Lords Sitting of 15 November 2004

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

The Lord Chancellor: Leave of Absence
The Lord Chancellor (Lord Falconer of Thoroton): My Lords, before business begins, may I take the opportunity to inform the House that I will be undertaking a ministerial visit to Cambridgeshire on Tuesday, 16 November? Accordingly, I trust that the House will grant me leave of absence.

Royal Assent
The Lord Chancellor: My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts:
Domestic Violence, Crime and Victims Act 2004,
Highways (Obstruction by Body Corporate) Act 2004,
Human Tissue Act 2004,
Children Act 2004.

Conflict Resolution and Peace-building: Women's Involvement
2.36 p.m.
Baroness Thomas of Walliswood Baroness Thomas of Walliswood asked Her Majesty's Government:
What progress has been made in the four years since the relevant resolutions were passed in the United Nations Security Council and the European Parliament to involve women in conflict management, peace-building and post-conflict reconstruction in the Balkans, the Middle East, Afghanistan and Africa.
The Minister of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): My Lords, the United Kingdom strongly supports these resolutions. Her Majesty's Government play a leading role in promoting women's engagement in conflict resolution and peace-building activities. We also support monitoring the implementation of these resolutions. There has been progress, such as voter registration initiatives in Afghanistan and Iraq focusing on women. There are real successes. Forty per cent of voters in the recent election in Afghanistan were women. But the international community needs to continue to intensify efforts on these policies.
Baroness Thomas of Walliswood: My Lords, I thank the Minister for her Answer. I do not doubt her own commitment to those issues in the very least, hut what efforts have been made to recruit women for places to be filled by the United Kingdom in United Nations and EU missions? Why have only about three out of 20 members of the Prime Minister's Commission for Africa, which is to report soon, been appointed? The commission is concerned precisely with peace-making and conflict resolution.
Baroness Symons of Vernham Dean: My Lords, on the latter point, people are still being recruited in advance of the G8. In fact, one of my Assistant Private Secretaries is starting that work this week. On recruitment generally, of course we would like to see more women drawn into these areas of work. The noble Baroness may be interested to know that in the Foreign Office, for example, we have recently expanded the number of posts engaged in conflict prevention. There has been an expansion of some 16 posts to try to align our strategic objectives with our resources in the Foreign Office. We are making progress on those issues; I hope that the noble Baroness will be pleased with the figures that I have given.

Bullying
2.39 p.m.
Baroness Massey of Darwen Baroness Massey of Darwen asked Her Majesty's Government:
What progress has been made on their anti-bullying strategy.
The Parliamentary Under-Secretary of State, Department for Education and Skills (Lord Filkin): My Lords, there has been significant progress to sustain the Making a Difference in Bullying campaign. Following on from the regional conference series, we formally launched the Anti-Bullying Alliance in July 2004 and provided funding of £600,000 to sustain the momentum of the strategy. We are now pleased to announce that the Anti-Bullying Alliance will run the first-ever national anti-bullying week next week, with a range of local, regional and national events.
Baroness Massey of Darwen: My Lords, I thank the Minister for that very positive Answer. Is he aware that bullying is becoming evermore complex and subtle and now happens by text messaging and e-mail? Does the strategy cover those aspects?
Lord Filkin: My Lords, my noble friend is correct. We are aware of the use of new technology such as mobile phones and the Internet for bullying and harassment. The strategy is wholly applicable to all forms of bullying. We are also working with the Anti-Bullying Alliance to identify ways of counteracting some of the new technology forms of bullying, to which the noble Baroness referred.
Baroness Howe of Idlicote: My Lords, given that being bullied can affect the whole pattern of an individual's life, can the Minister assure us that teacher training and teacher refresher courses will place special emphasis on that? In particular, will the Government see that those responsible for teaching citizenship courses are aware of the importance of this issue?
Lord Filkin: My Lords, the noble Baroness is absolutely right. In serious forms, bullying can damage a child's self-confidence, self-belief, ability to learn and ability to relate well to others. We have all been aware of the most appallingly tragic examples of that. Undoubtedly, since 1999, it has been a statutory duty of all schools to have effective anti-bullying policies in practice. As part of that, they must look to how the whole school and staff treat bullying seriously, both in the ethics that they project and by the clear practical actions that they can put in place when a child reports bullying to a teacher or another member of staff.
Lord Northbourne: My Lords, does the noble Lord agree that a very important element of the anti-bullying strategy are the relationship skills, personal and social skills, emotional self-belief and self-confidence which develop from the very beginning of a child's education and before? Am I right in believing that relationship education is an important element of the PSHE syllabus, and that it is not delivered effectively in many schools—perhaps more than 50 per cent—today?
Lord Filkin: My Lords, the noble Lord is right that children's self-confidence can have an impact on their ability to cope with and to stop bullying. The problem is that, in its worst forms, bullying undermines children's confidence and therefore in many situations makes it more difficult for them to take those issues effectively in hand without help from peers, their parents or the school.
I am not sure that I have seized the exact thrust of the noble Lord's question on the wider point about relationships. No doubt, when I rejoice and look at Hansard tomorrow, I will give the matter further thought and come back to the noble Lord if I can offer him further benefit.
Baroness Sharp of Guildford: My Lords, what sanctions can be taken against a school that fails to implement a proper anti-bullying strategy? What happens, in particular, if a school has an anti-bullying strategy but an ineffectual one? Does the DfES monitor the position?
Lord Filkin: My Lords, it is part of Ofsted's duties, when it carries out an inspection, to consider how the school is responding to bullying. It can write an adverse report in that regard. It is also the duty of the LEA to ensure that the statutory duty on schools is exercised in practice. Ofsted and the LEA can seriously censure a school that is failing.
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The issue is to try to ensure that the school recognises, without an excess of inspection or regulation, that the matter goes to the heart of its responsibilities to its pupils. Schools should develop an ethic in the school that such behaviour is unacceptable and, above all, an ethic that it is legitimate to seek help. The way in which staff respond should be sensitive to the way in which the pupil articulates the need. Sometimes, that will mean not acting immediately but allowing the child to keep some measure of control, but schools should also follow through when that is the appropriate action. That is where Ofsted can play a strong part, and it has done so through the code of practice and the guidance that were issued to all schools.
Baroness Whitaker: My Lords, I appreciate that this matter goes beyond the remit of my noble friend's department, but will he, in the spirit of joined-up government, undertake to ensure that any lessons learnt are transmitted to the Health and Safety Executive, with regard to the position of apprentices, and to the Army?
Lord Filkin: My Lords, yes.
Baroness Howarth of Breckland: My Lords, what action is being taken in children's homes? Children tell the Commission for Social Care Inspection that it is in children's homes that the worst physical and sexual abuse takes place. Although the wider aspects can be tackled in schools, such bullying is very much within the dynamic of the group of children in the home.
Lord Filkin: My Lords, the noble Baroness is right. We are aware that the vulnerability of children in children's homes is potentially greater. It can feel like a closed world, and, for obvious reasons, access to a parent is not necessarily always possible. The corporate parent—the local authority—is not as well placed to offer support as a good parent would be.
Following a series of appalling scandals in previous years, all children's homes are more aware of the seriousness of abuse by other pupils or by staff. It is one of my areas of ministerial responsibility, and I will give it further attention as we consider how to ensure, along with the local authorities, that children's homes are as well run as is practicable.
Lord Rix: My Lords, is the Minister aware that perhaps the most bullied of all are people with a learning disability, children and adults? What steps are being taken to improve that situation?
Lord Filkin: My Lords, the noble Lord is right: pupils with learning disabilities are potentially more vulnerable in a range of ways to exploitation, bullying and disadvantage. As for what is being done specifically, I shall have to rack my brains and check

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in the department. I shall be pleased to do so because, as the noble Lord knows, that matter is also among my personal responsibilities.
Earl Attlee: My Lords, clearly, school bullying is undesirable and unacceptable. How are we doing in comparison with our European partners? Is our record comparatively good or comparatively bad?
Lord Filkin: My Lords, when I asked officials that question last week, the information that I got was that there was probably one other country—Norway—that was doing better than us. However, when we have discussed bullying at round-table events, other countries have been impressed by the statutory basis of our approach and the effective practice.
No country has an easy answer to the problem. The reason is obvious: there are no easy answers. It is important that we keep track of international experience on the matter. We need not feel that we are in a completely hopeless position, although there is an enormous amount more to be done to make children feel safe.
Baroness Walmsley: My Lords, following on from the question asked by the noble Lord, Lord Northbourne, does the Minister agree that lack of self-confidence and poor interpersonal skills can be characteristics of the bully, as well as of the child who cannot deal very well with bullying?
Are the Government carrying out any research into the root causes of bullying and the reasons why certain children do it and others do not? We should consider whether there is any link between such behaviour and the general disengagement from the education process.
Lord Filkin: My Lords, I agree with the noble Baroness that it is not the case that only the bullied child will experience a lack of self-confidence. A high proportion of children are, at some stage, bullies—a sobering thought—and I suspect that they reflect the full range of human characteristics.
The noble Baroness's question is a good one. One needs to think about why it happens and what it is in the experience or mindset of a child who chooses to bully that makes him or her want to exploit a power relationship. I do not know the specific answers as to what research is under way at present. But it is an important question. I shall be pleased to write to the noble Baroness on that position when I have researched it.
Lord Stoddart of Swindon: My Lords, does the noble Lord agree that one of the problems relating to bullying in schools is that if a teacher dares to put a restraining hand on a bully, he is at risk of suspension from his job, the ruination of his career and possible prosecution? Is that problem being tackled? If not, why not?
Lord Filkin: My Lords, I cannot for the life of me think why a teacher would feel that he or she needed in any way to touch, hit or whatever a bully as part of an effective intervention.
Lord Stoddart of Swindon: My Lords, I did not say "touch" or "hit", I said "restrain".
Lord Filkin: My Lords, if the noble Lord means that a child bullying another child is doing it in front of a teacher, that is an implausible situation. It is not the way in which bullies normally behave.
Baroness Trumpington: My Lords, I trust that the Minister will forgive me if I am wrong, but I believe that some time ago the noble Baroness, Lady Whitaker, mentioned bullying in the Army. The noble Lord has not touched on that.
Lord Filkin: My Lords, I recollect that I said, "yes". The question was whether I would make sure that any lessons that were learnt would be looked at more widely.
The Earl of Listowel: My Lords, does the Minister agree that there needs to be good communication between local authorities and schools if children in local authority care are less likely to be bullied or to become bullies in schools? If that is so, what action is the Minister taking in the light of the Social Exclusion Unit's report on the education of looked-after children, which found that in some areas communication between schools and local authorities was inadequate?
Lord Filkin: My Lords, the noble Earl has raised, as well he might, the wider issues of the pretty appalling outcomes that looked-after children experience. As the noble Earl knows, that is part of fairly wide-ranging work being done by government, including the Social Exclusion Unit.
I expect that we are all aware that looked-after children have much worse educational outcomes than average children, which is not usually a product of them being in care but a consequence of the factors that have led them to being in care. Clearly, as was signalled previously, children's vulnerability to bullying in children's homes is part of what local authorities have to look at in order to address getting better outcomes for looked-after children, which should be one of our priorities.

Crossrail: Alternative Schemes
2.52 p.m.
Lord Berkeley Lord Berkeley asked Her Majesty's Government:
What appraisal process has taken place to compare the Crossrail and London Regional Metro schemes in order to create an east-west rail line across London.
Lord Davies of Oldham: My Lords, an assessment of London Regional Metro's proposals was carried out as part of the Montague review of the Crossrail business case, a copy of which my right honourable friend the Secretary of State for Transport placed in the Library on 20 July 2004. In addition, the Crossrail hybrid Bill will be supported by an environmental statement, which will contain an assessment of the main alternatives to Crossrail.
Lord Berkeley: My Lords, I am very grateful to my noble friend for that Answer. But is he aware that the current design of Crossrail makes it technically incompatible for the existing electric trains to Shenfield and Ebbsfleet or for the Heathrow Express to go into the tunnel at all? That means that Heathrow Express passengers will have to negotiate the wonderful interchange that is Paddington in order to get down underground.
Is the Minister aware that the London Regional Metro scheme would cost £6 billion less than Crossrail, which will probably be £10 billion after financing costs? Does he therefore believe that the Crossrail scheme as it stands represents good value for money?
Lord Davies of Oldham: My Lords, of course the Crossrail scheme has to be evaluated against other proposals. The London Regional Metro proposal has got the advantage, which my noble friend has indicated, of being cheaper. But it delivers far fewer benefits and is far less ambitious than the Crossrail scheme at present envisaged.
My noble friend is right. There are aspects of the Crossrail scheme that do not meet every conceivable specification, but a tunnel which goes across the centre of London from east to west will have some major engineering, technical and transport features to it. It is not surprising therefore that we have to strike a balance between cost, what is achievable and the best possible service to passengers.
Lord Marsh: My Lords, does the Minister agree that it is a bit late in the day to start having major doubts about Crossrail and the distortion that that would cause to the whole investment programme of the Mayor of London?
Lord Davies of Oldham: My Lords, I hasten to add that the doubts are not on the Government's side. I was responding to a challenge that was presented from my noble friend Lord Berkeley about an alternative scheme. I was seeking to give assurance that the scheme to be presented in the hybrid Bill in February or March next year will contain the benefits to be derived from the Crossrail scheme. It will also have an evaluation of other proposals being put forward and why they have been rejected.
Lord Bradshaw: My Lords, can the Minister confirm that the London Regional Metro scheme is simply a tunnel to be bored under London, which has no tracks or provision for rolling stock, and is really only part of
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a scheme? Has it been subjected to the same rigorous appraisal of the Treasury Green Book that has been applied to Crossrail? If so, will that be made public?
Lord Davies of Oldham: My Lords, at this point, the London Regional Metro scheme has the disadvantage that the noble Lord has identified; namely, being somewhat vague about crucial aspects of the way in which it could work. The presenters indicated that they wanted to keep the control of certain aspects of the scheme, which they regarded as their intellectual property. Of course, that has the disadvantage that it is open to the challenge which the noble Lord has so accurately identified.
Lord Brougham and Vaux: My Lords, I declare an interest as a vice-chairman of the Crossrail All Party Group. Is the Minister aware that I am advised that LRM proposes to use the boring machines of Crossrail, which will be totally unacceptable because they will be too small and worn out?
Lord Davies of Oldham: My Lords, no one underestimates the engineering challenge of this tunnel. After all, we will have seen nothing like it since the construction of the London Underground; but that comparison would apply only if all of the Underground had been constructed at the same time. Of course, as we all know, routes came on line over a long period of time.
This is a major engineering project. The noble Lord has identified that there are real challenges in the building of the tunnel. That is why on past occasions, when regret has been expressed that the Crossrail link will not be ready in time for the Olympic Games, accurate reflection has focused on the fact that this is one of the great engineering challenges of our time, and that there are, of course, attendant difficulties.
Earl Attlee: My Lords, the Government have made encouraging noises about Crossrail, but have they committed any funding for the construction?
Lord Davies of Oldham: My Lords, let us take first steps first. Our first job is to publish the Bill and to get parliamentary approval for the concept of Crossrail, with all the pieces in place for that. The issue with regard to funding, as everyone will recognise, is the absolute key to the project. No one would underestimate the enormous sums involved and the fact that not all of this could conceivably come out of government coffers but will require a substantive degree of private investment. Therefore, the noble Earl will need to be a little patient before the Government are in a position to identify just how all the resources are to be achieved.
Lord Stoddart of Swindon: My Lords, there are a number of people who are concerned that Crossrail in the west will terminate at Maidenhead rather than Reading, which, of course, is one of the great junctions

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of this country. Is any further consideration to be given to extending Crossrail to Reading? Of course, I must declare my interest as a council tax payer in Reading.
Lord Davies of Oldham: My Lords, the noble Lord's interest would never have sprung to mind had he not identified it. I think that it is recognised on all sides that this rail line is the major engineering project of our time. Therefore noble Lords who seek to identify ways in which we could improve the scheme by useful additions are perhaps asking a little more than we are able to respond to positively at this stage.

Sudan
3 p.m.
Baroness Northover Baroness Northover asked Her Majesty's Government:
What action they propose to take in the light of attacks by the Sudanese police force on refugee camps in Sudan.
Baroness Symons of Vernham Dean: My Lords, we have strongly condemned these forced relocations, and we have repeatedly made it clear that all returns must be voluntary and carried out after full international consultation. Our ambassador immediately protested about the relocations on 3 and 10 November. We have pressed both sides to uphold their security and humanitarian obligations. We have funded and expanded the African Union monitoring mission. We are pressing for a strong United Nations Security Council resolution to restrain violence and to maintain the threat of sanctions as set out in earlier resolutions. The Prime Minister has announced £100 million in aid next year, subject to a comprehensive peace agreement.
Baroness Northover: My Lords, I thank the noble Baroness for her reply, and for what the Government have done thus far. However, in the light of last night's "Panorama" programme, does she now feel that the term "genocide" can be appropriately applied to Darfur? Colin Powell, who is reported to have resigned, has used the term. Will she also expand on what action the Government will take at the UN Security Council meeting in Nairobi this week to try to extend the mandate of the peacekeeping force so that it is better able to protect in particular women and children who at the moment are the targets of rape and killings?
Baroness Symons of Vernham Dean: My Lords, I assure the noble Baroness, Lady Northover, that the Government take very seriously the conflict in Darfur and I fully understand the depth of her concerns. There is no doubt that huge crimes against humanity are being committed in Darfur which may indeed amount to genocide. That is why we welcome the establishment of the international commission of inquiry announced by the Secretary-General of the United Nations, as called for by Security Council Resolution 1564. That
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commission has begun its work and we should now see what conclusions it comes to over the difficult question of genocide.
On the question about monitors and peacekeeping, it is of course the responsibility of the Government of Sudan to provide the security necessary in the region. We have provided some £12 million for the expanded mission of the African Union monitors. Experience elsewhere in Sudan has shown that monitors can have a real impact on the security situation. But in saying that I return to the point: Government Ministers are taking this very seriously and are keeping a close watch on what is happening.
Lord Avebury: My Lords, if the AU force has a mandate which allows it to provide a visible military presence at the internally displaced refugee camps, and to protect the inhabitants of those camps when they are obviously under threat, will the noble Baroness ensure that at the meeting in Nairobi we give the AU force however many troops it thinks are necessary to conduct this task? Does she agree that 3,300 people, of whom only 2,300 are military, are woefully inadequate to conduct these operations in such an enormous territory?
Baroness Symons of Vernham Dean: My Lords, the discussions in Nairobi will be conducted on the north/south conflict, while in Darfur the AU has expanded its monitoring force from 500 to some 3,000 plus, as the noble Lord indicated. We have done a great deal to help with the financing of that monitoring presence. The noble Lord asked whether this is adequate. We have alas seen what has happened over recent days. Monitors are not necessarily able to intervene in the sort of difficulties described by the noble Lord. I am bound to say to him that the key to this is not AU monitoring; rather it is that the Government of Sudan and the rebel forces really must live up to the protocols in relation to security and humanitarian assistance to those who are suffering that they signed on 9 November.
Lord Astor of Hever: My Lords, the noble Baroness, Lady Northover, mentioned the UN Security Council meeting in Nairobi. Will Her Majesty's Government also press for targeted sanctions, including a total arms embargo, the freezing of assets and a travel ban on the regime's leaders?
Baroness Symons of Vernham Dean: My Lords, we rigorously enforce an EU arms embargo which has been in place since 1994. The UK-sponsored UN Resolution 1564 threatened measures which included but certainly were not limited to sanctions against the Government of Sudan should they fail to fulfil their commitments. The UN will decide the next steps in the light of the Secretary-General's monthly report to the Security Council.
However, it is vital that we keep up the pressure on both sides. The last of the reports from the Secretary-General on the situation in Darfur noted increased activity and violence on the rebel side, although I do not excuse for a single moment anything going on on

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the government side. Therefore it is enormously important that both government and rebel activity are kept under constant surveillance.
Baroness Williams of Crosby: My Lords, will the Minister accept that where there is "genocide", as distinct from bad behaviour on the part of a government, it then moves from being the responsibility of that government to being the responsibility of the international community to bring it to an end? Members on these Benches are well aware of how hard the Minister has worked on this issue, but is it not now crucial to look again at the mandate of the AU troops, as well as encouraging them to increase their numbers, and to support them in that?
Baroness Symons of Vernham Dean: My Lords, I can certainly tell the noble Baroness that my honourable friend Mr Mullin has been working extraordinarily hard on this issue, together with my right honourable friends the Foreign Secretary and the Prime Minister himself, who visited Sudan only a matter of weeks ago. Under Article 1 of the genocide convention, states undertake to "prevent and to punish" the crime of genocide. That includes a requirement to grant extradition for genocide. In addition the convention provides that states may call upon the competent organs of the United Nations—obviously the Security Council—to take appropriate action to prevent and suppress genocide. However, the problem is that there is no obligation on states to do so. I have to say to the noble Baroness that until I read again these points about the genocide convention, I thought that there was an obligation. However, that is not the case. Nor is there an obligation on any of the competent organs to act. So even if genocide were declared, we would still have the problem of trying to persuade others who, as I am sure the noble Baroness is well aware, have been very reluctant to take action on Sudan so to do.

Business
3.7 p.m.
Lord Grocott: My Lords, later this afternoon my noble friend the Leader of the House will, with the leave of the House, repeat a Statement on Northern Ireland. The Statement will be taken at a convenient time after 5.30 p.m.

Pensions Bill
3.8 p.m.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham): My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of
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the Pensions Bill, has consented to place her prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
Read a third time.
Clause 4 [Regulator's functions]:
Baroness Noakes Baroness Noakes moved Amendment No. 1:
Page 2, line 30, leave out from "in" to end of line 31 and insert "subsection (3) of section 9 must, by virtue of subsection (2) of that section, be discharged by the committee established under that section,"
The noble Baroness said: My Lords, in moving Amendment No. 1, I shall speak also to the other 35 amendments in the group. It gives me particular pleasure to bring forward these amendments because, as noble Lords will see from the Marshalled List, the noble Baroness, Lady Hollis, has added her name to the amendments and therefore I have every reason to believe that they will be accepted by your Lordships' House.
I should like to place on the record my thanks to the Minister not only for listening to our debates on the issues lying behind the amendments, but also for ensuring that her officials assisted in the translation of those issues into the amendments before noble Lords today. I am well aware that with a Bill as complex as this, and to which it has been necessary to introduce so many government amendments, the last thing officials wanted in the final week of our consideration was to be told by a Minister to be helpful to an Opposition Peer. But the Minister's officials were both helpful and efficient and I should like to record my thanks to them for that.
I shall not labour the amendments. We discussed the Government's arrangements for the bodies created by the Bill both in Committee and on Report, prompted by amendments tabled by my noble friend Lord Lucas. I was particularly concerned that the proposals in the Bill to create a non-executive committee undermined the unitary nature of the boards that were being created.
Amendments Nos. 1 to 12 and 74 to 79 deal with the Government's arrangements for the regulator. Instead of a non-executive committee under Clauses 8 and 9 with a long list of functions, the effect of the amendments is to require a committee of the regulator's non-executive members to deal only with internal control and remuneration matters. This is fully in line with modern corporate governance practice in both public and private sectors.
In addition, the reporting requirements of Clause 12 have now been adjusted to ensure that the regulator's board as a whole reports on matters such as strategy, performance, targets and objectives, including how it will be monitored by the regulator. The remaining amendments in the group deal with the pension protection fund in a very similar manner.
In my view, the bottom line of the amendments is that the governance arrangements in the Bill are strengthened rather than weakened. I hope that the amendments will find favour with the House. I beg to move.
Baroness Hollis of Heigham: My Lords, the Clerks had to consider whether it was legitimate for the Government to support and add their name to the amendments of a Peer who, for this purpose, was appearing as a Back-Bencher. However, we decided in the greater interest of the public that it was the wise way to go. I am therefore pleased to share the moving of these amendments in regard to the non-executive functions of the pensions regulator and the PPF with the noble Baroness, Lady Noakes.
I thank the noble Baroness for her contribution in this matter and for her warm words of appreciation for the work of the officials. As she said, there is nothing more irritating than having to draft 35 consequential amendments at the last moment, as well as redrafting the original, in order to meet the express views of the House.
The noble Baroness has described very well the purpose of the amendments. They serve two main functions. Basically, they ensure that some key functions of both the pensions regulator and the board of the PPF are to be designated as non-executive functions, and for a committee to discharge them—for example, remuneration, review of internal finance and control functions. But the list of non-executive functions is now much shorter, which gives the regulator and board greater flexibility. So it moves away from a non-executive director board.
I confess that I am agnostic about these additional functions and the way that we have moved. However, if the noble Baroness is right that there should not be this kind of divided board, the practices and procedures of both the fund and the regulator will be stronger for it. If, however, she is wrong, the board under these amendments will retain full discretion to introduce such an arrangement. It seems to me that it is a win/win situation in which we delegate the decisions downward from government to the board and the fund on the ground. It is a very wise way forward.
I am delighted to support the noble Baroness. I thank her and, like her, I commend the amendments to the House. I should be rather taken aback if there were any opposition to them.
Lord Higgins: My Lords, those of us who have had practical experience of such boards recognised in the earlier discussions that if you were to set up an organisation within the board itself it might not be as unified as it otherwise would be and therefore less effective.
The way in which the Government have reacted is typical of how we have sought to improve the Bill. An enormous list of changes has been made as a result of debate, quite apart from those which the Government have introduced and those upon which we have had to vote. These amendments are in addition to that very
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large list. I join with my noble friend in expressing our appreciation to the Government for the way in which they have acted in this respect and to the officials who have carried out the drafting.
Lord Oakeshott of Seagrove Bay: My Lords, we on these Benches support the amendments. We are pleased that they have emerged in this way. We supported them in Grand Committee and we are happy to support them now.
3.15 p.m.
Baroness Noakes: My Lords, I am in the pleasant position of having agreement on all sides of the House. If this is what happens when the noble Baroness, Lady Hollis, is agnostic, I look forward to future occasions when she is a true believer.
On Question, amendment agreed to.
Clause 8 [The Non-Executive Committee]:
Baroness Noakes Baroness Noakes moved Amendment No. 2:
Leave out Clause 8.
On Question, amendment agreed to.
Clause 9 [Functions exercisable by the Non-Executive Committee]:
Baroness Noakes Baroness Noakes moved Amendments Nos. 3 to 9:
Page 4, line 25, leave out subsection (2) and insert—
"(2) The Regulator must establish a committee to discharge the non-executive functions on its behalf.
(2A) Only non-executive members of the Regulator may be members of the committee."
Page 4, line 29, leave out paragraphs (a) to (d).
Page 5, line 3, leave out "Non-Executive Committee" and insert "committee established under this section"
Page 5, line 6, leave out "Non-Executive Committee's" and insert "committee's"
Page 5, line 7, at end insert—
"( ) The committee may establish sub-committees, and the members of any such sub-committee—

(a) may include persons who are not members of the committee or of the Regulator, but

(b) must not include persons who are executive members or other staff of the Regulator."

Page 5, line 8, leave out "Non-Executive Committee" and insert "committee"
Page 5, line 12, leave out "Non-Executive Committee" and insert "committee"
On Question, amendments agreed to.
Clause 12 [Annual reports to Secretary of State]:
Baroness Noakes Baroness Noakes moved Amendments Nos. 10 to 12:
Page 7, line 18, after "prepared," insert "including the matters mentioned in subsection (2A),"
Page 7, line 19, leave out from "prepared" to end of line 20 and insert "under subsection (4) of section 9 by the committee established under that section."
Page 7, line 20, at end insert—
"(2A) The matters referred to in subsection (2)(a) are—

(a) the strategic direction of the Regulator and the manner in which it has been kept under review;

(b) the steps taken to scrutinise the performance of the Chief Executive in securing that the Regulator's functions are exercised efficiently and effectively;

(c) the Regulator's objectives and targets (including its main objectives as set out in section 5 or in any corresponding provision in force in Northern Ireland) and the steps taken to monitor the extent to which they are being met."

