staff. This is in line with the civilianisation recommendations of the Independent Commission on Policing for Northern Ireland and will considerably increase the range of functions under the order which can be undertaken by civilians. In some areas, the Government have sought to reduce regulation where they are satisfied that there was no attendant risk to public safety.
  There was one significant provision contained in the proposal for a draft order which the Government decided not to bring forward; that appeals against decisions of the Chief Constable and applications for the removal of statutory prohibition on holding firearms should be to county courts rather than to the Secretary of State as at present.
  The reason for the original proposal was our concern that the system of appeals and applications to the Secretary of State might not meet the requirements

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  of Article 6 of the European Convention on Human Right—the right to a fair trial. But a recent decision of the Northern Ireland court was that the existing system, coupled with the opportunity for a judicial review, met those requirements.
  The Government concluded that there were strong arguments, including the protection of sensitive security information, for keeping firearms appeals and applications as an executive function. The Government intend to publish for consultation before the summer a guidance document on Northern Ireland's firearms controls. It will set out clearly and openly the policies and procedures which underpin the legislation and is almost as important as the legislation itself.
  The provisions of the draft order will maintain the essential elements of the existing system of firearms controls, which generally have served Northern Ireland well, and introduce some much-needed modernisation. There will be some relaxation of controls where there is deemed to be no risk to public safety, but at the same time the procedures for granting firearm certificates will be enhanced. The new order will bring some parts of Northern Ireland's legislation into line with the rest of the United Kingdom, where that is deemed to be appropriate, but in other parts—for example, in relation to shotguns—Northern Ireland will retain its own distinct provisions in the best interests of public safety there.
  The proposed controls for firearms represent a reasonable, effective and balanced approach to maintaining public safety and I commend the order to the House. I beg to move.
  Moved, That the draft order laid before the House on 9 February he approved.—(Baroness Amos.)
  Lord Glentoran: My Lords, I thank the Minister for so clearly laying out the order. Unlike the previous order, I commend the Government on it in general. I have only a few points of detail on which I would like clarification.
  On Article 6, dealing with conditions, the Explanatory Memorandum states that,
  "the Chief Constable may attach a condition requiring him to be supervised by an experienced firearm user when in possession of the loaded firearm and when using it".
  What constitutes "an experienced firearm user"? Will that person need to be licensed in some way? The problem will arise when the experienced firearm user proves not to have been an experienced firearm user as a result of an accident. There is need for clarification in that detail.
  On Article 7, dealing with the grant of a firearm certificate to young persons, the Explanatory Memorandum states:
  "He must be supervised for a period of at least 12 months when in possession of the firearm and any ammunition by someone of 21 years or over"—
  and this is the passage that concerns me—
  "who has held a certificate for that type of firearm for at least 3 years".
  It is possible that competent people no longer hold a firearms certificate for a shotgun. For example, if I decided to give up using a shotgun because my balance
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  or eyesight was no longer good, I would still be capable of supervising a grandchild. However, according to the order, I would not be eligible because I would not be the holder. Furthermore, a number of policemen and soldiers must be competent to supervise their children, but do not hold firearms certificates by dint of the fact that the weapons with which they were trained are military ones of one kind or another. Again, I ask for clarification of that provision.
  In respect of Article 17, I believe I know the answer but I would like clarification. It deals with firearm certificates and shotgun certificates granted in Great Britain, and the Explanatory Memorandum states:
  "Provides for the holder of a firearm certificate or shotgun certificate granted in Great Britain to possess his firearms in Northern Ireland provided that he has obtained a certificate of approval from the Chief Constable".
  I assume that that is the Chief Constable for Northern Ireland, but it could be the chief constable of the county in which he lives. Perhaps that, too, needs clarification.
  Finally, on Article 62, which deals with trespassing with firearm, the notes state that it,
  "Makes it an offence for a person to trespass in a building or on any land with a firearm or imitation firearm without lawful authority or reasonable excuse.
  I am delighted about that, but it would appear to make the offence of poaching into one of trespassing with a firearm. I wonder whether that is the Government's intention. It is different that the common poacher wit h his shotgun shooting on someone else's land—which has been a practice throughout the country for hundreds of years—will suddenly be turned into a trespasser with firearm. I would be delighted as a landowner, but wearing my politician's hat, I am not sure that that is what the Government should do. I ask for clarification of those points, but other than that, I support the order.
  7.30 p.m.
  Lord Shutt of Greetland: My Lords, I rise to thank the noble Baroness for speaking to the order and giving us this information, and to support it. However, I do not find it attractive in any shape or form. Having listened to the noble Lord, Lord Glentoran, the idea of being able to supervise my grandchild to cope with weaponry is not a concept that occurs to me in any shape or form. Indeed, I am appalled by this document, although I support it. It is important if we are to have legally held firearms that there is some form of regulation. Clearly, this is perhaps as good as it gets, and there must be proper regulation. The idea that there are 82 clauses and eight schedules on the one hand is appalling, because of all that waste of activity, but it is needed because of the concerns that there would be otherwise.
  I am far from clear on the scope of the order. How many certificates are there? How many dealers are there? How many clubs are there? How many visitors will say, as soon as they arrive in Northern Ireland, "I must get a certificate in order to have a firearm"? I would like to have some concept of the scale of this

  619
  operation. I understand—I speak as a fundamentalist in one sense—that it is about legally held firearms. Each to their own in terms of the legal holding of firearms, and operating that in a proper way. Is this document as proof as it possibly can be on legally held firearms crossing the divide? When we normally talk about Northern Ireland firearms, often we are talking about illegally held firearms, which is the real concern about Northern Ireland. Is this proof, as far as it possibly can be, on legally held firearms crossing the divide and getting into improper hands?
  Baroness Park of Monmouth: My Lords, I refer to Article 58, "Possession with intent", and Article 64, "Possession of firearm or ammunition in suspicious circumstances". I innocently suppose, though I recognise that this is largely about legitimate firearms in legitimate hands, that it cannot be wrong to reiterate the position to enable the police to act against individual paramilitaries if they have to. For that reason, I should have thought that it is useful legislation. I point out that there is a misunderstanding in Article 67. It is about the conversion of weapons, and it reads,
  "which, though having the appearance of being a firearm, is incapable … of discharging any missile".
  I think that the word should be "capable". It is a minor point, but the law is the law.
  Lord Rogan: My Lords, it has been 23 years since firearms legislation for Northern Ireland was last changed in any major way, and I welcome the order in as far as it attempts to improve public safety. However, if the order is intended to bring Northern Ireland more closely into line with similar legislation in Great Britain, it does not go far enough. I will address that point later.
  I would like to pick up on a few points that were raised by my colleague Lady Hermon when the legislation was debated in another place last week. I repeat her concern—as it is one that I share—about the extent to which police support staff are given increased powers to enter and search premises. Civilian staff will not have undergone any training in police operations, yet, through this order, we are dramatically increasing their powers by allowing them to,
  "enter at any time any premises or place named in the warrant, if necessary by force, and to search the premises".
  Without any training in police operations, any member of the police support staff finding himself or herself involved in a raid will be at a loss as to what to do and what procedures to follow. Can the noble Baroness more clearly outline why the powers of police support staff have been increased in this manner? If we discover that it is a matter of staff shortages, we are all aware of how best that can be addressed. The solution to such a problem does not involve using civilian staff, but would be resolved by halting the discriminatory 50:50 recruitment policy.
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  There is also some concern that not enough is being done to ensure that those applying for and those in possession of a firearms certificate are of sound psychological and physical health. If, as my colleague Lady Hermon pointed out, it is entirely possible for someone suffering from dementia to be re-issued with a firearms certificate, it is also possible that someone in possession of a certificate could, in the course of the five-year period for which it is granted, suffer periods of depression, or psychological ill health.
  Can the noble Baroness tell us whether any research is currently being carried out into how GPs, for example, can feed information on individual cases to the Firearms Licensing Branch, so that decisions to grant and to withdraw certificates are more informed and up-to-date? There must also be clear, good lines of communication from other departments in the PSNI to alert the Firearms Licensing Branch to any incidents that could suggest that the holder of a firearm certificate may no longer be fit to do so. I am particularly thinking of incidents of domestic violence or other such reported disturbances.
  The current minimum age for shooting in Northern Ireland is 18. In Britain there is no minimum age, and this has never presented any public safety concerns. If we are attempting to level Northern Ireland's legislation with provisions in Great Britain, why not remove the minimum age? While many regard our experiences with terrorism as a reason for imposing strict regulations—I suggest that the noble Lord, Lord Shutt of Greetland, feels this—I am unaware that any legally held guns—those used in shooting competitions, in clay pigeon shooting and in other outdoor sports—are the terrorist weapons of first choice. Surely we are denying our young people the opportunity to learn a sport in a safe and responsible environment. The Northern Ireland Office promised to look at this issue. Perhaps the noble Baroness will indicate why that has been reneged on.
  On a more positive note, I wish to welcome several aspects of the order, in particular that it will make it easier for estates and other businesses to offer shooting as a recreational activity to visitors to the Province. I am particularly referring to the provision to borrow shotguns and estate rifles under supervision and the introduction of controls on airguns to allow paintballing in Northern Ireland. Such provisions are excellent news for our tourist industry.
  These are important points, and I trust that the Government will consider them seriously so that I, and everyone in Northern Ireland, may be reassured that what we have before us today will ensure greater public safety. I look forward to the Minister's reply.
  Lord Hylton: My Lords, there seems to be a strange theory in the Northern Ireland Office—and perhaps in some other government departments—that the way to deal with problems is to legislate on them. Immense amounts of thought and energy must have gone into producing this order, with its 82 articles and seven schedules, yet the problem is not with weapons legally held—except when they are stolen—but, rather, with illegal guns and explosives.

