HL Deb 22 March 2004 vol 659 cc491-546

4.30 p.m.

Further consideration of amendments on Report resumed on Clause 27.

Lord Davies of Oldham moved Amendment No. 47: Page 25, line 42, leave out paragraph (a) and insert— ( ) it is not a company falling within paragraph (a) of that subsection

The noble Lord said: My Lords, I beg to move Amendment No. 47 and speak to the other government amendments in this group. In seeking to advance the discussions that we had on the last amendment with regard to taxation provisions, I want to emphasise the following points. It was suggested during the course of our debate on the previous group of amendments that the Government were drafting legislation on the hoof and had not consulted widely on some significant features of this Bill until late in the day. I want to put the record straight. Noble Lords will recall that the Bill was preceded by a White Paper in the summer of 2002. The draft Bill was published in July 2003. We have been involved in detailed discussions with stakeholders throughout the whole of the drafting and presentation of the Bill.

Through the framework of these amendments I am addressing myself to the general case which the noble Lord, Lord Jenkin of Roding, put with particular force on the last group of amendments. There are some things that are quite impossible to sort out in advance. He will recognise that we are seeking to create a flexible framework that will last over a significant period of time. As we all recognise, we are dealing with an industry with very long timescale operations. We need to allow the NDA to decide how it wishes to operate. We need to give it room to respond to the developing market when it is in place. Therefore, this necessary flexibility and conditionality with regard to specified aspects of the work is bound to take a period of time.

I responded to the noble Baroness, Lady Miller of Hendon, by indicating that she was making a plea for regulations which are frequently requested at this stage of a Bill. I wanted to emphasise to her that this was no general response. I am genuinely not able to deal with detailed regulations until we are further advanced both with the NDA and the nature of the contracts to be established. These will determine the appropriate taxation arrangements.

I make these general points purely in the interests of progress on the Bill. I also want to ensure that the House is fully aware of the Government's argument so that we can address ourselves succinctly to the issues at stake. I particularly refer to this group of amendments that the Government have tabled in response to the debate in Committee and also in response to the developing situation as negotiations take place with important stakeholders.

Amendments Nos. 47, 48 and 49 revise in three ways the definition of relevant site licensee in Clause 27, principally for the purposes of the exemption of certain trading profits from corporation tax and also in relation to the transfer tax provisions applying to site licensee companies.

First, Clause 27(5) was drafted on the assumption that site licensee companies would be owned directly or indirectly by the NDA before being transferred to a contractor. Recent detailed discussions as to the likely contractual structure have made it clear that this may not be the case. These changes ensure that site licensee companies that have never been a subsidiary of the NDA may be a relevant site licensee for the purposes of Chapters 1 and 2, if they meet the other conditions, which are relaxed as I shall explain.

Amendment No. 48—the second proposed change—relaxes the condition that a site licensee company can only come within the provisions if there is a management contract in force for the site. The change means that the case where the SLC's responsibilities are set out in NDA directions may come within this provision, which could apply to the AEA and its subsidiaries. The detailed requirements will be the subject of regulations.

Thirdly, Amendment No. 49 relaxes the ownership requirement so that where the management contract is with the parent of the site licensee, the site licensee company need be only a 90 per cent subsidiary, rather than a wholly owned subsidiary. This is to allow for the NDA to retain golden shares in relevant site licensee companies.

Amendment No. 51 introduces a new clause to confirm that the income generating activities of the NDA will be taxed under Case 1 of Schedule D, rather than Case VI of Schedule D (by virtue of Section 18 of the Income and Corporation Taxes Act 1988). This is being introduced in case the contractual relationships between the NDA and site licensee companies are such that the income generating activities of the NDA would be taxable under Case VI under the general tax rules. Taxing significant activities, such as electricity generation, under Case VI would cause difficulties in two ways. First, the tax clauses in the Bill are drafted on the assumption that the NDA would be trading under Case 1. Also, Case VI does not have a comprehensive set of computational rules in the same way that Case I does, so it would not be appropriate to rely on Case VI for a significant activity such as electricity generation. Subsection (2) limits the scope of this provision to sources of income within Case VI, under the general tax rules mentioned above, relating to the functions specified in subsection (1) (a), (d) and (e) of Clause 3.

Amendments Nos. 127 and 129 are consequential amendments that are made necessary by new paragraph 26A introduced by Amendment No. 24. They ensure that paragraph 26A will take precedence over paragraphs 3 and 4 (for the purpose of corporation tax on capital gains) where site licensee companies are transferred as part of a nuclear transfer scheme.

Amendments Nos. 140 to 144 amend paragraph 26 of Schedule 9 and add two new paragraphs, 26A and 26B. They concern transfers of securities in relevant site licensee companies as defined in Clause 27. The amendments allow for transfers of relevant site licensee companies to or from the NDA, or between one contracting group and another, to be at such a price that neither a gain nor a loss arises for the purpose of corporation tax on capital gains. The overall effect is that the transfer of ownership of site licensee companies between different owners is tax neutral.

Amendment No. 146 adds a reference to the new Clause 26A at section 35(3)(d) of the Taxation of Chargeable Gains Act 1992, which is concerned with assets held at 31 March 1982 and lists other provisions allowing for disposals at no gain no loss.

Amendment No. 145 is a technical amendment to enable the NDA to be treated as a company for the purposes of the capital gains tax rules applying to groups of companies. Similarly, it enables the NDA to be a company for the purposes of the intangible fixed assets rules. The amendment confirms that the NDA is to be taxed as if it were an ordinary company—subject to the special rules that are in this Bill. I beg to move.

On Question, amendment agreed to.

Lord Davies of Oldham moved Amendments Nos. 48 and 49: Page 26, line 4, leave out paragraphs (c) to (e) and insert— (ba) in a case where there is in force a management contract relating to the whole or a part of the site to which that licence relates, or to an installation or facility in or on that site, the parties to the contract include either—

  1. (i) the company in question; or
  2. (ii) a company which owns directly or indirectly at least 90 per cent of the ordinary share capital of that company;"
Page 26, line 16, leave out from "conditions" to end of line 18 and insert "that are required by regulations made by the Treasury to be satisfied have been satisfied.

On Question, amendments agreed to.

[Amendment No. 50 not moved.]

Lord Davies of Oldham moved Amendment No. 51: After Clause 27, insert the following new clause— "TAXATION OF NDA ACTIVITIES CHARGEABLE UNDER CASE VI OF SCHEDULE D

(1) For the purposes of the Corporation Tax Acts so much of any activity of the NDA as—

  1. (a) is an activity the profits and gains from which would (apart from this section) be chargeable to tax under Case VI of Schedule D, and
  2. (b) is not excluded from the operation of this section by subsection (2), shall be treated as an activity carried on by it as part of a trade in respect of which it is within the charge to tax under Case I of Schedule D.

(2) Any activity is excluded from the operation of this section if—

  1. (a) it is carried on by the NDA otherwise than in connection with something mentioned in section 3(1)(a), (d) or (e) of this Act; and
  2. (b) the profits and gains from it would, in the NDA's case, be chargeable to tax under Case VI of Schedule D by virtue of an enactment other than just section 18 of the Income and Corporation Taxes Act 1988 (c. 1).

(3) All activities treated under this section as carried on by the NDA as part of a trade—

  1. (a) shall be treated as carried on as part of the same trade; and
  2. (b) may be treated as carried on as part of another trade carried on by the NDA.

(4) Subsection (3) is subject to any other provision made by or under the Corporation Tax Acts that requires an activity to be treated as carried on as part of a separate trade (with or without any other activity).

(5) This section is to be construed as one with the Corporation Tax Acts."

On Question, amendment agreed to.

Lord Davies of Oldham moved Amendment No. 52 After Clause 27, insert the following new clause— "DISREGARD FOR TAX PURPOSES OF CANCELLATION ETC. OF PROVISIONS

(1) This section applies where—

  1. (a) a relevant provision is recognised in the accounts of a relevant company in accordance with generally accepted accounting practice;
  2. (b) that provision relates to decommissioning or cleaning-up which the NDA acquires responsibility for securing by virtue of a direction under section 3; and
  3. (c) that responsibility includes the financial responsibility under section 21.

(2) In computing the profits, gains or losses of the company for the purposes of corporation tax, no amount shall be brought into account in respect of a credit or debit to which subsection (3) applies.

(3) This subsection applies to a credit or debit if—

  1. (a) it arises on the occurrence of an event mentioned in subsection (4); and
  2. (b) it relates to the effect of that event on the relevant provision or the subject matter of the provision.

(4) The events referred to in subsection (3) are—

  1. (a) the coming into force of the direction mentioned in subsection (1)(b); and
  2. (b) a transfer of property, rights or liabilities of the company to the NDA or a subsidiary of the NDA in accordance with a nuclear transfer scheme authorised by section 36.

(5) In this section—

(6) This section is to be construed as one with the Corporation Tax Acts."

The noble Lord said: My Lords, in moving Amendment No. 52, I shall speak also to Amendments Nos. 53 and 67. This group is a response to the NDA taking responsibility for decommissioning and clean-up. The provisions have been drafted taking into account the recent clarification of a number of issues that affect the provisions and related assets recognised for accounting purposes in the SLCs and NDA and the consequent likely tax effects. The issues include the likely effect of nuclear transfer schemes, the undertaking of financial responsibility by the NDA and the making of "directions" in relation to sites, installations and facilities.

Amendment No. 52 introduces a new clause that provides that the accounting entries made by a BNFL site licensee company arising from the initial recognition of the NDA's taking responsibility for nuclear clean-up and decommissioning liabilities would not be included in the tax computation; namely, a disregard. This disregard would apply only to the initial recognition of the NDA taking responsibility. This will most likely involve the recognition of an asset representing sums recoverable from the NDA when it first takes responsibility as a result of a direction under Clause 3 of the Bill. This asset would match the nuclear liabilities that had been provided for in the accounts of the BNFL site licensee.

Without this provision, the credit arising in these circumstances would generate a very substantial tax charge on the BNFL group of companies. The disregard would not apply to any subsequent change in the estimated value of the undertaking or the expenditure to which it relates. Subsequent changes would generate a corresponding credit or debit in the site licensee's accounts and so the accounting entries would match one another for tax without the need for a special rule.

Amendment No. 53 introduces a new clause for the NDA that mirrors the effect of the new clause introduced by Amendment No. 52 for BNFL. This disregard in Amendment No. 53 applies to the NDA so that the entries recognised in its accounts immediately for taking responsibility for BNFL's nuclear liabilities would not be brought into account for tax purposes. As for Amendment No. 52, this disregard would not apply to any subsequent change in estimated value of the expenditure to which it relates.

Finally, Amendment No. 67 introduces a new clause after Clause 40 that extinguishes BNFL's losses for tax purposes. This is a quid pro quo for the disregard mentioned earlier. The accumulated losses in BNFL companies that have built up over time largely arise, one way or another, from provisions made in BNFL's accounts for decommissioning and clean-up. The losses will be extinguished when the NDA takes responsibility for decommissioning and clean-up under Section 21 or when assets and liabilities are transferred from BNFL under Section 36, whichever occurs first. I beg to move.

4.45 p.m.

Baroness Miller of Hendon

My Lords, I thank the Minister for explaining this group of amendments. I was grateful that his explanation was somewhat shorter than previously, which made it possible to remember at the end what the Minister began with. I have a couple of small questions in respect of Amendment No. 67.

First, the amendment refers in subsection (4) to, a 75 per cent subsidiary of BNFL", which does not appear to be defined. Could the Minister say precisely what this means? Does it mean that BNFL has to own precisely 75 per cent of the subsidiary for it to be within the clause, which appears to be the literal interpretation, or does it mean a company which is owned to the extent of 75 per cent or more? And can he explain why a different definition, using 100 per cent ownership, is used in Amendment No. 53, which disregards some provisions for tax purposes?

Secondly, subsection (4) also refers to, a BNFL parent company", of which BNFL is a 75 per cent subsidiary. Apart from the same definition point I have raised, will the Minister explain why this is included? What plans do the Government have to place a holding company above BNFL and for what purpose?

Thirdly, could the Minister explain how this clause works if BNFL is only 75 per cent owned or if a BNFL company is 75 per cent owned? As I understand the definition of the trigger point in subsection (4), this will come into play in respect of the Section 21 responsibility if BNFL is a "publicly owned company". That is defined in Clause 34(3) as 100 per cent public ownership. So my simple question is: why have the Government introduced this complication of 75 per cent companies if the tax rules in the clause will operate only if BNFL or its subsidiaries are 100 per cent owned?

That leads me to ask the Minister why the definition of a trigger point in subsection (4) is so complicated as between paragraph (a) and paragraph (b), with (a) applying to 100 per cent ownership and (b) applying to 75 per cent ownership. Will the Minister explain what the practical impact of this convoluted drafting results in?

Lord Davies of Oldham

My Lords, I am extraordinarily grateful to the noble Baroness, Lady Miller, for asking those questions. I shall first answer the straightforward one before getting into the more complex issue. With regard to the 75 per cent, it is simply 75 per cent and above. That figure is meant to be a minimum.

On the possibility of a parent company, looking forward over decades rather than years, we are not in a position to say whether within the Bill it would be wrong to make provision for a precise structure of the industry 10 or 15 years or beyond from now. In setting up the NDA and dealing with the future of the industry, we intend to maximise flexibility and to meet every conceivable development. Therefore, we are merely making provision within the Bill for possible change, although we have no plans or vision on precisely how the structure might develop. The noble Baroness will recognise that we are seeking to create a new framework in which there are a range of possibilities in the relationship between the NDA and the site licensee companies and with regard to BNFL and other companies.

As we see the position, the situation with BNFL will involve the development of the holding company with the consequence of the creation of site licensee companies to hold nuclear site licensees in operate sites. That is what the site licensee company is going to do. The rest of BNFL to which the noble Lady referred will be transferred to the new holding company and will contain non-UK clean-up businesses. It will be a management contractor function that will initially manage site licensees but its future structure in detail will need to have a degree of flexibility against changes in circumstances.

We expect the practical impact to be that BNFL will not incur a tax charge as the NDA takes responsibility, nor will it be able to carry forward its losses. We are seeking to create a tax position that gives some recognition of flexibility with regard to the future development of BNFL. We have a minimum position and, should BNFL fall below it, which is unlikely, it will not fall within the Bill's framework. My answer to the noble Baroness, Lady Miller, is to point out that we recognise that we need within the Bill's framework, and in relation to situations that no one can foresee with total precision, an element of flexibility that takes account of all possibilities.

Baroness Miller of Chilthorne Domer

My Lords, when the Minister refers to flexibility, will that mean more transparency for the public as to the true costs to the public purse of the generation of nuclear power were it to happen in the future? With the regime he envisages, were new nuclear power stations to be built—although I certainly do not support the idea—would the suggested scheme make all the costs that fall on the public purse more transparent, whether the tax is foregone or deferred?

The Minister is frowning, so clearly I am not making myself plain. One of the past difficulties has been that one price was quoted for the generation of nuclear power but the bills that eventually fall on the public purse kick in some years later and the true costs are much higher. Is the Minister confident that the clause as drafted will contribute to making the costs of nuclear clean-up and decommissioning more obvious to the public?

