Sitting of 23 July 1986

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRIVATE BUSINESS

  BRITISH RAILWAYS (STANSTED) BILL
  Order for consideration, as amended, read.
  To be considered tomorrow.

  RIVER HUMBER (BURCOM OUTFALL) BILL [LORDS]
  Read a Second time, and committed.
Oral Answers to Questions
  ENVIRONMENT

    Private Rents
    Mr. Meadowcroftasked the Secretary of State for the Environment if he has any plans to investigate the rents being charged by private landlords to unemployed tenants.
    The Minister for Housing, Urban Affairs and Construction (Mr. John Patten): No, Sir.
    Mr. Meadowcroft: Is the Minister aware of evidence from Leeds and Liverpool that a considerable abuse of the fair rents system is taking place? Because the initiative lies with tenants to apply to register a fair rent, if the rent is paid through housing benefit there is no incentive for them to do so. A number of private landlords charge up to four times a fair rent and pocket a vast amount of public funds. Would it not he in the Minister's own interests to liaise with other Departments. for example, to put the initiative with the Department of Health and Social Security to register a fair rent, and to ascertain the extent of the abuse?
    Mr. Patten: One or two cases of abuse have been reported to my right hon. Friend the Secretary of State. It is a bit much to say that there is considerable evidence of abuse, so I hope that the hon. Gentleman will pick his words carefully. Local authorities have the duty and the power to deal with cases of abuse where and when they exist. Local authorities should get on and do the job.
    Mr. Hill: Does my hon. Friend agree that there are so many anomalies in the Rent Acts that to try to protect any minority, whether unemployed or otherwise, is almost impossible? Is it not time that we had a general review of the Rent Acts and tried to formulate a legislative document on the Rent Acts that the normal person in the street can understand?
    Mr. Patten: The Rent Acts are of enormous concern to my right hon. Friend the Secretary of State and myself, and we are always thinking about them.
    Mr. Alton: How can the Minister justify the fact that in one area of Liverpool for nine properties a landlord is collecting over £120,000 a year, at taxpayers' expense, whereas, if a fair rent were charged, he would collect only £50,000 a year? What does the Minister intend to do about that?
    Mr. Patten: I know the case to which the hon. Gentleman referred, and obviously I cannot discuss it in the House this afternoon. I am grateful to the hon. Gentleman for drawing it to our attention. I know of his concern about the matter. None the less, Liverpool city council has the power and the duty to do something about it, and it should do so.

    Greenfield Sites
    Mr. Rathboneasked the Secretary of State for the Environment what is his policy on building on greenfield sites or a ribbon development from villages and towns in southern England.
    The Secretary of State for the Environment (Mr. Nicholas Ridley): Our policies are to encourage the fullest possible use of sites in urban areas, to protect the green belt and to avoid ribbon development. But some building on open land cannot be avoided if the demand for homes and commercial and industrial premises is to be met.
    Mr. Rathbone: Does my right hon. Friend accept that the first part of his answer is reassuring, but that the second is not'? Does he also accept that structure plans, as drawn by local councils, have identified, in my constituency at least, sufficient land for development for housing beyond the turn of the century? Will he encourage builders to develop that land, encourage councils and other public authorities to make that land available, and look carefully before he gives permission for development outside those village and town boundaries?
    Mr. Ridley: Yes I certainly will, but I am not the planning authority. In the first instance, the district council is able to grant planning permission, and it can do so, on some occasions, with regard to open land. My policy on appeal is as I have described it.
    Mr. Steen: Does my right hon. Friend agree that it is sheer madness to build on greenfield sites outside towns and villages when almost a third of a million acres of land are vacant, dormant and derelict in public ownership? Should not the Government call in all structure plans that seek to eat into the greenfield sites, to ensure that all the vacant, dormant and derelict land in public ownership is filled up first?
    Mr. Ridley: I agree with my hon. Friend that vacant and derelict land in cities and towns should be the first land to be redeveloped, but it would not be acceptable locally or right to develop a hard and fast policy. I could not agree more strongly with my hon. Friend's suggestion.
    Mr. Wiggin: Is my right hon. Friend aware that there will, of course, always be demand for housing, but that central Government have a responsibility to ensure that the south does not finish up with concrete from Kent to Somerset? Does he agree that, in the national interest, it is important that development should be pushed further north, which everyone would welcome?
    Mr. Ridley: Yes; but I make the point that I am not the only person who gives planning consent. Some 75 per cent. of consents are given by planning authorities.
    Mr. Campbell-Savours: Is it not interesting that all this pressure for new housing development is in the south, not in the north? Is not the reason for the high level of demand the emphasis of the Government's economic and industrial policies on development in the south? If a switch were to take place towards the northern region of the United Kingdom, all those pressures would be relieved. That is at the heart of the problem.
    Mr. Ridley: No. One of the main engines of this pressure is the high rating policies of councils in the north of England, which have driven businesses south, forcing people to follow if they are to obtain jobs. If the hon. Gentleman wants to do his constituents a service, he will encourage northern councils to impose lower rates.

    Empty Houses
    Dr. Twinnasked the Secretary of State for the Environment what progress has been made by the London boroughs towards bringing empty residential property back into use.
    Mr. John Patten: The boroughs reduced their empty dwellings from some 34,200 in 1982 to 31,600 in 1985, but further improvements should be made as soon as possible.
    Dr. Twinn: I welcome my hon. Friend's reply with the good news that there has been a reduction. Is he aware that that does not apply to every authority? There is still a need to reduce the unacceptably high numbers of flats and houses which stand empty for a long time. What are the Government's proposals to ensure that councils toe the line?
    Mr. Patten: We are continuing to give as much advice and guidance as we can, especially in respect of frankly delinquent boroughs such as Southwark, which is Labour-controlled, with 5 per cent. of its stock empty, Hackney, which is Labour-controlled, with 7 per cent. of its stock empty and, worst of all, Tower Hamlets, which is Liberal-controlled, with more than 8 per cent. of its stock empty.
    Mr. Dubs: Does the Minister agree that one of the culprits in keeping homes empty is his beloved Tory-controlled Wandsworth council? Homes there are kept empty, much to the offence of homeless and badly housed people, because Wandsworth borough council is selling off those properties.
    Mr. Patten: Wandsworth is without doubt one of the best housing authorities in this country. Through prudent management of its resources, Wandsworth is managing to spend more than almost any other London borough on the repair and renovation of housing stock.
    Mr. Stanbrook: Is my hon. Friend aware that nothing will assist in alleviating the shortage of residential accommodation in London so much as the repeal of the Rent Acts, which have been the cause of much social misery as well as housing shortages for many years?
    Mr. Patten: Alas, there are about 90,000 vacant private properties in London. If we could find a common sense way of bringing those properties back into use, that would be of the greatest possible assistance to the homeless. I
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    wish that we could find some common ground about ways to achieve that without involving the confiscation of private property.
    Mr. Raynsford: Does the Minister accept that his Department, when it last studied empty properties in the public sector, concluded that 3·8 per cent. of properties in the public sector were empty, 4·2 per cent. of properties in the private sector were empty and 6·9 per cent. of Government properties were empty? Will the hon. Gentleman put his own house in order before he criticises local authorities?
    Mr. Patten: It is important for Government Departments to make sure that they are getting rid of all empty property. Certainly Government Departments, to take just one example, will be rid of all their empty houses by 1988.
    Mr. Heddle: Does not my hon. Friend's answer confirm that local authorities in London and elsewhere are not necessarily the best qualified to manage the nation's housing stock? Is that not further endorsed by the fact that the majority of the nation's rent arrears, now considerably in excess of £200 million, should have been collected by otherwise negligent Labour-controlled councils? What proposals does my hon. Friend have to put out the management of the nation's housing stock to housing associations, building societies and others?
    Mr. Patten: We have an appalling problem of rent and rate arrears in this country, which amounts to more than £200 million. We intend to explore every avenue that we can to reduce that debt burden. In particular, we are always prepared to consider the idea that the management of council stock should be devolved to tenants, who can probably manage it a lot better than many local authorities seem to be doing at present.

    Rate Support Grant
    Mr. Fisherasked the Secretary of State for the Environment when he proposes to announce details of the 1987–88 rate support grant settlement.
    Mr. Ridley: I announced details of my proposals for the 1987–88 rate support grant settlement to the House yesterday.
    Mr. Fisher: Is it the Secretary of State's intention to set a deliberatly inadequate level of grant-related expenditure in order to force many local authorities to spend beyond it and so incur millions of pounds worth of loss of grant? In practice, would that not be a rather devious way of reintroducing a penalty system in another form? If it did happen like that, would not much, or perhaps all, of the £1 billion that the Secretary of State talked about yesterday be offset by such loss of grants?
    Mr. Ridley: It is the Government's intention, after consultation, to set grant-related expenditure totals at a lower figure than the total of provision. The consequences that will flow from that are not those suggested by the hon. Gentleman. There will be a slightly different allocation of resources in a better direction, and I doubt whether it will make much difference to the amount of grant forfeited.
    Mr. Powley: Does my right hon. Friend agree that, following his generous settlement of the rate support grant yesterday, there should be no excuse for any local

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    authority to engage in extravagant and unnecessary spending? Does he also agree that the settlement should be used to keep rate demands down to their lowest possible level and that money should be spend only on that which is necessary and essential?
    Mr. Ridley: The in word is "realistic" rather than "generous". However, I am grateful to my hon. Friend. I confirm that the results of yesterday's announcement should be that councils which spend reasonably and moderately in accordance with their needs will suffer little, if any, need for increasing rate bills.
    Mr. Tony Banks: Is the Secretary of State aware that the London borough of Newham is still in dispute with his Department about the outturn of the borough's budget for 1985–86? As that obviously very much affects the calculation upon which he has based Newham's rate capping, it means that less agreement can be reached in favour of Newham. Next year the London borough of Newham, which is the second most deprived local authority area in the country, will have to make a reduction of about £20 million in its budget. Will the Secretary of State please tell the London borough of Newham, since he has taken over control of local government, where it should make the cuts in expenditure? Is he aware of the enormous social and economic problems in Newham, or does he not care? We pay.
    Mr. Ridley: I have the deepest sympathy with the inhabitants of the borough of Newham when I think who represents them at local government and parliamentary level. So great is it that if they were to come to me with an application for redetermination of their expenditure level, we would consider it in accordance with the legislation.
    Mr. Simon Hughes: Is the Secretary of State aware that the considered view of some of the associations of local authorities is that, having received approximately £1 billion of new money, £630 million will be lost by the abolition of recycling? Is that because the Chancellor of the Exchequer has told the Secretary of State that that will allow a half penny in the pound to come off income tax, or is it because the Secretary of State will make sure that the money lost will he put hack into the kitty and the Government will not suffer a net loss, despite the announcement made yesterday?
    Mr. Ridley: The hon. Gentleman has mixed up two different years. The figure for the current year is £628 million of lost grant, but, with a great increase in both provision and aggregate Exchequer grant next year, the figure of grant lost must, by definition, be much smaller than that. If authorities do not spend up at all, it will be zero. It is up to them.
    Mr. Peter Bruinvels: I recognise that my right hon. Friend the Secretary of State was unable to rate-cap Leicester, because, as he said in his statement yesterday, there was something wrong with the formula. However, I reassure him that the people of Leicester are sad that they have not been re-rate capped. Will he look at the formula again and possibly include Leicester later, because the council is borrowing money unfairly? Rates are shooting up by the 80 per cent. I mentioned yesterday, and the people of Leicester feel let down.
    Mr. Ridley: The people of Leicester have one consolation for the unfortunate nature of their local authority, and that is that they are extremely well represented in Parliament.
    Mr. Straw: I sympathise with the Secretary of State's problems in relation to Leicester, and particularly the hon. Member for Leicester, East (Mr. Bruinvels), but is he aware that his statement, that the amount of holdback under the system is hound to be less than the £628 million last year, shows how little he understands the system over which he presides? The amount of holdback could be more than £628 million for this year if he sets the levels of GREA substantially below the £25·2 billion at which he has set current expenditure. Will he come clean and tell the House at what level he will set the GREA?
    Mr. Ridley: I made it clear that the Government thought that an increase in the totals of GREAs by the amount of the GDP deflator would be appropriate, although we have increased the total provision by 8·5 per cent. The figures are 3·5 per cent. on GREAs and 5 per cent. extra provision above that, which means an increase of 3–75 per cent. over this year's budgets. If authorities have provision to spend at 3·75 per cent. over this years budget, not this year's provision, they are able to survive without forfeit of grant. The cash figure for GREA is 95 per cent. of the cash figure for provision.

    Rate Capping
    Mr. Hayesasked the Secretary of State for the Environment what plans he has to seek further powers to prevent local authorities taking action aimed at circumventing rate-capping legislation; and if he will make a statement.
    The Minister for Environment, Countryside and Local Government (Mr. William Waldegrave): My right hon. Friend announced yesterday that he would be seeking to block one major loophole which has up to now been used by some authorities to avoid the effect of rate capping. We keep the position under review.
    Mr. Hayes: I hope that my hon. Friend will take careful note that the Left-wing loonies who run Harlow council recently banned the playing of the national anthem. The council has arranged a loan facility with a merchant bank for £50 million, which will cost the ratepayers over £20 million in bank charges. I hope that my hon. Friend will be able to do something about it.
    Mr. Waldegrave: Harlow is one of the authorities which, by manoeuvreing their balances, have just kept out of rate capping by keeping below the threshold of £11 million. The only thing that one can say to such authorities is that the penalties for all this will be visited on the people in the end. They will be paying not only the cost of the Left-wing high expenditure, but the profit margins of the people who are enabling them to undertake these manoeuvres.
    Mr. Cartwright: Rate capping has not prevented the London borough of Greenwich from budgeting to spend 25 per cent. more this year than it spent last year, so is the Minister not shutting the stable door long after the horse has well and truly bolted? Will he confirm that whatever fancy borrowing the council is undertaking, there will be a day of reckoning when the bill has to be paid, not by the

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    councillors, but by the ratepayers? What help can the ratepayers get from the measures to which the Minister has just referred?
    Mr. Waldegrave: We have blocked off one of the major measures. A leader of one of the Labour-controlled London boroughs, Mrs. Hodge, has explicitly said that she believes that this is a very high risk strategy, because it rests upon being bailed out by a future Labour Government. That is indeed a very high risk strategy, particularly as the Labour Front Bench has taken great care not to say that Labour will bail them out. The costs will fall on the ratepayers in the end. It is very irresponsible of those authorities to act like that.
    Mr. Squire: I welcomed yesterday's announcement by my right hon. Friend the Secretary of State for the Environment. Does my hon. Friend not think it strange that some of the most Left-wing councils have been prepared to embrace capitalism in some of its more extreme forms, including overseas banks and offshore funds?
    Mr. Waldegrave: They will also learn, as some countries in South America and elsewhere have learnt, that, although one can borrow, in the end it catches up with one.
    Mr. Pavitt: In the first part of his answer to me yesterday the Secretary of State referred to rate capping in Brent. In my innocence, I thought that he understood the intense social problems in that inner city area. If he was sincere, will he now make sure that no attempt is made to prevent creative accounting or steps being taken to ease rather than circumvent rate capping, and provide some services for the very hard-pressed people in my area? Yesterday the Secretary of State referred to rent arrears, but they occurred under a Tory administration. I assure him that now that Labour has gained control again, they will be rapidly dealt with.
    Mr. Waldegrave: I do not believe that the last part of the hon. Gentleman's question can be quite right, because there was only one year of Tory administration in Brent. What stands between the hon. Gentleman and my right hon. Friend and me is a completely different analysis of what will help the people of Brent. We do not believe that high spending, high taxing inner city authorities are the best way out for problem areas like Brent. Brent needs enterprise, low taxes and new jobs.
    Mr. Stern: Has my hon. Friend noted the recent decision of Bristol city council, which is under Labour control, to seek funds from an overseas bank for wasteful expenditure, which funds will no doubt arise from that bank's investments in South Africa? Does he agree that this is just a sign of the new-found desire of Bristol city council, at the prodding of the Transport and General Workers Union, to increase trade links with South Africa?
    Mr. Waldegrave: My hon. Friend is very ingenious in going a little bit wider than my Department's responsibilities. I am aware that Bristol city council has been seeking the re-financing of some of its dock debt, but I am not certain that I am aware of what my hon. Friend is referring to today.
    Mr. Straw: Will the Minister confirm that the admission that we dragged out of the Secretary of State a few moments ago means that authorities' GREAs will be £1,260 million less than the £25·2 billion that he said he
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    was accepting as their current spending? That is bound to mean that not just rate-capped authorities will suffer penalties, but that virtually every authority will suffer major penalties and that the total of those penalties could well, arithmetically, exceed the £628 million of grant money that was recycled this year.
    Mr. Waldegrave: When the hon. Gentleman has done the sums more carefully, I think he will find that it is exceedingly unlikely that the grant penalty money will be comparable to that for this year. Neither he nor I can say yet what the likelihood will be, because it will depend upon the spending levels and upon the GREs that are ultimately set.

    Fire Resistance Tests
    Mr. Ashdownasked the Secretary of State for the Environment what steps he is taking to comply with European Economic Community draft directive 1202 on fire resistance tests.
    The Parliamentary Under-Secretary of State for the Environment (Sir George Young): Commission document 1202 contained simply a preliminary draft directive. Since then work has been undertaken by the Commission to develop the proposals further. We shall be consulting industry when a formal proposal is made as a further step in the Community's programme for removing barriers to trade.
    Mr. Ashdown: The Minister will know that the Government's publicly stated objective, while they hold the presidency of the EEC, is to remove technical barriers to trade. As the Minister rightly says, draft directive 1202 does that by absolving manufacturers and exporters from having a second fire text. We all understand why the fire laboratories, which make a fat living from this testing, should want to drag their feet, but why are the Minister and the Government dragging their feet?
    Sir George Young: Neither the Minister nor the Government are dragging their feet. The high standards in Britain are maintained through the building regulations. We are waiting for the Commission to follow up its draft directive with firm proposals, and the moment that it does that we shall respond.

    Multiple Occupation Houses
    Mr. Knoxasked the Secretary of State for the Environment what steps he intends to take in the light of the findings of the first part of his Department's research study of houses in multiple occupation in England and Wales; and when he hopes to publish the second part of the study.
    Mr. John Fraserasked the Secretary of State for the Environment what recent representations he has received about his Department's policy towards houses in multiple occupation.
    Mr. John Patten: We have already strengthened local authorities' powers in this area and issued guidance. They should use those powers and follow that guidance. We are considering the need for further measures in the light of the current research and representations to the Department. We hope to publish the second part of the study before the end of the year.
    Mr. Knox: As over 1 million people live in multi-occupied accommodation, and as at the present rate of progress it will take between 70 and 85 years to bring it up to acceptable minimum standards, does my hon. Friend not think that there is a strong case for introducing legislation to compel local authorities to direct resources into this important but neglected area?
    Mr. Patten: This is an extrememly important area and one in which my hon. Friend has shown a considerable interest for many years. Progress is patchy. Some local authorities have made good progress, but, alas, others have not used the powers that have been theirs for between 20 and 25 years. We are waiting for the results of the research examination that we are making. Those results will be published by the end of the year and at that time we shall consider whether to issue strengthened guidance, or perhaps even to introduce legislation, which is what my hon. Friend wants.
    Mr. John Fraser: Does the Minister agree that such information from his Department's survey as we have received confirms all the warnings of death, danger and dereliction in houses in mulitple occupation? On his Departments' figures, one in two is in a poor state of physical repair, one in four is badly managed and one in six is overcrowded. Why wait? Why not allow the Bill that has completed its passage through the other place to pass through this House so that at the third attempt we can have some tougher legislation about houses in multiple occupation?
    Mr. Patten: We should wait for the research results, which, as I have said, will be published before the end of the year. If we do that we can take decisions on the basis of properly evaluated examination. I ask the hon. Gentleman not to forget that since 1979 we have given local authorities additional powers, and in certain circumstances we have placed duties on them to use those powers. We have made it possible for grant to be paid for the installation of fire escapes. I wonder why it is that so many local authorities have not used the powers that have been available to them for a quarter of a century?
    Mr. Squire: Will my hon. Friend consider making it a requirement on landlords of houses in multiple occupation to post a notice stating the relevant fire risk within the property, so that at least the tenants can be aware of the dangers they face?
    Mr. Patten: That is a valuable suggestion by my hon. Friend and we shall consider it when considering the results of the research at the end of the year.

    Homelessness
    Mr. Dubsasked the Secretary of State for the Environment what representations he has received concerning the use of bed-and-breakfast accommodation for homeless families.
    Mr. Willie W. Hamiltonasked the Secretary of State for the Environment what initiatives he intends to take to solve the problems of homelessness.
    Sir George Young: I refer the hon. Members to the reply that I gave to the hon. Member for Houghton and Washington (Mr. Boyes) on 21 July.
    Mr. Dubs: Does the Minister accept that there is a real crisis of homelessness, especially in the London area?
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    According to Shelter figures, which are better than his Department's, there are 4,400 homeless families in bed-and-breakfast accommodation in London. That is an increase of 16 per cent. in three months. Over a year the cost to local authorities in London has doubled from £13 million to £26 million. Keeping families with young children in bed-and-breakfast accommodation is humiliating and degrading and ought to be brought to an end immediately.
    Sir George Young: The Government have made it clear that bed-and-breakfast accommodation should be used only as a last resort and for as short a period as possible until permanent accommodation is secured. This year we have increased by £200 million the provision for housing investment, and we have redistributed it in such a way as to give more benefit to those boroughs that have a homelessness problem. We have asked the boroughs to give specific priority to the homeless when they make their investment decisions. It is interesting to note that many London boroughs, such as Brent, are not taking up the offers under the Greater London mobility scheme that are available to meet the needs of those in bed-and-breakfast accommodation. As my hon. Friend the Minister said, there is a large amount of empty public authority housing stock in London. We are determined to bring that back into use to help the homeless.
    Mr. Hamilton: Does the Minister recognise that probably the Government's greatest social crime is that since 1979 housing expenditure has been slashed by very nearly half? At this moment 400,000 building trade workers are unemployed, but hundreds of thousands of people are out searching for a house and cannot find one. It is not only me and my hon. Friends who are objecting to those obscene policies, but the Duke of Edinburgh, Prince Charles, the Archbishop of Canterbury and the Queen herself.
    Mr. Speaker: Order. Before the Minister answers I remind the hon. Member and the House that we never introduce the royal family to support our arguments. We stand on our own.
    Sir George Young: The major reduction in public investment in housing took place under a Labour, not a Conservative Government, and the hon. Gentleman's statistics ignore the recovery in the private housebuilding sector, which meets real housing needs.
    Mr. Lyell: Might not the way to bring the private rented sector back into operation be to abolish the Rent Acts and institute a limited form of control along the lines of business tenancy controls under the Landlord and Tenant Act 1954?
    Sir George Young: My right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin), the then Secretary of State for the Environment, said in June last year that we would have no major proposals for rent reform in this Parliament, but that we were interested in proposals after the next election.
    Mr. Nicholas Winterton: Will my hon. Friend say to the House that the way that Labour Members, especially in the way they make references to members of the Royal Family, seek to distort the facts and mislead our nation is shameful? Is it not true that if all the council accommodation in Britain which is currently vacant because of inefficient management, mainly by Socialist

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    local authorities, were put to use, virtually all Britain's homeless could be given a home immediately? Remarks by the hon. Member for Fife, Central (Mr. Hamilton)—
    Mr. Willie W. Hamilton: Shut up, you old windbag.
    Mr. Winterton: Well, that is the pot calling the kettle black.
    Is it not shameful how the hon. Gentleman will seek to use our royal family—
    Mr. Speaker: Order. The same rules apply on both sides of the House.
    Sir George Young: Arithmetically, my hon. Friend is correct.
    Mr. Janner: Is not the real problem for local authorities, not that they have a statutory duty to house the homeless, but that the number of homeless people is growing, that the amount of money available for councils to build, as they want to do, is evaporating—so that, for example, some 30,000 people in Leicester are on the housing list — and councils are then forced to spend revenue instead of capital on housing people temporarily in bed and breakfast accommodation, which is a rotten
    Sir George Young: I do not have the figures for Leicester in front of me, but in London it is the case that the number of relets of council housing has gone up since 1978–79, in spite of the right to buy. So it is not the case that there is a decreasing number of local authority flats available to help the homeless. Certainly in most major cities more and more homeless people are being given priority under the Acts and are getting permanent accommodation.
    Mr. Rooker: Does the Minister accept, notwithstanding the figures that he used earlier, that in the best year of the national housebuilding programme under this Government there were 50,000 fewer new dwellings than in the worst year under the Labour Government? As next year is the international year of shelter for the homeless, could not the Government take some special measures to talk about the new initiatives, which were implied in one of the questions that he refused to answer, to deal with the misallocation of money that is implied in funding bed-and-breakfast accommodation when there are a vast number of unfit empty dwellings in the public and the private sectors?
    Sir George Young: One of the top priorities for any local authority with its HIP allocation should be to bring back into use the empty properties that it has, many of which have been empty for more than a year. I suspect that the figure that the hon. Gentleman gave was just for the public sector.
    Mr. Rooker: No, total.
    Sir George Young: There has been a recovery in private sector starts. The figures are at the highest level for 10 years, apart from one year. Local authorities of all persuasions are rightly using their allocations to modernise and to bring up to standard properties that they already own rather than embarking on programmes of new build.

    Environmental Services
    Mr. Hardyasked the Secretary of State for the Environment what representations he has received seeking additional resources for authorities to enable them to increase expenditure on environmental services.
    The Parliamentary Under-Secretary of State for the Environment (Mrs. Angela Rumbold): The local authority associations through the Consultative Council for Local Government Finance are consulted about local authority relevant expenditure, including that on local environmental services.
    I also receive representations from individual authorities.
    Mr. Hardy: Does the Minister not accept that some areas need more resources in order to make swifter environmental improvements to compensate for rapid economic decline? Is she aware that the Minister responsible for sport recently visited South Yorkshire and is reported as having realised that the position is grave? Indeed, I believe that he used the word tragic. If his visit does not lead to increased support for my area, may we command the attention of the organ grinder rather than of the monkey?
    Mrs. Rumbold: In 1986–87 the hon. Gentleman's local authority is receiving some £400,000 in derelict land grant compared with the sum of only £300,000 that it received collectively for the previous three years. In addition, my right hon. Friend the Secretary of State announced a very realistic settlement yesterday. Consequently, it is to be hoped that the hon. Gentleman's local authority will be able to find adequate provision for local environmental services.
    Sir Dudley Smith: Does my hon. Friend agree that some of the money could well be used by local authorities to preserve the integrity of the green belt, which is constantly under attack? Is she aware that the green belt is particularly vulnerable when big and desirable projects such as motorways are put forward for development on the fringes, where people are trying to convert the green belt into extra work?
    Mrs. Rumbold: It is to be hoped that local planning authorities take great care not to infringe the green belt unless there is general consent for that among the local population.
    Dr. David Clark: Does the Minister not realise that her assurances fly in the face of reality? Will she confirm that the number of those employed in the key environmental agencies — the Countryside Commission, the Nature Conservancy Council, the Countryside Commission for Scotland, the Forestry Commission, and the Council for Small Industries in Rural Areas has fallen by more than 2.000 during the seven years in which the Government have been in office?
    Mrs. Rumbold: All those organisations have managed to increase their services and to improve on their excellence in discussion and consultation with central Government. Staffing numbers are adequate, according to their own lights.
    Mrs. Kellett-Bowman: Is my hon. Friend aware that there has been a suspension of European regional development fund non-quota grants to local enterprise

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    boards which wish to carry out environmental improvements in, for example, Lancaster? Will she affirm that such boards are eligible for grants from the ERDF, and expedite them?
    Mrs. Rumbold: My hon. Friend knows that ERDF funds have to be matched by funds from the local authority. I note what my hon. Friend says, and will take it into account.

    Beaches (Pollution)
    Mr. Kirkwoodasked the Secretary of State for the Environment what further steps he proposes to take to guarantee the safety from coastal pollution of bathers on beaches at holiday resorts in the United Kingdom.
    Mr. Waldegrave: In the next five years it is expected that some 80 schemes to improve the quality of coastal waters, costing over £300 million, will be in progress and completed throughout the United Kingdom. This is roughly double the rate of expenditure of the last four years.
    Mr. Kirkwood: That is a helpful answer. However, does the Minister agree that it is a matter of some concern that many of our resorts that have served the country well for years are being despoiled by raw sewage in our coastal waters? Will he comment on the reports produced by Greenpeace, whose independent analyses have shown that the level of pollution off Blackpool beach may meet Department of the Environment requirements but is five times higher than European limits? What does the Minister have to say about that?
    Mr. Waldegrave: I announced last year that we were undertaking a survey of all bathing beaches. The survey will be completed next spring. The preliminary results are quite encouraging and show that up to half the beaches probably meet European directive standards. There has been a problem at Blackpool and a project has been launched, with expenditure of over £30 million to put things right.
    Sir Peter Blaker: Would it not be rather more appropriate if the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) confined his remarks to the beaches in Berwickshire and did not make disparaging remarks about the finest beach in the country, which is at Blackpool? May I congratulate the Government on their plans for improving the beach at Blackpool? I ask my hon. Friend to elaborate on what he said about that, as his remarks were rather difficult to hear.
    Mr. Waldegrave: I find it rather more natural to be talking about Blackpool in reply to my right hon. Friend. I hasten to say that there is nothing seriously wrong with the Blackpool beaches. There is no health hazard. As part of the improvement of Blackpool beaches, and a number of other beaches, we are bringing forward a scheme that will cost about £35 million to make further improvements. I can confirm that the already fine beaches will be even better.
    Mr. Boyes: Is it not a fact that the Government have abused their powers under the Water Act 1973, with the result that in real terms capital investment has declined by 12 per cent. since 1978–79? Even worse, it was reported in the Brighton Evening Argus of 15 July that in the Southern water authority area gross pollution of many of the
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    traditional holiday spots is the result of capital investment declining by 28 per cent. between 1980 and 1985. It is no wonder that Mrs. Hargreaves found herself swimming in neat sewage off Seaford. She said that it was absolutely disgusting—just like the Government's policy towards the water industry.
    Mr. Waldegrave: Without the steady guidance of the leader of the Opposition's environment team, the hon. Member for Copeland, (Dr. Cunningham), things are getting rather out of control. Investment in the water industry is at the highest level that it has ever been. I have given figures to show that the investment in coastal water improvements is about to be doubled.
    Mr. Harris: I recognise that progress is being made, but does my hon. Friend not find it incredible that raw sewage is still discharged into the sea and on to beaches, especially in parts of the south-west that are dependent on tourism? Surely this is an area that should be given top priority in any capital spending programme.
    Mr. Waldegrave: It is for that very reason that considerable resources are now being committed. The programme will not be finished at the end of five years and the expending of £35 million. Further resources will be committed after that. A steady programme of improvement will ensure that by the end of the century virtually all the remaining problems will have been removed.

    Strategic Planning Policies
    Mr. Tony Lloydasked the Secretary of State for the Environment if he is satisfied with the operation of strategic planning policies in the former metropolitan county council areas.
    The Parliamentary Under-Secretary of State for the Environment (Mr. Richard Tracey): Yes, Sir. My right hon. Friend is satisfied.
    Mr. Lloyd: I regret that I shall not be able to bring Mrs. Hargreaves into this supplementary question. Is the Minister aware that in the Greater Manchester area a number of property developers are seeking to develop large shopping sites in the different boroughs? The problem is that each local authority has an incentive to ensure that it is not the last to allow such development to go ahead. As the Government have taken away the strategic planning role of the Greater Manchester council, what does the Minister intend to do to ensure that we have a co-ordinated approach to what could be a serious development problem?
    Mr. Tracey: The local authorities must conform with the current local plans and, indeed, the Greater Manchester structure plan, the alterations to which were approved in January 1986. As the hon. Gentleman knows, it is not our practice to discuss current cases at the Dispatch Box.
    Mr. Favell: I am afraid that I know nothing about Mrs. Hargreaves, but I know that we do not need a thumping great county hall to exercise overall strategic planning control. My right hon. Friend the Secretary of State for the Environment can do just that. Bearing that in mind, will my hon. Friend call in the seven planning applications for out-of-town shopping centres now being applied for in the Greater Manchester area, one of which is for over 1 million sq ft? At a time when we are trying to regenerate

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    the inner cities, would it not be foolhardy to put our town centre shopping areas in jeopardy, and all the jobs that go with them?
    Mr. Tracey: My right hon. Friend the Secretary of State will look at all material considerations before calling in any planning applications, but I repeat that we cannot discuss current planning applications at the Dispatch Box.
    Mr. Skinner: Is Mrs. Hargreaves involved in these strategic planning policies? Is she a floating voter, and who will get her out of it?
    Mr. Tracey: I fear that that has nothing to do with planning.

    Local Government Finance
    Mr. Amessasked the Secretary of State for the Environment what assessment he has made of the impact of the Local Government Act 1986 on the activities of local councils, with particular reference to political publicity and information campaigns.
    Mr. Ridley: No formal procedures have been instituted to monitor the effects of the 1986 Act, but I am watching its operation carefully.
    Mr. Amess: Is my right hon. Friend aware that Basildon district council continues to flout the law by spending ratepayers' money on propaganda to bolster Labour councillors' chances in marginal seats and by telling the editor of Link magazine not to photograph local Conservative Members of Parliament or report their presence at any event? Does my right hon. Friend agree that such bias is quite wrong?
    Mr. Ridley: I entirely agree that such bias as my hon. Friend alleges is quite wrong, but I encourage him to use the remedies of the civil law, which are there to interpret the 1986 Act. Even if we strengthen those powers it will still be a civil law requirement to enforce them. That is where my hon. Friend's remedies should properly lie.

    County Structure Plans
    Mr. Adleyasked the Secretary of State for the Environment if he will describe the administrative process by which he negotiates with county councils on their structure plans.
    Mr. Ridley: County councils must submit to me for my approval their proposals for alteration or replacement of their structure plans. Normally an examination in public is held, at which the council can explain its proposals. I may then publish draft modifications for comment before the plan is approved.
    Mr. Adley: I thank my right hon. Friend for that answer and, indeed, for answering the question itself. Will he confirm that the initiation of structure plans and, indeed, the initiation of the revision of structure plans, is primarily the responsibility of the county council, and not his Department? Will my right hon. Friend further confirm that his Department responds after the county council has produced its proposals, and does not pressurise county councils before they produce their proposals? Finally, will he confirm that Dorset county council's revised structure plan for south-east Dorset is entirely its own responsibility?
    Mr. Ridley: I can confirm that all that my hon. Friend has said is correct.
    Mr. Nicholas Baker: Will my right hon. Friend confirm that he will not seek to impose higher levels of development upon county councils presenting such structure plans? Does he recognise that in counties such as Dorset, whose present structure plans, development, and population levels have already been substantially exceeded, any suggestion that new structure plan proposals, levels of development or population should be exceeded would be greeted with great dismay and would be contrary to the wishes of the residents of such places?
    Mr. Ridley: My hon. Friend will not expect me to comment on any specific county plan or on any planning application. The description of the system which I outlined to my hon. Friend the Member for Christchurch (Mr. Adley) is accurate and the policy on the green belt is well known. It is difficult to discuss any general concept of planning without reference to the particular. However, I note what my hon. Friend has said.
    Mr. John Browne: Does my right hon. Friend accept that there is deep concern among the people of Hampshire, including Winchester, and possibly a certain Mrs. Hargreaves, about the fact that his Department has decided to impose an increase of 65,000 additional houses on the south Hampshire structure plan, which is greatly in excess of the infrastructure available and which is drawing much-needed resources from city centres in the south and north of England? Will he please assure the House and the people of Hampshire that he will look into this matter and ensure that the locally and democratically expressed views of the people of Hampshire about housing are adhered to?
    Mr. Ridley: I note what my hon. Friend has said. However, it appears that Mrs. Hargreaves comes from the north, and I am sure that my hon. Friend would not be grudging about affording her a house if she were to arrive in his constituency.

    London Residuary Body
    Mr. Tony Banksasked the Secretary of State for the Environment what matters were discussed at the meeting with the chairman of the London Residuary Body on 19 May 1986.
    Mrs. Rumbold: Matters relevant to the residuary body's functions under the Local Government Act 1985 were discussed.
    Mr. Banks: Does the Minister recall the answer that she gave to me on 11 July regarding the timing of distribution of balances from the London Residuary Body to the London boroughs? She said:
    "The timing … is a matter for the"—
    [HON. MEMBERS: "Reading."] At least I can read. It appears that an awful lot of liquid lunches have been consumed by Conservative Members. The Minister said:
    "The timing of the distribution is a matter for the LRB." —[Official Report, 11 July 1986; Vol. 101, c. 310.]
    However, it is equally clear from the meeting that the Secretary of State had with the chairman of the London Residuary Body on 19 May—which was duly recorded —that the Government have been directing the London Residuary Body about the timing of the distribution of

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    those balances. That is not unconnected with the local council elections on 8 May. Would the Minister now care to recorrect her position and stop misleading the House?
    Mrs. Rumbold: The chairman of the London Residuary Body came to see the former Secretary of State on 19 May about an announcement that he was to make on the balances, which he subsequently made on 20 May following his discussions with the then Secretary of State. In relation to the further balances, following the Law Lords' decision striking down the GLC's last-minute forward funding package, as the hon. Gentleman knows, the LRB has the power to distribute balances to the boroughs and to decide the timing as and when it pleases.
    Sir John Biggs-Davison: Is my hon. Friend aware that, despite our local representations, the residuary body has placed Hainault Forest under the control of three different authorities? Is she further aware that this is bad management and is making it more difficult to deal with the problem of the gipsy intrusion? Will my hon. Friend consider this problem?
    Mrs. Rumbold: As my hon. Friend is aware, this is a matter for the London Residuary Body. I shall, however, consider the matter.
    Mr. Straw: When the chairman of the London Residuary Body next meets the Secretary of State and asks why he and the House were tricked by the Secretary of State yesterday about the total of the rate support grant
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    settlement, what answer will he receive? Specifically, what answer will he receive when he asks why the Secretary of State yesterday deliberately withheld from the House information that the level of grant-related expenditure assessments will be £1,260 million below the level of current expenditure? It means that £1 billion is being given to local authorities, yet £1,260 million will be taken away from them.
    Mrs. Rumbold: That was an unworthy question and the hon. Gentleman is totally incorrect.

    Buildings (Cleaning Technique)
    Mr. Dalyell: asked the Secretary of State for the Environment if, pursuant to his answer, 25 June, Official Report, column 320, he will recommend the wet, dripping water technique rather than dry blasting for cleaning all buildings for which he is responsible.
    Sir George Young: No. The most appropriate method will be used in each case.
    Mr. Dalyell: Is the Minister aware that this is not a joking question, as the dry blasting technique has been an absolute disaster? Is not the wet healing technique much better?
    Sir George Young: I am advised by the English Heritage Commission on technical matters of this kind, and I understand that in a few cases the dry method is preferable.

Rate Support Grant (Wales)
3.30 pm
The Secretary of State for Wales (Mr. Nicholas Edwards): With permission, Mr. Speaker, I wish to make a statement about my proposals for the 1987–88 rate support grant settlement for Wales.
Local authorities have begun to plan their budgets for next year. To help them, I am today circulating to them my proposals for the key elements of the settlement. Copies of the material sent to Welsh councils have been placed in the Library and the Vote Office.
Before outlining my proposals, I should like to comment briefly on the spending decisions of Welsh local authorities in the present year, particularly those of county councils.
The rate support grant settlement for 1986–87 made provision for overall total expenditure to increase by 4·9 per cent., or slightly more than the then forecast rate of inflation. County councils generally have budgeted to increase their spending in 1986–87 on average by 7·6 per cent. — far in excess of provision and inflation. Their decision resulted in high and damaging rate rises. District councils' spending was broadly in line with the settlement and they were able to limit their rate rises to an average of just over 5 per cent. Nevertheless, ratepayers in the Principality have had to face a combined rate rise averaging nearly 12·5 per cent. in 1986–87.
More than 50 per cent. of the rate income in Wales comes from non-domestic ratepayers. High and unpredictable rate rises are bad for business, hinder expansion and put jobs at risk. Earlier this month the CBI in Wales wrote to council leaders asking them to recognise the needs of business ratepayers and to set low rates in 1987. I endorse and repeat that plea on behalf of all ratepayers.
When the public expenditure White Paper was published in January, no decision had been taken about provision for local authorities' current expenditure for 1987–88, and the White Paper showed the same provision in cash terms for 1987–88 as for 1986–87. I now propose a current expenditure figure of £1,496 million. That is £67·8 million, or 4·75 per cent. more than authorities have budgeted to spend this year. I shall give details of the distribution of this sum between services in the autumn. Once again, I intend to make additional provision for local authority capital spending and this, too, will be detailed in the autumn.
Total relevant expenditure for RSG purposes is expected to be £1,732 million. That is almost £135 million more than total relevant expenditure at the main report stage for 1986–87 and £97 million, or 5·9 per cent., more than the amount that authorities have budgeted to spend in the current year.
Aggregate Exchequer grant in support of relevant expenditure will be £1,157 million, £90 million higher than the level in the main RSG report for 1986–87. The grant percentage is 66·8 per cent. — the same as that in the 1986–87 main report. Comparisons with the grant position for 1986–87, taking into account the effect of authorities' budget decisions, will not be possible until the Supplementary report for that year is published in the autumn.
In my discussions with the local authority associations about the 1987–88 settlement, they have stressed to me the need for as much stability as possible between years in the grant distribution mechanisms. At the same time, the
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mechanisms must be such as to exert pressure to keep spending in line with our plans. I have, therefore, decided to retain the basic block grant mechanisms used in the present year, with no expenditure targets for individual councils and the slope of the grant-related poundage schedule both above and below the 10 per cent. threshold remaining unchanged, but GRE will be set in line with overall provision.
The effect of this will be that, at the margin of spending, decisions to increase it will result in a cash reduction in grant and decisions to reduce it will produce considerable rating benefits. Furthermore, I have decided that there will be no recycling of any under-claim on grant in Wales in 1987–88. Wales will therefore be covered by the legislation to be introduced in the autumn announced yesterday by my right hon. Friend the Secretary of State for the Environment. Authorities will be able to plan ahead with certainty knowing that the grant they receive will be directly linked to their own spending decisions. This will assist in forward budgeting.
In his statement to the House yesterday, my right hon. Friend the Secretary of State for the Environment announced his intention to take action to prevent local authorities from circumventing the present local authority capital expenditure control system by using devices such as advanced and deferred purchase agreements to incur prescribed expenditure in earlier or later years than would ordinarily be the case. The requirement, which applies equally in Wales, became effective from midnight last night.
The Government's proposals for an improved capital control system were set out in the Green Paper "Paying for Local Government". Responses have been received from the local authority associations and other interested bodies in Wales. With my right hon. Friend the Secretary of State for the Environment, I am urgently considering what steps should be taken. These proposals clearly offer local authorities in Wales a further opportunity to plan for stable expenditure levels while enabling them to pass on real benefits in services and low rate increases to their ratepayers. I sincerely hope that they will do so, and I commend my proposals to the House.
Mr. Barry Jones: The right hon. Gentleman presents the settlement with evident relief this year because the expenditure assumption will be nearer to what authorities have said they need to spend than has previously been the case. Whether the statement achieves the objective of low rent increases remains to be seen. I am sceptical.
I note that, in the second table in the material mentioned in the statement, the county of West Glamorgan has a 9 per cent. increase in rate poundage. Among the districts, the increase goes as high as 30 per cent. while, in Meirionnydd, it is down by 10 per cent. The variation is as high as 40 per cent. on the Secretary of State's figures, and there is an increase as high as 30 per cent. I calculate that three quarters of the Welsh districts have increases of more than 4·75 per cent.—the right hon. Gentleman's provision for inflation. Some 15 authorities have a 10 per cent. increase or more.
Will the right hon. Gentleman respond concerning his assumptions on inflation? Does he understand that local government is labour-intensive? He calculates price inflation at 4·75 per cent., but wage inflation is certainly 7·5 per cent. I understand that the police forces have been

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awarded more than 7 per cent. We know that there is to be a major restructuring of teachers' salaries. Will the Government meet the previous Secretary of State for Education and Science's commitment to fund the teachers' pay award? There is insufficient funding for the new general certificate of secondary education examination. There is insufficient cash for joint financing in the Health Service.
How does the right hon. Gentleman propose to meet the severe pressures on social services caused by major increases in the elderly population in Wales? Does he agree that, if there are more clients, there is a reduction in real terms in provision? He might agree that every community wants better roads and buildings maintenance. Such pressures can unhinge the statement's arithmetic.
There have been cuts in local government finance. Does the right hon. Gentleman know that, between 1978–79 and 1986–87, the cut in rate support grant has been as high as 12·5 per cent.? Put another way, rate support grant paid to Wales is £556 million less in real terms now than in 1978–79.
I deeply regret what the Secretary of State said about recycled grants. That is major money lost to Wales. Does he remember that when he got the reluctant agreement of Welsh local authorities to change from targets to the toughened grant poundage system it was with the promise that any grant withheld as a result of toughened poundage would not be lost to Wales? That was an important consideration. Can he assure me that that cash will not be lost to the people of Wales? If he cannot promise that it is in some respects a betrayal.
I wish to deal with matters relating to changes in the grant mechanism. Does the Secretary of State remember the requests for the schedule to be lowered, for nil safety nets, for nil gain caps and for the level of threshold to reach 20 per cent.? Some 10 districts will have negative marginal rates of grant at 100 per cent. or more as a result of the grant mechanisms which he is using.
On capital, why did the Secretary of State not increase the proportion of housing receipts from 15 per cent. to 33 per cent., as he was requested to do? Even if our proportionate share in Wales was simply upgraded to the English 20 per cent., we would gain £16 million annually, and the right hon. Gentleman will agree that we have major problems in housing.
Does the Secretary of State know that the overall level of spending will provide too little scope for councils to tackle the decaying infrastructure of our communities? May I remind him that Her Majesty's inspectorate depicted disrepair at every level in our education service, especially in our valley communities?
This appears to be a settlement from the cosmetician's angle. It does not repair the severe damage of yesteryear. The ministerial version of the status quo is unacceptable. The settlement has not commanded the support of Welsh local authorities, and contains in its detail a shabby deal on the recycling of grants. It is gravely defective on estimated inflation levels for next year. It does not address itself to the urgent need for comprehensive, major investment in schools, hospitals and houses. There are glaring omissions concerning the funding of teachers' and firemen's pay. It will not save the Conservative party. A Labour Government will restore the freedoms of local government in Wales.
Mr. Edwards: The hon. Gentleman has always considered himself to be rather good at theatre, and that was certainly a theatrical, if unrealistic, performance. He talked about cosmetics. My announcement was that there will be aggregate Exchequer grant amounting to about £1,200 to every household in Wales.
The hon. Gentleman had to admit at the beginning of his remarks that the statement might be greeted with relief, but the extent to which it will be greeted with relief by ratepayers entirely depends on the decisions of local authorities. Apart from the fact that the base of the settlement is extremely generous—I shall return to that — the negative marginal rates mean that if local authorities spend high above the settlement, their ratepayers will have a high bill to pay, while if local authorities spend below the level of the settlement — I believe that that is certainly within the power of many districts—there can be substantial rate reductions.
I remind the hon. Gentleman that we start from a base which itself involves reductions, because the £5 million of recycled grant from last year was given back to local authorities on the understanding, which they fully accepted, that that money would be used first to reduce rate bills. Therefore, there is that reduction to feed into the system even before the effects of this settlement.
The hon. Gentleman drew attention to the fact that there are differences between local authorities. The overall rating effects vary from council to council and from district to district. The higher impact is usually on those authorities that have taken action in the previous year which affects the marginal rate in the current year. Therefore, it is substantially a consequence of past decisions. The overall effect of the settlement for Wales is for nil or very low rate increases. If the hon. Gentleman looks at the rate effects in individual districts, he will see that that is so.
The hon. Gentleman talked about pay. He seemed to assume that pay increases are unrelated to the increase in inflation and that they have no effect on the pattern of spending by local authorities. People must understand that high pay settlements, way above the current rate of inflation, are bound to have consequences on services and employment. That must be borne in mind.
The hon. Gentleman did not seem to recognise that the increase in Wales of 4·75 per cent. of current expenditure is 1 per cent. higher than in England. That is because of the substantially better and lower spending performance of Welsh local authorities in the past. As they have performed better than the English authorities, it would have been wrong for them not to receive some recognition in the statement. I expect to be able to make additional capital allocations later in the year.
The hon. Gentleman asked about recycled grant. Local authorities asked for stability. It was not sensible to continue with a system that meant that individual local authorities' decisions could be severely affected by the spending decisions of other local authorities. If Welsh local authorities collectively spend on the lines of the settlement, no grant will be lost to Wales. It is very much up to the local authorities. The hon. Gentleman commented on grant mechanisms. I have pointed out that the principal request we received was for stability. I have commented on the hon. Gentleman's point about negative marginal rate.
The hon. Gentleman spoke about capital and housing allocations. No decisions on capital spending have been