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  The closest co-operation is clearly needed between police, Customs and Excise and, sometimes, the Inland Revenue to prevent illegal weapons entering Northern Ireland. There are no doubt linkages with all sorts of other forms of organised crime, including smuggling and drug trading. I know that co-operation between departments has been improved in recent years. However, given the small population of Northern Ireland, it should be possible to do still better. Can the Minister report on some successes?
  Illegal weapons are still regularly used for so-called punishment shootings, leading to serious injuries and, occasionally, death. Can the Minister tell us whether weapons used in such shootings have lately been recovered and what prosecutions have been brought against those responsible? Can she further inform the House about what consultations are under way with the local community leaders in so-called ghetto areas with a view to improving policing, especially during the hours of darkness, when most shootings occur?
  Would the Government view favourably the extension of local restorative justice schemes, especially in urban areas? I suggest that such schemes, which already exist in Belfast, are capable of reducing the demands made by some local residents for continued punishment beatings and shootings. They also have the potential for assisting the resumption of normal peacetime policing in certain neighbourhoods.
  Lord Brooke of Sutton Mandeville: My Lords, I rise to raise a highly technical point. I was reminded by the noble Lord, Lord Shutt, when he described the complications relating to dealers that occur under the order, of an episode once in County Down, where I saw a snake in an outhouse. I asked the owner of the house, if it were true that there were no snakes in Ireland, how there was one in an outhouse in County Down. He replied, "I got it from a dealer", as if that explained why the snake was on the island in the first place. Of course, that is against a background of the famous case of arbitration about whether Rathlin Island was in Ireland or Scotland, which was resolved in favour of Ireland on the grounds that there were no snakes on Rathlin Island.
  I apologise to your Lordships' House. Because I have been involved in debate on the draft gambling Bill this morning and the Horserace Betting and Olympic Lottery Bill this afternoon, I have been unable to look up the Police and Criminal Evidence (Northern Ireland) Order 1989 (NI 12), from which my technical point arises. I hasten to say that I shall be entirely content if the Lord President wishes to write to me, rather than to answer me today. That order appears in Schedule 7, where amendments are made to other schedules, on page 61 at paragraph 12. It states:
  "In Schedule 5, in Part II, after paragraph 15 add the following",
  and three paragraphs from the order are then transcribed into the 1989 order.
  Articles 58 and 69 both contain more than one paragraph, but only paragraph (1) is designated for transfer, whereas Article 60, which contains three
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  paragraphs, is transferred in its entirety. I follow how Article 60 hangs together, where paragraphs (2) and (3) clearly extend paragraph (1) with further definitions. I suppose that I understand Articles 58 and 59 and why only one paragraph needs to be transferred if either paragraph (2) of Article 58 and paragraphs (2) and (3) of Article 59 are already in the 1989 order, or if Article 58(2) and Article 59(2) and (3) are unnecessary. But if they are unnecessary, why is that, compared with the necessity to transcribe paragraphs (2) and (3) of Article 60?
  In the light of those inquiries, the Lord President will understand that reply in writing may be much easier. However, if there is anything wrong, we may be at a mild disadvantage if we have already passed the order this evening.
  7.45 p.m.
  Baroness Amos: My Lords, I thank all noble Lords who have spoken and shall try to address the points that have been made. I think that I followed the argument advanced by the noble Lord, Lord Brooke, but I shall seek to obtain an answer and, if I do not obtain one, I shall of course write to him. I shall return to his point in a moment.
  The noble Lord, Lord Glentoran, asked me several questions to clarify some of the issues raised by the order. On the issue of the new firearms certificate holders, the Chief Constable's statutory responsibility to assure public safety demands that the issue of the new and experienced shooters be addressed. Article 6(4) and (5) gives the Chief Constable the specific discretion to impose a condition that an experienced person or person who is acquiring a different type of firearm should undergo a period of supervision by a person aged at least 21 who has held a firearms certificate for that type of firearm for at least three years before he or she may possess a loaded firearm. Turning the noble Lord's question about experience round the other way, we are saying that experience means being over 21 and having held a firearms certificate for at least three years.
  Lord Glentoran: My Lords, I thank the noble Baroness for giving way. So is that someone not necessarily currently holding a firearms certificate but who has held one for three years?
  Baroness Amos: My Lords, I shall obtain clarification on that, but my sense is that we want those who are in a supervisory position to hold a current certificate. I shall obtain clarification from my officials on that and return to that point, but that was my reading of the provision. If someone does not currently hold a certificate, it could be some time since he has held one.
  On the point about the Armed Forces, the provision is intended to address the public safety concerns associated with new or inexperienced shooters. The Chief Constable's power to impose a supervisory condition is discretionary and the Government would