Lord Jenkin of Boding

My Lords, before the Minister replies, will he confirm to the noble Baroness, Lady Miller of Chilthorne Domer, that if—we always stress that word—there were to be a new nuclear build it would be carried out not by the NDA or the Government, but by one of the major private sector companies, which would consider that the market had reached the position where it would find a ready market for its output? That would be a taxable operation and subject to all the normal rules affecting companies. With the greatest respect to the noble Baroness, I am not sure that this issue has much to do with that.

Baroness Miller of Chilthorne Domer

My Lords, I know that we are not in Committee, but with the leave of the House I am not under a misapprehension: the clean-up is part of the cost.

Lord Davies of Oldham

My Lords, I hesitate to put my head above the parapet when two noble Lords are engaged in a most interesting debate. I am grateful to the noble Lord, Lord Jenkin, because he expressed exactly the points I would have sought to make but with greater eloquence and accuracy. These clauses are about the tax liability of NDA and BNFL as public companies. Of course I recognise the point in the longer run about aspects of tax impact on the cost of electricity, but the noble Baroness will recognise that we are seeking to identify how we deal with public companies, not translate them into a major operation in which they are making tax gains and losses that have to be computed in all their activities at enormous cost, when they all effectively come from the same pot.

My answer is that this part of the Bill is not directly concerned with the issues raised by the noble Baroness. The noble Lord, Lord Jenkin, is right that with the future generation of nuclear electricity, should there ever be a new build, that would be in response to the market and wider public considerations.

Baroness Miller of Hendon

My Lords, I thank the Minister for his explanation. He did not answer my fourth point, which was about why the definition of the trigger point seems so complicated in paragraphs (a) and (b), other than perhaps in the general terms that everything has to be flexible because we do not know exactly what it is going to be. We understand all that, but it seems in relation to the other matters that we have gone a long way down the line of the Bill without any detailed answers about anything, even when we were talking earlier about regulations.

Although we accept what the Minister is saying, it seems that the Bill will go through Third Reading without getting any further. Anyway, it is a government amendment. All I was going to say to the Minister at this stage was that I am sure that my noble friend will read his explanation carefully and if she is not happy with it she will no doubt return to the matter at Third Reading.

Lord Davies of Oldham

My Lords, in moving the amendment I have a chance to express my sympathy with the noble Baroness, Lady Noakes. We recognise how sad it is that she is not with us today and the reason for that. We miss her contribution.

As it is a government amendment, when I sat down we had concluded proceedings on that part of the amendment.

On Question, amendment agreed to.

Lord Davies of Oldham moved Amendment No. 53 After Clause 27, insert the following new clause— "DISREGARD FOR TAX PURPOSES OF PROVISIONS RECOGNISED BY NDA

(1) This section applies where—

  1. (a) by virtue of a direction under section 3 the NDA acquires the responsibility for securing the cleaning-up of a site falling within subsection (2), or the decommissioning of an installation or facility in or on such a site;
  2. (b) that responsibility includes the financial responsibility under section 21; and
  3. (c) on the coming into force of the direction mentioned in paragraph (a), the NDA recognises in its accounts, in accordance with generally accepted accounting practice, a relevant provision that relates to that responsibility.

(2) A site falls within this subsection if—

  1. (a) at the time the direction mentioned in subsection (1)(a) comes into force there is a nuclear site licence in force in relation to the site; and
  2. (b) the holder of that licence at that time is a BNFL company that is publicly owned.

(3) In computing the profits, gains or losses of the NDA for the purposes of corporation tax, no amount shall be brought into account in connection with the recognition of the relevant provision in the accounts of the NDA.

(4) But subsection (3) shall not affect the amount (if any) to be brought into account in computing the profits, gains or losses of the NDA in connection with an adjustment at a time after the first recognition of the relevant provision in the accounts of the NDA.

(5) In this section—

(6) This section is to be construed as one with the Corporation Tax Acts."

On Question, amendment agreed to.

Schedule 4 [Supplemental taxation provisions for exempt activities]

[Amendments Nos. 54 and 55 not moved.]

Clause 32 [Power to modify Chapter 1 of Part 1]:

Baroness Byford moved Amendment No. 56 Page 29, line 38, leave out paragraph (b).

The noble Baroness said: My Lords, when I raised this issue in Committee in the form of a question as to precisely how the Secretary of State would amend Clause 11 without weakening it, the Minister said: The position is that we cannot possibly envisage a situation that would require us to change the constitution of the NDA".[Official Report, 22/1/04; col. GC 419.] I stress that the Minister used the word "constitution". Yet the Bill contains the measure that would allow for the possibility of a change even though its nature is not presently foreseeable. Clause 11 relates not to the constitution of the NDA but to its strategy.

I repeat my original question: will the Minister explain in what way Clause 11 on the strategy of the NDA can be changed without weakening it? I should also like to quote from his reply five days later to my noble friend Lord Jenkin of Roding, who had sought enlightenment on the transfer of information. The Minister said: Officials at our departments have spoken to BNFL and UKAEA and recognise that there is an anxiety in the background, but they can come up with no specific situation where such a claim from a third party is likely to arise in practice. It would be difficult to justify a statutory measure without being clear of the kind of situation in which it could possibly arise". [Official Report, 27/1/04; col. GC 68.] Surely I am not the only one who feels that those two statements are totally contradictory.

During Grand Committee when I moved the original amendment, the noble Baroness, Lady Miller of Chilthorne Domer, expressed her concerns about this clause. She said: I am worried that the clause, with sweeping powers to amend so much of Chapter 1, is included". [Official Report, 22/1/04; col. GC 417.] I was also supported by my noble friend Lady Noakes, who is not with us for reasons that have already been explained. She said: I cannot remember a power which makes such sweeping changes because we cannot think at the moment about what we might want to do in 10 years' time". Later, when we were talking about the affirmative procedure, the noble Lord, Lord Whitty, said: It is less than primary legislation but nevertheless one House has the ability to [consider it]". But my noble friend Lord Jenkin came back again and said: This entire set up requires a more regular scrutiny by Parliament than seems to be currently envisaged".—[Official Report, 22/1/04; cols. GC 419–20.] Therefore, I do not apologise for returning to this issue because I consider it to be important. As I said, the two statements that I quoted suggest that there are different answers to two different issues—or, rather, to linked issues. I believe that it is difficult to justify a statutory measure without being clear about how the need for it might arise. In those circumstances, I believe that this amendment should succeed. If we leave the subsection in the Bill, we shall grant powers which the Government have accepted are unjustifiable. The Minister knows only too well how much I dislike measures being brought forward in regulations. I beg to move.

5 p.m.

The Deputy Speaker (Viscount Allenby of Megiddo)

My Lords, I should inform the House that, if this amendment is agreed to, I shall not be able to call government Amendment No. 57.

Baroness Miller of Chilthorne Domer

My Lords, I supported this amendment in Grand Committee and continue to do so. I believe that if the Opposition were to propose such wording, the Government would say, quite rightly, "This amendment is far too loose. We can't have this sort of wording on the face of the Bill". In the light of that, I offer the noble Baroness, Lady Byford, my continued strong support.

Lord Whitty

My Lords, in a moment I shall move government Amendment No. 57 in this group. Noble Lords will recall that it was the subject of some procedural discussion in Grand Committee. I apologised to the Grand Committee that the Delegated Powers and Regulatory Reform Committee had not had the opportunity to consider the amendment before we tabled it on that occasion. The committee has now had a chance to consider the amendment and has approved it. Amendment No. 57 does not indicate any change of policy but simply makes clear that the powers set out in Clause 32 to modify the provisions extend to both the strategy and the annual work plans, which are covered by Clauses 11 and 12.

The noble Baroness asked why we need this power in relation to Clause 11 of the Bill. The answer is that, although the detail that would be modified is in Schedule 2, Clause 11 introduces Schedule 2. Therefore, in order to provide for delegated powers, which I know the noble Baroness objects to almost in principle, we must mention Clause 11 as well. However, it does not mean that the powers could completely change the whole of Clause 11 as it relates to this provision.

Perhaps I may refer to the government amendment. I know that the noble Baroness is not keen on affirmative resolutions, but such resolutions provide a substantial parliamentary power in allowing some flexibility. At the same time, they provide Parliament with a means of control over the Executive. This provision relates mainly to the NDA's strategy. The Bill sets out in some detail in Schedule 2 the issues which must be covered by the NDA strategy, and that level of detail reflects our determination to provide a framework for the strategy over time.

However, as my noble friend Lord Davies said in respect of another amendment, here we are legislating for a function carried out by the NDA which will last for decades and, indeed, on occasion for at least a century. Over time, the situation is bound to change in ways of which we cannot easily conceive. Therefore, it is sensible to provide flexibility to make amendments in respect of issues where the strategy and annual plan would need to cover a change in circumstances.

In a sense, Amendment No. 57 would make good a gap in the original draft of the plan. The Bill already makes such a provision in respect of the annual plan in Clause 31(1)(c) but not in relation to the NDA's strategy. However, the intention was that the flexibility would apply to both. Before the noble Lord, Lord Jenkin, rises to say that this is muddled legislating, perhaps I may explain the logic behind it. During the course of revising the NDA provisions for introduction as part of the Energy Bill, the clause covering the strategy was divided into two but the consequential change required in Clause 32 was missed.

I apologise for that oversight, but the intention had already been made clear in the White Paper and subsequently. Therefore, I hope it will be recognised that the need to provide some flexibility in the content of the strategy and the annual plan and the provisions relating to parliamentary scrutiny through the affirmative resolution is appropriate. Indeed, it is also true that in future we shall have an additional procedure in relation to the Select Committee on the merits of statutory instruments. That may be of some comfort to the noble Baroness in any future application of this amendment. I hope that I have explained why the noble Baroness's amendment is not necessary and why, in a moment, I shall wish to move my amendment.

Baroness Byford

My Lords, I thank the Minister. He did not answer my first point when I quoted what was said in Grand Committee. We are dealing not with the constitution but with the strategy. If that is the case, why was it a slip of the tongue when the noble Lord referred to the "constitution'. when he was responding to questions of the "strategy"'? I am not enormously happy with what he said and I wish to test the opinion of the House.

5.7 p.m.

On Question, Whether the said amendment (No. 56) shall be agreed to?

Their Lordships divided: Contents, 110; Not-Contents, 127.

Division No. 2
CONTENTS
Addington, L. Lindsay, E.
Alton of Liverpool, L. Liverpool, E.
Anelay of St Johns, B. Livsey of Talgarth, L.
Astor of Hever, L. Ludford, B.
Attlee, E. Luke, L.
Avebury, L. Lyell, L.
Barker, B. McColl of Dulwich, L.
Bradshaw, L. Mackie of Benshie, L.
Brooke of Sutton Mandeville, L. Maclennan of Rogart, L.
Brougham and Vaux, L. Maginnis of Drumglass, L.
Buscombe, B. Mancroft, L.
Byford, B. Marlesford, L.
Caithness, E. Masham of Ilton, B.
Carlisle of Bucklow, L. Miller of Chilthorne Domer, B.
Carnegy of Lour, B. Miller of Hendon, B.
Chorley, L. Monson, L.
Clement-Jones, L. Murton of Lindisfarne, L.
Colwyn, L. Newby, L.
Cope of Berkeley, L. [Teller] Northesk, E.
Craigavon, V. Oakeshott of Seagrove Bay, L.
Dholakia, L. Onslow, E.
Erroll, E. Palmer, L.
Fearn, L. Park of Monmouth, B.
Fookes, B. Phillips of Sudbury, L.
Freeman, L. Razzall, L.
Freyberg, L. Rennard, L.
Geddes, L. Renton, L.
Glenarthur, L. Roper, L.
Goodhart, L. St John of Fawsley, L.
Gray of Contin, L. Scott of Needham Market, B.
Greenway, L. Seccombe, B. [Teller]
Griffiths of Fforestfach, L. Selsdon, L.
Higgins, L. Sharman, L.
Hodgson of Astley Abbotts, L. Shutt of Greetland, L.
Hooper, B. Skelmersdale, L.
Hooson, L. Steel of Aikwood, L.
Howe of Aberavon, L. Stewartby, L.
Howe of Idlicote, B. Ullswater, V.
Howell of Guildford, L. Walmsley, B.
Jopling, L Walpole, L.
Knight of Collingtree, B. Williams of Crosby, B.
Lamont of Lerwick, L. Williamson of Horton, L.
NOT-CONTENTS
Acton, L. David, B.
Ahmed, L. Davies of Coity, L.
Andrews, B. Davies of Oldham, L. [Teller]
Bach, L. Dean of Thornton-le-Fylde, B.
Barnett, L. Dixon, L.
Bassam of Brighton, L. Donoughue, L.
Berkeley, L. Evans of Parkside, L.
Bernstein of Craigweil L. Evans of Temple Guiting, L.
Blackstone, B. Falconer of Thoroton, L. (Lord Chancellor)
Bragg, L.
Brennan, L. Farrington of Ribbleton, B.
Brooke of Alverthorpe, L. Faulkner of Worcester, L.
Brookman, L. Filkin, L.
Brooks of Tremorfa, L. Gale, B.
Campbell-Savours, L. Goudie, B.
Carter, L. Graham of Edmonton, L.
Clark of Windermere, L. Grantchester, L.
Clarke of Hampstead, L. Grenfell, L.
Crawley, B. Grocott, L. [Teller]
Harris of Haringey, L. Pitkeathley, B.
Harrison, L. Puttnam, L.
Haskel, L. Ramsay of Cartvale, B.
Hayman, B. Randall of St. Budeaux, L.
Hilton of Eggardon, B. Robertson of Port Ellen, L.
Hogg of Cumbernauld, L. Rogan, L.
Hoyle, L. Rooker, L.
Hughes of Woodside, L. Sainsbury of Turville, L.
Hunt of Chesterton, L. Sawyer, L.
Hunt of Kings Heath, L. Scotland of Asthal, B.
Jones, L. Sheppard of Liverpool, L.
Jordan, L. Simon, V.
King of West Bromwich, L. Smith of Leigh, L.
Kirkhill, L. Stoddart of Swindon, L.
Lea of Crondall, L. Stone of Blackheath, L.
Levy, L. Strange, B.
Lipsey, L. Symons of Vernham Dean, B.
Lockwood, B. Taylor of Blackburn, L.
Lofthouse of Pontefract, L. Thornton, B.
Macdonald of Tradeston, L. Triesman, L.
McIntosh of Haringey, L. Turnberg, L.
MacKenzie of Culkein, L. Turner of Camden, B.
Mackenzie of Framwellgate, L. Warner, L.
Mitchell, L. Warwick of Undercliffe, B.
Morgan, L. Whitaker, B.
Orme, L. Whitty, L.
Patel of Blackburn, L. Winston, L.
Pendry, L. Woolmer of Leeds, L

On Question, amendment agreed to.

Resolved in the negative, and amendment disagreed to accordingly.

5.17 p.m.

Lord Whitty moved Amendment No. 57: Page 29, line 38, leave out "section 11" and insert "sections 11 and 12

The noble Lord said: My Lords, I have spoken to this amendment in the course of the previous discussion. I beg to move.

On Question, amendment agreed to.

Clause 38 [Recovery of property from private ownership]:

Lord Triesman moved Amendment No. 58: Page 36, line 2, after "applies" insert "in the case of a nuclear company ("the transferred company") all the shares in which were transferred for the purposes of a management contract to the contractor or to a subsidiary of the contractor

The noble Lord said: My Lords, the aim of this group of amendments is to ensure that the recovery powers available to the NDA in Clause 38 are fit for purpose and cover all the situations we want them to cover.