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announced. I made it perfectly clear in my statement that we are still reviewing the capital control system. We shall make announcements about capital spending later in the year, after we have considered the points that the hon. Gentleman has made, as well as local government representations.
Sir Raymond Gower: Does my right hon. Friend find it disheartening that the hon. Member for Alyn and Deeside (Mr. Jones) is apparently reconciled to the inevitability of permanent high inflation certainly in the foreseeable future — far above the ordinary figure of inflation? Is it not a fact that the figures cited by my right hon. Friend deserve a welcome by local authorities, as they should be able to avoid the excessive increases that caused so much distress last year?
Mr. Edwards: I acknowledge that they start from a much sounder, stronger base. They acknowledge that relevant expenditure will be 8·4 per cent. higher than total relevant expenditure at the main report stage in 1986–87, and nearly 6 per cent. higher than budgets.
My hon. Friend referred to the expected inflation rate. Most people, when they talk about 3·75 per cent., talk about the projected growth in costs in the economy as a whole, as spelt out in the Budget statement by my right hon. Friend the Chancellor of the Exchequer. The settlement gives Wales a further 1 per cent. on top of that.
If my right hon. Friend were to do a further forecast at this time, the figure would be significantly lower than at the time of the Budget. That factor is working entirely in favour of the local authorities. I remind my hon. Friend that the £5 million recycled grant this year was the base, and that there is an opportunity for local government to have low rate increases, or even rate reductions, in Wales.
Mr. Michael Foot: As the rate support grant system is obviously designed to prevent everyone, including possibly the Secretary of State, from knowing exactly what is going on, is the right hon. Gentleman willing to make a wild guess at how much he purports to restore to, say, the council of Blaenau Gwent of the money which his previous rate support grant system took away from it?
Mr. Edwards: This is an extremely generous settlement. We have maintained grants at the same percentage as last year. The decisions on spending will depend on local authorities. Our proposals for reforms of local government finance have been spelt out in detail. We have been consulting in detail on them. We wait with fascination to see when the Labour party gets around to putting forward some reform proposals of its own.
Sir Anthony Meyer: Is not the ungainly floundering of the hon. Member for Alyn and Deeside (Mr. Jones) a tribute to the skill with which my right hon. Friend has managed to tinker with the manifestly unroadworthy vehicle of local government finance to keep it on the road? Is my right hon. Friend aware how welcome will be his decision not to proceed with the ludicrous and complicated system of recycling, which made it impossible for local authorities to plan ahead with foreknowledge?
Mr. Edwards: I think that many people will welcome the stability it gives and the certainty in planning. Because
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Clwyd acted responsibly last year, it has come out well in the settlement. The rate increases which can be expected should be low, and reductions are possible.
Mr. Richard Livsey: The Secretary of State has announced a 4·75 per cent. increase. Compared with what has happened in the past, that is a vast improvement, but we must consider it in its historical context. Our experience in previous years has not been good. There has been a crisis in the education sector—[HON MEMBERS: "Reading.") — which has suffered tremendously, and in housing. There is a crisis in one of the boroughs which I represent — Brecknock — where 1,000 people are on the housing waiting list. I would welcome the right hon. Gentleman's assurance that more money will be recycled into the housing sector. In addition, there is a crisis in respect of road bridges, with 23 out of action in Powys. I hope—
Mr. Speaker: Order. The hon. Member must ask a question.
Mr. Livsey: Is the Secretary of State aware that 23 bridges in Powys are out of action? Will he assure me that resources will be made available to repair them so that hardship can be alleviated?
Mr. Edwards: I welcome the hon. Gentleman's declaration that this settlement represents a vast improvement, but I wish that the same could be said of the line of his questioning. The hon. Gentleman talks about a crisis in education. I well remember the entirely false allegation which he put around during his by-election campaign that a school was to be closed which no one intended to close. That is the type of myth that the Liberal party likes to put around. As for housing and other capital projects, including bridges, I have said that this is not an announcement on capital expenditure. That will come later.
Mr. Keith Raffan: I congratulate my right hon. Friend on his excellent statement and on the extremely generous settlement. Does he agree that, if local authorities are to take full advantage of it, they must make a concerted effort to keep pay settlements down, which may mean getting tough with the National and Local Government Officers Association? Following on from the question asked by my hon. Friend the Member for Clwyd, North-West (Sir A. Meyer), will my right hon. Friend give just one assurance that for Clwyd this year there will be no repeat of what his officials called the "unfortunately" wide difference last year between the provisional and final block grant figures?
Mr. Edwards: It is precisely to avoid such change and uncertainty that we are doing away with recycling and going for stability. There is no doubt that local authorities find it difficult to plan. They now know that they can succeed on the basis that what they will get will be a direct consequence of their decisions. That is a great step forward.
Mr. Donald Coleman: Is the right hon. Gentleman aware that the calculation of block grants is based on rateable values obtaining on 30 September? Why is no allowance made if the rateable value is subsequently reduced unless the reduction is greater than the figure which has been determined by the Secretary of State, which is at present 2.5 per cent.? Is the right hon. Genteman aware that, in many cases, substantial

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reductions in rateable value take place? Is he further aware that, in the case of the borough of Neath — [HON. MEMBERS: "Reading."] Grow up, will you please? I beg your pardon, Mr. Speaker. I was referring to Conservative Members. Is the right hon. Gentleman further aware that the contraction of the BP oil refinery in Neath is an example of that problem? Will he undertake to look urgently at this matter to see what can be done?
Mr. Edwards: Adjustments are made as a result of the closure of industrial premises. However, I shall certainly look specifically at the constituency point raised by the hon. Gentleman.
Mr. Ian Grist: Is my right hon. Friend aware that he should be congratulated on his handling of local government finance in that he is able to come before the House with this welcome statement? Would he like to hazard a guess at what South Glamorgan county council is likely to do having followed its irresponsible record rate rise last year?
Mr. Edwards: I fear that one of the consequences of the sort of decisions taken by South Glamorgan may continue to affect those who live in the area. I hope that with this generous and soundly based settlement in front of them, the local authority will recognise that, but by the sort of rate increases it went for last year, it is discouraging the very sort of development that elsewhere it is trying to get going. Therefore, I hope that the message that the confederation of British Industry gave so clearly about the impact of high rating will be heeded on this occasion.
Mrs. Ann Clwyd: How will the Secretary of State's statement help the 29 per cent. of men who are unemployed in my constituency, and how will it help Mid Glamorgan with its massive social and economic problems? Will he confirm that the amount announced is a mere fraction of the amount taken away from Welsh local authorities since 1979? Will he tell us how much the Treasury intends to claw back from this amount?
Mr. Edwards: Because the settlement is realistic, it will give Welsh local authorities, including that in the hon. Lady's constituency, every scope for maintaining social provision and services and keeping rate increases down, which will help to attract the industry and jobs she so badly wants. The only circumstance in which there will be claw back, that is to say where there will not be the full benefit because of grant recycling, is if local authorities generally in Wales go above the spending pattern that the settlement indicates. It is certainly within the power of the Welsh local government to ensure that there is no loss through that.
Mr. Keith Best:: Will my right hon. Friend confirm that his statement is much more generous than the one he made on 25 July last year, for two reasons? First, his proposals will assist forward budgeting, the absence of which has so badly hampered local authorities in planning in the past? Secondly, will he confirm that total relevant expenditure for RSG purposes is this year 5—9 per cent. more than budgeted for by local authorities, whereas last year it was only 5 per cent. more? Would the pontifications of the hon. Member for Alyn and Deeside (Mr. Jones) about the effect of wage increases not be much more persuasive if he were to take the same realistic view that the Trades Union Congress now seems to be taking which is that it should intervene in wage negotiations between
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local authorities and employees to ensure that there are moderate wage settlements because of the effect they have on expenditure?
Mr. Edwards: As my hon. Friend knows, last year we hoped that Welsh local government would maintain the good spending record that it had previously. In those circumstances, there may be some who feel that this settlement is over-generous. The fact is that we have taken account of actual spending patterns in the past and have now made generous provision against the expectation of the increase in costs in the current year. Therefore, there is no doubt that this settlement gives Welsh local government a considerable opportunity to maintain services and lower the rate burden. There is still plenty of scope for Welsh local government to prove its efficiency on the lines that it is beginning to acknowledge and which has been pointed out by the Audit Commission and others.
Mr. Ron Davies: Can I put it to the Secretary of State that this is not a good settlement for Wales—just not quite as bad as we have come to expect from him? His claim that local authorities in Wales will be the prime determinant of rate increases comes a bit rich from a member of a Cabinet which is forcing through the House measures which will result in a 20 per cent. increase in the rate bills of the poorest people in our communities. As he was so complimentary about Welsh local authorities, why has he not decided to fight to exempt them from the recycling provision?
Mr. Edwards: The hon. Gentleman can put it to me, but he is wrong. This is a good settlement. It is one thing to argue that everyone living in a local authority area should make some contribution to the rating costs so that they are aware that there are costs to be paid for the services provided, and another to argue for lowering the rate bills and rate costs generally. The people who are paying that percentage will benefit from the lower costs just as much as others.
Mr. Gwilym Jones: I welcome my right hon. Friend's statement. I trust that he agrees that this year's sharp practices by local councils in Wales should never again be repeated. I press him on the answer that he gave to my hon. Friend the Member for Cardiff, Central (Mr. Grist), which disturbed me. Will he give further consideration to the plight of my constituents, so that they will not again be the worst hit in Wales by South Glamorgan county council, a council that is notorious for its monstrous rate increases? Recent years have included increases of 94, 54 and 24 per cent., the latter being for this year. That burden seems to get better only because of the Government's success in conquering inflation.
Mr. Edwards: I agree with my hon. Friend that the record of that authority in recent years has been disgraceful. If the local authorities in my hon. Friend's area spend in line with the settlement, there is no reason why rate increases should be more than 1 or 2 per cent.
Mr. Dafydd Wigley: Does the Secretary of State accept that maintaining the status quo is not good enough when the status quo involved potholes in the roads, social services that cannot be delivered to those who need them, and a substantial bill for the education settlement coming through soon? Will he confirm that at 4·75 per cent., 1 per cent. above the GDP deflator, the figure is still 0·5 per cent. short of what is needed for the

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education settlement? That means that Wales will be £7 to £8 million short of what is needed to pay the teachers. That being so, shall we not either lose teachers or cut other services to finance the settlement?
Mr. Edwards: No, I think that this is untrue. The hon. Gentleman failed to listen to the answer that I gave earlier, when I pointed out that not only is the settlement above the GDP deflator, but the GDP deflator was a forecast made a considerable time ago, since when inflation has continued to fall. What is more, there has been a substantial increase in the amount allocated as the base from which local authorities start this year. Against that background, I cannot see that local authorities have the problems that he describes.
Mr. Gareth Wardell: Will the Secretary of State give the House three figures, one for Wales, one for the borough of Lliw Valley and one for Swansea city council? Will he precede the three figures by either a plus or a minus? What have been the changes in real terms in the cash awarded in the rate support settlement for 1986–87 compared to 1978–79?
Mr. Edwards: If the hon. Gentleman tables that question, I shall answer it.
Mr. Ray Powell: The Secretary of State can rarely answer a reasonable question. It is like his statements. I agree with my right hon. Friend the Member for Blaenau Gwent (Mr. Foot) that the rate support grant is confusing enough, but having a Secretary of State for Wales such as that which we have makes the matter even more confusing. When the right hon. Gentleman talks about recycling, I should like to suggest that he gets on his bike.
The right hon. Gentleman was asked a question by the Ogwr borough council, which appealed with him to meet it in the House and discuss with it the way that his Government and his actions have ensured that the council's development status has been down-graded in two places. I appeal to him to reconsider the matter, so that it can benefit, if there is any benefit to come out of the statement, in a proper and reasonable way.
Mr. Edwards: I know that the hon. Gentleman finds these matters difficult to understand, but his question has not the smallest connection with the statement that I have just made.
Dr. John Marek: Is the Secretary of State aware that when he said that Clwyd county council behaved last year, as he put it, responsibly, it has meant for those of us who live in Clwyd worse roads, growing dereliction on the roadways, less education provision and worse social services, and a general contribution to the shabbiness and lower quality of life with which we have had to put up from the social services? As the Secretary of State knows, rate support grants taken from Wales by this Government have amounted to £500 million since 1978–79. How much more rate support grant will be lost as a result of this statement?
Mr. Edwards: Again, the hon. Gentleman has clearly not been listening, because I have already told the House several times that the rate support grant percentage is unchanged this year.
Mr. Roy Hughes: Does the Secretary of State appreciate that the generosity that he is pretending to display is an exercise in duplicity, for over the years local government has had to put up with rate capping, the freezing of receipts from the sale of council houses, clawback, and restrictions of one kind or another. The latest example is the cheating over the recycling of grants.
When will the Secretary of State recognise the reality that Wales is about the most deprived area in western Europe? Heavy unemployment places a far greater burden on our local authorities and the services that they administer. Our education system is creaking at the seams, and the Secretary of State has not made clear how the teachers' award will be funded bearing in mind the inflation tendency.
Will the right hon. Gentleman also recognise that we have a massive housing problem, with thousands of properties lacking basic amenities, and that vast expenditure is required on our infrastructure to make the place a little more inviting for prospective new enterprises? Is it not sheer hypocrisy for the Secretary of State to urge local authorities to ease the burden on ratepayers when the right hon. Gentleman is the culprit who has done so much damage to local government and those whom it serves? Does he appreciate that we recognise, in the run-up to a general election, that he is trying to create a mirage of optimism? He will not be believed because the neglect and decay have gone on for too long.
Mr. Edwards: We all know that Opposition Members love to create an image of Wales in gloom, decay and depression, whatever the damage that it does to Wales, and however much it discourages job creation. The hon. Gentleman has led the field in that disreputable and damaging task.
The hon. Gentleman started by accusing me of rate-capping, when there has never been rate-capping in Wales. He accused me of cheating over recycling, but there has never been cheating over recycling. Some may think that a system under which some local authorities were penalised because of the decisions of other local authorities represented a form of cheating that we should do well to get rid of. The stability and security that this gives local authorities will be welcomed.
In his account of the relevant position between Wales and England, the hon. Gentleman failed to mention that there is a considerably higher grant percentage for Welsh local authorities than in England, that we are allocating more capital, and have done so because of the relatively good spending record of most Welsh authorities, and could have done even better if they had maintained that good record last year. Finally, I repeat that the onus for high rate bills this year will not be on the Government. If they rise, that will be solely the responsibility of local government.

Rate Support Grant (Scotland)
4.10 pm
The Secretary of State for Scotland (Mr. Malcolm Rifkind): With permission, Mr. Speaker, I wish to make an announcement about local authority expenditure and rate support grant in Scotland.
I would first like to deal with 1987–88. For that year I propose to set the level of provision for local authority relevant current expenditure in Scotland at £3,277 million. This figure is 3·75 per cent. above local authorities' adjusted budgets for 1986–87 and is a reasonable assessment of what they are likely to spend, given the level of inflation and their past pattern of spending. It recognises the efforts made by increasing numbers of authorities to budget at or below guideline.
I propose to set aggregate Exchequer grant for 1987–88 at £2,160 million. This will maintain, on present estimates of loans charges and other financing items, the present grant percentage of 56·1 per cent.
I consider that my proposals on provision and grant represent a fair and realistic settlement for next year. In making these proposals I have taken careful account of the points made to me by the Convention of Scottish Local Authorities. I met the convention on 18 July when we discussed expenditure prospects for next year. My hon. Friend the Minister for Local Government and the Environment met the convention this morning to outline these proposals to them.
Given this realistic settlement, there is no reason for rate increases next year, unless local authorities increase their spending next year above inflation or fail to bring their spending to guideline in the current year. I very much hope that local authorities will, in the interests of their ratepayers, respond positively to these proposals.
I turn now to 1986–87. Scottish local authorities have budgeted for 1986–87 to spend £118 million, or 3·9 per cent. more than the current expenditure guidelines which were issued to them. Authorities were given ample warning that the penalties for exceeding guidelines would again be severe. I have therefore decided, having consulted the Convention of Scottish Local Authorities on my proposals last week, to impose grant penalties for 1986–87 totalling £125 million. I will be laying the necessary rate support grant order shortly and grant reductions will start on 30 July. Copies of the report on the order showing how the penalties will affect each local authority are available in the Vote Office. Letters of notification are being posted to authorities today.
Penalties will again be calculated using a tariff which relates the penalty to the level of excess over guideline. The tariff will, to a greater extent than last year, concentrate the penalties on the highest overspenders. In particular, the four authorities which are responsible for 90 per cent. of the overspending will all have a penalty which is larger than in 1985–86.
Local authorities as a whole are increasingly budgeting within guidelines. In 1986–87, 40 out of the 65 authorities budgeted within guidelines and will suffer no penalty. I hope that the 25 remaining authorities which are responsible for the overspending in 1986–87 will make every effort to reduce their expenditure at outturn and thus recover the grant penalty which I have just announced. There are considerable benefits to authorities in doing so. In 1985–86, local authorities responded to penalties by
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bringing down their overspend from £91 million to £47 million and penalties will correspondingly be reduced from £126 million to £57 million. The advantages of spending within guideline are considerable and I hope that in 1986–87 there will again be many authorities modifying their spending to be within guideline at outturn.
Mr. Donald Dewar: I am glad to see any sign of repentance on the Government Front Bench and I take some satisfaction from the fact that the sustained campaign in defence of local services has forced the Scottish Office to pause and, hopefully, to think about what it has done in previous years. I offer a very sober and qualified welcome to part of this announcement. Undoubtedly the figures are better than those for last year. It is remarkable how entering the fourth year of a Parliament concentrates the minds of Ministers on survival.
The Government claim that the 1987–88 announcement amounts to a standstill. Typically, a status quo is the height of the right hon. and learned Gentleman's ambitions, but will he take note of our doubts about the adequacy of the inflation factor? He knows that manual workers in Scottish local authorities have rejected an offer of 6 per cent., that clerical and administrative staff have rejected an offer of 5·9 per cent. and that 55 per cent. of regional council budgets is spent on wages and salaries? Against that background, an inflation figure of 3·75 per cent. seems to me to be highly suspect. The right hon. and learned Gentleman will be aware that COSLA estimates that there will have to be an increase of £70 million over and above the relevant expenditure figure that has been announced today in order to have a standstill budget.
Will the Secretary of State say a word or two about the 3·75 per cent. and how it was formulated? He will be aware that his right hon. Friend the Secretary of State for Wales announced an inflation factor of 4·75 per cent. in the Principality and suggested that this was some sort of reward, because he felt that Welsh local authorities had performed reasonably well. Will the Secretary of State confirm that the inflation factor should be an attempt genuinely to estimate what the rise in prices in terms of Scottish local authority expenditure is likely to be? Does he accept that an inflation factor of 3·75 per cent. is inadequate?
The formula for the 1986–87 penalties has been varied. The penalty is less steep, despite what the Secretary of State said. However, there is no cause for celebration. Although the figures give the impression that concessions have been made, the clawback of £125 million is almost exactly the same as it was in the previous year. Furthermore, well over half the population of Scotland —not just four authorities; that is misleading—will be penalised on what I believe to be an unjust and unjustifiable basis.
How does the Secretary of State expect Strathclyde to find £76 million in the remainder of this financial year? If it is such a reasonable system, why is Lothian being penalised by £25 million on a budget that was formulated by his political friends in the Tory administration? Will the Secretary of State also comment on the fact that, as far as I can see — although I am open to correction — no account at all has been taken of the agreement that has been reached with Edinburgh to reduce its expenditure by £6·5 million and to re-rate to that effect? That factor has been completely ignored. If it were taken into account. the

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penalty of well over £10 million would be well under half that amount. Does that not illustrate the arbitrary nature of the system and the extraordinary way that it is operated? Why should Edinburgh have to lie out of this money, causing extra expense to its ratepayers, when an agreement has been reached between the right hon. and learned Gentleman and the district council?
Finally, on rates, will the Secretary of State note that everything depends upon the distribution formula? I hope that he will give help and lend a sympathetic ear to those authorities that face very real problems and that are genuinely struggling to meet guidelines. I hope that he will not use the increased aggregate Exchequer grant as a reward for cynical political purposes to help those who are already comfortably placed. Does he accept that, to any impartial observer, it is perfectly clear that this Government's strategy has been based upon hostility to local government — an assumption about irresponsible and profligate expenditure that cannot be justified—and that no account has been taken of the strain that has been placed on basic and essential services?
Although this announcement is better than some that we have had to endure in the past, it will do nothing to remove the pressures on many authorities in 1987–88. Although the settlement represents progress, it is very slow and grudging. I was taught very early in life to recognise that one should be thankful for small mercies, but this announcement will do nothing to undo the damage that has been done to local democracy since the right hon. and learned Gentleman's party hijacked the Scottish Office seven years ago.
Mr. Rifkind: I thank the hon. Gentleman for the general welcome that he has given to my announcement. I acknowledge the predictable qualifications that he felt it was appropriate to add to his general welcome. Nevertheless, it would be right to interpret his response as congratulating the Government on the provision that they have made for Scottish local authorities, and I am happy to accept it on that basis.
The hon. Gentleman asked for an explanation of the generous provision that we are making. There are two factors that he ought to bear in mind. For the first time, this year's settlement, in volume terms, is slightly below what it was in 1979. In addition, the budgets of two thirds of Scottish local authorities are now either at or below guideline. Therefore, it seemed to me and to my colleagues that it was right and proper that that should be reflected in the provision that we are making available. That is the explanation for that factor.
The hon. Gentleman took issue with the inflation projection. He will be aware that we have taken inflation into account at a projected rate of 3·75 per cent. for the purposes of determining provision. He is correct to say that local authorities are assuming a higher rate of inflation, but he cannot expect the taxpayer to fund any pay settlement that local authorities might choose to make. He gave the House information about pay claims made by various groups of local authority employees. We are well aware that bids and offers can be made, but it is right for local authorities to take into account the national rate of inflation and to expect their employees to take it into account. The figure of 3·75 per cent. is perfectly realistic for that purpose.
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The hon. Gentleman asked about Strathclyde and about the penalties announced for the current year. Strathclyde also had a heavy penalty last year, but during that year—perhaps because of the penalty—we saw a substantial reduction in expenditure at outturn. There is no reason of which I am aware why we should not anticipate a similar reduction in expenditure by Strathclyde this year. I suspect it was anticipating a much higher penalty than has been announced, and it should find no difficulty whatever in achieving significant reductions during the financial year.
The hon. Gentleman was correct when he said that the voluntary reduction in Edinburgh district council's proposed expenditure has not affected the way in which the penalty is distributed. Edinburgh will at outturn receive repayment of rate support grant to take account of the expenditure at the end of the day. Edinburgh district council may be reducing its budget as a result of direct pressure from the Scottish Office and the threat of parliamentary action. Other local authorities may also be revising their budgets and it would be quite wrong to single out one authority that has acted on a voluntary basis to avoid the proposed penalty. If at outturn the figures for original budgets have been reduced, as we hope they will be, then the penalty based on the original budget will be revised and local authorities will receive any grant that they had forfeited.
Sir Hector Monro: I welcome the statement by my right hon. and learned Friend. It should help prudent local authorities to keep down their rates and propose no increase for next year. When he makes the settlement, can he ensure that it is weighted in favour of authorities that have behaved prudently in the past and have kept their rates down? Will he bear it in mind that rural areas had some catching up to do after revaluation and see that they get priority in the settlement?
Mr. Rifkind: I thank my hon. Friend for welcoming the announcement. As he knows, in recent years the whole system of penalties has been changed to ensure that those local authorities which budget at or below guideline run no risk of forfeiting any rate support grant. Therefore, the £125 million that I have announced will not in any way affect my hon. Friend's regional council which has budgeted within the guideline.
Sir Russell Johnston: The Minister has said that this settlement is based on the past pattern of spending. Is it not plain that, despite falling school rolls, it will prevent education authorities improving education provision and will compel the closure of still more rural schools? How on earth the teachers' pay settlement will be dealt with is a mystery. Local authorities will be unable to make better provision through their social work departments, despite the enormous pressure upon them to do so.
Mr. Rifkind: I find the hon. Gentleman's intervention incomprehensible. We are all aware that in recent years pupil rolls have fallen by about 18 per cent. in Scotland. That enables local authorities to concentrate their education provision on a smaller number of pupils. That should enable them to make better provision.
The hon. Gentleman asked about the teachers' pay settlement. In determining provision for next year, account has been taken, and is incorporated in these figures, of the

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settlement that local authorities have reached with the teaching unions. For that reason, that part of the hon. Gentleman's question is superfluous.
Mr. Albert McQuarrie: I congratulate my right hon. and learned Friend on his excellent statement. Is it to be expected that anything that my right hon. and learned Friend produces will be sour grapes to the Opposition. This statement will be of considerable benefit to local authorities in Scotland, where 40 out of the 65 local authorities have met their deadline. That is a great credit to Government measures. My hon. Friend the Member for Dumfries (Sir H. Monro) made a plea on behalf of rural areas. I support that, because rural areas have to maintain an infrastructure in order to try to retain the rural population and avoid depopulation.
Mr. Rifkind: My hon. Friend should not be too upset by the carping comments of the Opposition. By the standards of the Labour party, what they said was a compliment to the Government and we can take that into account. We bear in mind the developmental needs of specific areas when determining capital allocations and provisions. The needs of each local authority are given intense scrutiny.
Mr. Norman Hogg: The Minister's statement is a continuation of the punitive policy that the Government have pursued against local government in Scotland. Is it not the case that the guidelines are unrealistic and unworkable? Instead of inventing poll taxes, the Secretary of State would do far better to set about establishing a proper working relationship with the local authorities so that they may be properly funded.
Mr. Rifkind: If the guidelines are unrealistic, it is surprising that some two thirds of Scottish local authorities have been able to budget within them.
Mr. Donald Stewart: Is the right hon. and learned Gentleman aware that the Scottish share of United Kingdom expenditure has been falling? There will be no great celebrations because the rate support grant has been kept static. [Interruption.] I am dealing with facts. One of the authorities omitted from the list of those which kept within the guidelines is the local authority in my constituency, the Western Isles islands council. Is the right hon. and learned Gentleman aware that all its essential services have been cut to the bone and that it has to make a drastic effort to keep to the levels to which it is tied? How will it fare if it cannot get any advance on the funds that have been available?
Mr. Rifkind: As the right hon. Gentleman acknowledges, his own islands council has felt able to budget within guidelines, and, contrary to what the right hon. Gentleman suggests, that is a factor to bear in mind. The provision that I have announced will enable that council to continue a level of expenditure consistent with that position.
Mr. Alexander Pollock: Now that the Government seem to recognise the virtue of supporting local authorities by holding public expenditure constant, can my right hon. and learned Friend tell me the implications for the capital consent programme, bids for which are clue a little later this year? Will he consider especially the problem facing Grampian region? It has a road building programme that will need substantial
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additional capital consents. Those roads are needed to give proper support to the timber industry in that region, given the expansion at Dalcross and the other efforts by timber growers there.
Mr. Rifkind: I am aware that the timber industry in Grampian and Dumfries and Galloway is relevant to the capital allocations. No doubt there are other authorities in a similar position. We have invited regional councils to tell us the details of their requirements so that we can take them into account when capital allocations are determined.
Mr. David Lambie: Is the right hon. and learned Gentleman aware that, after six years of serious cuts in local government grants and attacks on local government services, even this standstill settlement, although it is set at a low level, makes us all feel like cheering? In order to show his good faith and to remove the suspicion that this might be a pre-election settlement, is the right hon. and learned Gentleman prepared to look again at the clawback of the £76 million penalty that he has imposed on Strathclyde and the £50,000 penalty that he has imposed on Cunninghame district?
Mr. Rifkind: The hon. Gentleman, who is always a fair man, will—[Interruption.] I think so, even if Labour Members apparently do not. I certainly acknowledge that the hon. Gentleman is a fair man and he will know that reductions in local authority provision did not begin seven years ago but some 10 years ago under a Government whom the hon. Gentleman consistently voted against whenever the rate support grant was announced. I seem to remember that he has been consistent in each of the past 10 years in voting against local authority provision, irrespective of who proposed it.
The hon. Gentleman will be aware that, over the past year, certainly Strathclyde, and I suspect Cunninghame, have been able to reduce their expenditure on outturn and that has enabled significant amounts of grant to be returned. The very fact that we have imposed the heaviest penalties at the upper end of overspending will give that much greater incentive for reductions in expenditure.
Mr. Robert Maclennan: Will the Secretary of State clarify what he said in response to an earlier question about the impact of the settlement of the teachers' dispute in Scotland? He gave the impression that the settlement had taken that into account and would in some way act as a ceiling upon the deliberations of Professor Main.
Mr. Rifkind: No; I think that the hon. Gentleman has misunderstood what I said. In determining provision for local authorities for 1987–88, we have taken into account not only the budgets that they fixed but the pay settlement that was reached after the budgets had been fixed with the teaching unions, because clearly that must be added to the budgets in order to achieve a realistic figure.
Mr. John Corrie: I warmly welcome the fact that the rate support grant has not been cut again this year, as that inevitably leads to increases in rates, although it helps to control expenditure. May I take it from the statement that, with only a few exceptions, we are now reaching the sort of expediture levels that my right hon. and learned Friend wants to see in councils in Scotland?
Mr. Rifkind: The latter part of my hon. Friend's question must be taken into account. It is true that 40 out of 65 authorities have budgeted either at or below guideline and that a number of other individual authorities are at a level only marginally above. But my hon. Friend will recall my comment earlier that four local authorities are responsible for 90 per cent. of the excess, and that is a matter for severe concern.
Mr. James Hamilton: What comfort will this give to Strathclyde regional council in its efforts to eliminate composite classes in primary schools, when one in three primary schools have composite classes? In addition, what comfort will it give to Motherwell district council, bearing in mind the terrible unemployment there? Do not mention the food park, because that is not labour-intensive.
Mr. Rifkind: If the hon. Gentleman has discussions with either Strathclyde region or Motherwell district, he will find that it will tell him, privately if not publicly, that this provision is substantially greater than it had anticipated.
Mr. Barry Henderson: Will my right hon. and learned Friend accept that this welcome statement, which gives encouragement to Scottish ratepayers to expect a similar or lower rate bill in the coming year, owes much to the Government's success in persuading more Socialist authorities to budget at or near guidelines? Will he make further efforts to see that the track record of prudent local government management will be rewarded in rate support grant settlements?
Mr. Rifkind: My hon. Friend is correct. It is worth pointing out that local authorities are spending in volume terms for all practical purposes the same as in 1979. It has taken a number of years to reach that position, and it is good that they have now done so.
Mr. Jim Craigen: The impression is being created that this is a less worse settlement for ratepayers in the coming year. Is this the first sign of the advice that the Government have given to the inquiry committee on teachers' pay and of the settlement that he expects, or can local authorities expect a supplement to the rate support grant if the teachers' settlement is higher?
Mr. Rifkind: The Government's evidence to the Main inquiry has been published and is available for the hon. Gentleman to study if he so wishes. We have not yet even received the recommendations of the Main report and obviously I cannot comment at this stage on what our response will be to recommendations of which neither we, the unions nor the local authorities are aware.
Mr. Michael J. Martin: The Minister stated that he is looking for more cuts from authorities such as Strathclyde and Glasgow district. The Minister must know that, in communities such as my own, youth unemployment is very high and that the only people who seem to be trying to tackle that serious problem are the local authorities. [HON. MEMBERS: "No."] Hon. members say no, but I know of no private employer who is trying to get the young people off the street in the way that Glasgow district council is by attempting to get apprenticeships and by taking the Manpower Services Commission—
Mr. Rifkind: That is Government money.
Mr. Martin: It is not the Government's money. It is the taxpayers' money. [HON. MEMBERS: "Hear, hear."]
The Minister asked local authorities to participate in the MSC schemes. He knows that Strathclyde region and Glasgow district have not only participated but have tried to make permanent work for the young people in those schemes. The Minister knows that he is endangering the prospects of young people in our communities.
The Minister may know that a deputation was received from the people in the Barrmulloch area because the local authority intended to close down the community centres at the weekend. What chance is there of cutting down vandalism if the community centres are not open?
Mr. Rifkind: The hon. Gentleman should appreciate that it is not just Glasgow district and Strathclyde region that are participating in the youth training scheme and using, as he correctly says, taxpayers' money to help employment in their locality. Virtually all 65 authorities are participating in the scheme. If 40 out of those 65 can participate in the youth training scheme and still have budgets at or below guideline, there is no particular reason why Glasgow district and Strathclyde region cannot do so as well.
Mr. Michael Forsyth: Can my right hon. and learned Friend confirm that, within the additional resources that he has made available to local authorities in Scotland, there is ample scope for them to use their powers to give discretionary rate reductions to amateur sports clubs in Scotland? What was the result of discussions with the Convention of Scottish Local Authorities on that issue? Can we now expect local authorities which said that if they had these resources they would act to do so?
Mr. Rifkind: My hon. Friend makes a fair point. Already, a number of Scottish local authorities are giving discretionary rate relief to sports clubs. A number are not, and have sought to suggest that Government restrictions prevented them from being more generous. As my announcement today represents an increase in aggregate Exchequer grant of 7·5 per cent., or £152 million, my hon. Friend is correct to say that, if that is all that was stopping them using their discretion, as the 100 per cent. rates relief for sports clubs has been estimated to be about £3 million or £4 million, and as no one expects or would wish to see such a high level of rate relief, there can be no excuse now for any authority that wants to use its discretion not feeling free to do so.
Mr. Dick Douglas: Will the Secretary of State concede that we are all rather bemused by his and the Secretary of State for the Environment's exercise in raiding the contingency fund just prior to an anticipated general election in a year or so? Why is local government expenditure profligate when the Exchequer has to support it to the tune of 60 per cent. or over, while it is an exercise in probity when the Exchequer has to support it at 56·5 per cent., as is the case today? When has a regional council such as Fife embarked on excessive expenditure? Can he identify any expenditure in Fife that commands the penalties that he seeks to impose? Where, against the background of increasing unemployment and the increasing devastation of our industrial base, is any wasteful expenditure to be found?
Mr. Rifkind: As I understand it, Fife regional council was able, during last year, to reduce its expenditure by

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some £7 million, which suggests that the original budget was not the bare minimum that it could afford. The hon. Gentleman should ask himself why so many Scottish local authorities have been able to spend either at or below guideline—[AN HON. MEMBER: "They have not enjoyed it."' It is not a question of whether they have enjoyed doing so. There is no evidence that, in the two thirds of local authorities that are spending within guideline, services to the community are significantly different from those in areas that are overspending. Therefore, the hon. Gentleman should inquire about the reasons for that.
Mr. William McKelvey: There is nothing cheerful about the figures for Kilmarnock and Loudoun for they have been mallied. Kilmarnock and Loudoun is kind but not extravagant. Its only crime was to protect jobs and services. The authority must knock approximately £500,000 off the intended expenditure. That means several hundred jobs lost in an area which already has almost 20 per cent. unemployment. Would the Secretary of State care to tell me, so that I can tell the lads in Kilmarnock, how the authority can cut that expenditure without job losses?
Mr. Rifkind: Ayrshire Labour Members appear to be deeply divided about their proper response to my announcement. One wants to cheer and the other is worried.
Mr. McKelvey: My hon. Friend the Member for Cunninghame, South (Mr. Lambie) said "jeering", not "cheering".
Mr. Rifkind: That is not what I heard.
When the hon. Gentleman discusses the announcement with his district council he will discover that it considers the provision generous and considerably higher than it expected. The provision will enable the council to plan expenditure for next year on a realistic basis.
Mr. Bill Walker: Does my right hon. and learned Friend agree that the rate support grant which he has announced today shows clearly how far Britain has recovered from the day when the Labour Administration went to the International Monetary Fund? That followed many years when Britain had to be careful about taxpayers' money, borrowing and expenditure. Does he also agree that the best way to deal with the frivolous expenditure of local authorities, especially on such items as nuclear-free zones and conferences, is to ensure that others, such as those who run caravan sites which are an important part of the tourist industry, and who are concerned about the differences between their rates and the rates paid in England and Wales, are protected by continuing with the policy that we have been pursuing for years, which is to see that ratepayers get value for money?
Mr. Rifkind: It can only be in the interests of the local community if local authorities confine themselves to matters for which they clearly have responsibility.
Mr. Tam Dalyell: May I return to the answer given to the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston)? The Secretary of State talked about concentrating educational provision and mentioned an 18 per cent. drop in the number of pupils. Is the entire package conditional upon the closure of schools? [HoN. MEMBERS: "No."] If it is not, the right hon. and learned
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Gentleman had better make the position clear. What did the answer given to the hon. Member for Inverness, Nairn and Lochaber mean if it was not the closure of schools?
Is not the real answer to do something about class sizes, not least in the light of last night's vote? We have an opportunity to achieve better and more favourable class ratios, which are much required in the light of last night's vote. Will the right hon. and learned Gentleman address himself to the question put by my hon. Friend the Member for Glasgow, Springburn (Mr. Martin), which inadvertently he did not answer, as to whether it makes sense for community centres to have to close at weekends because of a shortage of money? Those places were built in the 1950s and 1960s at enormous expense, and socially it is highly desirable that they should remain open at the weekend.
Mr. Rifkind: That is a matter to be determined according to the priorities of the local authority. The hon. Gentleman will agree with me that Glasgow and Strathclyde region has sufficient resources to do what it thinks appropriate about community centres, given the overall resources available to it. But my announcement today is not conditional on anything. It represents a significant increase in resources for local authorities—an extra £152 million of cash through the rate support grant system. The hon. Gentleman should appreciate that that is a fair and realistic basis for local authority expenditure next year.
Mr. Michael Hirst: Does my right hon. and learned Friend agree that most people in Scotland will greatly welcome the announcement of extra resources today, and that it will be welcomed especially by local authorities which have shown prudence in their spending? Does he accept that most ratepayers in Scotland will welcome his assurance that there need be no increase in rates next year as a result of today's announcement? Will he give an undertaking that, despite all the huffing and puffing that we have heard from local authorities, he will continue to impose penalties where there is evidence of overspending?
Mr. Rifkind: I can give my hon. Friend that assurance. It is because the majority of Scottish local authorities are now budgeting responsibly and constructively that lit is possible and desirable for the Government to respond in a similar fashion.
Mr. Tom Clarke: When the Secretary of State met the Convention of Scottish Local Authorities, did he explain how he had managed to obtain from his Cabinet colleagues a protected inflation rate of 1 per cent. less than Wales, despite Wales' dynamic Secretary of State? Did the right hon. and learned Gentleman give COSLA the reasons for that difference? Did COSLA endorse the Government's proposals?
Mr. Rifkind: I do not recall COSLA being terribly interested in Welsh rate support grant provision but perhaps that will change. The level of local government expenditure in Wales has been, up to this year, dramatically lower than in either England or Scotland. Welsh authorities have kept within guidelines to a much greater extent than authorities in Scotland or England. I am sure that those factors were taken into account by my right hon. Friend the Secretary of State for Wales in determining what provision to make.
Mr. John Home Robertson rose—
Mr. George Foulkes rose—
Mr. Speaker: Mr. Foulkes.
Mr. Foulkes: I had expected to take on my hereditary position of sweeper, but I hand it over to my hon. Friend the Member for East Lothian (Mr. Home Robertson).
Two things are clear about the settlement from an initial consideration of the statistics. First, it is clearly political—[Interruption.]—party political—and there is an election approaching. For example, Argyll and Bute —one does not have to look far from the hon. Member who represents that area—gets an initial needs payment of £2·6 million, whereas East Kilbride and East Lothian receive about £900,000. Will the Secretary of State explain that?
Secondly, it is clear that the guidelines are completely arbitrary. Cumnock and Doon Valley is faced with a punitive penalty of 110 per cent. Can the Secretary of State explain to the local authority with the highest unemployment how it can cut its expenditure? It has the smallest administrative overheads. Should it close leisure facilities available to the unemployed? Should it stop advance factory building? Will the Secretary of State say exactly where the cuts can be made in an area such as Cumnock and Doon Valley?
Mr. Rifkind: First, my announcement today does not show the amounts going to any local authority. That is a matter which is determined by distribution principles, and nothing has been determined yet. Today I simply announced the global amounts. I hope that the hon. Gentleman appreciates that.
If Cumnock and Doon Valley wants to achieve economies, it might usefully take advice from the two thirds of Scottish local authorities which have found it possible to budget within guidelines.
Mr. Home Robertson: If I could sweep up the Secretary of State, I would be a happy man. He has been emphasising some rather contrived good news, but will he say something more about the bad news which he has tried to conceal? What about the £25·34 million which he proposes to impose by way of penalty on his constituents and mine, in Lothian region? What scope is there for cutting the services available to the people of Edinburgh, Pentlands or of East Lothian under Brian Meeks' Tory budget? Will the Minister tell us more about that? Will he also pay tribute to the fine tuning of East Lothian district council? Will its penalty of £1,762 cover the administrative costs of this absurd system of penalties and guidelines?
Mr. Rifkind: I have no doubt that, if the penalty is so small, East Lothian district council can ensure that there is no penalty at all. Even the hon. Gentleman will agree that that should not be beyond its wit and imagination. Lothian regional council is, indeed, one of the high overspending authorities and it is right and proper that we should have a system that imposes penalties only on those that are responsible for the excess. That is much fairer than the old system, when penalties were imposed on local authorities as a whole. That took no account of whether they had overspent. That was the system which the Labour Government seemed to prefer.

South Africa (Council of Ministers)
4.49 pm
Mr. George Robertson: On a point of order, Mr. Speaker. May I seek your guidance and, I hope, your support? On Monday 21 and Tuesday 22 July, the Foreign Affairs Council of the European Community met in Brussels under the Presidency for the first time of a British Foreign Secretary. A very serious report was given to it on the subject of South Africa by the Foreign Secretary, who is now perambulating his way around South Africa, being snubbed by all varieties of black opinion. He reported to Foreign Ministers of the European Community on his visit to the United States of America and on his conversations with Secretary Shultz and President Reagan, and informed them of his itinerary for this week.
But this afternoon there has been no report to the British House of Commons about that council meeting. We are left with a written answer to the hon. Member for Leeds, North-West (Dr. Hampson) if we are to work out precisely what the Foreign Secretary intends to say to the South African Government and to those elements who may choose to meet him. Surely it is intolerable for the Foreign Office and the Foreign Secretary to treat the House like that, and not to pay us the elementary courtesy of reporting back from that Foreign Affairs Council. It leaves us asking what on earth the Foreign Office has to hide if it has to take such an unprecedented step following the first meeting held during our Presidency. It has simply hidden behind a slim written answer given this afternoon.
Mr. Speaker: As the hon. Gentleman knows, whether the Government make a statement is not a matter for the Chair. I have no control over that.
Mr. Tam Dalyell: Further to that point of order, Mr. Speaker. May I ask you a factual question? Is there any precedent for such behaviour? In my 24 years of involvement, I cannot recall a time when there has not been a statement on such an occasion. If senior Ministers have been ill, their place has been taken by junior Ministers. Is there any precedent for a report being given in the form of a written answer instead of a statement? The Minister of State, Foreign and Commonwealth Office is certainly in the building.
The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): It may help the House if I say at once that it is by no means unprecedented for the proceedings of the Foreign Affairs Council to be reported to the House by means of a written answer. A case in point is the written reply given to my hon. Friend the Member for Teignbridge (Mr. Nicholls) on 12 March 1986.
Mr. Alan Williams: Further to that point of order, Mr. Speaker. In normal circumstances, we would no doubt accept what the Leader of the House has said, but there are only two days to go before the recess, and it will be October before the Foreign Secretary or one of the Foreign Office Ministers will be standing at that Dispatch Box again. It is imperative that we should have a statement before the recess. I hope that the Leader of the House will ensure that there is a statement tomorrow afternoon or, if necessary, on Friday morning.
Mr. Biffen: This afternoon the House has a pretty full bill of fare, and I appreciate that the right hon. Gentleman has tried to be helpful. Of course, we could look at this

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issue through the usual channels to see whether something could be done on Friday morning. But it should be placed on the record that last week we had a very authoritative debate on foreign affairs and on the South African issue. My right hon. and learned Friend the Foreign Secretary then gave the House the most authoritative report on the Government's position. He certainly would not have gone beyond that in Brussels.
Mr. Williams: This issue is important. I understand that the meeting with the American President took place after the debate last week in the House, so it is even more important to have a statement this week.
Mr. Biffen: As I have said, we can discuss the matter through the usual channels. However, my right hon. and learned Friend the Foreign Secretary would not take new policy initiatives with the American President. What he said to the House last week was a clear and definitive statement of the British position.
Mr. Dalyell: Further to that point of order, Mr. Speaker. May I declare an interest? The Leader of the House has just slipped in the suggestion that, if there is to be a statement, it could be on Friday morning. But on Friday morning I have an Adjournment debate on the Westland affair. Is the idea that my debate should be truncated in any way? After all, there is a great deal to be said about the Defence Committee—
Mr. Speaker: Order. I think that I can help the hon. Gentleman. I recall that his debate on the Westland affair will be held before 11 am. If by chance there is a statement, it will come after his debate.
Later—
Mr. Dick Douglas: On a point of order, Mr. Speaker. Perhaps inadvertently, your response to the point of order raised by my hon. Friend the Member for Linlithgow (Mr. Dalyell) on Friday's Adjournment debates gave me the impression that, if a statement were made on the Foreign Affairs Council, you would protect Adjournment debates prior to the statement. I and others have Adjournment debates that will take place after a possible statement and I trust that you will keep these in mind as well.
Mr. Speaker: Generally, I deprecate statements being made on a Friday because they intrude into Back Benchers' time; if they take place I normally adjust the timings of debates after 11 o'clock but not before. That is because statements on a Friday take place at 11 o'clock.

Members' Dining Facilities
4.56 pm
Mr. Harry Ewing: On a point of order, Mr. Speaker. I understand that an arrangement has been come to whereby the Members' Dining Room will be turned into the Strangers' Dining Room on an experimental basis at lunch time when the House returns from the summer recess, and that the existing Strangers' Dining Room will become the Members' Dining Room. I also understand that, if the experiment is considered to be successful, it will be extended, and the Members' Dining Room will be turned into the Strangers' Dining Room for dinner.
It is now becoming almost impossible for Members of Parliament to obtain tables in any of the facilities that should be available to them. What is happening to those facilities is nothing short of downright scandal. Hardly a day goes by without finding that it is impossible to have a buffet lunch in the Terrace Pavilion because the tables are almost entirely booked by those who are not Members of the House. The facilities that should be available to hon. Members are being increasingly encroached upon. In your capacity as Speaker, will you put that matter to the House for discussion and decision as a matter of urgency, and will you ensure that the experiment in the Members' Dining Room does not take place until the House has had a chance to discuss and decide on it?
Mr. Speaker: I understand that it was the unanimous recommendation of the Services Committee that the experiment should take place between October and Christmas, but if the hon. Gentleman and other hon. Members are unhappy about it their most appropriate course might be to make their strong feelings known to members of that Committee.
Mr. D. N. Campbell-Savours: Further to that point of order, Mr. Speaker. I understand that this matter comes before you as a recommendation and that it is for you to decide whether it is important enough to warrant putting it to the House. Would you consider putting it before the House, because —
Mr. Speaker: Order. The hon. Gentleman has not got this matter quite right. It is perfectly true that the unanimous recommendation was brought to me. As it was
unanimous, I inclined to agree to the experiment. If it does not work out, it will come to an end.
Mr. Willie W. Hamiliton: Further to that point of order, Mr. Speaker. From what you have said, do I take it that the Services Committee and you have executive authority to take such action without there being any prior debate in the House? If that is so, the House seems to have no control whatever. A cabal of Members called the Services Committee, in conjunction with you, have taken it upon themselves to take a decision that adversely affects the interests of the House as a whole. That seems manifestly wrong and I hope that this course is not pursued.
Mr. Speaker: The House sets up the Services Committee and charges it with making recommendations on the operation of the services of the House in the interests of the House. I do not think that the House would want every one of its decisions debated, but if the hon.