  623
  expect him to exercise that discretion in considering an application from a former member of the Armed Forces.
  I think that my next point will address the question about people who do not have current certificates. We believe that a person must be a current firearms holder to have the up-to-date experience to supervise another person. I think that that addresses the first point made by the noble Lord, Lord Glentoran.
  On the issue of trespassing and poaching, in which the noble Lord was especially interested, poaching is a separate offence; mere trespass is not poaching. That is currently the law in Northern Ireland and we have not changed it in any way.
  On the question of whether Article 17 refers to the Chief Constable of the Police Service of Northern Ireland, indeed it does.
  The noble Lord, Lord Shutt, asked me a number of questions and, in particular, wanted some statistics. I hope I can answer his questions. There are 78,887 firearm certificates covering 143,721 firearms ranging from shotguns, airguns and rifles to target handguns and handguns for personal protection. I can write to the noble Lord with specific numbers of each of those if that would be helpful. There are approximately 150 dealers.
  The noble Lord also asked about the ways that these firearms applications will be considered by the Chief Constable. They will be considered against the legislative criteria irrespective of the community background of the applicant. There have been no appeals to the Secretary of State from persons who feel aggrieved for that reason.
  The noble Lord, Lord Rogan, asked whether there was a case for removing the firearms licensing function from the police. We are convinced that for the foreseeable future firearms licensing functions should remain with the police. As the noble and learned Lord, Lord Cullen, said in his 1996 report into the Dunblane tragedy, the police are in the best position to collect and assess information bearing on the suitability of applicants for or holders of firearms certificates.
  The noble Lord also raised the role of civilian staff. The powers of entry and inspection in Article 51 and the power to search with warrant in Article 52 mirror those in the legislation for the rest of the UK. The extension of these powers to members of the police support staff was recommended by the noble and learned Lord, Lord Cullen, and should not cause any additional concern.
  On the role of GPs and the information which they can divulge, the applicant must give permission for the GP to give factual details of their medical history relevant to the application. The Chief Constable will approach a GP only when he or she has a valid reason for so doing and the GP will release only information relevant to the applicant's fitness to hold firearms. It is very much in the interests of public safety for the Chief Constable to be made aware of any medical condition which may adversely affect a person's fitness to hold and use a firearm safely.
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  The noble Lord, Lord Rogan, also raised the issue of age. We listened very carefully to the representations from shooting organisations that the minimum age limit for supervised shooting by young people—currently 16—should be reduced or even removed to mirror the position in Great Britain. The Home Office has indicated that it will be conducting a review of the firearms law in the rest of the UK in the near future. Harmonisation of the law relating to young people will be revisited at that time.
  The noble Baroness, Lady Park of Monmouth, raised the issue of the conversion of weapons. I hope that I can address her concerns. Paragraph 3 is correct in that it refers to something that looks like a firearm but is not because it cannot fire a shot. That is then converted to a firearm by, say, boring out the barrel so a shot can be fired from it. I hope that clarifies the position.
  The noble Lord, Lord Hylton, pressed me on the issue of illegal firearms and punishment shootings. Of course we want all paramilitary groups to give up their illegal firearms and to stop so-called punishment shootings. Today we are discussing the possession of legal firearms in Northern Ireland. I should like to make particular mention of the good record of safety and responsibility among those who hold firearms for sporting or other legitimate purposes.
  In relation to local policing strategy after hours of darkness, the Government have set in place district policing partnerships whose members work with local district commanders to agree policing plans to combat crime and reduce the fear of crime. I shall ensure that the concerns of noble Lords about local restorative justice schemes are passed on to the relevant Minister for a response.
  The noble Lord, Lord Brooke of Sutton Mandeville, asked me about paragraphs 58, 59 and 60. I can reassure him that his reference to the Police and Criminal Evidence Act 1989 Schedule 7 Page 61 Paragraph 12, is accurate but it is a little complex to deal with now so, as he suggested, I shall write to the noble Lord.
  I hope this addresses the questions raised by noble Lords and I commend the order to the House.
  On Question, Motion agreed to.

  Children: Protection
  7.56 p.m.
  Baroness Walmsleyrose to ask Her Majesty's Government what provisions are being made to improve vetting arrangements to prevent persons unsuitable to work with children from gaining employment with children in the United Kingdom and across the European Union.
  The noble Baroness said: My Lords, all over the world where one comes across fishing communities one finds, sitting on the quayside, people mending the nets. They do it with great care and attention because it is very important to them. Sometimes it is done by the fishermen themselves and sometimes it is done by

  625
  their wives. Very often it is done with a culture, traditions and knots that have been handed down from one generation to another, so important is it.
  Before noble Lords start to think that they might have unwittingly wandered into the wrong debate, I should explain that I believe that our debate tonight is about the need for us to mend the holes in the net that we cast to catch those unscrupulous people who want access to young children for the wrong reasons. Although the one that got away causes no more harm than a little dent in the pride of the fisherman, the one that got away in the terms of the net about children can have consequences which can ruin or even end a young and innocent life.
  Ensuring that people unsuitable to work with children and young people do not gain employment in positions which give them a high level of access is an absolutely basic child protection measure. Yet it is one that in the UK, and across the EU, we so often fail to carry out efficiently. Current holes in the net of legislation allow individuals to move between EU jurisdictions and even within the UK with their new employers being unaware or unable to check for previous allegations or offences against children.
  That is why I, together with a number of noble Lords, have been asked to raise the issue by the National Society for the Prevention of Cruelty to Children (NSPCC)—for whom I am an ambassador—and their equivalent organisations Children 1st in Scotland and the Irish Society for the Prevention of Cruelty to Children. It is why the ISPCC has been encouraging Irish Members of Parliament to lobby the Minister for Justice to improve vetting procedures in the Republic of Ireland and to consider the implications of movements of offenders across the Irish border. It is also why NSPCC has been briefing at the European level and in November held a roundtable discussion with MEPs and the European Commission's Director-General of Justice and Home Affairs.
  When the Criminal Records Bureau (CRB) was established in 1997, it was an important first step in preventing unsuitable people from working with children in England and Wales. The system can be effective because a combination of "hard" information, such as criminal records, and "soft" information, such as allegations and circumstantial evidence, can be accessed through it. While caution must be applied to the latter to protect the human rights of applicants, the children's charities support the use of soft details because of the simple fact that as many as 90 per cent of paedophiles are never convicted.
  The system however is not foolproof. There are still significant problems: many people who are unsuitable to work with children are still gaining employment in areas with access to children and young people. One of the problems is that the systems in the different jurisdictions were developed independently. The CRB is composed differently from the systems in Scotland, Northern Ireland and other EU member states. There are significant problems with data transfer between any two of the systems.
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  I recognise that the Government have made efforts to put in place links between different jurisdictions for sharing information on those with convictions—I refer to Lords Hansard, 29 January at col. 321. But those links are not finalised and many gaps remain. For example, I recognise and welcome recent moves that enable different professional sporting bodies to check across all systems in the UK whether potential sports coaches have criminal records. Sadly, that is not the case in other lines of work where adults interact with children.
  We must recognise that those who offend against children are often clever and devious people who will exploit any loophole that exists. We must address that with the utmost priority because they are clever fish who will find any little hole in our net and slither through it. It is vital, therefore, that there are clear and compatible protocols for information-sharing across borders, and that those responsible for implementing the checks in each of the jurisdictions make use of those protocols. Should there not be joint training and joint development of improvements to the systems?
  The majority of problems resulting from those unsuitable people slipping through the vetting net relate to sexual offences. The tragic events in Soham and the conviction of Ian Huntley in 2003 brought just such problems to the fore. I appreciate that Sir Michael Bichard's investigation is currently examining how police intelligence was handled, vetting practices and why vital information was not shared between agencies.
  However, I wonder whether an additional investigation on vetting procedures across the whole of the UK and the EU could not be undertaken. Perhaps that could be a vital first task for the new children's commissioner for England in liaison with the commissioners already established in Wales, Scotland and Northern Ireland. That would undoubtedly be for the commissioner to decide, but I would be interested in the Minister's views.
  This case, and others where cross-border protocols failed, demonstrates the need for mechanisms to track effectively those unsuitable to work with children. I regret that I cannot talk about particular cases because many are still in the legal system, but there is plenty of evidence for concern. Files containing crucial information must not be lost, as appears to have happened in the Soham case, but must reach those who need to know their contents. Such vetting mechanisms must work in relation to other measures that register and manage offenders—particularly sex offenders.
  The development of the Multi-Agency Public Protection Arrangements (MAPPA) in England and Wales is an excellent move forward that has been welcomed by the NSPCC. However, we are concerned about the lack of synergy with similar arrangements in Scotland. It is essential that we improve information sharing not only on data but also on management within the UK if we are to address the problem effectively.
  When the noble Lord, Lord Hylton, raised the issue in a Starred Question in January, the Minister described a number of measures that the Government