Where a management contractor is in breach of contract, or where the contract is at an end, Clause 38 enables the recovery of shares in a site licensee company that were transferred to the contractor, together with other property, rights and liabilities which were transferred at the time in relation to that contract.

That is necessary because although ownership of the SLCs will be transferred for the duration of the site management contract, the SLCs will remain de facto assets of the NDA. So the NDA needs to be able to recover these assets if, as Clause 38 indicates, a site management contractor breaches its contract, becomes bankrupt or has its contract terminated.

In reviewing Clause 38 it became clear that its powers did not cover two situations in which we would want the NDA to be able to recover its assets. Amendments Nos. 58 to 65 therefore extend Clause 38 to cover these situations. The two situations are as follows: first, recovering any new shares that are issued by an SLC since it was transferred; and, secondly, new property that is acquired by the SLC during the operation of the management contract—for example, to replace property that was originally transferred by the scheme. In practice, such purchases are likely to have been funded by the NDA, and we wish to have powers to recover that property.

I hope I have made the principle behind the powers in Clause 38 clear. The amendments seek to ensure the proper application of this principle in all situations where we want the NDA to be able to recover its assets from site licensee companies. It corrects a gap in the original clause. I beg to move.

Baroness Miller of Hendon

My Lords, I make a brief point about Amendment No. 58. I understand the Minister's explanation, but I must say that I find it quite extraordinary that such an important part of a clause was left out in the first instance.

Lord Triesman

My Lords, the provision should have been inserted in the first instance. The clause needed correcting and the amendment corrects it. I think that the clause is now in proper order and I hope it will now commend itself to your Lordships.

On Question, amendment agreed to.

Lord Triesman moved Amendments Nos. 59 to 65: Page 36, line 3, leave out "a contractor under a management contract" and insert "the contractor Page 36, line 5, leave out "a management contract" and insert "that contract Page 36, line 14, leave out paragraphs (a) to (c) and insert—

  1. "(a) securities of the transferred company (whether transferred as mentioned in subsection (1) or issued afterwards);
  2. (b) property, rights and liabilities to which the transferred company was entitled or subject immediately before the transfer so mentioned;
  3. (c) property, rights and liabilities transferred for the purposes of the management contract, to the contractor, to a subsidiary of the contractor or to the transferred company or a wholly owned subsidiary of the transferred company;
  4. (d) property, rights or liabilities to which the transferred company or a wholly owned subsidiary of the transferred company first became entitled or subject while that contract was in force."
Page 36, line 27, leave out "they" and insert "the property, rights and liabilities or the shares mentioned in subsection (1) Page 36, line 28, leave out subsection (5) and insert (5) A transfer is authorised by this section notwithstanding that what is transferred has ceased, before the transfer, to be the property or a right or liability—
  1. (a) of a person to whom anything was transferred for the purposes of the management contract mentioned in subsection (1);
  2. (b) of the transferred company or of a wholly owned subsidiary of that company; or
  3. (c) in the case of securities issued after the transfer mentioned in that subsection, of the person to whom they were issued."
 Page 36, line 41, leave out "and" Page 36, line 45, at end insert "; and "transferred", in relation to shares, property, rights or liabilities, means transferred in accordance with a nuclear transfer scheme.

On Question, amendments agreed to.

Clause 40 [Undertakings given by the Secretary State]:

Baroness Byford moved Amendment No. 66: Page 38, line 5, at end insert— ( ) This section will apply to the Magnox undertaking. ( ) Should the Secretary of State consider that the section should be applied to any other undertaking he will lay the proposal before Parliament.

The noble Baroness said: My Lords, on 27 January I rose to move that Clause 40 should not stand part of the Bill. The Minister very kindly and clearly explained: Although Clause 40 is drafted in general terms its purpose is to allow the Secretary of State to extinguish what is called the 'Magnox Undertaking"'.—[Official Report, 27/1/04; col. GC 76.] He went on to state at col. GC 77: It is true that the Magnox undertaking is the only significant undertaking that may be caught by the clause, but others may arise in the course of time". Perhaps I may remind your Lordships of the Minister's reply to my noble friend Lord Jenkin earlier that day. He stated: It would be difficult to justify a statutory measure without being clear of the kind of situation in which it could possibly arise".—[Official Report, 27/1/04; col. GC 68.] I believe the amendment admirably covers the situation. It clarifies that Clause 40 deals with Magnox and allows for an unforeseen situation to require its application to something that is not Magnox, while ensuring that Parliament will have the right to approve that application.

During our debates in Grand Committee my noble friend Lady Noakes said: I completely understand the Magnox Undertaking and not paying it out when it is no longer necessary because of the restructuring. Why, then, is the clause drafted in this oblique way as though it is trying to catch all kinds of things".—[Official Report, 27/1/04; col. GC 76.] I do not think we had a satisfactory answer to that. The noble Lord, Lord Whitty, responded at col. GC 77. He said: It is true that the Magnox undertaking is the only significant undertaking". I wanted to bring back the provision because I think that we are dealing with future issues rather than present ones—something we have been saying throughout the various stages of the Bill. Whereas we can all understand what the Magnox undertaking is about, we do not understand the rest; that is, those things that apply in the future. Therefore, I have tabled the amendment again today in the hope of a slightly better response from the Minister. Surely, if we have all agreed that we understand what the Magnox undertaking is, we should not be laying down such great flexibility. In fact, the Bill becomes one of the Bills with so much missing one that is left to the future and greater flexibility. I beg to move.

Lord Jenkin of Roding

My Lords, I have a horrid suspicion about the reason why the Clause is drafted in the way it is, with this extraordinarily wide provision, as my noble friend Lady Byford has said. I suspect it is because of the well-known legislative convention that if you seek to legislate in a public Bill to deal with a private right it is then open to those affected to insist on going through the private Bill procedure, with a committee to examine the Bill, and for it then to be reported back to the House.

However, I think it is being less than frank if the Minister does not actually tell us that that is the reason. It may be a clever wheeze to make the provision apply to any number of undertakings, which might or might not be given in the future in order to avoid that legislative trap. But I think that the principle of openness and transparency, to which Ministers so frequently appeal, requires them to tell the House whether that is the real reason.

Lord Whitty

My Lords, as we indicated in Grand Committee—and I then wrote to noble Lords opposite on 9 February—the purpose of Clause 40 is to allow the Secretary of State to extinguish undertakings given to publicly owned companies. That clearly includes the undertaking that was given to BNFL when it took over responsibility for the Magnox nuclear power stations; the so-called "Magnox undertaking". That is the obvious use of the clause.

There are two key reasons for the clause being drafted in general terms. First, we want to avoid any problems with similar undertakings that might be given in the future. Specifically, we want to avoid the possibility of government paying for nuclear liabilities that are no longer the financial responsibility of the company to which the undertaking was given. I think noble Lords would agree that the Government should not, as a result of passing responsibility for clean up to the NDA, be obliged in effect to pay twice for clean up.

Secondly, we need to allow for the possible renewal or novation of any undertaking with different companies. Restricting the scope of Clause 40 to any one publicly owned company—that is what the Magnox undertaking is—would severely hamper the ability of the Secretary of State to renew or novate the undertaking with a different company. Being too specific in Clause 40 risks the provision being overtaken by future events and being made redundant.

Those two reasons lie behind the formulation of Clause 40. It indeed has the additional benefit to which the noble Lord, Lord Jenkin, refers. Even without that, we need to draft the clause in more general terms than specifically referring to the Magnox undertaking as the noble Baroness's amendment would.

It is worth pointing out that, were the noble Baroness to press the amendment, the wording is probably defective. Its second part does not state what process Parliament would adopt in dealing with any undertaking. It says that the Secretary of State, will lay the proposal before Parliament". There is no clarity on what procedure Parliament would then use. So, I think that there are good and strong arguments for accepting that the clause has to be drafted in general terms. However, the noble Baroness's amendment would not resolve the position even should she be unpersuaded and wish to restrict the provision to the Magnox undertaking full stop.

Baroness Byford

My Lords, I am grateful to the Minister for his response. I am even more confused about the matter. I understand—though I may be wrong—that the provision would be restrictive as far as concerns the Magnox company anyway; and that it would not get a chance to go to Committee. No? Forgive me, I shall leave that point.

The Minister has said clearly that the provision would avoid similar and future liabilities. I obviously accept that. I am not happy if the Minister has said to me that he understands that I do have a point—which I think he has—but that it restricts the issue too much for the future. That is one matter. He went on to say that my amendment was defective. If it is his view that I have a point but my amendment is defective, I would be grateful if the Minister could consider whether the amendment has any merit, before Third Reading. If he says, "No, it hasn't", I am at the end of the line. Either I divide the House or not, and, having just divided the House, that might not benefit me anything at this stage.

I hope that the Minister will think about the amendment.

5.30 p.m.

Lord Whitty

My Lords, I must clarify my point. I said that I did not accept the amendment substantively, for the reason that I gave. It is too tight an amendment. The second part of the amendment would require further amendment to be effective, even if the House were to be convinced of the noble Baroness's argument. Therefore, I oppose the amendment substantively, as well as procedurally.

Baroness Byford

My Lords, I thank the Minister for that clarification. I will read what he said, and, at this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Whitty moved Amendment No. 67: After Clause 40, insert the following new clause— "EXTINGUISHMENT OF BNFL LOSSES FOR TAX PURPOSES

(1) In relation to accounting periods beginning on or after the trigger date, all the relevant losses of every BNFL company arising before that date shall be treated for the purposes of corporation tax as extinguished.

(2) The following are relevant losses of a BNFL company for the purposes of this section—

  1. (a) losses incurred by the company in a trade;
  2. (b) losses incurred by the company in a transaction a profit or gain from which would have been chargeable to tax under Case VI of Schedule D;
  3. (c) excesses to be carried forward in the company's case under section 75(3) of the Income and Corporation Taxes Act 1988 (c. 1);
  4. (d) Schedule A losses (within the meaning of section 392A of that Act) incurred by the company;
  5. (e) losses to be carried forward in the company's case under section 392B(1) of that Act;
  6. (f) any tax loss of the company falling within section 400(2)(d) of that Act;
  7. (g) allowable losses (within the meaning of section 8 of the Taxation of Chargeable Gains Act 1992 (c. 12)) that have accrued to the company;
  8. (h) deficits of the kind mentioned in section 83(1) of the Finance Act 1996 (c.8) to the extent that they are to be carried forward in the company's case under subsection (3A) of that section;
  9. (i) excesses of the kind mentioned in section 260 of the Capital Allowances Act 2001 (c. 2) in relation to the company;
  10. (j) losses of the kind mentioned in paragraph 35(1) of Schedule 29 to the Finance Act 2002 (c. 23) incurred by the company;
  11. (k) unrelieved surplus advance corporation tax of the company (within the meaning of section 32 of the Finance Act 1998 (c. 36)).

(3) This section applies to the relevant losses of a BNFL company only if it is publicly owned on the day before the trigger date.

(4) In this section— BNFL company" means—

  1. (a) BNFL;
  2. (b) a company that is a 75 per cent subsidiary of BNFL at a time during the qualifying period; or
  3. (c) a company (other than BNFL) that is a 75 per cent subsidiary of a BNFL parent company at a time during the qualifying period;
  4. (a) the date of the first occasion on which section 21 operates so as to confer financial responsibilities on the NDA in relation to an installation, site or facility the person with control of which is a BNFL company that is publicly owned; and
  5. (b) the date of the first occasion on which a transfer takes effect which is a transfer to the NDA or a subsidiary of the NDA in accordance with a nuclear transfer scheme authorised by section 36 of property, rights or liabilities of a BNFL company.

(5) This section shall be construed as one with the Corporation Tax Acts."

On Question, amendment agreed to.

Schedule 7 [Finances and accounts of transferee companies]:

Lord Whitty moved Amendment No. 68 Page 161, line 21, leave out from "corporate" to end of line 22 and insert "which is—

  1. (a) a body corporate to which a transfer has been made in accordance with a nuclear transfer scheme; but
  2. (b) not a subsidiary of the UKAEA."

The noble Lord said: My Lords, in moving Amendment No. 68, I shall speak to the other amendments in the group.

Essentially, the amendments make two technical changes to the Bill. The first is to clarify the statutory powers on borrowing and issuing guarantees that will apply to UKAEA subsidiaries, such as any site licensee companies that might be created to facilitate the NDA's objective of promoting competition. As with other amendments, in reviewing the mass of past nuclear legislation, we have spotted a potential source of confusion that the amendments will remove.

UKAEA subsidiaries are already subject to the borrowing and guarantee powers in the Atomic Energy Authority Act 1986. Schedule 7 introduces a similar regime for transferee companies. The schedule was principally designed to update such provisions in respect of BNFL companies. As drafted, however, it will have the additional effect of incorporating UKAEA subsidiaries which are transferee companies as well.

On reflection, we considered it appropriate to maintain the existing borrowing and other limits for UKAEA subsidiaries from previous legislation, rather than roll them into the pool applicable to BNFL companies or the pool applicable to other transferee companies that are not UKAEA subsidiaries. To do otherwise would be to lower the overall total that applies to BNFL and UKAEA combined.

The second change made by the amendments is to paragraph 8 of Schedule 7. Paragraph 8 is a technical provision that provides that the vesting of assets and liabilities in accordance with a transfer scheme, shall be taken to have been effected immediately after the end of the last accounting year of the transferor". That paragraph also enables a nuclear transfer scheme to contain valuations of any transferred assets or liabilities. The provisions are drawn from standard privatisation precedents to ensure continuity between the accounts of the transferor and transferee companies.

The amendments will apply the provisions of paragraph 8 to the statutory accounts of transferor companies, as well as those of transferees, thereby facilitating the transfer. We consider that the amendment would assist in the maintenance of continuity between the two sets of accounts. I beg to move.

Lord Higgins

My Lords, I intervene briefly. This is an enormous group of amendments—something like 47 or 48.

Noble Lords

It is not this group.

Lord Higgins

My Lords, I see. I am sorry.

On Question, amendment agreed to.

Lord Whitty moved Amendments Nos. 69 to 73: Page 161, line 27, after "if' insert ", without being a subsidiary of the UKAEA, Page 164, line 34, leave out "not a designated BNFL company" and insert "neither a designated BNFL company nor a subsidiary of the UKAEA Page 166, line 2, leave out "a transferee company" and insert "each of the following—

  1. (a) a transferee company;
  2. (b) a subsidiary of the UKAEA to which a transfer has been made in accordance with a nuclear transfer scheme;
  3. (c) a company that is the transferor in relation to a transfer in accordance with such a scheme to a company falling within paragraph (a) or (b)."
Page 166, line 4, after "company" insert "mentioned in subparagraph (1)(a) or (b) Page 166, line 5, leave out "a" and insert "the

On Question, amendments agreed to.

Schedule 8 [Pensions]

Lord Whitty moved Amendment No. 74: Page 166, line 35, at end insert— "BNFL company" means BNFL or a subsidiary of BNFL;

The noble Lord said: My Lords, we are now at the enormous group of amendments, for which I apologise. The group has two straightforward aims. It ensures that the coverage of the pension provisions in Part 1 is appropriate, and it ensures that the drafting of Part 1 is consistent. We want to be clear in our drafting and in our definition of those to whom the provisions apply.