On Question, amendments agreed to.
Clause 39 [Contribution notices where avoidance of employer debt]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 13:
Page 28, line 31, leave out "11th June 2003" and insert "27th April 2004".
The noble Baroness said: My Lords, in moving Amendment No. 13, I shall speak also to Amendment No. 27, with which it is grouped.
I agreed to bring forward these amendments during the debate at Report stage. They relate to retrospection. Your Lordships were concerned that the power to issue a contribution notice in relation to acts occurring after 11 June 2003 was not sufficiently clear in the Secretary of State's announcement and that, as such, this retrospection could be challenged in the courts.
I said at the time that the Government believe that the limited retrospection proposed was proportionate as a matter of law; that we had taken advice and we thought that we were entirely secure. However, we accept that some might seek to challenge this, resulting in the regulator being tied up in court for a number of years and unable to act to protect members of the PPF. This would benefit only lawyers. It is for this reason that I have tabled these amendments which seek to limit the retrospective effect of both contribution notices and restoration orders to acts, or deliberate failures to act, in transactions at an undervalue which took place on or after 27 April 2004—the date suggested by the noble Lord, Lord Oakeshott.
When the clauses were debated in Committee in the other place and at the time we were discussing it, this seemed to be the way forward. I believe everyone feels that there is now a fair and reasonable playing field. Given that the Government have moved in the way I hoped we would be able to, I am confident that your Lordships will accept the amendment. I beg to move.
Lord Higgins: My Lords, the Government have again showed a flexible attitude in this difficult part of the Bill concerned with moral hazard and so on. It is entirely appropriate that the noble Baroness should bring forward these amendments, which we welcome.
Lord Oakeshott of Seagrove Bay: My Lords, having suggested the date in a previous debate, I am very happy to support the middle way as presently proposed.
On Question, amendment agreed to.
Lord Higgins Lord Higgins moved Amendment No. 14:
Page 28, line 41, leave out "include those persons who" and insert "shall not include those persons who do not"
The noble Lord said: My Lords, from the wording of the amendment it is clear that this is a technical point. However, it is not unimportant. I shall deal with it as rapidly as possible but it is important that I make clear what is involved.
The clause we are seeking to amend is concerned with the tests that should be applied in relation to the issuing of a contribution notice where there is avoidance of employer's debt. We suggested at an earlier stage that the "knowingly assists" tests should be put in the negative—that is to say, the parties to an act or failure to act should not include those who do not knowingly assist.
The Government had some difficulty in understanding the point. It may be that I did not explain it as precisely as I might have done. We realise that the cause of the misunderstanding between the Government and ourselves is on the meaning of "party" in Clause 39(3)(a). If "party" means, broadly speaking, someone who actually signs documents or gives instruction on the act or failure to act, or otherwise actively participates in such an act or failure, the Government's approach is understandable. The Government will aim to catch those who sign up to an order or act or failure, and those who knowingly assist. In these circumstances the amendment I am proposing would be unnecessary. However, the Government have not defined "party"; there is therefore a danger that the party could be construed to mean anyone deemed to be connected with an act or failure to act, however remote. Hence, we are trying to limit that extremely wide range of people only to those who knowingly assist, which is why we have put the test in the negative. If we can misunderstand what the Government are driving at, then it is possible that the courts may do so and there will be subsequent disputes.
There are two ways around the dilemma. The Government can indicate that by "party" they mean almost anyone remotely connected with an act or failure and accept our amendment to limit that wide set of people to those who knowingly assist. Alternatively, they can indicate that by "party" they mean only those who, generally speaking, actually execute documents associated with the act or failure. In that case, we could reasonably withdraw our amendment. Presumably the well known Pepper v Hart situation would apply, in that what the Minister says in relation to this technical, but not unimportant, point would be taken into account by the courts.
So I hope that the Minister will either accept the amendment or clarify the situation in the way in which I have described. I beg to move.
Baroness Hollis of Heigham: My Lords, I am grateful for the way in which the noble Lord has introduced his amendment. I hope that I may be able to elucidate the matter in such a way that there is no ambiguity about it.
Our worry about accepting the amendment, which was the noble Lord's first option, is that it would create a dangerous loophole within the moral hazard provisions, which could allow those who are parties to the act of avoiding pension liabilities to avoid responsibility and prevent the regulator recovering any sum from them in relation to that avoidance.
Clause 39(6)(a) provides that the parties to an act or a deliberate failure to act include those persons who knowingly assist in that act or deliberate failure. The purpose of Clause 39(6)(a) is to ensure that a person cannot avoid a contribution notice by arguing that they were not a party to the act or deliberate failure, even though they had been the person who had made the act or deliberate failure to act happen.
The amendment would limit the people who can be a party to an act or deliberate failure to act to those people who knowingly assisted in that act or deliberate failure to act. It is possible that a person could be a party to an act or deliberate failure without having knowingly assisted in that act or deliberate failure. For example, if X enters into a contract with Y, then X is a party to the contract. However, it could be argued that X is not a person who has knowingly assisted with entering into that contract because X did the act—entering into the contract—rather than assisting with it. The amendment could prevent the regulator being able to issue X with a contribution notice, which runs entirely contrary to the policy.
It is unlikely that a person could be a party to an act or deliberate failure without that person realising that they are such a party. However, we cannot limit the imposition of contribution notices to people who were knowingly parties to acts or deliberate failures. This could leave the door open to people engineering a situation in which they made sure they did not have the requisite knowledge, or, at least, it was impossible to prove knowledge, something which we do not wish to encourage.
The regulator has to consider it reasonable to impose liability on a person. One of the factors that must be considered is the degree of involvement the person has had with the act. If, for example, a person had no conscious involvement in the act or deliberate failure, the regulator would take account of that in considering whether it was reasonable to issue a contribution notice.
Let me go over again the circumstances in which a contribution notice could be issued. It can be imposed only if a person was a party to an act or deliberate failure to act; and one of the main purposes of the act or deliberate failure was to prevent the recovery of the whole or any part of the debt that may be due; or,
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otherwise than in good faith, to prevent such a debt becoming due, perhaps through compromising the debt and so on; and the person is the employer or a person who is connected or associated with the employer. The fourth insurance net, so to speak, is that the regulator considers it reasonable to impose liability on the person to pay the amount specified in the notice.
When determining whether it is reasonable or not, the regulator must consider: the degree of involvement of the person in the act or failure to act; the relationship which the person has or has had with the employer, including, where the employer is a company, whether the person has or has had control of the employer; any connection or involvement which the person has or has had with the pension scheme; and if the act or failure to act was a notifiable event (under Clause 63), any failure by the person to comply with any obligation imposed on him to notify the regulator; all the purposes of the act or failure to act, including whether a purpose of the act or failure was to prevent or limit loss of employment—we are coming to that in a later amendment—and the financial circumstances of the person.
During the summer consultation, the issue of who could be served with a contribution notice was discussed. There was support for the Government's position that a person who was a party to an act or deliberate failure to act or who knowingly assisted in that act or deliberate failure should be potentially liable. It was agreed that there was sufficient protection for the innocent person who knowingly assists with the act, such as the secretary who types the contract, as that person would have to satisfy the other conditions for the imposition of a contribution notice. On the grounds that I have specified, they would not.
I have spoken at some length because of the noble Lord's reference to Pepper v Hart. I see that the question of where liability might fall could be of concern to some people. I hope that, with that rather full explanation, given all the safeguards in place and the need to engage the person who required the act to happen as well as those who assisted in it, which was one of the limitations of the proposal, the noble Lord will feel able to withdraw the amendment.
Lord Higgins: My Lords, I am most grateful to the noble Baroness. I understand why she does not feel able to accept the amendment, and I shall be withdrawing it. It is not always easy on these occasions to grasp precisely what is being said. I may be proved wrong when I read Hansard tomorrow, but my understanding is that the noble Baroness has met the points which we have sought to establish. If that is so, I am grateful. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 43 [Section 39 contribution notices: clearance statements]:
Lord Lucas Lord Lucas moved Amendment No. 15:
Page 33, line 23, at end insert—
"(2A) A clearance statement may contain terms that impose such obligations on the applicant, and such restrictions on the actions of the Regulator, as may be prescribed."
The noble Lord said: My Lords, in moving Amendment No. 15, I should also like to speak to the other amendments in the group.
In Committee, the Minister challenged me to go out and find some people in industry who would support the views I was putting forward on the implications of these clauses. I accepted her challenge, and I have been totally defeated—absolutely crushed. I went out into the market place, blew my bugle, and nobody came. Even my e-mails to certain senior persons in certain senior organisations were not returned. No, that is not entirely true. The Society of Turnaround Professionals—the STP—was there, but I suspect that, in honour of this occasion, its initials should stand for Sancho T. Panza.
The Minister's officials have been, throughout this episode, entirely courteous and helpful. In the correspondence that has taken place since Report, the Government's position has probably moved a little, so that we are closer to the spirit of Amendment No. 16 than that which would automatically be gathered from what the noble Baroness said on Report—that we are looking, as far as Clause 39 is concerned, at the conditions at the time. If somebody has not been clear enough or has not made it clear enough what the position is, the clearance statement can be revisited, not just because markets change some years down the road.
In Clause 39 and later provisions, I find it difficult to see how the new interpretations can be fitted within the wording. However, if the noble Baroness is happy—well, she has the troops and I do not. I shall certainly not think of pressing my amendments, but I beg to move.
Lord Oakeshott of Seagrove Bay: My Lords, that honest and straightforward contribution from the noble Lord, Lord Lucas, is entirely in character. It is useful that he explored the position; it has reinforced our views that the Government have the balance about right.
Lord Higgins: My Lords, the Government initially made various concessions on introducing a clearance procedure. My noble friend Lord Lucas has been assiduous in seeking to clarify exactly what that means. It may not be very easy to make sure that a clearance procedure operates so that it covers everyone in every conceivable circumstance. I believe that the Government probably have the matter right, and we look forward to hearing what the noble Baroness has to say.
3.30 p.m.
Baroness Hollis of Heigham: My Lords, I thought for one glorious moment that the noble Lord, Lord Lucas, was going to withdraw his amendments rather than seek a response from me. I was trying to think of the most helpful thing that I could do. Given that his concern was to see under what situations the insurance policy of the clearance statement might or might not
1204
hold, it would be worth spending a moment or two reading into the record two examples—one when it would hold and one when it clearly would not. However, as the noble Lord said, it would not stop any company revisiting the issue if it so wished.
I will start with the example of a contribution notice. If applied to, the regulator may issue a clearance statement binding itself from issuing a contribution notice in the circumstances described in the application. This statement can be given both before and after the act or failure to act has taken place. Clearance may be applied for on a number of grounds—for example: that the applicant is not a party to an act or a deliberate failure to act one of the main purposes of which was to prevent the recovery of the debt or to prevent such a debt becoming due and so forth, and it would not be reasonable to impose any liability on the applicant.
Let me explain my examples. Take an underfunded pension scheme that is attached to a company within a group of companies. The group as a whole is struggling. When seeking to renew their borrowing facilities, the lenders make it clear to the group that, although the pension scheme has outstanding liabilities, no further borrowing will be possible and indeed, existing facilities may be withdrawn. The group seeks alternative methods of funding, but is unable to find any. Without increasing its borrowing the group is facing insolvency and the loss of all jobs—1,000 or more.
The group considers alternative methods of reducing the cost of the pension scheme, from reducing future accruals, putting in place a recovery plan and increasing employee contributions, but the lenders are not satisfied with those proposals and continue to threaten the withdrawal of borrowing facilities. The group's only option is to make the company with the pension scheme insolvent. The Section 75 debt will then be due in full, but the scheme will rank alongside the other creditors of that company. The members of the scheme may receive compensation for the loss of their pension from the Pension Protection Fund.
The group has a number of reasons for its actions, the main ones being: to allow it to extend its borrowing facilities, to enable it to continue trading, to prevent the loss of its jobs and prevent the recovery of the Section 75 debt. An application is therefore made by a company in the group to the regulator for a clearance statement providing that it would not be reasonable to impose any liability on that company. The application will provide evidence to show the lenders' position, that alternatives have been considered and the reasons for the decision reached.
The regulator will consider the evidence and issue a clearance statement to the effect that it would not be reasonable in the circumstances to impose any liability under a contribution notice to that company. In deciding to make this statement, the regulator would have considered all the purposes of the act, including, for example, the implications for the jobs. If one month later those 1,000 jobs are lost the purpose of the act has not changed so the clearance statement will still

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be binding. However, the regulator then, by investigating, may find out that the circumstances were not as described in the application—for example, that evidence from the lending bank shows that it had not threatened to withdraw its lending facilities or minutes of a directors' meeting show that the group had decided to restructure and make redundancies prior to applying for clearance, or a statement is received from a director claiming that the purpose of the act in avoiding the pension liability was to increase profitability.
The regulator may consider that the circumstances in which it was considering issuing a contribution notice were not those described in the application and that there was a material difference. It therefore may consider itself not bound by the clearance statement. As I have already explained, it is therefore the case that Clause 43 clearance would bind the regulator to not issue a contribution notice unless the circumstances in the application for clearance for the act or failure are not the actual circumstances of the act or failure and that the difference is material. There is no disagreement between us on that.
Amendment No. 16 would make the clearance binding unless the regulator was materially and deliberately misled. I believe I have described that.
The amendments also apply to financial support directions (FSDs). I will give noble Lords another example because it is an area that has concerned the House. A company may wish to invest in another struggling company, which has an underfunded pension scheme, provided that it does not at the same time as investing in the struggling company have to guarantee the pensions liabilities. Doing that would make the investment an unattractive investment. The company therefore applies to the regulator for a clearance statement, sets out the recovery plan and details the expected return. The regulator issues a clearance statement, which is all fine.
Five years later, the investor company has turned the struggling company around. However, it has kept to the recovery plan and is making the return on investment that it detailed in the application. Therefore, the circumstances as originally outlined still exist and the regulator continues to be bound by the clearance until there is a material change in the circumstances.
However, were a material difference in circumstances to arise, or were there subsequently to be profitability, we would expect that pension scheme to be refloated. Again, there is no disagreement on that around the House.
With that detailed explanation of two examples, I hope that, although it was useful to raise the issue again, the noble Lord will none the less feel that he can withdraw his amendments.
Lord Lucas: My Lords, I am extremely grateful to the noble Baroness for that explanation, which has clarified a good deal some of the worries that were
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generated by our discussion at Report. I suspect that we will be able to let this Bill go and see how it works in practice. Given the general good will of the department, I am sure that it will choose a superb regulator and things will go well enough. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 16 to 18 not moved.]
Clause 45 [Meaning of "service company" and "insufficiently resourced"]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 19:
Page 35, line 24, leave out from "the" to first "the" in line 25 and insert "value of the resources of the employer is less than"
The noble Baroness said: My Lords, I listened carefully to comments made by noble Lords opposite in relation to the calculation of net assets. I tabled these amendments following the suggestion made by the noble Baroness, Lady Noakes, of replacing net assets with resources. The test now means that an employer is insufficiently resourced if at a particular time the value of its resources is insufficient to meet the prescribed percentage of the estimated Section 75 debt and there is a person—who falls within subsection 6(b) or (c) of Clause44—the value of whose resources is not less than the difference between the value of the employers' resources and the prescribed percentage.
Regulations will determine the meaning of resources. That may include matters which would not have been "net assets"—the point made very persuasively by noble Lords opposite. In considering how resources should be defined we will of course take into account those other matters which were drawn to our attention in the debate.
We are continuing to work and consult on the regulations dealing with how resources are to be defined. Of course these regulations will have to ensure that it is clear to all how the regulator will calculate, determine and verify the value of resources. Further help on this has been offered, which we appreciate, by the Institute of Chartered Accountants and we expect others who joined in our summer consultation also to take part.
In the light of that explanation, I reiterate that when we believed that noble Lords on both Benches opposite had a strong argument that resonated with the industry outside, we tried to accommodate that in conjunction with consultation on the regulations. I suspect that noble Lords will be happy to accept these amendments. I beg to move.
Baroness Noakes: My Lords, I briefly thank the Minister for taking away the amendments that we discussed at previous stages of the Bill and producing

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a very much better version. I am grateful that she listened and am sure that the Bill has been improved as a result of these amendments. Of course, as she herself mentioned, much of the hard work now starts to turn this into practicable regulations. I look forward to seeing those in due course.
Lord Oakeshott of Seagrove Bay: Amen, my Lords,
Lord Higgins: My Lords, one of the delightful things over the past 40 years has been the way in which the views of economists with regard to valuation and so forth have gradually been accepted by accountants. In the earlier debates I was delighted to see that my noble friend, a distinguished member of the accountancy profession, put forward the basic concepts that I used to teach at Yale a long time ago. I am even more pleased that there is general consensus on both sides of the House that the appropriate measure in these circumstances is that the term "resources" should be used, rather than "net assets". I am glad that the Minister has also been persuaded of that. We are very happy that we are making further progress in improving the Bill.
On Question, amendment agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 20 to 22:
Page 35, line 28, leave out "who has sufficient net assets to meet" and insert "the value at that time of that person's resources is not less than"
Page 35, line 30, leave out "amount of the net assets" and insert "value of the resources"
Page 35, line 33, leave out "a person's net assets are" and insert "—

(a) what constitutes the resources of a person is to be determined in accordance with regulations, and

(b) the value of a person's resources is"

On Question, amendments agreed to.
Clause 47 [Financial support directions: clearance statements]:
[Amendments Nos. 23 to 26 not moved]
Clause 53 [Restoration orders where transactions at an undervalue]:
Baroness Hollis of Heigham Baroness Hollis of Heigham
moved Amendment No. 27:
Page 41, line 34, leave out "llth June 2003" and insert "27th April 2004".
On Question, amendment agreed to.
Clause 113 [The Non-Executive Committee]:
Baroness Noakes Baroness Noakes moved Amendments Nos. 28 to 34:
Page 83, line 23, leave out subsections (1) and (2).
Page 83, line 31, leave out subsection (4) and insert—
"(4) The Board must establish a committee to discharge the non-executive functions on its behalf.
(4A) Only non-executive members of the Board may be members of that committee."
Page 83, line 35, leave out paragraphs (a) to (d).
Page 84, line 19, leave out "Non-Executive Committee" and insert "committee established under this section"
Page 84, line 22, leave out "Non-Executive Committee's" and insert "committee's"
Page 84, line 23, at end insert—
"( ) The members of any sub-committee of the committee (established by virtue of paragraph 15(2) of Schedule 5)—

(a) may include persons who are not members of the committee, but

(b) must not include persons who are executive members or other staff of the Board."

Page 84, line 24, leave out "Non-Executive Committee" and insert "committee"
On Question, amendments agreed to.
Clause 115 [Investment principles]:
Lord Lucas Lord Lucas moved Amendment No. 35:
Page 85, line 28, leave out subsection (3).
The noble Lord said: My Lords, the amendment was also discussed at Report stage. The Minister had the advantage of us, in that she had some draft regulations which I had hoped that I would see before Third Reading—but I have not.
Baroness Hollis of Heigham: My Lords, perhaps I may intervene to ask whether other noble Lords have received the draft regulations.
Noble Lords: No.
Baroness Hollis of Heigham: My Lords, they would not have been sent out in a blanket fashion to the whole House, but to those who participated in our previous debates.
Lord Oakeshott of Seagrove Bay: My Lords, Members on the Liberal Democrat Front Bench have not received them.
Baroness Hollis of Heigham: My Lords, I apologise.
Lord Lucas: My Lords, there is little that we can do now. I had hoped that between Report and Third Reading the Government might have considered what had been said and decided that my amendment would be a wise move. If they have not, I shall accept that. But in the hope that it might be accepted, I beg to move.
Baroness Hollis of Heigham: My Lords, I apologise profoundly, because I checked and was told that the draft regulations had certainly been sent to Members on the Front Benches and to those who had participated in our discussions. I made a particular point of checking and I was told that they had been sent on 11 November. I am therefore somewhat puzzled that they appear not to have reached your Lordships, given that today is 15 November. I am sorry, but we have now re-checked—I am assured that they were sent on 11 November. I apologise, because I had hoped that the draft regulations would have addressed noble Lords' concerns. There cannot have been an error by the department. I must assume that somehow they have been lost in the delivery system.

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I made a particular effort in trying to ensure that noble Lords received them by Third Reading, as I had promised. I shall try to obtain extra copies and ask the Doorkeepers to distribute them, if that is permitted, so that noble Lords can examine them before we finish today. I am distressed by this failure, which should not have happened.
Clause 115 establishes the requirement that the board must prepare, maintain and review a statement of its investment principles. This has long been a requirement for the trustees of occupational pension schemes. The amendment seeks to remove the power for regulations to set out procedures that the PPF hoard must adhere to before preparing or revising that statement. I had hoped that our previous debates on this subject had provided reassurance that the provisions in this clause were not designed to give the Government unfettered control over the board's investment principles. In our previous debates I offered to circulate a draft copy of the regulations which I had hoped that noble Lords would have had the opportunity to consider. As I say, I am distressed by the failure and will ensure that noble Lords reveive photocopies today.
During our most recent discussion of this clause, I was asked whether the intentions of subsection (3) could be met by the provisions in subsection (4). Regulations under subsection (4) will be concerned with the form and contents of the statement of investment principles and could not be used to require that the board considers relevant expert advice. That is why we wish to retain subsection (3) to provide for this important regulatory check.
I believe that it is reasonable for the board to be required to follow certain procedures in producing its statement of investment principles. This paragraph is about procedures rather than principles. We have provided the board with appropriate powers covering investment and statements of investment principles. I hope that we have demonstrated that we intend to use the provisions of this subsection in an entirely reasonable manner. Given that this matter relates only to procedures, not to policy control, I hope that the noble Lord, Lord Lucas, will withdraw the amendment.
Lord Lucas: My Lords, occasionally I fail to persuade the Government of the correctness of my views. This is such an occasion. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
3.45 p.m.
Clause 120 [Annual reports to Secretary of State]:
Baroness Noakes Baroness Noakes moved Amendments Nos. 36 to 38:
Page 87, line 11, after "prepared," insert "including the matters mentioned in subsection (2A),"
Page 87, line 12, leave out from "prepared" to end of line 13 and insert "under subsection (6) of section 113 by the committee established under that section"
Page 87, line 13, at end insert—
"(2A) The matters referred to in subsection (2)(a) are—

(a) the strategic direction of the Board and the manner in which it has been kept under review;

(b) the steps taken to scrutinise the performance of the Chief Executive in securing that the Board's functions are exercised efficiently and effectively;

(c) the Board's objectives and targets and the steps taken to monitor the extent to which they are being met."

On Question, amendments agreed to.
Clause 122 [Insolvency event, insolvency date and insolvency practitioner]:
Lord Higgins Lord Higgins moved Amendment No. 39:
Page 89, line 2, at end insert—
"( ) a liquidator is appointed provisionally by the court under section 135 of that Act."
The noble Lord said: My Lords, we debated this matter in Grand Committee, but we were not generally happy with the answer. We believe that the amendment is in line with what the Government wish to do and we have retabled it.
As we said at that earlier stage, the purpose of Chapter 2 of Part 2 of the Bill is to require insolvency practitioners to report to the regulator if insolvency events occurred to the employer and the definition of "insolvency event", in Clause 119, is used elsewhere. As currently drafted, Clause 119 does not include the appointment of a provisional liquidator. Therefore, it would be possible for most of the requirements of the Bill relating to an employer in liquidation not to apply for the period of a provisional liquidation.
That would seem to be contrary to the intention of the Bill. Provisional liquidations tend to occur only as a short emergency measure pending a full liquidation. Nevertheless, there are cases when they become protracted. In addition, if the Government accept that the regulator should not have power to issue notices for any act or deliberate failure to act during the period that the legal effects of an insolvency event remain in force—generally while an IP is in place—the provision should also apply during the period of provisional liquidation.
The Government responded to that, but did not fully cover the point. The purpose of Chapter 2 of Part 2 is to put a duty on an insolvency practitioner to notify the PPF board, the regulator and the trustees of a scheme when an employer in relation to that scheme is in such financial difficulties that insolvency procedures apply. The nature of the insolvency event is not significant itself—it merely provides a convenient reference date for the notification procedures. The underlying financial difficulty of the employer is significant.
In other words, the Government have not addressed the underlying point that when an employer is in such financial difficulties that a provisional liquidator is appointed, that should be of concern to the PPF board. Apparently, such situations may continue for two or three years. In an ideal world we would hope that the trustees would be aware that an employer was in such a dire situation, but that is not necessarily the case and it would not be safe for the Government to

1211
rely on the trustees to know what was going on. There appears therefore to be a gap in the procedure of ensuring that the PPF board is properly notified in the event of a provisional liquidation.
I hope that that sums up the situation. This amendment would improve the Bill and, no doubt, the Minister will comment. I beg to move.
Baroness Hollis of Heigham: My Lords, I am grateful for the amendment, which gives me the chance to explain our approach to this matter. Regarding the noble Lord's particular query about how long a provisional liquidator would be in place—our expectation is that it would normally be six to eight weeks.
The amendment relates to the appointment of a provisional liquidator as a "first insolvency event". The court can appoint a provisional liquidator on or after the presentation of a petition for winding up. This is usually because it is satisfied that the assets of the company may be in jeopardy and that a provisional liquidator should be appointed to seek to secure its assets pending the hearing of the petition.
Those appointments—I think that this is the point the noble Lord proposed—have not been included as an "insolvency event" because they are interim measures pending the hearing of a winding-up petition. At that hearing the court may make a winding-up order—which we have already included as an insolvency event; indeed, the winding-up order is the pivotal insolvency event—but it may also decide not to make a winding-up order.
I have checked the statistics on the number of petitions presented and then withdrawn or dismissed. They may be of interest to your Lordships. In the approximately three months from October/November 2003 to December 2003/January 2004, the number of petitions presented was 5,915, both companies and bankruptcies. Of those, 2,700 were dismissed and 715 were withdrawn. So well over half failed to proceed to the next stage. That was the reason for doing this as we have.
Therefore, had we made the appointment of a liquidator an insolvency event as defined by the noble Lord but a winding-up order was not subsequently given at the hearing—as tended not to happen in half the circumstances I outlined—we would have created an artificial interim assessment period before the assessment period, with all the consequential implications for trustees and the PPF as well as the costs on the levy and the subsequent costs to the payers.
Therefore, with those statistics in mind, we believe that it is right to wait until the court decides to make a winding up order before the assessment period begins. However, I should like to assure the noble Lord, Lord Higgins, that if we were later to be persuaded by industry that we should shift our ground on this and that it would be appropriate to include this event as a qualifying insolvency event—though, given the
1212
information we have, we do not believe that it is appropriate—we already have the power to do so by regulation under Clause 122(5).
With those assurances, I hope that the noble Lord, Lord Higgins, will be able to withdraw the amendment.
Lord Higgins: My Lords, I am grateful for that explanation. Obviously, if the delay is only a matter of a few weeks, then, except in extremely dire circumstances, it would not be particularly important. On the other hand, if the matter drags on for two or three years, then it is. However, the noble Baroness has been clear that if it subsequently turns out that this part of the Bill needs changes, then it will be possible to do so by order. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 128 [Duty to assume responsibility for schemes following insolvency event]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 40:
Page 94, line 20, at end insert "and"
The noble Baroness said: My Lords, this group of amendments relates to the Written Statement from my right honourable friend Mr Malcolm Wicks made in another place on Monday. I understand that that Statement has caused considerable interest in the media and in your Lordships' House. I am also aware that there has been some confusion about the Statement, and an idea, which is untrue—I am perfectly happy to enlarge on this if your Lordships wish—that the Statement made the PPF "retrospective". I should like to reassure the House that that is not the case. Moreover, it would be unfair if it were the case.
The Statement made on Monday simply confirmed how existing provisions in the Bill would apply. It has come to our attention from a number of people within the pensions industry that some pension scheme trustees were unaware of how the Bill's provisions would operate. We thought it essential to confirm the position in order to help trustees to make more informed decisions about the future of their pension schemes.
The Pensions Bill states that in order for a PPF assessment period to start, first, an eligible pension scheme must not commence wind-up prior to the introduction of the PPF; and, secondly, for schemes which are subject to UK insolvency law as defined in Clause 122 of the Bill, the sponsoring employer of the scheme must also have a qualifying insolvency event after the introduction of the PPF. So there must not yet be a wind-up, but there must be a qualifying insolvency event. Those are the two key triggers.
The position has not changed and the Statement merely elucidated that. As both the commencement of scheme wind-up and the qualifying insolvency event occur after the PPF has been introduced, the PPF has not, and cannot, become "retrospective". We merely wished to make it clear that if the sponsoring employer