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  are taking to ensure greater compatibility between the systems in England and Scotland. He—I believe that it was the noble Lord, Lord Bassam—was not able to say when that work would be complete. Could the Minister tell the House today what progress has been made?
  Before I close I want to turn briefly to the difficulties that lack of funding has caused to the effective implementation of vetting procedures. When the CRB checks were first introduced, the Government proposed charging organisations and employers that wanted to recruit someone to work with children to check for any records held on that person. It was even proposed that a charge would be administered for volunteers. After much successful lobbying by charitable organisations the charge for checking volunteers was dropped. That was a welcome move.
  However, we now find that organisations in England are being charged for the checks that they need to carry out for paid employees, whereas in other jurisdictions there is help with the cost. Perhaps I may give an example from sport. Umbrella bodies are bearing the cost of checks for sporting organisations in Scotland and Wales. They are able to do so because of funding from the Scottish Parliament and the Welsh Assembly; the latter giving £1 million to the Welsh Council for Voluntary Action, which has funded the checks on behalf of individual sporting and other voluntary organisations.
  That is not happening in England. As a result, there has been a significant delay in the introduction of checks by English sports organisations. Organisations that employed paid coaches had budgeted this financial year to cover the original £12.50 fee, but when it was doubled in July 2003, most could not afford the increase; and it is due to increase again. Evidence from the NSPCC Child Protection in Sport Unit shows that organisations are now finding it extremely difficult to introduce comprehensive vetting of coaches. Why does Capita find it necessary to increase those charges so horrendously? Anyone would think that it is not making money. I recently read that its profits have soared in the past financial year: no wonder!
  I am not saying that the checks should be stopped—far from it. But the Government must be aware of the implications of raising the fee. How are the Government holding Capita to account for its level of efficiency in doing the job at a reasonable price? In England, the end users bear the full cost. The need to finance the checks is diverting funding away from vital child protection training and awareness raising.
  Can the Minister say whether the Government will increase the resources available to support registered bodies using the CRB to prevent them having to fund the whole cost of the checks themselves? I also ask the Minister to assure the House that there are no proposals to bring in back-door charges for checks on volunteers through, say, an administration fee or something similar.
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  I have touched on many issues and I know that there are others who wish to contribute, for which I am most grateful. I should like to close with one thought: child protection is the responsibility of us all. Let us be good fisherman and mend our nets.
  8.7 p.m.
  Lord Harrison: My Lords, I thank the noble Baroness, Lady Walmsley, for her perceptive and darned good introduction to today's important and timely debate on the vetting of those working with children across the United Kingdom and the European Union. I likewise declare an interest as an NSPCC parliamentary ambassador. I shall speak principally about the European Union, which undergoes another seismic change in two months' time with the entry of 10 new member states and all that that means for the well-being of Europe's children.
  Yesterday, the trial of Marc Dutroux began in the Belgian courts. Noble Lords will recall that he imprisoned and murdered four children. His trial may confirm the suspicion that he was part of a paedophile gang that operated across the borders of the European Union to pursue its nefarious and sickening ends.
  About a year before Dutroux's arrest I, as an MEP working in Brussels, had an hour-long, one-to-one meeting with the single market Commissioner, Mario Monti. I had submitted to him my paper entitled Children and the European Single Market where I pointed to the advantages that will accrue to children as a result of the development of the single market, principally in economic and trade projects. I also sought to highlight what I perceived to be, even at that early stage of the market's development, the very real and disturbing dangers presented to children within our changing Europe. My views then and now are that each of the four freedoms of the free movement of people, capital, goods and services impacts on the lives of Europe's children.
  But my overwhelming fear was that Europe's legislators did not recognise the social and criminal dangers inherent in the development of that single market. To put it no more finely than this, the sweeping away of the artificial barriers for business people to trade freely across borders gives at the same time the freedom to criminals of all kinds to range across the face of Europe. Nowhere would this be more true than for the criminal and paedophile fraternities.
  Mario Monti's reply to me was that indeed the single market represented a wonderful opportunity for jobs and prosperity for children when they in turn came to adulthood. But what was missing from his reply was a recognition of the social threats that I had outlined.
  Only now is the European Union economic giant awakening to the responsibilities that we owe to children of the market and the need to find complementary measures which will help us to retain the market but close the loopholes through which criminals in general and paedophiles in particular can filter. One such loophole is the vetting of those who work with children and who can now exercise their new rights to work across Europe's borders.

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  The problems in the UK have already been alluded to, but my principal concern is with Europe, which is closer than we think because it includes that thin border which separates Northern Ireland from the republic. Perhaps the noble Lord, Lord Rogan, will refer to that in his speech.
  If the mechanisms and practices of sharing information across the UK are problematic, in the EU they are parlous. The entry of 10 new countries in May should deepen our concerns. For instance, Portugal has no current provision for disqualifying unsuitable people from working with children. Even if a Portuguese employer does check an applicant's criminal record—something which is not obligatory—the authorities have no power to reveal details of convictions which have attracted a sentence below six months. In Austria an employer who checks and discovers a potential employee's criminal conviction retains the discretion nevertheless to employ that individual. As regards new European Union states, most have legislation in this field which is slender at best and absent at worst. The Minister might consider commissioning the Institute of Advanced Studies at the University of London to expand its 2001 report to identify different disqualifications and vetting systems current across the new Europe of 25 to enable us better to respond to this open sore. Will the Minister do so?
  The European Union is now beginning to bestir itself in the face of these threats. The recent Danish presidency introduced a proposal for a Council decision on increasing co-operation among EU states with regard to sharing employee disqualifications. At that time my noble friend Lord Filkin suggested on behalf of the Government that the proposals should include disqualification in the field of sex offenders. Will the Government revive those suggestions? The European Parliament recently held a conference on the issue, which was attended by Jonathan Faull, the director-general of JHA, betokening, I hope, the Commission's warming interest. Will the Minister consult Jonathan Faull and leaders in the European Parliament about undertaking fresh initiatives?
  Former Irish PM John Bruton has led the working group within the convention whose recommendations appear in the text for a proposed constitution for the European Union. The text demands the mainstreaming of child protection in all EU policies and programmes. Will the Government ensure that, if the constitution is ratified under the Irish presidency, that text is retained and acted upon? Will the Government take inspiration from our Irish colleagues, who, under their current presidency, have already emphasised existing resources available to member states to help to identify unsuitable employees seeking cross-border jobs, including the use of Europol, Cepol (the European Police College) and the EU Police Chiefs' Task Force?
  A powerful initiative in that field would be for the Government to commit to establishing common minimum standards, including the encouragement of all EU countries to establish lists of sex offenders and appropriate mechanisms to share those lists across borders. That initiative could be a central plank of our
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  own presidency in late 2005. Now is the time to catch the tide. The Government join the Council troika in 10 months' time, and work can be done now to accomplish the goal of drawing up lists in all EU countries and creating mechanisms to share information that will unremittingly track down those who so heartlessly track down our children. Will the Government respond?
  The Government can do much more at EU level to protect children from the menace of under-vetted paedophiles in Europe's increasingly mobile workforce. I refer the Government to the DAPHNE II programme, concerned with violence against women and children, which runs from 2003–08, and whose funding has been doubled to accommodate the extension of the CUPISCO project from 15 to 25 countries. The Chancellor, who has an excellent record in helping underprivileged children, will recognise that the EU budget requires judicious expansion from time to time to fund effective and targeted programmes such as DAPHNE II.
  Action at Community level will be strengthened when the new constitution is signed, especially as the draft proposals make direct reference to anticipating children's concerns in all EU policies. Will the Government confirm their wholehearted support of the proposed constitution, particularly the reference to children? With the constitution in place, will the Government work to realise in full the 1991 Maastricht Treaty's creation of the JHA third pillar; the areas of freedom, security and justice in its derivative, the 1997 Amsterdam Treaty; and their own ultimate expression; that is, the vigorous implementation of the Eurojust proposals, an embodiment of the free movement of prosecution, which is so essential in this area? Will they co-operate with other EU states to explore the possibility of an EU-wide power to restrict the free movement of known paedophiles to their home countries? Similar measures have been enforced against football hooligans; children are clearly much more important. Furthermore, will the Government explain the implications of our absenting ourselves from the Schengen agreement? To what extent does our participation in the Schengen information system compensate? That, too, impacts on children.
  I also invite the Minister to discuss the difficult question of establishing a proper balance between the human and civil rights of all European citizens, including sex offenders, with the rights of children to remain unmolested. If those competing rights clash from time to time, how are we to ensure that matters are resolved? I renew my plea to the Government to make action in this field an action point in the 2005 British presidency. Europe's children would expect nothing less.
  8.19 p.m.
  The Lord Bishop of Oxford: My Lords, we are all very grateful to the noble Baroness, Lady Walmsley, for ensuring that this very important subject is before us today. I very much support what she said about the need to mend any holes in the net, improving vetting procedures and having clear, compatible procedures across jurisdictions in both the United Kingdom and the European Union. The European Union