Discussions in Grand Committee showed that there was broad support for our approach to protecting the pensions benefits of existing employees who were transferred as a result of the restructuring of the UK nuclear clean-up industry. We take workforce conditions and the retention and development of nuclear skills and expertise seriously, and that is what Schedule 8 is about. However, it is important that we achieve appropriate coverage of the pension protections afforded by the Bill.

Probably, the most significant amendments in the first batch are Amendments Nos. 91 and 125, which safeguard the position of employees of the new BNFL—the restructured BNFL—who are currently members of the UKAEA pension scheme. The amendments will enable the UKAEA pension scheme to be extended to designated new BNFL companies while such companies are publicly controlled. Such extensions will enable UKAEA scheme members who are transferred to those companies to remain members of the UKAEA scheme.

With regard to BNFL employees who are members of the BNFL group scheme, Amendments Nos. 80, 83 and 85 clarify the ability of the NDA to modify that scheme. We may wish the NDA to take control of the BNFL group scheme. In particular, we wish the NDA to have powers to modify the scheme rules, so that existing members of the scheme will be able to remain members, even if they are transferred to a different employer or their current employer is no longer eligible, under existing rules, to be a participating employer in the scheme. However, as drafted, the Bill pre-dates the conclusion of the joint BNFL strategy review, so we need the amendments to ensure that the provisions of paragraph 2 of Schedule 8 do their intended job of allowing the NDA to modify the BNFL group scheme.

Those are the two main amendments, but there is a significant number of technical amendments to ensure appropriate coverage of the Bill's provisions and consistency of drafting. I shall go through them.

Amendments Nos. 89, 90 and 92 make it clear that certain pension provisions apply to non-employee officers and directors of a company who might otherwise have been excluded by constant references to "employees". Amendments Nos. 74, 75 and 99 make provision for the application of the pension protections during the early stages of the restructuring of the nuclear clean-up industry. They also make it clear that the protection is afforded only to public sector employees.

Most of the rest of the amendments—Amendments Nos. 76 to 79, 86 to 88, 90 and 95 to 122, I think—deal with a potential loophole in the Bill's pension provisions. There may be one or two gaps in that list. Amendments Nos. 110 and 111 are excluded. Amendment No. 109 deals with the same thing. I am receiving clarification from the noble Baroness from a sedentary position. I am sure that she is right.

Baroness Miller of Hendon

My Lords, I beg the noble Lord's pardon; I was trying to be helpful. It was just that Amendment No. 111 is not in the group, and the noble Lord said that it was. Amendment No. 109, which he thought was definitely in the group, is not his amendment but is in the name of the noble Lord, Lord Lea of Crondall. I was trying to be helpful to the noble Lord, but I beg his pardon and that of the House.

Lord Whitty

My Lords, I am clear that Amendment No. 111 is not in this group. Amendment No. 109, which is on my list, probably should not be, so I apologise to noble Lords and in particular to my noble friend Lord Lea.

The rest of the group, which I will not repeat, deals with a potential loophole. There may be instances when an employee is not transferred but his employer—the site licensee company, for example—changes ownership. That could lead to employees having to leave their nuclear pension scheme. As previously drafted, the Bill's protection may not have been triggered in that case, and we want to make sure that it is.

Employees' pensions should be protected when they are transferred, as the Bill says, "for NDA purposes"—that should include such people—and when ownership of their employer is transferred, for example, following a competition for site management. The amendments are also intended to clarify the definition of "for NDA purposes" to ensure that it does not catch transfers which are unrelated to the NDA's own functions.

Finally, Amendments Nos. 151 and 152 simply make minor amendments to the Civil Nuclear Constabulary pension provisions in Schedule 10 to ensure that they, too, mirror the relevant provisions in Schedule 8.

As I have explained, therefore, the amendments are intended to ensure that the provisions of Schedule 8 do exactly what we want them to do—to protect the future pension benefits of staff who are required to transfer for NDA purposes. I beg to move.

Lord Higgins

My Lords, I apologise to your Lordships for intervening too quickly. When I used to be preoccupied with athletics, on the running track it was three false starts and you were out. At present, it is down to two false starts, and the Minister very nearly got himself disqualified. Be that as it may, we are grateful to him for explaining this huge group of amendments. Am I right in thinking that none of them actually arises as a result of the discussions which took place in Committee on 27 January? These are all changes which have resulted either from subsequent reflection by the Government on the loophole the noble Lord mentioned or because the original drafting was wrong. It seems quite extraordinary that at this stage of the Bill, which has been through the Committee stage, these amendments are before us now rather than earlier. Perhaps the Minister could clarify why we did not have a chance of debating them in Committee.

On the loophole, if I understand it correctly, the Government are saying that people who are at present employed by a company may not be protected if the employer moves but the employee remains in his present post. That would certainly seem appropriate.

While we are obviously very keen that the present position of the existing pensioners should be protected, are these largely final salary schemes, are they contributory and, in particular, are they index-linked? There is an increasing concern at the burden which public sector pensions are placing on the economy and the fact that they are in a privileged position. We might wish to return to the matter at Third Reading, and it would be helpful if the Minister could tell us whether a final salary scheme is being transferred to this new structure, whether it is contributory and whether it is index-linked.

5.45 p.m.

Lord Whitty

My Lords, on the first point, the amendments arise partly through drafting errors at an earlier stage which clearly needed tidying up, but also because the original form of the Bill pre-dated the review of the so-called BNFL strategy review. Therefore, further changes in Government policy needed to be reflected in how we were treating the current members of BNFL schemes in the context of some being transferred to the NDA and some being left in BNFL companies and what is provisionally being called new BNFL. So it is not so much an error in the original drafting as Government policy becoming clarified on the future of BNFL.

In relation to whether these amendments reflect discussions in Grand Committee, the honest answer is "only tangentially". Concerns were expressed, some of which were covered by subsequent amendments, which dealt with the position of employees who were being transferred at various stages and how far the guarantee continued down the various transferors through the change in the site management position.

As for the nature of the current UKAEA and BNFL schemes, as I understand it, they are final salary schemes and they are contributory. However, I think I should set out in a letter the rest of the detail that the noble Lord wants.

New starters in these schemes will have three choices. They can enter a final salary scheme within the overall nuclear clean-up pension scheme which would effectively reflect the previous schemes; they can enter a defined contribution—stakeholder—benefit within the nuclear clean-up pension scheme; and the new employer, or the employer entering the situation, could offer a good quality employer scheme which was the equivalent benefit. So a number of schemes could result from these various transfers, and a number of options could be available to companies and employees in the future. However, I shall set out in correspondence the nature of the existing schemes, beyond what I have already said.

Lord Higgins

My Lords, I would be grateful if the Minister would write. He will be aware that in the private sector, many companies are closing their final salary schemes to new entrants and some of them are closing them for existing potential pensioners. Will the guarantees that are now being given ensure that such a change cannot be made by the companies concerned under this Bill?

Lord Whitty

My Lords, as long as they are public companies, the Government's general commitment in relation to public pension schemes continues to apply. Therefore, the continued guarantees to the individuals through the system would continue to apply. New starters would have a choice and their employer could offer them a different scheme, which was a good quality scheme. However, the guarantees would reflect the Government's current commitments to existing staff regarding the existing guarantees on their BNFL or UKAEA pension.

On Question, amendment agreed to.

Baroness Byford moved Amendment No. 81: Page 168, line 29, leave out "to any extent.

The noble Baroness said: My Lords, we return to an issue that I raised in Committee. This amendment was discussed at great length in Committee, when a number of your Lordships indicated that its use was not calculated to inspire the average ex-BNFL employee with confidence that his or her pension rights would be fully protected. After some discussion, the Minister stated that, on the question of the words 'to any extent', I shall take further advice".—[Official Report, 27/1/04; col. GC 82.] Would he now tell us what that advice is, and whether he is prepared to drop the phrase from the Bill? If he is not prepared to do so, how does he propose to ensure that it does not, dilute the commitment in any way, and no less favourable treatment will be given to those employees"?—[Official Report, 27/1/04; col. GC 82.] In Committee, I was supported by the noble Lord, Lord Gray of Contin, the noble Lord, Lord Ezra, who expressed his concern about the threatening tone of this section, and by my noble friend Lady Carnegy of Lour. I beg to move.

Lord Whitty

My Lords, the noble Baroness and others made this point in the course of the previous debate in Grand Committee. I have taken further advice on this, and the conclusion is that the lawyers would take the opposite interpretation of 'to any extent', in the sense that deleting the phrase would dilute the provision. It could be held to deprive the scheme members of the absolute guarantee we are trying to give, that the NDA could not deprive the scheme members of pension rights that had accrued to them. Our advice is that, without these words, there would be a risk that an employee whose pension rights were reduced, but not utterly extinguished, could not be protected. Deleting the phrase would actually make the employees more vulnerable, rather than less. I can understand that in common parlance there is a certain ambiguity in the words 'to any extent', but nevertheless I have the firm opinion from parliamentary counsel that the inclusion of the phrase is a greater protection than its deletion. I therefore hope the noble Baroness will not pursue this amendment.

Baroness Byford

To be honest, my Lords, I find the Minister's response surprising. If he thinks that removing the phrase 'to any extent' would weaken the thrust behind my amendment, then I would question whether the words were necessary in the first place. Why do they have to be included? Could it not just have read straight through? The Minister has given his response to that, and obviously I will have a look at it in the light of his response. It is a pity that he or his legal colleagues did not write to me to give me some indication, having said they would do so at Committee stage. I will look carefully at their response and seek advice myself. At this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Lea of Crondall moved Amendment No. 82:

Page 168, line 30, after "him" insert "whether by virtue of service rendered, contributions paid or any other things done"

The noble Lord said: My Lords, the purpose of this group of amendments is to try to secure protection for transfer of accrued rights. In July 2002, the White Paper, Managing the Nuclear Legacy—A Strategy for Action, recognised that, on transfer to a contractor, employees, who opted to transfer their accrued pension would be protected by way of a Bulk Transfer Agreement. This would be a contractual condition for any potential site licensee company and would allow staff who chose to do so to preserve the link between their final salary and their past service". This is of course government policy, as set out in the Fair Deal paper from the Treasury, in respect of all staff who are transferred from the public to the private sector. However, it is a matter of policy rather than a legal requirement, and experience demonstrates that this policy is not always achieved in respect of second-generation transfers. Given that it is a statement of policy, we believe that the proposed amendments are necessary to make the provision of bulk transfer terms a legal requirement.

Lord Whitty

My Lords, these three amendments relate to the protection of pension rights accrued by staff who are required to transfer their employment for NDA purposes. I want to stress at the outset that, as I said in Grand Committee, the Government do not intend to use employees' terms, conditions or pensions as a means of driving down costs. Instead, we intend to protect the existing employees and their future benefits in circumstances where, as a result of a decision by the NDA, they are required to transfer either to new employers, for example the newly created site licensee companies, or to the private sector, for example if a private sector contractor won a contract to manage an NDA site.

Amendment No. 82 seeks to qualify the way in which members of a pension scheme can accrue pension rights under that scheme. I can assure my noble friend that the first two qualifications suggested, "accrual by service rendered" and "contributions paid", are not needed, because the concept of accruing pension rights by its nature includes those means of accrual. That does not need to be stated on the Bill.

The third qualification that my noble friend puts forward suggests accrual by "other things done". That is, frankly, a bit open-ended. I am not entirely sure what "other things done" would be in these circumstances, and this could lead, for example, to an argument that a statement of intent on the future of a pension scheme of itself creates an accrued right, because it is another thing done. However, it is not normal to include anything that is not formally part of the pension scheme in terms of the accrued rights, and therefore I do not think I can accept that third part of his Amendment No. 82.

The other two amendments, Amendment No. 109 and what is now Amendment No. 118A, seek to extend statutory protection of pension benefits under the Bill to accrued benefits of existing pensions that are required to be transferred for NDA purposes. As I said a moment ago, we intend to protect the future pension benefits of existing employees during this restructuring, and that essentially means employees of AEA and BNFL who are required to transfer to a new employer by the NDA. This policy is applied to a whole host of comparable systems where public sector workers have been required to transfer to a new employer, or to the private sector. There is well established documented guidance on that.

However, because the Government recognise how important are the skills of the people who make up the NDA workforce, we have taken the rather exceptional step of underpinning in statute the policy to protect the future pensions benefits of transferred staff, with careful drafting of the Bill. This is based on experience of previous examples of transfers within the nuclear industry, and does not of itself impose an excessive regulatory burden. In my view, it is not appropriate to go further than the terms now in the Bill, and to extend the protection offered under the Bill to the accrued benefits of staff transfer for NDA purposes. We simply cannot attempt to pin down in statute the whole range of complexities involved in bulk transfer agreements relating to accrued benefits. I am told by the experts in the Government Actuary's Department that each bulk transfer is unique, and that they need the flexibility to deal with that.

As my noble friend said, there is an existing and well established government policy in this area, published in 1999, in the document, Fair Deal for Staff Pensions. For transferred staff who are required to be early leavers of a public sector scheme, the policy is that there should be an agreement between that scheme and the new employers' scheme, giving staff the option to transfer their past service into the new scheme on preferential terms. Such a bulk transfer agreement should allow transferred staff, to secure credit for their past service in the new pension scheme on a day-for basis (or the actuarial equivalent if the differences between the schemes are significant". That remains government policy. Given that we have made the exceptional step of protecting in statute future benefits provisions of existing employees in the nuclear clean-up industry, which we have not done for other situations, and given the longstanding government policy protecting accrued benefits for transferred public sector staff, I cannot accept the amendments. They would need to be spelt out far more than they are in any case, and would result in great complexity, because almost every accrued benefit package is a unique package to that particular employee. Therefore, the policy stands, but I cannot accept my noble friend's amendment.

6 p.m.

Lord Lea of Crondall

My Lords, I thank my noble friend for putting on record that useful clarification. My noble friends and I will wish to study carefully what the Minister said, but I believe that we have made progress on the matter, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Whitty moved Amendment No. 83: Page 168, line 32, after "modification" insert "of a pension scheme".

On Question, amendment agreed to.

Lord Lea of Crondall moved Amendment No. 84: Page 168, line 33, leave out "the trustee of the scheme" and insert—

  1. "(a) the trustee of the scheme; and
  2. (b) such persons as appear to the NDA to represent the employees likely to be affected by the modification"

The noble Lord said: My Lords, given that pension provision in this industry, as in many others, is by common consent of key concern to the staff who work in it, this group of amendments would secure a statutory right to consultation with regard to any actions taken under the Act in respect of pensions schemes. While certain provisions in the Bill relating to pensions place on the NDA and/or the Secretary of State the duty to consult employee representatives in respect of pensions issues, that is not consistently the case.

For example, Part 4 of Schedule 8 gives the Secretary of State the power to modify an NDA pension scheme. We consider that, before exercising that power, there should be a statutory duty to consult the representatives of the employees who would be affected. Writing into the Bill a statutory duty to consult employees on all such matters would not only make the Bill internally consistent but bring it into line with the Pensions Bill, which is expected to include a statutory duty on an employer to consult trade unions or other elected workplace representatives in respect of changes to pension schemes. While amendments to that effect clearly do not provide any guarantees in respect of the outcomes—the substance of the matter that is being consulted about—they at least provide an assurance to staff and their representatives that the due processes will be followed and that there will always be a route through which concerns can be properly considered. I beg to move.