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Gentleman feels strongly about the issue—I sense that hon. Members do feel strongly — he should make representations to members of the Services Committee.
Mr. Campbell-Savours: Further to that point of order, Mr. Speaker. I do not wish to delay the House, but this is an important matter for all hon. Members, especially those who use the Dining Room regularly. You have said, Mr. Speaker, that it would be for us to find a way of raising the matter. The Leader of the House is present. Perhaps he will be able to tell us from the Dispatch Box whether time can be made available to enable us to discuss the matter. It seems that we have no control over events. I must tell the Leader of the House that Members are already talking of taking their places in the Dining Room irrespective of whether the change takes place. That would embarrass members of the public and the House authorities.
Mr. Michael Forsyth: Silly.
Mr. Campbell-Savours: The hon. Gentleman may think that that is silly, but some of us wish to defend the rights of Back-Bench Members. The way that the hon. Gentleman is going, he will probably spend the whole of his parliamentary life on the Back Benches. Perhaps the Leader of the House will make a statement.
The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): I have noted the hon. Gentleman's remarks and the intensity of feeling that lies behind them. I suggest that it is an appropriate matter to put to me in my role as Leader of the House when I next announce the business.
Mr. Speaker: Perhaps it will help if I draw these exchanges to the attention of the Chairman of the Catering Committee.

BILL PRESENTED
  OSTEOPATHS
  Mr. Roy Galley, supported by Sir Gerard Vaughan, Dame Jill Knight, Mr. Michael Brown, Mr. Nicholas Winterton, Mr. David Evennett, Mr. Christopher Murphy, Mr. Lewis Stevens and Mr. Kenneth Hind, presented a Bill to establish the existing general council and register of osteopaths as the statutory registering and governing body to unite and regulate the practice of osteopathy and certain other practitioners of manipulative therapy; to restrict the practice thereof by unqualified persons other than registered medical practitioners and State-registered physiotherapists and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 24 October and to be printed. [Bill 218.]

Companies (Disabled Employees Quota)
5.3 pm
Mr. Roland Boyes: I beg to move,
That leave be given to bring in a Bill to provide for effective penalties to be applied to registered companies which fail to employ a specified quota of disabled persons.
During periods of severe economic depression, disabled persons are much more severely affected than others when it comes to getting a job. The latest data available shows that unemployment among disabled persons is double that of non-disabled persons. It is not necessary for that to be so, because there is legislation on the statute book to protect the interests of disabled people who wish to work. The Disabled Persons (Employment) Act 1944 did three important things. It defined the term "disabled persons", it established the voluntary register of disabled persons, and it outlined the form of an employment quota scheme.
The quota scheme provides that all employers with 20 or more employees have a statutory duty to employ a quota of registered disabled persons, but the Act did not fix the level of the quota. However, in 1946 it was agreed that it should be 3 per cent. of the payroll. Although the 1944 Act was not binding on the Crown, Government Departments and the National Health Service nevertheless agreed to accept the same responsibilities as other employers. I shall demonstrate that, regrettably, Government Departments are among the worst offenders against the 1944 Act.
One of the problems with the present system is that it is not an offence for an employer to be below the quota, but it is an offence for an employer to engage someone other than a registered disabled person when the employer is below quota. There is a means of opting out for employers, and that is by applying to the Manpower Services Commission for a permit. Permits are issued by the MSC when it is satisfied that no suitable registered disabled person or persons are available. Regrettably, the MSC appears to issue permits, nearly always in bulk, with the same flippancy as a guest showers confetti at a wedding. This hypocrisy must stop. The system is a shambles.
Fines can be imposed on employers. If a company is obliged to employ a quota of disabled persons, it must keep a record, and failure to do so results in a fine not exceeding £20. I am sure that a fine of that size does not worry an employer for a second.
A few examples will illustate the problem. The Banking, Insurance and Finance Union carried out a survey among 31 companies in the finance industry. Between them the 31 companies employ more than 250,000, and the survey showed that only 2,000 are disabled. That is not 3 per cent. but less than 1 per cent. That is a disgrace and an outrage. In reply to a question from my right hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley) a Minister from the Department of Employment informed him that of the 35,481 firms subject to the provisions of the quota scheme, only 28 per cent. employed the full quota. A further 52·7 per cent. were below quota but had been issued with permits, and just about all of them were bulk permits.
That is unsatisfactory, and a number of questions must be asked. How many of the companies were checked? With what certainty can the MSC state that the companies were

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operating within the spirit of the law? How many of the 17,000 or 18,000 companies issued with bulk permits have abused them? Did the MSC do any follow-up checking? What about Government Departments? They might reasonably be expected to set a good example but, regrettably, the situation is hopeless.
At the latest date on which information is available, only one of 27 Government Departments is at quota level, and that is the National Savings Department. Of the rest, only five Departments have reached 2 per cent. or more, and four are employing less than 1 per cent. The Home Office has reached a miserly 0·5 per cent. and the Department of Health and Social Security has reached 1·4 per cent., which is less than half the quota level. It is shameful that the great Departments of State set such a bad example. Ministers should hang their heads in shame.
What happens to companies which break the law? The answer is nothing. Since 1944, only 10 companies have been to court on this issue and three of them escaped a fine. Those which were fined faced exceptionally small penalties. To counter this situation, the hon. Member for Plymouth, Sutton (Mr. Clark), who is now Minister for Trade, argued on 14 May 1985 at a meeting with the all-party disablement group that there were not enough registered disabled persons to allow employers to achieve the 3 per cent. quota, because not all disabled people choose to register.
When the 3 per cent. quota was determined in 1946, consideration was taken of the probability that not all disabled persons would register. Some disabled persons do not register because of the lack of incentive to do so, and for others registration is counter-productive. Such is the discrimination against those who have suffered certain illnesses — for example, against those who have experienced a period of mental illness or sufferers from epilepsy — that many people choose to keep quiet about their problems.
Since the 1950s, however, the number of disabled persons registering with local authorities has increased from less than 200,000 in 1956 to over 1 million. Over the same period there has been a decline in the number registering for employment purposes from over 1 million to 400,000. The decline is due to the lack of specific and
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real benefits as a result of registration. For those registering with local authorities there was immediate and tangible benefit, including car parking badges and bus tokens.
What should be done? Employers should be made to enforce the quota system. If disabled persons saw that efforts were being made to reach the 3 per cent. quota by private and public companies and Government Departments, there would be a greater incentive to register. Simultaneously, it would be easier for the MSC to take action against those employers not reaching the quota. The House should realise that 96 per cent. of all permits issued are bulk permits. There is an urgent need to stop the issue of these permits, as the present situation is no longer acceptable on either economic or moral grounds. There is a need for more inspectors to discover the companies which are infringing the present arrangements. There is a need for more prosecutions to be taken against companies flouting the law.
My Bill is aimed at giving disabled persons more opportunity to obtain work. It is also aimed at giving notice to employers subject to quota that, if there is no improvement, effective action will have to be taken against them, and that will be by the introduction of penalties that are large enough to make it extremely costly for an employer to ignore the quota. If doing so helps unemployed disabled persons to get jobs, it will be worthwhile.
Question put and agreed to
Bill ordered to be brought in by Mr. Roland Boyes, Mr. Jack Ashley, Mr. Alfred Morris, Dr. David Clark, Mrs. Ann Clwyd, Mr. Mark Fisher, Mr. Peter Pike, Mr. Tony Banks, Dr. Norman A. Godman, Mr. Jeff Rooker, Mr. David Clelland and Mr. Richard Caborn.

Companies (Disabled Employees Quota)
  COMPANIES (DISABLED EMPLOYEES QUOTA)
  Mr. Roland Boyes accordingly presented a Bill to provide for effective penalties to be applied to registered companies which fail to employ a specified quota of disabled persons. And the same was read the First time; and ordered to be read a Second time upon 24 October and to be printed. [Bill 219.]

Social Security Bill (Allocation of Time)
5.12 pm
The Secretary of State for Social Services (Mr. Norman Fowler): I beg to move,
That the Order of the House [15th April] be supplemented as follows:
Lords Amendments
1. — (1) The proceedings on Consideration of Lords Amendments shall be completed at this day's sitting. (2) The order in which the proceedings are taken shall be—

(a) the following Lords Amendments—

(i) 1 to 34;

(ii) 94 to 109;

(iii) 135 to 139;

(b) the following Lords Amendments—

(i) 35;

(ii) 42 to 44;

(iii) 36 to 39, 41, 45, 67, 119;

(c) the following Lords Amendments—

(i) 40;

(ii) 46 to 51 (including 48A);

(iii) 84 to 86;

(d) Lords Amendments 52 to 66, 68 to 83, 87 to 93, 110 to 118, 120 to 134 (including 121A), 140 to 184,

and, subject to the provisions of the Order [15th April], each part of those proceedings shall, if not previously brought to a conclusion, be brought to a conclusion not later than the end of such period beginning with the commencement of the proceedings on the Motion for this Order as is of the length specified in the second column of the Table set out below.

TABLE

Lords Amendments

Length of period from commencement of proceedings on Motion

Amendments up to the end of those listed in sub-paragraph (2)(a) above

1 hour 15 mins

Amendments up to the end of those listed in sub-paragraph (2)(b) above.

2 hours

Amendments up to the end of those listed in sub-paragraph (2)(c) above.

3 hours

Amendments up to the end of those listed in sub-paragraph (2)(d) above.

4 hours

2.—(1) For the purposes of bringing any proceedings to a conclusion in accordance with paragraph I above—

(a) Mr. Speaker shall first put forthwith any Question which has already been proposed from the Chair and not yet decided and, if that Question is for the amendment of a Lords Amendment, shall then put forthwith the Question on any further Amendment to the said Lords Amendment moved by a Minister of the Crown and on any Motion made by a Minister of the Crown, That this House doth agree or disagree with the Lords in the said Lords Amendment or, as the case may be, in the said Lords Amendment as amended;

(b) Mr. Speaker shall then designate such of the remaining Lords Amendments as appear to him to involve questions of Privilege and shall—

(i) put forthwith the Question on any Amendment moved by a Minister of the Crown to a Lords Amendment and then put forthwith the Question on any Motion made by a Minister of the Crown, That this House doth agree or disagree with the Lords in their Amendment or, as the case may be, in their Amendment, as amended;

(ii) put forthwith the Question on any Motion made by a Minister of the Crown, That this House doth disagree with the Lords in a Lords Amendment;

(iii) put forthwith with respect to the Amendments designated by Mr. Speaker
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which have not been disposed of the Question, That this House doth agree with the Lords in the said Amendments; and

(iv) put forthwith the Question, That this House doth agree with the Lords in all the remaining Lords Amendments;

(c) as soon as the House has agreed or disagreed with the Lords in any of their Amendments Mr. Speaker shall put forthwith a separate Question on any other Amendment moved by a Minister of the Crown relevant to that Lords Amendment.

(2) Proceedings under sub-paragraph (1) above shall not be interrupted under any Standing Order relating to the sittings of the House.
Stages subsequent to first Consideration of Lords Amendments
3. The proceedings on any further Message from the Lords on the Bill shall be brought to a conclusion one hour after the commencement of the proceedings.
4. For the purpose of bringing those proceedings to a conclusion—

(a) Mr. Speaker shall first put forthwith any Question which has already been proposed from the Chair and not yet decided, and shall then put forthwith the Question on any Motion made by a Minister of the Crown which is related to the Question already proposed from the Chair;

(b) Mr. Speaker shall then designate such of the remaining items in the Lords Message as appear to him to involve questions of Privilege and shall—

(i) put forthwith the Question on any Motion made by a Minister of the Crown on any item;

(ii) in the case of each remaining item designated by Mr. Speaker, put forthwith the Question, That this House doth agree with the Lords in their Proposal; and

(iii) put forthwith the Question, That this House doth agree with the Lords in all the remaining Lords Proposals.

Supplement
5. — (1) In this paragraph "the proceedings" means proceedings on any further Message from the Lords on the Bill, on the appointment and quorum of a Committee to draw up Reasons and on the Report of such a Committee.
(2) Mr. Speaker shall put forthwith the Question on any Motion made by a Minister of the Crown for the consideration forthwith of any such Message or for the appointment and quorum of a Committee to draw up Reasons.
(3) A Committee appointed to draw up Reasons shall report before the conclusion of the sitting at which it is appointed.
(4) Paragraph (1) of Standing Order No. 3 (Exempted business) shall apply to the proceedings.
(5) No dilatory Motion with respect to, or in the course of, the proceedings shall be made except by a Member of the Government, and the Question on any such Motion shall be put forthwith.
(6) If the proceedings are interrupted by a Motion for the Adjournment of the House under Standing Order No. 10 (Adjournment on specific and important matter that should have urgent consideration) a period equal to the duration of the proceedings on the Motion shall be added to the period at the end of which the proceedings are to be brought to a conclusion.
We have already spent a great deal of time debating the Bill. Up to now, a total of 224 hours have been spent in both Houses on the legislation. The Committee stage in this House alone took over 162 hours. If I may put the figure into context, the 224 hours spent on the Bill are already not far short of the 234 hours spent on four separate pieces of legislation between 1946 and 1948, which followed the Beveridge report. Therefore, more time has been spent on this social security legislation than on any other such legislation since the war.
I believe that the Bill has had a thorough examination, which has come on top of a period of consultation which began in November 1983. A total of 4,500 organisations

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and members of the public gave evidence in that period. Ministers held 19 public sessions to take formal evidence. In June last year we published a Green Paper, "Reform of Social Security" and in December a White Paper followed. Never before have a Government carried out such an extensive consultation exercise prior to introducing legislation.
Many of the amendments that are before the House are technical changes, which I do not think should delay us. I recognise, however, that a number of the amendments made in the other place raise important questions. The motion has been drafted in such a way as to enable debate on those issues.
In those circumstances, I hope that the House will agree that the terms of the motion are adequate for our consideration of the Lords amendments and that we can proceed to the final stages of this important Bill.
5.14 pm
Mr. Michael Meacher: There is something rather distasteful about putting a four-hour limit on debates on dozens of amendments received from another place, especially when three of them are extremely contentious. There is something infinitely more distasteful about forcing the measure through when the nation is distracted by the festivities of the royal wedding. But what is perhaps most distasteful of all is that the Government's business managers have deliberately orchestrated this dirty business in order to combine on this day, which might be expected to reflect a spirit of magnanimity and national unity, the imposition of extra rates payments of £300 million for the poorest people on supplementary benefit and cuts in single payments so necessary to their livelihood of some £150 million to £200 million—a total of nearly £500 million of cuts for some of the poorest people in our society.
I believe that any reasonably objective person would acknowledge that four hours in which to debate the amendments is absurdly inadequate. Indeed, it is not even four hours when one excludes the time spent protesting at the guillotine, which protest we are keeping short, but which is certainly necessary. When one excludes the time for votes, debating time is probably down to only two and a half hours. This is a charade when one bears it in mind that these are not some peripheral changes. Major modifications were made to the Bill in another place which have altered its structure and left it fundamentally flawed.
There has been forced retreat from the 2 per cent. personal pensions bribe; forced retreat on the payment of family credit to the father; forced retreat on the state-earnings related pension scheme; inclusion of community care additions for the disabled that the Government never intended; forced retreat on benefits for child minders; retreat on fares for the unemployed who do voluntary work; reversal of the Government's plans to force people, after emergencies or disasters, to apply to a discretionary social fund; defeat over the right to independent appeal from refusals of help under the social fund; and, of course, defeat over the imposition of the iniquitous 20 per cent. rates payment. After all that, the original structure and logic of the Bill are altered beyond recognition, and to allow a mere two and a half hours to debate what is now a largely rehashed Bill is, frankly, a travesty of parliamentary procedure.
That is the main ground on which we protest at the timetabling limit. but there are some others. Amendments
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from the other place made to other Bills are not being guillotined. Why should this Bill be singled out for such a restriction on debate? Indeed, if there is such a limit on time, how is it that three other major items of business are being taken afterwards? The fact is that the Government are gratuitously signalling their contempt for Parliament by putting a four-hour time limit on extremely contentious social security business, then putting on social security regulations that are also contentious, and following that with amendments from another place to three further Bills.
Another reason why we object to the guillotine is that the only relatively free—I say that as a term of art—and open voting on the Bill, free of the Whipping juggernaut in this House, has been in another place. After that led to such major structural changes in the Bill, it seems particularly offensive to use a 140 Whipped majority in this House to steamroller out all those changes within a debating period of two and a half hours, which is nothing more than an insult to the democratic process.
More specifically, we object because in all three of the main issues being debated today it is not simply a straightforward amendment in another place that is being reversed. In every case the thrust of the amendment made in another place is to be reversed, but in a manner which is not straightforward and which introduces several fresh complications.
On the 20 per cent. rates payment, the Government argue that the amendment from the other place is technically defective, but their own proposal goes far beyond reversing any technical defect and introduces several new questions which need adequate debating time. On the community care additions, the Government have, under the guise of tidying up a loosely drawn amendment, severely restricted the range of the proposal made in another place and have left open major new questions about who should or should not be covered. An entirely new concept is being introduced in the Bill, which it is ludicrous to restrict to a debate lasting three quarters of an hour to an hour.
On the question of independent appeals from social fund decisions, I should like to draw to the attention of the House the fact that since the issue was last debated in the House the European Court has ruled in two cases—one from Holland and one from Germany — that social security can he regarded as a civil right, and that under the European Convention on Human Rights there has to be an independent judicial element in social security disputes. That is very relevant. To restrict debate on this important matter to less than one hour in the light of the latest development from the European Court is, I repeat, a travesty of parliamentary procedure.
It is obvious that the Government have an obsessive determination to push through the reversal of these amendments with what I can only describe as indecent haste. The Government were even prepared in the early hours of this morning to sacrifice the Education Bill and to lose that important measure until October or November in order to get this Bill through at any cost in the next few days. I can explain why the Government are doing this. They are doing it because the Bill imposes cuts of £1,000 million on some of the most vulnerable people in society.
For those reasons, the Opposition strongly reject this unnecessary and offensive timetable motion. However, we do not propose to vote against it, not because of a lack of feeling on our part, but because of the way in which the Government have rigged the four hours of debate. It

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would take a further 15 minutes out of the debate if we were to divide and that would cut in on what is already less than minimal debating time. Our decision not to divide the House on the motion must not be seen as silent approval of the guillotine. Quite the reverse is true. We strongly condemn and castigate the motion as unnecessary and offensive.
5.22 pm
Mr. Archy Kirkwood: I do not wish to detain the House for any longer than the hon. Member for Oldham, West (Mr. Meacher) did. However, it is important to reinforce some of the points that he made.
The Secretary of State is pushing the position beyond the limits of reasonableness by presenting us with more than 100 amendments to consider this evening. I have tried to count the amendments, but the problem is that many of them are grouped on the selection list in the form, "Nos. 84 to 86". At first sight the position does not seem to be too bad, but if one adds them up one finds that there are dozens and dozens of amendments. I remind the House that the Report stage in the House of Lords finished only this week.
The Secretary of State guillotined the Committee proceedings in a way which inevitably meant that many of the issues were not properly discussed. That inevitably resulted in the Government having to amend the Bill in the House of Lords. I have studied the House of Lords Committee proceedings and the Report proceedings very carefully. It is clear, especially in the pensions provisions, that the Government's proposals were so ill-digested that it was inevitable — and the Secretary of State and his advisers must have realised—that the Lords would be required to insert many technical amendments and tidying up provisions of the Government's own making.
It is right for the House to protest in the strongest possible terms, if only in an attempt to influence Parliament in future and stop it from engaging in a legislative programme which inevitably puts the House in an impossible position when considering technical details, especially in relation to pension provisions.
I completely agree with the hon. Member for Oldham, West. The three other substantive debates this evening are of a political nature. The Government must have known that a great deal of time would be necessary to deal with these technical amendments, and I object more to the lack of time to deal with them than I do to the scant time that is provided for the political debates on these extremely important matters.
Mr. D. N. Campbell-Savours: The hon. Gentleman will be aware of the arguments that have taken place over the past week about the funding of the various social security programmes of political parties. How much does the alliance intend to spend on its social security programme? Can he provide us with a figure? During the course of these debates the alliance will climb on to Labour's argument in the country about the nature of the Government's social security proposals—
Mr. Deputy Speaker (Sir Paul Dean): Order. I find it very difficult to relate this intervention to the allocation of time motion.
Mr. Kirkwood: I am grateful for your protection, Mr. Deputy Speaker. The hon. Member for Workington (Mr. Campbell-Savours) will have to wait and see. If I followed him down that avenue, /would inevitably be out of order.
The Secretary of State must accept the point made by myself and others in Committee. We said that the Bill was a mistake. The right hon. Gentleman should have introduced two or three Bills. If he had done that, the parliamentary process in both Houses would have been more sensible and would have given hon. Members a better chance to scrutinise the measures properly.
5.25 pm
Dame Jill Knight: Listening to some Opposition Members one would imagine that a guillotine had never been imposed before at any time at any stage on any Bill. The hon. Member for Oldham, West (Mr. Meacher) repeated himself about six times. Although I was not a member of the Committee, there were more than 160 hours of debate—
Mrs. Margaret Beckett: The hon. Lady was not there.
Dame Jill Knight: I was not on the Committee of this Bill.
Mrs. Beckett: The hon. Lady was not here either.
Dame Jill Knight: If the hon. Lady wants to make a speech later, she will no doubt be able to catch your eye, Mr. Deputy Speaker. However, she must learn not to shout from a sedentary position when other hon. Members are trying to make their points.
Every hon. Member with any experience of these matters knows perfectly well that, unless a guillotine is imposed, the Bill will never get through the House. We all know of the ability of Members to make very long speeches to block the passage of Government business. In this instance the guillotine is perfectly reasonable and sensible. I strongly support it.
5.27 pm
Mr. Willie W. Hamilton: I find it especially offensive on this day of all days for Her Majesty's Government to come to the House an hour or two after witnessing the vulgar rich outside engaging in a spree which will cost the taxpayer we do not know what, and state that there will be two hours to debate the clobbering of the poor, as my hon. Friend the Member for Oldham, West (Mr. Meacher) said, to the extent of at least £300 million.
Today's copy of The Guardian contains an article about the Child Poverty Action Group. The CPAG plans to run a campaign about what the Government have been up to since 1979. The article states:
"The top 2 per cent. of taxpayers (earning £30,000-plus a year) are £2 billion better off this year as a result of tax cuts since 1979."
The article goes on to state that the poor are worse off by precisely the same amount. The Bill is part of that exercise.
However the Government wrap this up, they are suppressing debate on a matter about which the Opposition feel very strongly. They are trying to compress debate into one or two hours, because they think that events outside will take precedence in the press over their dirty work today. That is the purpose of today's exercise

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and that has been the purpose of the exercise since 1979. If the Government were in the dock, by God the whole lot of them would be in Brixton prison tomorrow.
5.29 pm
Mr. Erie Forth: As one who was not privileged to participate in the Committee stage, I am astounded at the synthetic anger of the Opposition. As my right hon. Friend the Secretary of State has said, there has been more debate on this Bill than on any other measure since the war. My right hon. Friend has explained how the Government's commitment to a thoroughgoing and overdue reform of the social security system has been dealt with in the greatest possible detail both in the Chamber and in Committee.
I am sure that all my hon. Friends are astounded that the Opposition wish so slavishly to adhere to amendments made in another place that they do not want them dealt with as proposed in the timetable motion. I am equally astounded that the Opposition are spending so much time on nonsensical argument about the timetable motion that there will be even less time to debate the substantive issues. I wonder how they will square that with their constituents, having given up the time that we wished to devote to debating the substance of the Bill and wasted it on all this nonsense about the timetable.
For all those reasons, I hope that we can now get on and approve the motion.
5.30 pm
Mr. Bill Michie: I think that I am the first Back-Bench spokesman who was a member of the Committee. which is a reflection in itself. The hon. Member for Mid-Worcestershire (Mr. Forth) said that we had plenty of time in Committee. In fact, after the guillotine was introduced, the Government put down about 50 amendments, taking up a great deal of the remaining time.
The reason for the Government's timing is obvious. It is because the eyes of people in this country and the world, for reasons best known to themselves, are marvelling at the event which has taken place today. Whether that is good or bad is a matter of opinion. What is appalling is that the Government should use this day to rob deprived people who have to pay their rents and bills and will be going to the social security offices tomorrow.
The Government have brought in a guillotine because the Bill cannot stand the light of examination, morally or otherwise. There is no justification whatever for this measure. It takes away the rights of the poor in relation to community care, the 20 per cent. rate contribution and the right of appeal.
Many years ago I read a book by a Christian priest entitled "The Confessions of an Ecclesiastical Coward", or something to that effect. He talked about rich and poor and the obscenity of the ring on the bishop's finger when people were dying of starvation. The Bill before us is an obscenity and should be thrown out immediately.
5.32 pm
Mr. David Winnick: Yesterday, the Tory Benches were packed, mainly by those who wished to retain corporal punishment. They are showing much less concern today. [HoN. MEMBERS: "Where are all the Labour Members?"] We did not introduce the Bill.
If the hon. Member for Mid-Worcestershire (Mr. Forth) does not understand why we are protesting, I will
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explain. The Bill is a further onslaught on the poorest members of the community. We believe that it is wrong that those whom we seek to protect should be subject to this kind of action from the Government and that we shall not have enough time to make our arguments.
The Report stage was also guillotined, and many issues that should have been debated were not discussed at all while other important issues received insufficient debate.
Any Conservative Member who thinks that our concern is not genuine should appreciate that when we talk about the poorest members of the community we refer not to a generalised problem bur to many of our own constituents. The Parliamentary Under-Secretary of State, the hon. Member for Huntingdon (Mr. Major), answered a parliamentary question from me about the percentage increase in the number of people of working age — I stress that aspect — receiving supplementary benefit in the west midlands, the black country and my own borough, Walsall, since May 1979. The number in Walsall in 1979 was 6,381. The latest figure, given in the Minister's reply to me, is 20,743. In the black country, the figure has risen from 26,500 in May 1979 to 94,000 today.
The Parliamentary Under-Secretary of State for Health and Social Security (Mr. John Major): I do not wish to detract at all from the seriousness of that situation, save to make one point that the hon. Gentleman would no doubt wish to have on record. The increase in the value of supplementary benefit automatically increases the figures. I hope that the hon. Gentleman will bear that in mind before drawing too many conclusions from those figures.
Mr. Winnick: I have never heard such a threadbare argument, even from a Tory Minister. The figures show that many more of our constituents are now living in poverty as a result of Government policy. The increase in my borough in seven years of Conservative government has been 225 per cent. In the black country which takes in my borough, Dudley, Sandwell and Wolverhampton, the increase has been more than 255 per cent. Those daunting figures illustrate the poverty and devastation caused by the Government. That is why we want sufficient time to debate amendments and clauses of crucial importance to our constituents.
If the Lords amendments are rejected, the lives of the people whom I have described will be made even more difficult as a result of Government policy. My hon. Friend the Member for Oldham, West (Mr. Meacher) RS absolutely right to protest extremely strongly about the further guillotine proposal before us today.
5.37 pm
Mr. Dafydd Wigley: I shall not detain the House long as we want to get on with the substantive debates. Nevertheless, it should be on record for the benefit of members of the other place that we have not had time to consider their proposed changes in detail.
It is ridiculous for the Government to talk about the hours of debate in Committee when we have before us 184 amendments from another place which this House has not yet had the opportunity to address at all as well as amendments tabled by the Government yesterday, which have appeared on the Amendment Paper today, dealing with matters of great importance, yet the Opposition have had no opportunity to put down amendments to those proposals.

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We have four hours to deal with 30 pages of minute detail, which gives us an average of one minute per amendment. Is that how the Government intend to pass social security legislation? If the Bill goes back to the other place tomorrow after the rejection of the Lords' proposals, they should know that we have not had time to divide the House on all the issues that we wished. I hope that the Lords will insist on their amendments, because we shall not have had time to do justice to their arguments or to the people affected by the proposals.
5.39 pm
Mr. Frank Field: I emphasise the points made by the hon. Member for Caernarfon (Mr. Wigley) and make one further point in opposing the guillotine.
The hon. Member for Birmingham, Edgbaston (Dame J. Knight) said that we had had a record amount of time to consider the Bill. Technically, she is right to refer to it as one Bill but a moment's consideration shows that it is really not one but five major Bills. We have had great difficulty securing sufficient time to debate all the issues involved, either in the Chamber or in Committee.
Like many other hon. Members, the hon. Member for Edgbaston knows that some of the proposals in what is being presented as a single Bill are contentious, to put it mildly. We are aware that the Government got many of them through by using the Whips. When they were taken to another place, however, the Government found it much more difficult to win the argument. As the hon. Member for Caernarfon said, we are supposed to examine the amendments at a rate of one a minute. The Government, far from giving us a free debate, will enforce their will by pushing through the guillotine motion.
As we debate the amendments, one crucial fact will form the backcloth. Many parts of the Bill will disadvantage many of our constituents. We must also remember that, since 1979, the richest 90,000 taxpayers have picked up an average of £12,750 in tax cuts whereas the poorest, who earn less than £5,000 a year, have gained an average of £55. Those are the Government's priorities, and it is those priorities, as they appear in the Bill, which we wish to oppose.
5.41 pm
Mr. D. N. Campbell-Savours: I do not wish to detain the House, but I have a special reason for not wanting there to be a guillotine.
It is about time that we were given an opportunity to press the alliance for more information. I do not know whether hon. Members are aware of it, but the alliance is telling people that it intends to raise the level of benefits while, in Conservative-held constituencies which it is setting out to win at the next general election, it is not admitting that it intends to raise taxes. There is a dubious tone to the campaign that it is running. It is important that the alliance is pressed on these matters so that people who intend to vote for it are aware of the implications of their decision.
When people vote Labour, they know that we intend to raise taxes. We have been open and clear about that. It is part of the just arrangements which we say should prevail. The same cannot be said of the alliance. We should be able to press spokesmen for the alliance on every amendment to establish their real policy. It is
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unreasonable for a political party to talk of increasing provision but to refuse to acknowledge where it will raise the money required.
Some months ago, during Prime Minister's Question Time, I put it to the Prime Minister, from a sedentary position, that she did not care. I never believed that that intervention would catch as much as it did among Conservative Back Benchers. It caught because they knew that it was true. They know what their supporters in the country are saying.
Mr. Max Madden: The Queen does not like it.
Mr. Campbell-Savours: My hon. Friend is right. The editor of The Sunday Times advises us that his sources are impeccable.
Mr. Deputy Speaker: Order. The hon. Gentleman must stick to the allocation of time motion.
Mr. Campbell-Savours: I was speaking absolutely to order because I believe that there are hundreds of Conservative Back Benchers who are desperate to speak up on these matters, and there will not be time. They know that they have a duty to the House and their constituents to bring to the House's attention the anxieties that are being expressed by their constituents. The hon. Member for Mid-Worcestershire (Mr. Forth) shakes his head. Is he saying that there are not Conservatives, and thousands of them, in Mid-Worcestershire — I hope that I am reported on his local radio station — who are saying, when they gather socially and at political meetings—
Mr. Forth: They never mention it.
Mr. Campbell-Savours: —that the Government are being insensitive to the needs of the unemployed?
Mr. Forth: They do not say that.
Mr. Campbell-Savours: Is he saying that his local Conservatives are turning their backs on people in need?
Mr. Forth: No.
Mr. Campbell-Savours: Is he saying that they are not saying that the Government are turning their back on people in need and are refusing to accept that they should make greater provision? The hon. Gentleman does not care because he does not understand what local Conservatives are saying. He does not understand their worries. Every right hon. and hon. Member is being subjected to the same pressures. Conservative Members know that that is true, because they tell my hon. Friends so privately.
Mr. Tony Favell rose—
Mr. Campbell-Savours: We do not have to catch them in the net in the House — we have millions in the country. They all know the truth, and they should go to Ministers privately and tell them what they are being told. What Conservative Back Benchers are doing is immoral. There is no justification for it. There are many people who believe in one-nation Conservatism and who object to what is going on and say, "Stop it." Why does the Secretary of State not stop it?
5.46 pm
Mr. Jeremy Corbyn: It is right to spend a few minutes debating the timetable motion

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because it goes to the heart of everything that the Government are trying to do with the Bill. The Bill affects more people than any other legislation that has been passed during the past seven years—it affects the old, the young, the sick, the poor, the out-of-work and people in work. It even affects schoolchildren who will today lose their right to a free school meal because of the votes of Conservative Members.
Consideration of the Bill is to be timetabled because the Government do not want public debate of the matter. It is being timetabled today because they hope that people will be befuddled by the royal wedding and not learn in the newspapers what the Bill really means.
Dr. Norman A. Godman: I am getting a little worried by some of my hon. Friends' references to events that have taken place outwith this place today. Is my hon. Friend aware that, in the Department of Health and Social Security parlance, a certain young naval officer will, from today, receive an additional requirement—not a single payment—of some £30,000 a year?
Mr. Corbyn: I hope that he does not—
Mr. Campbell-Savours: Does he need it?
Mr. Corbyn: —ever have to claim social security, because he would have difficulty living on it. His £30,000 is more than many families get over several years. The money that he is getting would keep an awful lot of people for a long time.
Mr. Deputy Speaker: Order. I realise that the hon. Gentleman was tempted, but he must speak to the motion.
Mr. Corbyn: The motion is perfectly simple. The House is being gagged by a Tory majority because they do not want public debate on the most vicious piece of social legislation to be introduced by any Tory Government since the days of Neville Chamberlain. We shall oppose it. We will probably be defeated by the willing herd of sycophants behind the Minister, but we shall defeat them in a general election and change the legislation.
5.48 pm
Mr. Tony Favell: The sooner that this courageous Bill to simplify and modernise the social security system reaches the statute book, the better. No Bill has been better debated inside the House and outside it since I was elected. Every beneficiary group is represented professionally. We have been inundated with correspondence and information. We know very well what the Bill is about and the sooner it reaches the statute book the better.
As for the charge that the Conservative party does not care for the unemployed, I find that the major complaint in my surgeries from the unemployed is that it is not worth while going out to work. That is one thing which the Bill tries to remedy-, and the sooner it is done, the better.
5.49 pm
Dr. Norman Godman: I wish to voice my dismay and concern at the guillotine on this Bill.
Poverty is not distributed evenly throughout Great Britain. Strathclyde region in Scotland is acknowledged by the European Commission as one of the most deprived regions in the European Community. In my constituency,
380
more than 40 per cent. of those whom I represent, about 33,000 people, live on or below supplementary benefit level. I protest most strongly on their behalf at the way in which the Government have treated the Bill and deliberations on it by introducing this guillotine motion.
Tory Members claim that the Government are a caring, compassionate Administration. If that is so, why is a large part of the electorate outside the deep south so hostile to the Tory party? [Interruption.]
Mr. Campbell-Savours: On a point of order, Mr. Deputy Speaker. Can we be assured that Hansard has recorded the remarks of the hon. Member for Worcestershire, South (Mr. Spicer)?
5.50 pm
Mr. Fowler: I shall respond briefly to the debate. I heard with mounting disbelief what the hon. Member for Oldham, West (Mr. Meacher) and many of his hon. Friends were saying. It is almost exactly 10 years since the day, in July 1976, when the Labour Government imposed, not one guillotine, but five guillotines in one day. This is the 10th anniversary of that action by the Labour Government. The Health Service Bill was guillotined that day and it had started its Committee stage only four weeks previously. The Minister in charge of the Education Bill was none other than the hon. Member for Derby, South (Mrs. Beckett).
Mrs. Beckett: Will the Secretary of State tell us in how many of those cases the content of the Bill was debated within the same timetable motion?
Mr. Fowler: My point is that there was no precedent for the five guillotine motions imposed that day, and the hon. Lady knows that that is the case.
The Government are simply not prepared to take lectures on imposing guillotines from the Labour party. When the hon. Member for Oldham, West poses as a defender of the House of Lords, this debate has reached an extraordinary stage. We have taken 224 hours to debate this social security legislation. We have taken 163 hours in Committee. That is longer than on any other social security legislation since the war, and it is certainly much longer than on any other social security legislation which was introduced by the Labour Government.
I must say to the hon. Members for Roxburgh and Berwickshire (Mr. Kirkwood) and for Caernarfon (Mr. Wigley) that many of the amendments are, as they well know, technical changes which should not delay the House greatly. I recognise that some amendments made in the other place raise important questions, and the motion before the House has been drafted in such a way as to enable debate on those issues to take place. I suggest that that debate now takes place.
Question put and agreed to.
Resolved,
That the Order of the House [15th April] be supplemented as follows:
Lords Amendments
1. — (1) The proceedings on Consideration of Lords Amendments shall be completed at this day's sitting.
(2) The order in which the proceedings are taken shall be—

(a) the following Lords Amendments—

(i) 1 to 34;

(ii) 94 to 109;

(iii) 135 to 139;

(b) the following Lords Amendments—

(i) 35;

(ii) 42 to 44;

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(iii) 36 to 39, 41, 45, 67, 119;

(c) the following Lords Amendments—

(i) 40;

(ii) 46 to 51 (including 48A);

(iii) 84 to 86;

(d) Lords Amendments 52 to 66, 68 to 83, 87 to 93, 110 to 118, 120 to 134 (including 121A), 140 to 184,

and, subject to the provisions of the Order [15th April], each part of those proceedings shall, if not previously brought to a conclusion, be brought to a conclusion not later than the end of such period beginning with the commencement of the proceedings on the Motion for this Order as is of the length specified in the second column of the Table set out below.

TABLE

Lords Amendments

Length of period from commencement of proceedings on Motion

Amendments up to the end of those listed in sub-paragraph (2)(a) above

1 hour 15 mins

Amendments up to the end of those listed in sub-paragraph (2)(b) above.

2 hours

Amendments up to the end of those listed in sub-paragraph (2)(c) above.

3 hours

Amendments up to the end of those listed in sub-paragraph (2)(d) above.

4 hours

2.—(1) For the purposes of bringing any proceedings to a conclusion in accordance with paragraph 1 above—

(a) Mr. Speaker shall first put forthwith any Question which has already been proposed from the Chair and not yet decided and, if that Question is for the amendment of a Lords Amendment, shall then put forthwith the Question on any further Amendment to the said Lords Amendment moved by a Minister of the Crown and on any Motion made by a Minister of the Crown, That this House doth agree or disagree with the Lords in the said Lords Amendment or, as the case may be, in the said Lords Amendment as amended;

(b) Mr. Speaker shall then designate such of the remaining Lords Amendments as appear to him to involve questions of Privilege and shall—

(i) put forthwith the Question on any Amendment moved by a Minister of the Crown to a Lords Amendment and then put forthwith the Question on any Motion made by a Minister of the Crown, That this House doth agree or disagree with the Lords in their Amendment or, as the case may be, in their Amendment, as amended;

(ii) put forthwith the Question on any Motion made by a Minister of the Crown, That this House doth disagree with the Lords in a Lords Amendment;

(iii) put forthwith with respect to the Amendments designated by Mr. Speaker
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which have not been disposed of the Question, That this House doth agree with the Lords in the said Amendments; and

(iv) put forthwith the Question, That this House doth agree with the Lords in all the remaining Lords Amendments;

(c) as soon as the House has agreed or disagreed with the Lords in any of their Amendments Mr. Speaker shall put forthwith a separate Question on any other Amendment moved by a Minister of the Crown relevant to that Lords Amendment.

(2) Proceedings under sub-paragraph (1) above shall not be interrupted under any Standing Order relating to the sittings of the House.
Stages subsequent to first Consideration of Lords Amendments
3. The proceedings on any further Message from the Lords on the Bill shall be brought to a conclusion one hour after the commencement of the proceedings.
4. For the purpose of bringing those proceedings to a conclusion—

(a) Mr. Speaker shall first put forthwith any Question which has already been proposed from the Chair and not yet decided, and shall then put forthwith the Question on any Motion made by a Minister of the Crown which is related to the Question already proposed from the Chair;

(b) Mr. Speaker shall then designate such of the remaining items in the Lords Message as appear to him to involve questions of Privilege and shall—

(i) put forthwith the Question on any Motion made by a Minister of the Crown on any item;

(ii) in the case of each remaining item designated by Mr. Speaker, put forthwith the Question, That this House doth agree with the Lords in their Proposal; and

(iii) put forthwith the Question, That this House doth agree with the Lords in all the remaining Lords Proposals.

Supplement
5. — (1) In this paragraph "the proceedings" means proceedings on any further Message from the Lords on the Bill, on the appointment and quorum of a Committee to draw up Reasons and on the Report of such a Committee.
(2) Mr. Speaker shall put forthwith the Question on any Motion made by a Minister of the Crown for the consideration forthwith of any such Message or for the appointment and quorum of a Committee to draw up Reasons.
(3) A Committee appointed to draw up Reasons shall report before the conclusion of the sitting at which it is appointed.
(4) Paragraph (1) of Standing Order No. 3 (Exempted business) shall apply to the proceedings.
(5) No dilatory Motion with respect to, or in the course of, the proceedings shall be made except by a Member of the Government, and the Question on any such Motion shall be put forthwith.
(6) If the proceedings are interrupted by a Motion for the Adjournment of the House under Standing Order No. 10 (Adjournment on specific and important matter that should have urgent consideration) a period equal to the duration of the proceedings on the Motion shall be added to the period at the end of which the proceedings are to be brought to a conclusion.

Orders of the Day
  Social Security Bill
  Lords amendments considered
  Social Security Bill
    Clause 1

      MINIMUM CONTRIBUTIONS TO PERSONAL PENSION SCHEMES
      Lords amendment: No. 1, in page 2, line 8, at beginning insert
      "Subject to subsection (3A) below,".
      5.53 pm
      The Parliamentary Under-Secretary of State for Health and Social Security (Mr. John Major): I beg to move, That this House doth agree with the Lords in the said amendment.
      Mr. Deputy Speaker (Sir Paul Dean): With this it will be convenient to take the following Lords amendments: No. 2, in page 2, line 10, at end insert—
      "(3A) In such circumstances as may be prescribed the Secretary of State shall pay minimum contributions to a prescribed person."
      No. 4, in clause 3, page 4, line 13, at beginning insert
      "Subject to subsection (1A) below,".
      No. 5, page 4, line 27, at end insert—
      "(1A) In relation to earnings paid with respect to any such employment as may be prescribed, subsection (1) above shall have effect as if the words 'the aggregate of' and paragraph (b)and the word 'and' immediately preceding it were omitted."
      No. 6, in clause 4, page 5, line 20, after "earner" insert
      "sections 16(2B), 28(7A) and 59(1A) of the Social Security Act 1975 and".
      No. 7, in clause 5, page 6, line 22, at end insert—
      "section 52C of or paragraph 16 of".
      No. 8, page 6, line 41, after "29" insert "(2) and".
      No. 9, page 6, line 43, leave out from beginning to "were" at page 7, line 7, and insert—
      "to that person and a widow or widower of that person as if any guaranteed minimum pension to which that person or any such widow or widower is treated as entitled under those provisions, and which derives from the minimum contributions, minimum payments (within the meaning of the Social Security Pensions Act 1975) or transfer payment or payments from which those rights derive".
      No. 10, page 7, line 26, leave out from "pension" to end of line 27 and insert—
      "such as is mentioned in subsection (9) above."
      No. 94, in schedule 1, page 88, line 15, leave out "or" and insert—
      "pension scheme or protected rights (within the meaning of the Social Security Pensions Act 1975) under an".
      No. 95, page 88, line 20, at beginning insert "The value of".
      No. 96, page 88, line 23, after "which" insert "the value of".
      No. 97, page 89, line 15, leave out sub-paragraph (3) and insert—
      "(3) Effect may be given to protected rights by the provision of a lump sum if—

      (a) the lump sum is payable on a date which is either the date on which the member attains pensionable age or such later date as has been agreed by him; and

      (b) the annual rate of a pension under sub-paragraph (1) above or an annuity under sub-paragraph (2) above giving effect to the protected rights and
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      commencing on the date on which the lump sum is payable would not exceed the prescribed amount; and

      (c) the circumstances are such as may be prescribed; and

      (d) the amount of the lump sum is calculated in a manner satisfactory to the Occupational Pensions Board by reference to the amount of the pension or annuity."

      No. 98, page 89, line 46, after "amount" insert—
      "and the circumstances are such as may be prescribed,"
      No. 99, page 90, line 17, leave out from "with" to end of line 46 and insert—
      "any such requirements as may be prescribed for meeting the whole or a prescribed part of any liability in respect of protected rights under the scheme which the scheme is unable to meet from its own resources—

      (a) by reason of the commission by any person of a criminal offence;

      (b) in such other circumstances as may be prescribed."

      I inform the House that Lords amendments Nos. 1 and 2 involve privilege.
      Mr. Major: Many of these amendments are drafting or technical changes to ensure that the Bill works as intended. [Interruption.] However, a small number of amendments deserve particular, but brief, mention, even at the risk of having to speak over the hon. Member for Workington (Mr. Campbell-Savours).
      Amendments Nos. 4 and 5 enable regulations to be made excluding some people from entitlement to the 2 per cent. incentive addition to the payment which DHSS Newcastle will make to their personal pensions. That is for a five-year period until April 1993, and it is in addition to the normal contracted-out rebate.
      As my right hon. Friend the Secretary of State undertook to do when the Bill was last considered by the House, we have listened carefully to representations about this incentive payment, particularly to the proposition that it should not go to people who have been in contracted-out occupational schemes. While we remain unpersuaded by the predictions of dire consequences for occupational schemes if this modest inducement were to remain available, we certainly do not doubt or question the sincerity of those who find this an issue of principle. After careful consideration, not forced retreat, as the hon. Member for Oldham, West (Mr. Meacher) claimed earlier, we have decided to make these amendments. The principle we are accepting is that the 2 per cent. incentive will not be available to people who have belonged to a contracted-out occupational scheme for a reasonable period and who then leave it voluntarily.
      What is a reasonable period? No decision has yet been taken about that, primarily because we wish to listen carefully to the views put to us. The proposals for the regulations will be subject to full public consultation later this year, and I hope that the House will welcome that.
      Of less importance, but worth mentioning, are amendments Nos. 1 and 2 which give power to allow outstanding payments from DHSS Newcastle to be made to a scheme or insurer to which a person's pension savings have been transferred. Without these amendments we would occasionally have faced the absurd situation of those payments having effectively no proper home to go to because the person had taken his or her accumulated pension rights elsewhere. The provision commits the contracted-out rebate effectively to follow the pension savings.