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  dimension, with the forthcoming accession of 10 new member states, was particularly and rightly emphasised by the noble Lord, Lord Harrison.
  I particularly want to speak from the standpoint of the Church of England. There are two reasons in particular that the Church of England has a very committed interest in the field. First, the Churches between them are the largest voluntary movement in the country and are weekly in contact with thousands of children. One aspect of that is that the Church of England is, I believe, the biggest employer of full-time children and youth workers. For example, in the diocese of Oxford the parishes between them employ 40 full-time youth workers, which is more than the number employed by the secular authorities. That pattern is repeated for the country as a whole. That is the first reason—weekly contact with thousands of children and the fact that we have so many paid professionals working with children.
  The second reason is a sadder one. As is well known, paedophiles gravitate to churches. No doubt they do so for a mixture of reasons. Many of them have a sincere religious faith and they are using the resources of their religious faith to struggle with their condition. But for some of them, and perhaps for many in part, it is because churches give access to children. So there are two important reasons why this issue is very much a lively concern for the Churches. I speak from the standpoint of the Church of England which is committed to safeguarding all the children who are involved in its activities.
  During public worship, children are generally in the care of their parents, but guidance for good practice is set out for all occasions where children and young people attend church services without their parents. The Church has many activities where children are in regular informal contact with adults, and it is here that children can be particularly vulnerable. Our experience is that adults can use these situations to target children, playing on the trust that church people engender and leading on to abuse that would usually happen outside the actual church activity. It is for this reason that the Church of England continually revises its guidelines, as it has done recently, having had the guidelines endorsed by the General Synod of the Church of England. That is also why we have a full-time child protection officer at Church House, Westminster, as do most dioceses now.
  The Church believes that creating a safe environment for children is the main way that they are protected. We are aware, as has already been mentioned, that most people who harm children have not been convicted. However, we use the Criminal Records Bureau, particularly for enhanced disclosures, as part of our recruitment procedures. I shall mention those briefly.
  Enhanced disclosure is required for all ordinands before they are selected for training and also before they are ordained. All clergy are checked when they move to a new appointment; clergy already in post are gradually being checked; readers, sometimes called licensed lay ministers, and other people who hold a bishop's licence
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  who are in contact with children are checked in the same way; all paid children and youth workers are also checked.
  The Church has many thousands of volunteers working with children, and adults in regular contact with children. All those in regular contact with children, when the parents are not present, are gradually being checked at the appropriate level.
  In order to achieve the highest possible standards, the Church of England and other Churches are committing time, resources and money which they can ill afford. Not only is there the cost of the salaries of the child protection officers but, as the noble Baroness, Lady Walmsley, mentioned, there is the increasing cost through the raising of fees for these disclosures, which I understand are shortly to go up to £33 for each enhanced disclosure.
  The noble Baroness mentioned sports organisations. All the money for this has to be found from Church of England congregations—through voluntary giving. I very much share her concern that this money could be used better by the Church and other voluntary organisations. Any streamlining of the service to make it less time-consuming and costly would be very much appreciated.
  The new regulations to be put before Parliament clarify those eligible for an enhanced disclosure. However, we believe that the legislation and regulations continue to demonstrate rather less understanding of the place of volunteers in the care of children, in particular the often informal nature of much Church and voluntary activity—such as in churches with mixed choirs. We regard it as very important that the checks made on volunteers are carried through as professionally as is enhanced disclosure for paid professionals.
  I strongly support the plea of the noble Baroness, Lady Walmsley, that we should tighten up our vetting procedures and that we have clear and compatible protocols across jurisdictions in the United Kingdom and the European Union. From the standpoint of the Church of England, we are fully committed to having the highest possible standards and to making our full contribution to those standards in the whole of our national life across the UK and the European Union.
  8.26 p.m.
  Lord Rogan: My Lords, I am also most grateful to the noble Baroness, Lady Walmsley, for bringing this important debate to the Floor of the House. Stopping unsuitable people from working with children is an important matter, especially from a Northern Ireland perspective. The noble Lord, Lord Harrison, alluded to the fact that we are the only part of the United Kingdom with a land boundary with another EU state. With the very different vetting arrangements in the two parts of the island of Ireland, this creates some concerning loopholes.
  The system of vetting in Northern Ireland carried out through the Pre-Employment Consultancy Service at the Department of Health, Social Services and Public Safety, has existed in Northern Ireland for

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  22 years and has widely been regarded as leading other parts of the United Kingdom in vetting procedures.
  Last year, legislation on vetting that had begun its life in the Northern Ireland Assembly passed through this House. The Protection of Children and Vulnerable Adults (Northern Ireland) Order 2003 replicated parts of the England and Wales Protection of Children Act 1999 and the Care Standards Act 2000. But significantly, and quite uniquely in the United Kingdom, the order dealt with the weakness found in the English legislation whereby there was no duty imposed on non-regulated childcare organisations to vet and report those dismissed for harming children.
  The Northern Ireland order introduces the concept of "voluntary accreditation". This will apply to a range of community and sporting organisations, allowing the Department of Health, Social Services and Public Safety to benchmark them against a number of child protection standards. These organisations, once accredited or "kite-marked", then acquire a statutory duty to vet and report staff dismissed or moved for harming children. I trust that the Government will note the developments taking place in Northern Ireland on this issue and I would be interested to know if the Minister is taking steps to strengthen the Protection of Children Act 1999 in line with the provisions on accreditation in Northern Ireland.
  Differing provisions underpin the operation of vetting arrangements in each jurisdiction and the exchange of information. There are two matters that I should like to highlight. First, despite being enacted in 1997, Northern Ireland is the only part of the United Kingdom not to benefit from Part V of the Police Act. This provides a statutory scheme for the disclosure by the police of non-conviction information and is extremely important. While the Government have indicated that they will enact Part V, I am concerned at the lack of progress to date which will have serious implications for the roll-out of the Protection of Children and Vulnerable Adults (Northern Ireland) Order. I ask the Minister for an assurance that the Government will take immediate steps to ensure the implementation in Northern Ireland of Part V of the Police Act 1997 and that this is co-ordinated in conjunction with the commencement of the Protection of Children and Vulnerable Adults (Northern Ireland) Order 2003.
  Secondly, given the proliferation of legislation in each of the jurisdictions of the United Kingdom underpinning the operation of the Pre-Employment Consultancy Service, Disclosure Scotland and the Criminal Records Bureau, the exchange of information across bodies is a complex issue. I should like to ask the Minister for an assurance that each vetting bureau has full legal access to the lists of disqualified people held by each of those jurisdictions. Will she confirm that there are no loopholes in the systems that will allow a disqualified person in one jurisdiction to gain access to a vetted post in another?
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  As I indicated earlier, Northern Ireland is the only part of the United Kingdom with a land border with another EU state. This gives rise to loopholes. In the Irish Republic vetting has not been mainstreamed as in Northern Ireland. The Government there have established the Garda Siochana Vetting Unit, which carries out police checks on a limited number of posts. However, these checks are very inconsistently applied, and there is no equivalent of a procedural or statutory disqualification from a working-with-children list or provision of non-conviction information.
  These anomalies create huge problems for adequately and consistently vetting staff working in Northern Ireland who reside in the Republic of Ireland. Moreover, problems are also created for sporting organisations which organise on an all-Ireland basis but which have to work with the very different vetting standards pertaining in the two jurisdictions. There is a real danger that adults unsuitable to work with children could manipulate these different systems. Indeed, we have seen with recent criminal convictions how an individual can pose a risk in both parts of the island of Ireland.
  I would ask the Government to take urgent action to raise this issue with the Irish Department of Foreign Affairs in Dublin through the auspices of the British-Irish Intergovernmental Conference and through the European institutional framework. The current Irish presidency of the EU would seem an opportune time to look at vetting in a wider EU context given the situation that exists and the problems that arise in the island of Ireland.
  Before I finish, I understand that the Northern Ireland Commissioner for Children and Young People, Nigel Williams, has proposed that there should be an overall review of vetting procedures in Northern Ireland, including relationships with other jurisdictions. Perhaps the noble Baroness will comment on whether the Government would welcome such a review.
  Preventing unsuitable people gaining access to children through employment or volunteer posts is a very important part of a structure and system to ensure that children are protected when in the care and trust of others. I hope that the Government will take action to ensure consistency in the United Kingdom and across the enlarged European community.
  8.33 p.m.
  The Earl of Listowel: My Lords, I am grateful for the opportunity to speak briefly in the gap. My interest in this issue is sharpened because I have recently been vetted to work with children by the Criminal Records Bureau.
  Let me remind your Lordships of what Sir William Utting said in 1997 in People Like Us: The Report Of The Review Of The Safeguards For Children Living Away From Home:
  "The best safeguard"—
  for children—
  "is an environment of overall excellence".