Lord Whitty

My Lords, I assure my noble friend that the Government have no intention of taking any steps that would significantly impact on employees without there being a full engagement with their representatives, especially the trade unions. On a wide range of issues, we shall develop a stakeholder engagement framework that will set that aspect, together with others, into a standing procedure for consultation. It is not possible to lay down in statute every particular instance in which consultation should arise.

However, I accept that on pensions issues, especially with modifications to pension schemes, it is important that we ensure that the trade unions and employees are kept informed and are fully consulted. The Bill already requires the Secretary of State and the NDA to consult extensively before making modifications to the UKAEA pension scheme and before making a transfer scheme or transfer arrangement for NDA purposes, which would require employees to leave their current scheme.

The amendments before us seek to create similar consultation requirements for any modification made under paragraph 2 of Schedule 8, which relates primarily to the BNFL group scheme. The modifications envisaged by those paragraphs are expected to be made as a result of the transfer scheme—for example, when staff are transferred to the site licensee companies. They would be caught by the requirement in paragraphs 9 and 11 of Schedule 8 to consult on transfer schemes and arrangements made for NDA purposes that force employees to leave their current nuclear pension scheme.

There are provisions already in the Bill that would cover most of the areas on which my noble friend is expressing his concern in moving the amendment. However, in order to absolutely clear that employees and their trade unions will be consulted before anything is done and to reinforce the commitment that we have made generally in protecting pension rights, I will consider his amendments further and see whether there are any minor changes that the Government might introduce to make clear the position in relation to the circumstances in which he expresses his concerns in the amendments.

Lord Lea of Crondall

My Lords, employees in the industry will be very glad to hear the remarks just made by my noble friend. I am sure that there is no great point of policy at issue here, but to have the provision in the Bill will be a very great reassurance. At this stage, therefore, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Whitty moved Amendments Nos. 85 to 108: Page 168, line 39, leave out paragraph (b) and insert— (b) a nuclear pension scheme designated as a relevant pension scheme for the purposes of this paragraph by an order made by the Secretary of State. Page 169, line 2, at and insert—

"Transfers of employment for NDA purposes

2A For the purposes of this Part of this Schedule a transfer of a person's employment is made for NDA purposes if his employment immediately after the transfer takes effect is—

  1. (a) employment with the NDA or a subsidiary of the NDA; or
  2. (b) other employment the duties of which consist wholly or mainly of duties relating to matters connected with the carrying out by the NDA of its functions."

Page 169, line 22, leave out paragraph (a) and insert— (a) the transfer is made for NDA purposes; or

Page 171, line 13, leave out from "or' to end of line 16 and insert—

  1. "(a) a transfer of his employment in accordance with a nuclear transfer scheme or transfer arrangements; or
  2. (b) a transfer, in accordance with such a scheme or such arrangements, of securities of, or voting rights in, a company by which he is employed or a company of which such a company is a subsidiary."

Page 171, line 28, after "employees" insert ", or directors or other officers,"

Page 171, line 31, leave out "officers or employees" and insert "employees, or directors or other officers,"

Page 171, line 36, after "under" insert "paragraph 12 of this Schedule,"

Page 171, leave out lines 40 to 44 and insert "Where employees, or directors or other officers, of a relevant public sector employer to whom employees are transferred in accordance with a nuclear transfer scheme or transfer arrangements participate in a UKAEA pension scheme by virtue of paragraph 3 or 4, the employer must pay to the UKAEA such amounts in respect of that participation as are—"

Page 172, line 8, leave out sub-paragraphs (1) and (2) and insert—

"( ) For the purposes of this Part of this Schedule a person is entitled to pension protection in relation to a nuclear transfer scheme or any transfer arrangements if—

  1. (a) sub-paragraph (3) applies to him; and
  2. (b) he is a person falling within sub-paragraph (4)."

Page 172, line 17, leave out paragraphs (a) and (b) and insert—

  1. "(a) in accordance with the scheme or arrangements, a transfer mentioned in sub-paragraph (3A) occurs; and
  2. (b) immediately after the time at which that transfer takes effect, the person's employment is for NDA purposes.

(3A) The transfers referred to in sub-paragraph (3) are—

  1. (a) a transfer of the person's employment to the UKAEA, the NDA, a publicly controlled company or a private sector employer;
  2. (b) where his employment is not so transferred, a transfer of securities of, or voting rights in, a company by which he is employed or a company of which such a company is a subsidiary.

(3B) For the purposes of sub-paragraph (3) a person's employment is for NDA purposes if it is—

  1. (a) employment with the NDA or a subsidiary of the NDA; or
  2. (b) other employment the duties of which consist wholly or mainly of duties relating to matters connected with the carrying out by the NDA of its functions."

Page 172, line 31, after "arrangements" insert— (i)

Page 172, line 35, at end insert "; or (ii) his employer will be entitled to do something the effect of which will be so to preclude him.

Page 172, line 46, leave out from second "if to end of line 3 on page 173 and insert ", his employment throughout the relevant period has been for NDA purposes (within the meaning of paragraph 8(3B))."

Page 173, line 4, leave out "the transfer of a person's employment" and insert "a person to whom sub-paragraph (3) applies"

Page 173, line 7, leave out paragraph (b) and insert— (b) the period up to the relevant time since the last occasion prior to the present case on which sub-paragraph (3) applied to him.

(8A) For the purpose of a person being entitled to pension protection in relation to a nuclear transfer scheme or any transfer arrangements on the first occasion on which sub-paragraph (3) applies to him, this paragraph shall have effect with the omission of sub-paragraph (4)(c).

(8B) A person is not entitled to pension protection in relation to a nuclear transfer scheme or any transfer arrangements—

  1. (a) at a time before the designated date unless he is a public sector employee at that time; or
  2. (b) at a time on or after the designated date unless he was a public sector employee at the time immediately before that date."

Page 173, line 10, leave out "the time when"

Page 173, line 11, at beginning insert "the time when,"

Page 173, line 11, leave out "he becomes an employee or and insert "the transfer of his employment to"

Page 173, line 13, after "employer" insert "takes effect"

Page 173, line 14, leave out paragraph (b) and insert— (b) in relation to a person whose employment is not so transferred, the time when, in accordance with the scheme or arrangements, the transfer of securities of, or voting rights in, the company by which he is employed or the company of which it is a subsidiary takes effect.

Page 173, line 18, leave out "to which this paragraph applies" and insert "in relation to which persons are entitled to pension protection"

Page 173, line 22, leave out from second "persons" to end of line 23 and insert "who are entitled to pension protection in relation to the scheme."

Page 173, line 25, leave out from "person" to "will" in line 26 and insert "who is entitled to pension protection in relation to the scheme"

Page 173, line 30, leave out "applies" and insert "will apply immediately before the relevant time"

On Question, amendments agreed to.

[Amendment No. 109 not moved.]

Lord Whitty moved Amendments No. 110: Page 173, line 32, at end insert— ( ) The Secretary of State's duty under sub-paragraph (2) is owed to every person who is entitled to pension protection in relation to the transfer scheme. ( ) In the case of a person to whom paragraph 8(4)(d)(ii) applies, the references in sub-paragraph (2) to a person being entitled to exercise an option are to be construed as references to a person being entitled to exercise an option if his employer exercises the entitlement mentioned in paragraph 8(4)(d)(ii).

On Question, amendment agreed to.

[Amendment No. 111 had been re-tabled as Amendment No. 118A].

Lord Whitty moved Amendments Nos. 112 to 118: Page 173, line 46, leave out from second "to" to end of line 6 on page 174 and insert—

  1. "(a) in the case of a person who has not previously been owed a duty under either sub-paragraph (2) or paragraph 10(3), the scheme by reference to which paragraph 8(6) will apply to him immediately before the relevant time; and
    2. 521
  2. (b) in other cases, the scheme by reference to which paragraph 8(6) applied to him immediately before the time that was the relevant time in relation to him on the first occasion on which he was owed such a duty;"
Page 174, line 9, leave out from "time" to end of line 12 and insert "specified in sub-paragraph (4A). (4A) That time is—
  1. (a) in a case falling within sub-paragraph (4)(a), the relevant time; or
  2. (b) in a case falling within sub-paragraph (4)(b), the relevant time in relation to the person on the first occasion on which he was owed a duty under either sub-paragraph (2) or paragraph 10(3)."
 Page 174, line 23, at end insert— ( ) Sub-paragraph (6) does not apply in relation to a person to whom paragraph 8(4)(d)(ii) applied when the Secretary of State discharged his duty to that person under sub-paragraph (2) unless the person's employer exercises the entitlement mentioned in paragraph 8(4)(d)(ii). Page 174, line 28, leave out "to which this paragraph applies" and insert "in relation to which persons are entitled to pension protection Page 174, line 34, leave out from second "persons" to end of line 35 and insert "who are entitled to pension protection in relation to the arrangements. Page 174, line 37, leave out from "person" to "will" in line 38 and insert "who is entitled to pension protection in relation to the arrangements Page 174, line 42, leave out "applies" and insert "will apply immediately before the relevant time".

On Question, amendments agreed to

[Amendment No. 118A not moved.]

Lord Whitty moved Amendments Nos. 119 to 122: Page 174, line 44, at end insert— ( ) The NDA's duty under sub-paragraph (3) is owed to every person who is entitled to pension protection in relation to the transfer arrangements. ( ) In the case of a person to whom paragraph 8(4)(d)(ii) applies, the references in sub-paragraph (3) to a person being entitled to exercise an option are to be construed as references to a person being entitled to exercise an option if his employer exercises the entitlement mentioned in paragraph 8(4)(d)(ii). Page 175, line 8, leave out from second "to" to end of line 17 and insert—

  1. "(a) in the case of a person who has not previously been owed a duty under either sub-paragraph (3) or paragraph 9(2), the scheme by reference to which paragraph 8(6) will apply to him immediately before the relevant time; and
  2. (b) in other cases, the scheme by reference to which paragraph 8(6) applied to him immediately before the time that was the relevant time in relation to him on the first occasion on which he was owed such a duty;"
Page 175, line 20, leave out from "time" to end of line 23 and insert "specified in sub-paragraph (5A). (5A) That time is—
  1. (a) in a case falling within sub-paragraph (5)(a), the relevant time; or
  2. (b) in a case falling within sub-paragraph (5)(b), the relevant time in relation to the person on the first occasion on which he was owed a duty under either sub-paragraph (d) (3) or paragraph 9(2)."
 Page 175, line 33, at end insert— ( ) Sub-paragraph (6) does not apply in relation to a person to whom paragraph 8(4)(d)(ii) applied when the NDA discharged its duty to that person under sub-paragraph (3) unless the person's employer exercises the entitlement mentioned in paragraph 8(4)(d)(ii).

On Question, amendments agreed to.

[Amendments Nos. 123 and 124 not moved.]

Lord Whitty moved Amendment No. 125: Page 176, line 4, at end insert—

"PART 5

UKAEA PENSIONS FOR EMPLOYEES OF DESIGNATED BNFL COMPANIES

12 (1) A pension scheme maintained by the UKAEA under paragraph 7(2)(b) of Schedule 1 to the Atomic Energy Authority Act 1954 (c. 32) ("a UKAEA pension scheme") may apply to employees of a designated BNFL company which is publicly controlled as it applies to persons to whom it applies apart from this paragraph.

(2) The Secretary of State may, by direction, require the UKAEA to make such modifications of a UKAEA pension scheme as the Secretary of State considers appropriate in respect of the participation in such a scheme of employees of a designated BNFL company which is publicly controlled.

(3) The Secretary of State may also, by direction, require the UKAEA to make such modifications of a UKAEA pension scheme as the Secretary of State considers appropriate for applying the provisions of such a scheme to persons—

  1. (a) who are directors, or other officers, of a designated BNFL company which is publicly controlled; and
  2. (b) who are not employees of that company.

(4) A direction under this paragraph may require the UKAEA to make such supplemental, consequential and transitional provision modifying a UKAEA pension scheme as the Secretary of State considers appropriate.

(5) Before giving a direction under this paragraph, the Secretary of State must consult—

  1. (a) the UKAEA;
  2. (b) the designated BNFL company in question;
  3. (c) the Treasury; and
  4. (d) such persons as appear to him to represent the employees, or directors or other officers, likely to be affected by the direction.

(6) The power of the Secretary of State to give directions under this paragraph—

  1. (a) is in addition to the powers of the Secretary of State to give directions to the UKAEA under paragraphs 4 and 5 of this Schedule or section 3 of the Atomic Energy Authority Act 1954 (c. 32); and
  2. is to be disregarded in construing those powers.

(7) A designated BNFL company must pay such amounts to the UKAEA in respect of the participation in a pension scheme by virtue of this paragraph of employees of the company, or of any of its directors or other officers, as are—

  1. (a) agreed between the company and the UKAEA; or
  2. (b) in the absence of such agreement, determined by the Secretary of State.

(8) In this paragraph "designated BNFL company" has the same meaning as in Schedule 7."

On Question, amendment agreed to.

Schedule 8 [Pensions]:

Lord Jenkin of Roding moved Amendment No. 125A: Leave out Schedule 8.

The noble Lord said: My Lords, I beg to move the amendment standing in my name but I make it clear that I shall not press this to a Division. I tabled the amendment because I am appalled by the way that this schedule has had to be amended by the Government in order to effect its intentions.

I am not the least surprised that the noble Lord, Lord Whitty, from time to time became confused about which amendment he was moving and had to be corrected by this side of the House. My mind went back to an occasion that my noble friend Lord Higgins will remember when in a Finance Bill Standing Committee in another place the same thing happened and the Minster got totally confused about which amendments he was replying to. The Daily Mail, which was then quite a sensible paper, wrote a leading article headed, "Laughter in Committee Room 10". It was shaming to find that the press had recognised the incompetence in the way that that Bill was being dealt with by the then-Ministers. I cannot help feeling that Ministers must be inordinately pleased that there are never any members of the press here to listen to our affairs. Otherwise, I suspect that we would have had more leaders about laughter in this House. But there is a serious point to this. I shall be very short.

I believe that there is a culture in Whitehall that Ministers inherit and appear to be quite happy to adopt. In that culture, officials say that it does not matter how many amendments are tabled in the House of Lords because nobody notices and nobody makes much of a fuss. They say that a Bill can be introduced and then, if necessary, literally hundreds of amendments can be tabled in the House of Lords. I believe that it is something that Ministers should say is unacceptable. They should say that they are not prepared to put themselves forward in the House of Lords and have to apologise again and again for what appears to be very sloppy drafting of Bills.

I invite noble Lords to look at Part 4 of this schedule. I have the pages here. I always mark each amendment on the page. Where it is a government amendment I put a dot in the side of a ring. For page after page there are dozens and dozens of amendments to one single part of this schedule. It is not good enough. I hope that Ministers will go back to their departments and say that they are not going to subject themselves to this kind of criticism and that these matters must be got right. Ministers must lay down the law. It is not good enough to bring legislation before this House that has subsequently to be corrected in this way. There are one or two amendments made to reflect the points made by my noble friends Lord Higgins and Lady Byford but most of them are simply to correct sloppy drafting. That is not good enough. I believe that I am justified in taking two or three minutes of your Lordships' time to say so unequivocally and strongly; and I mean it. I beg to move.