      385
      Finally, amendment No. 99 replaces paragraph 10 of schedule 1 with a specifically worded power. On reflection, and in the light of advice from some pensions experts, paragraph 10 did not do what we intended it to do. The amendment ensures that there is power to make regulations about the arrangements that a personal pension scheme must make to compensate members if it cannot meet its liabilities because of fraud, theft or negligence. My right hon. Friend invited the Occupational Pensions Board earlier this year to advise on compensation arrangements for personal pensions. We have just received its advice and will consider it carefully, with the other Departments concerned, before publishing consultative proposals later this year. That is in line with our intentions originally set out in the social security White Paper. I commend the amendments to the House.
      Mrs. Margaret Beckett: One of the reasons why we have argued that the time for debate on the Bill has been inadequate has just been made plain by the Minister. It is more than ever apparent that in this House, in the other place and again in this House the Government are making up the Bill as they go along. Every time the Government announce some fresh changes, there is buried within them the words that the Government have yet to make up their mind or that they do not know exactly what the change means but sooner or later, in the fullness of time, all will be revealed. Tonight we are being asked to put on the statute book a Bill, many of the details of which remain unclear and will be settled in future.
      Despite the changes that the Government have made on the 2 per cent. bribe, we remain of the view that personal pensions are likely to leave many people with wholly inadequate pension provision for their retirement which will inevitably mean that in future many more pensioners will be dependent on the equivalent of supplementary benefit. We remain even more strongly of the view that to offer people a 2 per cent. bribe to encourage them to run the risk of poverty in old age is morally indefensible, and, despite the Minister's concessions, may damage good occupational pension schemes. We shall terminate this bribe at the earliest possible moment after the general election. I do not intend to detain the House further on these amendments.
      Mr. Michael Stern (Bristol, North-West): Amendment Nos. 4 and 5 attempt to limit the substantial move towards personal pensions that is generally expected when the regulations are published and come into effect. As a proponent of personal pensions for some time, I must admit that I welcome the amendment through slightly gritted teeth. That is not to say that the occupational pensions industry, which pushed hard for the amendment, has anything to be ashamed of. I pay tribute to the work that the industry has done over many years in building up occupational pensions to the extent that the freedom of personal pensions can take off from the ground work that it has laid. It has little to fear, in the growth of occupational pensions, from the fact that personal pensions will grow also. Nevertheless, personal pensions will grow slightly less slowly if the amendment is passed.
      The amendment leaves the Secretary of State with the duty, ultimately, of regulating the time within which a member of an occupational scheme must decide whether or not to leave that scheme and to take out his own
      386
      scheme. I press my hon. Friend the Parliamentary Under-Secretary of State, the hon. Member for Huntingdon (Mr. Major), to allow a considerable time to pass before he closes the door. Until the advent of the Bill, many occupational pension schemes were compulsory. Therefore, many people in occupational pension schemes will want to consider whether to opt out of those schemes and take out a personal pension.
      That consideration will not be taken lightly or quickly. Very few people in occupational pension schemes have studied their schemes to the extent that they can say, off the top of their heads, whether the life cover in the scheme is adequate or whether it is below what is available on the market. Very few people can say whether the accrual rate on investments in the fund compares adequately with alternative accrual rates available elsewhere, or whether —this will be regulated by the Financial Services Bill—the charges levied by the managers of the schemes, especially in the early years, are comparable with those available in other schemes.
      As a result of the publicity that will be generated by the passage of the legislation, many people will consider whether to move out of occupational schemes. I believe that in the majority of cases they will decide to stay in their present schemes. It will take a long time to get all the information together and to obtain adequate comparisons.
      My comments are even more true of someone joining an occupational scheme after the legislation is effected, when the incentive is available. He will need a considerable amount of time to decide on the financial options. Once that decision has been made, further time will be necessary, in many cases, for the individual pension contributor to negotiate with his employer as to whether the employer will be prepared to make a corporate contribution to his individual pension scheme. All that will take time. Mechanisms must be developed, within the period in which the 2 per cent. incentive is available, to enable that to take place.
      When my hon. Friend considers, as a result of consultation, what length of time to allow a pensioner, who may be a compulsory member of a pension scheme — he never had a choice in the matter because he wanted to keep his job—to decide whether or not to take the freedom offered, for the first time, as a result of the Bill, I hope that he will err on the side of generosity. I should have thought that a period of five years was by no means unreasonable.
      My hon. Friend is to consult all relevant interests to decide on the time limit. He should not limit his consultations to representatives of existing pension schemes and existing pension scheme providers. As was noted in Standing Committee in a brief debate, to which both the hon. Member for Derby, South (Mrs. Beckett) and I contributed, there is in existence a sort of pensions ombudsman. Although limited in scope, that office is doing useful work. I share the hope of the hon. Lady that the work of that or a similar office will be extended in the future.
      That office has considerable experience of what one might call the unsatisfactory occupational pension schemes, about which a contributor who might consider leaving his existing scheme could require advice. I hope that in consulting on such schemes my hon. Friend will consider the experience of people who have complained to that ombudsman and ensure that he allows an adequate time limit.
      Mr. Archy Kirkwood: I had some difficulty in trying to disentangle the import of amendments Nos. 4 and 5. I was assisted to some extent by the debate that took place in the other place. I welcome the amendment so far as it goes. It would be churlish of me to do otherwise. I raised the point in Committee and it was raised by Lord Banks in the other place.
      It is important to recognise that the Government are assuming a wide power. I ask whether the wide powers that will be assumed by the Government will be used to exclude the 2 per cent. incentive for anyone who, after a "reasonable" period as a member of a contracted-out occupational scheme, decides of his own volition to leave it in favour of an "appropriate" personal pension. If that is the clear intention of the amendment, I support it and endorse what the Government are doing.
      The definition of the word "reasonable" in that context should be relatively short. I draw the Government's attention to a possible comparison in length with the cooling off period required under the Financial Services Bill. As the Minister is probably aware, that is intended to cover those who join a contracted-out scheme but regret the decision and change their minds. That is the reasonable period that we would have in mind as a sensible way to proceed. If the word "reasonable" is interpreted in the regulations as longer than that, my enthusiasm for the change would quickly wane.
      Because of the wide-ranging nature of the power, I seek an assurance from the Minister that there will be the fullest possible consultation with the industry and other interested parties before introducing the regulations, which will be extremely important to the way that the schemes work. That is a minimum requirement for my continued support of the amendment.
      The hon. Member for Derby, South maintains the use of the pejorative word "bribe" in relation to the 2 per cent., but I am prepared to start considering it more in terms of an incentive than a bribe.
      Sir Brandon Rhys Williams: I wish to speak only briefly because the House knows that I have serious reservations about the principle and many of the details of the Bill. As the Bill stands, it contains provisions that will have serious disadvantages for a large number of my constituents in Kensington where many poor families have to pay exceptionally high rents and rates. They, in particular, stand to suffer from the Bill if it is passed in the form that seems likely.
      I pay tribute to Ministers who have listened to our debates and made many important improvements in Standing Committee and in another place. I thank especially my hon. Friend the Under-Secretary of State, the hon. Member for Huntingdon (Mr. Major), in respect of the 2 per cent. "inducement", or whatever word one might wish to use, which was originally intended to lure pension scheme members away from occupational pension schemes to private provisions.
      I listened carefully to the comments of my hon. Friend the Under-Secretary of State and am glad that he has taken on board the criticisms made in Parliament and outside on this subject. No final decisions have yet been taken on the 2 per cent. inducement. I hope that, in the further discussions on this point, the Government will take account of the fact that contributions to the private sector
      388
      schemes are not enough, even for the long stayers, and need to be very much increased, but not by a little manoeuvre of this kind.
      Early leavers and personal pension scheme members get a still worse deal than those who belong to group schemes as long stayers. This 2 per cent. subsidy from the taxpayer to encourage members to leave collective schemes is an ungainly and unwarranted intervention in the working of the capital market which will persist until April 1993. It would be better to withdraw the proposal altogether. I hope that that will be the Government's conclusion by the end of their deliberations.
      It would be far better to induce the Treasury to regard the employer's entire national insurance contributions as the employee's deferred pay. That would significantly help to lift private sector pensioners from dependence on supplementary benefit. At the moment, the money flowing into occupational schemes in the private sector is not enough to do that. The problem of the millions of people on supplementary benefit in retirement is, I am afraid, likely to remain with us as the Bill stands. The Bill's object should be to reduce dramatically the number of people dependent on means-tested benefit through case work. I am afraid that, as the Bill stands, it will only add to their number.
      Mr. Major: With the leave of the House, I shall reply briefly to some of the points that have been raised.
      I am grateful to my hon. Friend the Member for Kensington (Sir B. Rhys Williams) and to the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) for their welcome of amendments Nos. 4 and 5. I note the cautionary words implicit in the remarks of those hon. Members about the definition of the word "reasonable" and the conclusion of the consultation period. I assure the hon. Member for Roxburgh and Berwickshire and my hon. Friend the Member for Bristol, North-West (Mr. Stern) that we shall consult widely before laying the regulations on the 2 per cent. incentive. We plan to publish a consultation document later this year and to consider representations before publishing the regulations. I shall take careful note of the other important points made by my hon. Friend the Member for Bristol, North-West.
      The hon. Member for Derby, South (Mrs. Beckett) rather uncharitably accused us of making up the Bill as we went along. 1 simply remind her that we are at present responding to representations made, not least by the Opposition, and I had hoped that the hon. Lady would welcome that. I remind the hon. Lady, who is clearly concerned about the number of regulations that spin off from this legislation, that it is in the nature of pensions legislation—both this and prior legislation—that many matters are best left to regulations. There is nothing novel in that concept.
      The hon. Member for Derby, South said that she and her hon. Friends, if given the opportunity — which I think is unlikely — would remove the 2 per cent. incentive as soon as possible. She did not define what was meant by "as soon as possible". She did not on this or on previous occasions answer the question whether the Labour party would take similar action with the remainder of the contracted-out rebate. I hope that at some stage Labour Members will make clear their position. I hope that the amendments will be approved.
      Question put and agreed to.
      Lords amendment agreed to. [Special Entry.]
      Subsequent Lords amendment agreed to. [Special Entry.]

    Clause 2

      APPROPRIATE SCHEMES
      Lords amendment: No. 3, in page 4, line 12, at end insert—
      "under section 41 of the Solicitors (Scotland) Act 1980"
      6.15 pm
      Mr. Major: I beg to move, That this House doth agree with the Lords in the said amendment.
      Mr. Deputy Speaker: With this it will be convenient to take amendment No. 32, in clause 16, page 20, line 30, at end insert—
      "(aa) the Sheriffs' Pensions (Scotland) Act 1961;"
      Mr. Major: I am assured by my colleagues in the Scottish Office that these two technical amendments are necessary so that the provisions of the Social Security Bill sit happily with existing regulations. I am happy to take their advice, and I trust that the House will do so also.
      Question put and agreed to.
      Subsequent Lords amendments agreed to.

    Clause 7

      SCHEMES BECOMING CONTRACTED-OUT BETWEEN 1986 AND 1993
      Lords amendment: No. 11, in page 8, line 24, leave out
      "to the trustees or managers of the scheme".
      Mr. Major: I beg to move, That this House doth agree with the Lords in the said amendment.
      Mr. Deputy Speaker: With this it will be convenient to take the following Lords amendments: No. 12, in page 8, line 34, at end insert—
      "(1A) The Secretary of State shall make a payment under this section to the trustees or managers of the scheme except that in such circumstances as may be prescribed he shall make such a payment to a prescribed person."
      No. 13, in clause 8, page 10, line 10, at end insert—
      "and except to that extent shall be treated for the purposes of section 50 of that Act (requirement of consent of Occupational Pensions Board to alterations of rules of schemes) as if it had never existed".
      No. 14, in clause 9, page 12, line 10, at end insert "(h) section 52D,"
      No. 15, in page 12, line 15, after "earner" insert—
      "in any case where he is entitled to a widower's invalidity pension, but that reference shall be so constructed where he is entitled to any other benefit"
      No. 16, in page 13, leave out lines 36 to 40 and insert—
      "(8) Except as permitted by subsection (13), (14) or (14A) below, the trustees or managers of a scheme may not make an increase in a person's pension which is required by virtue of this section out of money which would otherwise fall to be used for the payment of benefits under the scheme to or in respect of that person unless—

      (a) the payment is to an earner in respect of the tax year in which he attains pensionable age and the increase is the one required to be made in the following year; or

      (b) the payment is to a person as the widow or widower of an earner who died before attaining pensionable age in respect of the tax year in which the person
      390
      became a widow or widower and the increase is the one required to be made in the next following tax year."

      No. 17, in page 14, line 42, at end insert—
      "(14A) Where in any tax year subsequent to 1989–90 the trustees or managers of a scheme make an increase which is partly made otherwise than in pursuance of this section, they may deduct the part of the increase made otherwise than in pursuance of this section from any increase which, but for this subsection, they would be required to make under this section in the next following year."
      No. 18, in line 43, leave out "or (14)" and insert ",(14) or (14A)"
      No. 19, in page 15, line 2, at end insert—
      "(16) Where by virtue of any of those subsections guaranteed minimum pensions are required to be increased in pursuance of this section by an amount less than they otherwise would be, their amount shall be calculated for any purpose as if they had been increased by that full amount."."
      No. 20, in line 5, leave out "or (14)" and insert", (14) or (14A)'
      No. 21, after clause 10, insert the following new clause—
      ". The following shall be inserted after section 56N of the Social Security Pensions Act 1975—
      "Auditors Regulations as to auditors
      56P. The Secretary of State may by regulations make provision as to—

      (a) the appointment, resignation and removal of auditors of occupational pension schemes;

      (b) the duty of employers and auditors of employers to disclose information to the trustees or managers of occupational pension schemes and the auditors of such schemes;

      (c) the duty of trustees or managers of an occupational pension scheme to disclose information and to make available documents to the auditors of the scheme."

      No. 100, in schedule, 2, page 91, line 18, after "section" insert—
      "and sections 16(2B), 28(7A) and 59(1A) of the principal Act".
      No.101, in page 93, line 35, leave out from "to" end of line 39 and insert—
      "minimum contributions there shall be substituted references to minimum payments and any payments by the Secretary of State under section 7 of the Social Security Act 1986;"
      No. 102, in line 49, leave out from "rights" to "pension" in page 94, line 1 and insert—
      "(within the meaning of the Social Security Pensions Act 1975) under another occupational pension scheme or protected rights under a personal".
      No. 103, in page 94, line 4, leave out
      "for the reference in paragraph 9"
      and insert—
      "in paragraph 9—

      (i) for the reference to an occupational pension scheme there shall be substituted a reference to a personal pension scheme; and

      (ii) for the reference"

      No. 104, in line 13, leave out "trustees or managers" and insert "employers".
      No. 105, in page 95, line leave out "improve" and insert "approve".
      No. 106, in page 96, line 1, after "29" insert "(2)".
      No. 107, in line 3, leave out from beginning to "were" in line 13 and insert.
      "to that person and a widow or widower of that person as if any guaranteed minimum pension to which that person or any such widow or widower is treated as entitled under those provisions, and which derives from the minimum payments, minimum contributions (within the meaning of the Social Security Act 1986) or transfer payment or payments from which those rights derive"

      391
      No. 108, in page 96, line 37, leave out from "pension" to end of line 39 and insert—
      "such as is mentioned in subsection (8) above."
      No. 109, in page 98, line 11, leave out
      "after the definition of 'accrued rights'"
      and insert
      "before the definition of 'guaranteed minimum pension' "
      I inform the House that amendment No. 11 involves privilege.
      Mr. Major: Many of these amendments make drafting or technical changes. One that perhaps deserves particular mention is amendment No. 16 to clause 9. Apart from making some minor drafting changes, this provides for an exception, but only in the first year following payment of a guaranteed minimum pension, to the general rule that an increase in that GMP may not be provided out of any other part of the person's benefits due under the scheme. This relaxation will effectively simplify the administration of schemes which increase pensions other than at the beginning of a tax year and will mean that they will not have to provide two separate pension increases in the first year.
      Amendments Nos. 17 to 20 are technical amendments to protect pensioners. They ensure that, where an occupational pension scheme takes advantage of provisions which allow an increase in the occupational pension to count towards an increase in the GMP, the pensioner does not overall receive less than the required annual increase in the GMP.
      Amendments Nos. 11 and 12 allow outstanding incentive payments to be made to the scheme or insurer to which the pension rights of the member concerned have been transferred. Amendment No. 13 relieves the Occupational Pensions Board of the duty to examine scheme rules relating to "requisite benefits" for periods before clause 8 is operative.
      Amendment No. 21 introduces a new clause, after clause 10, which enables regulations to be made about the appointment, tenure and powers of auditors of occupational pension schemes in relation to their duties in connection with the disclosure requirements on schemes.
      I commend the amendments to the House.
      Question put and agreed to.
      Subsequent Lords amendments agreed to, one with Special Entry.

    Clause 11

      CONTRIBUTIONS TO SCHEMES
      Lords amendment: No. 22, in page 15, line 28, at end insert—
      "( ) must not prohibit, or allow any person to prohibit, the payment by a member of voluntary contributions;"
      Mr. Major: I beg to move, That this House doth agree with the Lords in the said amendment.
      Mr. Deputy Speaker: With this it will be convenient to take the following Lords amendments: No. 23, in page 15, line 30, leave out from "on" to end of line 33 and insert—
      "the payment by a member of voluntary contributions".
      No. 24, in line 34, leave out from "any" to "are" in line 36 and insert—
      "voluntary contributions paid by a member".
      No. 25, in line 38, leave out from "provide" to "and" in line 40 and insert—
      "additional benefits for or in respect of him".
      392
      No. 26, in line 42, leave out from "regard" to end of line 43 and insert—

      "(i) to the amount of the voluntary contributions; and

      (ii) to the value of the other benefits under the scheme."

      No. 27, in page 16, line 44, after "(4)" insert "or (6)".
      No. 28, in page 17, line 24, after "(4)" insert "or (6)".
      No. 29, in clause 14, page 18, line 25, leave out from "schemes" to "that" in line 26 and insert—
      "shall be void; and
      (b) any such term or rule to the effect".
      No. 30, in line 28, leave out from "scheme" to end of line 30 and insert—
      "of which the earner is not a member, or to one or other of a number of personal or occupational pension schemes of none of which he is a member, shall be unenforceable for so long as he is not a member of the scheme or any of the schemes."
      No. 31, in clause 15, page 19, line 30, after "applies" insert—
      "(including changes affecting adjustments under the regulations)".
      Mr. Major: All these amendments are drafting amendments which involve no changes of substance to the Bill. I commend them to the House.
      Question put and agreed to.
      Subsequent Lords amendments agreed to.

    Clause 17

      RETIREMENT PENSIONS
      Lords amendment: No. 33, in page 22, line 4, after "contributions" insert "or earnings".
      Mr. Major: I beg to move, That this House doth agree with the Lords in the said amendment.
      Mr. Deputy Speaker: With this we will consider Lords amendment No. 34, in page 22, line 16, at end insert—
      "(5) For the purpose of determining the additional pension falling to be calculated under section 6 of the Social Security Pensions Act 1975 by virtue of section 7, 13 or 16(4) of that Act in a case where the deceased spouse died under pensionable age, the following definition shall be substituted for the definition of 'N' in section 6(2B)—
      'N = the number of tax years which begin after 5th April 1978 and end before the date when entitlement to the additional pension commences, except that where—

      (a) in a case in which the deceased spouse was a man, that number would be greater than 49; or

      (b) in a case in which the deceased spouse was a woman, that number would be greater than 44, N = 49 or 44, as the case may be;'.

      (6) For the purpose of determining the additional pension falling to be calculated under section 6 of that Act by virtue of section 14 of that Act (invalidity pension for persons under pensionable age), the following definition shall be substituted for the definition of 'N' in section 6(2B)—
      'N = the number of tax years which begin after 5th April 1978 and end before the first day of entitlement to the additional pension in the period of interruption of employment in which that day falls except that where—

      (a) in a case in which the person entitled to the pension is a man, that number would be greater than 49; or

      (b) in a case in which the person so entitled is a woman, that number would be greater than 44,

      N = 49 or 44, as the case may be;'."
      Mr. Major: The amendments to clause 17 are all of a technical or drafting nature.
      Amendment No. 33 is consequential on the provisions in clause 72 and schedule 8, which relate to earnings factors.
      Amendment No. 34 modifies the calculations for SERPS, additional pensions for widow's and invalidity pensions to ensure that they are made on the same basis as for a person reaching pensionable age in the same year.
      Question put and agreed to.
      Subsequent Lords amendments agreed to.

    Schedule 10

      MINOR AND CONSEQUENTIAL AMENDMENTS
      Lords amendment: No. 135, in page 133, line 30, at end insert—
      "2A. In section 64 (modification of occupational pension scheme by order of Occupational Pensions Board) the following subsection shall be inserted after subsection (1)—
      "(1A) The Board shall also have power on such an application to make an order—

      (a) authorising the modification of the scheme with a view to achieving any one or more of such other purposes as may be prescribed; or

      (b) modifying the scheme with a view to achieving any one or more of those purposes"."

      Mr. Major: I beg to move, That this House doth agree with the Lords in the said amendment.
      Mr. Deputy Speaker: With this it will be convenient to consider the following Lords amendments:
      No. 136, in page 135, line 30, leave out
      "(1)(a) (contracted-out rates of benefit)"
      and insert
      "(contracted-out rates of benefit)—
      (a) in subsection (1)(a)."
      No. 137, in page 135, line 33, at end insert—
      "(b) in subsection (2)—

      (i) after the words "this section" there shall be inserted the words "and sections 16(2B), 28(7A) and 59(1A) of the principal Act"; and

      (ii) at the end there shall be added the words "or if as a result of a transfer payment or transfer under regulations made by virtue of section 38 below he is no longer entitled to guaranteed minimum pensions under the scheme by which the transfer payment or transfer is made and has not as a result of the transfer payment or transfer becomes entitled to guaranteed minimum pensions under the scheme to which the transfer payment or transfer is made.""

      No. 138, in page 136, line 11, leave out paragraph 17 and insert—
      "17. The following subsection shall be substituted for section 38(1) (transfer of accrued rights)—
      (1) Regulations may prescribe circumstances in which and conditions subject to which—

      (a) there may be made by one occupational pension scheme to another or by an occupational pension scheme to a personal pension scheme a transfer of or a transfer payment in respect of—

      (i) an earner's accrued rights to guaranteed minimum pensions under a contracted-out scheme;

      (ii) an earner's accrued rights to pensions under an occupational pension scheme which is not contracted-out, to the extent that those rights derive from his accrued rights to guaranteed minimum pensions under a contracted-out scheme; or

      394

      (iii) the liability for the payment of guaranteed minimum pensions to or in respect of any person who has become entitled to them;

      (b) there may be made to an occupational pension scheme or a personal pension scheme a transfer of or a transfer payment in respect of an earner's accrued rights to guaranteed minimum pensions which are appropriately secured for the purposes of section 52C below."

      No. 139, in page 138, line 17, leave out paragraph 25 and insert—
      "25.—(1) Section 52C (cases where scheme's liability is discharged) shall have effect and shall be deemed always to have had effect as if the following subsections were substituted for subsections (1) to (3)—
      "(1) A transaction to which this section applies discharges the trustees or managers of an occupational pension scheme from their liability to provide for or in respect of any person either the requisite benefits or short service benefit or any alternative to short service benefit—

      (a) if it is carried out not earlier than the time when that person's pensionable service terminates; and

      (b) if and to the extent that it results in—

      (i) the requisite benefits; or

      (ii) short service benefit or an alternative to short service benefit, for or in respect of that person being appropriately secured; and

      (c) in a case where the transaction takes place on or after 1st January 1986, if and to the extent that the requirements set out in anyone of paragraphs (a), (b) and (c) of subsection (5) below are satisfied.

      (2) This section applies to the following transactions—

      (a) the taking out or the transfer of the benefit of a policy of insurance or a number of such policies;

      (b) the entry into or the transfer of the benefit of an annuity contract or a number of such contracts.".

      (2) Subsection (5) of that section shall have effect and shall be deemed always to have had effect as if "(1)" were substituted for "(2)(b)".
      (3) In relation to transactions which take place after the commencement of section 8 above section 52C(1) of the Social Security Pensions Act 1975 shall have effect with the substitution of the words "guaranteed minimum pensions" for the words "the requisite benefits", in both places where they occur.
      25A.—(1) Subsection (1) of section 52D (supplementary provisions) shall have effect and shall be deemed always to have had effect—
      (a) as if the following paragraph were substituted for paragraph (b)—
      ( ) "(b) either—

      (i)) the transaction wholly or partly securing them was carried out before 1st January 1986 and discharged the trustees or managers of the scheme as mentioned in subsection (1) of that section; or

      (ii) it is carried out on or after that date without any of the requirements specified in subsection (5)(a) to (c) of that section being satisfied in relation to it and the scheme has been wound up;"; and

      (b) as if for the words from "entitled" to "which" there were substituted the words "only entitled to such part (if any) of his or her guaranteed minimum pension as".
      (2) In that subsection after the words "purposes or there shall be inserted the words "sections 16(2B), 28(7A) and 59(1A) of the principal Act and".
      25B. The following definition shall be inserted after the definition of "occupational pension scheme" in section 66(1)—
      ""personal pension scheme" has the meaning assigned to it by section 80(1) of the Social Security Act 1986;"."
      Mr. Major: Although these amendments are technical, they are important for the smooth operation of the legislation in practice.
      Amendment No. 135 gives authority to extend the existing powers of the Occupational Pensions Board to modify the rules of an occupational pension scheme. That would be used where those rules would otherwise prevent the scheme from complying with a statutory requirement or exercising an option available under the law — for example, one of the permitted options for reducing surplus funds as proposed under the Finance Bill.
      Amendments Nos. 136, 137 and 138 substitute a revised version of section 38(1) in the Social Security Pensions Act 1975. This provides for the regulations about transfers of guaranteed minimum pensions. A central feature of the new pension arrangements will be that contracted-out rights will be capable of maximum transferability, when an employee changes his job or alters his pension arrangements. We have made it clear that existing schemes will not be required to provide transfer values of rights built up before the new arrangements begin to people who opt out of the scheme while continuing in the job. But where the right to a transfer value is available, we do not want to put unnecessary restrictions on what can be done with any GMP element which it may include. Where the individual wants to — but not of course otherwise—it seems reasonable that he should be allowed to apply the value of the GMP to buying "protected rights" in a personal pension or money purchase contracted-out scheme. These amendments enable regulations to be made about that. The details will be included in the consultative proposals which we will be issuing later this year.
      Amendment No. 139 has been made in response to requests from the pensions practitioners. It clarifies that section 52C of the Social Security Pensions Act 1975 provides a discharge for scheme trustees even in cases where the benefits secured by an insurance policy or annuity contract arc not identical to those which would have been provided by the scheme. The revised provision will have effect from the date that section 52C was operative— 1 January 1986 — so that pension schemes can have confidence in the legal soundness of their arrangements to date.
      Mr. Kirkwood: I wish to speak briefly to amendment No. 139. If my understanding is wrong, perhaps the Minister will put me right this evening or perhaps, more appropriately, drop me a note about it.
      As I understand the amendment, we have introduced into paragraph 26 of schedule 10 a retrospective amendment to section 52C of the Social Security Act 1985. That was one of several amendments in a package taken in another place. It included amendments to the regulations which are designed to remove the present difficulty for scheme trustees and insurance companies in implementing the buying-out requirements under the Act. I understand and appreciate that.
      However, although the amendment is fully retrospective to 1 January 1986, the Department is not taking power to make retrospective the related amendments to the regulations. If that is true, and if my understanding is correct, the present impasse on buying-out will not be dealt with. It will continue until all the amendments are effective. I suggest that paragraph 26 of schedule 10 should be looked at again with a view to an extension to provide that regulations made within six months of the
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      commencement date of this paragraph under the powers in section 52C or paragraphs 13 and 20 of schedule 1A to the Social Security Pensions Act 1975 should also be retrospective to 1 January 1986. That would enable buying-out to proceed without any further delay once the proposed content of the amending regulations is known.
      Mr. Major: The hon. Gentleman raises an interesting and intriguing point to which I am sure there is a satisfactory answer. I shall raise precisely that interesting and intriguing point over the next day or so and write to the hon. Gentleman with a definitive reply.
      Question put and agreed to.
      Subsequent Lords amendments agreed to.

    Clause 19

      INCOME RELATED BENEFITS
      Lords amendment: No. 35, in page 24, line 8, at end insert—
      "(1A) The scheme prescribed in subsection (1)(a) above shall provide for weekly payments of a community care addition to a chronically sick or disabled or elderly person, or in respect of a chronically sick or disabled child or other chronically sick or disabled elderly dependant.
      (1B) Regulations shall provide that payments of community care addition made under subsection (1A) above shall be payable at a rate that shall be determined by reference to—

      (a) the needs of the claimant or dependant in relation to his proper welfare and need for care and attention in a dwelling which he occupies or is to occupy as his home or in which he resides or is to reside as a member of a family, and

      (b) the extent to which other benefits or payments that are payable under Part II of this Act fail to meet those needs.

      (1C) Payments of community care addition under subsection (IA) above shall be payable in addition to any other income support payment, including any premium, and in addition to any attendance allowance or mobility allowance to which the claimant or dependant may be entitled."
      The Minister for Social Security (Mr. Tony Newton): I beg to move, That this House doth disagree with the Lords in the said amendment.
      Mr. Deputy Speaker: With this it will be appropriate to take the following Government amendment (a) in lieu of the Lords amendment, in page 27, line 37, at end insert—
      '(2A) In relation to income support and housing benefit the applicable amount for a severely disabled person shall include an amount in respect of his being a severely disabled person.
      (2B) Regulations may specify circumstances in which persons are to be treated as being or as not being severely disabled.'.
      Amendment (i) to Government amendment (a), in line 4, at end insert—
      'and that amount shall be determined in accordance with the severity of his disability.'.
      Amendment (ii) to Government amendment (a), in line 6, at end add—
      'and how the severity of the disability of such persons is to be assessed.'
      Amendment (iii) to Government amendment (a), in line 6, at end add—
      '(2C) The amount or amounts referred to in subsection (2A) above shall be calculated with regard to the cost incurred by severely disabled persons in living as householders or as members of a household and to the income support payments available to such persons in residential care homes.'.
      Mr. Newton: I think that the House understands that the background to this important debate on the needs and interests of disabled people, especially severely disabled people, is one in which we have actively and consciously sought, through the new income support scheme and as shown by the illustrative figures we have published, to improve the support made available to less well off disabled people generally.
      Under our proposals, we shall be paying the disability premium automatically, without a qualifying period, to people receiving one of the disability or continuing incapacity benefits. It will be paid without a time limit for blind claimants and claimants will qualify for the premium on grounds of incapacity for work after 28 weeks, compared with the present one-year qualifying rule for the long-term rate. The premium will be payable where either the claimant or a partner is receiving one of the qualifying benefits, unlike the position for the long-term rate, and our proposals on equal treatment should also make it easier for a disabled partner to qualify the whole family for extra help. There will also be considerable improvements in the amount of part-time earnings. Disabled claimants who are in a position to have some part-time earnings can retain them without it affecting their benefit to the extent that it would at present.
      I sum up those points by saying that on the illustrative figures—they are avowedly illustrative—published in the technical annex, our proposals for disability premium would imply an increase of about £50 million a year for those in receipt of it, by comparison with the present system. That is something we will be proud of when we have had the opportunity to implement it. I think that the House will accept that it shows our good intentions in this area.
      Alongside that, we have made it clear that there will be transitional protection arrangements, where they would be necessary, to ensure that income support payments will make up weekly cash income to at least the same level as supplementary benefit did before the change in the system.
      Having made those points about general improvement in support for the less well off disabled people, which is reflected in the policies we have put forward in the Bill and the figures in the illustrative tables, I want to acknowledge that throughout discussions on the Bill there has been concern about the position of what is acknowledged to be a small group of very severely disabled people, especially those who are in receipt, under the present system, of very high weekly additional payments in respect of domestic assistance. The position that we adopted during some of the earlier discussions was that that was very much the kind of problem, relating as it did to the individual needs of a relatively small number of people, that we would expect to find an appropriate way of dealing with through the social fund.
      However, it was clear from discussions in Committee and on Report and from quarters outside the House that the general statement of intent about our aim to find a new solution to the problem of those severely disabled people had fallen short of satisfying those who rightly and properly represent the interests of that group. Concern was expressed about both the possible change from regulated entitlement to the provisions represented by the social fund, and about the actual position, especially at the point of change and despite what had been said about transitional protection, of those who were receiving large amounts of weekly help with domestic assistance.
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      When the matter was debated in the other place, my noble Friend Baroness Trumpington gave two commitments on behalf of the Government. The first was to improve transitional protection for severely disabled people receiving extensive support by way of the domestic assistance provision addition. It was made clear that the amount would continue to be paid separately to, and on top of, any other transitional protection needed. It was further made clear that it would be increased at future upratings, if the need continued, to maintain its value. That goes well beyond the normal arrangements for transitional protection, but it was intended to offer assurance to those receiving these relatively high weekly payments.
      6.30 pm
      The second assurance given was that we would be seeking new arrangements to continue support for similar new cases after the changes in 1988, and that that would be the subject of consultation with interested groups.
      Those undertakings were welcomed in the other place, as I am sure that they will be welcomed here, especially that about transitional protection in these cases, which I am happy to repeat tonight. Nevertheless, the other place felt that the Government had not gone far enough to overcome the anxieties that had been expressed. Clearly, it felt that there should continue to be some regulated entitlement, so it passed what is now Lords amendment No. 35.
      The amendment that I am moving alongside the motion to disagree with Lords amendment No. 35 represents our clear acceptance of the basic proposition that there should continue to be a regulated system of weekly benefit directed to the kind of needs that have been the cause of concern. The fact that I am moving the motion makes it clear that we do not feel able to accept the Lords amendment in the terms in which it was passed. The amendment includes payments to groups such as the "chronically sick and disabled" and "elderly people", neither of which terms is further defined. I accept that it would be possible to find some way to define "chronically sick and disabled" people, but the fact that elderly people are included in such a way would inescapably mean that the provisions would cover up to 1·75 million supplementary pensioners. In other words, the amendment goes massively beyond any possible definition of the group that has given rise to the concern that has led to the amendment.
      Mr. Alfred Morris: Is the Minister prepared to say what the weekly payment will be? Will he estimate what will be the cost of the amendment?
      Mr. Newton: I am and I will, but I hope that the right hon. Gentleman will allow me to make my speech in the order in which I wish to make it, which I hope is reasonably rational and logical.
      The other principal point that I shall make, apart from what might be called technical nit-picking, is that the adjudication officer would be expected to deal with the payments by reference to a person's
      "proper welfare and need for care and attention".
      Those are wide and imprecise phrases, and the latter in particular raises questions of overlap with local authority service responsibilities, particularly those under the Chronically Sick and Disabled Persons Act to provide assistance in the home.

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      The enormous potential coverage of the amendment and the wider scope of the phrases that are used and would have to be assessed by social security adjudication officers means that, in the terms in which it has been passed, the amendment is simply unworkable with the current arrangements of the social security system. Potentially, it would involve us in taking over a wide part of the work of local authority social services departments in a way that the social security system is simply not qualified to carry out.
      Mr. Frank Field: The Minister says that the amendment would be unworkable. If the Government amendment is accepted, will more or fewer people be eligible compared to what would be the position if the Lords amendment were passed?
      Mr. Newton: I shall again come to that point. By definition, it is clear that since I have resisted the amendment partly on the ground that potentially it covers the entire supplementary pensioner population, I am unlikely to be moving a Government amendment that would run wider than that.
      Mr. Field: That is a cut.
      Mr. Newton: The hon. Gentleman is now being merely mischievous. I shall come to that point.
      We are seeking to accept the spirit of the way in which the amendment was spoken to and passed in the other place. We are seeking an additional disablement premium —one might call it a severe disablement premium. I am happy to see the hon. Member for Wolverhampton, North-East (Mrs. Short) in her place. That premium also has the advantage of responding to the recommendation of the Select Committee on Social Services, that we should consider the introduction of a two-tier disablement premium. That is what the Government's amendment is designed to bring about.
      Mr. Dafydd Wigley: Government amendment (a) says:
      "the applicable amount for a severely disabled person shall include an amount in respect of his being a severely disabled person."
      Is that amount a variable sum or is it a fixed amount that will be appropriate to disabled people, however severe the disability? Is there scope in the way that this measure will be used to vary that in line with the degree of disability?
      Mr. Newton: I am tempted to say that I will be grateful if the hon. Gentleman will allow me to set out my points in logical order. However, the direct answer is that the intention is that this shall be a fixed sum, a point to which I shall return.
      As an additional sign of our good intentions, I point out that there is no need to amend the Bill to provide for a severe disablement premium. There are ample powers within the Bill as it stands for us to have as many premiums as we wish. We have thought it right to make clear our intentions and to respond to the feelings both in this place and the other place. Nevertheless, we wished to table an amendment that specifically provides for a severe disablement premium.
      We are proposing a higher and additional premium for a particular group of disabled people. It will be paid on top of the other structural improvements for disabled people in the Bill, and in particular the disablement premium. As I have said, in effect it provides the two-tier disablement premium that many commentators, including the Select
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      Committee, have urged upon us. It will be paid as an extra amount to severely disabled people who are living on their own, and who are most likely to need extra support and care. It will be paid to them direct and as of right within the income support scheme. It will also form part of the assessment of need in the housing benefit rules.
      In considering the issue, we have sought criteria that are consistent with other social security arrangements. Our intention is that receipt of the higher rate of attendance allowance should be the first qualifying condition. The present domestic assistance addition already has a condition that there must be no one in the household capable of carrying out normal domestic duties. The purpose behind that rule, on the need for extra support to maintain independence that cannot otherwise be provided, is a sensible one.
      We have recently announced a major extension of the invalid care allowance as the benefit that is paid to those caring for disabled people. Consistent with that, we intend that the extra disablement premium will be paid direct to a severely disabled person where there is no one receiving or eligible for the invalid care allowance in respect of that person's care needs. We envisage setting the rate at the same level as for invalid care allowance, currently, although shortly to rise, £23 a week. This will be paid on top of the disablement premium in relevant cases. It is nearly double the rate of the basic disablement premium for a single person that is illustrated in the technical annex.
      Our estimate is that up to 10,000 severely disabled people could qualify for this additional premium, at a cost of up to £12 million. It will go to a far wider range of people than those who currently receive the domestic assistance addition. Our latest information, for December 1984, shows that only 3,150 people then received the domestic assistance addition, of whom 3,000 received £10 or less, compared with the figure of £23 that I have mentioned.
      On the basis of those figures, total expenditure on the current domestic assistance addition was well below £1 million. We expect that this measure will lead to a twelvefold increase in expenditure on severely disabled people and to at least a trebling of the number of people who are helped by the current domestic assistance addition. It is a very substantial move towards meeting the points that were made in another place. No less important is the fact that it represents a substantial move towards—
      Mr. Jack Ashley: Will the hon. Gentleman give way?
      Mr. Newton: Perhaps the right hon. Gentleman will allow me to finish this point.
      It represents a very substantial move towards extending the help that is available. It will help a much larger number of severely disabled people than are helped by the existing arrangements. Thus, it will further the objectives that unite all right hon. and hon. Members.
      Mr. Ashley: Does the Minister—
      Mr. Deputy Speaker: Order. I am not sure whether the Minister is giving way.
      Mr. Newton: I had finished, Mr. Deputy Speaker, but I am happy to allow the right hon. Gentleman to appear to intervene during my speech, if he so wishes.
      Mr. Ashley: The Minister says that this is a substantial increase, but he also said that the amounts are to be fixed. How can fixed amounts provide for people with different disabilities who require separate amounts? Is the Minister able to give a categoric assurance that no fewer people will be living in the community and that these proposals will not force them to live in institutions?
      Mr. Newton: The right hon. Gentleman will be very well aware that it would be very unwise of me to give a categorical assurance of the breadth that he seeks. It is clear, from the figures that I have just given, that substantially more severely disabled people who are living in the community will receive significant additional help, compared with what they receive under the present income support scheme. That must help to serve the objective that all of us have in mind of extending the effectiveness and the real meaning of care in the community.
      Mr. Alfred Morris: It will excite no surprise in the House when I say that I very much agree with Lords amendment No. 35. The amendment is, of course, virtually identical to the one I moved at the Bill's Report stage in this House on 19 May. Except for the Minister, everyone who took part in the debate on my amendment, from both sides of the House, spoke in support of what I was proposing. Yet the Government defeated the amendment on a three-line Whip.
      In another place, their Lordships were clearly much more impressed by the speeches in favour of my amendment than they were by the fiercely whipped vote by which it was defeated. Maurice Jackson, in Therapy's widely read parliamentary column, wrote after the Lords debate:
      "What happens now? The Government, of course, with its big Commons majority, could try to reverse the Lords amendment when the Bill returns for final examination by MPs. My prediction is that they will do nothing of the sort, but retire from the field—battered and bloody and not a little bowed—yielding victory with as much grace as they can muster."
      In fact, however, the Government are still opposing the amendment. Their own alternative amendment is grossly unsatisfactory and I hope very much that the Lords, when the Bill returns to them, will stand their ground and insist that the protection we are seeking for severely disabled people stays in the Bill. At the same time, I hope they will appreciate that the outrageously strict guillotine on the time available to us today makes it impossible for there to be more than one vote at the conclusion of this debate.
      6.45 pm
      This is a deeply important debate for severely disabled people. It is a debate not about compassion but about rights and, in particular, about the right of every disabled person to live, wherever that can be made possible, both independently and with dignity in his or her own home.
      The outcome of the debate will quite literally, as Lord Henderson of Brompton said in another place, mean the difference between life at home and life in an institution for many of the most severely disabled people in this country. On 19 May and again in the Lords, numerous cases were quoted of the kind of people who will lose out. They were the cases of very severely disabled people who now live independently at home by virtue of the domestic care allowance which, if the Government have their way, will disappear.
      Let me remind the Minister of just two cases that were drawn to my attention by the organisations of disabled
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      people. One is that of a woman who is paralysed from the neck down after a road accident. She requires help with virtually all aspects of personal care and was looked after by an elderly mother until increasing frailty left her unable to cope. She then had to spend weekends in bed until she received the domestic care allowance. Until the Bill was amended in the Lords, a person like her would have lost much more than the Minister is now proposing in his amendment.
      Mr. Frank Field: Has my right hon. Friend not reached a most important point? Although the Government, for once, have carefully costed this amendment, the one crucial piece of information that they have not given us is whether some disabled people, even if the amendment is passed, will still be worse off.
      Mr. Morris: I agree with my hon. Friend. It is incontrovertibly the fact that some of the most severely disabled people will be very much worse off if the domestic care allowance disappears without an adequate replacement.
      Another case drawn to my attention was that of a young man who recently graduated from university. He not only needs help with washing, dressing and using the toilet, but also has to be turned in bed frequently during the night. Before the Lords amendment, the loss in a case like his would have been £48·55 a week and there is no doubt whatever that admission to an institution would have resulted at a cost to the taxpayer of at least £180 a week.
      Everyone who knows the facts sees that residential care would cost the taxpayer more than the benefits that the Government want to scrap. That is why the Spastics Society condemned the Government's attitude as "self-defeating" and why Eric Ward-Rowe, a war-blinded campaigner for the disabled and a life-long Conservative, described the Bill as a "wicked attack" on severely disabled people.
      The Government's amendment has not removed the fear of their organisations that many severely disabled people will lose their independence and they are very angry about the Government's treatment of their representations. When the Bill went into Committee in this House, six organisations wrote to the Secretary of State and the Minister for the Disabled about their concern. They were the Disablement Income Group, the British Council of Organisations of Disabled People, Disability Alliance, the Spastics Society, the Royal National Institute for the Blind and the Royal Association for Disability and Rehabilitation.
      On 21 February, they requested a meeting with Ministers. The meeting took place on 17 March and the six organisations wrote again, on 20 March, for clarification of the Government's position. No reply was received. Then on 14 May—in advance of the Report stage in this House—the organisations wrote asking for some comment about the community care addition I was proposing. No reply was received. Yet again, on 9 July, they wrote to Ministers for their views about the provision of a community care addition. No reply has been received. As Peter Large of the Disablement Income Group has commented:
      "The absence of any reply since the meeting of 17 March makes it difficult to be constructive. In my opinion, the absence of a reply to three letters from six reputable charities,

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      all of them expert in the field of disability, is a sign either of an arrogant disregard for the needs of disabled people or of inefficiency".
      At this last hour of our proceedings on the Bill the Minister produces what he claims to be a solution. Even disregarding the spelling on yesterday's Order Paper, it looked more like a Back-Bench amendment on the back of an envelope than the fruit of two years' deliberations by a Department of State. All it does is to allow a higher rate of payment to severely disabled people, yet the Minister has known of the problem ever since he took the chair of the DHSS review of supplementary benefits over two years ago.
      The House now needs cast-iron assurances that the Minister will pay extra amounts of the order of £50 to £60 a week—or perhaps even more—to people who require such sums to pay for the support that they need to live in the community. This is why right hon. and hon. Members have tabled amendments to the Government amendment.
      The Opposition would prefer Lords amendment No. 35 to be retained because it would ensure that the precise needs of severely disabled people are met. However, it may be possible to describe in regulations the people about whom the House is so concerned in a way that they can be easily and accurately identified by adjudication officers and paid a fixed-rate benefit that is high enough to enable them to live or to continue to live in their own homes. The danger is that the defects of a basic disablement premium will simply be repeated in the proposed new premium.
      If the Minister just thinks of a number and picks some convenient passport off the shelf, he will fail to meet the needs of some of the most disabled people. If he has in mind, as seems to be the case, something of the order of an extra £23 a week for people on income support who are in receipt of the higher rate of attendance allowance, then I must emphasise to him that he will be sentencing many disabled people to indefinite institutional care.
      Ministers refused to speak to organisations of and for disabled people before tabling their amendments. In the next 48 hours a solution must be found that will satisfy their legitimate claims. The amendments tabled by my right hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley) and colleagues from the all-party disablement group would give the Minister discretion to pay more than one rate of the new premium. That would make it much easier for him to target resources on those identified as being in the greatest need. The amendments also relate the amounts to the costs incurred by severely disabled people on a general rather than on an individual basis and to the level of support available in residential care. In the tiny amount of time available, the all-party disablement group has been doing the Minister's work for him and has been bending over backwards to meet his administrative complaints about Lords amendment No. 35, which I am sure the membership of the all-party group still hope will be accepted by the House.
      The House owes a great debt to the Select Committee on Social Services under the chairmanship of my hon. Friend the Member for Wolverhampton, North-East (Mrs. Short) for the way in which it has exposed in its recent report the illogicality of providing substantial sums to people in residential care and practically nothing to disabled people living in the community. The Opposition seek the introduction of non-means-tested payments to disabled people which would allow them to make their own choices. The whole structure of the Bill is inimical to
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      the interests of disabled people and all the amendments we have tabled are exercises in damage limitation. Without Lords amendment No. 35 or an acceptable alternative, the damage to severely disabled people after April 1988 will be appalling.
      As their former Minister, I know that disabled people crave nothing more than to live independently at home. The Government's stance on this issue is thus egregiously cruel. It makes total nonsense of the claim that their Bill helps those most in need. Since the Government were routed in the local government elections, we have heard much of their claim about a "caring" new image, but it is totally uncaring to drive into institutions disabled people who, with adequate help, could live at home.
      One of the Bill's probable victims has summed it all up.. She said: "If that's caring, the word has lost its meaning." I strongly urge all hon. Members in all parts of the House to respond to her anguish, in the way that she would wish. by supporting the Lords amendment.
      Mr. John Hannam: I cannot follow the line taken by the right hon. Member for Manchester. Wythenshawe (Mr. Morris), because it was one of extreme criticism of the attempts by my hon. Friend the Minister to find a solution to what has proved to be a difficult problem. I pay tribute to my hon. Friend for the way in which he has kept in close contact with the all-party disablement group to try to find a solution to this problem, which is to find a satisfactory method of replacing the accumulation of additional allowances which the severely disabled are able to obtain under the present system. We need to find a replacement for that accumulation, and the amount will vary from one person to another but will be sufficient to allow disabled people to live in the community rather than in institutions.
      Over the last two years my hon. Friend has assured us that he is aware of the need to secure for this small but important group of severely handicapped people a method by which they would not suffer as a result of the change over to income support. I welcome the fact that my hon. Friend has been able to find an additional disability premium which will allow those people nearly to reach that final objective, but I am worried that in a couple of years a new group of severely disabled, blind and handicapped people will be outside the continuity assurances that have been given to those who are presently severely disabled and who will continue to receive amounts equivalent to the present allowance.
      In a couple of years, disabled people in the 16-plus group will miss out on the level of allowances. They will require just as much help as similarly disabled people who will continue to receive the full guaranteed benefits. They will require just as much help for special diets, heating, blindness allowance and domestic assistance and all the other benefits that build up and allow disabled people to live in the community rather than have to return to institutional or residential home care.
      The Lords amendment is rather like the one tabled on Report by the all-party disablement group and like the amendments that we have tabled. The benefit of those amendments was that they provided flexibility and were attractive because of that. They took account of individual needs, because we all know that disability is unique to each person and that the financial needs vary from one person to another. The single objective is to give each disabled person the means to live in the community, and my worry

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      about the Government amendment is that it could mean everything or nothing. I was relieved to hear further details from my hon. Friend about the amounts that will be made available, because they come close to securing the final objective.
      My hon. Friend talked about a second tier disability premium of some £23 on top of the £12 basic disability premium. That takes in many disabled people who might have found themselves with nothing but the basic disability premium. I appreciate the problem that has faced my hon. Friend in trying to find a system that would provide for a clearly defined flat rate addition. That is the nub of the problem that the Government face.
      My hon. Friend's proposal will provide about 12 times as much financial help as the domestic assistance allowance that it replaces, and about three times as many disabled people will receive it. However, that does not address the main point that we have raised again and again about the small but vital group of severely disabled people. It is upon them that the full focus of attention will be directed. They could normally have expected to receive amounts in excess of the combined second tier and the basic disability premium.
      Mr. Wigley: Will the hon. Gentleman address himself to the fact that the Spastics Society estimates that to keep a severely disabled person in institutional care costs between £230 and £280 a week, of which the DHSS may be paying £180?
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      Mr. Hannam: The hon. Gentleman has just pre-empted exactly the point that I was about to make. To find the extra few pounds a week to ensure that disabled people remain in the community rather than being in institutional care would save hundreds of pounds of taxpayers' money and prevent the return of disabled people to a point from which we have tried to move away.
      Therefore, I am not happy to accept the Government amendment and the Bill as it stands without a further assurance from my hon. Friend that he will find a way to meet the needs of the group of people about whom we are talking in the next few days with a more flexible use of the new system.
      Will my hon. Friend consider a suggestion made to me by the manager of my local DHSS office, which happens to have the largest number of claimants in the country? I cannot praise the manager highly enough for the interest that she takes in the needs of her clients and the disabled in particular. She said that, looking at the proposed workings of the social fund, it would be eminently possible for her and her staff to enable the small group of severely disabled people in the community, about whom they all know, to have the necessary topping up amount on a weekly basis if necessary. If that flexibility were built into the system, she said that she and her staff would have no problem.
      I hope that my hon. Friend will consider whether he can, through the regulations that he will be applying, look at that suggestion closely and introduce a method to ensure that this small but vital group of disabled people do not find themselves deprived of that essential £5, £10 or £15 a week that enables them to live in the community rather than having to return to institutional care.
      Mr. Ashley: The hon. Member for Exeter (Mr. Hannam) plays a prominent role in the all-party disablement group and I share many of his views. However, I do not think that the Minister was quite as magnanimous as the hon. Gentleman made out. This is obviously a party-political difference, despite the attempts that we make in the group to find some kind of consensus. The hon. Gentleman knows that the Minister is failing to meet the requirements of the other place. The Lords amendment made necessary provisions for severely disabled people, but the Minister has refused to accept it. He is offering us a substitute which he claims is just as good as the Lords amendment but, of course, it is not. It is inadequate and it fails on a number of counts to help severely disabled people in the way that the all-party disablement group would have wanted. However, I shall not press the hon. Member for Exeter on that point.
      Will the Minister clarify one point that he made? He did not answer my question about different premiums to help different people with different disabilities, and I hope that he will be able to do so when he replies. The Minister said that the premium would be paid only to people living on their own and receiving the high rate of attendance allowance. That is an unusual provision. Many people need extra money for someone living with them. Some good friends of ours are severely disabled and help those of us who play a prominent role in helping those with disability. They must have people living with them. If such people were excluded, it would be a scandal. I hope that I have misunderstood the Minister, but if I have not, there will be hell to pay. Those people must not be deprived of the special premium that the Minister has promised.
      The Opposition's amendment seeks to introduce different amounts for different people. That is the crux of the matter. A general allowance is of no use at all, because disabled people cannot simply be lumped together and given X amount of money. That cannot be done; it is most unrealistic. Our intention is to focus particular additional resources on those who specifically need them.
      The basis point of the Opposition's amendment is to recognise the individuality of disability. We recognise that individual disabled people require individual payments for specific individual needs. Any alternative in the form of a general payment to all severely disabled people—I put this seriously to the Minister—is inadequate, demeaning and insulting. It is offensive to lump all disabled people together in one homogeneous group.
      In all my years in the House I have never spoken of "the disabled". There is no such thing. Each disabled person has an individual problem. I know the Minister recognises that because he meets many disabled people. However, these provisions do not meet that fundamental point and the Minister should have a battle with his own Department, and the Secretary of State should take the point on board. Disabled people need individual payments. We do not want a lump sum for everyone. A few disabled people may receive a bit more than they need, but many will not.
      What does it mean to disabled people not to get what they need? We are not speaking of a few people going without a few luxuries. If severely disabled people do not get what they need, they will not be able to get the basic resources and necessities of life. They cannot obtain the care that is vital to their wellbeing. They cannot go to the toilet, have a bath, use the telephone, feed, wash or dress

      407
      themselves without help. If they cannot use their legs and arms, they must be provided with adequate resources to enable them to cope.
      I make no party-political point when I say that we all know that many local authorities simply do not provide the wherewithal for disabled people. There are some fine authorities, but there are some lousy ones. Some appalling authorities leave severely disabled people without basic necessities. We could say that that is not our business but local authority business the Minister hinted at this in his speech—but we must find some means in this House of Commons of providing the essential specific disability payment for the individual. There is no alternative. That is the only answer, and I hope that the Minister will bear that in mind.
      I have a lot more to say, but 1 shall not go on. I want to drive that point home to the Minister. If he takes that point on board, he will go much further towards helping severely disabled people than he could by any other single thing that he could do.
      Mr. Newton: I want to make three points in reply. First, in the sense in which the word has been used, there are no victims of this proposal in view of the arrangements that we have made for transitional protection.
      Secondly, I want to make it clear that, in contradiction to what has been suggested, the noble Lord Henderson who moved the amendment in the other place made it clear that he was aiming for an amendment which would be related to the needs of 2,000 or 3,000 people. There can be no doubt that the amendment goes much wider than that, but that was his explicit intention in moving the amendment.
      The third point is that. of the 3,000 people at whom the Lords amendment was aimed. the vast majority receive far less than we propose to make available under the new premium. Only 50 persons receive more than £20 a week, according to the latest information available.
      I take up the point made by my hon. Friend the Member for Exeter (Mr. Hannam), that part of our purpose has always been to treat disabled people's needs individually and flexibly. Resistance to doing that through the social fund has led to the amendment. We have sought to respond to it, but we do not rule out the possibility of also meeting the special needs of disabled people through the social fund, which is one of the purposes for which it was designed and intended. We hope that the social fund will work closely with local authorities, because none of us would wish them to cease caring for disabled people. One of our objectives is to bring about a better working relationship between the Department, in its social security role and in its wider caring role, and local authorities in their responsibilities for sick and disabled people.
      I hope that the House will recognise that a change from a benefit which costs £1 million and helps 3,000 people to a benefit that we expect to cost £12 million and to help 10,000 people represents a substantial, significant and important move.
      Mr. Wigley: I hope that the House of Lords will realise when it considers the matter—
      It being two hours after the commencement of the proceedings on the motion relating to the Social Security Bill (Allocation of Time), MR. DEPUTY SPEAKER proceeded, pursuant to the Order this day, to put forthwith the Question already proposed from the Chair, That this House doth disagree with the Lords in the said amendment:—
      The House divided: Ayes 251, Noes 183.