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had experienced any insolvency events before the introduction of the PPF, those previous events would not in themselves disqualify schemes from entering the PPF. What matters is not that there was an insolvency event but that there was a qualifying insolvency event and, beyond that, wind-up.
Over the past few months we have been looking at whether we should use the power in Clause 128(3)(c). This power would have enabled us to prescribe the circumstances which would disallow an otherwise qualifying insolvency event in relation to a sponsoring employer. The Statement issued on Monday made it clear that we do not intend to use that power. We are therefore now seeking in our amendment to remove this power from the Bill.
In order to maintain consistency in our approach to the PPF entry rules and the fraud compensation application process, we are also proposing to remove an identical reference from Clause 183(8). Removal of this reference may mean that a few more qualifying insolvency events occur in relation to schemes that may be able to apply for fraud compensation.
I think that I am right in saying that the noble Lords, Lord Higgins and Lord Skelmersdale, tabled amendments which have the same effect as ours, to remove this power from the Bill. Parliamentary counsel have drafted the government amendments and are confident that this drafting will achieve what the noble Lords would like it to do. For that reason, I hope that the noble Lord, Lord Higgins, is able to accept the government amendment and to withdraw his own. I beg to move.
Lord Higgins: My Lords, as the noble Baroness rightly pointed out, the genesis of this amendment arises from the Written Statement that was made to the House last Monday but that, generally speaking, did not become available to the public or ourselves until the Tuesday morning. It was a matter of some astonishment when we discovered that. The noble Baroness did, of course, repeat the Statement made by her right honourable friend in another place. The final section of it read:
"The Pensions Bill provides a power that could be used to exclude schemes that have an insolvency event before the PPF is launched. We wish to make clear that we have no plans to use this power".—[Official Report, 8/11/04; col. WS17.]
Both the noble Baroness's amendment and ours therefore knock out the clause that the Government do not wish to use. That seems appropriate, although I understand that we have had representations today saying, quite the contrary, that we ought to leave it in in case it is needed. But at all events, the Government do not propose to use it. It seems sensible, therefore, to knock it out.
What gave us great cause for concern, however, was that this information was not available to us during our debates last Monday. Moreover, the other place did not have it ahead of oral Parliamentary Questions. I think that it would have been helpful if it had been available.
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Another apparent point of substance which gave us cause for concern was that the Government seemed to be moving the boundaries. We come in a later group of amendments to the question of whether there is a gap between the FAS coming in and the PPF coming in—or whether, indeed, instead of a gap there is an overlap. In those amendments, we are seeking to have one of them in place precisely at the moment when the other begins. However, the Written Statement seemed to move the dividing line—assuming that it was neither an overlap nor a gap—to a later date than we had originally expected. The consequence of that would be to shift the responsibility for, for want of a better expression, "bailing out" the pension scheme from the FAS, financed by the Treasury. There is a division of opinion on this; there are nods and shakes of heads on the other side of the House, no doubt recorded faithfully on television, which show a degree of confusion.
The impression was that the dividing line had been moved later in time—for example, in the particular case of, I think, Turner & Newell, and so on. The effect would be to remove the burden and strain on what is undoubtedly a totally inadequate sum for the FAS—£400 million spread over 20 years—and to place that strain on to the PPF. Indeed, all the way through, ever since the Chancellor was pushed into giving the £400 million figure, with no basis for calculating such a figure, the impression has been that he is trying to get out of as much of that as possible.
When we saw the Written Statement, belatedly as I say, our impression was that the Minister was effectively shifting the cost of bailing out such schemes from the taxpayer to the levy payers, who are already suffering severely. That was rather borne out by reports—for example, one in the Times of 12 November which stated:
"The NAPF were infuriated earlier this week when the Minister appeared to break his promise to the industry that the PPF would not be open to companies that became insolvent before April 2005".
If the noble Baroness says all of this is a complete misunderstanding and that there is no such shift, we shall be reassured that the fears expressed by the NAPF, and others, are groundless. However, it is still my impression that what is happening as a result of this Statement is what we supposed; namely, the dividing line did not apply to the date that we thought it did, but was moved to a later date with the consequent adjustment of costs from the FAS to the PPF.
4 p.m.
If the noble Baroness assures me that the NAPF and others have misunderstood the situation, we shall need to consider very carefully the way in which she explains that misunderstanding. The Written Statement, which is an unsatisfactory form of announcement in any case in my view, appears to have created considerable confusion and concern. Be that as it may, certainly the case for knocking out the clause that will not be used,

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and which we and the Government want to knock out, constitutes a good amendment. We are happy to go along with the Government's version of it.
Lord Oakeshott of Seagrove Bay: My Lords, I wish to put one matter on the record as a matter of clarification and simplification, of which we are a little short. I have now been handed a copy of the Minister's letter of 11 November to the noble Lord, Lord Higgins, copied to me and others, which I have received. I am bound to say that it includes a draft regulation so to that extent clearly there has been a misunderstanding. The letter concerned various matters. I am happy to confirm that I have received it.
I have listened carefully to the Minister's comments on this amendment and the Written Statement. No doubt she will tell me that it is all there somewhere, but, given the confusion and the concern that have arisen in industry, if she could tell us in words of one or very few syllables what the qualifications are for an employer's qualifying insolvency event, as she described it, I think we would all be clearer.
Baroness Hollis of Heigham: My Lords, I am grateful to the noble Lord, Lord Oakeshott, for acknowledging that the regulations were tucked away behind a covering letter, if I can put it that way. As I say, they tend to go out in bundles of stuff due to the assiduity of noble Lords' requests for information and comment. Therefore, we package them up. I hope that other noble Lords have also had the opportunity to study that information although I can quite conceive that they may not have noticed the regulations as they are very short and were tucked at the back of the letter. As I say, I am grateful to the noble Lord, Lord Oakeshott, for acknowledging that he at least has received them.
I accept that much concern and confusion has arisen. I hope it will help if I spend a little time trying to track how all of this fits together. We have made reasonably fast progress and, therefore, I do not think that anyone can accuse us of exhausting the patience of the House.
An insolvency event is described in Clause 122. It qualifies if it takes place after a particular day—which is 6 April 2005—and it occurs in respect of an eligible scheme. An eligible scheme is defined in Clause 127, with its consequent regulations, which states that an eligible scheme would not include a money purchase scheme, a single member scheme, a scheme not recognised by the Inland Revenue or schemes such as public sector schemes guaranteed by Crown guarantee. An eligible scheme would not have started wind-up prior to 6 April 2005. Therefore, an insolvency event applies to those schemes that qualify after a particular day in respect of an eligible scheme. That defines "eligible scheme".
Ambiguity arose—that is why we considered that we needed the Statement—as there was a power under Clause 128 which would have allowed us to prevent an insolvency event becoming a qualifying insolvency event. That power would have been used where we
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feared that trustees had colluded in delaying insolvency. We were trying to avoid a situation of manipulation. That is why the power was originally included in the Bill. However, we have taken advice from insolvency practitioners and the Insolvency Service. They advised us that it would prove almost impossible to distinguish between a matter that was simply taking a long time due to the complicated nature of the scheme involved and something that involved a possible manipulation of the evidence. We were advised that it would not be possible to make those distinctions very easily. Given that we could not clarify the distinction on which the purpose of the power in the regulation hinged, and therefore we would not use that power, we thought it wise to seek to withdraw that power. I believe that the noble Lord accepted that.
Therefore, if an employer goes into insolvency, he can come into the PPF, as was always the case—that has not changed since the Written Statement was issued—if he has a qualifying insolvency event after April 2005. For example, an employer could be in administration now or could have entered a voluntary arrangement—both of those could constitute part of a business rescue—but if after 2005 those moves fail and that company moves into liquidation, it would then be entitled to enter the PPF provided all the other eligible criteria were met.
The insolvency definition is cast broadly compared with the 1995 Act, which dealt only with the final insolvency event. However, what is key is the date of wind-up. There is absolutely no ambiguity about that. It has not changed at any stage. There could be a long chain of preceding events that might take two or three years or those events might take place very quickly in a few months. What matters is the wind-up. The implications for FAS remain unaltered. Schemes that start wind-up before 5 April 2005 could be eligible for FAS assistance depending on the start day of FAS and other considerations, which have yet to be bottomed out. However, if a scheme started wind-up before 2005 and it was solvent and then became insolvent, we would obviously need to consider whether there could be full buy-out.
I understand that NAPF did not want us to delete the power because it considered that it was a useful moral hazard deterrent. Given the general problems of trying to define what is simply an elongated period of administration as opposed to manipulation, we believe that effective protection is offered by Clause 127(5). We brought forward an amendment on Report to prevent compromises below the PPF level of benefit. In those very rare circumstances where it is clear that manipulation has occurred—for which this power was originally designed—we can address that problem through another part of the Bill.
I hope that I have done what noble Lords sought: that is, to define what counts as an insolvency event which has to qualify after a particular day and in respect of an eligible scheme. I hope that I have defined what counts as an eligible scheme. I think that is fairly obvious. I also hope that I have explained that, crucially, an eligible scheme with an insolvent

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employer has to have started wind-up after 6 April 2005. That was the situation before the Written Statement was issued and remains the situation. It has not changed. However, it is worth clarifying. I hope that that additional information has been useful to your Lordships.
Lord Higgins: My Lords, before the noble Baroness sits down, I think that we are agreed on knocking out this clause. However, on the wider issue that we are discussing, the noble Baroness seemed to say that there was a danger that schemes delayed proceedings in order to enter the PPF instead of the FAS because the terms of the former were more advantageous. It seems to us that the Written Statement achieved precisely that. It enabled some schemes to delay proceedings in order to enter the PPF rather than the FAS. We came to that view in part due to the Written Statement, which said that,
"eligible schemes, whose sponsoring employer has already entered into insolvency proceedings may still be able to receive PPF compensation".—[Official Report, Commons, 8/11/04: col. WS 17.]
It looked as though the crucial date was the beginning of insolvency proceedings. The noble Baroness is now saying that we have all misunderstood that, and that it is actually the wind-up. If so, why are we dealing with the insolvency proceedings at the beginning at all? It certainly has not been clear, in Committee or at Report, that the crucial date is the wind-up. It will then be easier for companies to delay that procedure in order to get the PPF, and the Government seem to be encouraging that.
Baroness Hollis of Heigham: My Lords, a scheme can perfectly well wind up without being insolvent, so one cannot hinge the matter on the wind-up. Three interlocking factors have to be read across. The first is what counts as an insolvency event; the second is what counts as an eligible scheme; the third is the timetable of wind-up. One cannot pull individual provisions out and start changing the words around, but if noble Lords read Clauses 122 and 127 in conjunction, they should get there. The delay for insolvency requires consent of all creditors involved, which could make it difficult for trustees to control insolvency proceedings.
We are not shifting the line to send more on to the PPF in order to protect the FAS, which I think was the worry for noble Lords. Our position has not changed; this is a clarification. We have always been clear about the importance of wind-up, but we cannot only use wind-up, because it could refer to something wound up outside the insolvency, perhaps before a DB scheme is replaced for new members by a DC scheme. We have an interlocking insolvency event triggered after a particular day and in respect of an eligible scheme under Clause 122. We have a definition of an eligible scheme that should not have started wind-up prior to April 2005. We then have the definition of wind-up. Put them together and the line has not shifted.
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The FAS and the PPF have the distinct territories that they have always occupied. The noble Lord's concerns were obviously shared by trustees, so we sought to clarify them. I hope that this additional debate will further clarify the situation for trustees.
Lord Oakeshott of Seagrove Bay: My Lords, exactly where have we got to on my question about what a qualifying insolvency event is for the employer? Perhaps the noble Baroness will confirm something that I think I heard her say. So far as this part of the interlocking requirements is concerned, did she say that an employer in administration before April 2005 that went into liquidation after April 2005 could be subject to the other interlocking requirements and be eligible for the PPF? I would like that to be clearly stated. Could receivership also be included? Given that a company in that situation in administration is clearly in pretty extreme financial difficulties, if what we are talking about has not happened by 2006, what sort of risk-based levy does she think that such a fund will pay to the PPF?
Baroness Hollis of Heigham: My Lords, on the second point, I thought that the noble Lord was going to ask how the PPF could afford to pay, in which case I would have said that the liabilities for members would have fallen in over time, rather than with the big bang that people will suggest. In terms of the proportion of risk-based levy falling on companies in such a situation, inevitably any such company would wish to remain with a flat-rate levy as long as possible. A risk-related levy would obviously be relatively burdensome to that company, and one would not wish to see the payment of the levy itself tip the company over into the very thing that the levy sought to avoid. That is right.
In terms of the insolvency event, I am not sure about receivership; I want to check on that. Basically, for any company going into administration, what counts as a qualifying insolvency event is that an eligible scheme goes into wind-up after April 2005. I want to hold on to that. I need clear legal advice on receivership and do not have it at the moment; I shall write to the noble Lord.
On Question, amendment agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 41:
Page 94, line 26, leave out from "event" to end of line 27.
On Question, amendment agreed to.
[Amendment No. 42 not moved.]
4.15 p.m.
Clause 176 [Pension protection levies]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 43:
Page 135, line 27, after "liabilities, insert—
"( ) the likelihood of an insolvency event occurring in relation to the employer in relation to a scheme,"
The noble Baroness said: My Lords, this group includes both government and opposition amendments. The amendments tabled by the noble Lords, Lord Higgins and Lord Skelmersdale, would make two changes to the Bill. They would require the board to take account of, first, insolvency risk when setting the risk-based pension protection levy, and, secondly, a scheme's liabilities when setting the scheme-based pension protection levy.
We believe that the risk of insolvency and the level of a scheme's liabilities are important factors that the board should take into account. We are all in full agreement on that. Where I think that we have a difference of opinion is in our assessment of the difficulties that the board would face in taking those factors into account. At present, there is no consistent measure for determining the risk of an insolvency event. One proxy that has been suggested is to use credit ratings. However, they do not apply to all employers, such as those with two member DB schemes, of which there are around 1,600. That could be considered unfair.
We must also consider the information-gathering requirement that the amendments would place on the board. They would mean that the board might have to collect information on insolvency and liabilities for each and every eligible scheme. Furthermore, the level of a scheme's liabilities could he considered a crude measure of the level of risk posed to the PPF, so the amendments would require the board to duplicate, to some extent, the role of the risk-based pension protection levy. It would be better to give the board the flexibility to take such factors into account as it sees fit.
All that said, the House is clearly of the view that those factors are so important that they should be included in the Bill. Therefore, in the spirit that we have tried to show so far, we are willing to move on the opposition amendments. The noble Lord, Lord Higgins, has kindly allowed me to group with them a set of government amendments. They do exactly the same as the amendments tabled by him, but, as drafted by parliamentary counsel, are consistent in style with the existing clause. They also include the necessary consequential amendments, such as ensuring that all the numbering is correct.
I am not sure that we need the amendments but it seemed that they would do no harm, and might avoid some harm. Noble Lords were very clear in earlier discussions that they felt it important that we move towards them on the matter. We have tabled the amendments in lieu of those of the noble Lord, Lord Higgins, so I urge him not to press his and to accept ours. I beg to move.
Lord Higgins: My Lords, we have already made it clear that we are against retrospection in many respects. None the less, I want to say a word or two about the missing statutory instruments. The noble Baroness has been extremely helpful—not only on this Bill, but on earlier pension Bills—in letting us have regulations at the earliest possible moment. If there
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seems to be some mechanical breakdown at this stage, we understand that she would not have wished it. They may have been attached to some other correspondence and consequently, given the pressure under which we are all working at present, one looked at the first page, thought it not relevant to this afternoon and put it on one side, but the important bits were at the back. That may explain what has happened; I am not sure.
Another point—it is completely out of order—is that the amendments are a result of representations that we received from Allied Domecq and others. Many of our amendments are a reflection of representations that we have received from outside. Again, one does not generally have the resources to thank everyone in reply. We must rely on our fans to read Hansard or consult the web to realise that their points have been taken into account. That does not mean that we do not appreciate the advice given, irrespective of whether we take it.
However, the principle of the amendment is that it should be compulsory rather than optional to take into account the likelihood of an insolvency event occurring in relation to an employer when assessing the risk-based nature of a scheme. It is argued that there is no point in looking at the likelihood of an insolvency event in relation to a small firm, but we think that the same principle of risk assessment should apply to all firms—not only large and small ones—which pay a levy for the PPF.
This matter relates to some of our earlier debates. We want to consider the extent to which problems will occur in distinguishing between the situation for large and small firms. But we should take into account whether an insolvency event is likely to take place, and that should not be optional.
My understanding is that effectively the Government accept that position—the noble Baroness nods her head. In that case, we are grateful to her for taking the matter into account, and no doubt those outside who made representations will be equally grateful. I thank the noble Baroness and shall not move my amendments in this group.
Lord Oakeshott of Seagrove Bay: My Lords, as noble Lords will recall, we also welcomed these amendments in Grand Committee. Indeed, at Second Reading we strongly expressed the view that the risk-based levy should be based effectively on the joint risk of employer insolvency and the underfunding in the pension scheme. We are very pleased that it is moving in that direction.
The noble Baroness referred to the difficulty of assessing a risk-based levy for very small pension schemes, and—rather late, I fear—we have received from the National Association of Pension Funds suggested amendments to reflect that point. The association suggests that a risk-based levy should not be calculated for the very smallest schemes. In view of the fact that those amendments were not received in time for us to table them for Third Reading, it is only fair to warn the Government that my honourable friend Steve Webb will be seeking to raise this issue in

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the Commons tomorrow. I think that a genuine point has been raised with regard to very small schemes, but that should not deflect from the importance for most funds of this approach, which we welcome.
Lord Lucas: My Lords, perhaps I may also apologise for suggesting that the regulations were not circulated. I recognise the front page, and I recognise having put it in the pile because I thought that it related to the amendments of my noble friend Lord Higgins and not the point that I had raised. Given that insolvency will be incorporated in this way, can the noble Baroness say whether the judgments reached on the risk posed by insolvency and debt will be a matter of public record? Will they be the kind of thing to which people turn in assessing a public company or will they be "commercial in—confidence" and never released?
Baroness Hollis of Heigham: My Lords, I do not know the answer to that question. I suspect that it is "possibly not", but I shall follow that up in writing. I am amused that the noble Lord, Lord Lucas, thinks that comments from this Bench to the noble Lord, Lord Higgins, have "nothing to do with him, guv", but I suspect that that says more about the situation on the Benches opposite.
Noble Lords: Oh!
Baroness Hollis of Heigham: Cheap it was indeed, I accept.
The noble Lord, Lord Oakeshott, said that, as a result of the NAPF amendments, his honourable friend may move amendments in the other place. I am concerned about that because I tried to make that case extensively in Grand Committee and on Report but the Benches opposite would not accept my arguments. I do not want to provoke a row about this, but I think it is a little unfortunate that they would not accept the Government's concerns that we may need to keep the flat-rate levy for very small schemes.
When I tried to make that key point on behalf of the Government, it was not acceptable. However, when, beyond the appropriate time, NAPF takes exactly the same line as the Government, we hear that amendments may be moved in the Commons. If I may say so, I do not think that that is the right way to proceed. If people are not persuaded by the Government, I cannot see that they will be persuaded by NAPF running the same argument. It seems to me that if the arguments are valid, they are valid whoever raises them. I do not want to carp but I do not feel that this is the right way to proceed. I try to take on board arguments wherever their merits fall.
Lord Oakeshott of Seagrove Bay: My Lords, I am grateful to the noble Baroness. Clearly, what she said warrants a response. I was merely trying to be courteous by warning her about what may happen in the Commons tomorrow. As I understood the matter, and as we heard at length in Grand Committee, the noble Baroness did not accept the arguments that we
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put forward for a risk-based scheme. She argued that we could not move rapidly to a risk-based scheme, but that was a very different approach and a very different context. We have now reached this point and we are clearly seeking effectively to close off one loophole. But it seems to me that the approaches are different. If the noble Baroness had accepted what we were saying in Grand Committee, the matter would have been sorted out.
Baroness Hollis of Heigham: My Lords, on the contrary, what has not changed is the situation on transitional arrangements. Therefore, this provision applies to when the transitional arrangements have ended, by which time we shall indeed be in that situation. However, that is now in the past.
Perhaps I may respond to the point raised by the noble Lord, Lord Lucas. Precisely because the information on insolvency, whether it is to he made public or otherwise, will probably be regarded as commercially sensitive for firms, I suspect that the answer to his question will be "no". However, I shall take full advice on the matter and come back to him. I think that the noble Lord will understand that perfectly well. I hope that the Opposition will accept the Government's amendment and that, as a result, the Government will be able to encourage noble Lords not to press the opposition amendments.
On Question, amendment agreed to.
[Amendments Nos. 44 and 45 not moved.]
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 46:
Page 135, line 31, leave out from "to" to end of line and insert"—

(i) the amount of a scheme's liabilities to or in respect of members (other than liabilities in respect of money purchase benefits), and

(ii) if the Board considers it appropriate, one or more other scheme factors mentioned in subsection (4)."

On Question, amendment agreed to.
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 47:
Page 135, line 34, leave out paragraph (a).
The noble Lord said: My Lords, I beg to move.
Baroness Hollis of Heigham: My Lords, there is a typo on my briefing note as both the Opposition and the Government seem to have tabled Amendment No. 47.
Lord Skelmersdale: My Lords, I took the liberty of moving it.
On Question, amendment agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 48 and 49:
Page 135, line 39, after "The" insert "other"
Page 135, line 39, leave out "(2)(b)" and insert "(2)(b)(ii)"
On Question, amendments agreed to.
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 50:
Page 136, line 1, leave out paragraph (c).
On Question, amendment agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 51:
Page 136, line 6, leave out paragraph (a).The noble Baroness said: My Lords, the Opposition tabled the amendments in this group on Report. The amendments required that the initial period would start on the appointed day and end on the following 31 March or 12 months after the appointed day and that the board must set both a risk-based pension protection levy and a scheme-based levy for each financial year falling after the initial period, subject to modifications by Clause 181.
The noble Baroness said: My Lords, the effect of the amendments—this goes back to my previous discussion with the noble Lord, Lord Oakeshott—was that the initial period could not be any longer than 12 months and that from the end of the transitional period the board would be obliged to set both a risk-based and a scheme-based pension protection levy in respect of all schemes.
That created two problems. First, the possibility that the initial period could end 12 months after it began meant that the initial period could end after the start of a financial year—for example, if the initial period began in June. Secondly, the amendment to require the board to set both levies left a number of references to a single levy in the Bill. Some further technical consequential amendments are therefore necessary.
The amendments introduce a regulation-making power to Clause 181, which concerns pension protection levies during the transitional period. This is a power to modify the clause in the event that the transitional period does not begin on 1 April. The modifications would alter references so that the provisions under Clause 181 could apply to a period which began part way through the financial year—for example, the regulations would change references to "financial year" to "financial year or part year". Such modifications could apply only for a limited period of time. They would apply to the period from the start of the transitional period to the following 31 March, and then everything would be back on track again.
The other amendments in the group delete references to a single levy throughout Clauses 176, 177 and 179. In view of what I have just said, which delivers on opposition amendments, I encourage noble Lords to accept the amendments, unless they wish to revisit the issue in its entirety. I beg to move.
4.30 p.m.
Lord Higgins: My Lords, I always worry when amendments are expressed as "just technical" and they are rushed through. If I understand the matter correctly, these amendments are consequential as a result of previous votes.
Baroness Hollis of Heigham: My Lords, that is correct.
Lord Higgins: My Lords, I am most grateful.
On Question, amendment agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 52 to 55:
Page 136, line 8, leave out "levy or"
Page 136, line 11, leave out "levy or"
Page 136, line 12, leave out "levy or"
Page 136, line 26, leave out "a pension protection levy or" and insert "pension protection"
On Question, amendments agreed to.
Clause 177 [Supplementary provisions about pension protection levies]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 56 to 58:
Page 136, line 35, leave out "a levy or"
Page 136, line 38, leave out "levy or"
Page 136, line 41, leave out "any pension protection levy" and insert "the pension protection levies"
On Question, amendments agreed to.
Clause 179 [The levy ceiling]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 59 to 61:
Page 137, line 35, leave out "a levy is or"
Page 137, line 38, leave out "a levy is or"
Page 137, line 42, leave out "a levy is or"
On Question, amendments agreed to.
Clause 181 [Pension protection levies during the transitional period]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 62:
Page 139, line 29, at end insert—
"( ) If the transitional period begins with a date other than 1st April, regulations may provide that any provision of this section or of sections 176 to 180 applies, with such modifications as may be prescribed, in relation to—

(a) the period beginning at the same time as the transitional period and ending with the following 31st March, and

(b) the financial year which begins immediately after that period."

On Question, amendment agreed to.
Clause 183 [Cases where fraud compensation payments can be made]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 63 and 64:
Page 141, line 37, at end insert "and"
Page 141, line 45, leave out from "event" to end of line 46.
On Question, amendments agreed to.
Lord Higgins Lord Higgins moved Amendment No. 65:
Before Clause 240, insert the following new clause—

REMOVAL OF COMPULSION TO TAKE ANNUITIES
Notwithstanding any statutory provision or rule of law to the contrary, the requirement for pensioners to take their pension in the form of an annuity, together with the requirement to do so by the age of 75, shall cease to have effect, provided that the pensioner can demonstrate that he has resources to ensure that he will not become dependent on means-tested benefits."
The noble Lord said: My Lords, this matter has a long history stretching over decades and over the period of debates on this Bill. We have debated the issue both in Committee and at Report stage. I indicated at both stages—we did not vote on it then—that I intended to raise the matter again on Third Reading.
In a more historical context, amendments similar to this, but perhaps not quite as elegantly drafted, have been carried on two previous occasions by your Lordships' House. On each of those occasions the matter was reversed when it went to another place—a regrettable occurrence, certainly for those who have suffered from the effects of the present rule on annuities ever since. The issue is important and if noble Lords decide that it is an appropriate amendment—as I hope they will—perhaps on this occasion it will not be reversed in another place.
The importance of the issue has not been overlooked by the Chancellor of the Exchequer who, in a recent Finance Bill, sought to deal with the matter in a different way. We are told that he decided to deal with it in relation to the representations from a particular Christian sect, which took the view that annuities are a bet on someone's life and, therefore, immoral. There are those who regard annuities as immoral for a number of reasons, but as is typical of the present Chancellor of the Exchequer, his proposals were unbelievably complicated and not understood by a great many people, in the same way that the whole of the tax credit structure is incomprehensible to many people. I have had a number of letters complaining that that system will not come into effect until 2006, and those writing the letters were approaching the age of 75.
At all events, in earlier debates we discussed the various forms in which an amendment on this issue might be drafted. At Report stage we looked at three possible ways of doing it. I believe that the present form should be acceptable from a technical point of view, whether or not from other points of view. I believe that it should be acceptable from all points of view. As a result of our debates in Committee and at Report stage, the issue is now more closely focused than it has been on a number of occasions—including at least the three occasions when Members of the other place sought to deal with the issue by way of Private Member's Bill.
It is important to distinguish exactly how the matter has come into focus. Effectively there are two elements which are both covered in the amendment. First, whether annuities should be taken at the age of 75. That is to say, whether individuals who build up a pension pot—if I may use that expression—should be required, whether they like it or not, to take that in the form of an annuity, even though they take the view that annuity rates may be better on some future date. Therefore, they are forced to use their pension pot at what they regard as a disadvantageous moment of time.
It has been difficult to establish exactly when the rule came into effect. It may be that the noble Baroness can provide illumination. However, what I have
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managed to establish is that the age ceiling for annuity buy-out from occupational schemes rose from 70 to 75 in May 1994. Personal pensions were introduced in July 1988 with an annuity age ceiling of 75 years, and the retirement annuity age was raised from 70 to 75 in 1976. Ahead of that, there were earlier periods in which a lower limit existed. That is not surprising. I have not been able to establish precisely whether it goes back to Beveridge or even earlier, but what is clear is that when Beveridge introduced much of our pensions legislation immediately after World War II, the life expectancy of a man at retirement age was only two years. That is to say that a man was expected to survive for only two years after the retirement age of 65. For many people taking an annuity at the age of 70 must have been a fairly academic exercise as they would not be around at that time.
Be that as it may, it seems clear that the age of 75 is not consistent with the kind of point made in the recent Turner report about the extent to which people are living a great deal longer. That is the first point. I stress strongly that the present rule forces people to take an annuity at a time when they do not want to. It seems to us that that is quite wrong.
The second aspect of the matter is whether one should be compelled to take an annuity at all. In the course of the earlier debates I referred to a very comprehensive and technically well executed study by Watson Wyatt about people's attitudes to annuities. Over a reasonable sample survey, it came to the view that something like 58.8 per cent of those surveyed never wanted to annuitise their pension pots; and something like 12.1 per cent wanted to do so later than required to at present. Therefore, something over 70 per cent of the people surveyed were against annuitising their assets as the present law requires them to do. All kinds of interesting reasons were given why they take that view; for example, 74 per cent said that they liked flexibility; 45.9 per cent said they could do it better themselves; some were concerned about the so-called "bequest notice"; and quite a number said that they did not believe they would live long enough to get their money back. There is fairly widespread antagonism to the way in which annuities operate generally.
Our amendment would abolish the rule. In a sense this is a very protected market. Those offering annuities scarcely need a sales force, because people are compelled to buy annuities. Therefore, it is not surprising that, for example, the ABI is not in favour of this kind of amendment. However, I think that one should take its interests into account on the matter.
Another relevant point, which the noble Baroness has made on previous occasions, is that this provision will have a dramatic effect on financial markets. I do not think that she is right in believing that the change will be as dramatic as she supposes; it is only the people who are coming up to the age limit, and so on. Anyway many of them may still decide to take an annuity.
The noble Baroness put forward some cogent arguments—I want to make our position clear in this respect—on what happens to the pension pot if it is