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  And yet I am reminded by leaders in social care that, on occasions, children who have been neglected and abused are still cared for by people who have difficulty in reading and writing, in addition and subtraction.
  I simply add that the Government's emphasis on improving the recruitment, retention and quality of the social care workforce is vital to improving the protection of our most vulnerable children. I should like to put on record my warmest welcome for the attention they are paying to this area and for the commitment they are showing.
  8.35 p.m.
  Lord Hodgson of Astley Abbotts: My Lords, I join other noble Lords in thanking the noble Baroness for giving us a chance to discuss this important topic. We have benefited from her experience in the field and from the experience of the noble Lord, Lord Harrison, on the European dimension.
  In the light of the Soham case, numerous questions have arisen, in particular about the provisions of the Data Protection Act and the interpretation of them. It is clear that a good deal of confusion persists. I hope that Sir Michael Bichard's inquiry will go some way to answering these public concerns, and I am sure that noble Lords are anxious to see, hear and discuss Sir Michael's conclusions.
  Meanwhile, the efficacy of the Criminal Records Bureau, as managed by Capita, the implications of the Data Protection Act and the collaborative sharing of information between local police forces in the United Kingdom and between EU member states remain key concerns. They combine to give a pretty confused picture. The extent of this confusion is demonstrated when one examines in a little more detail how the vetting process works in practice. As the noble Baroness, Lady Walmsley, said, we have had some very helpful briefings from the NSPCC and the Children's Society, among others. While the system sounds quite simple in theory, it has proved far more problematic in practice. Practitioners say that, while the CRB appears to be a smooth running operation, we need only scratch the surface to see that it is not quite so satisfactory.
  The bureau was established as a public/private partnership between the Passport and Records Agency and Capita plc. Live services began in March 2002. Weaknesses in the business assumptions led to a great deal of subsequent criticism, particularly in the recent National Audit Office report. It was assumed in the business plan that between 70 and 85 per cent of people would apply by telephone to a call centre and that others would apply online. The assumptions had clearly not been adequately researched. It was found that over 80 per cent of applications came in paper form. Data entry screens were not designed for keying in details from paper forms, and staff were not suitably trained. There were also limits on the number of users who could access the system at the same time and links between the bureau and the Metropolitan Police systems were slow.
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  These technical problems were the results of poor research and the inaccurate assumptions of Capita and the Passport and Records Agency. Capita estimated low processing costs, which were far from realistic, and was paid an extra £1.7 million to manage these unexpected processing costs. But in total it was paid an extra £8 million for changes, extra costs of testing and delays in going live. The National Audit Office concluded that Capita had been fined a total of £3.7 million for failing to meet parts of its service agreement and at the same time had been paid more than £23 million up to January 2003. The result of all these figures is that fees for a check have been raised from £12, the level set in the spring of 2001, to either £28 or £33 from April 2004. The service is now expected to break even sometime between 2005 and 2006, that is a year later than expected, and it will cost the taxpayers an extra £68 million. Of course, as several noble Lords have pointed out, one of the prevailing concerns is the rise in the cost for disclosures. With further increases in prospect, there are many child welfare organisations that will be hard hit by the charges for checking. According to the Criminal Records Bureau regulations, the CRB is proposing to show on its website the surcharges levied by umbrella-registered bodies because, in its words,
  "this approach will allow market forces to operate more effectively by compelling high charging Umbrella Bodies either to reduce their fees or to de-register".
  That is a hit rich from a body that is not subject to market forces, and which has increased its charges by 250 per cent in two years of operation.
  Obviously, costly checking will not help to improve the vetting system. However, there are other areas of concern that are potentially even more detrimental. The security of the recorded data is clearly of vital importance. On 12 February I received a Written Answer concerning this issue from the Minister who is to reply to the debate tonight. She said:
  "it has at all times been the intention that, in terms of data protection, security and other aspects, the arrangements for processing data should entail no material increase to the risk of misuse of data".—[Official Report, 12/2/04; col. WA 173.]
  The use of "intention" and "no material increase" gives me some cause for concern. I hope that the Minister can be more positive when she comes to reply.
  The Minister continued in another Written Answer by explaining that there are personnel in India involved in the processing of data for the Criminal Records Bureau. That may be one cause of her uncertainty. I draw her attention to an article by Mr Pete Warren in the Evening Standard on 9 February 2004, entitled "Criminals target India call centres for data". It highlights the concerns triggered by the Government's Trade Secretary, Patricia Hewitt, after chairing a meeting on 2 February about mass overseas outsourcing. It transpires that there has been a significant rise in criminals who target call centres in India for data. The article explains:
  "If you are using people in a low-wage area, organised crime can afford to pay a lifetime's wages for data".
  We are not talking about limited information about an individual. Another reply from the noble Baroness, for which I was also grateful, stated:

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  "Work—consisting solely of manually inputting all personal information contained on Criminal Records Bureau (CRB) disclosure application forms (including the mandatory details such as the applicant's name, date of birth, current and previous addresses during the past five years, position applied for, the organisation concerned and details of the documents used as evidence of an applicant's identification, such as passport, driving licence and birth certificate)—is undertaken at a site in India".—[Official Report, 1212/04; col. WA 172.]
  That means that a comprehensive detailed record of a person's private life and records is inputted by a person outside the United Kingdom.
  That is of particular concern when considered in conjunction with the 2001 individual learning accounts debacle. Run on contract by Capita, the scheme was scrapped in November 2001 after discovery of fraud and security failures in IT systems run by Capita. In the light of that, it is particularly worrying to imagine fraud and security failures in IT systems run for Capita and the Criminal Records Bureau in India.
  I therefore want the noble Baroness to answer some questions. First, were the Government aware that the terms of the contract with Capita permitted it to sub-contract the work to another party—Hays plc—and that that party could carry out work outside the United Kingdom? Secondly, what is the Government's view now of Capita's operational performance, particularly in light of the increased fees charged? Thirdly, does she not agree that Capita appears to have submitted initially an unrealistically low bid in order to secure the contract from the CRB?
  Although the Minister will no doubt argue that a number of those problems have now been addressed and resolved, strategic issues still persist. The noble Lord, Lord Rogan, asked about interchange ability of data. It appears that the bureau still cannot access all potential sources of data, such as those held by HM Customs and Excise and the British Transport Police. The bureau's listings might not identify an applicant who has been under investigation by HM Customs for smuggling drugs or pornography—two examples that the Government often use—but who has yet to come to the attention of the police. Could the noble Baroness shed any light on whether steps are being taken to rectify that lack of cohesion?
  The noble Baroness, Lady Walmsley, talked about Scotland. It has been reported that the cross-border legal loopholes have left Disclosure Scotland—the Scottish equivalent of the CRB—unable to access vital information about paedophiles and alleged abusers in England and Wales when carrying out checks on behalf of potential employers. Joanne Robertson, writing in the Sunday Times's Scotland edition on 21 December 2003, said:
  "The loophole arose following the introduction of the Protection of Children Act at Westminster in 1999 … Separate legislation introduced north of the border resulted in the creation of Disclosure Scotland. However, it did not include a provision to allow employers continued access to List 1R, a register of suspected paedophiles in Scotland, or to the Protection of Children Act List held by the Department of Health".
  She concluded that, as a result,
  "more than 350,000 people working with children in Scotland have not been subject to vital child protection checks".
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  A spokesman for Disclosure Scotland has since commented that the Protection of Children (Scotland) Act 2003 will close the cross-border loophole. However, that Act will not come into force until next month. Can the Minister confirm that the procedures to close the cross-border loophole are ready for implementation and that there will be a reciprocal transfer of relevant data between the Scottish records system and the English equivalent?
  In addition, what are the links between the CRB and overseas crime databases so that the past credentials of a foreign language teacher or a sports coach working internationally can be checked with the same thoroughness as someone registered on the UK system? Is that to be changed? Is there to be full integration with the other European Union databases? Does the Minister know the condition of the criminal records bureaux in EU member states? The noble Lord, Lord Harrison, referred to, I think his word was, a seismic change. What about the countries which are to join the EU on 1 May? What do we know about the criminal databases in additional countries—Cyprus, the Czech Republic, and so on?
  However, perhaps strategically the biggest cause for concern—it has been underlined by the news from Soham—is the uncertainty surrounding the interpretation of the provisions of the Data Protection Act 1998. Extracts from that Act help to demonstrate how difficult they can be to interpret. Parts I and II of Schedule 1 to the Act spell out the circumstances in which personal data should be stored or deleted. Paragraphs 4 and 5 of Part I state:
  "Personal data shall be accurate and, where necessary, kept up to date … Personal data processed for any purpose or purposes shall not be kept for longer than is necessary for that purpose or those purposes".
  The key word must be "necessary". Without further details and explanation, how will the data processor or policeman know exactly what is "necessary"' Above all, how is it to be known when it is no longer "necessary" to keep the data? In that case, the devil more than ever is in the detail—and it is clear that the amount of detail here is unsatisfactory.
  In conclusion, there are clearly numerous improvements to and clarifications of the vetting system that need to be implemented. The loophole in the cross-border system with Scotland must be dealt with swiftly as must the establishment of some form of cohesive approach with other EU member states. But, most importantly, we need a system that is clear and comprehensible to those who run it, within our own country. How can we be expected to initiate a unified system beyond England if we have not achieved this yet within our own borders? I look forward to hearing the Minister's response to these and other important issues raised.
  8.47 p.m.
  The Minister of State, Home Office (Baroness Scotland of Asthal): My Lords, I, too, thank the noble Baroness, Lady Walmsley, for initiating the debate and commend her and the NSPCC, Children First, and their Northern Irish counterpart for their substantial efforts in encouraging the development of this and the broader debate. I agree that the issue is

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  about how we can prevent those who seek to take advantage of any perceived hole in the safety net which has been created for the protection of children. I am pleased that the noble Baroness and my noble friend Lord Harrison—they are NSPCC ambassadors—have been able to participate in the debate.
  I begin by airing a slight note of caution. We must all be very careful not to overlook the need to protect and safeguard other vulnerable members of our society apart from children. Certainly we as a government do not. Some of the measures that we have put in place apply more widely than children and are designed to protect other vulnerable people too. In addition, we have introduced further measures specifically to cover other vulnerable groups. I have in mind, for example, measures taken by colleagues in the Department of Health under the Care Standards Act 2000 to regulate care homes, domiciliary care agencies and nurses agencies, which includes the vetting of staff. Much of that would impinge on children too.
  However, we all recognise that the protection of children is of particular importance. Certainly it is a matter to which we as a government attach very great importance. It is a paramount consideration.
  It may be helpful in setting the wider context to describe some of the steps that we have taken in the past five years. We need to look at the issue holistically. The noble Earl, Lord Listowel, was right in saying that we have to look at an environment of excellence which will help better to protect the children that we seek to safeguard. Therefore, it is important that we have tightened the law on the sexual abuse of children in the Sexual Offences Act 2003.
  New offences have been created to protect children from abuse—for example, in the areas of grooming, child prostitution and pornography. We have strengthened the sex offenders register, including introducing a requirement for sex offenders to tell the police when they travel overseas. There were 21,413 offenders on the register on 31 March 2003. From May, offenders will need to notify the police whenever they intend to travel overseas for three days or more.
  We have introduced new orders to protect children from grooming and to stop sex offenders travelling overseas. A new order will require sex offenders who commit offences overseas to go on the sex offenders register if they come to the UK. We have established MAPPA, to which the noble Baroness, Lady Walmsley, has referred. We have brought in disqualification orders prohibiting unsuitable people from working with children. Disqualification orders have been strengthened in the Criminal Justice Act 2003 and we have introduced post-release supervision for up to 10 years for sex offenders. We have expanded places on sex offender treatment programmes, established a task force on child protection on the Internet and run awareness campaigns on the issue.
  So, the Criminal Records Bureau is one part of that safety net and I know that the noble Baroness will say that when we go fishing we take all our rods with us. I heard the criticism made by the noble Lord,
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  Lord Hodgson, which I respectfully suggest is mainly historical. A key element in the wider programme has been the establishment of the Criminal Records Bureau under Section 5 of the Police Act 1997. The noble Lord will remember that prior to that, arrangements for police checks agreed at national level with the Association of Chief Police Officers were restricted in two important ways.
  First, checks were available mainly in relation to posts only in the statutory or public sector. Secondly, checks were restricted to posts which afforded, in the words of the main circulars, substantial unsupervised access to children. So, even in establishments where checks were available, there was only limited, selective access where it was judged that the risk was greatest. We all believed that that was not good enough and we needed to do better. The right reverend Prelate the Bishop of Oxford commented on all the work done by the Churches to try to protect children. The people who were volunteering also had to be looked at.
  For the first few months after it began operating in March 2002 the CRB suffered from initial operational problems. In the summer of that year the service improvement plan was put in place. Since autumn 2002 the CRB has achieved substantial and sustained improvement in performance. The noble Lord, Lord Hodgson, asks if we are satisfied that the improvement is sustained and real. We are. The CRB has now issued over 3 million disclosures. Its capacity is currently in excess of 55,000 disclosures a week and it is keeping pace with demand. Since last June it has consistently met its further standards of issue—90 per cent of standard disclosures within two weeks and 90 per cent of enhanced disclosures within four weeks. Across that period it has averaged 92.5 per cent and 92.9 per cent respectively and applications more than six weeks old, which at one stage were 70,000, as the noble Lord, Lord Hodgson, will remember, are now below 1,000.
  The Criminal Records Bureau was established in response to mounting pressure for greater access to information from police records—both across other interested sectors and in relation to a wider range of posts within bodies which already enjoyed some access to police checks. The CRB now offers the capacity for between two and three times the number of police checks that were available hitherto.
  It is important to say that CRB disclosures are not a panacea. Under a convenient one-stop arrangement, the CRB provides information about convictions, cautions, reprimands or warnings recorded on the police national computer and information on whether the individual is recorded on the Protection of Children Act—POCA—list and List 99, both now maintained by the Department for Education and Skills, of people who are unsuitable to work with children. And in the case of the highest level of disclosure—enhanced disclosure spoken of by the right reverend Prelate the Bishop of Oxford—information comes from local police records which in the judgment of the chief police officer is relevant to the purpose for which the disclosure was being sought.