      Division No. 275]

      [7.11 pm

      AYES

      Aitken, Jonathan

      Forsyth, Michael (Stirling)

      Alexander, Richard

      Forth, Eric

      Alison, Rt Hon Michael

      Fowler, Rt Hon Norman

      Amess, David

      Fox, Sir Marcus

      Ancram, Michael

      Franks, Cecil

      Arnold, Tom

      Fraser, Peter (Angus East)

      Ashby, David

      Freeman, Roger

      Atkins, Rt Hon Sir H.

      Fry, Peter

      Atkins, Robert (South Ribble)

      Gale, Roger

      Atkinson, David (B'm'th E)

      Galley, Roy

      Baker, Rt Hon K. (Mole Vall'y)

      Gardiner, George (Reigate)

      Baker, Nicholas (Dorset N)

      Gardner, Sir Edward (Fylde)

      Baldry, Tony

      Garel-Jones, Tristan

      Banks, Robert (Harrogate)

      Glyn, Dr Alan

      Batiste, Spencer

      Goodlad, Alastair

      Beaumont-Dark, Anthony

      Gow, Ian

      Bellingham, Henry

      Gower, Sir Raymond

      Bendall, Vivian

      Grant, Sir Anthony

      Benyon, William

      Greenway, Harry

      Bevan, David Gilroy

      Gregory, Conal

      Biffen, Rt Hon John

      Griffiths, Peter (Portsm'th N)

      Biggs-Davison, Sir John

      Grist, Ian

      Blackburn, John

      Ground, Patrick

      Blaker, Rt Hon Sir Peter

      Grylls, Michael

      Bonsor, Sir Nicholas

      Gummer, Rt Hon John S

      Boscawen, Hon Robert

      Hamilton, Hon A. (Epsom)

      Bowden, Gerald (Dulwich)

      Hamilton, Neil (Tatton)

      Boyson, Dr Rhodes

      Hampson, Dr Keith

      Bright, Graham

      Hanley, Jeremy

      Brinton, Tim

      Hargreaves, Kenneth

      Brooke, Hon Peter

      Harris, David

      Brown, M. (Brigg & Cl'thpes)

      Haselhurst, Alan

      Browne, John

      Havers, Rt Hon Sir Michael

      Bryan, Sir Paul

      Hawkins, C. (High Peak)

      Buchanan-Smith, Rt Hon A.

      Hawkins, Sir Paul (N'folk SW)

      Buck, Sir Antony

      Hawksley, Warren

      Budgen, Nick

      Hayes, J.

      Burt, Alistair

      Hayhoe, Rt Hon Barney

      Butcher, John

      Hayward, Robert

      Butler, Rt Hon Sir Adam

      Heathcoat-Amory, David

      Butterfill, John

      Heddle, John

      Carlisle, John (Luton N)

      Heseltine, Rt Hon Michael

      Carlisle, Rt Hon M. (W'ton S)

      Hickmet, Richard

      Cash, William

      Higgins, Rt Hon Terence L.

      Chalker, Mrs Lynda

      Hill, James

      Chapman, Sydney

      Hind, Kenneth

      Chope, Christopher

      Hirst, Michael

      Churchill, W. S.

      Holland, Sir Philip (Gedling)

      Clark, Dr Michael (Rochford)

      Hordern, Sir Peter

      Clark, Sir W. (Croydon S)

      Howard, Michael

      Clarke, Rt Hon K. (Rushcliffe)

      Howarth, Alan (Stratf'd-on-A)

      Clegg, Sir Walter

      Howarth, Gerald (Cannock)

      Colvin, Michael

      Howell, Ralph (Norfolk, N)

      Coombs, Simon

      Hunter, Andrew

      Cope, John

      Hurd, Rt Hon Douglas

      Corrie, John

      Jenkin, Rt Hon Patrick

      Couchman, James

      Jessel, Toby

      Critchley, Julian

      Johnson Smith, Sir Geoffrey

      Crouch, David

      Jones, Gwilym (Cardiff N)

      Currie, Mrs Edwina

      Jones, Robert (Herts W)

      Dickens, Geoffrey

      Jopling, Rt Hon Michael

      Dorrell, Stephen

      Kellett-Bowman, Mrs Elaine

      Douglas-Hamilton, Lord J.

      Kershaw, Sir Anthony

      Dover, Den

      Key, Robert

      Dunn, Robert

      King, Roger (B'ham N'field)

      Durant, Tony

      King, Rt Hon Tom

      Dykes, Hugh

      Knight, Greg (Derby N)

      Evennett, David

      Knight, Dame Jill (Edgbaston)

      Eyre, Sir Reginald

      Knowles, Michael

      Fairbairn, Nicholas

      Knox, David

      Farr, Sir John

      Lang, Ian

      Favell, Anthony

      Latham, Michael

      Finsberg, Sir Geoffrey

      Lawler, Geoffrey

      Fletcher, Alexander

      Lawrence, Ivan

      Fookes, Miss Janet

      Lee, John (Pendle)

      Forman, Nigel

      Leigh, Edward (Gainsbor'gh)

      409

      Lester, Jim

      Peacock, Mrs Elizabeth

      Lewis, Sir Kenneth (Stamf'd)

      Percival, Rt Hon Sir Ian

      Lightbown, David

      Pollock, Alexander

      Lilley, Peter

      Porter, Barry

      Lloyd, Peter (Fareham)

      Portillo, Michael

      Lord, Michael

      Powley, John

      Luce, Rt Hon Richard

      Prentice, Rt Hon Reg

      Lyell, Nicholas

      Price, Sir David

      McCurley, Mrs Anna

      Proctor, K. Harvey

      Macfarlane, Neil

      Raffan, Keith

      MacKay, Andrew (Berkshire)

      Rhodes James, Robert

      MacKay, John (Argyll & Bute)

      Ridley, Rt Hon Nicholas

      Maclean, David John

      Rifkind, Rt Hon Malcolm

      McLoughlin, Patrick

      Roe, Mrs Marion

      McNair-Wilson, M. (N'bury)

      Rossi, Sir Hugh

      McQuarrie, Albert

      Rost, Peter

      Madel, David

      Sainsbury, Hon Timothy

      Major, John

      Shepherd, Colin (Hereford)

      Malins, Humfrey

      Sims, Roger

      Malone, Gerald

      Skeet, Sir Trevor

      Maples, John

      Smith, Sir Dudley (Warwick)

      Marland, Paul

      Smith, Tim (Beaconsfield)

      Marshall, Michael (Arundel)

      Stanbrook, Ivor

      Mates, Michael

      Steen, Anthony

      Mather, Carol

      Stern, Michael

      Mawhinney, Dr Brian

      Stewart, Andrew (Sherwood)

      Merchant, Piers

      Taylor, John (Solihull)

      Miller, Hal (B'grove)

      Tebbit, Rt Hon Norman

      Miscampbell, Norman

      Thatcher, Rt Hon Mrs M.

      Mitchell, David (Hants NW)

      Thompson, Donald (Calder V)

      Moate, Roger

      Thompson, Patrick (N'ich N)

      Monro, Sir Hector

      Thorne, Neil (Ilford S)

      Montgomery, Sir Fergus

      Thurnham, Peter

      Morrison, Hon P. (Chester)

      Townsend, Cyril D. (B'heath)

      Moynihan, Hon C.

      Viggers, Peter

      Murphy, Christopher

      Wakeham, Rt Hon John

      Neale, Gerrard

      Walker, Bill (T'side N)

      Neubert, Michael

      Wall, Sir Patrick

      Newton, Tony

      Wardle, C. (Bexhill)

      Norris, Steven

      Warren, Kenneth

      Onslow, Cranley

      Watson, John

      Oppenheim, Phillip

      Watts, John

      Oppenheim, Rt Hon Mrs S.

      Wells, Sir John (Maidstone)

      Osborn, Sir John

      Wheeler, John

      Ottaway, Richard

      Wiggin, Jerry

      Page, Sir John (Harrow W)

      Wood, Timothy

      Page, Richard (Herts SW)

      Young, Sir George (Acton)

      Parkinson, Rt Hon Cecil

      Patten, Christopher (Bath)

      Tellers for the Ayes:

      Patten, J. (Oxf W & Abgdn)

      Mr. Francis Maude and

      Pattie, Geoffrey

      Mr. Mark Lennox-Boyd.

      Pawsey, James

      NOES

      Alton, David

      Carter-Jones, Lewis

      Anderson, Donald

      Cartwright, John

      Archer, Rt Hon Peter

      Clark, Dr David (S Shields)

      Ashdown, Paddy

      Clarke, Thomas

      Ashley, Rt Hon Jack

      Clay, Robert

      Ashton, Joe

      Clelland, David Gordon

      Atkinson, N. (Tottenham)

      Clwyd, Mrs Ann

      Banks, Tony (Newham NW)

      Cohen, Harry

      Barnett, Guy

      Coleman, Donald

      Barron, Kevin

      Cook, Robin F. (Livingston)

      Beckett, Mrs Margaret

      Corbyn, Jeremy

      Beith, A. J.

      Craigen, J. M.

      Bell, Stuart

      Crowther, Stan

      Benn, Rt Hon Tony

      Cunliffe, Lawrence

      Bennett, A. (Dent'n & Red'sh)

      Dalyell, Tarn

      Bermingham, Gerald

      Davies, Rt Hon Denzil (L'lli)

      Blair, Anthony

      Davis, Terry (B'ham, H'ge H'l)

      Boothroyd, Miss Betty

      Deakins, Eric

      Boyes, Roland

      Dewar, Donald

      Brown, Gordon (D'f'mline E)

      Dixon, Donald

      Brown, N. (N'c'tle-u-Tyne E)

      Dobson, Frank

      Brown, Ron (E'burgh, Leith)

      Dormand, Jack

      Caborn, Richard

      Douglas, Dick

      Callaghan, Jim (Heyw'd & M)

      Dubs, Alfred

      Campbell, Ian

      Duffy, A. E. P.

      Campbell-Savours, Dale

      Dunwoody, Hon Mrs G.

      410

      Eadie, Alex

      Millan, Rt Hon Bruce

      Eastham, Ken

      Mitchell, Austin (G't Grimsby)

      Edwards, Bob (W'h'mpfn SE)

      Morris, Rt Hon A. (W'shawe)

      Evans, John (St. Helens N)

      Morris, Rt Hon J. (Aberavon)

      Ewing, Harry

      Nellist, David

      Fatchett, Derek

      Oakes, Rt Hon Gordon

      Field, Frank (Birkenhead)

      O'Brien, William

      Fields, T. (L'pool Broad Gn)

      O'Neill, Martin

      Fisher, Mark

      Orme, Rt Hon Stanley

      Flannery, Martin

      Owen, Rt Hon Dr David

      Foot, Rt Hon Michael

      Park, George

      Forrester, John

      Parry, Robert

      Foster, Derek

      Patchett, Terry

      Foulkes, George

      Pavitt, Laurie

      Fraser, J. (Norwood)

      Pendry, Tom

      Freeson, Rt Hon Reginald

      Pike, Peter

      Garrett, W. E.

      Powell, Raymond (Ogmore)

      George, Bruce

      Radice, Giles

      Godman, Dr Norman

      Randall, Stuart

      Golding, Mrs Llin

      Raynsford, Nick

      Gould, Bryan

      Redmond, Martin

      Gourlay, Harry

      Rees, Rt Hon M. (Leeds S)

      Hamilton, W. W. (Fife Central)

      Richardson, Ms Jo

      Hancock, Michael

      Roberts, Ernest (Hackney N)

      Hardy, Peter

      Robinson, G. (Coventry NW)

      Harman, Ms Harriet

      Rogers, Allan

      Harrison, Rt Hon Walter

      Rooker, J. W.

      Hart, Rt Hon Dame Judith

      Ross, Ernest (Dundee W)

      Hattersley, Rt Hon Roy

      Ross, Stephen (Isle of Wight)

      Heffer, Eric S.

      Rowlands, Ted

      Hogg, N. (C'nauld & Kilsyth)

      Sedgemore, Brian

      Home Robertson, John

      Shore, Rt Hon Peter

      Hoyle, Douglas

      Short, Ms Clare (Ladywood)

      Hughes, Dr Mark (Durham)

      Short, Mrs R.(W'hampt'n NE)

      Hughes, Robert (Aberdeen N)

      Silkin, Rt Hon J.

      Hughes, Roy (Newport East)

      Skinner, Dennis

      Hughes, Sean (Knowsley S)

      Smith, Rt Hon J. (M'ds E)

      Hughes, Simon (Southwark)

      Snape, Peter

      Janner, Hon Greville

      Soley, Clive

      John, Brynmor

      Spearing, Nigel

      Johnston, Sir Russell

      Stewart, Rt Hon D. (W Isles)

      Jones, Barry (Alyn & Deeside)

      Stott, Roger

      Kaufman, Rt Hon Gerald

      Strang, Gavin

      Kirkwood, Archy

      Straw, Jack

      Lambie, David

      Thomas, Dafydd (Merioneth)

      Leadbitter, Ted

      Thomas, Dr R. (Carmarthen)

      Leighton, Ronald

      Thompson, J. (Wansbeck)

      Lewis, Terence (Worsley)

      Thorne, Stan (Preston)

      Livsey, Richard

      Tinn, James

      Lloyd, Tony (Stretford)

      Torney, Tom

      Lofthouse, Geoffrey

      Wainwright, R.

      Loyden, Edward

      Wardell, Gareth (Gower)

      McDonald, Dr Oonagh

      Wareing, Robert

      McKay, Allen (Penistone)

      Weetch, Ken

      McKelvey, William

      Welsh, Michael

      MacKenzie, Rt Hon Gregor

      White, James

      Maclennan, Robert

      Wigley, Dafydd

      McTaggart, Robert

      Williams, Rt Hon A.

      McWilliam, John

      Wilson, Gordon

      Madden, Max

      Winnick, David

      Marek, Dr John

      Woodall, Alec

      Marshall, David (Shettleston)

      Wrigglesworth, Ian

      Martin, Michael

      Young, David (Bolton SE)

      Maynard, Miss Joan

      Meacher, Michael

      Tellers for the Noes:

      Meadowcroft, Michael

      Mr. James Hamilton and

      Michie, William

      Mr. Ron Davies.

      Mikardo, Ian

      Question accordingly agreed to.
      Government amendment in lieu of the Lords amendment agreed to.
      Subsequent Lords amendments agreed to, some with Special Entry.

    Clause 20

      AMOUNT ETC.
      Lords amendment: No. 40, in page 27, line 20, at end insert—
      "and shall include the whole of the amount which he is liable to pay by way of rates in respect of his home."
      The Secretary of State for Social Services (Mr. Norman Fowler): I beg to move, That this House doth disagree with the Lords in the said amendment.
      The first point to make is that there is nothing in the Bill concerned with 20 per cent. contributions to rates. The Government have made it clear that they want to see greater accountability in local government and that they believe that it is a serious defect of present arrangements that many people have no financial interest in the current level of rates charged or in any proposed increase. We have made it clear that we will put proposals to Parliament to change that position, but this Bill is not the vehicle for that change.
      The powers in the Bill go no further than the provisions in existing legislation. When the Government put forward their proposals on domestic rates as they now are, they will be in the form of regulations which will be debated by both Houses. But, of course, the Government are also consulting on the proposals for a new community charge. That consultation is not yet complete, but it is clear that any change there would require primary legislation.
      Mr. David Winnick: I am sure that the Secretary of State will be perfectly frank with the House. I appreciate that a measure will be introduced in due course, but does he agree that the Government intend to introduce a measure whereby at least 20 per cent. will be paid by those on supplementary benefit?
      Mr. Fowler: The point is that this Bill is not the vehicle for that change. I see that we are agreed upon that.
      Basically, the amendment pre-empts that decision. Rather than waiting for the proposition to be put, the authors of the amendment have used the opportunity of this Bill to seek to prevent any action at all. Let us be clear that the effect of the amendment is not just to make impossible a 20 per cent. contribution to rates; it would make any contribution impossible. It would not be possible to have a 15 per cent. contribution, a 10 per cent. contribution, a 5 per cent. contribution, or a 1 per cent. contribution. I must say that I find that totally unacceptable. It is unacceptable for the reasons given in the other place by my noble Friend Lord Boyd-Carpenter. It is an attempt to pre-empt Government policy on the whole question of local government finance.
      Even on its own terms the amendment is wrong on several important counts. It would diminish a major achievement in the Bill—fairer treatment between those in work and those not in work. It would further weaken the link between payment for and use of services provided by local authorities. There would be greater expenditure on a benefit which has increased dramatically in recent years.
      The central aim of the reforms is to treat people at the same level of income in exactly the same way, whether they are in or out of work. Thus, one has the same maximum for both. The amendment would guarantee a 100 per cent. rebate of domestic rates for those with incomes at or below the income support level.
      412
      There is a technical flaw in this, as it would also prevent any deduction from housing benefit to take account of the contribution towards domestic rates expected from nondependent members of the same household. Thus, even though the non-dependent is earning, say, £100 a week, no deduction could be made from housing benefit. It cannot be right that a head of household should receive 100 per cent. help from the taxpayer with domestic rates when other members of the household are in full-time work. The cost of that would be about £100 million. But under the present system, and under any changed system, the effect would be to create sharp reductions in benefit as income rises. That would create new unemployment and a poverty trap which the unified structure in the Bill is designed to avoid. It could lead also to the reintroduction of housing benefit supplement.
      The only way to avoid the effect of the amendment would be to extend 100 per cent. help with rates to all those who qualify for benefit. That would have the effect of reducing, not increasing, accountability.
      7.30 pm
      Currently, a substantial minority of householders — about 3 million — are insulated entirely from rises in domestic rates. A scheme which started with 100 per cent. maximum assistance would insulate even greater numbers from the consequences of their local authorities' spending policies. I shall develop that. At present, for standard housing benefit cases, the starting point for calculating rate rebates is 60 per cent. of the claimant's rates. That means that if his rates increase by £1 a week his rebate automatically increases by 60p a week, unless his income or other circumstances change. It would be the same for everyone receiving a rebate, however large or small his rebate was initially. But under a scheme that is based on 100 per cent. of rates, a £1 increase in weekly rates would produce a £1 increase in benefit, again no matter how much rebate the individual was receiving initially. Even if he was entitled to a rebate of only a few pence a week, a £1 rise in rates would still lead to a £1 rise in his rebate if his circumstances remained the same.
      Mr. Nick Raynsford: Will the Secretary of State explain why similar logic should not extend to rents?
      Mr. Fowler: We are not making the same proposals for rents. We are seeking more accountability within the rating system between local authorities and those who elect local authorities. The hon. Gentleman knows that the Government have made that clear from the beginning.
      In other words, every household receiving a rate rebate — about 5·5 million, on the basis of our illustrative figures—would no longer have any financial interest in the spending policies of its local authority. That would weaken and, in some authorities, threaten to destroy the link between those who vote for more services, those who use the services and those who pay for them. That would be bad for local accountability and for personal responsibility. Our initial proposal is that everyone should pay a contribution towards his domestic rates. This proposal will have to be developed in the light of the consultations and discussions on the proposals in the Green Paper, "Paying for Local Government". In principle, however, our case is clear and remains firm. Local electors must be aware of the costs of the policies that they are invited to support.
      Finally, we have been entirely open in our commitment to restrain the cost of housing benefit. Total expenditure

      413
      on assistance with rent and rates has more than doubled over the past six years. Current expenditure is estimated to be about £4·5 billion. At the same time, the numbers have risen so that one in three households is receiving some assistance. Overall, our proposals seek to restrain future housing benefit expenditure, and the proposal that everyone should make a contribution towards his domestic rates is an important part of that saving. I do not believe that the Government can be pre-empted from making financially important proposals of this sort.
      The Opposition have sought to alarm people and will no doubt seek to do so again. I understand that they will claim that this measure will have dire consequences for poor households. We should be clear that we are talking about benefit rates to be set at the uprating that is due to take place in the autumn of 1987, not at the next uprating. Even on the illustrative figures published with the White Paper, the majority of those on income support would not experience any reduction in disposable income overall.
      In summary, the amendment would not increase accountability in local government. In fact, it would reduce it. It would not restrain future spending on housing benefit. Instead, it would multiply it. Above all, the amendment is out of time. It seeks to pre-empt the Government's right to make proposals to Parliament in a vital area of policy. That is a fundamental issue, and I ask the House for its support.
      Mr. Deputy Speaker (Mr. Ernest Armstrong): I remind the House that the amendment involves privilege.
      Mr. Michael Meacher: Contrary to the clear decision and vote of a significant majority in another place, the Government are seeking to revert to their original intention to impose this iniquitous 20 per cent. rates payment on even the poorest in our society. This proposal has been rejected by the Government's housing review committee, which was set up in the course of the social security reviews. It has been rejected virtually unanimously by public opinion in the course of consultation. It has been rejected—this is the reason for the debate—by a decisive vote in another place. Lastly, it has been rejected by the Social Security Advisory Committee, the Government's own advisory body. There is no support anywhere for this measure except among the Institute of Directors and among those who, to their shame, submit to the Tory Whip in this place.
      Contrary to the Secretary of State's complacency, the Government's proposal will mean that the poorest claimants, even those on supplementary benefit, will have to use money which is intended for food and clothing as well as fuel to pay part of their rates. The proposal has been opposed by a wide range of political opinion, as well as by local authorities and those concerned about the welfare of claimants. Contrary to the Secretary of State's statement, the amendment is not an attempt to pre-empt the Government's policy. The vote in another place was not an attempt to pre-empt Government policy on local finance.
      The Government's action is a deliberate one to cut benefit by between £300 million and £400 million a year, and this will affect some of the poorest in our society. That and that alone is the reason why the Government's proposal has been brought back to the House.
      414
      The Opposition have two main complaints about the 20 per cent. proposal. We say that it will cause hardship and that administratively it will be highly inefficient. Supplementary benefit claimants — if the right hon. Gentleman has any doubt about this I suggest that he should have rather more experience of what it is like to live on supplementary benefit—already have a pretty hard time getting by. By any standard, their income is extremely low. Many have to forgo necessities or get into debt, or both.
      I shall quote one example of the impact of the Government's proposal. Let us consider the position of a pensioner couple aged 72 and 74 years whose sole income consists of supplementary benefit of £64·90, including allowances for the wife, who is diabetic, and heating addition. That is their income, apart from rent and rate rebates. They receive a full rent rebate, plus a fuel rebate of £7·50 and an allowance for water rates of £1·50. That is the position of a fairly typical couple in retirement. Their income support would total £63·25, out of which they would have to pay water rates and 20 per cent. of their domestic rates. They would be worse off by £4·65 per week. The 20 per cent. rate rebate cut would be £1–50 of the loss. That is a substantial cut. I am amazed that anyone in the House believes that that is justified and can find it in himself to vote for it.
      Mr. Winnick: As my hon. Friend says, is not the situation deplorable? Is it not the case that, whereas now those on supplementary benefit are entitled to some assistance during a harsh winter, however bureaucratic the regulations are, and however inadequate the sums are, under the new position, such sums will not be paid? Therefore, apart from all the other difficulties of paying 20 per cent. in rates, certainly during the winter months, the people concerned are likely to have less income than they have now.
      Mr. Meacher: My hon. Friend is right. We are debating just one item from the Social Security Bill. There are several others and, unfortunately, some of them combine. Therefore, the overall loss of income in particular cases, which is what matters, is greater than that as a result of any single one of the cuts, such as the one that we are now debating.
      The DHSS tax-benefit model, which is the best indicator of the effect of the proposal, suggests that the average loss to claimants from the measure will be about £1·25 a week. In certain places where there is a great deal of poverty, it will be considerably higher. In Camden, it will be more than £3 a week because the average rent level there is over £15. In Islington, Lambeth, Lewisham, Brent and Hounslow it will be over £2·50 a week, which is a considerable sum to people on low incomes. The loss may not seem a lot to many hon. Members, but it is sobering to reflect that it is almost a day's benefit, in supplementary and child benefit combined, for a 10-year-old. Claimants live in a hard world where those figures are a serious business. The hon. Member for Derbyshire, South (Mrs. Currie) smiles. We know that she comes from a very rich and well-off family, with both her income and that of her husband. She would do well to listen carefully to the effects that the measure has on many people with very low incomes, something that she has never experienced in her life.
      Mrs. Edwina Currie: Will the hon. Gentleman give way?
      Mr. Meacher: I shall not give way. If the hon. Lady is insulting enough—[HoN. MEMBERS: "Give way."] If the hon. Lady is insulting—
      Mrs. Currie: Will the hon. Gentleman give way?
      Mr. Meacher: I shall not give way.
      Mrs. Currie rose—
      Mr. Meacher: If the hon. Lady is—
      Mrs. Currie rose—
      Mr. Meacher: I shall not give way. If the hon. Lady insults those whom we are discussing tonight, she has no right to speak at this time. She can make her own speech in her own time.
      Mrs. Currie: On a point of order, Mr. Deputy Speaker. As it appears to be in order for the hon. Member for Oldham, West (Mr. Meacher) to make such insulting remarks across the Chamber, is it not in order for him to give me a little time to reply?
      Mr. Deputy Speaker (Mr. Harold Walker): I cannot compel an hon. Member to give way to someone who seeks to intervene.
      Mr. Fowler: I simply want to say to the hon. Member for Oldham, West (Mr. Meacher) that I gave way to the hon. Member for Walsall, North (Mr. Winnick) a moment ago. Surely, having referred directly to my hon. Friend the Member for Derbyshire, South (Mrs. Currie), he will at least have the courage to give way to her.
      Mr. Meacher: My hon. Friend asked a proper and courteous question. I only wish that the Secretary of State were as defensive of the poor people as he is of some of his insulting hon. Friends.
      Mrs. Currie rose—
      Mr. Meacher: The Social Security Advisory Committee had this to say:
      "We are …seriously concerned"—
      Mrs. Currie rose—
      Mr. Deputy Speaker: Order. I understand the hon. Lady's resentment, but she must not persist in seeking to intervene when the hon. Gentleman has made it clear that he will not give way.
      Mr. Meacher: The Social Security Advisory Committee, which advises the Government, had this to say:
      "We are …seriously concerned at the proposal to limit eligible rates to a level which is less than 100 per cent.—and possibly as low as 80 per cent. Our concern is twofold: First, and most important, we believe that the proposal could cause real hardship to many claimants, especially those on income support; and second, the proposal will cause local authorities extra administrative difficulties, and therefore higher administrative costs, at a time when the Government is committed to simplifying administration and controlling costs".
      The SSAC is right on that score, too.
      The amounts regained from claimants may cause hardhip—I believe that they will but they are puny in administrative terms, and local authorities regard the costs of collecting them as a nonsense, out of all proportion to
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      the amounts collected and directly contrary to considerations of efficiency in social security. That applies even more to the costs of pursuing arrears, leaving aside the effects on claimants of losing furniture to the bailiffs or appearing in court.
      7.45 pm
      A paper has been passed to me from the Department of the Environment, which is headed:
      "The community charge: Enforcement of payment."
      Although the paper is about collecting the community charge, it also applies to collecting arrears on the 20 per cent. rates payment. It talks of introducing "time to pay" orders and attachment of earnings to cover arrears, with direct payment arrangements by the DHSS where debtors are on benefit. That is particularly interesting. I quote from that paragraph:
      "Attachment of earnings would not cover those on benefit who had fallen into arrears. One possibility in these cases might be for local authorities to seek to have amounts deducted from benefit and paid direct to the local authority to cover community charge payments and to pay off arrears." That is an insight into the way in which the measure is likely to be administered between the two Departments.
      Mr. Andrew Bowden: I am grateful to the hon. Gentleman for giving way. Does he accept that, if I believed that tonight we were discussing the issue of pensioners on supplementary benefit and those on low incomes being charged 20 per cent. of their rates, I would not hesitate to vote against the Government? I would do so if that was the specific issue, but is it really the issue? Surely the issue is that that cannot be done under the Bill without further legislation. The amendment is preempting something that may never happen. Therefore, if at some future time legislation were brought before the House to charge supplementary pensioners and those on low incomes 20 per cent. of their rates without any compensating increase in their income, I would vote against that. But the hon. Gentleman has not made out the case for me to vote for the Lords amendment.
      Mr. Deputy Speaker: Order. Interventions should be brief.
      Mr. Meacher: I can be brief, as I see that time is going on. The hon. Gentleman raises the point that I am just coming to. If he really believes that the measure is not about cutting into the budgets of pensioners on supplementary benefit, among others, in a significant way, he is more credulous and gullible than I believe he is. It will have exactly that effect.
      I refer to the Government's arguments. The Secretary of State talked about accountability. The Government want the measure to affect voting intentions. The Widdicombe report found that rate rebate claimants did regard themselves as ratepayers. There is no need to punish them so that they can see themselves in that light. Moreover, the fact remains that claimants are innocent bystanders in the Government's dispute with local authorities over rate levels. Wherever one stands on the rates question, which goes broader than what we are discussing tonight, it cannot be right to deploy as a tactic the threat of hardship to claimants. They are simply being used as pawns or weapons in the Government's fight with local authorities. Surely that is wrong.
      The amendment from the other place is said to be defective. I do not believe that it is deficient; it is technically sound. It has certain incidental consequences.

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      While claimants at or below the income support level are protected, the Secretary of State could still, if he so wished, impose the reduction above that level, thereby introducing an anomaly into the scheme. But one presumes that such anomalies would not be knowingly included in regulations. Indeed, the Government spokesman in another place said that that could happen only if the Secretary of State so wished. So I do not regard that as a justification for altering the amendment.
      The Secretary of State said that certain other deductions are prevented, notably the non-dependant deductions. I believe that they are of dubious relevance anyway, because they apply only to housing benefit and not to mortgage interest tax relief. They also tend to discourage efficient use of housing stock. The Government could restore these non-dependant deductions if they wished without overturning the wider protection. That is the real point.
      If there are deficiencies in the way that the amendment is drawn as it was finally decided in another place, these deficiencies can be put right within the terms of reference of preserving 100 per cent. coverage of rates for those on supplementary benefit, including pensioners. That would be completely acceptable to the Opposition. However, it is not acceptable for the amendment to be altered in a way that ensures that the 20 per cent. shortfall will be reintroduced. That must harm pensioners and others on supplementary benefit.
      On those grounds, I strongly invite the House to reject this attempt to overturn the decision made in another place and to protect some of the poorest in our society.
      Mrs. Currie: I am very glad to have this opportunity to put one or two matters right. First, I would like to tell the hon. Member for Oldham, West (Mr. Meacher) that I believe that the personal circumstances of hon. Members are irrelevant. I consider his personal circumstances are irrelevant, even though he comes from a far wealthier background than I. I stress to the hon. Gentleman that I merely taught in a public school, whereas he went to one. If the hon. Gentleman's behaviour reflects the manners that he was taught in that public school, I wish that I had been there to teach him. He would not have come out of my classroom behaving and talking in the way he did.
      Last week the Labour party very nearly lost an election on the issue of the personal circumstances of their candidate. If the Labour party wishes to indulge in such remarks against the Conservative party, Labour Members had better watch their own backs. They might find that the electorate begins to listen and calculates very carefully in regard to the people whom the Labour party puts up for election.
      Mr. Stern: I congratulate my hon. Friend on her thoroughly well deserved comments against the hon. Member for Oldham, West (Mr. Meacher). Would my hon. Friend agree that the hon. Gentleman is smarting at the publicity in Private Eye today?
      Mrs. Currie: My hon. Friend the Member for Bristol, North-West (Mr. Stern) knows that, as soon as this debate has finished, I will go straight to the Library and find out what Private Eye says.
      I deplore the implication that I am not capable of asking the hon. Member for Oldham, West a courteous
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      question. The hon. Gentleman should know that I am never discourteous in the Chamber. Whatever I may do to the hon. Gentleman or to the hon. Member for Derby, South (Mrs. Beckett) outside the House, I try to observe the rules in this House and he should do that as well. However, I do not indulge in synthetic indignation like the hon. Gentleman.
      I would like to consider the amendment and the Government's view on this matter. The current system of local government finance is thoroughly unsatisfactory. There are wide differences in the rates that are charged and differences in the services available to people. There are also differences of geography and political philosophy. The position is simply not satisfactory.
      I am not sure that any proposed change in the system would satisfy all the critics. Rates are a tax and there is no such thing as a fair tax. The only nice tax is a nil tax. However, if we had nil taxes we would not have the services that we need.
      One of the methods to ensure that efficient services are provided is to use some form of pricing or charging system. In that context, the proposal that people should have to pay 20 per cent., or whatever figure is eventually written into the regulations, should be adopted.
      I do not believe that services should be free. When I was responsible for community services in Birmingham as chairman of the social services committee, I insisted that we charged for basic services like home helps, meals on wheels, night watchers and day care for children. I thought that it was right and proper that we should charge for these services. We did not charge the full economic value, but we charged a figure that was related to that. If the economic costs rose, we considered increasing the cost and in many cases we did that.
      Mr. Bill Michie: Can the hon. Lady tell us what happened if they could not pay? Did they receive no services?
      Mrs. Currie: We found that in the case of certain services like the night watch, people were willing to pay. They were prepared to put money on one side to pay for that service. The result of this charging was extremely beneficial to the people concerned. We had some 20 per cent. of the budget available and as a result of the charges we brought in about £10 million on a budget of some £40 million, which we could then spend completely within our own control. The same principle applies to rates. These should also be seen as a charge for local services.
      I have just ceased to be a councillor in Birmingham. The ward that I represented consisted of 55 per cent. council tenants and 45 per cent. other occupants.. Three quarters of the council tenants in the ward were on benefit of one kind or another. One does not need to be an arithmetical genius to work out that a significant minority of the people whom I represented were able substantially to ignore the rate proposed by the local authority. They did not need to pay attention to the results of their voting pattern. I am delighted to say that the people in my ward had incredible common sense. After I gave up my seat of 11 years, they elected another Tory. Indeed, they elected another woman, with a majority of 600. That was a bigger majority than I had 11 years ago on a bigger electorate and I believe that the ward is a darn sight more Tory now than it used to be.
      The hon. Member for Oldham, West spoke about taking money from fuel bills to pay the rates. If that is the

      419
      case, I am surprised that the Labour party ever backed the miners' strike. If Mr. Scargill had won, the costs of electricity would have shot through the roof. Instead of a cut of 3·5 per cent., electricity charges would have rocketed.
      I want to put a serious point to the hon. Member for Oldham, West which arises out of the point that he made about the week-by-week effect which these proposals would have on the finances of the people concerned. I served on the Select Committee on Social Services when the Committee expressed concern about the problems of collecting very small bills week by week. The hon. Gentleman said that the effect would be to create bills of the order of some £3 a week. That is not a tiny sum. Therefore, the problem of lots of little bills flying around would diminish.
      At the moment, I am dealing with a case in my constituency of a widow who was moved into a new bungalow. The bungalow has just been rated and her rates are £25 a week. Under the proposals we would be able to help her to the tune of £20 a week and she would have to find £5. That procedure is administratively straightforward and would deal with the Select Committee's objection about bills of that order. We have also found that the payment of small amounts for water rates, which are often paid weekly through the use of payment books, has proved to be no problem. The money is collected and the procedure is straightforward.
      For these reasons, I am glad to support the Government and I hope that we will see the changes introduced so that people will think about their rates when they go to the ballot box in future.
      Mr. Kirkwood: I would like to contribute a few brief remarks to the debate. I accept that there are problems about accountability because some local authorities have been acting in a profligate way. However, to achieve accountability by this route is completely unjustified. I cannot begin to support the proposal, whether it is hypothetical. pre-emptive, or whatever. It is right that the House should take and express forcibly a view about the proposal.
      If the Government are thinking about increasing and improving local accountability, there is clearly an alternative available. They can change the electoral system. If there were a system of multi-member constituencies with a single transferable vote, the local electorate would be given the power to choose—
      Mr. Deputy Speaker: Order. I do not think that this has very much to do with Lords amendment No. 40.
      Mr. Kirkwood: We are discussing local government accountability, Mr. Deputy Speaker. I was arguing that there are ways of improving and increasing the level of accountability. That was the only point that I was trying to make. I will pass from it as there is not enough time to develop it further.
      Mr. Deputy Speaker: Order. It is a matter not of time but of order. The hon. Gentleman would be out of order if he sought to develop that point further. I hope that he will not do that.
      Mr. Kirkwood: Thank you, Mr. Deputy Speaker.
      My other objection, which was mentioned by the hon. Member for Oldham, West (Mr. Meacher), relates to the important question of hardship. There is no way that the
      420
      proposal could be introduced without producing an unacceptable degree of hardship. I hope that when the House of Lords considers our scant debate this evening, it will continue to be resolute in its opposition which it voiced recently on the matter.
      I do not believe that this proposal will work in any shape or form. Interestingly, the Secretary of State said that consultations were not complete. Yet the Secretary of State for Scotland is working on a Bill to introduce these very proposals for Scotland next Session. I was interested in the comments of the hon. Member for Oldham, West on the enforcement provisions being considered by the Department of the Environment. I hope that the Secretary of State will bear in mind that the situation in Scotland is even more urgent.
      8 pm
      Given the way in which the Government introduced the proposal and the Lords' reaction to it, it is entirely right that the House should support the position taken by their Lordships, and I hope that they will continue to maintain that position when the Bill returns to the other House.
      Dame Jill Knight: It is an important democratic concept that there should be no taxation without representation. I believe that the converse is also true — that there should not be representation without taxation.
      Mr. Jeremy Corbyn: Property votes.
      Dame Jill Knight: One might use the word "reception" rather than representation. It is extremely important that people should understand that there is no Father Christmas and no golden tree which drops benefits upon the fortunate without payment. Under the present system, votes have been bought. That is immoral. I wonder what the Opposition would say if we bought votes by dishing out largesse as they do.
      Mr. Michie: You do it all the time.
      Dame Jill Knight: That is not true.
      Mr. Raynsford: What about mortgage tax relief?
      Dame Jill Knight: If the hon. Gentleman wishes to intervene, he is welcome to do so. I am not like the hon. Member for Oldham, West (Mr. Meacher).
      Mr. Raynsford: Would the hon. Lady deny the vote in parliamentary elections to people who do not pay tax because their incomes are too small?
      Dame Jill Knight: I did not say that. The hon. Gentleman should listen more carefully. His suggestion is ridiculous. I am talking about rates.
      Mr. Raynsford: The hon. Lady enunciated the principle that there should be no representation without taxation. I asked her to draw the analogy with elections to this House.
      Mr. Deputy Speaker: Order. We are dealing with the Social Security Bill. I hope that we can get back to it.
      Dame Jill Knight: I will gladly follow your guidance, Mr. Deputy Speaker.
      When things are made available totally free there is no understanding of their value. There must be a relationship of experience between the cost of meeting need and the need to meet the costs. Labour authorities lash out on endless benefits to people who never pay a penny. A girl

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      being helped by Labour-controlled Islington council spent five months in 18 London hotels at a cost to the ratepayers of more than £4,000. She was not just placed in a bed-and-breakfast hotel — dear me, no! The social workers decided that she must be in a large, impersonal, good hotel, in which she was allowed unlimited use of the telephone and had £7 per day pocket money. That girl paid not a penny towards the cost of what she received. I am sorry, but I believe that that is wrong.
      Mr. Corbyn: Will the hon. Member give way?
      Dame Jill Knight: I will give way, but only briefly, as others wish to speak.
      Mr. Corbyn: As the hon. Member has referred to my borough, she should allow me to comment. Islington borough council does not like putting people into bed-and-breakfast hotels. It chooses quality hotels where there is room for children to play and people can live decently. Islington and other authorities put people into bed-and-breakfast accommodation not because they wish to do so, but because of Government cuts in the housing programme and the Government's refusal to provide sufficient money to repair existing properties. None of that is the fault of the people in bed-and-breakfast accommodation.
      Dame Jill Knight: The hon. Gentleman does not listen. It was not bed-and-breakfast accommodation; it was expensive hotel accommodation.
      Mr. Corbyn: In which they were given bed and breakfast.
      Dame Jill Knight: No doubt that wounded the social workers all the way to the budget box because it was the ratepayers who had to pay for that largesse.
      Mr. Corbyn: What largesse?
      Dame Jill Knight: It was not bed-and-breakfast accommodation. A cost of £4,000 plus free phone calls and £7 per day pocket money is ridiculous. The hon. Gentleman should hang his head in shame at some of the things that Islington council has done. That girl was deliberately led to believe that money grew on trees. She did not have to pay and no one she knew had to pay. That is quite wrong.
      Mr. Winnick: Is this an Adjournment debate on Islington?
      Dame Jill Knight: There will be no understanding of the cost and no accountability unless the system is changed.
      Mr. Corbyn: Will the hon. Member give way?
      Dame Jill Knight: No. I have given way a great deal, and others wish to speak in the debate.
      The more that local authorities spend on goodies, the more the lucky recipients will wish to keep the reckless spenders in office. That is wrong, too, because someone has to foot the bill, and the more the expenditure increases the greater the burden on the pockets of those who have to pay. Labour Members do not seem to realise that many people who pay rates are often much worse off than the people receiving all these benefits and there is great resentment among them when cases such as I have
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      described are made public, because they have to foot the bill while the people who receive all the money pay nothing at all.
      Dr. Norman A. Godman: Will the hon. Lady give way?
      Dame Jill Knight: I have given way twice and that is enough in a short speech.
      The proposed cost for poorer households is very reasonable. We shall continue to pay 80 per cent. of the burden for those who find it hard to meet their rate bills. That is a very reasonable way to sort out the problem. Removing the assistance altogether would be another matter and I would vote against such a proposal, but we are talking about paying 80 per cent. out of the public purse. We are merely asking that people should understand that benefits cost money and that there is some relationship between what they receive and what they pay.
      The Labour authorities are the big spenders.
      Mr. Michie: They are the authorities that care.
      Mr. Corbyn: And their rate support grant has been cut.
      Dame Jill Knight: It is no use weeping crocodile tears. If Labour authorities were more careful in their spending, there would not be such hardship for ratepayers.
      Mr. Corbyn: How much has Westminster city council spent on decorating the pavements?
      Dame Jill Knight: The remedy lies in the authorities' own hands. For goodness sake, let us have some realism and understanding. I urge the House to support the amendment.
      Mr. RaynsfordFrom the comments of the hon. Member for Birmingham, Edgbaston (Dame J. Knight), one would not suppose that we were discussing a proposal to cut benefit to 5 million or more households with a considerable saving for the Government. The proposal is about cuts, and the House of Lords has rightly rejected it on a number of grounds.
      First, it is unfair because rate bills differ widely from one house and one area to another in a way that does not necessarily have anything to do with the political complexion of the local authority. Often it has more to do with the rateable value, when the property was last valued, the size of the property, and so on.
      Dr. Godman: A 20 per cent. contribution to rates would fall especially hard on Scottish ratepayers because of the revaluation that the Government made in Scotland but dare not repeat south of the border, for obvious reasons.
      Mr. Raynsford: I am grateful to my hon. Friend. He highlights yet another of the variations in rate bills which mean that the impact of the Government's proposal would cause greater hardship to people who, for whatever reason, are paying a high proportion of their income in rates.
      The proposal would be administratively inefficient. In many areas, it will cost local authorities more to collect the money than they will be able to bring in. I remember the Minister for Social Security arguing in the House a few weeks ago about the proposal to cut housing benefit for students and saying that one of the reasons for the cut was that the administrative cost of paying out the benefit was so high as to make it not worth while. The Government are here proposing a system that would incur quite unnecessary but considerable extra administrative costs.