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taken in a form other than as an annuity. Under present arrangements, 25 per cent of the amount is tax free as a lump sum if individuals wish to take it that way. The remainder is taxed. Clearly, if we were to abolish the rule in the way we have suggested, it seems highly likely that the Chancellor of the Exchequer would have a view regarding taxation. We are not suggesting that the whole amount should be tax free; that would be a wrong attitude to take.
The tax relief that people have already had on their pensions is a very important incentive to encourage them to save to ensure that they have resources available for retirement. Over the life of the Government the savings ratio has halved. The noble Baroness shakes her head—it has virtually halved since 1997. It is very important to maintain that particular incentive. In most cases it has achieved its objective. Clearly, people have decided that they need to make adequate provision for their retirement.
In this context, in the earlier debates the noble Baroness gave some extraordinary figures about the amount of money one needs to have in the pension pot if one was not to go on to means tested benefits. That brings me to the next point, which is clear from the amendment. We do not think it is right that people should be able to take the amount, even if it is taxed, spend it and then go on to means tested benefits. That would be wrong in our view. We believe that it should only be possible if adequate provision is made to ensure that individuals do not rely on means tested benefits—massive and complicated though they are—under the present Chancellor of the Exchequer's policy. I shall not go off into other issues about the basic state pension, and so on. So, in our view, this is an appropriate amendment and one whose time has come.
We said at the earlier stage of the debate that the drafting of the amendment was difficult. I believe that in its current form it should be acceptable to the House of Commons; it was drafted with that in mind. No doubt it could be implemented in a future finance Bill—hopefully, the next finance Bill.
One should stress also that there is no reason why the existing arrangements should not continue if individuals wish to take their pension in the form of an annuity at some stage, not necessarily at 75. They will still be free to do that. We seek to establish as flexible an approach as may reasonably be initiated.
I referred to another place. Against the historical background and the economic situation which I have described, I hope that there are sufficient Members in another place who take the view that their constituents are entitled to the provision and support this amendment. I add one caveat to that: it is not unusual for amendments from this place to go to another place and be rejected on grounds of financial privilege. I looked up the relevant parts of Erskine May. I am surprised; my version is only about 10 years out of date, but I see that it has already been substantially rewritten by Mr McKay, a former Clerk to my committee in the other place.
Looking at this issue with the background of having been a Treasury Minister and chairman of the Treasury Committee in another place for well over 10 years, it does not seem appropriate to claim financial privilege on this particular amendment. I certainly hope that view will be shared by Mr Speaker in due course.
This issue has been going on for far too long. It is one where the present limit is clearly out of line with the way in which life expectancy has changed over time. It is clearly out of line with the way in which financial markets could provide a more flexible and better form of finance in retirement for a great many people. This is not simply a question of those who are well off. Although clearly people who have invested more in their pensions are likely to have some advantage, many of the letters I received have been from people who are obviously quite poor but who, none the less, object to having to take their pension in the form of an annuity and to having to do so at a specific age.
I think this amendment should commend itself to your Lordships. I hope it will. I hope that it will also commend itself to those at the other end of the building I beg to move.
4.45 p.m.
Lord Oakeshott of Seagrove Bay: My Lords, noble Lords on these Benches support the amendment and are happy to put our names to it. This is clearly an area where life, work patterns and financial markets have moved on a great deal since the legislation was framed and the limits were fixed.
The noble Lord, Lord Higgins, used a rather nice phrase from the Telegraph today about the origin of this being lost in the "mists of time". We on these Benches have been doing our best to peer into the mists of time. The advice from friends on our working group, which has recently been drawing up our policy, is that they believe these provisions started about 1956 when there was an age limit of 70. I raised the matter with the noble Baroness the other day. We look forward to her giving us the official background before 1976.
If one looks just to 1976—in the letter the noble Baroness kindly sent us—when the limit was raised from 70 to 75, my figures are that the average age of death in 1976 was about 70 for men and 75 for women. So the limit at that stage was raised to five years above the average age of death. The latest official projections for next year, when obviously the Bill would come into effect—as amended we hope—are that the average age of death for men is 76.4. As we know, it is going up rapidly. So we move from a position where effectively the limit was five, years below the average age of death to that of one and a half years the other way.
I defer to other noble Lords on financial privilege. I have no view on that, but I hope that the noble Lord, Lord Higgins, is right. Even so, it seems quite clear to me that the limit at the age of 75 is well out of date. Furthermore, whatever the reasons were for fixing the

1229
limit previously—and no doubt they were good ones—there should, at the very least, be a substantial increase in the limit.
As I say, we would prefer no limit at all. The fixed limit is a disincentive to people making retirement provision for themselves. We are all in favour of much more flexibility in retirement and of people working longer. It seems wrong that somebody should run up against the buffers of having to use all or most of his pension pot at 75, which is now an age at which many people still work and earn. Surely, we should encourage that.
For all those reasons I support the amendment. At the very least we feel that there is a strong argument for an increase in the limit to 80, if the principle of abolishing the limit altogether is not accepted.
Lord Fowler: My Lords, I, too, strongly support what my noble friend Lord Higgins said. As the Minister's note makes clear, retirement annuity was raised from age 70 to 75 in 1976, so even on that reasoning, there should be a big increase in the age. The Minister mentioned that when personal pensions were introduced, it was not raised. My comment on that is that in 1986–88 it was not the issue that it is today.
The fact is that the level of annuities then being paid was greatly more than the level of annuities today. Annuities have gone down and down in value. That is what is of public concern at present, which is why there is so much strong public support for this change. That is not surprising. The truth is that today, more and more people approaching the age of 75 realise that the requirement to take an annuity is not a good deal for them.
This weekend, there was a piece in the Sunday press, in which the example given was that at the end of the 1980s—in 1988, as it happened—a person of 65 could get an annuity of 10.8 per cent. Today the figure is 6.8 per cent: 4 per cent less, and set by all predictions to go lower. If you want an annuity that gives full widow's rights and inflation-proofing, you will probably have to settle for less.
People who are retiring can get a decent income in other ways, using other products open to savers, but with the enormous benefit that they keep their capital. Under the Government's rules at present, they get a reduced rate of interest and lose their capital as well. That is what is at the heart of so much objection to the measure and I think it unacceptable, especially if, as my noble friend Lord Higgins said, the individual can establish beyond reasonable doubt that in no way will he come back for support from the state.
So I do not understand why the Government so stubbornly refuse to move on the issue. I cannot understand whom the rules help, apart from the annuity companies. I accept that people have had tax relief, but their expected yield has been reduced and payments from their fund will be subject to tax in any event. Frankly, this Government have done quite enough to take from pension funds the tax due to them, and much more.
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The policy is also serious in the following way. We know that final salary schemes are closing down. There is no question about that: evidence establishes that that is the case. We know that money purchase schemes will be the way forward for the vast majority of people in the private sector, if not in the public sector. We know that we want to encourage as much private saving as possible. The policy on annuities goes smack against that central policy. That rule is unjust to savers. It works against a sensible pension policy. It should be scrapped without more ado.
The Minister may resist the amendment today and, as my noble friend said, the Government may get their way on the Bill. But I tell her this: in the end—I hope sooner rather than later—that rule will be swept away because it is insupportable.
Lord MacGregor of Pulham Market: My Lords, I, too, shall speak briefly in support of the amendment. I do not need to repeat all the arguments that have already been made about greater flexibility, removal of inflexibility, and greater incentives for savings for one's old age—not through defined benefit schemes, because I agree that they will be much less influential in future. I accept all those arguments. I just want to add one or two points.
I say to the noble Lord, Lord Oakeshott, who gave the average age of death, that the relevant figure is life expectancy after the age of 65, because that is what we are talking about: people who have pensions and life expectancy beyond that. In the excellent report that we debated last Friday from the Select Committee on Economic Affairs on Aspects of the Economics of an Ageing Population, there is a table that I believe originally comes from the Department for Work and Pensions, which shows that, for men aged 65 in 2002, life expectancy was another 16 years and for women another 19 years. So we are well beyond the age of 75 and, increasingly, as longevity increases year after year, many people will have many years beyond the age of 75 in which they will want the flexibility to make their own arrangements for retirement.
My only other point is this. Perhaps the Government are concerned that, given the tax incentives for taking up personal pension schemes and so on, somehow individuals will not be taxed at all on the benefit that they get after they have retired. If so, the majority of people who will be able to benefit from not having to take out annuities beyond the age of 75, given the qualification that my noble friend Lord Higgins mentioned of having enough funds to be above the means test from then on, will, however they deploy their assets after the age of 75, be paying inheritance tax at the full 40 per cent, given the current high rate of, not least, house prices. The argument that somehow they will be able to evade tax on their assets if they do not have to move to an annuity at age 75 no longer applies under current conditions.
I strongly support the amendment. Its Lime has come.
Baroness Hollis of Heigham: My Lords, we return to a topic that we have debated not only during the past

1231
few years but also during the past few weeks in your Lordships' House. In Committee, we discussed at a blue sky level, to use a phrase that I was teased by the noble Lord, Lord Skelmersdale, for over-using, the arguments for and against the proposal. At Report, the noble Lord, Lord Higgins—unusually; I do not think I have seen this before—produced three different versions to get rid of the annuitisation rule at 75, I think in the hope that he would find out which of those was most robust, so that he could have a go at it on Third Reading.
In the process, I think that the noble Lord accepted that there were serious policy flaws, not merely technical drafting problems. He shakes his head but he has to—"He would, wouldn't he?", as they say. As a result, he decided not to recycle any of those amendments today. So we now have a new version.
The current rules on annuities require members of personal pension schemes to purchase an annuity by age 75 and members of occupational pension schemes to receive a pension by age 75. I was pressed about dates. We circulated what we knew and have done more research since then. As I understand it, it was from 1921 that there was a general assumption that there would be annuitisation of pots at retirement. In 1956, that figure was defined as 70; in 1976, as 75.
The noble Lords, Lord Higgins and Lord Oakeshott, made much of the point about life expectancy, but the noble Lord, Lord MacGregor, made the point that I wanted to make: that the reason life expectancy back in 1921 and 1931 was so low was high infant mortality. Therefore, the gap between life expectancy at age one and at age 65 was very wide. Now, with, fortunately, very reduced infant mortality, any gains in average life expectancy are because people are actually living longer, as opposed to fewer infant deaths.
As the noble Lord, Lord MacGregor, said, if we take the figures for 1921, those people who lived to 65 went on to live another 11.5 years, compared to 16 now. Although the average life expectancy was only 67, those who lived to 65 would have lived to 71, 72 or 73, on average. That makes the point made by the noble Lord, Lord MacGregor, very telling. So, overall, life expectancy from the age of 65 has not changed as dramatically as life expectancy from birth.
Lord Oakeshott of Seagrove Bay: My Lords, accepting that point, what was life expectancy at age 65 in 1976, when the level was last raised?
Baroness Hollis of Heigham: My Lords, in 1971, for men, it was 12.3; in 1981, it was 13. So it was about 12 and a half years and is now about 16, so far as we can tell.
5 p.m.
Lord MacGregor of Pulham Market: My Lords, I think that the noble Baroness will draw the opposite conclusion from the one that I draw. Increasing longevity over the age of 65 makes this change
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relevant. Does she not also agree that, compared with 1921, 1960 or whenever, many more people have personal pensions than previously, and therefore removal of the obstacle at 75 is much more relevant today?
Baroness Hollis of Heigham: My Lords, I do not dispute that. I was trying to address a new point, introduced at Third Reading, about changing life expectancy, on which the noble Lords, Lord Higgins and Lord Oakeshott, had not previously argued. I was saying that there was a fallacy in that argument. I was anxious to explore that.
The second argument, raised by the noble Lord, Lord Fowler, was annuity rates in 1988 and concern that they had fallen. The noble Lord said that annuity rates then were around 10 per cent. He is right; annuity rates have halved since then. But he must accept that that was a reflection of high inflation at the time. One of the differences is that inflation at 5 per cent halves the value of an annuity in 14 years; at 10 per cent, it halves the value of an annuity in nine years; given current inflation rates, today it would halve the value of an annuity in around 30 years. For women, who are likely to live longest, the level of inflation is at least as important a determinant of the value of their income being protected over time as the nominal annuity rate, as I am sure the noble Lord will accept.
Perhaps I may return to the substantive arguments. Why do we require people to take an annuity at 75? It is to ensure an income stream in retirement. To encourage that form of saving for retirement, current tax legislation is very generous in the concessions granted towards contributions. In other words, the pension regime could be regarded as a tax haven for retirement savings.
It is generally accepted that 75 is the age at which further delaying annuitisation could be harmful to retirement income, as the investment returns required to exceed those from taking an annuity become unrealistically large. It has been the maximum age since 1998 and has been applied to occupational pension schemes from 1994. Not only does the age of 75 seem reasonable, but the huge majority of pensioners—almost two thirds—buy their annuity when they retire. If they decide to defer, they normally purchase an annuity long before they reach age 75. It is widely recognised that annuities are the most suitable vehicle for ensuring a regular stream of income throughout the period of retirement, no matter how long or short it may be. None of us can predict what our life span will be.
The amendment tabled by noble Lords opposite would remove the requirement on members of personal pension schemes to secure an income stream by purchasing an annuity as well as the requirement to do so by age 75, but only if they can "demonstrate"—the word used in the amendment—that their existing resources would enable them to avoid any reliance on means-tested benefits.
Who would benefit from the removal of the need to purchase an annuity? Clearly, the wording of this new amendment makes it more apparent than previously

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that, frankly, it is concerned with those in our society who are well off—in many cases, very well off. By imposing a condition that a member has to,
"demonstrate that he has resources to ensure that he will not become dependent on means tested benefits"
the amendment creates an option that at present would be readily acceptable only to the richest 4 per cent of annuitants in the personal pensions market. We do not know yet how they would demonstrate the fact that there would be no fall-back on benefits at a future date, nor does the amendment provide any guidance on the level of resources that would be required to give such an assurance.
How long could such members' level of income be sustained, bearing in mind that none of us knows how long we will live? How long would their levels of private investment continue to generate their current income? What are the future levels of state pension and benefits? What happens if their savings vehicle collapses? We all have that in mind. I know that one very big case will have affected many noble Lords.
Would there be an initial form of means-testing to decide whether the conditions imposed by the amendment were satisfied? I am intrigued that the noble Lord, Lord Higgins, who so vigorously denounced the extension of what he calls "means-testing" on those who are less well off, should now seek to apply the equivalent means-testing to those who are better off to ensure that they stay free of benefits.
Lord Forsyth of Drumlean: My Lords, I am grateful to the Minister; perhaps she can help me. I do not understand her point that the amendment favours those who are best off or well off. Surely the people who have suffered are those with comparatively small pension funds, which have been reduced by the Government's imposition of a tax on their dividends, and who are forced to buy an annuity at a time when annuities produce less income. Surely it is people just slightly above the benefits level, having saved throughout their lives, who now have no income because annuities do not provide it. The Minister has made the case for buying an annuity. Why do the Government not leave it up to those people themselves to decide whether to buy an annuity?
Baroness Hollis of Heigham: My Lords, we welcome the noble Lord, Lord Forsyth, to these debates. Of the people who take annuities, half of all pension pots are under £40,000. We estimate that about 1 per cent of all annuitants—around 20,000 to 30,000—would have an annuity worth more than about £250,000 that would therefore float them into being able to take advantage of this amendment. The noble Lord presses me about why I say that only the best off would benefit. Perhaps only 1 per cent would have a sufficiently large annuity pot to run an income sufficient to float them off income-related benefits. We explored that subject fairly thoroughly on Report and in Committee.
I know that the noble Lord, Lord Higgins, is aware of all these issues and unanswered questions. I am equally sure that he will say that it is for the Government to sort out the drafting, but I do not think
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that we can do so at this stage. By introducing the amendment in this manner and without the necessary changes to the Income and Corporation Taxes Act 1988 and the Finance Act 2004, the clause would simply stand in isolation. It would not be usable by either pension schemes or providers. It would certainly not deliver the results that the noble Lord hopes to achieve.
I wish to repeat the arguments that the Government advance. The amendment would benefit only a tiny fraction of people, and possibly against their own self-interest. As it stands, it would not carry the Government's policy intent. The amendment also ignores the fact that people wish to get access to the pension pot precisely because it has been so enhanced by the tax contributions of the rest of us. Probably over half the value—we calculate 55 per cent—of an annuity pot has been contributed in various ways by the taxpayer. It is not surprising that the individual would like to see the pot as a pensions pot, a savings pot and a legacy. But they wish to do so because the taxpayer has built it up, for use neither as a savings pot nor as a legacy, but to provide a secure income in retirement. That is why the pot enjoys the privileges that it has. To extract the income-related benefit requirement, on the one hand, and the tax privileges, on the other, would leave such a small pot that not just 1 per cent but probably far fewer people would see real cash in hand as a result.
I understand where the amendment is coming from. The new argument advanced today, which is attached to life expectancy, is that what matters is life expectancy after 65, as the noble Lord, Lord MacGregor, said—he did not say that exactly, but I shall put a gloss on his words. It does not carry the argument that the noble Lord makes. Technically the amendment does not carry the position that the noble Lord advances. If it were passed and nothing else happened, nothing else would happen, because the Government have to own it through changes in tax legislation.
The bulk of the argument is that the annuity pot is so attractive to people and they wish to gain access to it precisely because it enjoys the tax privileges, tax shelter and tax haven provided by the taxpayer to give an income in retirement.
I have one final argument. At the moment, anybody in a final salary scheme does not have access to the size of the pot, except perhaps with regard to a lump sum. Somebody now entering a pension scheme would, if the amendment were made and there was no annuitisation requirement, have a choice between a pension scheme that paid final salary benefits and a pension scheme that produced a pot to which they would have access whenever they wanted after the age of 65, regardless of whether the full tax privileges had been stripped out. Which do your Lordships think people would choose? I suggest that they would choose the DC scheme, the money purchase scheme. That

1235
would destabilise the complicated existing regime, which seeks to sustain DB final salary schemes, while allowing people the choice of when to annuitise under money purchase schemes. Such a change could not be made in isolation from the whole field.
For technical reasons, reasons of longevity, reasons of fairness, reasons of taxpayer's privilege and reasons relating to the implications for the rest of the pensions situation, I hope that your Lordships will not accept the amendment.
Lord Higgins: My Lords, the noble Baroness said that the amendment was an attack on final salary schemes. That is a bit thick, when the Government's imposition of a sum of £5 billion a year has resulted in the demise of a huge percentage of final salary schemes.
Our proposal would not be to the advantage only of the rich. From the letters that I have received it is clear that many people who are in no sense rich object to being forced to take an annuity, to which many object in principle, and being forced to do so at an age when they do not think that it will be to their advantage. It is true that there has been considerable tax relief to encourage people to save for retirement. They have responded accordingly. However, as my noble friend Lord Fowler and others pointed out, the results have been disappointing, because of the enormous reduction in annuity rates over recent years.
Many of the arguments made by the noble Baroness just now are objections to the idea that the people of this country should have a choice in the matter. On this side, we believe in choice. For the reasons that have been given in all parts of the House, we believe that the position ought to be changed now. I hope that my noble friends will take that view and support the amendment in the Lobby.
5.12 p.m.
On Question, Whether the said amendment (No. 65) shall be agreed to?
*Their Lordships divided: Contents, 198; Not-Contents, 144.

Division No. 1

CONTENTS

Addington, L.

Bowness, L.

Alderdice, L.

Bradshaw, L.

Alliance, L.

Bridgeman, V.

Ampthill, L.

Bridges, L.

Anelay of St Johns, B.

Brittan of Spennithorne, L.

Attlee, E.

Brooke of Sutton Mandeville, L.

Avebury, L.

Brougham and Vaux, L.

Baker of Dorking, L.

Burnham, L.

Barker, B.

Byford, B.

Beaumont of Whitley, L.

Caithness, E.

Bell, L.

Campbell of Alloway, L.

Biffen, L.

Carlile of Berriew, L.

Blackwell, L.

Carlisle of Bucklow, L.

Blatch, B.

Carnegy of Lour, B.

Bledisloe, V.

Cavendish of Furness, L.

Bonham-Carter of Yarnbury, B.

Chan, L.

1236

Chorley, L.

Mar, C.

Clement-Jones, L.

Mar and Kellie, E.

Colville of Culross, V.

Marsh, L.

Colwyn, L.

Mayhew of Twysden, L.

Cope of Berkeley, L. [Teller]

Mathuen, L.

Craigavon, V.

Michie of Gallanach, B.

Crathorne, L.

Miller of Hendon, B.

Crickhowell, L.

Monro of Langholm, L.

Cuckney, L.

Monson, L.

Darcy de Knayth, B.

Montagu of Beaulieu, L.

Dixon-Smith, L.

Montrose, D.

Donaldson of Lymington, L.

Moore of Lower Marsh, L.

Dykes, L.

Morris of Bolton, B.

Eccles of Moulton, B.

Mowbray and Stourton, L.

Eden of Winton, L.

Murton of Lindisfarne, L.

Elis-Thomas, L.

Naseby, L.

Elles, B.

Newton of Braintree, L.

Elliott of Morpeth, L.

Noakes, B.

Elton, L.

Northesk, E.

Erroll, E.

Northover, B.

Ezra, L.

Oakeshott of Seagrove Bay, L.

Falkland, V.

O'Cathain, B.

Falkner of Margravine, B.

Palmer, L.

Fearn, L.

Palumbo, L.

Feldman, L.

Park of Monmouth, B.

Ferrers, E.

Patten. L.

Fookes, B.

Peyton of Yeovil, L.

Forsyth of Drumlean, L.

Phillips of Sudbury, L.

Fowler, L.

Prior, L.

Garden, L.

Quinton, L.

Geddes, L.

Razzall, L.

Gilmour of Craigmillar, L.

Reay, L.

Goodhart, L.

Redesdale, L.

Goschen, V.

Rees, L.

Greenway, L.

Rennard, L.

Hamwee, B.

Renton, L.

Hanham, B.

Roberts of Conwy, L.

Harris of Richmond, B.

Roberts of Llandudno, L.

Hayhoe, L.

Rodgers of Quarry Bank, L.

Henley, L.

Roper, L. [Teller]

Higgins, L.

Rotherwick, L.

Hodgson of Astley Abbotts, L.

Russell-Johnston, L.

Hogg, B.

Ryder of Wensum, L.

Hooson, L.

Saatchi, L.

Howe, E.

St. John of Bletso, L.

Howe of Aberavon, L.

St John of Fawsley, L.

Howe of Idlicote, B.

Saltoun of Abernethy, Ly.

Howell of Guildford, L.

Scott of Needham Market, B.

Hunt of Wirral, L.

Seccombe, B.

Hurd of Westwell, L.

Selborne, E.

Inglewood, L.

Sharp of Guildford, B.

Jacobs, L.

Sharples, B.

Jenkin of Roding, L.

Shaw of Northstead, L.

Kalms, L.

Shutt of Greetland, L.

Kimball, L.

Simon of Glaisdale, L.

Kingsland, L.

Skelmersdale, L.

Laing of Dunphail, L.

Skidelsky, L.

Laird, L.

Slim, V.

Lamont of Lerwick, L.

Smith of Clifton, L.

Lane of Horsell, L.

Soulsby of Swaffham Prior, L.

Lawson of Blaby, L.

Stevens of Ludgate, L.

Lindsay, E.

Stewartby, L.

Listowel, E.

Strange, B.

Liverpool, E.

Sutherland of Houndwood, L.

Livsey of Talgarth, L.

Swinfen, L.

Lucas, L.

Taverne, L.

Luke, L.

Tebbit, L.

Macfarlane of Bearsden, L.

Tenby, V.

MacGregor of Pulham Market, L.

Thatcher, B.

Thomas of Gresford, L.

Mackie of Benshie, L.

Thomas of Swynnerton, L.

MacLaurin of Knebworth, L.

Thomas of Walliswood, B.

Maclennan of Rogart, L.

Thomson of Monifieth, L.

McNally, L.

Tope, L.

Maddock, B.

Tordoff, L.

Mancroft, L.

Trefgarne, L.

1237

Trumpington, B.

Walmsley, B.

Tugendhat, L.

Walpole, L.

Vinson, L.

Wilcox, B.

Waddington, L.

Williams of Crosby, B.

Wade of Chorlton, L.

Williams of Elvel, L.

Williamson of Horton, L.

Wakeham, L.

Wilson of Tillyorn, L.

Wallace of Saltaire, L.

Young of Graffham, L.

NOT-CONTENTS

Acton, L.

Haskel, L.

Ahmed, L.

Haworth, L.

Amos, B. (Lord President of the Council)

Hayman, B.

Henig, B.

Andrews, B.

Hilton of Eggardon, B.

Archer of Sandwell, L.

Hogg of Cumbernauld, L.

Ashton of Upholland, B.

Hollis of Heigham, B.

Bach, L.

Howie of Troon, L.

Barnett, L.

Hughes of Woodside, L.

Bassam of Brighton, L.

Hunt of Chesterton, L.

Berkeley, L.

Hunt of Kings Heath, L.

Bernstein of Craigweil, L.

Janner of Braunstone, L.

Bhattacharyya, L.

Jay of Paddington, B.

Billingham, B.

Jones, L.

Blood, B.

Jordan, L.

Borrie, L.

Judd, L.

Bragg, L.

King of West Bromwich, L.

Brookman, L.

Kirkhill, L.

Brooks of Tremorfa, L.

Layard, L.

Burlison, L.

Lea of Crondall, L.

Burns, L.

Leitch, L.

Campbell-Savours, L.

Lipsey, L.

Carter, L.

Lockwood, B.

Carter of Coles, L.

Lofthouse of Pontefract, L.

Christopher, L.

McDonagh, B.

Clarke of Hampstead, L.

McIntosh of Haringey, L.

Clinton-Davis, L.

McIntosh of Hudnall, B.

Cohen of Pimlico, B.

MacKenzie of Culkein, L.

Corbett of Castle Vale, L.

Mackenzie of Framwellgate, L.

Crawley, B.

McKenzie of Luton, L.

David, B.

Mason of Barnsley, L.

Davies of Coity, L.

Massey of Darwen, B.

Davies of Oldham, L. [Teller]

Merlyn-Rees, L.

Dean of Thornton-le-Fylde, B.

Mishcon, L.

Dearing, L.

Morgan, L.

Desai, L.

Morgan of Drefelin, B.

Dixon, L.

Morgan of Huyton, B.

Drayson, L.

Morris of Manchester, L.

D'Souza, B.

Patel of Blackburn, L.

Dubs, L.

Paul, L.

Elder, L.

Pendry, L.

Evans of Parkside, L.

Pitkeathley, B.

Evans of Temple Guiting, L.

Plant of Highfield, L.

Farrington of Ribbleton, B.

Portsmouth, Bp.

Faulkner of Worcester, L.

Prosser, B.

Filkin, L.

Prys-Davies, L.

Fitt, L.

Randall of St. Budeaux, L.

Fyfe of Fairfield, L.

Rendell of Babergh, B.

Gale, B.

Richard, L.

Gavron, L.

Rooker, L.

Gibson of Market Rasen, B.

Rosser, L.

Giddens, L.

Royall of Blaisdon, B.

Gilbert, L.

Sawyer, L.

Golding, B.

Sewel, L.

Goldsmith, L.

Sheldon, L.

Gordon of Strathblane, L.

Simon, V.

Goudie, B.

Smith of Leigh, L.

Gould of Brookwood, L.

Snape, L.

Gould of Potternewton, B.

Stoddart of Swindon, L.

Graham of Edmonton, L.

Strabolgi, L.

Greengross, B.

Symons of Vernham Dean, B.

Grocott, L. [Teller]

Taylor of Blackburn, L.

Harris of Haringey, L.

Temple-Morris, L.

Harrison, L.

Thomas of Macclesfield, L.

Hart of Chilton, L.

Thornton, B.

1238

Tomlinson, L.

Wall of New Barnet, B.

Triesman, L.

Warner, L.

Truscott, L.

Warwick of Undercliffe, B.

Tunnicliffe, L.

Whitaker, B.

Turnberg, L.

Whitty, L.

Uddin, B.

Wilkins, B.

Varley, L.

Woolmer of Leeds, L.

[*See col. 1253]
Resolved in the affirmative, and amendment agreed to accordingly.
5.25 p.m.
Clause 287 [Financial assistance scheme for members of certain pension schemes]:
Lord Higgins Lord Higgins moved Amendment No. 66:
Page 241, line 28, at end insert—
"( ) New qualifying members shall continue to be eligible for membership of the financial assistance scheme until such time as they could, instead, qualify for the Pension Protection Fund."
The noble Lord said: My Lords, in moving Amendment No. 66, I think that it will also be convenient to debate Amendment No. 67 and government Amendment No. 68. In previous debates, we referred to the problem that exists because the Bill contains two separate systems; namely, the original pension protection fund, which was set out in the Bill when it was debated at Second Reading in another place, and the financial assistance scheme, which was introduced at the very last moment in another place before coming to your Lordships' House.
As your Lordships are aware, the financial assistance scheme is financed by the Treasury from a sum that is apparently limited to £400 million, which would be spread over 20 or more years. Therefore, the present value is probably something like £250 million. We have no idea from where that figure came: it appears to have been taken out of the air by the Chancellor in an attempt to buy off Labour Members of Parliament who were otherwise going to revolt against the problems faced by their constituents. Indeed, they were supported by Conservative Members who had suffered from their pension funds going bust.
The crucial question here is whether the financial assistance scheme, which will come in for schemes that are already bust, overlaps with the pension protection fund; or, alternatively, whether there is a gap in time between the two. I think that I would be right to say that it is common ground between the noble Baroness and those of us on this side of the House that the right structure for the Bill is to have neither a gap nor an overlap between the financial assistance scheme and the pension protection fund; that is, the one fund should cease to have new members at the moment where they are able to enter the second fund.
If that is the intention, it is not clear from the Bill as it currently stands. My two amendments seek to make that clear. Amendment No. 66 states:
"New qualifying members shall continue to be eligible for membership of the financial assistance scheme until such time as they could, instead, qualify for the Pension Protection Fund".