Lord Brooke of Alverthorpe

My Lords, I shall intervene quickly. I was pleased to hear the noble Lord, Lord Jenkin, say that he does not intend to press this to a Division. We wish to place on record that we hope that there will be no Divisions whatever on Schedule 8 because it contains a great deal of protection for people working in the industry. We would not wish to see anything moved that might interfere with that, while we accept that there is some justification for criticism about the great number of changes that have had to be tabled late.

En passant, I did not say anything on government Amendments Nos. 88 and 104 but we were very pleased that the Government have reflected on the terms that had been offered for pension protection. They have wisely extended the protection and it will be to the benefit of employees. So while there may be grounds for criticism, I want to place on record that some useful advances have been made that will be to the benefit of the workforces and help provide for the better operation of the NDA in the future.

Baroness Carnegy of Lour

My Lords, I am sure that my noble friend Lord Jenkin was not criticising the content of the schedule. He was talking about the timing and what the House is confronted with as a result. Both this schedule and the changes in the taxation of the NDA have been amended today in the most extraordinary way. It is very difficult for noble Lords to understand what is happening. The hurrying makes one suspect that there may be further changes that have to be made. I would not be in the least surprised. One has little confidence in the control that Ministers have over this piece of legislation when they are legislating on the hoof in this way. But I am sure that I am right in saying that my noble friend was not implying that everything was wrong with the schedule. He was simply talking about the way in which it is being presented to the House.

6.15 p.m.

Lord Whitty

My Lords, I think that the House accepts that the substance of Schedule 8 is desirable for the protection of employees and the skills that they represent in the nuclear sector. Therefore in moving this amendment—although he has indicated that he does not intend to pursue it—the noble Lord was not criticising the substance but raising a point of process.

It would be extremely efficient and desirable if all drafts were 100 per cent correct. But Ministers are fallible and even—dare I say so?—parliamentary counsel is fallible. There is no more important area of law to get right in its detail than pensions and taxation law, to which the bulk of the amendments that are before noble Lords at this Report stage are directed.

I remind noble Lords that we are dealing with a Bill that was introduced in the House of Lords. If the Government do spot mistakes, it is surely important that they draw those to the attention of Parliament at the earliest possible point. For the most part, this House is dealing with legislation that has been started in the Commons and has gone through a lengthy procedure there. I have some sympathy with noble Lords opposite who ask why we are introducing government amendments so late in the process of a Bill when we are dealing with them in the House of Lords. That is not the position in this case.

This is a complicated Bill and it is particularly complicated in what are not its main provisions—that is, those that relate to tax and pensions. It is important that we get the Bill right. It would be wrong if we had left these amendments to Third Reading, which I think we would have hesitated to do, or to the Commons, so that the Bill would have to be brought back to your Lordships at a much later stage. Therefore, the Government are right to bring such amendments before the House at the earliest possible opportunity. In some cases that opportunity was at Committee stage. In other cases, because of discussion in Committee, because of other developments, or because parliamentary counsel was still drafting the amending clauses, it was not. Nevertheless, we have brought amendments before the House at every stage at the point when they are available to Ministers. I think that that is the correct procedure.

It is slightly irritating to Ministers, and hugely irritating to the House, to see a large number of clarifying government amendments. But it is better than allowing the stages of the Bill to go through without having made those amendments. As for this schedule, we hope to produce an amended draft of Schedule 8, which will be available to noble Lords, so that by Third Reading it will be clear how all the amendments that have been adopted by that stage stand together. I hope that the House will appreciate that that is something that will help noble Lords to see where all these amendments pan out in the schedule.

I make that point because if we are to start Bills of this complexity in this Chamber—and I hope to see more of such Bills starting in the House of Lords then some of the consequences have to be accepted by noble Lords. I take back every time to my department in this case, other departments; and, in some cases, not even the main department dealing with the Bill—the request that we should minimise such changes. Nevertheless, there will always be cases where changes have to be brought forward by the Government. As I say, we try to do so at the earliest possible opportunity.

Lord Higgins

My Lords, I agree with my noble friend who moved this amendment. As regards these amendments on pensions, nothing has really changed since Committee, but they suddenly appeared on the Marshalled List. Officials simply did not check them early enough. We could have debated them in Committee and discussed them back and forth, from one side of the House to the other. The trouble is that if the Government do what they are doing now, we only have one chance to intervene, and with complexity of this kind you simply cannot sort it out on Report. It ought to be put right and the amendments ought to have been tabled in Committee.

On the other point that the Minister has Just made, it is true that Bills very often come to this House from the other place and have already been considered. It used to be true that they had been looked at properly on previous occasions. That is no longer the case. Because of the way Bills are programmed in the other place, we get Bill after Bill coming here large chunks of which—sometimes a third of the Bill—have not been looked at properly in the other place because of the way in which the proceedings have been curtailed.

Finally, I want to make a constructive suggestion, because we are discussing pensions in these clauses. The pension credits Bill arrived from the other place in a totally unworkable state. The back half of the Bill had absolutely nothing to do with the front half. The Minister in another place clearly had not understood it at all. I had discussions with the Minister responsible for pensions in this place, and we adjourned the Committee. The Government then produced a whole series of amendments to put things right, but they also provided the Opposition with explanatory notes as to what the amendments were about.

I do not ask the Minister to respond now—I merely put forward this constructive suggestion—but we found that that enabled us to sort out the Bill in a way which simply is not true if all one has is a single speech from the Government Bench and then only a single speech from this side, and so on. I ask the Minister to consider generally whether on matters of this complexity there might be a case for providing explanatory notes to the Opposition, because on these clauses the explanatory notes which were formerly provided have been totally overtaken by events.

Lord Jenkin of Roding

My Lords, I am grateful to those who have joined in this short debate and I have no wish to prolong it. I do not know whether the noble Lord, Lord Whitty, realises, but what he is proposing is called a Keeling schedule. I am glad that he nods assent. That will be welcome, because Schedule 8 as it now stands after the amendments have been made is totally unintelligible and will need to be completely rewritten, as he promised. I welcome that.

On the substance of the matter, the noble Lord, Lord Whitty, made the best of a very bad case. We recognise that he is in a particular difficulty as a Minister for one department being responsible for legislation which is the responsibility of another. Many of the problems that we have had to deal with have stemmed from that curious division of responsibility. Nevertheless, having said that—he is waving at me, but I will not give way because I will withdraw the amendment—I hope that Ministers will take note that this House will not put up with shoddy legislation which then needs to have literally hundreds of amendments tabled by the Government on Report. It is not good enough. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 9 [Taxation provisions relating to nuclear transfer schemes]

The Deputy Speaker (Baroness Fookes)

My Lords, we turn now to Schedule 9 and Amendment No. 126. I point out that if Amendment No. 126 is agreed to, I cannot call Amendment No. 127 by reason of pre-emption.

Baroness Miller of Hendon moved Amendment No. 126: Page 177, line 4, leave out paragraph 3.

The noble Baroness said: My Lords, Amendment No. 126 repeats a probing amendment tabled for Grand Committee by my noble friend Lady Noakes. One purpose of that amendment was to ask whether the Government intended this provision to exempt from tax rolled-over or held-over gains, which may well have arisen in connection with activities that had nothing to do with the activities which are being transferred to the NDA.

In Grand Committee the Minister did not answer that point, and so we have tabled the amendment again in the hope that we will get a straight answer. Will the Minister confirm whether it is the Government's policy to allow a rolled-over or held-over gain to escape tax as a consequence of Schedule 9? Will he explain why it is that BNFL or the UKAEA, which are basically taxable entities, should not pay tax in respect of gains on assets not related to NDA transfers?

The equivalent of Amendment No. 128 was also tabled in Grand Committee. The Minister partly explained paragraph 4 of Schedule 9, to which the amendment relates, along the lines that keeping tax records is too onerous for the NDA. We shall not challenge that today though we find it an odd proposition. We would, however, like the Minister to explain the logic of sub-paragraph (3). Why is it that the Bill has gone to great lengths to exempt the trading activities of the NDA but imposes a capital gains liability on 100 per cent of the proceeds of assets acquired under a transfer scheme even if those assets are connected with the tax-exempt activities? What is the policy intent behind that? I beg to move.

Lord Davies of Oldham

My Lords, we have had extensive—even intensive—discussions on the tax provisions in Clause 27 and Schedule 4. With these two amendments we now turn to Schedule 9, which contains the detail of the transfer tax provisions. The provisions allow for tax neutral transfers of assets and companies between publicly owned companies—I emphasise that point—such as BNFL, the UKAEA and the NDA. They also allow for the ownership of site licensee companies that are relevant site licensees to be transferred in a tax neutral way.

The amendments tabled by the noble Baroness are specifically concerned with the provisions in the Bill that deal with the tax consequence of nuclear transfer schemes. The broad aim of Clause 43 and Schedule 9 is to ensure that tax charges or tax reliefs are not triggered by a transfer. In other words, we want transfers under nuclear transfer schemes to be tax neutral so that both transferee and recipient are not penalised, nor receive a windfall gain in tax terms. The detail of Schedule 9 is necessarily complex because it attempts to cater for the flexibility of the various transfer scheme arrangements.

Amendment No. 126 would remove the provision that allows for assets to be transferred at value for tax purposes that would give no gain and no loss. The provision ensures that the transferor would not face a tax charge on any chargeable gains as a result of the transfer. That is a standard tax provision in Bills that are concerned with public reorganisation and transfers. We are legislating simply to provide for the public sector the equivalent facility that exists under the normal tax rules for groups of companies. Under the normal tax rules intra-group transfers are deemed to take place at a value that gives no gain and no loss, and that is what we are replicating here. The intra-group tax rules cannot apply to the publicly owned companies because there is no head. A publicly owned group comes under the Crown. Therefore, BNFL and its subsidiaries form a group but BNFL and the NDA do not, even though they are both effectively owned by the Crown. That is why we need the tax provisions in Schedule 9 to allow for tax neutral transfers.

Amendment No. 128 would remove a pragmatic computational provision concerning the calculation of any tax on chargeable gains for the NDA. This provision is included to reduce the disproportionate effort and cost that the NDA would otherwise incur. Without this provision it would be necessary for the NDA to maintain registers and associated base costs of publicly owned assets through potentially numerous transfer schemes and over lengthy periods of time. That seems to be unnecessary given the overall intent behind the provisions in the clause and in the schedule. I refer in that connection to the government amendments, some of which we have already discussed. The next group is also germane to this matter. We hope that the noble Baroness will consider that that is a watertight explanation and will feel able to withdraw the amendment.

6.30 p.m.

Baroness Miller of Hendon

My Lords, I thank the Minister for his explanation. I think that it is a little clearer than the explanation that we received in Committee. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Whitty moved Amendment No. 127: Page 177, line 10, at end insert— ( ) This paragraph does not apply in relation to a transfer to the NDA or to a subsidiary of the NDA in accordance with a nuclear transfer scheme of securities of a company, in consequence of which that company ceases to be a relevant site licensee. ( ) In this paragraph "relevant site licensee" has the same meaning as in subsection (4) of section 27 (see subsection (5)).

On Question, amendment agreed to.

[Amendment No. 128 not moved.]

Lord Whitty moved Amendment No. 129: Page 177, line 26, at end insert— ( ) This paragraph does not apply in the case of a disposal which under paragraph 26A is to be treated as a disposal on which neither a gain nor a loss accrues to the NDA or a subsidiary of the NDA.

On Question, amendment agreed to.

Lord Davies of Oldham moved Amendment No. 130: Page 178, line 17, at end insert— ( ) For the purposes of the allowances and charges provided for by the 2001 Act, the trade is not to be treated as permanently discontinued, nor a new trade as set up; but sub-paragraphs (2) and (3) of this paragraph are to apply.

The noble Lord said: My Lords, in moving Amendment No. 130, I wish to speak also to Amendments Nos. 131 to 139 and Amendment No. 147 with which it is grouped.

These amendments relate to the transfer provisions in Schedule 9. They include extending Part 2 of Schedule 9 to cover UKAEA and other technical amendments. They take into account recent discussions and clarifications on the proposed contractual structure.

Amendment No. 130 is a technical amendment to put beyond doubt that for capital allowance purposes no balancing adjustments or recognition of disposal proceeds arise to a company that transfers its whole trade, or part of its trade, to the NDA. Together with the rest of paragraph 7 of Schedule 9 this ensures that transfers, for instance from BNFL and UKAEA, are neutral for capital allowance purposes.

Amendment No. 131 amends paragraph 9 of Schedule 9 so that for capital allowance purposes assets are transferred to the NDA at their book value for accounts purposes, rather than treated as a gift at a market value which might have been difficult to ascertain. The transfers to which this applies are those under a Section 36 scheme where property is transferred other than as part of a transfer of a trade or part trade.

Amendment No. 132 introduces a new paragraph 14A. This ensures that where a trade or part of a trade is transferred from a BNFL company to the NDA there is tax neutrality and the transferee effectively stands in the shoes of the transferor for tax purposes. This will ensure that there will be no tax consequences where the transferor writes off sums in its books as part of the detailed transfer arrangements. The rule will apply to trading items, such as trade debtors or sums received in advance for the supply of goods or services by the transferor, or trade creditors and sums paid in advance for the provision of services to the company.

Amendments Nos. 133 to 137 extend Part 2 of Schedule 9 to wholly-owned subsidiaries of BNFL and to 1JKAEA and its wholly-owned subsidiaries. As drafted, Part 2 currently applies only to BNFL. This allows the provisions in Part 2 of Schedule 9, that generally allow for tax neutral transfers to publicly owned bodies other than the NDA, to apply more widely to cater for possible future transfers from BNFL and UKAEA companies. For instance, transfers as a consequence of any reorganisation of the publicly owned BNFL and UKAEA groups would be covered by this extension.

Amendment No. 138 amends paragraph 20 of Schedule 9 in a similar way to Amendment No. 131 for paragraph 9. For capital allowance purposes assets will be transferred from BNFL or the UKAEA to another publicly owned company at their book value, rather than treated as a gift at a market value, which, as I indicated earlier, could be difficult to ascertain.

Amendment No. 139, mirroring Amendment No. 132, introduces a new paragraph 25A. This ensures that where a trade or part of a trade is transferred from a BNFL company or a UKAEA company to another publicly owned company that is not the NDA, there is tax neutrality and the transferee effectively stands in the shoes of the transferor for tax purposes. This will potentially apply to trading items such as trade debtors or sums received in advance for the supply of goods or services by the transferor, or trade creditors and sums paid in advance for the provision of services to the company.

Amendment No. 147 introduces a definition of "transferee" to the list of definitions in paragraph 32 of Schedule 9. In relation to a nuclear transfer scheme, the transferee means the person to whom the transfer is made. I beg to move.

On Question, amendment agreed to.

Lord Davies of Oldham moved Amendments Nos. 131 to 139: Page 179, line 14, leave out sub-paragraph (2) and insert— (2) For the purposes of Part 2 of the 2001 Act (capital allowances for plant and machinery), the NDA or its subsidiary is to be treated—

  1. (a) as having incurred capital expenditure on the provision of the plant or machinery at the time of the transfer; and
  2. (b) as having owned the plant or machinery as a result of having incurred that expenditure.
(3) The amount of that expenditure is to be treated as being the book value of the plant or machinery. (4) For the purposes of the application of section 61 of I hat Act in relation to the transferor the disposal value of the plant or machinery is to be treated as being the book value of the plant or machinery. (5) The references in this paragraph to the book value of the plant or machinery are references to the amount which, in accordance with generally accepted accounting practice (within the meaning of the Tax Acts)—
  1. (a) was recognised as its value in the accounts of the transferor at the time of the transfer; or
  2. (b) should have been so recognised at that time.
 (6) Expressions used in this paragraph and in Part 2 of the 2001 Act have the same meanings in this paragraph as in that Part. Page 181, line 3, at end insert—

"Computation of profits and losses in respect of transfer of trade

14A (1) This paragraph applies where, in consequence of a section 36 scheme—

  1. (a) a BNFL company ceases to carry on a trade or a part of a trade; and
  2. (b) an NDA group member begins to carry on the trade or that part of it.