      423
      The proposal will cause hardship and suffering and a mounting burden of debt among people who are already burdened with debt. The Minister's arguments are threadbare. If he claims that there is no proposal to take 20 per cent. of the rates, why did he and his colleagues talk about it incessantly during the consultation period?
      It being two hours after the commencement of the proceedings on the Motion relating to the Social Security Bill (Allocation of Time), MR. DEPUTY SPEAKER proceeded, pursuant to the Order this day, to put forthwith the Question already proposed from the Chair, That this House doth disagree with the Lords in the said amendment:—
      The House divided: Ayes 238, Noes 175.

      Division No. 276]

      [8.12 pm

      AYES

      Adley, Robert

      Crouch, David

      Aitken, Jonathan

      Currie, Mrs Edwina

      Alexander, Richard

      Dorrell, Stephen

      Alison, Rt Hon Michael

      Douglas-Hamilton, Lord J.

      Amess, David

      Dover, Den

      Ancram, Michael

      Dunn, Robert

      Arnold, Tom

      Evennett, David

      Ashby, David

      Eyre, Sir Reginald

      Atkins, Rt Hon Sir H.

      Fairbairn, Nicholas

      Atkins, Robert (South Ribble)

      Farr, Sir John

      Atkinson, David (B'm'th E)

      Favell, Anthony

      Baker, Nicholas (Dorset N)

      Finsberg, Sir Geoffrey

      Baldry, Tony

      Fletcher, Alexander

      Batiste, Spencer

      Fookes, Miss Janet

      Beaumont-Dark, Anthony

      Forman, Nigel

      Bellingham, Henry

      Forsyth, Michael (Stirling)

      Bendall, Vivian

      Forth, Eric

      Benyon, William

      Fowler, Rt Hon Norman

      Best, Keith

      Franks, Cecil

      Bevan, David Gilroy

      Fraser, Peter (Angus East)

      Biffen, Rt Hon John

      Freeman, Roger

      Biggs-Davison, Sir John

      Fry, Peter

      Blackburn, John

      Gale, Roger

      Blaker, Rt Hon Sir Peter

      Galley, Roy

      Bonsor, Sir Nicholas

      Gardiner, George (Reigate)

      Boscawen, Hon Robert

      Gardner, Sir Edward (Fylde)

      Bottomley, Mrs Virginia

      Garel-Jones, Tristan

      Bowden, Gerald (Dulwich)

      Glyn, Dr Alan

      Boyson, Dr Rhodes

      Goodhart, Sir Philip

      Braine, Rt Hon Sir Bernard

      Goodlad, Alastair

      Bright, Graham

      Gow, Ian

      Brinton, Tim

      Gower, Sir Raymond

      Brooke, Hon Peter

      Grant, Sir Anthony

      Brown, M. (Brigg & Cl'thpes)

      Greenway, Harry

      Bryan, Sir Paul

      Gregory, Conal

      Buchanan-Smith, Rt Hon A.

      Griffiths, Peter (Portsm'th N)

      Buck, Sir Antony

      Grylls, Michael

      Budgen, Nick

      Gummer, Rt Hon John S

      Bulmer, Esmond

      Hamilton, Neil (Tatton)

      Burt, Alistair

      Hampson, Dr Keith

      Butcher, John

      Hannam, John

      Butler, Rt Hon Sir Adam

      Hargreaves, Kenneth

      Butterfill, John

      Harris, David

      Carlisle, John (Luton N)

      Haselhurst, Alan

      Carlisle, Rt Hon M. (W'ton S)

      Havers, Rt Hon Sir Michael

      Carttiss, Michael

      Hawkins, C. (High Peak)

      Cash, William

      Hawkins, Sir Paul (N'folk SW)

      Chalker, Mrs Lynda

      Hawksley, Warren

      Chapman, Sydney

      Hayes, J.

      Chope, Christopher

      Hayhoe, Rt Hon Barney

      Churchill, W. S.

      Hayward, Robert

      Clark, Dr Michael (Rochford)

      Heathcoat-Amory, David

      Clark, Sir W. (Croydon S)

      Heddle, John

      Clarke, Rt Hon K. (Rushcliffe)

      Hickmet, Richard

      Clegg, Sir Walter

      Higgins, Rt Hon Terence L.

      Colvin, Michael

      Hill, James

      Coombs, Simon

      Hind, Kenneth

      Cope, John

      Hirst, Michael

      Corrie, John

      Hogg, Hon Douglas (Gr'th'm)

      Couchman, James

      Holland, Sir Philip (Gedling)

      Critchley, Julian

      Hordern, Sir Peter

      424

      Howard, Michael

      Nicholls, Patrick

      Howarth, Alan (Stratf'd-on-A)

      Onslow, Cranley

      Howarth, Gerald (Cannock)

      Oppenheim, Phillip

      Howell, Ralph (Norfolk, N)

      Oppenheim, Rt Hon Mrs S.

      Jenkin, Rt Hon Patrick

      Osborn, Sir John

      Jessel, Toby

      Ottaway, Richard

      Johnson Smith, Sir Geoffrey

      Page, Sir John (Harrow W)

      Jones, Gwilym (Cardiff N)

      Page, Richard (Herts SW)

      Jones, Robert (Herts W)

      Parkinson, Rt Hon Cecil

      Jopling, Rt Hon Michael

      Patten, Christopher (Bath)

      Kellett-Bowman, Mrs Elaine

      Patten, J. (Oxf W & Abgdn)

      Kershaw, Sir Anthony

      Pattie, Geoffrey

      Key, Robert

      Pawsey, James

      King, Roger (B'ham N'field)

      Percival, Rt Hon Sir Ian

      King, Rt Hon Tom

      Pollock, Alexander

      Knight, Greg (Derby N)

      Porter, Barry

      Knight, Dame Jill (Edgbaston)

      Portillo, Michael

      Knowles, Michael

      Powley, John

      Lang, Ian

      Prentice, Rt Hon Reg

      Lawler, Geoffrey

      Price, Sir David

      Lawrence, Ivan

      Proctor, K. Harvey

      Lee, John (Pendle)

      Raffan, Keith

      Leigh, Edward (Gainsbor'gh)

      Rhodes James, Robert

      Lennox-Boyd, Hon Mark

      Ridley, Rt Hon Nicholas

      Lewis, Sir Kenneth (Stamf'd)

      Ridsdale, Sir Julian

      Lightbown, David

      Rifkind, Rt Hon Malcolm

      Lilley, Peter

      Roe, Mrs Marion

      Lloyd, Peter (Fareham)

      Rossi, Sir Hugh

      Lord, Michael

      Rost, Peter

      Luce, Rt Hon Richard

      Sainsbury, Hon Timothy

      Lyell, Nicholas

      Sims, Roger

      McCurley, Mrs Anna

      Skeet, Sir Trevor

      Macfarlane, Neil

      Smith, Sir Dudley (Warwick)

      MacKay, Andrew (Berkshire)

      Smith, Tim (Beaconsfield)

      MacKay, John (Argyll & Bute)

      Soames, Hon Nicholas

      Maclean, David John

      Speller, Tony

      McLoughlin, Patrick

      Stern, Michael

      McNair-Wilson, M. (N'bury)

      Stewart, Andrew (Sherwood)

      Madel, David

      Taylor, John (Solihull)

      Major, John

      Thatcher, Rt Hon Mrs M.

      Malins, Humfrey

      Thompson, Donald (Calder V)

      Malone, Gerald

      Thompson, Patrick (N'ich N)

      Maples, John

      Thorne, Neil (Ilford S)

      Marland, Paul

      Thurnham, Peter

      Marshall, Michael (Arundel)

      Townsend, Cyril D. (B'heath)

      Mates, Michael

      Viggers, Peter

      Mather, Carol

      Wakeham, Rt Hon John

      Maude, Hon Francis

      Walker, Bill (T'side N)

      Mawhinney, Dr Brian

      Wall, Sir Patrick

      Mayhew, Sir Patrick

      Wardle, C. (Bexhill)

      Merchant, Piers

      Watts, John

      Miller, Hal (B'grove)

      Wells, Sir John (Maidstone)

      Miscampbell, Norman

      Wheeler, John

      Moate, Roger

      Wiggin, Jerry

      Montgomery, Sir Fergus

      Wood, Timothy

      Moynihan, Hon C.

      Young, Sir George (Acton)

      Murphy, Christopher

      Neale, Gerrard

      Tellers for the Ayes:

      Needham, Richard

      Mr. Tony Durant and

      Newton, Tony

      Mr. Michael Neubert.

      NOES

      Alton, David

      Boyes, Roland

      Anderson, Donald

      Brown, Gordon (D'f'mline E)

      Archer, Rt Hon Peter

      Brown, N. (N'c'tle-u-Tyne E)

      Ashdown, Paddy

      Buchan, Norman

      Ashley, Rt Hon Jack

      Caborn, Richard

      Ashton, Joe

      Callaghan, Jim (Heyw'd & M)

      Atkinson, N. (Tottenham)

      Campbell-Savours, Dale

      Banks, Tony (Newham NW)

      Carter-Jones, Lewis

      Barnett, Guy

      Cartwright, John

      Barron, Kevin

      Clark, Dr David (S Shields)

      Beckett, Mrs Margaret

      Clarke, Thomas

      Beith, A. J.

      Clay, Robert

      Bell, Stuart

      Clelland, David Gordon

      Benn, Rt Hon Tony

      Clwyd, Mrs Ann

      Bennett, A. (Dent'n & Red'sh)

      Cohen, Harry

      Bermingham, Gerald

      Coleman, Donald

      Blair, Anthony

      Cook, Robin F. (Livingston)

      Boothroyd, Miss Betty

      Corbett, Robin

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      Corbyn, Jeremy

      Madden, Max

      Craigen, J. M.

      Marek, Dr John

      Crowther, Stan

      Marshall, David (Shettleston)

      Cunliffe, Lawrence

      Martin, Michael

      Dalyell, Tam

      Maynard, Miss Joan

      Davies, Rt Hon Denzil (L'lli)

      Meacher, Michael

      Davis, Terry (B'ham, H'ge H'l)

      Meadowcroft, Michael

      Deakins, Eric

      Michie, William

      Dewar, Donald

      Mikardo, Ian

      Dixon, Donald

      Millan, Rt Hon Bruce

      Dobson, Frank

      Morris, Rt Hon A. (W'shawe)

      Dormand, Jack

      Morris, Rt Hon J. (Aberavon)

      Dubs, Alfred

      Nellist, David

      Duffy, A. E. P.

      Oakes, Rt Hon Gordon

      Dunwoody, Hon Mrs G.

      O'Brien, William

      Eadie, Alex

      O'Neill, Martin

      Eastham, Ken

      Orme, Rt Hon Stanley

      Edwards, Bob (W'h'mpt'n SE)

      Owen, Rt Hon Dr David

      Evans, John (St. Helens N)

      Park, George

      Ewing, Harry

      Patchett, Terry

      Fatchett, Derek

      Pavitt, Laurie

      Field, Frank (Birkenhead)

      Pendry, Tom

      Fields, T. (L'pool Broad Gn)

      Pike, Peter

      Fisher, Mark

      Powell, Raymond (Ogmore)

      Flannery, Martin

      Radice, Giles

      Foot, Rt Hon Michael

      Randall, Stuart

      Forrester, John

      Raynsford, Nick

      Foster, Derek

      Redmond, Martin

      Freeson, Rt Hon Reginald

      Richardson, Ms Jo

      Garrett, W. E.

      Roberts, Ernest (Hackney N)

      Gilbert, Rt Hon Dr John

      Robinson, G. (Coventry NW)

      Godman, Dr Norman

      Rogers, Allan

      Golding, Mrs Llin

      Rooker, J. W.

      Gould, Bryan

      Ross, Ernest (Dundee W)

      Gourlay, Harry

      Ross, Stephen (Isle of Wight)

      Hamilton, W. W. (Fife Central)

      Rowlands, Ted

      Hancock, Michael

      Sedgemore, Brian

      Hardy, Peter

      Shore, Rt Hon Peter

      Harman, Ms Harriet

      Short, Ms Clare (Ladywood)

      Harrison, Rt Hon Walter

      Short, Mrs R.(W'hampt'n NE)

      Hart, Rt Hon Dame Judith

      Silkin, Rt Hon J.

      Hattersley, Rt Hon Roy

      Skinner, Dennis

      Heffer, Eric S.

      Smith, Rt Hon J. (M'ds E)

      Hogg, N. (C'nauld & Kilsyth)

      Snape, Peter

      Holland, Stuart (Vauxhall)

      Soley, Clive

      Home Robertson, John

      Spearing, Nigel

      Hoyle, Douglas

      Stewart, Rt Hon D. (W Isles)

      Hughes, Dr Mark (Durham)

      Stott, Roger

      Hughes, Robert (Aberdeen N)

      Strang, Gavin

      Hughes, Roy (Newport East)

      Straw, Jack

      Hughes, Simon (Southwark)

      Thomas, Dafydd (Merioneth)

      Janner, Hon Greville

      Thomas, Dr R. (Carmarthen)

      John, Brynmor

      Thompson, J. (Wansbeck)

      Johnston, Sir Russell

      Thorne, Stan (Preston)

      Jones, Barry (Alyn & Deeside)

      Tinn, James

      Kaufman, Rt Hon Gerald

      Torney, Tom

      Kirkwood, Archy

      Wardell, Gareth (Gower)

      Lambie, David

      Wareing, Robert

      Leadbitter, Ted

      Weetch, Ken

      Leighton, Ronald

      Welsh, Michael

      Lewis, Terence (Worsley)

      Wigley, Dafydd

      Livsey, Richard

      Williams, Rt Hon A.

      Lloyd, Tony (Stretford)

      Wilson, Gordon

      Lofthouse, Geoffrey

      Winnick, David

      Loyden, Edward

      Woodall, Alec

      McDonald, Dr Oonagh

      Wrigglesworth, Ian

      McKay, Allen (Penistone)

      Young, David (Bolton SE)

      McKelvey, William

      MacKenzie, Rt Hon Gregor

      Tellers for the Noes:

      McTaggart, Robert

      Mr. Ron Davies and

      McWilliam, John

      Mr. James Hamilton.

      Question accordingly agreed to.
      Lords amendment accordingly disagreed to.
      Subsequent Lords amendments agreed to, some Special Entry.

    Clause 32

      THE SOCIAL FUND AND SOCIAL FUND OFFICERS
      Lords amendment: No. 52, in page 41, line 23, leave out "directions given" and insert "regulations made".
      Mr. Newton: I beg to move, That this House doth disagree with the Lords in the said amendment.
      Mr. Deputy Speaker: With this it will be convenient to take the following Lords amendments: No. 53, in clause 33, page 42, line 16, leave out direct" and insert "determine".
      No. 54, in page 42, line 18, leave out "direct" and insert "determine".
      No. 55, in page 42, line 22, leave out "directs" and insert "determines".
      No. 56, in page 42, line 34, leave out from "person" to end of line 36 and insert.
      "who is liable to maintain the person by or on behalf of whom the application for the award was made or any person in relation to whose needs the award was made.
      (8A) Subsections (3) to (6) of section 25 above have effect for the purposes of subsection (8)(c) above as they have effect for the purposes of sections 23 to 25 above."
      No. 57, in page 43, line 9, leave out "general directions issued" and insert "regulations made".
      No. 58, in page 43, line 13, at end insert
      "(11A) A person applying for a social fund payment may appeal to a social security appeal tribunal constituted in accordance with section 97(2) to (2E) of the Social Security Act 1975 against any determination of a social fund officer with respect to the application.
      (11B) On an appeal under subsection (11A) above the appeal tribunal may—

      (a) confirm the determination appealed against;

      (b) substitute for that determination any other determination which a social fund officer could have made; or

      (c) if the appeal is against a determination under subsection (3) or (4) above, set aside that determination."

      Government motions to disagree with Lords amendments Nos. 57 and 58.
      Government amendments in lieu of Lords amendment No. 58: (a), new clause —The social fund Commissioner—
      'A.—(1) There shall be an officer to be known as the social fund Commissioner (in this section referred to as "the Commissioner.").
      (2) The Commissioner shall be appointed by the Secretary of State.
      (3) The Commissioner—

      (a) shall appoint such social fund inspectors;

      (b) may appoint such officers and staff for himself and for social fund inspectors,

      as he thinks tit, but with the consent of the Secretary of State and the Treasury as to numbers.
      (4) Apppointments under subsection (3) above shall he made from persons made available to the Commissioner by the Secretary of State.
      (5) It shall be the duty of the Commissioner—

      (a) to monitor the quality of decisions of social fund inspectors and give them such advice and assistance as he thinks fit to improve the standard of their decisions;

      (b) to arrange such training of social fund inspectors as he considers appropriate; and

      (c) to carry out such other functions in connection with the work of social fund inspectors as the Secretary of State may direct.

      (6) The Commissioner shall report annually in writing to the Secretary of State on the standards of reviews by social fund inspectors and the Secretary of State shall publish his report.'.

      427
      (b), in page 41, line 22, leave out from 'fund' to 'shall' in line 28 and insert—
      '(1A) Payments may be made out of that fund, in accordance with this Part of this Act—

      (a) to meet, in prescribed circumstances, maternity expenses and funeral expenses; and

      (b) to meet other needs in accordance with directions given or guidance issued by the Secretary of State.

      (1B) Payments under this section.'.
      (c), in page 41, line 28, at end insert—
      (1C) Social fund payments to meet funeral expenses may in all cases he recovered, as if they were funeral expenses, out of the estate of the deceased, and (subject to section 51 below) by no other means.'.
      (d), in page 41, line 35, leave out subsection (4).
      (e), in page 42, line 6, at end insert
      'such as are mentioned in subsection (1A)(b) above; and the Secretary of State may allocate an amount, or allocate different amounts for different purposes, for such payments by a particular social fund officer or group of officers in a financial year.'.
      (f), in page 42, line 10, after 'payment', insert
      ', such as is mentioned in section 32(1A)(b) above'.
      (g), in page 42, line 18, leave out
      'under section 32(1)(b) or (c) above'.
      (h), in page 42, line 22, leave out subsection (6).
      (i), in page 42, line 26, leave out
      'made under section 32(1)(c) above'.
      (j), in page 42, line 28, leave out
      `made under section 32(1)(c) above'.
      (k), in page 43, line 7, leave out '(4)' and insert '(6)'.
      (l), in page 43, line 36, leave out from 'inspector' to end of line 37 and insert
      'appointed by the social fund Commissioner under section [The social fund Commissioner] below'.
      (m), in page 44, line 2, at end insert—
      '(4A) A social fund inspector may review a determination under subsection (3) above made by himself or some other social fund inspector.'.
      (n), in page 55, line 8, at end insert
      'and any social fund payments such as are mentioned in section 32(1A)(a) above'.
      (o), in page 56, line 9, at end insert
      'and any social fund payments such as are mentioned in section 32(1A)(a) above'.
      (p), in page 59, line 16, at end insert
      'and any social fund payments such as are mentioned in section 32( 1A)(a) above'.
      Mr. Newton: On Monday I set out in my statement to the House the view that had led to the social fund. Essentially, it is that the present single payment system is unsatisfactory and is becoming increasingly unworkable. That arises in part from a failure to distinguish sufficiently clearly between the two distinct roles of providing a basic weekly income and of meeting special emergency or one-off needs. The proposals in the Bill rest on that analysis, first, by creating a simpler, clearer structure for weekly income support and, secondly, by establishing a separate mechanism specifically designed to enable help with genuine, special, occasional needs to be given in a more practical, manageable, flexible way.
      The first objective is unquestionably best met by precisely defined, closely regulated entitlement, with an appeal mechanism of the present type. That is a formal judicial structure which determines whether the law has been correctly applied in a particular case through adjudicating officers and appeal tribunals which we have improved and strengthened for that purpose.
      The second objective is generally best met by a more discretionary approach operated on the basis of directions and guidelines rather than regulations so as to allow the
      428
      application of a broader judgment to all the varied circumstances of individual cases. Just as we see this as a separate and distinct task, so we believe it requires its separate and distinct process of decision making through social fund officers and a different system of review.
      Mr. Keith Best: My hon. Friend will appreciate that for a system to appear to be fair there must be a degree of independence so that there is not automatically a bias towards either an applicant or the social fund. Justice must not only be done but must he seen to be done. Can he assure the House that an appellant can present his or her case at all levels on the procedure that he is proposing?
      Mr. Newton: I shall come to the role that we see for the social fund commissioner, whom we have proposed in the amendment.
      To ask the existing tribunals to perform this review role would be wrong from every point of view. If, in reviewing social fund decisions, they were to be subject to the directions and guidelines of the Secretary of State, the independence of their more clearly judicial role in applying regulations laid down by Parliament would be, and certainly could be, undermined. If they were not, they would in effect be acting as a second tier of discretionary decision making within no real framework. Either way, the inevitable tendency would be to build a body of case law which would risk recreating the very problems which have made the present system of regulated single payments so unsatisfactory.
      As the House knows, our original proposals envisaged the first stage of review by the social fund officer, as indeed would be the case now with adjudicating officers. Beyond that we propose to review at a higher level within the normal management chain, with the applicant being given a further opportunity to put his case. In Committee we accepted that that alone might not be, and certainly might not be seen to be, sufficiently distanced from the original decision to be accepted as either fair or impartial.
      Therefore, on Report we introduced proposals for a separate body of social fund inspectors, operating not only outside the local DHSS office, but outside and independent from the normal DHSS local office network and management. The inspector's role would be to establish whether the social fund officer had taken his decision properly — for example, whether it had been based on the proper evidence and in the light of all the facts. He would have power to confirm the determination made by a social fund officer, to make any determination which a social fund officer could have made—in other words, to substitute his determination—or to refer the matter back to the social fund officer for determination.
      In debate in the other place and in the amendments that have come to this House as a result, the argument has been carried forward in two closely linked ways. First, directions, not guidelines, would be turned into regulations. Secondly, decisions, whether under the regulations as proposed or the guidelines, would be subject to appeal to the social security appeal tribunals.
      For the reasons I have sought to give, we do not feel able to ask the House to accept the amendments. We wish to make a further clear and significant response to the concerns that underlie them. We seek to do that in three ways — partly through the amendments and partly through an earlier amendment.

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      The first is the community care amendment — the severe disablement premium—that we discussed earlier. As I said in that debate, we had intended that those needs should be met on a discretionary basis through the social fund. By creating the new severe disablement premium, which is decided on by adjudication officers and appeal tribunals in the normal way and is a part of the regulated entitlement of the income support scheme, we have responded to some of the concern expressed on that aspect of the social fund.
      8.30 pm
      Secondly, we have concluded that the proposed maternity and funeral payments should be put on a regulated basis and that decisions should be taken by normal adjudication officers, subject to the normal appeal machinery. In the case of community care reflected in the severe disablement premium and maternity and funeral payments, which are undoubtedly sensitive areas about which many hon. Members are concerned, we propose to put the entitlement into regulations. They will be decided by adjudication officers, and will be subject to the normal process of appeal.
      Thirdly, for those decisions that would remain subject to the discretionary process on the basis of directions and guidelines, we propose an amendment to entrench the independence of the social fund inspectors in the role that they are assigned by the Bill.
      Dr. Godman: Will the inspectorate have a career structure of its own? Will the inspectorate be independent of the general career structure of the Department? Will the inspectors be of a more senior rank than those whose decisions they may overturn?
      Mr. Newton: As to those questions—particularly the last one—we should wish to discuss the matter with the social fund commissioner after his appointment. I hope that the hon. Gentleman will allow me to proceed.
      We propose to establish the post of a social fund commissioner building on the well-established pattern—I think that it is widely accepted as valid—represented by the existing chief adjudication officer regarding the regulated part of the system.
      The chief adjudication officer has his own specific position in the legislation and is statutorily independent of the Secretary of State. Our amendment proposes a social fund commissioner, similarly with his own position written into the legislation, and statutorily independent of the Secretary of State in his work—in this case, the work is to appoint the inspectors and their staff, to ensure that they are given appropriate training, and to monitor the quality of their decisions.
      I shall make a further important point, because it completes, in some respects, the parallel with the chief adjudication officer. It will be within the memory of several hon. Members—certainly the hon. Members for Birkenhead (Mr. Field) and for Roxburgh and Berwickshire (Mr. Kirkwood)—that we responded to argument on earlier legislation—I think that it was the Health and Social Services and Social Security Adjudications Act; commonly called the 1983 HASSASSA Act—by requiring the chief adjudication officer to produce an annual report to the Secretary of State which the Secretary of State should have a duty to
      430
      publish. We propose to match that requirement on the chief adjudication officer and the Secretary of State with a parallel requirement regarding the proposed social fund commissioner.
      Mr. Andrew Bowden: My hon. Friend has talked about the duties of the commissioner for monitoring the quality of decisions. Will the commissioner, if he thinks fit, be able to consider individual cases and make decisions?
      Mr. Newton: The social fund commissioner should satisfy himself that the standards maintained by the inspectors are proper and fair, and that they operate in a reasonable manner. He will be concerned with the quality control of those working the system, and not with taking separate decisions himself.
      Mr. Max Madden: Can the Minister say what the net costs of the appeal arrangements are expected to be? Will new staff be appointed, or will the appointments be made from existing staff? Will the appeal arrangements be on a district or a regional basis?
      Mr. Newton: The latter part of the hon. Gentleman's question would need further discussion with the commissioner and further development as we work out the proposals. We have brought forward proposals in response to quite legitimate expressions of opinion by Members of both Houses of Parliament. It is clear, from the amendment, that the social fund inspectors should be appointed from staff made available by the Secretary of State. Their responsibility as social fund inspectors would be to the social fund commissioner, in the same way as is familiar in the adjudicated side of the system.
      The social fund is not simply an attempt to return single payments to discretionary form. Hon. Members opposite have found that difficult to accept. It is designed as, and we hope it will be, a new approach to what has been a difficult and intractable problem under successive Governments, and one more appropriate than that which we have at present to the meeting of genuine special needs. It requires a system of review, specifically related to the new approach. In those areas that lend themselves to regulated entitlement, such as maternity and funeral payments, as well as community care, we have met the needs of the other place and the consequent case for the normal system of adjudication and appeal.
      In those areas where discretion remains, and where we believe that it must remain if we are to have the flexibility to look at individual special circumstances as they should be considered, we have responded by establishing a clear new safeguard for the independence and integrity of the appropriate process of review. Taken together, I believe that those steps constitute, as with the earlier amendment on community care, a real and significant move to meet the wishes that were expressed in another place.
      Mrs. Beckett: The Secretary of State said that we had enjoyed listening to the discussions on the Bill for about 200 hours. It seems to me that during most of that time we have listened to Government Ministers saying, "We are thinking about that, we are considering that, we are discussing that with people, and we have not made up our minds."
      In many ways, the speech by the Minister for Social Security was quite remarkable. Two thirds of the way through he said that it was not acceptable to the Government to include in the Bill the amendments passed

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      in another place because it would be wrong for appeals to go to tribunals and for them to be decided as a result of directions by the Secretary of State. He said that it would make the system unworkable if tribunals acted on directions rather than on regulations. Later, he said that the amendments proposed that the tribunals should act on regulations and not on directions. He then applied the argument for the first case to the second, to which it is clearly not applicable.
      There is nothing wrong with the amendments; it is just that the Government do not like them. It is clear that the Government's alternative proposals are not exactly stringent in their application. I was fascinated when, in answer to my hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman), the Minister could not tell us not only whether there would be a separate career structure for the inspectors, but whether they would be of senior rank to those whose decisions they were reviewing, which may cast some light on the authority that he expects them to exercise.
      There are problems with some of the Government's amendments, especially amendment (c), which goes further than the original Bill and which we find unacceptable. It is right for me to deal with the principal problem to which the amendments are directed — the Government's proposals to withdraw, through the Bill, rights of independent appeal that have existed for 50 years. The Government's reason for doing so is contemptible. They realise only too well that if applications are to be made for items that cannot be paid for out of weekly benefit, and those applications are to be judged on their merit, as they must be in an independent appeal, the cash limits which the Government ultimately intend to introduce will not hold. I say that with confidence, because we shall later discuss the paving proposals for the social fund by which the Government are clearly halving the already inadequate assistance now given. The scheme cannot be so severely restricted if need is to be properly weighed.
      For the Government to dismiss cursorily a half-century-long civil right in their search for economy is widely considered to be a constitutional outrage. That view was clearly held by those in another place—many of them with a wealth of experience in these matters—and obviously led to the amendments that we are debating. That was also the strongly held view of the Council on Tribunals, a body which, so far as I am aware, has never before ventured into the area of political controversy, but which was so horrified by the Government's proposals that it denounced them in uncompromising terms and expressed its "grave concern" in a special report addressed to this subject alone.
      It is widely accepted that the quality of decision-making is affected by the existence of an independent system of appeal. No one believes that it is an accident that, in so many cases in which an appeal is sought, and the case papers are therefore re-examined, decisions are overturned on review alone, without the full process of appeal. That happened in about 19,000 cases in 1984. An additional 8,000 decisions in that year where review had confirmed the original decision were overturned on appeal. That means that at least 8,000, and possibly up to 27,000, people received payments to which they were entitled in law, but which they received only because of the existence of an independent appeal system.
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      The first annual report of the Chief Adjudication Officer, as the head of the service in which these decisions are made, stated that DHSS officers make decisions
      "on scanty evidence on the assumption that claimants will complain or appeal"
      and that
      "the standard of adjudication cannot objectively be regarded as satisfactory".
      The Council on Tribunals points out:
      "such a high proportion of incorrect decisions is most unlikely to be improved, even using specially trained officers to the extent where the need for independent tribunals became questionable".
      The Government suggest that they have made concessions, but that is less than accurate. They have not made concessions in the case for independent appeal, except in respect of maternity and funeral payments. The Government have tried to find cosmetic cover to make an internal system of appeal sound independent. They refer to inspectors and to a commissioner, but a brief glance at Government amendment (a) blows the gaff and certainly calls into question the Minister's remarks.
      The Minister referred to the commissioner as "statutorily independent", but proposed subsection (4) in Government amendment (a) states:
      "appointments under subsection (3) above shall be made from persons made available to the Commissioner by the Secretary of State."
      Some independence!
      The Minister suggested that the commissioner would be concerned only with "quality control" of the system. I have no idea what he meant by that, and I doubt that he has. The inspectors and the commissioner are all to be responsible to, and in practice chosen by, the Secretary of State. They will not be, and will be seen not to be, independent. There will rightly be no confidence that each case will be judged on its merits, because cases will not be considered solely on their merits. The Government's amendments continue to fail the common test of justice. This injustice will be inflicted on those described by the Government's own Social Security Advisory Committee as "the most vulnerable" people in our society.
      The Opposition are, of course, glad that the maternity and funeral payments will be judged in an independent procedure, but this highlights the truth of our argument. The Government have always stated that these payments would not be subject to cash limits and so, on these measures, fair dealing could be allowed.
      There is nothing defective about the amendments. They seek merely to remedy an injustice which the Government seek to impose. The Opposition agree wholeheartedly with the Lords amendments. We hope that the other place will stand by its guns and see through the device of the Government's amendments as clearly as will the unfortunate claimants who otherwise will be subjected to these procedures.
      Mr. Andrew Bowden: I shall detain the House only briefly to make a few comments on the proposed new clause. I am deeply disappointed with it. Unfortunately, the grand title of "social fund Commissioner" is far too grand for what the commissioner has to do and for his powers. I shall consider the proposed new clause subsection by subsection.
      It is, of course, reasonable that the commissioner
      "shall be appointed by the Secretary of State",

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      but after that, in his activities, responsibilities and powers, he is bound hand and foot by the Secretary of State. Subsection (3) states that the commissioner

      "(a) shall appoint such social fund inspectors;

      (b) may appoint such officers and staff for himself and for social fund inspectors, as he thinks fit, but with the consent of the Secretary of State and the Treasury".

      We might just as well say that the commissioner can appoint anyone he likes, so long as that person is on the list supplied by the Secretary of State.
      8.45 pm
      What are the commissioner's duties? The great disappointment is that the commissioner, so far as I understand from the reply by my hon. Friend, will not have the power to look at individual cases. He will
      "monitor the quality of decisions".
      I do not understand what that means. Will the commissioner look collectively at all the decisions made in a particular matter by the social fund inspectors and say that they were all wrong, or all right, or that some were right and some were wrong? This is a cosmetic exercise.
      Subsection (6) states that the commissioner
      "shall report annually in writing to the Secretary of State"—
      that is good—
      "and the Secretary of State shall publish his report."
      I am deeply disappointed that the commissioner has no real powers, that he is not an ombudsman and that there is no independent tribunal. In the context of the way in which our social security system has worked for a long time, it is sad that a degree of independence has been removed.
      Mr. Kirkwood: I strongly subscribe to the arguments of the hon. Member for Brighton, Kemptown (Mr. Bowden). The scheme has been ill-thought-out and will eventually be shown to be so. The proposals as they stand show no real element of independence. The Minister for Social Security knows that he is in difficulty with the other place. This is an attempt to get him off the hook. I hope that, even if this measure is passed with the use of the Whips here, the other place will not accept it.
      The proposed new clause refers to a "social fund Commissioner". That is an especially cruel use of the word "commissioner". The proposal tries to invest this new official creature with the considerable authority and independence of the commissioners in the existing independent appeal system. That amounts to political sleight of hand. The two are in no way analogous.
      The real independence of the proposed new commissioner is highly questionable. I do not believe that they will really have the power to overturn decisions taken by inspectors. At the end of the day, someone has to take the decision. There is a power to review. The commissioner may say that he wants to change a decision. The social fund inspector may say, "That is all very well, but I think that my decision is right." What will then happen? Obviously, there is no change in the application of the guidelines, which means, indirectly, no change in the cash limits faced by the social fund inspectors and the social fund commissioner. That is not acceptable.
      The fact that the review will be taken in-house means that the social fund inspectors will have less stringent and effective powers of oversight. The present panoply of
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      genuinely independent appeals will be missing in the future. Do claimants have a right of audience before the social fund inspector? If not, the whole system is vitiated. That aspect must be considered.
      As I understand it, the social fund inspector will be based at a regional office. My regional office is 55 miles away from the local office. If people are to be sent traipsing from Galashiels to Edinburgh for a right of appeal, that will be an entirely regressive and detrimental move.
      The Government's amendment talks about publishing a report. I welcome that as far as it goes. Of course, those reports will not be debatable in Parliament. They will be published and go into the ether. It may make interesting reading to see how the reports are handled, but they will not be debated in the House. We should look at that aspect carefully.
      This whole matter should be taken essentially on the basis of a question of justice. The Council on Tribunals was right. Although there are some welcome improvements, which the Minister explained, they do not go far enough for me to recommend my right hon. and hon. Friends to support this amendment.
      One of the great strengths of the appeal system as we now know it is that decisions are published and people can understand what is going on during the review that takes place under the normal process. Will claimants be given a clear explanation as to how their case was dealt with under the proposed system? Will the key decisions in the reviews be made available more publicly and generally by the Department? It is important for us to be able to measure exactly how the system will work.
      These proposals do not go nearly far enough. This is nothing like the independent system that we would support. I recommend my right hon. and hon. Friends to vote against the Government's proposals.
      Mr. Roy Galley: One can well understand and fully support the Government's determination not to introduce the full panoply of a quasi judicial appeal procedure such as we have at present. To deal with thousands and thousands of possible claims about small items will require a procedure which is cumbersome, longwinded, expensive, absurd at the margins and cannot be entirely fair and just to those who seek to appeal against decisions. I say that it is absurd at the margins because much time, effort, money and bureaucracy can often be involved in whether somebody should have a hot water bottle, a saucepan, or whatever. Therefore, one can fully understand that one does not wish to have—
      Mrs. Beckett: I am listening with interest to the hon. Gentleman's remarks. Does my memory fail me or was it the hon. Gentleman who served on a Committee last year when his hon. Friend the Minister instituted this very judicial system? The hon. Gentleman enthusiastically welcomed it and his hon. Friend the Minister took credit for the Government making the system more judicial at the time.
      Mr. Galley: That is not the case. That is not what happened last year. If that point is in any way valid, the hon. Lady should have made it long ago because this is a debate that we have had in Committee over a long period. Let me come to what I sought to persuade the Government to do.

      435
      One can fully understand that this long-winded procedure, which is not necessarily going to produce good decisions, should not be implemented. Nevertheless, concern has been expressed by many hon. Members on both sides of the House about the need for some form of appeal mechanism. The system, as initially proposed, meant that particular individuals had enormous power and responsibility. Therefore, it was crucial that there was some movement towards an appeal procedure. It should not be the case that one person made the decision and that was the end of the matter.
      Therefore, after much debate in Committee and on Report, it was accepted, before the measure went to another place, that there should be an internal review procedure. That meant the possibility of social fund officers reviewing their own decisions, passing those decisions on to other social fund officers and having an inspectorate to monitor the decisions and to which people could appeal. That allayed some of the fears. It meant that there was a second opinion. That was an important concession.
      When one looked at the new—[Interruption.] If hon. Gentlemen want to make comments, would they not make them from a sedentary position?
      Mr. Frank Field: The hon. Gentleman may not be able to recall last year. However, does he recall the Committee on this Bill in which he was in the vanguard for reforms which would strengthen the appeal system?
      Mr. Galley: Yes, indeed. If the hon. Gentleman looks at the Committee proceedings he will see that the remarks I have made this evening are precisely in tune with what I said during those debates. I said that there had to be a review procedure, and we got a concession towards an internal management review system. The hon. Gentleman should wait until I come to my further point.
      With the Government's proposal, we now have the idea of a social fund commissioner. One looks at that and thinks, "Good, we are getting a little further. We will have a social fund ombudsman." That was my first thought. That would have been a good idea. It is important that there should be consistency in decisions in different parts of the country and that the quality of those decisions should be the same in varying circumstances. We should have a quality control mechanism through the social fund commissioner.
      However, this is a lost opportunity in not extending the function of the social fund commissioner to an appeal of last resort. It may be that one would need to institute some control upon the range of such appeals, but it would give a further element of independence.
      Mr. David Evennett: I had the pleasure of serving on the Committee with my hon. Friend the Member for Halifax (Mr. Galley). I was under the impression that my hon. Friend was advocating that there should be monitoring of the performance of the inspectorate, and that is what we have now.
      Mr. Galley: My hon. Friend is right. We have agreed on an internal review procedure which is a plus point, and we how have a monitoring of consistency, which is another plus point. All I am suggesting is that we must resist the Lords amendment. I fully support my hon. Friend the Minister in that. However, he may have missed an
      436
      opportunity to have an appeal of last resort in a social fund commissioner. He could have gone just one step further.
      Mr. Winnick: I am pleased that the other place recognised the importance of continuing an appeals system, which has operated in social security matters for over 50 years. It is interesting to note that the figures show that, between 1981 and 1984, over 25,000 decisions about single payments were challenged by tribunals on appeal. I hope that the Minister will take this on board.
      It is important to bear in mind that not only does the system allow an appeal to be made, and many are successful, but decisions are affected by an appeals system. Once a decision has been made and a claimant is dissatisfied and intends to lodge an appeal, the matter is reviewed before the appeal. That is bound to have an effect. It is not likely to continue under the proposed system set out in the Government's new clause.
      My hon. Friend the Member for Derby, South (Mrs. Beckett) mentioned the Council on Tribunals but, because of time, did not quote from what it said. However, I shall do so, because what it said is of the utmost importance. The Council on Tribunals is rarely mentioned in connection with these issues. It said:
      "Very good reasons are needed before the abolition of the right to an independent appeal in such circumstances, an appeal which has existed for over 50 years. It would probably be the most substantial abolition of a right of appeal to an independent tribunal since the Council on Tribunals was set up by Parliament in 1958 following the Franks report. It is for these reasons that we are so critical of the proposal. In our last Annual Report we described it as highly retrograde".
      That view comes not just from the Opposition but from the Council on Tribunals.
      9 pm
      Mr. Tony Favell: The Council on Tribunals has an axe to grind. Has it not been made clear that the resources in the social fund are finite? Is it not better for the social fund to be directed towards those in real need rather than lining the pockets of those who sit on appeal tribunals, the secretariat and Uncle Tom Cobbleigh and all?
      Mr. Winnick: To a large extent, the hon. Gentleman has given away the reason why there will be no appeal system. He has said frankly what the Minister was reluctant to say. It will be a highly cash limited social fund, the purpose of which is to limit and reduce the amount of money being given — hence no appeals system. I am grateful to the hon. Gentleman because his intervention was useful.
      What is contained in the new clause is no satisfactory alternative to an independent appeals system. The social fund officer will be based in the local office, so he will be in the very office where the decision was first taken against which an appeal is being made. Although the social fund inspector will not be based in the local office, he will be based in the regional office and will be perceived, inevitably, as part of the internal DHSS procedure.
      As the new clause says, in the main — perhaps without exception—such inspectors will come from the existing DHSS staff. Does anyone believe, or could they come to accept, that this will be an independent review that will be a satisfactory alternative to the existing system of independent appeal?
      I ask questions that I have asked before. Will claimants be seen in the first place by a social fund officer?
      Mr. Major: The hon. Gentleman made a curious remark about the fact that the social fund inspectors may come from within the DHSS staff. Is he saying that the adjudication officers, who do the same, do not accurately and properly carry out their functions, because that is the logical conclusion of his remarks?
      Mr. Winnick: To some extent, my analogy is with the system of appeals in immigration, with which I am familiar. Although the adjudicators are appointed by the Home Office, it is recognised that they are independent, and that is an important difference. It is important that there should be an understanding, a recognition and an acceptance that the people concerned are independent. I do not believe for one moment that the social fund inspectors will be seen in that light.
      Will people who say that they are dissatisfied with a decision see the social fund inspector in person? Many of the people with whom we are dealing may not feel adequately able to present their cases. Will they be in a position to go and see the social fund officer, or will such matters be dealt with through paperwork? We must not forget that, under the existing appeals system, people can be represented.
      Mr. Corbyn: Does my hon. Friend accept that, as the terms of reference for the social fund commissioners are so vague, the only thing that can logically happen is that, as the many discrepancies on decisions of social fund officers arise, cases will end up in the court as a matter of natural justice?
      Mr. Winnick: My hon. Friend is right.
      It is understandable that, with the tainted record of Ministers trying to lessen the amount of money given to the poorest in our community, who desperately need the payments for which they can apply, there is so much suspicion of what is being done. That is why we are justified, like the other place, in voting against the Government's proposal and in believing that the appeal system should continue.
      This is a further onslaught on the poor—on those who desperately need the items for which they have applied. The speeches by Conservative Members in previous debates and also in this debate demonstrate what was said a few moments ago: that they believe that the assistance that is being given should be reduced and that the poorest should be further discriminated against and penalised. The policy of this Tory Government is to give to the rich and to take away from those who are most in need.
      Mr. Evennett: The social fund came in for a great deal of scrutiny in Standing Committee. Two matters caused concern to hon. Members. Certain hon. Members were in favour of a full appeals procedure, with all the bureaucracy that that entails. Other hon. Members felt that there should be a monitoring system to ensure that inspectors are doing their job correctly. That concern in Committee has been removed to a large degree by the new clause.
      Conservative Members welcome the creation of a commissioner who will be responsible for ensuring that inspectors perform their job well. Conservative Members welcome most of all the fact that his report will be published, for it will then be possible to monitor his comments on the system. We do not want a return to the
      438
      kind of bureaucracy which would result in appeals over minor matters being dealt with at great length. That does not help claimants, or administrators or taxpayers, who have to foot the bill.
      I welcome the movement that the Government have made since the Committee stage. Also, I welcome the fact that they have taken on board the concern of some hon. Members about the monitoring of the social fund. The new clause is a vast improvement and it should be supported. We look forward to this radical Bill, which is long overdue, being placed on the statute book.
      Mr. Frank Field: I should like to make four points in one minute. My hon. Friend the Member for Derby, South (Mrs. Beckett) said that tonight the Government have made the crucial point that they are willing to concede independent appeals only to those parts of the scheme that are not cash limited.
      Secondly, the hon. Member for Brighton, Kemptown (Mr. Bowden) made, as so often happens in these debates, a most pertinent contribution. He said that the use of the word "commissioner" in this context is a sham and that it will be seen to be a sham.
      Thirdly, the hon. Member for Halifax (Mr. Galley) said that such items as saucepans, clothing and bedding are small items and are of little importance. They may be of little importance to hon. Members, but to all too many of our constituents they are crucial ingredients for a decent standard of living.
      Fourthly, even though, with his usual ability, the Minister used his silver tongue to move the amendment, he convinced us all that, if we were asked to write a minute on the working of the new system, if we were honest, we could not do it.
      Dr. Godman: The concept of a commissioner is somewhat ambiguous, despite the welcome that has been given to it by the hon. Member for Erith and Crayford (Mr. Evennett). It is an unknown quantity. Is the commissioner to become a social welfare ombudsman, or is he or she to be simply a chief inspector, or Government inspector? In some ways, the role is analogous to the lay observer in the Scottish legal system. Will he or she be a career civil servant, or will he or she be a member of the Department itself and hence part of the Department's career structure? Is it likely that the successful applicant will be recruited from outwith the Department? Will the commissioner have legal training? Is it likely that he or she will be a Queen's counsel? To my mind, none of those matters is at all clear from what the Minister said when introducing the concept of a commissioner.
      The Minister knows the importance of single payments in Scotland vis-a-vis the rest of Great Britain. It is essential for us to have an independent appeals system and this shadowy vague animal, this commissioner, whoever he or she may be, will simply not be good enough for the people I represent. Despite the inefficiencies and the deficiencies of the single payment system, at the moment those people, at least at the back of their minds, trust an independent appeals system. This shadowy commissioner will not be able to earn the trust of people who depend on social welfare incomes in Scotland and in the rest of Great Britain.
      Mr. Newton: The missing ingredient in the debate is the failure to acknowledge that the system we have is simply not working. In part, that is because of the nature of the system.
      It being four hours after the commencement of proceedings on the motion relating to the Social Security Bill (Allocation of Time), MR. SPEAKER proceeded, pursuant to Order this day, to put forthwith the Question already proposed from the Chair, That this House doth disagree with the Lords in the said amendment:—
      Question agreed to.
      Lords amendment accordingly disagreed to.
      MR. SPEAKER then proceeded to put forthwith the Questions necessary for the disposal of the business to be concluded at that hour.
      Subsequent Lords amendments agreed to, some with Special Entry.
      Lords amendment: No. 58, in page 43, line 13, at end insert—
      "(11A) A person applying for a social fund payment may appeal to a social security appeal tribunal constituted in accordance with section 97(2) to (2E) of the Social Security Act 1975 against any determination of a social fund officer with respect to the application.
      (11B) On an appeal under subsection (11A) above the appeal tribunal may—

      (a) confirm the determination appealed against;

      (b) substitute for that determination any other determination which a social fund officer could have made; or

      (c) if the appeal is against a determination under subsection (3) or (4) above, set aside that determination."—[Mr. Newton.]