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  Disclosures are intended to supplement and certainly not to replace other forms of check which have long been part of a good recruitment practice and must continue to do so. Checks such as taking up references and inquiring into previous employment history, if properly undertaken, are more likely to yield more information—and more meaningful information—but clearly CRB disclosures may provide information which is particularly material to a recruitment decision.
  Lord Hodgson of Astley Abbotts: My Lords, will the noble Baroness answer the question that I raised? When the CRB began, did the Government anticipate that much of the data inputting would be done in India?
  Baroness Scotland of Asthal: My Lords, it is right to say that it was not necessarily anticipated before the whole scheme began. The decision to outsource the inputting work to India was taken only after the most careful scrutiny of the security and data protection implications. It has always been the objective that there should be no material impact on security and data protection. Arrangements have been rechecked to ensure that they remain sound.
  It is right that we should have the smoothest, most efficient, most effective system possible. Of course I hear the comments the noble Lord made about outsourcing to a country where the amount of payment is low. However, he knows very well that, relatively speaking, this work is paid very well in India and the quality of the people dealing with it are of a high standard. Many of them have degrees and so forth and it would be invidious to make a comparison between the standard of education and opportunity that we might have for people checking in one jurisdiction from another.
  A number of important issues were raised and I should be delighted to answer the noble Lord in great detail. However, time will prevent me so doing and I hope that he will understand that.
  This year the Scottish Executive is putting in place an equivalent of the POCA list used in England and Wales. This is being introduced in phases beginning around May, with referrals from bodies such as the General Teaching Council for consideration for inclusion in the list. The second phase from around July will introduce referrals from courts. Under the final phase in the autumn, other organisations will be able to make referrals. The plan is that Disclosure Scotland will be able to access our POCA list and List 99 from around May.
  The noble Baroness and the noble Lord, Lord Rogan, asked about the Northern Ireland situation. Separately, a list broadly equivalent to the POCA list will be introduced in Northern Ireland, replacing the Pre-Employment Consultancy Service register managed by the Department of Health, Social Services and Public Safety. This is due to come into force towards the end of the year. An order-making power is in place which will enable Disclosure Scotland to access the Northern Ireland list once it comes on stream.
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  We have made it clear that Part 5 of the Police Act 1997 is to be implemented in Northern Ireland. No date for its implementation has yet been given, but colleagues are actively considering how best to implement it. There is legislative provision in place to enable Northern Ireland to access the POCA list and List 99 when Part 5 is in force there.
  We are committed to introducing legislation as soon as there is legislative opportunity which will enable the CRB to access the lists of people unsuitable to work with children which are being introduced in Scotland and Northern Ireland. It is intended that the same legislation will enable Northern Ireland to access the new Scottish list. Together with the provisions already in place, this will complete the network, enabling checks to be carried out across the United Kingdom.
  The noble Lord, Lord Rogan, asked about the review. I understand that colleagues in Northern Ireland intend that a review of vetting arrangements should be conducted in collaboration with the Commissioner for Children and Young People in the light of the findings of the Bichard inquiry into matters arising from the tragic events in Soham. Colleagues will be making an announcement about this and about preparatory work by the relevant departments in Northern Ireland. I hope that that answer will give the noble Lord a little pleasure.
  A very important issue was raised about the European dimension further afield both by my noble friend Lord Harrison and by the noble Baroness, Lady Walmsley. In today's world, there is greater movement of people between countries. My noble friend was right to say that it is a great opportunity in widening Europe, but there are also some dangers in that. This is especially true in the European Union. Issues arise about checks on people from outside the UK wishing to come here to work.
  The CRB is not empowered to search databases outside the UK for conviction and other information shown on its disclosures. In fact, inquiries made about arrangements in force in other countries showed both how varied they are and how complex it would be to introduce widespread arrangements to link up with the records in a range of other countries. The CR13 has taken the initiative by establishing what it has termed its "overseas information service". This is for the benefit of employers who are considering recruiting staff from outside the United Kingdom.
  The service provides detailed information about the arrangements for checks in other countries including where such information can be obtained, how to go about obtaining a check, the cost and the time taken. At present, 17 countries are covered, including 10 in Europe. The possibility is currently being explored of extending the service to a further 14 countries, including 12 in Europe. We are also exploring with our European partners how arrangements for collecting and sharing information on those who are a sexual risk to children can be improved. In some such areas the United Kingdom leads the way. There is much that we can learn from our partners, but also much that we can share with them.

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  As a first step, we are hosting a seminar for members and accession states in London on 18 March to consider how we can take forward work on this issue. That seminar will be an important opportunity. I say to my noble friend Lord Harrison that it will give us the opportunity to test the waters. The noble Lord and the noble Baroness will know that not all our partners in Europe are as enthusiastic as we are about this issue. They see challenges, and they have concerns. We would love to be able to address those concerns and talk to them. The seminar will be an ideal vehicle for us to use to make that assessment as to how much further or other encouragement or work may be necessary.
  It is an important area, and I know that I only have a few moments left, but I should like to touch on some of the important questions that I was asked by the noble Baroness, Lady Walmsley, and the noble Lord. I hope that noble Lords will indulge me with just a couple of minutes so that I can give some answers.
  The noble Baroness asked me when we will have a compatible system across the United Kingdom. VISOR, which is the violent and sexual offenders register, is as the noble Baroness will know, a national database that is currently being developed. It is hoped that it will cover Scotland and Northern Ireland as well as England and Wales. The system is due to be rolled out in England and Wales at the end of this year. The database would provide access for police and probation officers across the United Kingdom to records on dangerous offenders, which will be helpful and important.
  The noble Baroness and the right reverend Prelate the Bishop of Oxford raised the issue of volunteers. We have no plans to change the current systems in Scotland and Wales. The situation in England is on a different scale. It is necessary to consider how beneficial such arrangements would be. We continue to have dialogue with the sector to identify the most appropriate and most effective means of accessing the CRB services. It has always been the intention of the CRB, as noble Lords will remember, that it should be self-financing by means of charges. In future years, this will certainly be the case. It has been necessary to subsidise the CRB through payments by the Home Office, the Department of Health and the Department
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  for Education. Our aim is that the CRB should be self-funding by 2005–06. This is a year later than originally planned. The most recent fee increase of £4 per disclosure from April 2004 is the next step towards this target, reducing the level of Government subsidy and increasing the contribution made by CRB customers. My noble friend asked about the 2001 study undertaken by the University of London. It has been the starting point for our seminar, which I mentioned, on 18 March. However, we are not considering extending that research programme by commissioning further research and reports. Instead, we have gone to each of the EU countries for an update of their system and to see where they are.
  We are working with the NSPCC and others to advance the issue in Europe, where the UK is driving the issue. As I said, we have said that that is a good way forward. Issues arise relating to Europol, but we must recognise that our EU partners will need a little, if not a great deal, of persuading to adopt similar measures. As I said, the seminar will provide an opportunity to do that.
  I really have run out of time. I hope that I have covered most of the main themes raised in the debate. I see signs that the noble Lord, Lord Hodgson, may or may not be satisfied, but, notwithstanding the fact that I could doubtless keep your Lordships here for long time answering all his questions, I shall write to him on all the matters that I have been unable to cover.
  In conclusion, it has been a privilege to participate in the debate. This is an important area. As I have said, we are certainly not complacent. We are keen to pursue measures both within the UK and across Europe to strengthen the protection of children through the sharing of criminal records and other information. To that end, we continue to put in place links between the different jurisdictions in the United Kingdom for sharing conviction information and information about people disqualified from working with children. We are also examining with other EU states how arrangements for sharing information can be improved.
  I very much welcome this debate, thank the noble Baroness and apologise for speaking with such rapidity.
  House adjourned at seven minutes past nine o'clock.