1239
Amendment No. 67 effectively states that there cannot be benefits under both schemes.
The Government have tabled an alternative amendment, which is much more esoteric in character. It may achieve the same end, but I am not clear whether it does. There are a whole series of related problems to be referred to otherwise, which arise because, quite clearly, the financial assistance scheme will be less favourable than the pension protection fund.
Therefore, there is some danger in two ways: on the one hand, that the Government will seek to alter the situation so that people become a burden on the fund's levy rather than on the Government's financial assistance scheme; or, on the other hand, that individual companies may seek to arrange their affairs in such a way that they delay being qualified for the financial assistance scheme in order to become entitled to benefits under the pension protection fund.
Essentially, these two amendments seek to clarify the position. As I said, I believe that the Government's amendment is designed to achieve the same end. If that is so, it may be better drafted than mine, although I hope that mine also has the same effect. We look forward with interest to what the noble Baroness has to say. But we think that this is an important issue. Unless we receive a satisfactory answer, we may wish to vote on our amendments. I beg to move.
5.30 p.m.
Baroness Hollis of Heigham: My Lords, I said on Report that I appreciated the intention behind the amendment then brought forward by the noble Lords, Lord Higgins and Lord Skelmersdale. It would make explicit on the face of the Bill that the financial assistance scheme would cover schemes winding up between May 2004 and the start of the PPF. However, I argued that it would not be right to announce a decision now on the inclusion of these schemes before we have had an opportunity to assess their circumstances further, and until moral hazard risks are minimised.
This was and remains a finely balanced judgment. The recent statement on PPF eligibility clarified that schemes sponsored by employers currently involved in insolvency proceedings may under certain circumstances still qualify for PPF compensation—referring back to an earlier debate on Amendment No. 39 and the government amendments grouped under Amendment No. 40—if they do not start to wind up until after the introduction of the PPF. That was why I argued that in our written statement we sought to clarify the situation rather than change the starting points of each of the two schemes.
The statement on the PPF has been made to help trustees make informed decisions, particularly when considering compromise agreements or revised contribution schedules tabled by employers. It provides clarification, for example, that when an employer is in administration and has tabled a one-off compromise agreement, a scheme may receive PPF
1240
compensation if the trustees reject that agreement and then do not start wind-up until the PPF is introduced. This is subject to the employer having a further insolvency event after the introduction of the PPF.
This has always been the policy of the PPF, but the recent statement has removed any uncertainty for trustees and employers, in particular the commitment not to use the power in Clause 128(3)(c). We are committed to ensuring that trustees are able to make informed decisions about the future of their pension schemes, particularly in those cases where the sponsoring employers are currently in financial difficulty.
In the light of this, and in the light of the views expressed by noble Lords on Report, we have now taken a decision which I hope will be welcome to the noble Lord, Lord Higgins. It will meet the concerns he raised in Committee, on Report and again today at Third Reading. We have taken the decision that the balance of the argument is now in favour of making the position clearer in respect of schemes which have started to wind up after May 2004 or which will start to wind up between now and the start of the PPF.
As my colleague the Minister of State for Work and Pensions said on Friday, this amendment is,
"good news for hard hit individuals in those schemes that have found themselves in difficulty".
At this point I should like to give a brief description of the technical effect of the government amendment, if that is what the noble Lord, Lord Higgins, would wish. It may help the noble Lord to judge whether we have met his concerns. Amendment No. 68 is an amendment to the definition of a "qualifying pension scheme" under Clause 287. The definition of a "qualifying pension scheme" currently provides, among other things, that such a scheme must have begun winding up during such period "as may be prescribed". Under the amendment, I propose that this part of the definition is changed.
Under the amendment, for a pension scheme to qualify under the financial assistance scheme it must have begun winding up during the prescribed period ending immediately before the day appointed under Clause 127(2). This too requires some explanation. Clause 127(2) provides that a scheme is not eligible for the PPF if it is being wound up immediately before the day appointed by the Secretary of State. The amendment would mean that in order to qualify for the FAS, a scheme must have begun winding up during a prescribed period which ends before this date, which we hope will be in April 2005. Any scheme which begins winding up before that date may be eligible for assistance from the FAS, subject to other FAS eligibility conditions being satisfied. Moreover, any scheme which begins winding up after this date may be eligible for consideration by the PPF. So before the date, consideration by FAS, and after, consideration by the PPF, subject in both cases to the usual rules about eligibility—whether the employers are solvent or insolvent, wind-up capacity and so forth.

1241
To recap, our proposed amendment meets our commitment to provide assistance to those hardest hit by their pension schemes winding up underfunded. As noble Lords have recognised, it would be wrong to leave such members and the trustees of their schemes facing uncertainty because of the date on which their scheme starts to wind up. So I hope that I have met in full the concerns of the noble Lord and that, as a result, he will feel able to withdraw his own amendments and to accept the government amendment.
Lord Higgins: My Lords, this is quite a complicated issue. Is there in effect a single date or cut-off point, call it what you will, on which schemes, depending on when they wind up, cease to be eligible for the FAS and become eligible for the PPF? Am I right in thinking that a single date will be specified in the order? If that is so, I presume that there will be neither an overlap nor a gap.
Baroness Hollis of Heigham: My Lords, yes, there will be neither an overlap nor a gap. I hesitated because rules of eligibility will still need to be met under both schemes, but they will be seamless in that the PPF will kick in where the FAS stops.
Lord Higgins: My Lords, if I understand the situation correctly, the government amendment will achieve what we seek. I presume the implication is that it also covers our amendment, Amendment No. 67, specifying that members would qualify under one scheme or the other but cannot qualify in any way for both. However, provided that all the eligibility criteria are met and that they fall later than the amended start date we discussed in our earlier debates, they will all be entitled to one or the other. I see that the noble Baroness is nodding her head. If that is so, the government amendment will set to rest the problem before us. It has at least settled one of the points about which we have been unclear in the single clause covering the FAS which even now is only partially clarified. That is an advantage from everyone's point of view and I hope that the scheme will work satisfactorily.
As the noble Baroness said, there may still be a tendency for people to delay winding up, although it seems that despite the criteria for eligibility, the wind-up date will be the crucial one. On the assumption that all that is so, I beg leave to withdraw my amendment and I shall not move the subsequent amendment. I presume that in due course the House will agree to Amendment No. 68.
Amendment, by leave, withdrawn.
[Amendment No. 67 not moved.]
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 68:
Page 242, line 8, leave out "such period as may be prescribed" and insert "the prescribed period ending immediately before the day appointed under section 127(2)"
On Question, amendment agreed to.
Lord Oakeshott of Seagrove Bay Lord Oakeshott of Seagrove Bay moved Amendment No. 69:
Page 242, line 22, at end insert—
"( ) Schemes where the qualifying pension scheme was wound up while the sponsoring employer was solvent shall be qualifying pension schemes for the purpose of this section"
The noble Lord said: My Lords, this amendment, tabled in my name and that of my noble friend Lady Barker, seeks to make it clear that,
"Schemes where the qualifying pension scheme was wound up while the sponsoring employer was solvent shall be qualifying pension schemes for the purpose of this section",
which means that they would he eligible for inclusion in the financial assistance scheme.
This covers a small number of people, but a group which in our view rightly feels a burning sense of injustice. We think that just under 4,000 people had their schemes wound up while the company was still solvent—in many cases solvent but probably very shaky; and in other cases the company has become insolvent and so is no longer in a position to help its pensioners. It is our intention, as I hope the amendment clearly implies, that this should apply only to funds which were wound up before 11 June 2003 when the relevant statutory instrument came into effect following the Maersk case.
When we discussed this in Committee there was a good deal of talk about moral hazard, to which I make two responses. First, I do not think that there is any moral hazard here, or it is a rather odd form of retrospective moral hazard because we are talking about a clearly defined group of people in the past, rather than anything that may happen in the future. Secondly, so far as concerns the pensioners of these companies, it makes no difference to them, when their fund is in serious deficit and they have lost a large part of their pensions, whether years ago the employer technically was or was not insolvent.
For all these reasons, we believe that this is a small but appropriate action to take. In Committee, the Minister tended to ask us not to tie her hands and not to chip away at the structure of the FAS. We believe that it would be wrong to exclude this small group of people from eligibility for the FAS, however modest the FAS benefits eventually turn out to be.
We were struck by the similar remarks made by the noble Baroness, Lady Turner, in Committee. I hope that she will feel able to support the amendment. I beg to move.
Baroness Turner of Camden: My Lords, I spoke to a similar amendment in Committee. Like many noble Lords who have been involved with the Bill, I have received a great deal of information from a small group of people who have been adversely affected because they seem to be excluded from any kind of assistance at all. As was said in Committee, it is a very small group of people involved in a "once only" situation. I hope that my noble friend will feel able to respond sympathetically.
Baroness Hollis of Heigham: My Lords, I am not sure I shall be able to do that. Amendment No. 69

1243
seeks to ensure that assistance from the financial assistance scheme may be given in respect of members of pension schemes with solvent employers. We had an extensive and helpful debate at Report stage on this point. The debate underlined that there are real and important principles at stake which are not easily reconciled.
The noble Lord, Lord Higgins, made some apposite remarks at the time. He said:
"it is highly deplorable for a company which is perfectly solvent to renege on its pension promises, a classic moral hazard argument would ensue if the company concerned believes that the FAS will pick up the pieces".—[Official Report, 8/11/04; col. 707.]
Further, if all solvent employers renege on their promises, the cost on the financial assistance scheme will be considerable and the taxpayer would be picking up the tab. That was the argument and I agree with every word.
Noble Lords also discussed cases where a company may be insolvent but has a parent company or other connected company which is solvent and well able to contribute to the pension scheme. On the other hand, the noble Lord, Lord Oakeshott, also drew the House's attention to the situation where an employer is technically solvent but still in a very weak financial position in respect of funding the pension liabilities.
The range of views expressed shows how complex the issue is. The Government's starting point is the principle that solvent employers should be responsible for the occupational pension schemes they provide. If they make that promise they should, if their finances permit because they are solvent, deliver it. They should not ask other people, whether as taxpayers through FAS or levy payers through the PPF, to deliver it on their behalf because the pension promise is now inconvenient to some degree.
However, we are aware that the blanket term "solvent employer" covers an enormous variety of different circumstances. The purpose of our ongoing consultation and research is to understand what these are and whether and to what extent there may be sensible, workable distinctions to be drawn in the detail of the regulations while protecting the principle that neither the taxpayer nor the levy payer should stand behind an employer's voluntary pension promise.
Now that we have announced—this refers back to our previous discussion—that there will be no gap between FAS and PPF, the principle is even more important. Let us consider the position of a solvent employer and pension scheme trustees, tomorrow, who are negotiating a compromise agreement relating to an underfunded pension scheme. Let us assume that they believe they could find 70 or 60 per cent. If they know that FAS will include schemes with solvent employers up until April 2005, the trustees will have less incentive to press for a high level of employer contribution and the employer has less incentive to agree to a high level. Therefore, instead of settling at 50, 60 or 70 per cent, they might very well compromise at a much lower level, expecting FAS to take up the strain.
1244
The impact could extend to solvent employers with ongoing pension schemes. Solvent employers would know for certain that FAS assistance will be available to them only up until April 12005 as, being solvent, they will not qualify for the PPF. So it could encourage solvent employers to decide to start winding up underfunded schemes before April 2005, compromise their debt at artificially low levels—20, 25, 30 per cent or whatever—and obtain FAS assistance. The additional demands on FAS in these circumstances could be vast.
I appreciate the desire for clarity on the position of schemes with solvent employers and I have given assurances that issues around employer solvency remain under consideration. We are not closing the door entirely. However, I hope that I have demonstrated that the price of making that decision now is unacceptably high. Given the very real moral hazard issues that would follow, I ask the noble Lord, Lord Oakeshott, to withdraw the amendment.
Lord Oakeshott of Seagrove Bay: My Lords, I do not feel able to withdraw the amendment. I am sorry if I was not as clear as I should have been but I did not hear the Minister reply to the point that I made at the beginning. I was specifically referring only to funds that were wound up before 11 June 2003, so the very interesting and persuasive arguments that the noble Baroness has made about moral hazard do not apply.
Effectively, this is water under the bridge. The schemes were wound up in a period when there was no FAS and no PPF. The world has moved on and these poor people are left in a situation where, unless we insist on the amendment, they will qualify for neither the FAS nor the PPF. That cannot be fair and I wish to test the opinion of the House.
5.46 p.m.
On Question, Whether the said amendment (No. 69) shall be agreed to?
Their Lordships divided: Contents, 64; Not-Contents, 134.

Division No. 2

CONTENTS

Alderdice, L.

Harris of Richmond, B.

Alliance, L.

Hooson, L.

Avebury, L.

Jacobs, L.

Barker, B.

Livsey of Talgarth, L.

Beaumont of Whitley, L.

Macfarlane of Bearsden, L.

Bonham-Carter of Yarnbury, B.

Mackie of Benshie, L.

Bradshaw, L.

MacLaurin of Knebworth, L.

Carlile of Berriew, L.

Maclennan of Rogart, L.

Clement-Jones, L.

McNally, L.

Dykes, L.

Maddock, B.

Elis-Thomas, L.

Mar and Kellie, E.

Falkland, V.

Methuen, L.

Falkner of Margravine, B.

Michie of Gallanach, B.

Fearn, L.

Miller of Chilthorne Domer, B.

Fowler, L.

Monson, L.

Garden, L.

Newby, L.

Glentoran, L.

Northover, B.

Goodhart, L.

Oakeshott of Seagrove Bay, L. [Teller]

Greengross, B.

Hamwee, B.

Palumbo, L.

1245

Park of Monmouth, B.

Slim, V.

Phillips of Sudbury, L.

Smith of Clifton, L.

Razzall, L.

Sutherland of Houndwood, L.

Redesdale, L.

Taverne, L.

Rennard, L.

Thomas of Gresford, L.

Roberts of Llandudno, L.

Thomas of Walliswood, B.

Rodgers of Quarry Bank, L.

Thomson of Monifieth, L.

Roper, L. [Teller]

Tope, L.

Tordoff, L.

Ryder of Wensum, L.

Wallace of Saltaire, L.

Saltoun of Abernethy, Ly.

Walmsley, B.

Sharp of Guildford, B.

Williams of Crosby, B.

Shutt of Greetland, L.

Williamson of Horton, L.

NOT-CONTENTS

Acton, L.

Harrison, L.

Ahmed, L.

Hart of Chilton, L.

Amos, B. (Lord President of the Council)

Haskel, L.

Haworth, L.

Andrews, B.

Hayman, B.

Archer of Sandwell, L

Hilton of Eggardon, B.

Ashton of Upholland, B.

Hogg of Cumbernauld, L.

Bach, L.

Hollis of Heigham, B.

Barnett, L.

Howie of Troon, L.

Bassam of Brighton, L.

Hughes of Woodside, L.

Berkeley, L.

Hunt of Chesteron, L.

Bernstein of Craigweil, L.

Hunt of Kings Heath, L.

Bhattacharyya, L.

Hylton, L.

Billingham, B.

Janner of Braunstone, L.

Blood, B.

Jay of Paddington, B.

Borrie, L.

Jones, L.

Bragg, L.

Judd, L.

Brooke of Alverthorpe, L.

King of West Bromwich, L.

Brookman, L.

Kirkhill, L.

Burlison, L.

Lamont of Lerwick, L.

Campbell-Savours, L.

Layard, L.

Carter, L.

Lea of Crondall, L.

Carter of Coles, L.

Leitch, L.

Chan, L.

Lipsey, L.

Christopher, L.

Lockwood, B.

Clarke of Hampstead, L.

Lofthouse of Pontefract, L.

Clinton-Davis, L.

McDonagh, B.

Cohen of Pimlico, B.

McIntosh of Hudnall, B.

Corbett of Castle Vale, L.

MacKenzie of Culkein, L.

Crawley, B.

McKenzie of Luton, L.

Darcy de Knayth, B.

Mason of Barnsley, L.

David, B.

Massey of Darwen, B.

Davies of Coity, L.

Merlyn-Rees, L.

Davies of Oldham, L. [Teller]

Morgan, L.

Dean of Thornton-le-Fylde, B.

Morgan of Drefelin, B.

Desai, L.

Morgan of Huyton, B.

Dixon, L.

Morris of Aberavon, L.

Drayson, L.

Morris of Manchester, L.

D'Souza, B.

Patel of Blackburn, L.

Dubs, L.

Pendry, L.

Elder, L.

Pitkeathley, B.

Evans of Parkside, L.

Plant of Highfield, L.

Evans of Temple Guiting, L.

Prosser, B.

Farrington of Ribbleton, B.

Prys-Davies, L.

Faulkner of Worcester, L.

Randall of St. Budeaux, L.

Filkin, L.

Rendell of Babergh, B.

Fitt, L.

Richard, L.

Fyfe of Fairfield, L.

Rooker, L.

Gale, B.

Rosser, L.

Gavron, L.

Royall of Blaisdon, B.

Gibson of Market Rasen, B.

St. John of Bletso, L.

Giddens, L.

Sawyer, L.

Gilbert, L.

Sewel, L.

Golding, B.

Sheldon, L.

Gordon of Strathblane, L.

Simon, V.

Gould of Brookwood, L.

Smith of Leigh, L.

Gould of Potternewton, B.

Snape, L.

Graham of Edmonton, L.

Symons of Vernham Dean, B.

Grocott, L. [Teller]

Taylor of Blackburn, L.

Harris of Haringey, L.

Thomas of Macclesfield, L.

1246

Thornton, B.

Wall of New Barnet, B.

Tomlinson, L.

Warner, L.

Triesman, L.

Warwick of Undercliffe, B.

Truscott, L.

Whitaker, B.

Tunnicliffe, L.

Whitty, L.

Wilkins, B.

Turnberg, L.

Williams of Elvel, L.

Uddin, B.

Woolmer of Leeds, L.

Resolved in the negative, and amendment disagreed to accordingly.
5.56 p.m.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 70:
Page 243, line 20, at end insert—
"( ) The scheme established under subsection (1) shall be subject to annual review by Parliament, with a view to ensuring that the money provided is adequate to meet liabilities as set out in subsections (3) and (4)."
The noble Baroness said: My Lords, I normally try to adhere to the requirement that amendments at Third Reading should be limited only to items of overriding importance or to items on which it has not been possible to obtain a reasonable response earlier in discussions. I must say that I might not always have agreed with the Minister's response to most of my amendments, but she has always presented a reasonable argument.
We know that in the matter of the FAS, a great deal has been left deliberately vague, and that I understand. However, in the past couple of days, a report has appeared widely in newspapers, including on the front page of the Financial Times, saying that specialists in the field were very doubtful whether the fund being established would be sufficient to meet the demands that were certain to be made on it. We are not talking about a tabloid, where scare stories are endemic—this was the lead story in the Financial Times, with headlines on the front page. I certainly thought that it was something that should be taken very seriously. It would be disastrous if members of failed schemes, having been led to believe that a rescue was imminent, should find that, after all, there was little for them in the FAS.
The amendment I have devised puts matters in the hands of Parliament. It seems reasonable; it is, after all, MPs who will be lobbied by angry constituents if the FAS is seen to be failing their needs. My amendment would require Parliament to look annually at the fund to make sure that it is adequate to meet the liabilities referred to in the legislation.
I hope that the Minister will agree that this is reasonable. The fund will, after all, be in the hands of elected Members of Parliament, who will know from their constituents whether or not it is working well. We know, of course, that pensioners, whether state or occupational, are not backward when it comes to lobbying Parliament.
We have to make sure that the FAS really is able to meet the requirements of the legislation and that people are not desperately disappointed after having their hopes raised. I beg to move.
Lord Higgins: My Lords, the noble Baroness has made a very important point. There is a case for having

1247
such an annual review. She indicated very clearly in her opening remarks, in referring to the article in the Financial Times, studies by Ros Altmann, and so on, that the scheme was starting off on an unsound basis.
We have complained all the way through the Bill's proceedings that we really do not know what the detail of the scheme is. In fact, apart from the various amendments we have managed to make in the course of our deliberations, which have gone some way towards putting flesh on the skeleton of the single clause in the Bill covering the FAS, a huge amount is still obscure.
By now, it should be possible for the Government to give some idea of to what extent they think that the provisions that are made for the FAS are adequate. The Chancellor, in response to a panic when it looked as if the Government might be defeated in the Commons on providing support for those whose pension schemes had gone bust, came up with a proposal at the very last minute, before it arrived at your Lordship's House, saying that there would be a sum of £400 million. However, that is not £400 million immediately, but spread over 20 or so years. It will therefore probably have a discounted present value of about £250 million, which is a tiny amount compared with many other items of government expenditure.
Of course, it is not only that amount; the assets of the schemes that have collapsed should presumably be taken into account so that the figures arrived at simply by dividing the £400 million spread over 20 years by the number of possible claimants is not the precise figure that is needed. Surely, by now, the Government have done some calculations to establish whether the funding is likely to be adequate. It is generally agreed that something like 65,000 people are likely to qualify, and they are members of a considerable number of schemes which we believe are going to be entitled to help under the FAS. Allowing for the assets and dividing the number of people into the amount of money, it seems that the likely benefit will be very small indeed.
We still have absolutely no indication at all about how the Government arrived at the figure of £400 million—none whatever. As far as we can see, it was plucked out of the air in a panic measure to buy off a revolt. Even at this late stage—it certainly is a late stage; this is almost the last trump as far as this Bill is concerned—we may get an answer. However, all the indications are that false hopes are being raised. I hope that when the Bill, with its various provisions, returns to another place, those who went along with the Government on the basis of this promise, which sounded a nice round figure and generous at the time, will reappraise their positions. In our view, the sum is not likely to be adequate and I hope that the Minister can give us some idea why she thinks that it is.
Lord Lea of Crondall: My Lords, the noble Lord's critique of the £400 million is now a critique that has one or two extra features. It is the first time that I have
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heard this notion that the discounted present value of that £400 million is £250 million. Is that what the noble Lord said?
Lord Higgins: My Lords, I have said the same thing time and again throughout the deliberations, and the noble Lord very assiduously attended throughout.
Lord Lea of Crondall: My Lords, £250 million?
Lord Higgins: Yes, my Lords.
Lord Lea of Crondall: My Lords, well that is my mistake. However, I understand that the question of how the £400 million is interpreted, how the sum is administered and how it can be reported on has yet to be pinned down. Certainly, it is unreasonable to suppose that it would be possible, on the face of the Bill, to specify that £400 million means X, Y and Z. With his experience as a Treasury Minister, the noble Lord should not have expected that to happen. He is trying to have his cake and eat it with his argument about this being a rather obscure matter.
Some of us have difficulty in accepting the noble Lord's critique and are sympathetic towards my noble friend's amendment. Let us see what the Minister has to say, but it is not quite as simple as saying that £400 million must nevertheless equal 20 times 20. There are several ways of skinning this cat, if I can use a different metaphor, and I want to query that there is only one way of viewing this arithmetic and it is the way asserted by the noble Lord, Lord Higgins. I am sure that I could come up with three or four different ways in which the figure could be interpreted, and we are not actually at that point. That is why I do not think that his critique should necessarily be accepted as a factual description.
Lord Oakeshott of Seagrove Bay: My Lords, this is not the time or place to have a general discussion about the adequacy or otherwise of the FAS. Views are pretty widely known. We said from these Benches that it was a cruel deception when the figure was announced. Since then, the experts have got to work—people such as Ros Altmann—and her remarks over the weekend were virtually unprintable. It is fair to say that almost all independent experts believe that it will be only a drop in the bucket.
However, we are discussing the amendment moved by the noble Baroness, Lady Turner. I support it. It would be churlish not to, given that it is on similar lines to the one for triennial reports on adequacy that we moved and just lost at Report. It is a sensible amendment and I support it.
Baroness Hollis of Heigham: My Lords, we have had constructive discussions on the subject of future FAS accountability both in Grand Committee and at Report. I supported and still support the principle that the FAS must be accountable to Parliament and that regular reports on objective questions such as how many people have been helped and how much assistance they have been given ought certainly to be made available. The noble Lord lost his amendment

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partly because he did not accept my offer. None the less, we would still expect the information to go to Parliament and think that it is right that it should.
We have discussed at length the ongoing work that we are doing to determine how financial assistance will be provided—when, and to whom. I understand noble Lords' frustration at the lack of detail in the Bill today. But long before we begin making assistance payments, we will of course have a much clearer picture of how the FAS will operate and, when we do begin making payments, we want to ensure that the process is transparent and open to public scrutiny, and above all that we are able to keep the promises that we have made about this assistance.
Two other bodies which are being set up through this Bill—the Pensions Regulator and the Pension Protection Fund—will also be open to public scrutiny. Under provisions in Clauses 12 and 120, both the regulator and the board of the PPF will be required to produce reports and to send them to the Secretary of State, who must then lay the reports before each House of Parliament. We can make the same provisions with FAS under powers at Clause 287(4)(j) as well. I can confirm that we will do this to ensure that the arrangements for FAS reports are made in regulations. The detail of the new arrangements will of course depend on future decisions on the Government's arrangements for FAS, but I hope that this will satisfy my noble friend on that matter.
I will return to the concerns that I expressed at Report regarding amendments that refer to the "adequacy" of the assistance provided from the FAS. The problem is against whose judgment will "adequacy" be measured? We are discussing an assistance scheme; the FAS will not, as the amendment seems to imply, have "liabilities" as such, nor is there any reference to such liabilities in subsections (3) and (4). I therefore cannot accept the amendment as drafted. I hope that my noble friend will accept my assurances that we have the powers to require reports to be prepared and laid before Parliament on FAS in regulations. We plan to use them to ensure that FAS will be administered in a transparent and accountable way. With those assurances now in Hansard, I hope that my noble friend will withdraw her amendment accordingly.
Baroness Turner of Camden: My Lords, I thank my noble friend for those assurances and I am glad to learn that the intention is to ensure that the promises that have been made will be kept. I have made a careful note of that. I am glad that transparency is the objective and that the information will be publicly available as well as being available to Parliament. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Barker Baroness Barker moved Amendment No. 71:
Before Clause 297, insert the following new clause—

POWER TO VARY AGE ADDITION TO BASIC STATE PENSION
The Secretary of State shall have power to vary the amount of the basic state pension payable according to the age of the recipient."
The noble Baroness said: My Lords, the amendment has been tabled for a particular purpose. The Minister and other noble Lords will be aware that it has been the policy of noble Lords on these Benches that there should be greater weighting of pensions towards those who are older. We believe that the longer someone has not received earnings from a job, the greater their need for an enhanced pension. That is our stated policy which we look forward to defending over the coming months.
The particular reason for the amendment, which was not moved at an earlier stage, is to make an inquiry of the Minister. There are already enhanced payments for the over-80s of 25 pence, or the "bottle of milk" provision, as it is known among pensioners. It was recently suggested to our colleague, Mr Steve Webb, in another place that the reason the Government were averse to greater age-related enhancements of the state pension was because they believed that they did not have the power to do so—they had no power to make a greater enhancement other than the current nominal 25 pence. I wish to ask the Minister at this opportune stage of the Bill whether that is indeed the case. I beg to move.
Baroness Hollis of Heiigham: My Lords, perhaps I may say that I am slightly taken aback by the manner in which the noble Baroness moved her amendment. I thought that she was seeking to argue that older pensioners were poorer and, therefore, that they should have an increased state pension. The noble Baroness is signalling that that is her view. That is the argument I wish to address, rather than her more specific point. I have received some advice on that matter—there is no power to do anything about the 25 pence, except for that. We have no separate powers to go after that 25 pence figure. In other words, my understanding is that that would have to be done by primary legislation. If I have misled her I will come back to her. Time and again I have asked, "Why the heck was that not rolled up into something else?", given that we have been dealing with other matters. I am told that that matter would require primary legislation.
I wish to return to the substance of the noble Baroness's basic position and that of her party, which is to allow the Secretary of State to vary the amount of the basic state pension, presumably to increase it by age. We recognise that pensioners have additional expenses as they get older—in terms of warmth, for example. We have addressed the need for extra income by introducing a number of specific measures which help pensioners at the time that they need the extra income.
Winter fuel payments, for example, which from the age of 60 are worth £200 per eligible household, benefit over 11 million people in around 8 million households. Anyone aged 80 or over gets an additional payment of £100 as part of his or her winter fuel payment entitlement, which helps a further 2 million people. Help also includes TV licences and with council tax for those suffering hardship—where people over 70 benefit by up to £100 or so. This payment will go to