      Motion made, and Question put, That this House doth disagree with the Lords in the said amendment—[Mr. Fowler.]
      The House divided: Ayes 237, Noes 184.

      Division No. 277]

      [9.12 pm

      AYES

      Adley, Robert

      Buck, Sir Antony

      Aitken, Jonathan

      Budgen, Nick

      Alexander, Richard

      Bulmer, Esmond

      Alison, Rt Hon Michael

      Burt, Alistair

      Amess, David

      Butcher, John

      Ancram, Michael

      Butler, Rt Hon Sir Adam

      Arnold, Tom

      Butterfill, John

      Carlisle, John (Luton N)

      Atkins, Robert (South Ribble)

      Carttiss, Michael

      Atkinson, David (B'm'th E)

      Cash, William

      Baker, Nicholas (Dorset N)

      Chalker, Mrs Lynda

      Baldry, Tony

      Chapman, Sydney

      Banks, Robert (Harrogate)

      Chope, Christopher

      Batiste, Spencer

      Churchill, W. S.

      Beaumont-Dark, Anthony

      Clark, Dr Michael (Rochford)

      Bellingham, Henry

      Clark, Sir W. (Croydon S)

      Bendall, Vivian

      Clarke, Rt Hon K. (Rushcliffe)

      Benyon, William

      Clegg, Sir Walter

      Bevan, David Gilroy

      Colvin, Michael

      Bitten, Rt Hon John

      Coombs, Simon

      Biggs-Davison, Sir John

      Cope, John

      Blackburn, John

      Corrie, John

      Blaker, Rt Hon Sir Peter

      Couchman, James

      Bonsor, Sir Nicholas

      Cranborne, Viscount

      Boscawen, Hon Robert

      Crouch, David

      Bottomley, Mrs Virginia

      Currie, Mrs Edwina

      Bowden, Gerald (Dulwich)

      Dickens, Geoffrey

      Boyson, Dr Rhodes

      Dorrell, Stephen

      Braine, Rt Hon Sir Bernard

      Douglas-Hamilton, Lord J.

      Bright, Graham

      Dover, Den

      Brinton, Tim

      Dunn, Robert

      Brooke, Hon Peter

      Evennett, David

      Brown, M. (Brigg & Cl'thpes)

      Eyre, Sir Reginald

      Bryan, Sir Paul

      Farr, Sir John

      Buchanan-Smith, Rt Hon A.

      Favell, Anthony

      440

      Finsberg, Sir Geoffrey

      McCurley, Mrs Anna

      Fletcher, Alexander

      Macfarlane, Neil

      Fookes, Miss Janet

      MacKay, Andrew (Berkshire)

      Forman, Nigel

      MacKay, John (Argyll & Bute)

      Forsyth, Michael (Stirling)

      Maclean, David John

      Forth, Eric

      McLoughlin, Patrick

      Fowler, Rt Hon Norman

      McNair-Wilson, M. (N'bury)

      Franks, Cecil

      Madel, David

      Fraser, Peter (Angus East)

      Major, John

      Freeman, Roger

      Malins, Humfrey

      Fry, Peter

      Malone, Gerald

      Gale, Roger

      Maples, John

      Galley, Roy

      Marland, Paul

      Gardiner, George (Reigate)

      Marshall, Michael (Arundel)

      Gardner, Sir Edward (Fylde)

      Mates, Michael

      Garel-Jones, Tristan

      Mather, Carol

      Glyn, Dr Alan

      Mawhinney, Dr Brian

      Goodhart, Sir Philip

      Mayhew, Sir Patrick

      Goodlad, Alastair

      Merchant, Piers

      Gow, Ian

      Miller, Hal (B'grove)

      Gower, Sir Raymond

      Miscampbell, Norman

      Grant, Sir Anthony

      Moate, Roger

      Greenway, Harry

      Montgomery, Sir Fergus

      Gregory, Conal

      Moynihan, Hon C.

      Griffiths, Peter (Portsm'th N)

      Murphy, Christopher

      Grylls, Michael

      Neale, Gerrard

      Gummer, Rt Hon John S

      Needham, Richard

      Hamilton, Neil (Tatton)

      Neubert, Michael

      Hampson, Dr Keith

      Newton, Tony

      Hannam, John

      Nicholls, Patrick

      Hargreaves, Kenneth

      Norris, Steven

      Harris, David

      Onslow, Cranley

      Haselhurst, Alan

      Oppenheim, Phillip

      Havers, Rt Hon Sir Michael

      Oppenheim, Rt Hon Mrs S.

      Hawkins, C. (High Peak)

      Osborn, Sir John

      Hawkins, Sir Paul (N'folk SW)

      Ottaway, Richard

      Hawksley, Warren

      Page, Sir John (Harrow W)

      Hayes, J.

      Page, Richard (Herts SW)

      Hayhoe, Rt Hon Barney

      Parkinson, Rt Hon Cecil

      Hayward, Robert

      Patten, J. (Oxf W & Abgdn)

      Heathcoat-Amory, David

      Pattie, Geoffrey

      Heddle, John

      Pawsey, James

      Hickmet, Richard

      Peacock, Mrs Elizabeth

      Higgins, Rt Hon Terence L.

      Percival, Rt Hon Sir Ian

      Hill, James

      Pollock, Alexander

      Hind, Kenneth

      Porter, Barry

      Hirst, Michael

      Portillo, Michael

      Hogg, Hon Douglas (Gr'th'm)

      Powley, John

      Holland, Sir Philip (Gedling)

      Prentice, Rt Hon Reg

      Hordern, Sir Peter

      Price, Sir David

      Howard, Michael

      Proctor, K. Harvey

      Howarth, Alan (Stratf'd-on-A)

      Raffan, Keith

      Howarth, Gerald (Cannock)

      Ridley, Rt Hon Nicholas

      Howell, Ralph (Norfolk, N)

      Ridsdale, Sir Julian

      Jenkin, Rt Hon Patrick

      Rifkind, Rt Hon Malcolm

      Jessel, Toby

      Roe, Mrs Marion

      Johnson Smith, Sir Geoffrey

      Rossi, Sir Hugh

      Jones, Gwilym (Cardiff N)

      Rost, Peter

      Jones, Robert (Herts W)

      Sainsbury, Hon Timothy

      Jopling, Rt Hon Michael

      St. John-Stevas, Rt Hon N.

      Kellett-Bowman, Mrs Elaine

      Sims, Roger

      Kershaw, Sir Anthony

      Skeet, Sir Trevor

      Key, Robert

      Smith, Sir Dudley (Warwick)

      King, Roger (B'ham N'field)

      Smith, Tim (Beaconsfield)

      King, Rt Hon Tom

      Soames, Hon Nicholas

      Knight, Greg (Derby N)

      Steen, Anthony

      Knight, Dame Jill (Edgbaston)

      Stern, Michael

      Lang, Ian

      Stewart, Andrew (Sherwood)

      Lawler, Geoffrey

      Taylor, John (Solihull)

      Lawrence, Ivan

      Tebbit, Rt Hon Norman

      Lee, John (Pendle)

      Thompson, Donald (Calder V)

      Leigh, Edward (Gainsbor'gh)

      Thompson, Patrick (N'ich N)

      Lennox-Boyd, Hon Mark

      Thorne, Neil (Word S)

      Lewis, Sir Kenneth (Stamf'd)

      Thurnham, Peter

      Lightbown, David

      Townsend, Cyril D. (B'heath)

      Lilley, Peter

      Viggers, Peter

      Lloyd, Peter (Fareham)

      Wakeham, Rt Hon John

      Lord, Michael

      Walker, Bill (T'side N)

      Luce, Rt Hon Richard

      Wall, Sir Patrick

      Lyell, Nicholas

      Wardle, C. (Bexhill)

      441

      Watson, John

      Wood, Timothy

      Watts, John

      Wells, Bowen (Hertford)

      Tellers for the Ayes:

      Wells, Sir John (Maidstone)

      Mr. Tony Durant and

      Wheeler, John

      Mr. Francis Maude.

      Wiggin, Jerry

      NOES

      Alton, David

      Evans, John (St. Helens N)

      Anderson, Donald

      Ewing, Harry

      Archer, Rt Hon Peter

      Fatchett, Derek

      Ashdown, Paddy

      Field, Frank (Birkenhead)

      Ashley, Rt Hon Jack

      Fields, T. (L'pool Broad Gn)

      Ashton, Joe

      Fisher, Mark

      Atkinson, N. (Tottenham)

      Flannery, Martin

      Banks, Tony (Newham NW)

      Foot, Rt Hon Michael

      Barnett, Guy

      Forrester, John

      Barron, Kevin

      Foster, Derek

      Beckett, Mrs Margaret

      Foulkes, George

      Beith, A. J.

      Fraser, J. (Norwood)

      Bell, Stuart

      Freeson, Rt Hon Reginald

      Benn, Rt Hon Tony

      Freud, Clement

      Bennett, A. (Dent'n & Red'sh)

      Garrett, W. E.

      Bermingham, Gerald

      George, Bruce

      Blair, Anthony

      Gilbert, Rt Hon Dr John

      Boothroyd, Miss Betty

      Godman, Dr Norman

      Bowden, A. (Brighton K'to'n)

      Golding, Mrs Llin

      Boyes, Roland

      Gourlay, Harry

      Bray, Dr Jeremy

      Hamilton, W. W. (Fife Central)

      Brown, Gordon (D'f'mline E)

      Hancock, Michael

      Brown, N. (N'c'tle-u-Tyne E)

      Hardy, Peter

      Brown, Ron (E'burgh, Leith)

      Harman, Ms Harriet

      Buchan, Norman

      Harrison, Rt Hon Walter

      Caborn, Richard

      Hart, Rt Hon Dame Judith

      Callaghan, Jim (Heyw'd & M)

      Heffer, Eric S.

      Campbell-Savours, Dale

      Hogg, N. (C'nauld & Kilsyth)

      Carter-Jones, Lewis

      Holland, Stuart (Vauxhall)

      Cartwright, John

      Home Robertson, John

      Clark, Dr David (S Shields)

      Hoyle, Douglas

      Clarke, Thomas

      Hughes, Dr Mark (Durham)

      Clay, Robert

      Hughes, Robert (Aberdeen N)

      Clelland, David Gordon

      Hughes, Roy (Newport East)

      Clwyd, Mrs Ann

      Hughes, Simon (Southwark)

      Cohen, Harry

      Janner, Hon Greville

      Coleman, Donald

      John, Brynmor

      Cook, Robin F. (Livingston)

      Johnston, Sir Russell

      Corbett, Robin

      Jones, Barry (Alyn & Deeside)

      Corbyn, Jeremy

      Kaufman, Rt Hon Gerald

      Craigen, J. M.

      Kirkwood, Archy

      Crowther, Stan

      Lambie, David

      Cunliffe, Lawrence

      Leadbitter, Ted

      Dalyell, Tam

      Leighton, Ronald

      Davies, Rt Hon Denzil (L'lli)

      Lewis, Terence (Worsley)

      Davis, Terry (B'ham, H'ge H'l)

      Livsey, Richard

      Deakins, Eric

      Lloyd, Tony (Stretford)

      Dewar, Donald

      Lofthouse, Geoffrey

      Dixon, Donald

      Loyden, Edward

      Dobson, Frank

      McDonald, Dr Oonagh

      Dormand, Jack

      McKay, Allen (Penistone)

      Douglas, Dick

      McKelvey, William

      Dubs, Alfred

      MacKenzie, Rt Hon Gregor

      Duffy, A. E. P.

      Maclennan, Robert

      Dunwoody, Hon Mrs G.

      McTaggart, Robert

      Eadie, Alex

      McWilliam, John

      Eastham, Ken

      Madden, Max

      Edwards, Bob (W'h'mpt'n SE)

      Marek, Dr John

      442

      Marshall, David (Shettleston)

      Shields, Mrs Elizabeth

      Martin, Michael

      Shore, Rt Hon Peter

      Maynard, Miss Joan

      Short, Ms Clare (Ladywood)

      Meacher, Michael

      Short, Mrs R.(W'hampt'n NE)

      Michie, William

      Silkin, Rt Hon J.

      Mikardo, Ian

      Skinner, Dennis

      Millan, Rt Hon Bruce

      Smith, Rt Hon J. (M'ds E)

      Morris, Rt Hon A. (W'shawe)

      Snape, Peter

      Morris, Rt Hon J. (Aberavon)

      Soley, Clive

      Nellist, David

      Spearing, Nigel

      Oakes, Rt Hon Gordon

      Stewart, Rt Hon D. (W Isles)

      O'Brien, William

      Stott, Roger

      O'Neill, Martin

      Strang, Gavin

      Orme, Rt Hon Stanley

      Straw, Jack

      Owen, Rt Hon Dr David

      Thomas, Dafydd (Merioneth)

      Park, George

      Thomas, Dr R. (Carmarthen)

      Parry, Robert

      Thompson, J. (Wansbeck)

      Patched, Terry

      Thorne, Stan (Preston)

      Pavitt, Laurie

      Tinn, James

      Pendry, Tom

      Torney, Tom

      Pike, Peter

      Wainwright, R.

      Powell, Raymond (Ogmore)

      Wardell, Gareth (Gower)

      Radice, Giles

      Wareing, Robert

      Randall, Stuart

      Weetch, Ken

      Raynsford, Nick

      Welsh, Michael

      Redmond, Martin

      Wigley, Dafydd

      Rees, Rt Hon M. (Leeds S)

      Williams, Rt Hon A.

      Richardson, Ms Jo

      Wilson, Gordon

      Roberts, Ernest (Hackney N)

      Winnick, David

      Robinson, G. (Coventry NW)

      Woodall, Alec

      Rogers, Allan

      Wrigglesworth, Ian

      Rooker, J. W.

      Young, David (Bolton SE)

      Ross, Ernest (Dundee W)

      Ross, Stephen (Isle of Wight)

      Tellers for the Noes:

      Rumbold, Mrs Angela

      Mr. James Hamilton and

      Sedgemore, Brian

      Mr. Ron Davies.

      Question accordingly agreed to.
      Lords amendment accordingly disagreed to.
      Government amendments (a) to (p) in lieu of Lords amendment No. 58 agreed to.
      Lords amendment No. 57 disagreed to.
      Subsequent Lords amendments agreed to, some with Special Entry.
      Ordered,
      That a Committee be appointed to draw up Reasons to be assigned to the Lords for disagreeing to certain of their amendments.— [Mr. Fowler.]
      Ordered,
      That Mrs. Margaret Beckett, Mr. Secretary Fowler, Mr. Mark Lennox-Boyd, Mr. John Major and Mr. Michael Meacher, be Members of the Committee.—[Mr. Fowler.]
      Ordered,
      That three be the Quorum of the Committee. — [Mr. Fowler.]
      Ordered,
      That the Committee do withdraw immediately.—[Mr. Fowler.]
      Reasons for disagreeing to certain of the Lords amendments reported, and agreed to;to be communicated to the Lords.

Supplementary Benefit
9.26 pm
Mr. Michael Meacher: I beg to move,
That an humble Address be presented to Her Majesty, praying that the Supplementary Benefit (Miscellaneous Amendments) Regulations 1986 (S.I., 1986, No. 1259), dated 18th July 1986, a copy of which was laid before this House on 21st July, be annulled.
We have tabled this prayer for three reasons. First, the proposals involve a cut in single payments of between £150 million and £200 million. I have based that on the figure that the Minister gave in his statement two days ago, when he referred to a current rate of £400 million. There is, therefore, a cut of something over 45 per cent. in expenditure on single payments, regardless of need, despite the increased number of those dependent on supplementary benefit. We believe that that must cause intense and widespread hardship.
Until now, it has always been accepted that the supplementary benefit scale rates are fixed at so low a level on the assumption that expenditure on major household items must be met separately. Indeed, many believe that the cut in expenditure is an attempt to accustom claimants and others to the limits under a future social fund. We believe that these regulations give us an insight into the sort of conditions that will exist under the social fund when the Bill is enacted.
Secondly, we object to the regulations because the new rules are extremly complex. Any hon. Member who reads the draft regulations will see what I mean. Moreover, they are contrary to the Government's stated aim on social security policy, which is to simplify administration. As a result, there is likely to be confusion, hardship and a low take-up, even among those who are entitled to benefit.
Thirdly, we object to the regulations on the ground of procedure. We are extremely disturbed about the manner in which the regulations have been tabled, with little or no time for hon. Members and outside organisations to consult on the response made by the Social Security Advisory Committee to the Government's proposals before today's debate and implementation on 11 August. Indeed, implementation is less than three weeks' time. Thus, we have yet another example of the Government's precipitate and indecent haste to put these measures into operation.
The Government sat on the highly critical report of the SSAC on these proposals for two months. The committee's report is dated 22 May. Yet only three weeks have been allowed for claimants and staff to find out about these complex changes. In the middle of the holiday period, it is totally unreasonable for DHSS staff to be expected to master these new complex rules in time to apply them by 11 August. The staff are already struggling to cope with what the Secretary of State referred to recently as the major operational burdens that the present scheme places upon them. Claimants are even less likely now to find out about the changes before the axe falls on 11 August. The Opposition believe—I say this advisedly — that this is a deliberate ploy to prevent people claiming their entitlement while they still can.
The problem, as the Government see it, is one of rising costs. The Minister shakes his head, but he will be able to speak in due course, and no doubt shortly. That was very much in evidence in what he said two days ago, when he spoke a great deal about exploitation and abuse. There is
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evidence, however, of a bottomless pit of need which is fed by rising unemployment, the growing number of claimants who have been unemployed for two or three years, the gradual erosion of other resources, such as savings, and the inadequate levels of weekly benefit payments.
Mr. Tony Favell: On Monday, my hon. Friend the Minister talked about leaflets circulating throughout the country containing tick lists under the slogan "closing down sales". He said that during the four weeks to 3 June there had been claims amounting to an annual rate of 5·5 million payments involving at least £400 million. It is no coincidence that these leaflets appeared throughout the country. Who was behind that smash-and-grab raid? Was it the Labour party? Will the hon. Gentleman tell the House here and now?
Mr. Meacher: I am sure that the House will be interested to know who is behind the smash-and-grab raid of tax cuts for some of the highest-paid people in the country.
Mr. Favell: Answer my question. Who is behind it?
Mr. Meacher: If individual Tories pay accountants to ensure that they receive all the reliefs to which they are entitled, why should not welfare rights officers, on behalf of poor people, obtain benefits for their clients to which they are entitled? These are benefits to which they have a right under legislation. The Government pretend at least that they wish there to be a high take-up rate and that benefits should be paid to those who are entitled to receive them.
Grants for exceptional needs are precisely that. Proving need is a basic condition before claims can be made and they are not paid without proof of need. That is set out in the regulations. The Minister has spoken of grants running at £400 million annually and the Government have said that they will return to the 1984 level, which will be entirely arbitrary now that we are in 1986. The effect of that move will be a reduction from £400 million to £216 million. That is a cut of about £190 million, not the £100 million that the Minister talked about originally.
The Minister for Social Security (Mr. Tony Newton): The figures that I used on Monday were based on one month's figures, which were the four weeks to 3 June. They reflect in part the astonishing activities that are taking place throughout the country, some of which I referred to on Monday and to which I shall refer again this evening. The plain and blunt fact is that currently it is difficult for us to know what the position is on single payments.
Mr. Frank Field: The Government are in charge.
Mr. Newton: We are in charge, and we believe that the present torrent of claims could cause the breakdown of the entire social security system. That is why we are taking action.
Mr. Meacher: The Minister's last remark, when he was under some pressure, is significant. He is saying that when people claim their rights, which they are entitled to do under legislation which applies to the social security system, the system is in danger of breaking down completely. It is an astonishing claim to make. The fact is that those welfare rights claims are purely to ensure that people get what the House has said they are entitled to claim. It is the Government who should be ensuring that

445
they get that and we should not need to depend on welfare rights officers, financed by various voluntary organisations.
Mr. Frank Field: Did my hon. Friend notice the condemnation from Conservative Benches of voluntary organisations issuing leaflets with check lists of items to which people may be entitled? Will he remind Conservative Members who initiated that process? Is he not aware that earlier in this Parliament, with the cut in staff, the Government themselves started sending leaflets to old people, asking them to tick off items to which they may be entitled? Surely one is just learning from what the Government themselves have done.
Mr. Meacher: My hon. Friend makes an effective point. That is true. One section of the population that is in need, about which the Government are concerned, is the elderly —purely because of their numbers, one suspects. They have employed those methods to ensure that some elderly people get more benefit, but as soon as it is lone parents, the unemployed, or single unemployed persons claiming benefit, the Government strongly object. But they all have rights under the legislation. It is wrong to suggest that the social security system depends on a massive failure to take up benefits. That shows what a charade it is in the minds of some Conservative Members.
I wish to refer to the reasons advanced by the Government in a statement that they made two or three days ago to justify the measure. First, the Government see an inequity between those who are on supplementary benefit and those who are not. That is an odd argument because it was the Conservative Government in 1980, when the social security rules were changed, who removed entitlement to lump sum grants from those not on supplementary benefit and not in full-time work. They are now using that removal to withdraw the right to such grants from others. In other words, one chips away part of the edifice and, when one sees an inequity, one chips away at another part. If there is an inequity between the low paid and supplementary benefit claimants, surely the answer lies in improving the position of the low paid rather than further worsening that of supplementary benefit claimants.
The second argument used by the Government was the increased value of the scale rates since 1979, which they say reduce the need for single payments. However, the scale rate takes no account of the differential impact of price increases on the poor. I do not know whether the Government accept the low-paid price index, which was developed by the Low Pay Unit and the Civil and Public Services Association. Perhaps they do not. But it is a significant and carefully controlled independent effort to arrive at a fairer retail prices index for the low paid. On that basis, there has been not an increase in the rates, but a 1 per cent. cut in the value of the rates. However, another point is relevant. The Supplementary Benefit (Requirements) Regulations set out a claimant's weekly requirements to be covered in the scale rates. They do not include an amount towards major items of household equipment and furniture. That is what we are talking about.
The third argument concerns the increased number of single payments that have been made since 1981. I was surprised by the figures quoted by the Government until
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I looked into the matter more carefully. The fact is that 1981 is a deceptive base line for comparison because it was the first year of the new social security scheme in which single payments were set out in regulations. Neither the public nor many DHSS staff knew the rules. In that year, single payments as a proportion of the number of claimants were at their lowest level since 1971. For that reason, it is scarcely surprising that we saw the results that we did.
Two other arguments to which the Government and Conservative Members have referred tonight relate to the welfare rights take-up campaigns. It is extraordinary that Conservative Members should make so much of that. In effect, the Government have said that they introduced rights to single payments in 1980, but, now that people are exercising those rights, thanks to the efforts of local councils to improve take-up, those rights will be curtailed. A right is acceptable to Conservative Members as long as it is not taken up by too many people. The omens are ominous for future attempts to improve take-up of benefits. That raises serious questions about the Government's commitment to decent levels of benefit. It suggests that the Government support the means test because they know that there will be substantial underclaiming.
The implication is that people do not really need the single payments that they are claiming. A recent academic study into the matter was carried out by Berthoud and that study was much quoted in Committee. Berthoud states:
"There has been a massive and continuing increase in the number of payments made especially for bedclothes, furniture and a range of household goods. This is not an artificial demand by claimants who have learned how to obtain extra money. The need for household items was there all the time and is only now beginning to be met."
I am sure that Berthoud is absolutely correct. All that local take-up campaigns have done is to attempt to make a reality of the right that claimants were promised in 1980. That is a job that the Government should undertake.
The examples that the Government have given of abuse involve ways in which claimants get round the regulations regarding entitlement to clothing grants. I would be the first to admit that there is some abuse in this system, as in any system involving money, whether it be tax, bus fares or whatever. The so-called abuse of clothing grant regulations is a reflection of the absurdly restrictive regulations. The Government have always refused to admit that the 1980 reforms involved a severe cut in clothing grants. The Minister looks doubtful, but I can tell him that between 1978 and 1981 the number of grants dropped from 137 per 1,000 claimants to 15 per 1,000 claimants. Such extraordinary attempts are made to get round the regulations because there is a great need for clothing and almost no help is now given.
Berthoud also states:
"The evidence suggests strongly that claimants are not in a position to exploit the rules by making unmerited claims and it is clear that the needs being met by single payments are genuine."
None of the Government's arguments holds water. We are back to the simple, stark, crude but real aim behind the proposals, and that is to save another £150 million to £200 million at the expense of poor people, in addition to the £300 million which has already been lopped off by the vote taken a few hours ago.
The supplementary benefit scale rates have always been fixed at a level so low that they were never intended to pay

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for major household items such as furniture, bedding, cookers and clothes. Yet that is what will now happen. The effect of the measure must be to force many poor families to go without these essential household items or to drive them deeper into poverty and debt. Either way, to do that, on this day of all days is especially offensive and we totally reject the regulations.
9.44 pm
The Minister for Social Security (Mr. Tony Newton): I begin by reminding the House of the basic facts that I put to the House on Monday, without going back as far as the last Labour Government, who were also concerned about the growth in this area.
The hon. Member for Oldham, West (Mr. Meacher) clearly misunderstood. There was no reference whatever to 1981, so all his remarks about using a false base were entirely irrelevant. I said in my statement that, comparing 1979 with 1983, the number of payments virtually doubled to almost 2 million and that expenditure almost quadrupled to more than £140 million. By 1985, both figures had more than doubled again, to more than 4 million payments at a cost of more than £300 million, and the growth shows no sign of diminishing. Whatever else may be said about those figures, I did not use what I acknowledge would have been the low base year of 1981. Indeed, my previous sentence covered the 1981 position by saying that the measures that we took in 1980 appeared to have had some success.
I shall not repeat all that I said on Monday, but the points that I made then are in no way shaken by what the hon. Member for Oldham, West has said today. The trend cannot be explained merely by the increase in the number of claimants, because the rate of payment per claimant has itself doubled since 1979. I made it clear that, apart from the real increase in weekly benefit levels, there have been specific improvements — for example, in some of the scale rates for children, in the rate of additional heating payments, especially for pensioners, and in the rules governing the payment of benefit, especially at the long-term rate, for lone parents and for the sick and the disabled. That has also brought about a substantial improvement in the amount that people receive, especially at certain periods. We estimate very roughly that the total effect of the changes in benefit rates that we have made over the period is probably about £250 million in real terms for many of the people who the hon. Gentleman argues are affected by the proposals.
I note the hon. Gentleman's comments about entitlement and take-up. I made the point on Monday, and on several occasions since then, that I very much doubt whether any Government could live with a system of this kind growing at the rate of 1 million payments and £100 million per year. If, by some mischance, the hon. Member for Oldham, West had been the Minister responsible I am sure that he would have done something about it by now.
Mr. Meacher: Yes, we would have cut unemployment.
Mr. Newton: What has been revealed by what has happened? The serious point to which the House must direct its attention is whether the system is workable in the long run. As I have said twice this week, that is why we have brought forward proposals for a different system through the social fund in the Social Security Bill, but we
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have nearly two years to go before those proposals can be implemented and we face a dramatic problem affecting local officers now.
I was amazed when the hon. Member for Oldham, West implied that there would be much grumbling by staff at being asked to digest complex regulations at short notice. I have had quite a lot of contact with DHSS staff recently, and not just with people at headquarters who sometimes seem remote. If there is one thing that DHSS staff throughout the country want it is relief from the burden of single payments work which is making it almost impossible for them to do the rest of their work properly.
Mr. Bob Clay: Disgraceful.
Mr. Newton: I have a letter from the hon. Gentleman complaining about the delays at his local DHSS office.
Mr. Clay: I have indeed written to the Minister and I spoke to staff at both my local DHSS offices last Friday. They want to get rid not of single payments but of the average eight-week backlog. People are waiting eight weeks for cookers and babywear. The DHSS offices want more staff and sufficient pay, even if it means working overtime to clear the backlog. They say that, if Ministers would pull their fingers out and do something, the backlog could be cleared in two weekends.
Mr. Newton: The hon. Gentleman knows that we are in the process of substantially increasing the number of staff in DHSS local offices because of a variety of problems. I suspect that almost anybody with a serious knowledge of the social security system accepts that nobody is likely to devise a means of coping sensibly, without some priority needs suffering, with the type of influx of claims that some local offices have experienced.
I mentioned on Monday a Sheffield office which received 4,000 claims for bedding over a relatively short period of time and 2,500 claims for furniture in four days. No serious administrative system can cope with that problem. I have here a schedule which I asked my officials to prepare. It lists the hon. Members who have asked about delay problems in their local offices during the past few weeks. I guess that at least half of them are sitting opposite me now.
Mr. Frank Field: I am grateful to the Minister for giving way, because I have most certainly asked about delays. I have also asked how many of the extra 5,000 staff will come to Birkenhead, and the reply has been nil. Is the Minister aware that, in view of the way in which he is developing his argument, we must ask him a fundamental question—for whom is the welfare state being run? The Minister's answer is, the officers in local offices. That is one consideration, but we are also anxious about claimants. Is he aware that many of them have needs which must be met through the system? How will he guarantee that that happens?
Mr. Newton: The hon. Gentleman knows that I have a lot of respect for him. I am sure that he will want to listen to me when I say that the people who are most at risk of suffering as a result of what has happened in regard to some of the single payments campaigns and claims are claimants with genuine needs. Their cases should be considered as a matter of priority, but they all too easily get buried at the bottom of some unmanageable heap. Other sufferers are people who want a speedy and proper resolution of their normal weekly claim to benefit.
Mrs. Margaret Beckett: Is the Minister aware — I am sure that he is—that DHSS staff said before there was any welfare rights campaign such as the Minister has referred to that they have for some considerable time been labouring under an increasingly intolerable work load, involving even routine business? It is disgraceful for the Minister to blame welfare rights campaigns for the problems in his Department. The staff have been telling him about them for years.
Mr. Newton: I am not trying to do what the hon. Lady suggests. Acting faithfully within the current and agreed complementing system, which is being reviewed, and the results of which review we shall consider when we have them, Ministers have been trying to ensure that DHSS offices are properly staffed to do their work. I do not believe that it is possible in any reasonable administrative system to cope with sudden torrents of work such as this, which are being experienced by some DHSS offices. The sufferers are not our staff, difficult though they may find it, but the claimants for whom we are unable to do the job that we would like to do and whose proper claims we cannot process as we would like.
Dr. Norman A. Godman: I think that I am right in saying that about 800 of the 5,000 new jobs will come to Scotland. What is the likelihood of a similar number being created in the following year to deal with the delays?
Mr. Newton: I gather that the exact figure that the hon. Gentleman seeks is 869. Regarding any further developments, I have said that we are awaiting the results of the complementing review, and obviously, we will want to look carefully and faithfully at those results when we have them.
Rather to my sadness, the hon. Gentleman was not present in the House on Monday when I had hoped to use one of my most interesting examples of what has been going on, in view of his well-known dedication to Strathclyde social work department. If he has read my statement or talked to some of his hon. Friends, he will know that I am concerned about the tick list which was filled in by a claimant who had been visited by a Strathclyde social worker — [Interruption.] I can understand that Labour Members do not wish to listen. They do not like this, do they? This list—[Interruption.] I am grateful to the hon. Member for Greenock and Port Glasgow, because I know he takes a serious interest in the work of the Strathclyde social work department.
The social worker visited the claimant and filled in the tick list form, asking for four single beds and mattresses, bedding for the whole family, two wardrobes, a three-piece suite, a cooker and cooker guard, three fires and fire guards, four hot water bottles, curtains, rods and something I cannot read, floor covering, repair of the washing machine and vacuum cleaner, cleaning equipment, kitchen utensils, crockery and cutlery. a carpet sweeper—
Several Hon. Members rose—
Mr. Newton: I am not going to stop. The list, continues with bath, hand, and tea towels, light fittings, draught-proofing material, a hot water tank jacket, a pushchair, a high chair, a safety gate, clothes and shoes for the whole family, fuel costs and rent arrears.
Dr. Godman rose—
Mr. Speaker: Order. Only one hon. Member may be on his feet at a time, and at present it is the Minister.
Dr. Godman rose—
Mr. Newton: I shall not give way until I come to the end of my little story. Having ticked all those items, the social worker got the claimant to sign the form and then sent it to the local—
Mr. Tony Banks: I have already heard this three times.
Mr. Newton: The hon. Gentleman may have heard it three times, but it is well worth hearing a fourth time.
Having sent the form to the local DHSS office, the social worker provided the claimant with a copy of it, at which point the claimant decided to write to the local DHSS office in these terms:
"I am Writing this letter As my social worker came to visit me and told me I could claim for different Items he said he would send it to yous. I signed it and he posted it I dident pay much attention at first the next day he Gave me a copy I realised Most of the things I dont need so I am writing to let yous know the Items I do need. and could yous Ignore the letters he has sent I want to apply for these items I have listed below."
If that is what social workers and other welfare rights workers are doing in Strathclyde, it is deplorable.
Dr. Godman: The Minister mentioned me by name. May I first point out that the campaign was undertaken with the full support of the 19 district councils in the region, including — that rare animal — the few Conservative councils? The Minister quoted extensively from a letter, but in fairness he should also have quoted from the letter that was circulated with the check list. The letter states:
"Dear Sir/Madam
We are writing to you to draw your attention to certain proposed changes in Social Security legislation which will affect the rules for receiving grants for essential needs for those in receipt of or entitled to Supplementary Benefit or Housing Benefit Supplement. These changes are being introduced prior to the major changes proposed in the Social Security Bill."
If I catch Mr. Speaker's eye, I shall be able to enlarge on the campaign. I remind the Minister that the Strathclyde council, with other Scottish regional and islands councils, carried out joint campaigns with the DHSS to help my constituents, and other Scots who are severely handicapped, to acquire what is theirs by right.
Mr. Newton: As a number of hon. Members wish to speak, perhaps my best observation is that my confidence in what has happened in Strathclyde is not enhanced by the knowledge that all 19 district councils have joined in.
It being Ten o'clock, the debate stood adjourned.

BUSINESS OF THE HOUSE
Ordered,
That, at this day's sitting, consideration of Lords Amendments to the Wages Bill, the Agriculture Bill and the Dockyard Services Bill may be proceeded with, though opposed, until any hour—[Mr. Sainsbury.]

Supplementary Benefit
Question again proposed.
Mr. Newton: If that is a blatant example of some of the problems, let me give the House one or two other examples of what can happen.
Mr. D. N. Campbell-Savours: This is the Tories at their worst.
Mr. Newton: A lady who left her husband on Thursday night—[Interruption.]
Mr. Speaker: Order.
Mr. Newton: I am grateful to you, Mr. Speaker. However, I do not know how long it will last.
A woman left her husband on Thursday night. She took the children and moved to a women's hostel. On the following Tuesday, she returned to the marital home to resume a normal relationship, having received, in the meantime, over £300 supplementary benefit from another local office. On returning to her husband, only four days later, she requested a single payment for clothing for herself and the children, claiming that her husband gave it all away during her absence.
In another case, a claimant washed in excess of 60 items of clothing, bedding, towels, a dozen nappies, and other items, and put the wet washing into a bin bag to take it to the launderette. The bag vanished. The only explanation the claimant could give was that she had mistaken the bag for one of rubbish, had put the remnants of the family's tea in the bag and put it out for the dustman. [Laughter.]
Mr. Campbell-Savours: This is not funny; it is tragic. The Government do not understand.
Mr. Newton: There is the case where items were stolen from outside a launderette. The items were on top of the claimant's push chair. The mind boggles — [Interruption.]
Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. We cannot have these sedentary interventions.
Mr. Newton: The mind boggles at the push chair that could carry two sets of towels, two pairs of curtains, two double sheets, eight single sheets, four single blankets, two double blankets, two pillow cases, and a great raft of a family's clothing. It does not stand up. That is typical of many of the claims that we receive.
Mr. Frank Field: Why is the Minister citing such cases? Surely the current system deals with those claims. Most offices would not award claims for such lists. Claimants who dispute a decision can go to the appeal tribunals. Is the Minister saying that the appeal tribunals would allow such grants?
Mr. Newton: The system that gives rise to a large number of palpable and probable claims of that kind, in a volume which makes it increasingly difficult for DHSS staff to do a proper job of checking claims fairly, and paying claims promptly, is an inherently unsatisfactory system. We feel that it needs reining back and curbing in the way we have proposed.
Mr. David Winnick rose—
Sir Kenneth Lewis rose—
Mr. Newton: I shall give way to my hon. Friend the Member for Stamford and Spalding (Sir K. Lewis).
Sir Kenneth Lewis: I am sympathetic to what my hon. Friend is trying to do. I have no doubt that there is abuse in the system. Equally, I have no doubt that that is aided and abetted by the Labour party. How on earth can DHSS
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officers give out grants for what are obviously spurious claims and simply say that they do not have the time to check them? My hon. Friend's suggestion will not end that difficulty. It may lessen the amount being spent. If DHSS officers continue to give out grants, even at the lower rate, there will still be abuse of the system. How will my hon. Friend deal with that? We must do so.
Mr. Newton: I recognise my hon. Friend's point. It important that we do our job in two respects—first, to ensure that we get benefit effectively and promptly to those who should have it and need it and, secondly, to prevent abuse. The same is true of weekly benefit. We must try to ensure as far as possible that we do not make payments to people who should not have them or who make bogus claims.
The core of a sizeable part of the problem is that a system that is used to generate claims on this basis makes it almost impossible for us to do the sorting out job needed, to prevent abuse and to ensure that we get benefit to those who need it.
Mr. Tony Banks rose—
Mr. Winnick rose—
Mr. Newton: Let me reply to my hon. Friend the Member for Stamford and Spalding.
The first requirement of a system which works as my hon. Friend and I want it to work is that it should be on a manageable scale and be confined to meeting the needs which we all agree must be met.
Mr. Winnick: Will the Minister give way on that point?
Mr. Tony Banks rose—
Mr. Newton: In a time-limited debate, it would be wrong for me to take up too much more of the time of the House.
Mr. Campbell-Savours: I hope that the Minister goes to confession on Sunday.
Mr. Newton: On Monday, I outlined the general lines along which the regulations seek to change the position, concentrating on those we see as having priority needs, including pensioners, the disabled and those needing long-stay hospitals. I outlined the way in which we have responded to the Social Security Advisory Committee's specific recommendations, although I recognised that it did not endorse the proposals as a whole. I continue to believe that what we have put before the House and what is being prayed against tonight is a reasonable, balanced package to restore sensible working to this system and to enable us to achieve those objectives which have rightly been urged upon us.
10.7 pm
Mr. Archy Kirkwood: To a certain extent, we should be grateful that we are having this debate at all. If my reading of the situation is correct, the Government were trying to slip off to summer beaches without having a debate. These regulations are subject to the negative procedure. There is no requirement for a debate to be held before they are implemented. I acknowledge the fact that we are having this debate, but I suspect that it is only because some of us agitated hard to get it.
This whole matter is based on establishing the existing levels need. The evidence of the increases in single

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payments suggests that the Minister has seriously underestimated the level of need. He seeks to justify the increases in terms of abuse of the system. There may be abuse. If it exists, it should be eradicated. The point that comes across to me strongly from my constituency experience and elsewhere is that there has been a substantial increase in real need. But the Government are moving in exactly the wrong direction to deal with it. I put it squarely to the Minister that the ordinary and long-term rates that apply especially to unemployed people with families, are not high enough to enable people to replace major items, especially furniture. That is proven without any shadow of doubt. The Minister's case is based on the fact that the scale rates are adequate and that the families who receive the scale rates can survive without single payments unless there are exceptional circumstances. I deny that. The ordinary scale rates of £29·80 for a single person and £34·90 for a couple are patently not adequate to meet the replacement cost of major items that are currently provided by single payments. I understand what the Minister is saying, but the evidence that he is quoting suggests that his analysis is quite wrong and that he is moving in totally the wrong direction.
The question of check lists was openly recognised and endorsed by the Social Security Advisory Committee. It may be that the regulations are being abused. If the examples which were read out are true, the claims should not have been accepted. The adjudication officers can rule them out of court. That is the way to deal with that problem. The SSAC is not composed of wild and extreme leftist councillors or whatever. It accepts that, if used responsibly, check lists can assist claimants through these bewilderingly complex areas. [Interruption.] As the hon. Member for Birkenhead (Mr. Field) reminds me, the Government have, in the past, introduced check list forms of their own.
The hon. Member for Oldham, West (Mr. Meacher) was right to pick up the point made by the Minister under pressure that the system, as presently constituted, depends
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on the massive failure to take up the benefits to which people are entitled. If that is the case, it is a dire state of affairs.
The changes made in relation to furniture grants will cause exceptional hardship. The changes that the Government are making in regulation 28 when Giro cheques are not paid are regressive and are to be regretted. In my experience, many claimants are not aware of their entitlements.
I am also worried about the changes to regulation 30 where we have the health and safety discretionary fallback. That is a mean and hard change to make. At the end of the day, the adjudication officers in my part of the country use that provision with great care and only in exceptional circumstances, which the regulation was designed to cover. The Government's proposal to change that regulation is deeply regretted.
The single payments regulations have differing rates of incidence in different regions of the country. We have had debates about that in Standing Committee. I am worried about the disproportionate effects that the changes will have on some of the regions that have traditionally relied on single payments, for whatever reason. Scotland, Northern Ireland and some other places which have a higher proportion of claims per 1,000 live claims involving single payments will be particularly hard hit. Not only that, but there will be localised effects. The whole economy of places such as Easterhouse, where I was born and brought up, in the constituency of Provan in the east end of Glasgow will have substantial sums of money withdrawn at a stroke by these regulations. That will have severe micro-economic local effects. The total number of claims paid in areas such as Scotland is traditionally higher and the regional effects will be varied and hard to bear.
I am left with the conclusion that this is a Treasury order being visited on the Minister. I do not believe that his heart is in these changes, however much he may go on about abuses. It is just taking money out of the social security system in advance of bringing in the Social Security Bill so that when the time comes he can say that it has not been as bad as some Opposition Members had expected. I certainly oppose these regulations.