(2) For the purpose of computing, in relation to the time when the scheme comes into force and subsequent times, the relevant trading profits or losses of the BNFL company and the NDA group member—

  1. (a) the trade or part is to be treated as having been a separate trade at the time of its commencement and as having been carried on by the NDA group member at all times since its commencement as a separate trade; and
  2. (b) the trade carried on by the NDA group member after the time when the section 36 scheme comes into force is to be treated as the same trade as that which it is treated by virtue of paragraph (a) as having carried on as a separate trade before that time.

(3) This paragraph is subject to paragraph 11.

(4) In this paragraph—

Page 181, line 7, leave out "it is"

Page 181, line 8, at beginning insert "it is"

Page 181, leave out line 9 and insert "a BNFL company or of property, rights or liabilities of a BNFL company; and"

Page 181, line 10, leave out from beginning to second "is" and insert "the transferee"

Page 181, line 11, at end insert— (2) This Part of this Schedule also applies to a transfer if it is a transfer in accordance with a section 36 scheme to a transferee falling within sub-paragraph (3) of—

  1. (a) property, rights or liabilities of the UKAEA;
  2. (b) securities of a wholly-owned subsidiary of the UKAEA; or
  3. (c) property, rights or liabilities of such a subsidiary.

(3) The transferee falls within this sub-paragraph if it is—

  1. (a) a publicly owned company which is not a subsidiary of the NDA; or
  2. (b) the UKAEA.

(4) In this paragraph "BNFL company" means BNFL or a wholly-owned subsidiary of BNFL."

(4) Page 182, line 16, leave out sub-paragraph (2) and insert— (2) For the purposes of Part 2 of the 2001 Act (capital allowances for plant and machinery), the transferee is to be treated—

  1. (a) as having incurred capital expenditure on the provision of the plant or machinery at the time of the transfer; and
  2. (b) as having owned the plant or machinery as a result of having incurred that expenditure.

(3) The amount of that expenditure is to be treated as being the book value of the plant or machinery.

(4) For the purposes of the application of section 61 of that Act in relation to the transferor the disposal value of the plant or machinery is to be treated as being the book value of the plant or machinery.

(5) The references in this paragraph to the book value of the plant or machinery are references to the amount which, in accordance with generally accepted accounting practice (within the meaning of the Tax Acts)—

  1. (a) was recognised as its value in the accounts of the transferor at the time of the transfer; or
  2. (b) should have been so recognised at that time.

(6) Expressions used in this paragraph and in Part 2 of the 2001 Act have the same meanings in this paragraph as in that Part."

Page 184, line 3, at end insert—

"Computation of profits and losses: transfer of trade

25A (1) This paragraph applies where, in consequence of the section 36 scheme—

  1. (a) a BNFL company ceases to carry on a trade or a part of a trade; and
  2. (b) a publicly owned company that is not a subsidiary of the NDA (the "transferee company") begins to carry on the trade or that part.

(2) For the purpose of computing, in relation to the time when the scheme comes into force and subsequent times, the relevant trading profits or losses of the BNFL company and the transferee company—

  1. (a) the trade or part is to be treated as having been a separate trade at the time of its commencement and as having been carried on by the transferee company at all times since its commencement as a separate trade; and
  2. (b) the trade carried on by the transferee company after the time when the section 36 scheme comes into force is to be treated as the same trade as that which it is treated by virtue of paragraph (a) as having carried on as a separate trade before that time.

(3) This paragraph is subject to paragraph 22.

(4) In this paragraph—

On Question, amendments agreed to.

Lord Whitty moved Amendment No. 140: Page 184, leave out lines 9 and 10 and insert "the application of the enactments mentioned in sub-paragraph (2A) to the assets of

On Question, amendment agreed to.

Lord Whitty moved Amendments Nos. 141 to 146: Page 184, line 11, after "licensee" insert ", that company Page 184, line 14, at end insert— (2A) Those enactments are—

  1. (a) the 1992 Act;
  2. (b) Schedule 29 to the Finance Act 2002 (c. 23);
  3. (c) paragraphs 5, 14, 18 and 25 of this Schedule."
Page 184, line 21, leave out sub-paragraph (4). Page 184, line 22, at end insert— 26A (1) This paragraph applies where—
  1. (a) as a consequence of a transfer in accordance with a nuclear transfer scheme of securities of a subsidiary of the NDA, that subsidiary becomes a relevant site licensee;
  2. (b) as a consequence of a transfer to the NDA or to a subsidiary of the NDA in accordance with such a scheme of securities of a company, that company ceases to be a relevant site licensee; or
    3. 533
  3. (c) there is a transfer in accordance with such a scheme of securities of a company that is a relevant site licensee from one person to another person for purposes connected with securing that the condition in section 27(5)(ba) continues to be satisfied in relation to the company.
 (2) For the purposes of the 1992 Act, the securities shall be treated as disposed of to the transferee for a consideration of such amount as would secure that, on the disposal, neither a gain nor a loss accrues to the transferor. 26B In this Part of this Schedule "relevant site licensee" has the same meaning as in subsection (4) of section 27 (see subsection (5)). Page 185, line 33, at end insert—

"Groups of companies

30A References to a company in the following enactments shall apply to the NDA—

  1. (a) sections 170 to 181 of the 1992 Act;
  2. (b) Part 8 of Schedule 29 to the Finance Act 2002 (c. 23).

"Page 185, line 37, after "17" insert ", 26A"

On Question, amendments agreed to.

Lord Davies of Oldham moved Amendment No. 147: Page 186, line 11, at end insert— "transferee", in relation to a transfer in accordance with a nuclear transfer scheme, means the person to whom the transfer is made;

The noble Lord said: My Lords, this amendment has already been spoken to. I beg to move.

On Question, amendment agreed to.

Schedule 10 [The Civil Nuclear Police Authority]:

Baroness Anelay of St Johns moved Amendment No. 148: Page 186, line 29, at end insert "at least one of whom shall have specialised policing knowledge

The noble Baroness said: My Lords, in moving Amendment No. 148, I wish to speak also to Amendments Nos. 149 and 150 that stand in my name and appear to be supported by the noble Lord, Lord Bradshaw. However, in his defence I should point out that his name appears in error against Amendment No. 150. In Grand Committee the noble Lord made it clear that he did not support that amendment although some accord has broken out between us on all other matters in this part of the Bill.

We now reach the part of the Bill that creates a new nuclear civil police authority to oversee a reconstituted nuclear constabulary which will be directly accountable to the Secretary of State. On Second Reading we made it clear that we believed it would be more appropriate for the Secretary of State concerned to be the Home Secretary who is accountable to Parliament for the vast majority of police forces in the UK. But that aside, we support the thrust of the provisions for setting up the new police authority.

I was intrigued to receive a letter from the Minister stating that the Government now accept that in certain cases Home Office Ministers have a role with regard to the ministerial confirmation of authorisations given under Section 44 of the Terrorism Act 2000. As the Minister reminds us in that letter, Clause 53 of the Bill extends the powers in Section 44 to senior officers of the Civil Nuclear Constabulary so that they can authorise the stop and search of persons or vehicles without grounds of suspicion. That is similar to other police forces. Under this Bill, as with other police forces, Ministers must confirm an authorisation within 48 hours for it to apply for more than 48 hours. Can the Minister confirm that the DTI has now had further discussions with Home Office colleagues and that the Government have now concluded that Home Office Ministers—not DTI Ministers—will have that responsibility?

My amendment to this part has been tabled for the following three reasons. If I outline them now I shall save time later. The first reason is to follow up answers given in Grand Committee by the Minister and in ministerial letters to me following Committee stage. The second reason is to probe more extensively the issues that I raised in Grand Committee, as I believe that the Government have not yet provided a satisfactory answer. Thirdly, I have some new material. I shall put forward some issues raised by the UKAEA Police Federation since the end of the Grand Committee stage. I am grateful to the federation for coming to the House of Lords to brief me and my noble friend Lady Byford.

All the amendments in this group refer to Schedule 10 which sets out the rules governing the appointment of the members of the authority and the good governance provisions for its operation. Paragraph 172 of the Explanatory Notes states: The Government intends that the rules on appointment set out by the Office of the Commissioner for Public Appointments (OCPA) will be followed", and that, membership will consist of independent members and representatives of the civil nuclear industry".

Amendment No. 148 has been tabled specifically at the request of the atomic energy police federation. It would ensure that at least one member of the new police authority would have specialised policing knowledge. The police federation explains that it will be important for the new authority to have at its disposal the expertise of at least one person who can advise on policing techniques and the way in which they can most effectively and efficiently be delivered. That seems eminently sensible to me.

Do the Government agree with the police federation that given the particular nature of this police authority, with some members appointed from the industry that is funding the constabulary, this would be an important safeguard and one that would help the authority to fulfil any statutory functions? What are the Government's plans in that respect?

Amendment No. 149 has been tabled to follow up on the discussion about the nature of Scottish representation and consultation. That is reported at col. 106 in Grand Committee on 27 January. I would be grateful if the Minister could tell the House what discussions the DTI have had with the Secretary of State for Scotland on such matters since Grand Committee.

Finally, Amendment No. 150 is an old friend. It comes back from Grand Committee and follows questions that I asked then about good governance at col. 103 on 27 January. The amendment provides that the chairman of the police authority should not be able to serve in office for more than 10 years as chairman. That proposal did not find favour with the noble Lord, Lord Bradshaw, who said that it takes about three years to understand how an authority works before one becomes an effective member. I have considered his view, but I remain concerned about the importance of ensuring that the chairmanship should not remain in one pair of hands for more than 10 years. After all, my amendment would allow the chairman to serve first as a member to obtain experience and then to be appointed as a chairman and to serve a maximum of 10 years from the date of his or her appointment.

I was also encouraged to return to this proposal as the Government have tabled an amendment in the Domestic Violence, Crime and Victims Bill at Report stage. In response to amendments that I had tabled on good governance, the Home Office tabled its own amendment which states in Schedule 2, subparagraph (4) that a person who is appointed as either a commissioner for victims or a deputy commissioner, must not hold office for more than 10 years in total". I believe that it is important to get good governance right from the beginning. In Grand Committee the Minister, the noble Lord, Lord Whitty, said that the chairman would be able to serve for more than 10 years only if the Commissioner for Public Appointments gave her agreement. Why is an exception to good governance required here? The Home Office was prepared to follow good practice in the domestic violence Bill and I am simply asking that the DTI should follow suit. I shall say that very quietly so that Home Office Ministers do not hear me praising them. Let us have joined-up thinking on good governance. I beg to move.

6.45 p.m.

Lord Bradshaw

My Lords, I support the noble Baroness, Lady Anelay of St Johns. There is certainly a need for some police expertise in what I feel would be a somewhat closed and probably fairly secretive organisation. Some knowledge of how the police work will be valuable to the new police authority. Scottish Ministers should be consulted.

On whether someone should serve as chairman for more than 10 years, I recollect that when I referred to the matter in Grand Committee, I probably did not take into account the years that someone should have served as a member of the authority before aspiring to chairmanship. I would think it very unlikely that anyone's term of office, in almost any public office, should exceed 10 years. In a matter that is not open to public scrutiny, the chances of complacency, connivance or slightly corrupt procedures may grow if someone holds a seat for many more than 10 years. In the authorities with which I have been concerned, the practice is for the chairmanship to rotate about every two or three years. I broadly support the amendment.

Lord Gray of Contin

My Lords, I support the amendment, particularly the suggestion that someone with police knowledge should be a member of the board. That is very important because this matter has assumed a completely new aspect in recent times due to the dangers with which we now live and the complete irresponsibility of people who are prepared to commit the most vile crimes to kill others. It is important that police forces, especially this particular police force which has such an important responsibility throughout the country, should have the very best experience available to it.

The policing issue is of special importance. All British police forces are extremely competent and able to look after their own areas very well indeed. But there is so much specialisation in the nuclear industry that it is very important that that police force, as well as those who operate those vitally important installations, should have the best knowledge available to them and the best instruction in how to cope with the awful situations that they are liable to encounter. I support my noble friend in moving the amendment and I trust that we shall have some co-operation from the Government when the Minister answers.

Baroness Carnegy of Lour

My Lords, I, too, rise to support my noble friend. It is important that this police force should be acceptable to local police forces and the public because the very nature of their responsibilities and what they will be up to will require the confidence of people. If one member of the board has specialised policing knowledge that will help local chief constables and police have confidence that that force is being led from the top in a knowledgeable manner. That may be a small point and we have talked often in this House about representation, but sometimes it matters more than at other times; and that is the case now. So Amendment No. 148 is important.

As for Amendment No. 149, can the Minister reveal the outcome of his discussions regarding consultation with Scottish Ministers or the Secretary of State? It is important for the constabulary in Scotland to be accepted as a United Kingdom matter—which, of course, includes the Scottish element.

Regarding the position of the chairman of the authority, the noble Lord, Lord Bradshaw, slightly changed his position when he said that the person might not be completely new to the authority. A term of 10 years as chairman is a long time by any measure, particularly for a public body, so it would be a good amendment. I hope that the Government will look sympathetically at all three amendments.

Lord Triesman

My Lords, I thank noble Lords who have contributed to the debate. After a period of dealing with tax and other matters, this has been closer to matters that I can understand and to sets of arguments whose power is evident to me. This group brings together a number of amendments concerning appointments to the Civil Nuclear Police Authority.

Amendment No. 148, as noble Lords, including the noble Baroness, Lady Anelay, have said, would require at least one member of the Civil Nuclear Police Authority to have specialised policing knowledge. The current UKAEA constabulary police authority includes a member with senior level experience of policing and the constabulary has probably benefited considerably from that expertise—that may be what is in everyone's minds.

The Managing the Nuclear Legacy White Paper also gave a clear commitment that it was the Government intention that one of the independent members appointed to the Civil Nuclear Police Authority should continue to have a background in senior level policing. I can confirm that commitment.

The Bill does not specify the detailed composition of the police authority for reasons that were touched on in Grand Committee, when an amendment was considered seeking a minimum number of industry representatives to be appointed to the police authority. I cannot envisage circumstances at this time where the Government would not think it sensible to appoint an independent member with police experience. But circumstances change. We believe it is important that the Bill should allow sufficient flexibility for the Secretary of State to vary the composition of the police authority so that it always has available to it the skills it needs, both now and in the future. Limiting that flexibility in legislation would potentially be restrictive.

Could I conceive of circumstances in which it might not be appropriate to have a policing expert on the authority? Indeed, it is difficult to think of any specific reason at this stage. The built-in flexibility is about the future and in our debate today there has been considerable discussion about the length of time over which this legislation would have an impact and circumstances unquestionably would change over that period. In responding to some of the points made by the noble Lord, Lord Gray, in particular, there are good reasons why other people would say, "If we are going to construct an authority of this kind and it is useful to have expertise of a one kind, why not reserve places for other kinds of expertise in that authority?" That would be to the detriment of constructing the sort of' authority that, as the guidance notes that were just quoted say, needs a degree of flexibility.