1251
over 6 million pensioners. We also reintroduced free eye tests, pensioners do not have to pay for their passports and the Transport Act 2000 helps guarantee that pensioners and disabled people can obtain concessionary services.
So we have done much to meet some of the very real areas where older pensioners find that their costs increase. The major point, in my judgment, is that because they tend to be less mobile and spend more time at home, it is heating costs that most affect what pensioners spend. We have addressed that decently, humanely, properly and appropriately with the winter fuel payments. However, going beyond that and providing an age-related addition to the basic state pension, for example £5 per week to all recipients aged 70 or over, with a further £5 at the age of 75 or so, would require a gross additional cost of almost £4 billion a year.
I do not want to rest my argument primarily on its cost, although that would be substantial. My problem is that that cost would not be well targeted, for two reasons. First, although it is clear that as pensioners get older they become poorer—often because their pensions, particularly for widows, do not keep pace with inflation and so on it is also the case, as the Turner report found, that older pensioners do not spend their incomes. In cash terms, older pensioners actually reduce their expenditure from about £157 per person to about £122 per person. On average, a household headed by a person aged 65 to 74 spends about 90 per cent of its income. From the age of 75 onwards households spend about only 76 per cent of their income. The figures show that there is an average under-spend for older pensioners of about £30 regarding their income.
Obviously, poorer pensioners are much more likely to spend to their ceiling and better-off pensioners are less likely to do that. Whereas pensioners, according to the Turner report, appear not to disinvest themselves of their savings, as one might expect, the reason for the under-spend may be due to concerns about matters such as funeral costs and also that they are less mobile than in the past and are, therefore, not spending the money on transport that they may have done. To give more money to older pensioners when they now under-spend their incomes significantly, compared with younger pensions, would seem somewhat curious.
Secondly, there is a greater and more substantive argument. I know that the noble Baroness has seen the figures that I am about to give, because I have sent them to her honourable friend Mr Webb in the other place three or four times, but I do not believe that lie accepts the nature of the argument. It is undoubtedly true that pensioners become poorer as they get older, primarily because they are increasingly likely to be widows without a pension. The median income of a couple under 75 is £261 and the median income for those over 75 is £227. The equivalent figures for a single pensioner under 75 are £150 and £143 for those over 75. There is no doubt that single pensioners' incomes will drop over the course of their time as
1252
pensioners by about £7 per week. These are median figures. It is undoubtedly true that pensioners become poorer as they become older.
But the noble Baroness did not tell the House that that is considerably overwhelmed by the difference between the poorest quintile and the highest quintile within each pensioner cohort. Among the under-75s, the bottom quintile has an average income of £161 for couples, with £542 for the top quintile. For those couples over 75 the bottom quintile is £143 and the top is £413. Crudely speaking, within each age cohort, between the poorest and the richest there is a 3:1 ratio of about £200 to £300, compared to the difference in income between cohorts, which, for single pensioners is around £7.
If the amendment were passed, one would be giving an awful lot of money to older, richer pensioners and not to younger, poorer pensioners. The discrepancy within each age cohort is very many more times the discrepancy between age cohorts. That is why the amendment is not fair. The sums and the statistics do not bear it out. I have read the statistics for inclusion in Hansard, because I have provided them to the noble Baroness's honourable friend three, four or five times—in Parliamentary Questions and debates. The Liberal Democrats still recycle their argument and there is still no recognition that the facts do not support the amendment; it is not the best way to target the available resources of around £4 billion.
We have done much to help the particular problems facing older pensioners, where the issue can genuinely be that of heat, which we have tackled with the winter fuel allowance. But given my other arguments, I simply do not accept where the noble Baroness is coming from. She is right that one becomes poorer as one becomes older, but the gap within each age cohort between rich and poor is so great that most of her money would go to pensioners who did not need it, at the cost of other younger pensioners who did. Therefore, I cannot accept the argument behind the noble Baroness's amendment and I hope that she will withdraw it.
Baroness Barker: My Lords, I thank the noble Baroness for restating the arguments, some of which I had heard before. I have two comments in response. First, pensioners on a higher income will be paying tax, as those on a lower incomes may not. Secondly, she talked about getting payments to those who need them. I believe that a much simplified system which relies on the basic state pension rather than complex claims would get it to those who need it, but who currently are not getting the income to which they are entitled.
The noble Baroness gave us a long list of additional payments which the Government have made to pensioners. However, she left one out of the list. She may have missed it because she regards it as inconsequential, but it is the one that proves the case—the Christmas bonus. None of these payments is uprated; they are all one-off and fixed. She left off the Christmas bonus because it remains at exactly the same level—£10—as when it was introduced.

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I remember when the Christmas bonus was introduced because of one particular reason. I went to visit my great-uncle and he told me about a gentleman who had gone to the post office to collect his Christmas bonus. After picking it up, the man, with an air of defiance, said, "Nobody else is going to get their hands on this". He walked straight into the pub, drank the lot and was carried home. I rather suspect that if he were to do the same thing today, he would have the mildest of hangovers. It does not go very much further at all.
I thank the noble Baroness for answering the question that I really wanted answered, on the Secretary of State's power to vary that. I thank her very much for that and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Speaker (Lord Tordoff): My Lords, perhaps this is a convenient moment to announce that, in the first Division on the Pensions Bill, the number of those voting Not-Content was 143 and not 144, as announced. Although it may be improper for me to say so, it may be worth noting that that was not the fault of either the Clerks or the Tellers.
Clause 324 [Extent]:
Baroness Noakes Baroness Noakes moved Amendment No. 72:
Page 268, line 38, leave out ", 8"
On Question, amendment agreed to.
Schedule 1 [The Pensions Regulator]:
Lord Oakeshott of Seagrove Bay Lord Oakeshott of Seagrove Bay moved Amendment No. 73:
Page 271, line 3, at end insert—
"Pension arrangements
The Regulator shall make pension provision for its chief executive and employees by means of a funded defined benefit pension scheme with rates of employer and employee contributions, benefits and indexation of pensions in payment, all broadly comparable to those provided to new members by the 100 pension schemes with the highest number of members for whom levies are payable to the Pension Protection Fund."
The noble Lord said: My Lords, I rise with a great sense of relief which I am sure is shared by other noble Lords as we near the end of our consideration of the Bill. In moving Amendment No. 73, I should like also, with the permission of the House, to speak to Amendment No. 80. The two amendments are substantially the same except that they refer to two different bodies.
The amendments deal with a simple issue of principle which we have discussed at considerable length both in Grand Committee and on Report. Amendment No. 73, which my noble friend Lady Barker and I tabled, takes very careful note of the Minister's detailed account on Report of the Government's intentions for how the pension schemes—the PPF in this case, but I assume that she also means the regulator—would operate. We have very carefully drafted the amendment to reflect exactly what she said, on the assumption that she meant it.
I am grateful that more research has been done. The statistics produced in Grand Committee were, frankly, a travesty. The noble Baroness has now produced
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information on 50 FTSE schemes. I should add that I believe that quite a small number of those are open to new entrants, which is tile important point if we are talking about having a scheme broadly comparable to those for new entrants into the private sector.
Specifically, the Minister said that the scheme will be contributory, if it is on Civil Service lines; that it will be defined benefit; and that it will be broadly comparable to schemes in the private sector. The problem, with which she did not deal, is what the actual contribution rate will be. A contribution rate of 3.5 per cent from employees is fine, but the Turner report estimates that the implied total contribution rate for schemes with these sorts of benefits is between 22 per cent and 26 per cent. So, knocking off the 3.5 per cent that the employees are contributing, it is a very fair assumption that the total amount that the PPF members will have to pay in the levy towards the pension schemes of those people will he in the order of 20 per cent. We should have a clear provision addressing that in addition to the other provisions which the noble Baroness mentioned.
There is an important principle here. As Adair Turner points out in his excellent report, the public sector employs 18 per cent of the population, comprising 17 per cent of total earnings and 36 per cent of pension rights. He says:
"In 2000 there were about 4.6 million active members of private sector DB schemes, and a similar number in public sector schemes".
He believes that, given current trends, it is unlikely that there will be more than 1.6 million to 1.8 million private sector employees in active DB schemes in 20 years' time. Consequently, in 20 years, about three-quarters of those with good quality pensions will be in the public sector and most of the rest of the country will be out in the cold.
We therefore believe that the Pension Protection Fund is the place to start bridging the chasm between public and private sector pension provision. The staff of the PPF should be the last people to be hermetically sealed in a risk-free inflation-proof Civil Service pension capsule at the expense of the private pension fund members whose pensions they are paid to protect. I invite the House to support the amendment, to start establishing that principle. I beg to move.
Lord Fowler: My Lords—
Baroness Hollis of Heigham: Oh.
Lord Fowler: My Lords, if the noble Baroness does not mind, perhaps I may support the proposition that is being put.
I have sympathy with the amendment. In some ways, I do not think that it goes as far as I would go. In particular, I still find the idea of the chairman having a defined benefit scheme very odd. I do not know of many part-time chairmen in the private sector who have defined benefit schemes. Perhaps the Minister, who is so anxious to reply, can tell us how many of the chairmen in the 50 FTSE companies have defined

1255
benefit schemes. I should be very interested to know that. They are paid a fee, and if they want to, they can then contribute to a personal pension of their own. That is the rule.
However, that is not part of the amendment. The noble Lord, Lord Oakeshott—I almost called him my noble friend—has been extremely generous on this. He has raised a very important point, particularly regarding the Turner report. In 2000, there were 4.6 million active members of private defined benefit schemes. It is unlikely, according to Turner, that in 20 years' time, more than 1.6 million to 1.8 million private sector employers will be covered. That, incidentally, is a total reply to the Minister's point in the annuities debate about the destruction of final salary schemes if we went down that path. Much of the destruction has already been done.
I think that the Pension Protection Fund is the place to start, as the noble Lord said, "bridging the chasm" between public and private pensions. I think that an example should be set as far as that is concerned. I think that the noble Lord, Lord Oakeshott, has set that out very well. I hope that he will press the amendment to a Division.
Baroness Noakes: My Lords, I shall speak very briefly. I have every sympathy with the amendment. The principle is right that there should be comparability between those who are employed to oversee these pension funds and the members of those funds. However, I have a problem with the amendment which derives from the currently changing nature of pension provision. There is no doubt that there is a great state of flux in all companies, not only the major companies to which this amendment refers. Although there has been a movement out of defined benefit schemes, companies have by no means settled on any particular method of providing pensions. Defined contribution schemes are shifting all the time even within those companies that are maintaining them.
I suggest to the noble Lord that the amendment might well cause practical difficulties because it implies that pension provision should be changed as we go along. Having said that, I completely support the principle behind the amendment.
6.30 p.m.
Baroness Hollis of Heigham: My Lords, I was in a hurry to answer because I was being pressed on all sides to expedite the proceedings. Through no fault of my own we are running later than expected. I hope that the noble Lord, Lord Fowler, will understand that point.
I fully agree with the argument made by the noble Baroness, Lady Noakes, that to have a pension based on a comparison with other pensions would result in a shifting sands situation. I do not want to take up the time of the House repeating arguments that we have already discussed. However, I wish to make a few points. First, many of the staff who currently work for
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OPRA will transfer. They will have TUPE protection. Therefore, if this amendment were accepted, there would be a two-tier pension scheme. Secondly, I emphasised on Report that this was already a contributory scheme with, according to our information, rates of contributions broadly in line with those of 50 FTSE schemes. Thirdly, I emphasise that, given the small numbers involved, we would be dealing with very high costs—something like £120,000 to set up the scheme and £50,000 a year to run a separate scheme rather than allow some members to enter the existing Civil Service scheme.
I cannot give the noble Lord, Lord Fowler, the information he wants about chairmen but given that we regard this as virtually a full-time job we think it not unreasonable to include the relevant measure. I could mention the European directive and other matters, but I shall not do so. I simply ask the House to accept that in my view we have not heard any further arguments beyond those we heard on Report. We consider that this amendment would constitute an expensive gesture given the cost involved that might well outpace any savings which might result were we to establish that the premier scheme, which has a contribution rate of 3.5 per cent, was more advantageous. We would be continually comparing that with schemes that were themselves for ever changing.
For those reasons, which I have not had time to explore in greater depth, I hope that your Lordships will not support these amendments.
Lord Oakeshott of Seagrove Bay: My Lords, the hour is late. I accept that not many new arguments have been made since Report. Neither we nor the Conservatives pressed this matter to a Division on Report as the amendment was technically defective and did not apply to the right people. However, in this case it clearly does apply to the PPF and I beg leave to test the opinion of the House.
6.32 p.m.
On Question, Whether the said amendment (No. 73) shall be agreed to?
Their Lordships divided: Contents, 73; Not-Contents, 132.

Division No. 3

CONTENTS

Addington, L.

Falkland, V.

Alderdice, L.

Falkner of Margravine, B.

Alliance, L.

Fearn, L.

Avebury, L.

Fookes, B.

Barker, B. [Teller]

Forsyth of Drumlean, L.

Beaumont of Whitley, L.

Fowler, L.

Bonham-Carter of Yarnbury, B.

Garden, L.

Bowness, L.

Goodhart, L.

Bradshaw, L.

Hamwee, B.

Carlile of Berriew, L.

Harris of Richmond, B.

Clement-Jones, L.

Hooson, L.

Dykes, L.

Inglewood, L.

Eden of Winton, L.

Jacobs, L.

Elis-Thomas, L.

Laird, L.

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Livsey of Talgarth, L.

Redesdale, L.

McAlpine of West Green, L.

Rennard, L.

Macfarlane of Bearsden, L.

Roberts of Llandudno, L.

Mackie of Benshie, L.

Rodgers of Quarry Bank, L.

Maclennan of Rogart, L.

Roper, L. [Teller]

McNally, L.

Russell-Johnston, L.

Maddock, B.

Scott of Needham Market, B.

Mar and Kellie, E.

Sharp of Guildford, B.

Methuen, L.

Shutt of Greetland, L.

Michie of Gallanach, B.

Smith of Clifton, L.

Miller of Chilthorne Domer, B.

Stern, B.

Stoddart of Swindon, L.

Monson, L.

Sutherland of Houndwood, L.

Naseby, L.

Swinfen, L.

Neuberger, B.

Taverne, L.

Newby, L.

Thomas of Gresford, L.

Northover, B.

Thomas of Walliswood, B.

Oakeshott of Seagrove Bay, L.

Thomson of Monifieth, L.

Palumbo, L.

Tope, L.

Peyton of Yeovil, L.

Tordoff, L.

Phillips of Sudbury, L.

Walpole, L.

Plumb, L.

Watson of Richmond, L.

Razzall, L.

Williams of Crosby, B.

NOT-CONTENTS

Acton, L.

Gilbert, L.

Ahmed, L.

Golding, B.

Alli, L.

Gordon of Strathblane, L.

Amos, B. (Lord President of the Council)

Gould of Brookwood, L.

Gould of Potternewton, B.

Andrews, B.

Graham of Edmonton, L.

Archer of Sandwell, L.

Greengross, B.

Ashton of Upholland, B.

Griffiths of Burry Port, L.

Bach, L.

Grocott, L. [Teller]

Barnett, L.

Harris of Haringey, L.

Bassam of Brighton, L.

Harrison, L.

Berkeley, L.

Hart of Chilton, L.

Bernstein of Craigweil, L.

Haskel, L.

Bhattacharyya, L.

Haworth, L.

Billingham, B.

Hilton of Eggardon, B.

Blood, B.

Hogg of Cumbernauld, L.

Bragg, L.

Hollick, L.

Bramall, L.

Hollis of Heigham, B.

Brooke of Alverthorpe, L.

Howie of Troon, L.

Brookman, L.

Hughes of Woodside, L.

Burlison, L.

Hunt of Chesterton, L.

Campbell-Savours, L.

Hunt of Kings Heath, L.

Carter, L.

Janner of Braunstone, L.

Carter of Coles, L.

Jay of Paddington, B.

Chorley, L.

Jones, L.

Christopher, L.

Judd, L.

Clinton-Davis, L.

King of West Bromwich, L.

Cohen of Pimlico, B.

Kirkhill, L.

Corbett of Castle Vale, L.

Lamont of Lerwick, L.

Craig of Radley, L.

Layard, L.

Crawley, B.

Lea of Crondall, L.

David, B.

Leitch, L.

Davies of Coity, L.

Lipsey, L.

Davies of Oldham, L. [Teller]

Lockwood, B.

Dean of Thornton-le-Fylde, B.

Lofthouse of Pontefract, L.

Desai, L.

McDonagh, B.

Dixon, L.

MacKenzie of Culkein, L.

Drayson, L.

McKenzie of Luton, L.

Dubs, L.

Mason of Barnsley, L.

Elder, L.

Massey of Darwen, B.

Evans of Parkside, L.

Morgan, L.

Evans of Temple Guiting, L.

Morgan of Drefelin, B.

Farrington of Ribbleton, B.

Morris of Aberavon, L.

Faulkner of Worcester, L.

Morris of Manchester, L.

Filkin, L.

Palmer, L.

Fyfe of Fairfield, L.

Patel of Blackburn, L.

Gale, B.

Pendry, L.

Gavron, L.

Pitkeathley, B.

Gibson of Market Rasen, B.

Plant of Highfield, L.

Giddens, L.

Prosser, B.

1258

Randall of St. Budeaux, L.

Thornton, B.

Rendell of Babergh, B.

Tomlinson, L.

Richard, L.

Triesman, L.

Rooker, L.

Truscott, L.

Rosser, L.

Tunnicliffe, L.

Royall of Blaisdon, B.

Turnberg, L.

Sawyer, L.

Turner of Camden, B.

Sewel, L.

Uddin, B.

Wall of New Barnet, B.

Sheldon, L.

Warner, L.

Simon, V.

Warwick of Undercliffe, B.

Slim, V.

Whitaker, B.

Smith of Leigh, L.

Whitty, L.

Snape, L.

Wilkins, B.

Symons of Vernham Dean, B.

Williams of Elvel, L.

Taylor of Blackburn, L.

Woolmer of Leeds, L.

Thomas of Macclesfield, L.

Young of Norwood Green, L.

Resolved in the negative, and amendment disagreed to accordingly.
6.41 p.m.
Lord Skelmersdale Lord Skelmersdale moved Amendments Nos. 74 to 79:
Page 271, line 36, leave out sub-paragraph (5) and insert—
"(5) By virtue of subsection (2) of section 9 (non-executive functions), the function conferred on the Regulator by subparagraph (4)(b), so far as it relates to the terms and conditions as to remuneration, is exercisable on its behalf by the committee established under that section."
Page 273, line 32, leave out paragraph (a) and insert—
"(a) the committee established under section 9 or any of its sub-committees, or"
Page 273, line 38, leave out "Non-Executive Committee" and insert "committee established under section 9"
Page 275, line 3, leave out from "which" to end of line 4 and insert ", by virtue of subsection (2) of section 9, must be discharged by the committee established under that section),"
Page 276, line 18, leave out "Non-Executive Committee" and insert "committee established under that section"
Page 280, line 11, leave out "Non-Executive Committee" and insert "committee established under section 9"
On Question, amendments agreed to.
Schedule 5 [The Board of the Pension Protection Fund]:
[Amendment No. 80 not moved.]
Lord Skelmersdale Lord Skelmersdale moved Amendments Nos. 81 to 87:
Page 294, line 28, leave out sub-paragraph (6) and insert—
"(6) By virtue of subsection (4) of section 113 (non-executive functions), the function conferred on the Board by sub-paragraph (5)(a) is exercisable on its behalf by the committee established under that section."
Page 295, line 1, leave out sub-paragraph (4) and insert—
"(4) By virtue of subsection (4) of section 113 (non-executive functions), the functions conferred on the Board by sub-paragraph (3)(a) and (b) are exercisable on its behalf by the committee established under that section."
Page 295, line 18, leave out "Non-Executive Committee" and insert "committee established under section 113"
Page 295, line 20, leave out sub-paragraph (6).
Page 295, line 32, leave out "Non-Executive Committee" and insert "committee established under section 113"
Page 295, line 37, leave out from "which" to end of line 38 and insert "must, by virtue of subsection (4) of section 113, be discharged by the committee established under that section)"
Page 299, line 33, leave out "Non-Executive Committee" and insert "committee established under section 113"
On Question, amendments agreed to.
Baroness Hollis of Heigham: My Lords, I beg to move that this Bill do now pass. I shall say only a few sentences. The Bill is in a very different shape from when it entered the House. The changes have been made with consent all around the House, apart perhaps from on annuities. I am very appreciative of the active work of those on the Liberal Democrat and Conservative Front Benches; the work has been done in a spirit of co-operation and non-partisanship that shows the House of Lords at its best.
Apart from thanking my own team, I want to recognise on behalf of us all, I am sure, the work produced by the officials in terms of briefings, meetings, information and the like. I have never dealt with a team of officials who have shown such unrivalled good humour and intelligent industry. The Bill is better not only for your Lordships' work, but also for the work that the officials have continued to exhibit. The House and I have been fortunate in that work.
Moved, That the Bill do now pass.—(Baroness Hollis of Heigham.)
Lord Higgins: My Lords, it is increasingly clear that the time restraints under which the Commons operates with Programme Motions make it extremely difficult for it to do the job properly. I agree entirely with the noble Baroness; an enormous number of government amendments has gone through. There have been many government concessions, which have been entirely justified. We have divided the House on certain issues, all of which have involved amendments that ought to be accepted in another place.
The noble Baroness has done a remarkable job in improving the Bill. We have had great support from those on the Liberal Democrat Benches, and the House of Lords has operated as it ought to. We have carried out our task as best we can, and the Bill is a great deal better as a result of that. I join her in expressing thanks to officials.
Lord Oakeshott of Seagrove Bay: My Lords, we join in those expressions, particularly those addressed to the officials. It is fair to say—they have been the first to admit it—that they have been on a very steep learning curve for much of the Bill, and we have greatly appreciated their help. I also thank the noble Baroness for her kind remarks. I am not sure about the "nonpartisanship"; she will be interested to see when we start getting partisan. However, we have greatly enjoyed our proceedings and hope that we have improved the Bill.
On Question, Bill passed, and returned to the Commons with amendments.

Northern Ireland
6.45 p.m.
The Lord President of the Council (Baroness Amos): My Lords, I would like to repeat a Statement made in another place by my right honourable friend the Secretary of State for Northern Ireland. The Statement is as follows:
"With permission, Mr Speaker, I wish to make a Statement. I announced on Friday 12 November my intention to despecify the UDA, incorporating the UFF. I signalled my intention to lay an order before this House to give effect to that decision and today I have taken the earliest opportunity to do so. This House will also be aware of the statement made yesterday by the Ulster Political Research Group on behalf of the UDA. I welcome that development, which I think is positive, and will say more about the detail in due course.
"First, I want to explain my actions in terms of despecifying the UDA. I have reviewed the status of all specified and other paramilitary organisations, as I am obliged to do under legislation, and concluded that there are sufficient grounds to despecify the UDA/UFF. For some time now, there has been contact between my officials and their political representatives. I, too, have recently met them. I view this as part and parcel of an overall strategy to bring final closure to the problems that have hindered progress in Northern Ireland and to set in place an inclusive future for all, based on an enduring political settlement.
"The UPRG announced a 12-month period of 'military inactivity' by the UDA/UFF, known as the Gregg initiative, on 23 February 2003 and announced an 'indefinite extension' of the Gregg initiative on 24 February 2004. I have taken advice from the chief constable and others and, as I am obliged to do under the terms of the Northern Ireland (Sentences) Act 1998, I have reviewed the status of all specified and other paramilitary organisations. It is my judgment, made in the round and having regard to the Act and other relevant issues, that the UDA ceasefire is now holding and is genuine.
"I appreciate that some may question this decision in light of negative comments in recent IMC reports. I have carefully studied both relevant IMC reports and support the strong language directed against a range of paramilitary organisations. But it is clear, between the first and second relevant reports, that there has been a reduction in UDA activity. Other material provided to me would endorse that view.
"I am persuaded by the advice I have received that it is appropriate to despecify the organisation. I have taken this decision cautiously and prudently, considering the full consequences of my actions, and the effect on others, particularly victims. I am only too conscious of the impact on victims of violence and the terrible consequences of both sectarianism and feuding within communities. I would reassure

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victims that this Government have not forgotten their suffering and that we will continue to support and work with them.
"But there is now an opportunity to move forward. The statement made yesterday by the UDA contained a number of important undertakings. First, there is its commitment to work towards the day when, to use its own words, there will no longer be a need for the UDA or the UFF, its reaffirmation that the UDA will desist from all military activity and its declaration that the organisation's strategy will focus on community development, job creation, social inclusion and community politics. Secondly, there is its agreement to enter into a process with the Government which will see the eradication of all paramilitary activity. Thirdly, there is confirmation that it will re-engage with the Decommissioning Commission; indeed, I understand that it has already begun.
"These undertakings, which are commitments and not aspirations, are positive ones. The Government agree with the UPRG when it says that the loyalist community's enemies are issues such as poverty, social deprivation, drugs and crime, and we will work energetically with it and others to tackle those problems.
"The other issue is to end paramilitarism, and we will he discussing equally urgently with the organisation how this is to be achieved. The UDA says that it wants lasting peace and that it can prove to the people of Northern Ireland that it can change. I believe it should be given the opportunity to do so.
"However, the Government have always made clear that they would judge paramilitary organisations by their deeds and not by their words alone. So I will be watching the actions of the UDA very carefully over the coming weeks to ensure that it lives up to the commitments that it has made. The UDA remains a proscribed organisation and the police will pursue relentlessly any criminal activity undertaken by its members or those of any other group.
"In coming to a final judgment on this matter, I wish to acknowledge the work that has been done in terms of political leadership by the UPRG. I also want to recognise the contribution that members of other political parties have made to creating the conditions in which loyalism can take these important steps. I also want to use this opportunity to call on other groups engaged in violent activity to take similar steps.
"I know that the House will agree that the time has long since passed for all paramilitary groups—loyalist and republican—to cease their activities once and for all and to decommission the weapons which have brought so much suffering to the people of Northern Ireland. As my right honourable friend the Prime Minister said in Belfast in 2002, the Government want to see all paramilitary groups complete the transition from violence to exclusively peaceful means. I believe that yesterday's announcement by the UDA, together with political
1262
dialogue which is currently taking place with other interested parties, constitutes a significant step towards achieving this goal—a goal which unites every Member of this House and every decent person in Northern Ireland".
My Lords, that concludes the Statement.
6.52 p.m.
Viscount Bridgeman: My Lords, I thank the Minister for repeating the Statement today and for her customary courtesy in giving us early knowledge of its contents. From these Benches, we want to he in a position to welcome yesterday's statement on behalf of the Ulster Defence Association. We hope that there will now be, in the words of yesterday's statement, an eradication of all paramilitary activity.
But it is not by mere words that we shall judge the UDA; it is by its actions on the ground, and, in that respect, there is clearly a long way to go. The Independent Monitoring Commission has highlighted in two reports the extent to which the UDA has been involved in murder, shootings, assaults, exiling, organised crime and drugs. It has painted a graphic picture of the way in which the UDA imposes a mafiastyle terror on entire communities.
Representatives of the UDA often talk about the problems affecting loyalist communities, but does the Minister not agree that organisations such as the UDA are the main problem affecting loyalist communities? The most recent IMC report concluded that the UDA,
"remains heavily involved in many kinds of organised crime and remains an active organisation capable of more widespread violence, with the will to commit it if judged appropriate".
Yet all these paramilitary and criminal activities have taken place over a period when senior UDA figures have reiterated their commitment to the 1994 cessation of military activities. That alone should lead us to be cautious; so, too, should the deplorable incident last night when an SDLP councillor in Larne, who has previously been targeted by loyalists, had to fire shots to defend himself.
I have a number of questions which I should like to ask the Minister, but I understand that she has a very important engagement. If she is not able to answer them comprehensively, I am sure that we shall have the benefit of a letter being placed in the Library of the House. My questions are as follows. Does the Minister agree that an eradication of all paramilitary activity must include an end to all other forms of criminal activity? What assurances has she had from the UDA that the organised crime, the drug dealing, the racketeering and the intimidation will stop? And does she agree that it must include the complete decommissioning of the UDA's illegally held weapons?
The Minister's right honourable friend the Secretary of State is clearly taking the UDA at its word in taking it off the list of specified organisations. Will the Minister confirm that, unless all its activities now cease, she will have no hesitation in putting it back on the list? Will she also confirm that, notwithstanding

1263
yesterday's statement, there will be absolutely no letup in the work of the police and the Assets Recovery Agency in pursuing the UDA figures who have amassed vast fortunes on the back of crime and terror?
Finally, there will certainly be speculation within Northern Ireland that these announcements are an integral part of a sequence designed to bring about restoration of the political institutions in Northern Ireland. We know that the British and Irish Governments are planning an initiative which is designed shortly to restore the institutions of Stormont. Will the Minister confirm that there can no longer be any room for fudge and that everyone, including the paramilitaries on all sides, must do what is required of them to make this initiative really effective?
6.56 p.m.
Lord Smith of Clifton: My Lords, I, too, thank the Minister for repeating the Statement. We on these Benches find it a surprising decision, given the latest IMC report of only 10 days ago that outlined continuing loyalist paramilitary violence. In response to my Question earlier in the year, the Minister's statistics revealed that loyalist atrocities were running at twice the rate of those perpetrated by republicans.
Astonishingly, as the noble Viscount, Lord Bridgeman, remarked, early this morning, hours before the Secretary of State was known to be despecifying the UDA/UFF, a gang of loyalist paramilitaries attacked the house in Lame of a local SDLP councillor, Mr Danny O'Connor, where he lived with his mother. His brother had previously been murdered by the loyalists. Does the Minister agree that the timing of that incident does not augur well for the proclaimed ceasefire and the withdrawal by the UDA from all forms of violence?
The Statement is very vague as to the precise reasons for the Secretary of State's decision to despecify. In the light of today's attack on Councillor O'Connor, general utterances of the kind used in the Statement do not carry the credibility that more specific and detailed reasons would have done. Can the Minister elucidate more specifically on her right honourable friend's reasons for coming to the decision that he has?
Furthermore, can she expand on what is meant by the term "ceasefire'? The past 10 years have shown that it is not a robust operational concept. Should we not now be speaking more precisely by insisting that paramilitary organisations become fully committed to paragraph 13 of the Joint Declaration?
Can the Minister assure the House that absolutely no understanding has been reached with the UDA that would permit it to preserve elements of its paramilitary infrastructure, especially as it has recently said that it retains,
"the right to defend its own communities"?
Finally, will the Minister confirm that government undertakings to work with a reformed UDA on community development and economic renewal will
1264
not undermine the role of democratically elected representatives both at the local level and in the Assembly?
Northern Ireland has seen too many false starts and disappointments in the past. We must hope, against the odds, that this will not he yet another. Sinn Fein now needs to persuade the IRA to take similar action and totally decommission, as the Secretary of State has called for in the Statement.
With fingers crossed, we on these Benches are inclined to support the Secretary of State in his latest move but we will be helped by the Minister's responses to the queries that I have raised.
6.59 p.m.
Baroness Amos: My Lords, I thank the noble Viscount, Lord Bridgeman, and the noble Lord, Lord Smith of Clifton. I particularly thank the noble Viscount for acknowledging the pressures on my time. As ever, parliamentary engagements take precedence and I am happy to reply to all questions that I am able to answer. If I am unable to address a question I shall, of course, write to the noble Lord concerned.
I agree with the noble Viscount that the Statement will be judged by the actions. It is not about words alone; but very much about action that needs to be taken. I assure the noble Viscount that the Government's policy remains the same: we are looking for complete decommissioning by all parties. Any decision of this kind has to be kept under review and I know that my right honourable friend the Secretary of State will keep his decision under review.
I turn to the specific questions that have been raised. The UDA has given assurances that eradication of paramilitary activity will include organised crime, but as I said earlier, words must be matched by action and the action must be swift and consistent. We all know that the drugs trade is a scourge and impacts on the young in Northern Ireland. It must be part of the process and I think the UDA recognises that.
The noble Viscount also sought assurances that there will be no let up in the work of the police and the Assets Recovery Agency. I am very happy to give him those assurances. The police and the Assets Recovery Agency carry out good work and they will continue to do that work.
The noble Lord, Lord Smith of Clifton, asked about the reasons for the decision. The noble Lord will know that under the Act the Secretary of State is required to take into account four issues when considering whether an organisation should he despecified. The four are as follows:
"whether an organisation—

"(a) is committed to the use now and in the future of only democratic and peaceful means to achieve its objectives;

(b) has ceased to be involved in any acts of violence or of preparation for violence;

(c) is directing or promoting acts of violence by other organisations;

(d) is co-operating fully with any Commission of the kind referred to in section 7 of the Northern Ireland Arms Decommissioning Act 1997".

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That paragraph continues. The Secretary of State has taken account of and, as has been made clear in the Statement, has weighed up those factors very carefully indeed.
Again, I can assure the noble Lord, Lord Smith, that no undertakings have been given to the UDA. All groups must decommission. There is certainly no intention to undermine the role of democratic representatives through this process. However, we have welcomed the statement by the UDA which says that part of its activity should be geared towards community cohesion and community development.
Lord Smith of Clifton: My Lords, before the noble Baroness sits down, can she say where the attack on Councillor O'Connor last night comes in the spectrum of violence on the part of paramilitary loyalists?
Baroness Amos: My Lords, of course, we absolutely condemn the attack that took place last night. As far as I am aware, there is no evidence that it was committed by the UDA, but the police are investigating the incident. The noble Lord also asked me earlier about the sequence of events. There is no choreography here, but it is clear that we want this to be a helpful part of the political process.
7.3 p.m.
Lord Laird: My Lords, I join other noble Lords in welcoming the Statement from the Lord President. Like everyone else, I am keen on the policy of wait and see. As other noble Lords have pointed out, we have been here before: we have had other dawns that have not matured into the full daylight that we would have expected. Does the noble Baroness recognise that there is great annoyance in the Province and that people are upset about the attack on the SDLP councillor in Larne overnight, only 45 minutes after the so-called change in attitude of the UDA was supposed to take place. If it is discovered that the UDA was involved in this matter, can we he assured that appropriate action will he taken?
One of the most insidious and nasty things that has come out of Northern Ireland in the past couple of years has been the Protestant paramilitary attacks on racial targets. That is something that the community will not stand for; it is one of the most disgusting, despicable things that can possibly happen. People who have suffered difficulties, possibly in their own land, come to Northern Ireland for a fresh start but are then subjected to violence from thugs and hoods masquerading as loyalists.
The racial minorities are a valued section of society. I would like to see them well integrated into Ulster society. They fulfil a very good function and many of them undertake extremely worthwhile jobs. As far as I am concerned, they are extremely welcome. I ask the Minister to ensure that anyone conducting racial attacks will be subject to the law.
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There is a perception that a lot of money goes to paramilitaries. They just have to put up their hands, say they are a paramilitary group and they receive funding right, left and centre. Those of us not in paramilitary groups but in community groups try to get funding and government support but always seem to be subject to cutbacks, allowing funding to go to paramilitaries. Does the noble Baroness recognise that that is an unfair state of affairs? That was very much reflected in the words of the noble Lord, Lord Smith of Clifton, when he said that we cannot ignore the democratically elected people in Northern Ireland—they play a very important part. Those community groups that have nothing to do with paramilitarism should not he punished by a lack of resources.
The House should recognise that if the effect of the Statement and the effects of the statements made yesterday by the groups come to fruition, that will be to the benefit of everyone in the Province.
Baroness Amos: My Lords, I thank the noble Lord, Lord Laird. Of course, I recognise the concerns in Northern Ireland about the attack that took place last night. As I said earlier, the Secretary of State will keep this decision under review. I too condemn the rise in racial attacks in Northern Ireland. We have discussed the issue in this House before. I entirely agree with the noble Lord, Lord Laird, that our ethnic minority communities in Northern Ireland are a very valued section of society.
On the issue of funding, I reiterate that we will not ignore democratically elected groups. Yes, there are different priority areas with respect to funding in Northern Ireland. Very often different groups compete for the same pot. We have to consider that very carefully, but from his own work the noble Lord will be aware that clear criteria are established for the funding of community organisations in Northern Ireland.
Lord Fitt: My Lords, it is regrettable that there is no Minister in this House who has sat down face-to-face with the UDA and asked all the questions that needed to be asked at the time. We have been down this road before. I vividly recall five or 10 years ago someone called Gusty Spence calling in the press and photographers and telling them that the UDA had given up violence. We all know that in the intervening years innocent Catholics have been murdered by the UDA.
The Statement says that the Secretary of State took a decision after having discussions with all the appropriate agencies and people in Northern Ireland. The PSNI, formerly the RUC, must have had an opinion on the activities of the UDA. The Minister may not be able to answer my question this afternoon—that is why I wish there was another Minister—but did the PSNI say that the UDA in its opinion was going to become a non-violent

1267
organisation? If it did, then it would appear to be in conflict with the decision that has been taken by the Minister. I think we should be very careful about this.
Two or three weeks ago we received the IMC report. I glanced at it and was surprised to see that members of the IMC were referring to a bunch of murderous thugs in the UDA as brigadiers. All those people have taken fancy titles for themselves; for example, supreme commander. They look on themselves as a legitimate army. In any dealings the Government have with them I would suggest that they treat them as what they have been and what they still are in my mind—criminals.
I ask the Minister a specific question. She was not at the talks, but in briefing the noble Baroness for this afternoon did the Minister say that the PSNI is of the opinion that the UDA is honest and is going to stop its ways of violence?
Baroness Amos: My Lords, perhaps I may refer the noble Lord, Lord Fitt, back to the Statement. It states:
"I have taken advice from the Chief Constable and others and, as I am obliged to do under the terms of the Northern Ireland (Sentences) Act 1998, I have reviewed the status of all specified and other paramilitary organisations".
My right honourable friend the Secretary of State then went on to say that it is his judgment,
"made in the round and having regard to the Act and other relevant issues, that the UDA ceasefire is now holding and is genuine".
I appreciate absolutely the concerns being expressed in the Chamber about the IMC report. It shows that the UDA remains an active organisation. It also shows that there has been a marked reduction in the level of violence from the group and that the leadership has reaffirmed the intention to hold to the terms of the ceasefire.
I recognise the scepticism being expressed around the Chamber, but we all know that, when we are dealing with such peace processes, sometimes decisions have to be taken in the round, as my right honourable friend the Secretary of State has done.
Lord Carlile of Berriew: My Lords, I declare an interest as the independent reviewer of the Terrorism Act 2000, in which position I sat face to face with the political parties and community groups in the Province. From that viewpoint I strongly welcome the Statement made by the noble Baroness and the Secretary of State this afternoon, especially if the actions of the UDA are consistent with the words which it has spoken and the intention it has declared. It will go a long way towards the normalisation of the criminal justice system in Northern Ireland.
However, does the noble Baroness agree that for there to be a real advance towards normalisation of the criminal justice system in Northern Ireland, it is absolutely essential that all paramilitaries should now start to disengage from their very large-scale involvement in organised crime?
Baroness Amos: My Lords, I thank the noble Lord. Lord Carlile, for welcoming the Statement. The noble Lord has a great deal of experience and expertise in this area. I agree also that the actions need to be consistent. The noble Lord is quite right that on other occasions Members of this House have expressed concerns at the link between paramilitarism and organised crime. That concern is shared by the Government. My right honourable friend has been assured by the UDA that it will tackle that. We will have to look at its actions. But I entirely agree with the noble Lord that this link has to cease.
Lord Tebbit: My Lords, first, I apologise to the noble Baroness for not having heard her deliver the Statement which I heard earlier in the day in the other place.
Does the noble Baroness agree that it is one thing to make a statement that one intends to give up violence; it is a distinctly different thing to give up the capability of violence and to surrender or put beyond use one's arsenal of weapons? Will she be able to come to the House before very long with a statement on the disarmament of the UDA?
Baroness Amos: My Lords. I agree with the distinction made by the noble Lord, Lord Tebbit. That is why the Government have been absolutely clear that decommissioning by all paramilitary organisations remains their priority in Northern Ireland.
The noble Lord knows that I cannot put a time-frame on that action. We have been working actively and serious acts of decommissioning have been overseen by the decommissioning authority. We want the UDA to take that action. It has already, as I understand it, begun talks with the decommissioning commission. We have to watch the action and not the words.
Lord Shutt of Greetland: My Lords, I too welcome the decision made and trust that it really is of some satisfaction. Whereas I take account of the points made by my noble friend Lord Smith and the noble Lord, Lord Laird, it seems to me that there has been a huge difference in the mental state of those people who have been involved for many years as men of violence for them to make that transformation to men of peace. Can anything be done by Her Majesty's Government, either with the UDA or with its friends the Ulster Political Research Group, in order to assist in that transformation?
Baroness Amos: My Lords, the noble Lord, Lord Shutt, asks a pertinent question. I am not a psychologist but I entirely take the point he makes. I shall investigate and see whether the Government are taking any specific action—I am not aware of any—or whether we are having any discussions around this particular issue or theme.
Lord Brooke of Sutton Mandeville: My Lords, pursuant to one of the questions asked by the noble Lord, Lord Laird, and to the words with which the Minister answered that question, can we take it that when the Government take comfort from the declaration of the UDA,
"that the organisation's strategy will focus on community development … social inclusion and community politics",
the Government believe that the UDA will not only desist from all military activity, which is also in the Statement, but that it will also desist from the racial activity to which it has recently been prone?
Baroness Amos: My Lords, we expect it to desist from all unlawful activity. That is part of the process we are going through. Again I repeat what I have said in response to other noble Lords: we now have to look at the actions. The statements have been made. Everyone in this House wants the political process to move forward and for peace to come to Northern Ireland as quickly as possible, but that requires certain action on the part of paramilitary groups. We have to hold them to account as best we can.
Baroness Farrington of Ribbleton: My Lords, I understand that the noble Viscount, Lord Bridgeman, wishes to make a personal statement to correct something.
Viscount Bridgeman: My Lords, I wish to apologise to the noble Baroness and to the House for my failure to address her properly as Lord President.
Baroness Park of Monmouth: My Lords, I welcome, as I think we all must, the Statement in many ways, but I should like to hear from the Lord President whether the disarming of the paramilitaries will be done in a different way from the decommissioning that has so far taken place through the decommissioning commission.
That has tended to deal with arms in the hands of a group that call themselves an army, whereas what we are talking about now—and should have been talking about since 1997—is removing the guns from the hands of the people in the little back streets of Belfast who have terrorised everybody all these years. I hope very much that something will be done to ensure that they give up their arms, rather than the UDA making some symbolic gesture very secretly with the decommissioning commission, as happened with the IRA.
Baroness Amos: My Lords, I can assure the noble Baroness, Lady Park, that this is about decommissioning all illegal weapons, it is not in any way about making a distinction between small arms. There was a report over the weekend which seemed to give some credence to that. My right honourable friend the Secretary of State for Northern Ireland today described that as rubbish. I can do no better than he did.

Hunting Bill
7.19 p.m.
Lord Grocott: My Lords, I have it in command from Her Majesty the Queen and His Royal Highness the Prince of Wales to acquaint the House that they, having been informed of the purport of the Hunting Bill, have consented to place their prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
Bill read a third time.
Clause 47 [Subordinate legislation]:
Lord Mancroft Lord Mancroft moved the amendment:
Page 19, line 18, leave out from "instrument" to end of line 22 and insert—
"( ) An order of the Secretary of State under this Act may not be made unless a draft has been laid before and approved by resolution of each House of Parliament, other than an order under section 49 which shall not be subject to parliamentary proceedings."
The noble Lord said: My Lords, on behalf of the other noble Lords whose names are attached to the amendment, I beg to move the amendment. Its effect is identical to Amendment No. 19, moved and agreed to by your Lordships at Report. It is being moved again at Third Reading because the original amendment contained an inaccurate line reference which would have made the amendment inconsistent with the clause's structure. Although the Clerks accept that your Lordships agreed to the amendment, and what it is intended to do, at Report, as a matter of procedure it must be formally moved again in order to correct the incorrect line reference in the amendment agreed at Report and thus be inserted in the correct place. I beg to move.
On Question, amendment agreed to.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whitty): My Lords, I beg to move that this Bill do now pass.
Moved, That the Bill do now pass.—(Lord Whitty.)
Lord Peyton of Yeovil: My Lords, I have so far taken no part at all in the debates on this Bill, but, before it leaves your Lordships' House, I wish to take up a few minutes of your time. I regard it as a disgraceful measure, a shocking interference with the personal liberties of people who have broken no law, on the strength—here I use the word of Mr Banks—of the passions of a few. I want to say as seriously as I can at this stage that I find the prospect of being ruled by the passions of anybody unappealing, and that is particularly so of those of Mr Banks. They seem monstrously unattractive.
I am sure that I will not get an answer from the Minister, but I also want to ask: what was the position of the Prime Minister on the Bill? He has given the impression throughout that it was nothing to do with him and that he wished to be dissociated from it as far as possible. But that position surely comes ill from a leader of a party and a Prime Minister. That seems a

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thoroughly cowardly position to have taken up and shows once again, if we needed further proof of it, his total disdain for what goes on in Parliament. I do not want to say more, but I hope that the Government will learn some lessons from this and that, while they remain in office, they will in future do their best to discourage their wilder followers from policies that simply divide the country, at a time when it is facing very important issues on which division is, or should be, the last thing we seek.
That is all I have to say, but I make very clear how absolutely disgusted and revolted I have been by this Bill. There was one word, emanating from the Benches behind the Minister, which appealed to me during its passage. That was when the noble Baroness, Lady Mallalieu, spoke of the "stench" that hung over government policy on the matter. I cannot endorse that word too warmly.
Lord Hurd of Westwell: My Lords, as we are now close to a decision in this House, I think that it is right to turn away from the arguments with which we have been familiar during the Bill's passage to a word about the consequences of its passage—in particular, if it is carried, as it may be, through the use of the Parliament Act. It is not for me to discuss the legality of the 1949 Act, although I gather that that may be tested before long in the courts. But we laymen are entitled to say something, and I think it needs to be said tonight, about the impact of its use—if that is what happens—to force into law a Bill in the form of a ban rejected at one stage by Ministers and consistently rejected by this House.
The origins of the Parliament Act 1911 are famous. It was passed by a Liberal government determined to see that essential government business was passed. There is nothing in the 1949 Act that alters that context. That is light years away from the present position and many of us believe that the use of the Parliament Act on this Bill would be bizarre and, to all friends of individual liberty, completely unacceptable. The Lords is returning to the Commons a Bill broadly in line with and in the form which the Government themselves once favoured. I say "broadly" because I know that there are particular provisions which differ.
Normally, at this stage, we are all familiar with that. Such differences are discussed in the dying days of a Session between the two Houses. So far as I am aware, no such discussion is going on. Why? The majority in this Chamber is composed of noble Lords from all parts of the House, but there is no one with whom we can negotiate in the Commons. The Prime Minister's spokesmen, those powerful and shadowy creatures, have for days been dropping hints about compromise, and so have individual Ministers. But those are incoherent and useless, because the people who drop those hints have abdicated the power to do anything about it. They have handed over the power to the Back-Bench majority in the Commons.
As my noble friend pointed out, that Back-Bench majority is not concerned with the welfare of the fox but simply with hostility to those who hunt the fox.
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That hostility is based on what now seems to be impregnable ignorance of who are the people who hunt and how they set about it.
If this Bill passes through the use of the Parliament Act, it will have a different flavour, which will affect the way that it is enforced and received in the country. We are a law-abiding country, but all the way through our history our citizens have been able clearly to sniff out the difference between normal legislation and legislation that is unjust and passed in an unjust way, such as this Bill.
I sympathise with the position in which chief police officers will be placed if the Bill becomes law through the use of the Parliament Act. They will find, as they are finding, that the support on which they have relied implicitly in the countryside in the ordinary businesses of policing, so that they have not had to use all their resources themselves, will die away and be replaced by sourness the moment that the police move, as they will have to do, to enforce this law. That is a serious situation that is simply not grasped either by Ministers or their Back-Benchers. It is perhaps, even now, not too late to urge that some attention be given to that.
Those of us who live in the countryside and all those who signed the Hunting Declaration greatly appreciate what the police do to protect us from crime of all kinds and they have unflinching support from almost everyone. But very few people in the countryside accept that it is part of the duties of the police to pursue and punish people because they are simply following a traditional sport of their own choice.
7.30 p.m.
Lord Carlile of Berriew: My Lords, like the noble Lord, Lord Hurd, I wish to say a few words about the compromise, in particular. When this process started, those of us who oppose a ban believed that no action or very little action was needed on the control of hunting. I hope that Members of the Commons who take the trouble to read this debate will realise that the compromise has been almost all on one side. From time to time during the passage of the Bill in this House, the Minister has suggested that those opposed to the ban have not compromised at all or enough. It has been very difficult for us, because we do not know who to compromise with or what compromises are requested, and, as the noble Lord, Lord Hurd, said, we have not even had an indication of what the Prime Minister believes is an appropriate compromise. But we have compromised.
We have agreed to registration; discipline; tests, which, empirically judged, are in my view very sound; and what many of us call "Michael-plus", a version of the original Alun Michael Bill, which we believe has been improved by our compromises. We trust that the other place will take into account that there are two parties in any compromise. They have had ours; we hope now that we shall have theirs.
Lord Eden of Winton: My Lords, in many ways this Bill, to whose Third Reading and passage from this

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House we are now invited to consent, is much better than the one that came to us from the other place. It is obviously better than the banning Bill, but it is also better than the original Alun Michael Bill. It has been improved in three important ways: first, it proposes to treat all quarry species equally; secondly, the test for registration will include the management of wildlife; thirdly, time should be given for adequate and proper research into cruelty among the various different ways of controlling the quarry species.
It is poignant that our deliberations on this Hunting Bill have been taking place over a period of remembrance of those who gave their lives for this country. I do not want to become emotional about it in any way but I intrude one personal observation. I never knew my uncle Jack. He was killed within a few days of going to the front in the First World War. He did so in the process of trying to rescue a comrade who had been wounded. I have no doubt that when he left this country he took with him in his mind a vision of the places that he loved. He was a keen rider, a great horseman and came from a family with a long hunting tradition. His father had been master of the fox hounds for several seasons. I cannot tell what was in his mind, but I am sure that he was at heart against tyranny, as were the countless thousands of others whom we have been remembering in this country at various ceremonies up and down the land over these past few days— against tyranny and for freedom. By freedom they must have thought, as we think, of a tolerant society where the rule of law prevailed, where people could get on with what they wanted to do and the life that they wanted to live, so long as it did not trespass upon the lives of others, and where there was respect for the minority interests represented up and down the country.
The noble Lord, Lord Whitty, on Report, referring to what he called the "pro-hunters", said that they had adopted the more confrontational rather than the less confrontational option. The confrontational option was the one that came up to this House from the other place, which introduced the total banning Bill. That was the confrontational option, from which, as my noble friend has said, there has been no departure and no attempt to compromise. The anti-hunters, if they get their way, will not make one scrap of difference to the life or happiness of a single fox, but they will perpetrate a grave assault on the liberties of the people. They will drive a stake into the heart of the country. They will divide the people of this country, and the people of this country will not forget.
Lord Donaldson of Lymington: My Lords, I am in complete agreement that this Bill should pass, and in the form in which your Lordships' House has amended it. However, I want to take a quick glance into the future. In doing so, I need only say that I am in wholehearted agreement with the speech of the noble Lord, Lord Hurd. But I want to look at a slightly different potential aspect of the future. I fear that at this stage the chances of the two Houses of Parliament reaching a compromise agreement on the terms of the Bill must be regarded as slim, perhaps very slim. In the
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event of no compromise being reached, unless the Commons otherwise orders, the automatic procedures of the Parliament Acts 1911 and 1949 will take effect and the Bill will become the Hunting Act 2004 on Thursday.
It seems likely that the next stage will be for the Countryside Alliance to apply to the courts for leave to bring proceedings for judicial review. Although I do not know precisely what relief it will seek or on what grounds it will seek it, the general purpose of the application will clearly be to render the new Act ineffective. At that point I hope that those parliamentarians and others who seek a total ban on hunting will take a deep breath and remind themselves that in a constitutional democracy it is perhaps the most basic of all citizens' rights to be able to go to the courts to seek redress for grievances, whether real or imagined.
At that point I fear that we shall hear a great deal about unelected judges being asked to substitute their views for those of the elected House of Commons. Nothing could be further from the truth, and parliamentarians and others who claim to be democrats should know it. In this context, judges have only two tasks. First, they must uphold and enforce all laws which have a constitutional and legal foundation; in other words, laws which have a democratic foundation. Secondly, they must protect the public from being harrassed by laws which, notwithstanding the bona fides of those promulgating them, have no constitutional and legal foundation; in other words, laws which are undemocratic and perhaps dictatorial in character.
It is the duty of the judges, in undertaking those tasks, to ignore any argument based on contentions that the law under consideration is beneficial or otherwise. Their sole concern is with its legality. Long experience enables them to adopt that somewhat blinkered approach, which others might find difficult. What matters is that they adopt it in practice. It is because they are required to address an issue different from that which confronts both Houses of Parliament that the judges cannot be said to be usurping the functions of the representatives of the people, elected or unelected.
Earl Ferrers: My Lords, before the Bill goes to another place, I shall add a few words on the process used and the possibility that the Bill will be made law under the Parliament Act.
We know that we all have different views about hunting. I agree with all that my noble friend Lord Hurd of Westwell said about the Parliament Act and about the difficulties that the police might have, once the Bill had been enacted. My objection is that the Bill has been subjected to a most grotesque and irregular parliamentary procedure. The Parliament Act is there for times when there is disagreement between the two Houses on a Bill of a substantial nature. As my noble friend said, this Bill is light years away from what was anticipated in 1911. The purpose was that, if there was

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disagreement between the two Houses, the Parliament Act could be used. There has been no disagreement between the two Houses.
When the first Bill was passing through another place, it was changed at the last moment due to the actions of some Back-Benchers. It was changed from being a regulating Bill to being a banning Bill. In Committee in your Lordships' House, it was changed back to being a regulating Bill. Thereafter, the Government stopped any further discussion of the Bill. The Government said that there was to be no more Committee, no Report and no "Bill do now pass" Motion. The Government said that the Commons would not be able to consider any of the amendments that your Lordships might have made but did not. So, that Bill stopped.
In this Session, the Government introduced a similar Bill. It had to be directly similar, in order for it to be passed using the Parliament Act. All stages of that Bill took place in one day in another place. Then, it came to your Lordships' House. We are told that, despite all our discussions and all the amendments that have been made, which show how much error there was in the original Bill, none of our amendments is likely to be accepted or considered—they may be, but we are told that it is unlikely—by another place. We are told that the Bill will be processed under the Parliament Act. That is a gross infringement of the parliamentary process.
The purpose of Parliament is to allow for disagreement. That disagreement should go backwards and forwards between the two Houses until there is agreement. In the event of there being no agreement, either the Bill will fall or the Parliament Act can be used. This is an abuse of parliamentary procedure because the Bill will not have been discussed in another place after being in your Lordships' House. That is terrible.
With all his great charm, the noble Lord. Lord Whitty, said that he was a "facilitator"—that was the word that he used. He was nothing of the sort. He was the Minister responsible for a government Bill. It so happens that his Back-Benchers in another place hijacked the Bill and twisted it into something that the Government did not want. Nevertheless, it was a government Bill.
We all understood the noble Lord's difficulties. If he had accepted the amendments, which would have translated the present Bill into the Bill that the Government originally introduced, he would have infuriated all the Labour Back-Benchers in the House of Commons. If, on the other hand, he had said that he would accept the Bill as it was, he would have been supporting something that was not the Government's intention in the first place. The noble Lord was in a dilemma. We understood and sympathised, and some of us smiled a little at it. The noble Lord acquitted himself well over that matter.
It would be a monstrous use of the Parliament Act to use it for this Bill. It will split the countryside apart. It is a terrible thing that the Government and
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Parliament—the House of Commons—are determined to bludgeon the interests of the countryside into the ground just because of a few Back-Benchers. There may be quite a lot of such BackBenchers, but, as one noble Lord said—I think that it was my noble friend Lord King of Bridgwater—those Back-Benchers have no responsibility for dealing with the aftermath, unlike Cabinet Ministers.
If the Bill is passed by your Lordships' House—it will be—I must record the fact that I think that it has been passed through a monstrous misuse of the processes of Parliament.
7.45 p.m.
Lord Donoughue: My Lords, I compliment the House for producing this compromise Bill. From our side's point of view, it is not ideal, and the noble Lord, Lord Carlile of Berriew, gave examples of that. In particular, the tests of "least cruelty" will be difficult to prove or pass.
This side—by "this side", I mean the representatives of a majority of all sides, one of the other commendable aspects of the process—has accepted much that it does not like, in the cause of compromise. As has been said, the other side, which tends to be one party's side, has not yielded an inch. This House has demonstrated within itself what is normally the parliamentary process between the two Houses and between all sides and has sought an acceptable compromise.
The Prime Minister has made it clear that he wants a compromise, and I believe him. To the Prime Minister I say that this is the compromise that he should adopt. This is the compromise that he should promote to his Commons Back-Benchers.
If any government started off wanting to deal with the issue of hunting in the context of animal welfare and wildlife management, they would, after due consultation, conclude with a Bill along these lines—as, to some extent, Alun Michael did. The Bill is based on a registration structure and on principle and evidence, as he said, although these were abandoned in the Commons hijack. We have borne in mind crucial considerations of wildlife management, which are central but were absent from the so-called compromises that were put before us last Thursday.
Assuming that the Bill is passed tonight, we await the reaction of the House of Commons. Many of us cannot predict what our position will be then, until we see what, if anything, returns. If a genuine attempt at real compromise—not a ban dressed up as a deceitful compromise—is returned, perhaps limiting some hunting but preserving the key structure of registration and the basic principles, including wildlife management and evidence-based decisions, we should consider it carefully. The question of the time of commencement is separate. It will depend on what is proposed; it will depend on what is to commence.
I urge the Prime Minister and the House of Commons that it is not, even at this late stage, too late to introduce legislation that is acceptable, if not perfect, from the point of view of any side. But if, on