I shall put the matter in the following terms—almost any senior police officer with an area of expertise will have a specialised knowledge in that area. But it does not necessarily follow that that would be the most critical area of expertise needed if, for example, issues of terrorism or security emerged. They may have expertise in the guarding of sites and making sure that they are secure, or in making sure that there is no leakage of material—for bad reasons—from sites, particularly the types of material with which we are dealing. It is not necessarily the case that the expertise will be of precisely the kind that is needed.

I suggest that, like most bodies which have to take on diverse and complex issues, this body must always take advice, whether in confidence or not. I refer to the potential for secrecy mentioned by the noble Lord, Lord Bradshaw. It would be bound to take detailed advice needed in any specialised area. That is not an argument for not having a senior police officer or a person with expertise, but other kinds of specialist—for example, with anti-terrorism knowledge—may equally be useful in other circumstances. I understand why the UKAEA Police Federation has made its comments. I do not disparage it by saying that I have yet to serve on any body that has not thought its expertise was absolutely essential to one authority or another. They are the sort of comments that people are likely to make.

Regarding the question asked by the noble Baroness, Lady Anelay, about which government department would have authority, the Home Office will have all authority in respect of terrorism: the DTI will have authority in respect of the nuclear matters contained in the legislation. I hope that that clarifies matters. So I ask your Lordships not to press the amendment, because I do not believe that it necessarily accomplishes the objectives that your Lordships have described. Of course the expertise needs to be available. It is important that the authority can call on that expertise from whichever source it feels is most useful, but the authority might be limited if it was compelled to call on that expertise in the way suggested by the amendment. Having said all of that, at present it is extremely unlikely that that kind of expertise would not be available on the authority when it is established.

I shall answer the question put regarding Amendment No. 149—the Scottish Executive has discussed the matter and has agreed to the propositions. We touched on the role of Scottish Ministers in Grand Committee, when my noble friend Lord Whitty made it clear that, while we would expect to take account of Scottish Ministers' views, appointments to the Civil Nuclear Police Authority were a reserved matter. The Scottish Executive is content with that interpretation. That is because the authority will be part of nuclear security and not of public policing and the arrangements will be those for a reserved body. I understand that the constabulary clauses were also not a matter of concern in the Scottish Parliament when it debated the Energy Bill. I hope for those reasons that noble Lords will feel that their concerns have been satisfied and that the amendment will be withdrawn.

Amendment No. 150 was also discussed in Grand Committee and concerns the period of membership of members of the authority. At that time the noble Lord, Lord Whitty, said that the Government's intention in making appointments, including that of the chair, was to follow the letter and the spirit of the Commissioner for Public Appointments' code of practice.

It is perfectly correct to say that the maximum period in office must not normally exceed 10 years. The code of practice allows that this will be exceeded only in exceptional circumstances provided there is full and open competition. There is no obvious reason why this flexibility should not also be available to the Government in appointing members to the Civil Nuclear Police Authority—including its chair.

It does not mean that, in general, people will serve for more than 10 years but it does mean that the same degree of flexibility, common in all public appointments conducted under the code of practice, would apply to this post. I understand the point made by the noble Baroness, Lady Anelay of St Johns, in relation to the domestic violence legislation. However, as noble Lords made clear in an earlier amendment, we may be talking about appointments of people in some highly specialised areas. It may well be that one of those areas is of signal importance when this changeover might otherwise take place. I would like to think that the Secretary of State would take account of those circumstances and make the judgment whether it was sufficiently unusual and would decide in that light. Accordingly, I ask that this amendment also be withdrawn.

7 p.m.

Baroness Anelay of St Johns

My Lords, I am grateful for the support I have received from my noble friends Lord Gray of Contin and Lady Carnegy of Lour. I also thank the noble Lord, Lord Bradshaw. The point he made at the beginning of this debate is absolutely right. One has to be wary when one is thinking about the appointment of people to this authority because they will have to perform a very specialised task. They may be drawn from a very closed group of people, not because they are secretive but because they are carrying out secret work.

My noble friend Lord Gray was right to point out that the writ of this police authority is nation-wide. It will be a very important organisation. We need to get right, from the beginning, the rules that govern it. I listened to what the Minister said about Scotland. He said that the Scottish Parliament did not find the Energy Bill a problem. I was simply asking whether the Government had taken seriously what we said at Grand Committee and whether they had consulted with the Secretary of State for Scotland. The Government appear to have taken the view that it was unnecessary to talk to the Secretary of State because the Scottish Parliament had not raised the issue. That is a matter for the Government not for me. Obviously it is something I shall consider further with my colleagues who have far greater knowledge of Scotland than I ever could.

The Minister rebutted my argument that there was a need to have one person on the authority who has specialised policing expertise. The Minister seemed to say that it was what the Government want but they do not want it in the Bill. He wants that old friend flexibility so the Government can change things in the future if they think it appropriate. I was a little more unpersuaded here than is normal. I try to be reasonable on flexibility, especially since the Minister specifically said that he could not envisage circumstances where the Government would want to avoid having one person with police experience on the authority.

He posed the question, "Could I conceive of circumstances? Well, it's difficult at this stage. It's all about the future." Sometimes that is true. But we are talking about policing. Policing is policing is policing. It was in Peel's day. It was even prior to that, before there was such a thing as a police force. The actual activity of policing remains constant and I do not believe that our language will change so much that we will not know what we mean in 100 years' time—if this Bill is still going. I do not believe that we will not know what we mean if we say we want someone who has specialised policing knowledge.

The Minister said that, if adopted, this argument could limit the kind of people appointed. It may be that at some stage it would be necessary to find someone who knows about guarding site perimeters. You might want someone to advise on spills or on terrorism. Well, I specifically left my definition of this person to be appointed broad enough so that the Government would be able to appoint someone knowledgeable without having a specifically targeted knowledge. Just because there is someone with specialised policing knowledge on the authority, it does not mean the authority cannot bring in additional advisers as various tasks arise. I want to build this into the authority from the word go, something that the Minister himself recognises. This was put to me very strongly by the UKAEA police. We need to build a level of expertise into the authority to enable it to deliver its particular task properly.

The Minister also referred to my good practice issues. He referred to the appointment of a chairman and repeated the Government's commitment that they would wish to follow the code of practice. This states that a chairman would not serve more than 10 years except in exceptional circumstances. We are back to flexibility again. The Government want the Secretary of State to be able to appoint someone beyond 10 years, subject to the post being advertised. But they say that in general they would not wish people to serve more than 10 years. On that one I am flogging a very dead horse at the DTI. They obviously do not wish to come into the fold as the Home Office has done. I would argue that there are occasions when it is absolutely right to get the rules correct from the beginning. However, I can see that the Government will not move on that.

I feel I have a responsibility with regard to the request from the UKAEA police. They say that what has worked well so far in the authority should continue. There should be someone on the authority with a senior level of experience in policing. It is important to put the will of the Government to the test. In response to the request from the police, I wish to test the opinion of the House on Amendment No. 148.

7.7 p.m.

On Question, Whether the said amendment (No. 148) shall be agreed to?

Their Lordships divided: Contents, 84; Not- Contents, 93.

7.17 p.m.

[Amendments Nos. 149 and 150 not moved.]

Lord Whitty moved Amendments Nos. 151 and 152: Page 188, line 28, leave out "amending" and insert "modifying Page 189, line 3, at end insert— ( ) References in this paragraph to the modification of a UKAEA pension scheme include references to the modification of any one or more of the following—

  1. (a) the trust deed of the scheme, if there is one;
  2. (b) rules of the scheme; or
  3. (c) any other instrument relating to the constitution, management or operation of the scheme."

Baroness Anelay of St Johns moved Amendment No. 153: Page 41, line 19, at end insert— ( ) The secondary functions of the Constabulary may include—

  1. (a) training other national and overseas police forces; and
  2. (b) establishing and developing liaison with overseas police forces."

The noble Baroness said: My Lords, after the recent excitement, I want to make it clear that Amendment No. 153 is only a probing amendment.

In Grand Committee, I asked how the provision in Clause 48(6) differed from Section 6 of the Police Act 1996. Since then, noble Lord, Lord Whitty, wrote to me a helpful letter setting out the effect of Clause 48 as a whole. During that response, the Minister referred to the secondary functions of the constabulary and I have tabled this amendment to probe further the extent of those functions and, more importantly, how they will be funded.

Amendment No. 153 makes it clear that the secondary functions of the constabulary can include training other police forces, both in the United Kingdom and overseas, and establishing liaison with those police forces. That is based on the guidance in the Explanatory Notes and in the Minister's letter.

The Minister, in his letter, said that the circumstances in which the constabulary performs such functions will be fairly limited. But, presumably, that is only a guess because, as we heard from the Government in the previous group of amendments, they hope that this Bill will deal with future circumstances and are therefore trying to cover all eventualities. We do not know how the authority will develop.

That will be the case unless the Government plan to use the powers that they have given themselves in Clause 48(5) to prevent the development of secondary functions beyond what they consider to be an acceptable limit. What on earth will they consider to be "an acceptable limit"? What will govern that decision?

Secondly, who funds the carrying out of the secondary functions? The police authority and the police working for it will have highly specialised knowledge. They are experts in their field. They will have an expertise that is valued overseas; we know that from the existing experience of the police who worked for the UKAEA, so we assume that that will continue.

It is vital that we make it as straightforward as possible for the expertise possessed by the new civil nuclear police to be of benefit to other police forces. I do not want to end up in a position where our own civil nuclear police, in developing the expertise of other police forces by sending their people to a system find, themselves out of pocket. My commercial attitude asks why they should not also make some money out of it for their own purposes. It seems good practice that they should be able to make some income for themselves out of what will be a worthwhile activity.

Can the new police authority make a commercial charge for its services and keep control of those funds? I beg to move.

Lord Bradshaw

My Lords, I support the amendment. It is a matter of fact that the police authority will be kept short of funds. Every other police authority is and they are enjoined by the Government to trade and train people and do everything in their power to raise funds. The police force will also have levels of expertise that, despite the fact that we are not now developing new nuclear power stations, will be of great value to countries overseas. I foresee that many will seek to avail themselves of the training and education opportunities available in the force.

The secondary functions described in the amendment are likely to be important functions which, while they do not serve the principal function of the constabulary, will be necessary, especially to raise funds. I know from my experience that when new equipment comes into use it is the contribution of other police forces that makes it possible not only to afford one's own training facilities but often to afford the capital cost of equipping oneself. I am happy to support the amendment.

Earl Attlee

My Lords, I am grateful to my noble friend for introducing the amendment. I have one or possibly two questions. Will the civil nuclear police force be sending contingents to international police task forces such as those in Bosnia and Kosovo? It is important for the experience of senior officers in their earlier career to have done different things and worked with international police task forces. If they will be so dispatched, who will pay for it?

Lord Triesman

My Lords, it is always intriguing to try to anticipate the questions one is likely to be asked. I must confess that having spent a good deal of the day thinking about Kosovo I had not anticipated that question.

Amendment No. 153 specifies possible secondary functions for the civil nuclear constabulary, including training and liasing with overseas forces. In a moment I shall pay special attention to the questions asked by the noble Baroness, Lady Anelay, and the noble Lord, Lord Bradshaw, about that matter. The present UKAEA constabulary already occasionally undertakes some activities of training and liasing with overseas forces. The intention is that the new constabulary will continue to do so where there is a need in relation to its core function or where it is part of a wider UK co-operation programme.

I am not aware at the moment—and if I am wrong I shall certainly write to the noble Earl, Lord Attlee—that there is an intention that we would be taking part in international policing operations of the kind that he described, although I want to go back to the sorts of things we have done and are likely to continue to do, which are slightly different.

Earl Attlee

My Lords, if we do not allow them to go off on international police task forces, is there not a danger that officers from the civil nuclear police authority will be less experienced than others and therefore will not be able to compete for promotion in other forces?

Lord Triesman

My Lords, the definitive answer which I was giving to the noble Earl's first question is no. I wanted to be direct and use one word. I understand the argument that a variety of experience in different police forces would give rise to more varied career opportunities, but our task in setting up this police force must be that it focuses specifically on the tasks of protecting the nuclear decommissioning work and the sites on which it happens. That has to be the principal focus of our work.

The functions, which include training of and liasing with overseas police forces, would not be an end in themselves. I imagine that if it were conceived as a major distraction, the Secretary of State should have a right to veto those activities if, for example, the director for civil nuclear security, who is the regulator, had concerns about the effects of carrying out such activities on the ability of the constabulary to undertake its principal tasks, which is my general point.

The amendment would restrict the Secretary of State's ability to intervene in such circumstances. But I know that the UKAEA constabulary has liased with overseas police forces as part of the discussions to agree arrangements for the handover of security responsibility for sensitive nuclear material when they have been escorted by the constabulary and when it is delivered, for example, to overseas ports by ships. Such movements have not been particularly frequent, but they have occurred.

A recent initiative may lead the constabulary to be involved in the training of guard force commanders responsible for the protection of Russian nuclear sites utilising the limited spare capacity of its training centre; obviously an area of major international importance where we might from the UK make an extremely valuable contribution to the security of the world.

In such cases the constabulary's costs will be reimbursed fully by the Department of Trade and Industry. It will not find itself out of pocket, which was one of the concerns that arose. I hope that the amendment can be withdrawn. It restricts the Secretary of State's ability to intervene, but it will not restrict us from doing some of the sensible things that noble Lords have described in this brief debate.

Baroness Anelay of St Johns

My Lords, I am grateful to the Minister for his response. To take the last point first, he gave an assurance that he has given in the past, although not quite so clearly, with regard to the reimbursement of costs by the DTI to the civil nuclear police when it is carrying out its secondary functions.

I was trying to go a little further in my probing of the Government's intentions in asking whether they can foresee a situation where the civil nuclear police authority could make a commercial charge which it could keep. Will the Minister consider that further and write to me between now and Third Reading? As the Government keep saying, we are considering a Bill that is intended to remain in place for some time. We need to respond to different circumstances.

In response to my noble friend Lord Attlee the Minister narrowed down the circumstances in which the Government foresee a role for the police forces outwith this country in international circumstances. I am grateful to him for the way in which, on the hoof, he tried to narrow that down.

As I cover the Home Office brief, what immediately came to the forefront of my mind when my noble friend was speaking was the fact that this weekend the Home Secretary has been in discussions with his European colleagues about how the Government might take forward with the rest of Europe some form of supranational force to deal with terrorist incidents. I raise that now simply because I believe that between now and Third Reading it may be worth considering the role that the civil nuclear police might play in such a force if it were to come about.

Of course, as the Minister rightly said, the force's expertise is in the area of nuclear decommissioning. However, it is very much an expertise that could be used to counteract terrorism and any attempts to gain access to such material. It may well be that the force will have a role in future discussions about how we can all try to counteract what is a very real terrorist menace. I began by saying that this was very much a probing amendment and therefore I beg leave to withdraw it.

Amendment, by leave, withdrawn.

Lord Davies of Oldham

My Lords, I beg to move that further consideration on Report be now adjourned. In moving the Motion, perhaps I may suggest that Report stage begin again not before 8.31 p.m.

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