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the contrary, they insist on a crude ban, which is enforced by the Parliament Act—abused and misused in my view—that will do nothing for animal welfare and will divide our society unnecessarily, that would be irresponsible. To accept this Bill, as improved by this House, would be a responsible approach. Therefore, I commend the Bill.
Baroness Miller of Chilthorne Domer: My Lords, this House has had its chance to send back a Bill that addresses compromise: it has had the Committee and Report stages. I speak for myself obviously and not for others on these Benches, but from where I stand I can see very little that is a compromise. In fact, I can see nothing at all from the Bill that was sent here.
Hare coursing was reintroduced into the Bill. The Bill was widened. When this House knew, I believe, that regulated foxhunting was an approach that would be possibly acceptable, it insisted on widening the Bill to include all forms of hunting again. Therefore, we cannot say that we are sending back a Bill with which it is possible that the Commons will agree. It will see no compromise. I know that noble Lords on all sides have expressed the view that we are sending back a better Bill that indeed includes a compromise, but that is simply not the case. We are under an illusion if we think that.
People who hunt care deeply about wildlife, its management and the countryside, but so do those who do not hunt. Too often, we have heard the statements made. Indeed, I would have supported regulated foxhunting. But pro-hunters cannot claim for themselves ownership of all issues concerned with the care of the countryside. They are as deeply felt by those who do not hunt.
I regret that we spent no time in Committee or at Report truly debating what would happen as regards species management in the event of a ban. I spent all of about two minutes in an exchange with the Minister at Report on the future of the red deer herd on Exmoor should a ban came into effect. That is to be regretted because when we debate legislation we should look at the results of any possibilities. Much has been made of what would happen in terms of law enforcement, and so on, if there was a ban, but very little has been said about what would happen to the different species if a ban was introduced. I know how deeply everyone genuinely feels about this issue, but I am sorry to say that we cannot stand or sit here today and feel proud of what we are sending back to the other place as a basis for a compromise.
Viscount Astor: My Lords, it is important that one should, I am afraid, rebut the speech made by the noble Baroness, Lady Miller, because we have improved the original Alun Michael Bill. First, we should be proud of it. Secondly, we should also be clear on exactly what we have done. Currently, the Bill has an identical registration system to the original Bill; it has an identical test of "least suffering"; and it has identical requirements for the tribunal.
Two important changes were made by this House. The first was the addition of the added criterion of "wildlife management". But that was publicly
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promised by Alun Michael at the commencement of the consultation period. It is not your Lordships' idea; it was the Minister's original idea. That is an important point to make. We have not made the test any easier by adding "wildlife management": it was the Government's original intention and they should own up to that.
Our second change is that we have added all forms of legal hunting to be passed by the registrar. That is fair and principled. Some will pass the test; some will not. That is a perfectly clear position. We have not made it any easier for any of those forms of hunting. All we have said is that they must pass the same test as everything else.
The changes that have been made are better. They have improved the Bill. We are open and honest about them. I hope that the Government can also be honest about their role in the Bill as it goes forward.
Lord King of Bridgwater: My Lords, my noble friend Lord Eden referred to Remembrance Day. For those of us who took part in that wonderful occasion, as it is every year, perhaps what strikes everyone most is that it brings people together. There is an extraordinary feeling of union and support on those occasions.
It is tragic that immediately after that we are discussing a measure which, if it is to be changed back to the form in which it came to this House, will he as divisive a measure as one can imagine. One only has to listen to the speeches of your Lordships on these Benches and all parts of the House to know how strongly many noble Lords feel about this measure and the damage that it can do.
Anyone who was next door will know that we lived with this issue for about 30 years. We knew the pressures, challenges and arguments that there were about it. I respected the views—one respected one's constituents' views—of those people who were not of the same view as oneself. One knew what a difficult issue it would be and how it would need to be handled with extreme sensitivity. It would need understanding and a bit of give and take on both sides to find any way forward.
If this goes the way that many of us fear, it could go down in history as a sort of text book case for future colleges of public administration of how not to run a government and how not to conduct legislation. I sympathise with the noble Lord, Lord Whitty. In one sense, he has had to sit there and no one quite knows whether he is a government Minister, a facilitator, an agent for the Commons, or whatever is his role. I have never seen a government Minister put in such an embarrassing position. Obviously, he has no answer to the challenge, "But this is not the Bill that you and your colleagues wanted to bring in and yet you are conducting the business as you are".
I suppose the ultimate humiliation, which really brought it home, was when the Minister warned this House, as my noble friend mentioned, that the amendment that we were considering at the time would be the most confrontational that we could pursue. He strongly urged the House not to support it.

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Who did not agree with him? Well, the roll call of honour—if I may put it that way— started with the Lord Chancellor and two other senior Members of his Front Bench. What will the people who may, ultimately, be affected by the Bill think when the history is written of the whole conduct of the Bill? They will not really need to read the history because they are aware of the shambles that it has been.
People—undoubtedly people in the hunting field—feel absolutely betrayed by the way that this has been conducted. We have heard those echoing words of "principle" and "evidence". They were not invented by these Benches or by other people who support or would allow hunting to continue, but by the Government who agreed and established that that would be the approach.
Jack Straw very sensibly set up the Burns inquiry and his committee. A number of people co-operated with that. A great number of people took a lot of time to give evidence, thinking that it was a serious attempt to consider these issues. But they found, ultimately, that in spite of careful, measured, serious and substantial consideration of these issues, it was all chucked clean out of the window. I had not thought that anyone would remember a speech of mine a week or so after it was made, so I was most grateful to the noble Lord, Lord Burns, for remembering that it was I who said that a bunch of Back-Benchers who will take no responsibility for the consequences of what they are doing are indulging themselves, leaving others to pick up the pieces.
8 p.m.
Here we have the Government, who of all governments I have admired and envied somewhat for their ability to control things—they are the control freaks of all time; it is their hallmark—completely losing control of this issue. They have let the genie out of the bottle and are now saying rather plaintively, "This is not what Tony wants. He would like a compromise". They are doing absolutely nothing to exercise the power of government to stop what they know will be disastrous.
I want to say a word about Exmoor, to which the noble Baroness, Lady Miller, referred. I represented part of Exmoor and I weep for what may happen there. The noble Lord, Lord Burns, very fully recognised the special situation and problem of Exmoor. Alun Michael claimed to recognise that the issues surrounding stag hunting on Exmoor were ones of considerable complexity and difficulty. The extraordinarily complicated relationship and interaction between farmers, deer and the hunt gives us the finest thriving herd of red deer in the country, or certainly in England. That has come about through the concentration of interests that care for them.
But now I see a different situation developing. There is no question about the fact that if you are a farmer on Exmoor and a herd of red deer decides to descend on your land, they are a pest. I had farmers coming to my constituency surgeries to complain about herds of
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red deer destroying their crops. It takes the particular relationship that exists among the people of Exmoor to allow them to tolerate the deer. With the co-operation of the hunt the deer are moved on so that the animals do not concentrate too much on any one particular farm. All that will go. With it will go farmers' tolerance. They cannot see their livelihoods destroyed, and I fear greatly for the future.
With his far greater experience, and obviously as a former Home Secretary, my noble friend Lord Hurd speaks with authority, but I refer only to my own constituency experience. I mention also the relationship between the local police and the country people on Exmoor. What will this legislation do to those human relationships that have formed such a strong bond over the years?
In the end it is a tragedy, and a most frustrating one. I say that because there seems to be no spokesman for what we may be faced with in this House. So far as I can see, no one is prepared to stand up and discuss in proper debate the argument for a ban. The noble Lord. Lord Whitty, has to sit there and try to explain what he believes people were thinking about, but that is wholly frustrating.
I accept that in earlier stages we heard speeches from people who explained why they did not like hunting. Perhaps an unpleasant experience had upset them when they were young. However, we now have a mechanism to deal with this difficult area. Many of the unpleasant and unfortunate complaints of the past could now be addressed. They are precisely the sort of issues that the registrar would he expected to deal with. If hunts did not conduct themselves in a proper way, your Lordships' compromise proposals provide a system that would he able to deal with them. While I have made it clear that I am not in favour of a system of registration, I agree that in the circumstances, and if that is the will, it must be accepted. It would mark a great step forward for those concerned about possible cruelty in hunting.
As others have said, I hope that even at this late stage wiser counsels will prevail in another place. Because of the way the measure has been handled: because of the obvious inadequacies, confusions and statements made by Government Ministers themselves that the proposal is unworkable; and because of the confused and chaotic background, the sort of problems we may face if it goes through—most of all if it is imposed by a Parliament Act—cause me to worry very much for the country.
Lord Livsey of Talgarth: My Lords, I wish to make a short contribution. I thank goodness that this is a matter of conscience and one that throughout its stages has been the subject of free votes—although I am not sure what will happen this evening. I would say to my noble friend that we do not know what the compromise is. What is the compromise in this situation? We know that the House of Commons will bring forward amendments to the Bill and no doubt some of those amendments will be passed. Only then

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will we have a clue about where we are going with the legislation. We do not really know the rules of the game at the moment.
It was interesting to note that the top predators of the fox were the bear and the wolf. Bears and wolves no longer exist, but foxes and badgers do. There are very good reasons for that. As others have said, the Bill has become a Bill for registered hunting; one to allow licensed hunting. I believe that those who are opposed to this solution and choose to send back to us a banning Bill are sadly ignorant of many of the issues. Registration would be subject to tests of least suffering, as was said in the Burns findings and at the Portcullis House hearings which resulted in the first Alun Michael Bill.
In my view, the Bill does not address adequately the situation in the uplands, and I know that a contribution is to be made on that with which I agree. The situation regarding wildlife is absolutely central. Hunting forms part of the overall pattern of countryside conservation, it is not the exclusive factor in conservation, but without it many places where wildlife can thrive in the countryside will diminish or vanish.
The three-year delay we voted for on Report would enable the Royal College of Veterinary Surgeons to undertake research on aspects of least suffering, and I believe that the Bill as now constructed is a compromise based on licensing and objective tests. Let us not forget: those objective tests could outlaw unacceptable forms of hunting. That is built into it.
The Bill has been constructively amended back to the original Alun Michael Bill of December 2003, with some additions. Indeed, it is the Bill that went to the House of Commons, where it was amended and eventually turned into a banning Bill. I believe that the Prime Minister wants a compromise—and this is it.
Lord Inglewood: My Lords, as your Lordships will know, I am a supporter of registered hunting. I also believe, as do a number of other Members of your Lordships' House who come from the north of England and from Wales, that the issue in the uplands is rather different from elsewhere. In the former, hunting is the only realistic way of dealing with foxes, whereas elsewhere it is merely the most desirable and best way of doing so.
I and a number of other noble Lords have raised this topic on several occasions. It had been our intention to table a further amendment for consideration today. However, despite having drafted it with the Clerks, I was surprised and disappointed when it was ruled inadmissible. In the circumstances, therefore, I hope your Lordships will allow me the indulgence of reading out to the House the amendment that we would have put down in order that it may take its place in the record of today's proceedings.
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It has the heading "Hunting on foot in the uplands" and was to be added to Schedule 1. It reads:
"(1) Unless the registration scheme established by section 2 and Part 2 is in force, hunting a wild mammal with a dog is exempt hunting if—

(a) the wild mammal being hunted is a fox;

(b) the person or people pursuing the wild mammal do so only on foot;

(c) the hunting takes place in an upland area of England or Wales;

and

(d) that form of hunting has been carried on in that manner in that locality during the last 10 years.

(2) For the purpose of this paragraph, an 'upland area' is land designated as a Less Favoured Area in accordance with Council Directive 75/276/EEC, as amended by Council Directive 84/169EEC and Commission Decision 91/25/EC.
(3) The Secretary of State may make regulations to set conditions (including provision for a registrar and registration scheme) for the hunting defined as exempt hunting by this paragraph".
That is the amendment which was intended, first, to ensure that the integrity of a registration scheme in general was upheld; and, secondly, to ensure that, in the event of a ban, this form of exempt hunting would not become a free for all but would itself be subject to a registration scheme and could exist as a microcosm of the larger one that the House would like to see in place.
From here on, who knows what will happen. I am grateful to your Lordships for allowing me to put that on the record.
Lord Alderdice: My Lords, I have not taken part in the debates on the Bill until now but sometimes a piece of legislation or a government measure becomes something more than the material upon which it appears to be based. Sometimes a government or those in authority take action which becomes symbolic, something around which people gather. There are certain things about the process and what is happening now that make me fear that something is developing with regard to the Bill which we have begun to see in other places too.
We have observed an election on the other side of the Atlantic in America, our closest ally. In my perception, at least, it was the most divided election that I have observed there—not only in respect of the votes but in respect of the attitudes and the approaches in the country itself; passions appear to have been aroused. This had a positive outcome in terms of participation—the rate of voting was way up on what it has been since the 1960s—but the depth of division was greater too, and that is much less positive.
Part of the reason for this is that, in political life in general, thinking about, reflecting on and discussing issues has begun to become less important than passion and emotion. Coming from the part of the world that I come from, I am the last person who would wish to remove all passion from political debate, but where it takes over from thinking, reflection and sound judgment is another matter.

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It seems to me that part of the explication of developments in the United States is that beliefs, convictions, policies, principles and rational argument have begun to become less important in influencing the way people vote than passion and belief held without reflective thought as a base for it. This is an important part of us as human beings, but it is a dangerous development. Led to its extreme it creates deep division and fundamentalism in approach.
In this country we would have to descend a very long way before we would find ourselves prey to religious fundamentalism. But it is not impossible that deep passions and emotions could be unleashed which would divide our country in other ways. Divisions between town and country, between those who hold to certain traditions and those who take pride in tossing them to the side, can become very deep as well.
It seems to me that our Government would be well advised, as they conduct this process and take an approach, not to permit things to happen which will deepen division. The division which is developing not in this House, particularly, between Government and Opposition Benches, but between this House and the other place may become reflective of deep division in the country as a whole. I hope and trust that our Government will recognise that, and take action to hold our country together rather than see it come apart.
8.15 p.m.
Baroness Byford: My Lords, I think the Minister and the Government should take note of the fact that some 13 noble Lords have decided to speak at this late stage of the Bill's proceedings. Many of them had already taken part, but one or two new people were moved to speak.
We have been asked all the way through for a compromise. The House, in going through the detail of the Bill, has come to a form of compromise. What we have not had from the Government, in any form and at any stage is any indication of what they would consider a compromise. That is truly remarkable; it may be the first time ever that we have been dealing with a Government Bill on which the Government have failed to give any direction or offer any compromise. That is where we are today.
I shall not repeat what noble Lords have said; each of their contributions has been very precious, in my view. However, I should like to pick out two contributions in particular, from my noble friends Lord King and Lord Hurd. My noble friend Lord Hurd, with his very great experience, said, quite rightly, that it is totally unacceptable that the Parliament Act should be used on this Bill. My noble friend Lord King referred to the fact that the Government said that the Bill should be based on evidence and on principle. They went to the trouble of having the Burns report and the Portcullis hearings, which have now been swept aside as not being important at all.
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We have been asked to consider how the Commons will deal with this compromise Bill. We know not; the Minister should at least tell us that tonight. Before we move that the Bill do now pass, we should know whether there will be a debate in another place or whether that will be guillotined and the Parliament Act will be used without a word of discussion on the Bill. Even if the Minister cannot give us much more, we are due that.
Changes have been made to the Bill, as the Minister knows. But Members around the House have decided that these improve the regulatory Bill which is before us. The whole issue of animal welfare is hugely important, and the inclusion of wildlife management is something for which the Minister was looking.
I should like to raise three issues. The rural affairs Minister, Alun Michael, said originally, quite rightly, that the future of hunting with dogs,
"should not be decided on personal taste, but on evidence on the principles of whether or not it is serving an effective purpose in managing wildlife and whether it is more or less cruel than the alternative methods currently available".
His words are all on the record. He said on the "Today" programme on 28 September that it was for the Lords to consider, to amend and to send something back constructively. I think your Lordships have done just that. I am sure that the Minister will not agree, but we cannot be accused of not doing that.
Alun Michael went on to say that he hoped that the House of Lords would engage with the Bill and seek to improve and amend it. We have done that. He said in the Commons:
"I will approach their amendments with an open mind and consider whether they are serious ones".—[Official Report, Commons, 15/9/94; col. 1326.],
He said that if they were serious amendments, they would look at them seriously.
Does the Minister think that there is a hope of that happening, or will this be shoved under the carpet and rushed through?
There is much more that I could say but at this stage it is not for me to do so. I hope that I have reinforced what noble Lords have said. I hope that I have shown that the Minister who is dealing with the Bill in another place clearly stated that he wanted us to consider the Bill, complete it and let it pass to another House. We have done that. It is a compromise Bill. We are all waiting to hear from the Minister what the Government's compromise is.
Lord Whitty: My Lords, I remind the House that I moved that the Bill, as decided in the House, do now pass, meaning that it would then be for the Commons to consider your Lordships' deliberations. It is true that this is a rather unusual situation in a number of respects. There has been a free vote in both Houses by all parties and, to some extent, that has meant that my role is that of facilitator. I thank the noble Lord, Lord King, and others for their commiserations about my position but actually I do not feel any great pity is needed for me. I am in fact carrying out an election

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manifesto promise made in two sequential elections that we would allow this issue to be resolved on the basis of a free vote in House of Commons.
Noble Lords: Parliament!
Lord Whitty: My Lords, we have said both, because if a free vote in both Houses goes different ways then ultimately the will of the House of Commons prevails.
The situation is also unusual because the two Houses are in absolutely polarised positions. They started from those positions and, regrettably, they have ended up in them. It is also unusual because deep passions have been evoked and I therefore understand why noble Lords are making somewhat exaggerated speeches at this stage in the debate.
Noble Lords: Oh!
Lord Whitty: My Lords, I will return to that. However, we are in the normal situation in other respects. We are often in this position in the ping-pong stages of a Bill where there have been deep disagreements and the House decides to send back to the House of Commons something that it knows the House of Commons has rejected. I do not know, on a free vote, what the House of Commons will do with this Bill. I do not know whether another form of compromise will be proposed in the House of Commons, and if it is, whether it will succeed. However, whatever else people have said this evening, the one thread running through the speeches has been that the House of Commons should again consider the position of the House of Lords. Indeed, that is what the House of Commons will he doing tomorrow.
Having said that, I am not sure whether the speeches today have helped that position. Once again, this House, instead of nodding through a Bill on Third Reading, has issued a challenge to the House of Commons rather than facilitating the House of Commons considering seriously the issue again. Anyone approaching this matter with any neutral state of mind would say that some of the appeals to high constitutional principles, the name calling, the threats of judicial intervention, the comparison of this with human rights issues and the sacrifices made in great wars were somewhat over the top.
Lord Cavendish of Furness: Rubbish!
Lord Whitty: My Lords, the noble Lord may feel that that is rubbish, but I suspect the vast majority of the British people think that many of the contributions this evening and throughout the debate in this House have been seriously over the top. I put it no higher than that. The point that I am making here and the point to which several noble Lords alluded is that, at various stages, there has been the possibility of a less confrontational position being adopted by your Lordships. I accept that the majority of this House feels that the position taken down below was highly
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confrontational. However, in those situations one tries to move closer to develop an argument in an area that might still potentially be a middle ground.
However, what has happened time and again is that this House has, on every occasion, chosen not to go down the road of potential olive branch or at least discussion, in which some Members of the House of Commons might have been interested, but has chosen the opposite. With the exception of the noble Baroness, Lady Miller, all noble Lords have taken that a bit further today and made speeches that are threatening to the House of Commons. They indicated that the House of Commons is acting with impropriety, that the Government are acting with impropriety and that this issue is bound to be a confrontational one.
I hope that Members of the House of Commons do not read too many of your Lordships' speeches today, but actually deal with the Bill, that I hope your Lordships are about to pass, in the normal way. But if they do not, we will be in a situation where the House of Lords has, to some extent, brought this upon itself.
Earl Ferrers: My Lords, is it not without precedent that a Bill should be considered to go under the Parliament Act, when its processes were not considered in the original Bill and, when it was reintroduced, all stages were taken in another place in one day? Was that an act of Government?
Lord Whitty: My Lords, it was an act of the House of Commons upon which it is not normal in this House to comment. But the other part of the noble Earl's assertions is totally wrong—his reference to the last time that such a Bill was before us and the manner in which the Government dealt with it then are, I believe, inaccurate. But even if the noble Earl were right, we are now in a position where the House has agreed to go through all of its procedures and we have reached the stage at which to move that the Bill do now pass.
The normal hope of this House would be, given that the majority of the House support the Bill in its present form, that the House of Commons give serious consideration to it. I would hope for the same and I merely draw to the attention of the House that it is not just the majority in the House of Commons which has adopted a confrontational view on this Bill. It is the pro-hunters here—and I use that term, although the noble Lord, Lord Eden, objected to it—and outside who have adopted a highly confrontational approach. At the end of the day that is bound to affect people's judgments and the way in which people consider the proposals that are now before them.
Even at the Report stage of the Bill, when noble Lords had before them a set of coherent compromise positions in the name of my noble friend Lord Tunnicliffe, supported by the noble Baroness, Lady Miller or Chilthorne Domer, once again noble Lords chose the more extreme position to send back to the House. That is the position that we are in. I would hope that the House of Commons is now prepared to consider those matters. What comes back from the House of Commons will be a matter for it. The issue

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of the Parliament Act does not arise until the House of Commons has considered the Bill in its present form. It will do so in the normal way, as with other legislation, except that it will be on a free vote, as it is this House.
The principle of the—
Lord Eden of Winton: My Lords, I am most grateful to the noble Lord for giving way at this stage. He has purported to be in a neutral position. When the other place considers the amendments that have been passed here, is any Minister going to give any lead at all? Is, for example, the Prime Minister going to give any indication of what he believes should happen, since all the whispers that have emerged from No. 10 have been that he wants a compromise? What compromise does he want?
Lord Whitty: My Lords, the position of the Prime Minister is well known. He supported the original Alun Michael Bill; he supported a number of improvements that were made in the Commons to that Bill, virtually all of which have been rejected by this House and noble Lords have gone back to a position which is well short of the Alun Michael Bill—and the Prime Minister has indicated that he would like a compromise to emerge. But the compromise requires that this House compromises and on every occasion it has not compromised; it has taken the less compromising position. That has to be taken into account when the Bill returns to the Commons. The Prime Minister has also indicated that he will accept the will of the House of Commons, because that is what was set out in the election manifestos—whatever the result in the House of Commons.
Lord Carlile of Berriew: My Lords—
Lord Whitty: My Lords, I will give way in a moment. We are in a free-vote situation. Every Minister has a free vote. Every Member of both Houses has a free vote. At the end of the day, if agreement cannot be reached, then the Parliament Act comes into play. But we are not yet at that stage. We are at the stage where this House wishes for its version—which it chooses to call a compromise—to go back to the House of Commons, where it should be considered in the normal way.
Lord Carlile of Berriew: My Lords, I am grateful to the noble Lord for allowing me to intervene. At 11 o'clock this morning the Prime Minister's official spokesman said that the Prime Minister was still firmly committed to trying to seek a compromise. In what way is the Prime Minister making that attempt to seek a compromise?
Lord Whitty: My Lords, I do not comment on radio programmes. What happens in the House of Commons will be a matter for the House of Commons.
Lord Carlile of Berriew: My Lords, with great respect to the noble Lord, it was not a radio
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programme; it was an official comment made by the Prime Minister's official spokesman which happens to have been relayed to the nation on a radio programme. But the comment was that of his official spokesman. Will the Minister please answer the question?
Lord Whitty: No, my Lords; I will not answer the question posed in that way. A number of rumours have emanated from I know not where—some of them from Downing Street, some from the House of Commons, some from this House, some from the Countryside Alliance and some from nefarious media influences. Clearly there is a discussion on whether any other compromise is available. That will undoubtedly be discussed in the House of Commons tomorrow. It would be wrong of this House to try to anticipate what will be discussed in the House of Commons. That is not the normal procedure. We normally send our Bills back and ask the House of Commons to consider them. That is what should happen today.
Lord King of Bridgwater: My Lords, I am grateful to the noble Lord. My noble friend Lady Byford asked whether the Government will be tabling any amendments tomorrow. Because of the pressure of our timetable—the Bill will be considered tomorrow—I imagine that amendments will be tabled tonight. Can the Minister tell us what form those amendments may take?
Lord Whitty: No, my Lords. I have had no indication of the form in which any amendments may be tabled by the Government, by Back-Benchers, by opposition parties or by anyone else in the House of Commons. We have not yet passed the Bill back to the House of Commons for them to table amendments to it. We are very shortly, I hope, to pursue the Motion that this Bill do now pass. After that, then any Member of the House of Commons, particularly on a free vote, can table amendments. We are not yet at a position where we would expect them to table amendments.
Lord King of Bridgwater: My Lords, the Minister is replying on behalf of the Government. In his reply to the noble Lord, Lord Carlile, he seemed to equate the Prime Minister as just another one of the lookers-on in this matter—he was equivalent to the Countryside Alliance and various other people. He is the Prime Minister of this country. Is the Minister saying that we are not supposed to believe an official briefing from No. 10 Downing Street? The Prime Minister's official spokesman says that the Prime Minister is going to do something. The Minister is a Minister of the Government. The implication is that the Government will table amendments. It is a free vote, so they may or may not get support for those amendments. Alternatively, is the Minister saying that the Government will not table any amendments at all?
Lord Whitty: My Lords, the noble Lord can draw no such inference. And I did not equate the Prime

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Minister to those other influences. I equated the half-baked report that the noble Lord, Lord Carlile, gave of what—
Noble Lords: No!
Lord Whitty: Well, my Lords, there has been a lot—
Noble Lords: Withdraw!
Lord Whitty: No, my Lords, I am not prepared to withdraw.
Noble Lords: Order!
Lord Carlile of Berriew: My Lords, first of all, with great respect to the Minister, for whom the House has great respect and admiration, he should calm down and deal with—
Lord Whitty: My Lords, I have sat through several—
Noble Lords: Order!
Lord Carlile of Berriew: May I finish, my Lords?
Noble Lords: Order!
Lord Whitty: Thank you, my Lords. I have sat through many of these debates in which I, the Government and those who supported the original Bill have been subject to a lot of abuse, a lot of harassment and a lot of misleading and occasionally entirely objectionable statements. If the noble Lord, Lord Carlile, finds objectionable what I have rather mildly said was a "half-baked" report, then I will withdraw it.
Lord Carlile of Berriew: My Lords, I am grateful to the noble Lord for what he has just said. But would he tell us what he says the Prime Minister's official spokesman said at 11 o'clock this morning if it is not what I told the House the Prime Minister's official spokesman said at 11 o'clock this morning? My version has been described as "half baked". Let us have the full pie.
Lord Whitty: My Lords, I do not know; I was not present. The noble Lord was not present. In any case, we do know, and I am perfectly prepared to accept, that the Prime Minister has been reported as looking for a compromise. We know that the Prime Minister would prefer a compromise. He is also committed to a
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free vote within the House of Commons. That is what will happen after this Bill is passed back to the House of Commons for consideration tomorrow.
It is not worth my or the House's time speculating what amendments, if any, will be put down to that Bill tomorrow, or what view the House of Commons will take of those amendments, should they be so put. Clearly, a number of people have looked for compromise. I consider that at times I have looked for compromise, as have others. I consider that this House has not gone sufficiently down the road of compromise to persuade many people within the House of Commons, but that is a matter for them. It is not a matter for me; it is not, ultimately, a matter for the Prime Minister as he has to accept whatever view the House of Commons takes. What this House needs to do now is to stop making accusations, to pass this Bill, send it back to the House of Commons and see how that House deals with it. We ought now to proceed with the Motion that the Bill do now pass.
Earl Ferrers: My Lords, before the noble Lord sits down, will he answer the question that my noble friend Lord King put; namely, if there is to be a compromise, do the Government intend to put down any amendments? The noble Lord is a Minister and he must know whether his department is going to put down any amendments.
Lord Whitty: My Lords, I have nothing to add to what I have said. Indeed, at Third Reading in this House there is very rarely any indication of what amendments the Government will put down in the House of Commons. It would be very unusual for anybody to disclose the Government's hand before this House had voted to pass the Bill back to the House of Commons. What the noble Earl is asking me to do would be almost, although not entirely, unprecedented. It is certainly not the normal procedure. I have put the Motion, but I will put it again. I beg to move that this Bill do now pass.
On Question, Bill passed, and returned to the Commons with amendments.

Armed Forces (Pensions and Compensation) Bill
Bill returned from the Commons with the Lords amendment in lieu disagreed to with a reason for such disagreement; the Commons reason was ordered to be printed.
House adjourned at twenty-three minutes before nine o'clock.