Supplementary Benefit
10.14 pm
Mr. Geoffrey Dickens: When the welfare state system was introduced following Beveridge, it was considered to be a wonderful thing for the country and was the envy of the world. However, it has become a monster, because it has become universal and not selective, and it is not always targeted on the low-income families. The Conservative party wants the money to reach those who are in genuine need.
In one hand I hold a letter from the social services department at Sheffield, and in the other—I can see the hon. Member for Oldham, West (Mr. Meacher) flinching — I have a leaflet published by the social services department at Oldham, part of which I represent.
Mr. Terry Fields: On a point of order, Mr. Deputy Speaker. Is it in order, When so many hon. Members have been sitting in the Chamber for hours waiting to participate in the debate, for the Government Front Bench, through Parliamentary Private Secretaries, to feed a Back Bencher with a brief when he has been here for only five minutes and others have waited for the past hour?
Mr. Deputy Speaker: Order. The hon. Gentleman knows that that is not a matter for the Chair. Besides, the debate only started at 9.26 pm.
Mr. Dickens: How could it ever be alleged that I need feeding?
The leaflet from Oldham is paid for by ratepayers' money, to cream off taxpayers' money. If people are in need they should get help, but when they start to climb on to a gravy train, which uses a bottomless pit of money, there is no end to it. I shall explain the front cover of the leaflet. It says:
"Claim it while you can."
It is printed in three colours, and we all know from our election addresses what thousands of copies of three-colour runs on superior quality paper will have cost the ratepayers of Oldham.
The leaflet says:
"If you get: supplementary benefit, supplementary pensions, housing benefit,"—
do not leave it at that. Get the nose in the trough. It offers:
"cash help with laundry and baths, cash help with special diets"—
I do not need those—
"cash help with clothing and shoes, cash help with baby things."
I shall not go through the list, because other hon. Members wish to speak and I am a fair man.
There is a claim form for dozens and dozens of items, listed on both sides, asking whether one needs this, that or the other. A woman can go into the DHSS and say, "Last night I lost all the clothing off my washing line except for one pair of knickers." The DHSS officer will say, "We cannot have this. We must replace all the other items of clothing. Let her have"— I cannot go through the list because I would be embarrassed, but the woman can get many items of clothing, and if she has a hole in her pullover, she can have a new one.
I may have made my point in a good-humoured way, but this is a serious problem. We are the custodians of
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taxpayers' money. We have to use it in a sensible way. We are not in business to feed Socialism. Let me explain what I mean by that. It is no coincidence that most of the Opposition Members who are in the Chamber have constituencies in inner city areas. Many of their constituents enjoy rent and rate rebates and are provided with free glasses, free prescriptions and all kinds of other free benefits. They do not mind if the Labour party inspires this kind of literature. Why do they not mind? They do not mind because it is free. If they feel that they can get something free from the Government and from the ratepayers, they will continue to vote for those people. That was the downfall of Liverpool.
The Labour party has cottoned on to the fact that the people who vote for them want more and more money for things that they do not need and to which in many cases they are not entitled. That is what the Socialist party is up to, and that shame has to be exposed. I shall tell you, Mr. Deputy Speaker, why it has to be exposed. Industry, small shopkeepers and commerce pay the bulk of the rates and the bulk of the tax. Furthermore, the people who live in the outer suburbs, in constituencies such as mine, pay high taxes and high rates, and they see their hard-earned money being shovelled into a welfare state system that has become universal and not selective in helping those who are really in need.
Mr. Kirkwood: Is the hon. Gentleman able to say what proportion of the total social security budget constitutes single payments?
Mr. Dickens: It happens to be £400 million.
Does the House realise that what this Conservative Government are doing will not win local government elections or by-elections? However, they have had the guts to do something that is very much required in this country, because our welfare state system has run wild.
We want those who are really in need to be given help. That is why all our thinking is closely targeted on low-income families. We shall look after them. We are no longer prepared to tolerate a gravy train from which people demand things to which they are not entitled and which they do not even need. That is why we are taking these measures, and that has to be right. We must help those in need, but we must not be ripped off by those who do not need help.
10.23 pm
Mr. Bob Clay: Although we have heard such repulsive garbage from Conservative Members, we have not yet been given a single example of a claim that should not have been allowed. The Minister for Social Security had his colleagues rolling about in mirth when he referred to an individual who had lost a large amount of clothing. It was an interesting example for the Minister to quote. When the Foreign Secretary was Chancellor of the Exchequer he managed to lose a pair of trousers on a train, presumably when he was travelling first class. Therefore, it ill becomes Conservative Members to crack jokes about people losing clothes.
When the Minister referred to the Strathclyde check list, I thought that the most interesting and important part of that story was the letter that the claimant later wrote in which she said that she needed some of those items. Had the social worker not called, it is possible that those items

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which were needed and to which that person was entitled would not have been received. That is the most important moral to draw from that particular tale.
I should like to cite not the most overwhelming case for the need for single payments but an important and comprehensive one. If a family that has nothing and has been in some kind of residential social services home for a year or more — I have one such home in my constituency, in accommodation run partly by Dr. Barnardo's and partly by the social services—comes out of that accommodation with nothing, it no doubt horrifies Government Members to know that there is a general understanding with local DHSS offices that that family can get £800 by way of a single payment. Government Members will say that is shocking, but I should like one of them to explain how he would equip a house with furniture, carpets and curtains and with every other thing it needs for £800.
Mrs. Edwina Currie: Will the hon. Gentleman give way?
Mr. Clay: No, I will not give way. We have heard quite enough garbage and filth from the Government side without the hon. Member for Derbyshire, South (Mrs. Currie) joining in as well.
Mrs. Currie rose—
Mr. Clay: I am not giving way: the hon. Lady is wasting time.
Mrs. Currie rose—
Mr. Deputy Speaker: Order. The hon. Lady can see that the hon. Gentleman is not giving way.
Mr. Clay: That is one serious example and the Government have perpetrated a deceit in this matter because we hear how much the figures have gone up. Those figures represent claims that are paid. We hear lots of jokes about claims that perhaps should not have been made and about little bits of, perhaps, fraud here and there. The money paid out in claims was needed. The Government have not explained why the amounts have increased. We have just had a lot of hysteria about fraud. The only explanation that we have heard is that people are getting things they do not need. There has not been a word about the fact that perhaps, if a claimant has been unemployed for two or three months, it is unlikely that such a person will need new clothes in that time and the number of people having babies in a two or three-month period of unemployment may be low, but when people have been unemployed for two or three years and when over 100,000 people have been unemployed for over five years and with the percentage of the long-term unemployed going up, that is bound to give rise to claims and explains the rise in the need for single payments.
I defend the advice and welfare rights centres that have been so much abused. My local DHSS staff tell me that they are a godsend even though they have a backlog. They say that those advice centres do a lot of the work that the DHSS should be doing. They are not encouraging people to make claims willy-nilly; they are explaining to people what they are and are not entitled to and how to claim and how much money they are likely to receive. If all the people who use those centres had to go to the DHSS for long interviews, there would be ever more pressure on a system
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that is nearly breaking down as it is. The DHSS should fund those advice centres for the good and effective work they are doing on behalf of the DHSS.
A matter that has not been mentioned sufficiently in the debates is the danger that exists following the withdrawal of many of these single payments. I shall give an example from the borough of Lewisham, where I stay when I am in London. In 1985, Lewisham council tested seven second-hand cookers on sale in its area through secondhand dealers. Every one of them failed the safety regulations and the condition of one was deadly. The local DHSS and the gas and electricity boards subsequently reached an agreement that, because there were obviously no safe second-hand cookers on the market, single payments would be made for new items at the cheapest available price, £225. I dare say that all Government Members always make sure when they buy a cooker that they buy a new one, but they expect claimants to get second-hand ones that blow up and kill them or burn them.
It is an interesting admission to hear Government Members say it is shocking that claimants should have new cookers rather than buy second-hand ones that are unsafe. The likelihood, not that claimants are being forced to buy second-hand cookers, is that traders will cash in and ask ludicrous prices for them. But that is all the DHSS will supply because it will not pay for new cookers and the dangers will increase. There are many other examples, quite apart from cookers. The restriction in single payments will cause not only further poverty and hunger and lead to people freezing because they cannot afford the clothes they need; it will also cause real physical danger. There will be more fires and explosions and more poisoned water. The Government should be ashamed of themselves, not only for what they are doing but for the despicable way in which Government Members have uttered filth and garbage from the sewers of the 19th century rather than make out any sort of case.
10.29 pm
Mr. Tony Favell: As I put it to the hon. Member for Oldham, West (Mr. Meacher), it is clear that a campaign has been orchestrated by the Labour party to flood the single payment system. It is nonsense for the hon. Member for Sunderland, North (Mr. Clay) to suggest that the notices have just been sent to people who recently came out of homes. They have been sent to every pensioner and person in receipt of housing benefit throughout my borough of Stockport, without exception. Now that the Labour party has been exposed, it is embarrassed. The single payment system causes a great deal of annoyance to the low-paid hard-working people who pay taxes. It causes them enormous resentment, and rightly so.
I recently came across two families living in terraced houses subject to a compulsory purchase order. One was occupied by a widow with two young children who was working and got no supplementary benefit. She was obliged to move and buy a second-hand cooker and second-hand carpets and curtains for her new home.
Next door was a family of four, none of whom was working, was doing any training or was making any effort to get a job and, my goodness, did they scoop the pool? They got a brand-new home, while the widow who had scrimped and saved for years in the most extraordinarily

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difficult circumstances had to go round the second-hand shops. She resented that, and there are many others in the same position.
Most people, when they need clothing, furniture, carpets or curtains, have to save. [Interruption.] Me too. The sooner the social fund comes in, the better. Then people who receive single payments will have loans and repay them. That is fair.
The hon. Member for Oldham, West, who has unfortunately left his seat, said that anyone who was unemployed could not afford to pay for something which at the moment is subject to a single payment. That is patent nonsense. Millions of people during the summer of this year saw people going to Mexico with, emblazoned across their chest, "We're here thanks to the DHSS". [Interruption.] They were bragging that they were there as a result of the welfare benefit system. [Interruption.] Good luck to them. If they can manage to save to go to the World Cup in Mexico, good luck to them. But if they can save to go to Mexico, they can save to buy a hot water bottle. The sooner the regulations are introduced the better.
10.32 pm
Mr. Max Madden: We have before us tonight a Government who are presiding over record poverty. There are 7 million people in Britain living at or below the official poverty level. Earlier tonight the Government steam-rollered through the House a Bill which is designed to rob the poor of what little they have. These regulations are designed to take £100 million away from the poorest people in Britain and they are being steam-rollered through the House for the interim period between now and when the measures that we agreed earlier tonight come into effect.
As a result of the Social Security Bill, 19,000 households in my constituency will have their incomes cut. Of those, 2,700 households will have their incomes cut by more than £5 a week. The regulations will deprive already seriously disadvantaged and deprived people of essential help to enable them to survive. The Minister, who used to have a reputation as a liberal and a progressive, has treated us over so many months to a litany of measures designed to make the poor poorer and the rich richer that he lost his reputation long ago.
On the Jimmy Young programme this week, the Minister sought to justify these measures in very honeyed tones. We had the same story as he has given tonight about the check list. But he told his listeners that Members of Parliament were very lucky to have an opportunity to debate these regulations. He told them that there was no need to have a debate at all, because the new provisions would come into force on 11 August. He implied that it was only through his generosity that we would have an opportunity to debate the regulations—albeit for only an hour and a half.
This must be one of the most squalid, mean and nasty measures that this squalid, mean and nasty Government have taken since coming to office in 1979. The Minister gave the impression tonight that the regulations were being introduced because there had been an avalanche of single payments claims, and they were somehow preventing those in real need from receiving help. Listening to him, anyone would think that to obtain a single payment one
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had to be on supplementary benefit, and have less than £500 in the bank. We are dealing with people who have been unemployed for years in my constituency.
Things wear out and have to be replaced. Household items cost a lot of money. But the sort of household items that we are talking about do not cost as much as the items that Conservative Members consider to be essential. The hon. Member for Stockport (Mr. Favell) has many interests and incomes. Some Conservative Members have two or three jobs.
Mr. Campbell-Savours: He is a hypocrite.
Mr. Madden: The hon. Member for Derbyshire, South (Mrs. Currie) has a swimming pool. I am sure that she is not in any great need of a single payment.
Mr. Campbell-Savours: The hon. Member for Stockport (Mr. Favell) is a hypocrite.
Mr. Deputy Speaker: Order. The hon. Member for Workington (Mr. Campbell-Savours) must contain himself.
Mr. Madden: The Minister used to have a reputation as a progressive, but he should be deeply ashamed of this measure and of the way in which he is exploiting those who wish to claim their rights. They are entitled to those things. He has chosen to put the blame on welfare rights advisers who merely help the poor to obtain what is theirs by right. He does not care about the tax advisers or tax avoidance schemes that exist to help very rich people to obtain even more money. They do not need or deserve it, yet it is supplied at the taxpayers' expense.
The Parliamentary Under-Secretary of State for Health and Social Security (Mr. John Major)rose—
Mr. Madden: I shall not give way.
Mr. Major rose—
Mr. Deputy Speaker: Order. The Minister knows that the hon. Gentleman is not giving way.
Mr. Madden: This disgraceful measure will rob the poor of help to which they legally have a right in order to obtain the things to which they are entitled. Those things make their meagre, mean lives a little better. We are dealing not with those who can stand on their own feet and look after themselves, but with those who need and deserve help. They need these things and are legally entitled to claim them.
We shall vote against the regulations. We shall be beaten, but the verdict on this Government will be given at the next general election. We will have the political commitment to ensure that the poor of this country are given the resources that they need to climb out of poverty. We will reduce poverty and reform the social security system. At present social security workers are deeply ashamed of the inadequate service that they can give to the poor of this country. We shall give those workers the resources and the political support and commitment to tackle the poverty that the Government have created, which will be made worse as a result of these regulations.
10.40 pm
Mr. Michael Stern: I shall be brief, because I am conscious of the time. I shall try to deliver my speech at a slightly lower level of synthetic indignation than did my predecessor, the hon. Member for Bradford, West (Mr. Madden).

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It seems that two issues have not been emphasised adequately. The Opposition have rightly argued that there is a comparison — [Interruption.] Perhaps the hon. Member for Liverpool, Walton (Mr. Heffer) will shut up for a change. There is a comparison between tax reliefs, which are available, and payments under the regulations. The Opposition have made the comparison time and time again in many different ways. In both instances, payments are made as a matter of right. The Opposition have not said that where the right of tax relief has been abused or has become too expensive, no Government have ever refrained from stopping or limiting it. Why, therefore— —
Mr. Nick Raynsford: Will the hon. Gentleman give way?
Mr. Stern: No, I shall not give way. I have only one minute in which to complete my remarks.
Why do the Opposition object when exactly the same position is taken on a system which is so clearly being abused to the extent that, in the words of the famous leaflet, it can be treated only as a closing down sale?
Mr. Frank Cook: Prove the abuse.
Mr. Stern: The Opposition use their social and welfare rights arguments when talking about claimants. They do not talk to the people next door to the claimants who are extremely resentful that they are working for a living and living at a lower level than those who are living off the state. Until they understand that, they will never understand why a Conservative Government are governing the country.
10.42 pm
Mrs. Margaret Beckett: This has been an extraordinary debate. The Minister has sought to argue that the regulations are necessary because the numbers and costs of the payments being made have increased so much. He implied this evening, as he did on Monday, that this is due almost entirely to fraud. In an effort to justify what is a contemptuous allegation, he endorsed the suggestion that payments should be made for unforeseen needs only. That has been the tenor of the remarks of Conservative Members. That is not the law, and it will not be the law even when the regulations are passed tonight.
The Minister justified his insinuations by saying that weekly benefit levels have risen under the Government and that need cannot, therefore, have increased. He must be aware, though I fear that many of his hon. Friends are not, that the long-term unemployed remain on the short-term rate of benefit until they are 60, drawing over £12 a week below the income that is considered adequate for any other group drawing benefit for longer than a year. How can the Minister say that in those circumstances need cannot have increased? We know that the number of long-term unemployed increases and the length of their unemployment increases with every year that the Government remain in office.
The smugness of the speeches of Conservative Members has been intolerable. The hon. Member for Stockport, North (Mr. Favell), who does not even have the courtesy to listen to the speeches of Opposition Members, suggested that claimants should save from their weekly benefit. Does he think that he could save to buy or to replace, in the
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terms of the regulations, carpets, tables, chairs and wardrobes from £29·80 a week, which is what a single person has to live on, apart from his housing cover? Could he raise the money if he were trying to keep himself and his wife on £48·40 which is what an unemployed couple receive? It is contemptible talk—
Mr. Favell: Will the hon. Lady give way?
Mrs. Beckett: No, I shall not give way to the hon. Gentleman. It is contemptible to talk about people saving from sums of the sort that I have mentioned. Even before the unemployed reach the stage of claiming supplementary benefit, the Government have removed the payment to which they used to be entitled. The abolition of the earnings-related supplement means that a single man is nearly £20 a week worse off than he was when the Government came to power. It is grossly misleading to imply, as the Minister did in his statement on Monday and in his speech this evening, that the unemployed are better off than they were.
It seems that the Government object strongly to take-up campaigns. On Monday the Minister took credit for the improved advice services that his Department is offering, but apparently an improved advice service is acceptable only as long as nobody takes the advice. He argued at length tonight about the intolerable burden that welfare rights campaigns have imposed on staff in the context of the regulations. Most of his hon. Friends seem to swallow that argument because they are too ill-informed to realise that the announcement that the Government proposed to reduce and remove the grants in the social fund and pave the way for that by the regulations created those campaigns. The regulations are not following the campaigns; they initiated them. They are the cause of the very thing about which the Minister has been complaining.
On Monday the Minister assured one of his hon. Friends, who was worried about insulation grants, that they will not be affected by the regulations that we are discussing tonight. That is good, and of course we are pleased about that. but what it means is that those who can get a grant at all will he able to have a well insulated room with a bed, a cooker and a heater, but no curtains, no carpet, no cupboards, no chairs, no tables, no cooking utensils, no plates, no towels, and so on —[Interruption.] Conservative Members do not even know what is in the regulations. Those people cannot have those things, except what they can buy from £75 for a single person, or the princely sum of £125 for a couple. Not long ago we all saw a little story in the paper about the Prime Minister taking a special outing to somewhere in Chelsea to buy lamps for her new home. I wonder how much change she got out of £75.
I am well aware that some Conservative Members will argue that £75 or even £125 is a great deal of money, but if they compare it with the Government's own list of published costings— not exactly generous in themselves — they will see that the Government expect one to be able to get a vacuum cleaner for about £35 or a washing machine for £100. If they compare that with the £75 or £125 for a couple, which is supposed to provide for all their other needs, they may begin to understand how inadequate the measures are.
This is a contemptible measure. Conservative Members have sought to justify it by a series of contemptible

463
speeches. They have reminded us vividly in the debate that the Conservative party stands for wealth, privilege and greed, and does not care who it stands on.
10.47 pm
Mr. Newton: Perhaps my role at this stage might sensibly be to cool down some of the things that have been said in the debate, which has led to a good deal of extraordinary language, including some of the things said by the hon. Member for Bradford, West (Mr. Madden) and others, from which it has to be understood that his conclusion is that to be liberal and progressive — to attach the adjectives that he attached to me in some former incarnation—one has to be willing to preside over a degree of manifest abuse of the social security system, which is militating against the interests not just of the taxpayer, but of serious, sensible claimants throughout the country. That is the point—
Mr. Tony Banks rose—
Mr. Newton: I shall tell the House frankly that I have never seen anything liberal or progressive, or indeed sensible or capable of any other reasonable label, about allowing abuse in a system — [HoN. MEMBERS: "Prove it."]— that already does too little to ensure fairness between those who are on benefit and those who are in low-paid work but not on benefit.
The hon. Member for Oldham, West (Mr. Meacher) asked what we were doing about our worries about the unfairness of the present system towards some of the people who are not on benefit. He knows what we are doing. We propose to introduce a family credit which will double the amount going to such families, and that will significantly improve the position.
Mr. Speaker: Order. The hon. Gentleman must address the House. He should not turn his back on the Chair.
Mr. Newton: I apologise, Mr. Speaker. I do not wish to turn my back on you. I wish to turn my face to the Opposition Front Bench and ask a question which the Opposition never answer. In all this rhetoric, are the Opposition saying that they will restore any reductions and restrictions in single payments? Will that produce another bill from the shadow Chancellor?
Mr. Meacher: I shall give the Minister an answer if he wants one. The causes of the huge rise in single payments are the continuing enormous rise in unemployment, the rapid growth in long-term claimants whose needs are greatest and the inadequate rate of weekly benefit. Our answer is not to tackle the symptoms but to tackle the cause by reducing unemployment by 1 million in two years. That is the real answer. [Interruption.]
Mr. Speaker: Order. I remind the House that we are debating a prayer, and prayer time for me was always a quiet time.
Mr. Newton: The hon. Member for Oldham, West has given his answer at considerable length and that answer was no. He is not going to restore the consequences of the restrictions that we are proposing. At the end of the day, the reason why the hon. Gentleman will not restore the cuts is that he knows that, if he were a Minister, he would have to act on these problems to protect the sensible working of the social security system.
Mrs. Beckett: I should like to remind the Minister that only a few days ago my hon. Friend the Member for
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Oldham, West (Mr. Meacher) reminded him that one of our three priorities is to give the unemployed the long-term rate of benefit. They would get an immediate increase of £12 a week from a Labour Government. Is the Minister going to match that?
Mr. Newton: That is very interesting. [HoN. MEMBERS: "Answer."] The last time I did to the hon. Member for Oldham, West what I have just done, was during the debate a week or so ago when the hon. Gentleman was banging on about the £3·6 billion that he was going to spend and I said that as far as I could see it would be £3·6 billion, instead of £5·;6 billion, only if he took all the money back from those on supplementary benefit and housing benefit, leaving those people no better off than they were before. I did not get an answer to that point either. Perhaps we should have some answers from the Opposition, because we no longer know whether the Opposition will have £5 billion, £10 billion or £20 billion.
It is absolutely clear that the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) does not have the foggiest notion what the figure is and he is frightened silly by the hon. Member for Oldham, West coming to the House night after night making further promises to spend money.
The non-answer from the hon. Member for Oldham, West tonight reveals clearly that the proposal is sensible, reasonable and necessary, and I rest my case.
Mr. Tony Banks: Although the Minister has given way, he has not at any time during the course of his various rants and rambles said whether there is firm evidence of abuse of single payments. He made many claims, but he did not say that there had been any abuse. I have sat through the debate and did not hear the Minister say that.
Many people have been forced into poverty by Government policies, and because they have turned up and claimed their rights and because so many people are now in poverty, the Government have said that they will change the system and take their rights away from them.
It is strange that the Minister, who has given the House a series of anecdotes, has never been able to show that there has been abuse. All that he has said is that there has been a great deal of pressure on the system. Of course there has; it has been brought about by the economic and social policies of this Government, who have created so much poverty—
Mr. Jeremy Corbyn: And the cuts in staff.
Mr. Banks: And the cuts in staff, as my hon. Friend says. So the Minister is changing—
Mrs. Currie rose—
Mr. Banks: So the Minister is changing the system—
Mrs. Currie rose—
Mr. Speaker: Order. The hon. Lady can see that the hon. Gentleman is not giving way.
Mr. Banks: It is obscene that here we have a bunch of well-fed, contented Tory Members, many of whom turned up late for this debate, screaming abuse at welfare rights organisations which have simply pointed out to individuals that to which they are entitled. We have heard no complaints about income tax payers claiming the rights that the Government extend to them. They can afford to

465
employ expensive tax accountants and lawyers to tell them what they can claim. I have not heard the Government say that, because people are claiming those tax benefits, they must be changed. I have not heard the Government say that, because so many people get mortgage interest relief, they will abolish it, too.
We are talking about people thrust into poverty by the Government's policies claiming what is theirs by right, and the Government—
It being one and a half hours after the commencement of proceedings on the motion, MR. SPEAKER put the Question pursuant to order [22 July].
The House divided: Ayes 179, Noes 233.

Division No. 278]

[10.56 pm

AYES

Alton, David

Field, Frank (Birkenhead)

Anderson, Donald

Fields, T. (L'pool Broad Gn)

Archer, Rt Hon Peter

Fisher, Mark

Ashdown, Paddy

Flannery, Martin

Ashley, Rt Hon Jack

Foot, Rt Hon Michael

Ashton, Joe

Forrester, John

Atkinson, N. (Tottenham)

Foster, Derek

Banks, Tony (Newham NW)

Foulkes, George

Barnett, Guy

Fraser, J. (Norwood)

Barron, Kevin

Freeson, Rt Hon Reginald

Beckett, Mrs Margaret

Freud, Clement

Beith, A. J.

Garrett, W. E.

Bell, Stuart

Godman, Dr Norman

Benn, Rt Hon Tony

Golding, Mrs Llin

Bennett, A. (Dent'n & Red'sh)

Gourlay, Harry

Bermingham, Gerald

Hamilton, James (M'well N)

Blair, Anthony

Hamilton, W. W. (Fife Central)

Boothroyd, Miss Betty

Hancock, Michael

Boyes, Roland

Hardy, Peter

Bray, Dr Jeremy

Harman, Ms Harriet

Brown, Gordon (D'f'mline E)

Harrison, Rt Hon Walter

Brown, N. (N'c'tle-u-Tyne E)

Hart, Rt Hon Dame Judith

Buchan, Norman

Hattersley, Rt Hon Roy

Caborn, Richard

Heffer, Eric S.

Callaghan, Jim (Heyw'd & M)

Hogg, N. (C'nauld & Kilsyth)

Campbell-Savours, Dale

Holland, Stuart (Vauxhall)

Carter-Jones, Lewis

Home Robertson, John

Cartwright, John

Hoyle, Douglas

Clark, Dr David (S Shields)

Hughes, Dr Mark (Durham)

Clarke, Thomas

Hughes, Robert (Aberdeen N)

Clay, Robert

Hughes, Roy (Newport East)

Clelland, David Gordon

Hughes, Simon (Southwark)

Clwyd, Mrs Ann

Janner, Hon Greville

Coleman, Donald

John, Brynmor

Cook, Frank (Stockton North)

Johnston, Sir Russell

Cook, Robin F. (Livingston)

Jones, Barry (Alyn & Deeside)

Corbett, Robin

Kaufman, Rt Hon Gerald

Corbyn, Jeremy

Kirkwood, Archy

Craigen, J. M.

Lambie, David

Crowther, Stan

Lamond, James

Cunliffe, Lawrence

Leadbitter, Ted

Dalyell, Tam

Leighton, Ronald

Davies, Rt Hon Denzil (L'lli)

Lewis, Terence (Worsley)

Davies, Ronald (Caerphilly)

Litherland, Robert

Davis, Terry (B'ham, H'ge H'l)

Livsey, Richard

Deakins, Eric

Lloyd, Tony (Stretford)

Dewar, Donald

Lofthouse, Geoffrey

Dixon, Donald

Loyden, Edward

Dobson, Frank

McDonald, Dr Oonagh

Dormand, Jack

McKelvey, William

Douglas, Dick

Maclennan, Robert

Dubs, Alfred

McTaggart, Robert

Duffy, A. E. P.

Madden, Max

Dunwoody, Hon Mrs G.

Marek, Dr John

Eadie, Alex

Marshall, David (Shettleston)

Eastham, Ken

Martin, Michael

Evans, John (St. Helens N)

Mason, Rt Hon Roy

Ewing, Harry

Maynard, Miss Joan

Fatchett, Derek

Meacher, Michael

466

Meadowcroft, Michael

Short, Ms Clare (Ladywood)

Michie, William

Short, Mrs R.(W'hampt'n NE)

Mikardo, Ian

Silkin, Rt Hon J.

Millan, Rt Hon Bruce

Skinner, Dennis

Morris, Rt Hon A. (W'shawe)

Smith, C.(lsl'ton S & F'bury)

Morris, Rt Hon J. (Aberavon)

Smith, Rt Hon J. (M'ds E)

Nellist, David

Snape, Peter

Oakes, Rt Hon Gordon

Soley, Clive

O'Brien, William

Spearing, Nigel

O'Neill, Martin

Stewart, Rt Hon D. (W Isles)

Orme, Rt Hon Stanley

Stott, Roger

Owen, Rt Hon Dr David

Strang, Gavin

Park, George

Straw, Jack

Parry, Robert

Thomas, Dr R. (Carmarthen)

Patchett, Terry

Thompson, J. (Wansbeck)

Pavitt, Laurie

Thorne, Stan (Preston)

Pendry, Tom

Tinn, James

Penhaligon, David

Torney, Tom

Pike, Peter

Wainwright, R.

Powell, Raymond (Ogmore)

Wardell, Gareth (Gower)

Raynsford, Nick

Wareing, Robert

Redmond, Martin

Welsh, Michael

Rees, Rt Hon M. (Leeds S)

Wigley, Dafydd

Richardson, Ms Jo

Williams, Rt Hon A.

Roberts, Ernest (Hackney N)

Wilson, Gordon

Rogers, Allan

Winnick, David

Rooker, J. W.

Woodall, Alec

Ross, Ernest (Dundee W)

Young, David (Bolton SE)

Ross, Stephen (Isle of Wight)

Rowlands, Ted

Tellers for the Ayes:

Sedgemore, Brian

Mr. Allen McKay and

Shields, Mrs Elizabeth

Mr. John McWilliam.

Shore, Rt Hon Peter

NOES

Aitken, Jonathan

Chope, Christopher

Alexander, Richard

Clark, Dr Michael (Rochford)

Alison, Rt Hon Michael

Clark, Sir W. (Croydon S)

Amess, David

Clarke, Rt Hon K. (Rushcliffe)

Ancram, Michael

Clegg, Sir Walter

Ashby, David

Colvin, Michael

Atkins, Rt Hon Sir H.

Coombs, Simon

Atkins, Robert (South Ribble)

Cope, John

Atkinson, David (B'm'th E)

Corrie, John

Baker, Nicholas (Dorset N)

Couchman, James

Baldry, Tony

Cranborne, Viscount

Banks, Robert (Harrogate)

Crouch, David

Batiste, Spencer

Currie, Mrs Edwina

Beaumont-Dark, Anthony

Dickens, Geoffrey

Bellingham, Henry

Dorrell, Stephen

Bendall, Vivian

Douglas-Hamilton, Lord J.

Benyon, William

Dover, Den

Bevan, David Gilroy

Dunn, Robert

Biffen, Rt Hon John

Durant, Tony

Biggs-Davison, Sir John

Dykes, Hugh

Blackburn, John

Eggar, Tim

Blaker, Rt Hon Sir Peter

Evennett, David

Bonsor, Sir Nicholas

Eyre, Sir Reginald

Boscawen, Hon Robert

Fairbairn, Nicholas

Bottomley, Mrs Virginia

Farr, Sir John

Bowden, Gerald (Dulwich)

Favell, Anthony

Boyson, Dr Rhodes

Finsberg, Sir Geoffrey

Bright, Graham

Fletcher, Alexander

Brinton, Tim

Fookes, Miss Janet

Brooke, Hon Peter

Forman, Nigel

Brown, M. (Brigg & Cl'thpes)

Forsyth, Michael (Stirling)

Bryan, Sir Paul

Forth, Eric

Buchanan-Smith, Rt Hon A.

Fowler, Rt Hon Norman

Buck, Sir Antony

Fox, Sir Marcus

Budgen, Nick

Franks, Cecil

Bulmer, Esmond

Fraser, Peter (Angus East)

Burt, Alistair

Freeman, Roger

Butler, Rt Hon Sir Adam

Fry, Peter

Butterfill, John

Gale, Roger

Carlisle, John (Luton N)

Galley, Roy

Carlisle, Rt Hon M. (W'ton S)

Gardiner, George (Reigate)

Carttiss, Michael

Gardner, Sir Edward (Fylde)

Cash, William

Garel-Jones, Tristan

Chalker, Mrs Lynda

Glyn, Dr Alan

Chapman, Sydney

Goodhart, Sir Philip

467

Goodlad, Alastair

Maude, Hon Francis

Gow, Ian

Mawhinney, Dr Brian

Gower, Sir Raymond

Mayhew, Sir Patrick

Grant, Sir Anthony

Merchant, Piers

Greenway, Harry

Meyer, Sir Anthony

Gregory, Conal

Miller, Hal (B'grove)

Griffiths, Peter (Portsm'th N)

Miscampbell, Norman

Ground, Patrick

Mitchell, David (Hants NW)

Grylls, Michael

Moate, Roger

Gummer, Rt Hon John S

Montgomery, Sir Fergus

Hamilton, Neil (Tatton)

Moynihan, Hon C.

Hampson, Dr Keith

Murphy, Christopher

Hannam, John

Neale, Gerrard

Hargreaves, Kenneth

Needham, Richard

Harris, David

Neubert, Michael

Haselhurst, Alan

Newton, Tony

Havers, Rt Hon Sir Michael

Nicholls, Patrick

Hawkins, C. (High Peak)

Norris, Steven

Hawkins, Sir Paul (N'folk SW)

Onslow, Cranley

Hawksley, Warren

Oppenheim, Phillip

Hayes, J.

Oppenheim, Rt Hon Mrs S.

Hayhoe, Rt Hon Barney

Osborn, Sir John

Hayward, Robert

Ottaway, Richard

Heathcoat-Amory, David

Page, Sir John (Harrow W)

Heddle, John

Page, Richard (Herts SW)

Hickmet, Richard

Patten, Christopher (Bath)

Higgins, Rt Hon Terence L.

Patten, J. (Oxf W & Abgdn)

Hill, James

Pawsey, James

Hind, Kenneth

Peacock, Mrs Elizabeth

Hirst, Michael

Percival, Rt Hon Sir Ian

Hogg, Hon Douglas (Gr'th'm)

Porter, Barry

Holland, Sir Philip (Gedling)

Portillo. Michael

Hordern, Sir Peter

Powley, John

Howard, Michael

Price, Sir David

Howarth, Alan (Stratf'd-on-A)

Proctor, K. Harvey

Howarth, Gerald (Cannock)

Raffan, Keith

Howell, Ralph (Norfolk, N)

Ridley, Rt Hon Nicholas

Jenkin, Rt Hon Patrick

Ridsdale, Sir Julian

Johnson Smith, Sir Geoffrey

Roe, Mrs Marion

Jones, Gwilym (Cardiff N)

Rossi, Sir Hugh

Jones, Robert (Herts W)

Rost, Peter

Jopling, Rt Hon Michael

Sainsbury, Hon Timothy

Kershaw, Sir Anthony

Skeet, Sir Trevor

Key, Robert

Smith, Sir Dudley (Warwick)

King, Roger (B'ham N'field)

Smith, Tim (Beaconsfield)

King, Rt Hon Tom

Soames, Hon Nicholas

Knight, Greg (Derby N)

Steen, Anthony

Knight, Dame Jill (Edgbaston)

Stern, Michael

Lang, Ian

Stewart, Andrew (Sherwood)

Lawler, Geoffrey

Taylor, John (Solihull)

Lawrence, Ivan

Tebbit, Rt Hon Norman

Lee, John (Pendle)

Thompson, Patrick (N'ich N)

Leigh, Edward (Gainsbor'gh)

Thorne, Neil (Ilford S)

Lester, Jim

Thurnham, Peter

Lewis, Sir Kenneth (Stamf'd)

Townsend, Cyril D. (B'heath)

Lightbown, David

Trippier, David

Lilley, Peter

Viggers, Peter

Lord, Michael

Wakeham, Rt Hon John

Lyell, Nicholas

Walker, Bill (T'side N)

McCurley, Mrs Anna

Wall, Sir Patrick

Macfarlane, Neil

Wardle, C. (Bexhill)

MacKay, Andrew (Berkshire)

Watts, John

MacKay, John (Argyll & Bute)

Wells, Bowen (Hertford)

Maclean, David John

Wells, Sir John (Maidstone)

McLoughlin, Patrick

Wheeler, John

Madel, David

Wiggin, Jerry

Major, John

Winterton, Mrs Ann

Malins, Humfrey

Winterton, Nicholas

Malone, Gerald

Wood, Timothy

Maples, John

Marland, Paul

Tellers for the Noes:

Marshall, Michael (Arundel)

Mr. Peter Lloyd and

Mates, Michael

Mr. Mark Lennox-Boyd.

Mather, Carol

Question accordingly negatived.
11.8 pm
Mr. Stuart Randall: On a point of order, Mr. Deputy Speaker. I missed the last Division, which is why I am out of breath, and would like to ask your advice on how I should make representations regarding the procedure of the House. I made representations first to the Deputy Serjeant at Arms that a bus and about seven taxis were blocking the entrance to the House. He told me that today was wedding day and I got the impression that we took second place to those participating in it. We all support the wedding — [Interruption.] Some hon. Members may not support it. This is a charade. Tonight we have had a running Whip, some of us have been entertaining our wives and families — [Interruption.] I shall not tell you about the other little problem I had last week when I found—
Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. I understand the hon. Gentleman's point. I am sorry he missed the Division. I remind him that the Serjeant at Arms said that there might be difficulties today and that hon. Members should be aware of that. I shall have the matter looked into.
Mr. John McWilliam: Further to the point of order, Mr. Deputy Speaker. It seems that the Sessional Orders have been moved and accepted by the House. My hon. Friend the Member for Kingston upon Hull, West (Mr. Randall) has run into trouble. Therefore, the Sessional Orders have not been complied with.
Mr. Deputy Speaker: I am aware of the Sessional Orders. I shall have the matter looked into to see why the hon. Member was not here.
Mr. Randall: Further to my original point of order, Mr. Deputy Speaker. I recall that at the beginning of this Session, the House voted on a matter concerning the Metropolitan police. Perhaps I should quote the question that the House voted on.
Mr. Deputy Speaker: The hon. Member need not refresh my memory. I am well aware of the matter. I am aware of what has happened tonight. I assure the hon. Member that I shall have the matter looked into. It has been an exceptional day. We should move on to the business of the House.
Mr. Don Dixon: On a different point of order, Mr. Deputy Speaker. It appertains to the Wages Bill.
Mr. Deputy Speaker: I shall make an announcement about the Wages Bill which may deal with the point of order. If not, the hon. Member for Jarrow (Mr. Dixon) can raise it when we consider the Bill.
Mr. Gerald Bermingham: Further to the point of order raised by my hon. Friend the Member for Kingston upon Hull, West (Mr. Randall). Would it not be common courtesy to hon. Members if the entrance to the House and the yard around it were kept clear at times when it can be anticipated that there will be a vote? It does not seem unreasonable to anticipate votes. All hon. Members know the time of tonight's votes. Priority should be given to allowing hon. Members access to the House.
Mr. Deputy Speaker: There is no question about that. We are all aware of the Sessional Orders and the precedents. I shall have the reason why the hon. Member was delayed in getting to the House tonight looked into.
Mr. Bermingham: Is the Chair prepared to concede, bearing in mind the debate, that steps will be taken to ensure that it does not happen again and that the result of the inquiry will be reported to the House before the House rises?
Mr. Deputy Speaker: The Chair will take steps to see that the Sessional Orders are carried out.

Wages Bill
Lords amendments considered.
11.13 pm
Mr. Deputy Speaker (Mr. Ernest Armstrong): The House will wish to know that Mr. Speaker has selected two manuscript amendments tabled by the hon. Member for Kingston upon Hull, East (Mr. Prescott) and other hon. Members. Copies are available in the House and from the Vote Office. The amendments will be discussed in the appropriate groups, which are those headed by the Lords amendments Nos. 3 and 34.
Mr. Don Dixon: On a point of order, Mr. Deputy Speaker. I am pleased that Mr. Speaker has accepted two manuscript amendments. However, the Government have acted with unholy haste to try to get this shabby legislation on the statute book.
In Committee hon. Members did not have a copy of Hansard, because of the number of Bills going through the House. At that time, about 10 Bills were being considered by Standing Committees. Hon. Members were unable to avail themselves of the Hansard record of Committee sittings. The Government amended clause 26 concerning the redundancy payments scheme. Originally, the scheme was to be operative from 1 October. The Government decided that, by amending clause 26, they could save an extra £50 million. That proposal has caused complications in my constituency, where there have been massive redundancies in the shipbuilding industry. As a result of the date being brought forward, more shipyard workers were made redundant. The shipbuilding employers were not able to claim the 35 per cent. from the central fund. Therefore, more workers than necessary were made redundant to make up the shortfall.
I submit that there is no reason why the Bill should be discussed tonight. Hon. Members should have sufficient time to table amendments and consider those made by the other place. Wages councils are not discussing employees' claims pending the passage of this legislation and they hope that the Bill will be passed before the recess.
Clause 26 is sufficient reason for the House not to discuss the Bill. The redundancy payments scheme, to which employers and employees contribute, made a profit last year of £9 million.
Mr. Deputy Speaker: Order. The hon. Member is straying far from his point of order. He is arguing his case.
Mr. Dixon: I am explaining why I am raising the point of order, Mr. Deputy Speaker. I submit that the House should not proceed with the debate on the Bill.
Mr. Deputy Speaker: The only consideration for me is the decision of the House. The House has already decided that the Bill will be considered. A motion to that effect has already been passed.
Mr. Dave Nellist: Further to that point of order, Mr. Deputy Speaker.
Mr. Deputy Speaker: Order. I remind the House that the 10 o'clock business motion was carried without a Division. It stated that the Bill would be considered tonight until any hour. I cannot go against that decision.
Mr. John McWilliam: Further to that point of order, Mr. Deputy Speaker.
Mr. Deputy Speaker: Order. I am bound by the decision of the House.
Mr. McWilliam: Further to the point of order, Mr. Deputy Speaker. The business motion merely says that the Bill "may" be considered after 10 o'clock. It does not say that it "must" be considered.
Mr. Deputy Speaker: The arguments yesterday by the hon. Member for Jarrow (Mr. Dixon) were made to Mr. Speaker by other hon. Members. That is why Mr. Speaker considered the manuscript amendments. The timing of the debate is not a matter for the Chair.
Mr. Nellist: Further to the point of order, Mr. Deputy Speaker. I thank you for your ruling on the two manuscript amendments, which we submitted this afternoon in the expectation of the debate being taken later this evening.
The point of order that I raised yesterday in the presence of Mr. Speaker was considered by him on the basis that the 1984–85 report of the Committee on Procedure clearly laid down standard guidelines as to how much time should pass between consideration of different stages of a Bill. The Leader of the House was present during that exchange. At my request, the right hon. Gentleman came to the Dispatch Box. He produced an example of the last time a Bill had left the other place and arrived in the Commons the following day. In 1977, almost 10 years ago, that not unprecedented but certainly unusual mechanism was used.
I do not want to develop the arguments of my hon. Friend the Member for Jarrow (Mr. Dixon), but I wish to request a further ruling. It is clear that the Bill is being rushed through because of the change of the date in part III, which was announced on virtually the last sitting of Standing Committee K. As far as I can discover from a brief reading of "Erskine May", we may consider on the same day or subsequent day to the Third Reading in the House of Lords the final stages of a Bill in this place if there is an "emergency". How is an "emergency" defined? Is it an "emergency" if the Government want to "save" an extra £50 million from the redundancy payments scheme? That is not their money. That is a scheme into which employers and employees have paid and from which they expect to gain money when faced with the problem of job losses.
I have raised this point of order now, Mr. Deputy Speaker, because, when I raised it yesterday and Mr. Speaker kindly and carefully gave his ruling, neither he nor I was aware that at about 8 o'clock last night the Government would bring in a host of new amendments on Third Reading in the other place. Those amendments were not available to any hon. Member until later this morning. It took my hon. Friends and I some hours poring over last night's amendments—
Mr. Douglas Hogg: The hon. Gentleman was moonlighting.
Mr. Nellist: If the hon. Gentleman wants to comment, he can do so under his own steam. He should give me a little quiet while I am finishing my comments.
We were not able to consider those amendments until this morning because they were not tabled by the Government until 8 o'clock yesterday—[Interruption.]
Mr. Deputy Speaker: Order. The hon. Member for Grantham (Mr. Hogg) must contain himself.
Mr. Nellist: My legitimate point of order, not like the bogus heckling coming from the Tory Benches, is to ask you, Mr. Deputy Speaker, how, in the light of the rules that govern the House, in "Erskine May" or wherever, the Chair defines an "emergency" when it allows the Government to bring a Bill from the House of Lords into the Commons within 24 hours. I can think of several occasions in the past three years, never mind the past 10, which marked a far greater crisis for the Government to get through than merely the saving of £50 million, by creative accountancy, which has been put into a redundancy insurance fund by workers and employers in this country. I ask you to rule on that. Is this a necessary emergency to enable them to get away with this tonight?
Mr. Deputy Speaker: It is not the job of the Chair to give definitions about "Erskine May", I am glad to say. The Chair's job is to carry out the rules of the Houe and to proceed with what is in order. I understand that hon. Members may well criticise the timing and actions of the Government and so on. However, everything that is taking place is completely in order and it will be in order when we consider the Wages Bill.
Mr. Ken Eastham: Further to that point of order, Mr. Deputy Speaker. An important point has been raised by my hon. Friend the member for Jarrow (Mr. Dixon). He said that Government Departments are already interpreting law which has not even been made yet because the Bill has not been approved by the House. If that is the case, it is a serious legal principle that should be clarified. If people are being denied their rights under the present legislation because this legislation has not been introduced, it is a serious matter that should be clarified by the Chair.
Mr. Deputy Speaker: My job is to decide whether it is proper and in order to discuss the Lords amendments to the Wages Bill tonight, and it is.
Mr. Ian Mikardo: Further to that point of order, Mr. Deputy Speaker. You were good enough, in reply to my hon. Friend the Member for Coventry, South-East (Mr. Nellist), to say what you considered to be the duties of the Chair. With respect, I have always understood that one of the duties of the Chair is to protect the rights of private Members so that they can properly carry out their duties to the House and to their constituents. The procedure which is now being adopted does not provide facilities for hon. Members to carry out their duties properly.
We are dealing with a Bill of considerable complexity. It is a Bill which, as those who served on the Standing Committee will recall, involved a great deal of research to understand all its implications. It involved not only a great deal of research, but a great deal of consultation with interested parties, such as the Low Pay Unit and others. Since it is impossible for any such study of the complexity to be made and for any consultation with outside bodies to take place between 10.30 am and 11 pm on a single day, I submit that the procedure we are now having to undergo does not provide proper facilities for hon. Members to carry out their duties to the House and to their constituents. Therefore, I believe that it is right for my hon. Friends to seek your help, against the Government, to ensure that the job can be done properly and in

473
accordance with the normal procedures of the House. That can be done only if the Minister will take the Bill away and bring it back at another time.
Mr. Deputy Speaker: The hon. Gentleman has had great experience in the House. I have made arguments such as that myself, and it may be valid. However, my duty is to interpret the rights of Back Benchers in accordance with the rules and procedures of the House. All I can say is that, although we may think that the debate comes too soon after the Bill has left the other place, everything is in order. It is in order to proceed with the debate on the Lords amendments, and I am bound to allow the debate to take place.

Wages Bill
  Clause 1

    GENERAL RESTRICTIONS ON DEDUCTIONS MADE, OR PAYMENTS RECEIVED, BY EMPLOYERS
    Lords amendment: No. 1 in page 2, line 33, after first "of" insert—
    "(i)"
    The Parliamentary Under-Secretary of State for Employment (Mr. David Trippier): I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Deputy Speaker: With this it will be convenient to take Lords amendment No. 2, in page 2, line 33, after "wages" insert
    ", or
    (ii) any overpayment in respect of expenses incurred by the worker in carrying out his employment,"
    Mr. Trippier: Clause 1(5)(3) contains a provision which excludes deductions made by employers to recover earlier overpayments of wages from the requirements of part I. It is common practice in many organisations to make small overpayments of wages or expenses, for administrative convenience, which are then recovered from a later payment of wages. An example would be where final figures on bonus due or expenses claims are not available in the pay office when the computer is run, so a standard sum is paid and the balance paid or recovered later. In the Government's view, deductions for such reasons should not be caught by the Bill. Otherwise provision to make such deductions would have to be made explicitly in the contract of employment, with the result that vast numbers of contracts would have to be rewritten. An employer would also have to ensure that all workers liable to suffer such deductions had been given, at some point in advance of the first such deduction being made, a copy or explanation of the term of the contract providing for the deduction. In short, if such deductions were covered, it would lead to the need for substantial changes in administrative and personnel practice in many companies. In our view, that should not be necessary.
    The Lords amendments with which we are here concerned are intended to close a gap in clause 1(5)(a). In some circumstances, employers will seek to recover an overpayment of expenses which has been made to a worker in the course of his employment. Because expenses are not included in the definition of wages for the purposes of the Bill, they are not caught by the existing wording of clause 1(5)(a).
    474
    Let me emphasise, however, that these amendments will not affect the common law rights of workers where an employer recovers sums from wages on the ground that he had made an earlier overpayment of expenses and the worker thinks the recovery involves a breach of contract. The Bill will not prevent workers from continuing to take employers to the ordinary courts about alleged breaches of contract arising from the non-payment of expenses. Furthermore, there is no possibility that these amendments could give rise to injustice. If the worker believes the employer is deducting more than what was overpaid he can complain to a tribunal, which will determine the matter. If what is being deducted is no more than the earlier overpayment, the worker has not lost anything.
    We believe that expenses should be treated in the same way as wages concerning deductions to recover earlier overpayments. I commend these amendments to the House.
    Ms. Clare Short: There is no need to spend long on these amendments. The Opposition accept that they should be made. However, given the nature of the Bill, its mean-mindedness, the way in which it will cut the wages of some of our poorest workers, and the unreasonableness with which the Government have brought the Bill to the House when the other place finished with it only yesterday, we are inclined to be bloody-minded and to oppose amendments such as these, so that employers would have to specify in contracts the right to take back over-payment of expenses. However, we have decided to proceed on the basis of common sense, and it is obviously the case that sometimes mistakes are made and workers are overpaid wages or expenses, and it is better that these things should be settled amicably. We are not opposed to the amendments.
    Question put and agreed to.
    Subsequent Lords amendment agreed to.

  Clause 2

    DEDUCTIONS FROM WAGES OF WORKERS IN RETAIL EMPLOYMENT ON ACCOUNT OF CASH SHORTAGES ETC.
    Lords amendment: No. 3, in page 4, line 3, leave out "respect of" and insert "connection with"
    Mr. Trippier: I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Deputy Speaker: With this it will be convenient to take the following Lords amendments: No. 4, in page 4, line 7, leave out from "involving" to "of" in line 8 and insert
    "(whether on a regular basis or not)
    (a) the carrying out by the worker"
    No. 5, in page 4, line 11, at end insert
    , or
    (b) the collection by the worker of amounts payable in connection with retail transactions carried out by other persons directly with members of the public or with fellow workers or other individuals in their personal capacities:"
    A manuscript amendment to the proposed Lords amendment No. 5, at end add
    "or
    (c) the collection by the worker of amounts payable in connection with any aspect of the worker's employment."
    No. 6, in page 4, line 34, after "is" insert "or may be"
    11.30 pm
    Mr. Trippier: The first three amendments were tabled to make it clear beyond doubt that a certain category of worker that I will describe is covered by the protection of clauses 2 and 3. They involve no change of policy. On further consideration of the provisions, we have come to the view that the definition of retail employment does not make it absolutely clear that workers involved in the collection or receipt of money in connection with retail transactions but not in the retail transaction itself—that is, they are not involved in the sale or supply of goods or the supply of services, although they collect money in respect of such transactions by other people — are covered by the provisions of clauses 2 and 3, if a cash shortage occurs. This category would include cashiers who simply collect money and take no part in any service or sales activity.
    I am sure all hon. Members would agree that it is desirable that these workers should be protected by the provisions of clauses 2 and 3 if they face a deduction from wages or are asked to make payments on account of a shortage in the cash they have collected in connection with retail transactions conducted by other people. The amendments are designed to make certain that these workers are so protected and I ask the House to accept them.
    Turning to the fourth amendment, subsections (4) and (5) of clause 2 dealt with the situation where all or a part of the wages of a worker depend on the absence or extent of any cash shortage or stock deficiency. The aim of the subsections is to ensure that, if an employer pays a bonus related to the absence or size of a cash shortage or stock deficiency, any failure to pay the bonus is to be treated as a deduction from wages related to cash shortages or stock deficiencies and is covered by the protection of clause 2. This in effect means that the unpaid bonus must not exceed 10 per cent. of gross wages—that is, basic wages plus bonus.
    These provisions are designed to protect the worker in instances where employers might attempt to avoid the requirements of part I by the introduction of special bonus arrangements. However, after further consideration we believe that subsection (4)(a) as drafted might have left a small gap in the intended protection. It is the intention that the protection should cover agreements which provide for a bonus, conditional on the absence of a cash shortage or stock deficiency, where the amount of bonus is clearly spelt out according to an arithmetical formula — so much shortage, so much bonus forgone. But it is also intended to cover agreements where payment of a bonus is discretionary or conditional on a number of different factors, one of which is the absence of cash shortages or stock deficiencies. It is uncertain whether the original wording covers the second category of agreements. The amendment agreed in the Lords is designed to make the position absolutely clear and to ensure that the protection of clause 2 applies to both types of bonus agreement.
    I know that hon. Members will agree that an amendment designed to ensure that the protections in the Bill cannot be avoided is to be welcomed, and I commend it to the House. All four of these amendments are designed to ensure that workers are properly protected by part I of the Bill, and I hope the House will accept them.
    I must ask the House to resist the Opposition's manuscript amendment. Again I shall explain the objective
    476
    of the special controls in clauses 2 and 3 of the Bill. The clauses establish controls over deductions or payments on account of cash shortages or stock deficiencies from the wages of workers in retail employment. These are limited to 10 per cent. of any payment of wages to ensure that such workers are not left with little wage, due to deductions to cover shortages in the till, or stock losses. Retail employment is defined as employment involving the carrying out of a retail transaction, which is defined in clause 2.
    The amendment made in the Lords extends the definition of retail employment to include those collecting money in respect of retail transactions carried out by others. However, the Opposition amendment further extends the definition of retail employment to cover work involving the collection by the worker of amounts payable in connection with any aspect of his employment. This takes the definition of retail employment right outside the area of retailing as the ordinary man or woman understands it, to cover all activities involving the collection of money in the course of employment. Conceivably, even the collection of money for an office party would be defined as retail employment.
    Ms. Clare Short: That is not part of the job.
    Mr. Trippier: The hon. Member for Birmingham, Ladywood (Ms. Short) says it is not part of the job, but it is tied in with the employment of the people employed in the firm.
    For that reason, the amendment runs against the basic principles of clauses 2 and 3 as argued throughout the passage of the Bill. Those principles are, first, that the 10 per cent. limit is a special protection to meet a particular need and is specific to those involved in the area of retail employment as that term is normally understood. Secondly, it is in the specific area of retail employment involving transactions with the public that there has been public concern about excessive deductions because of cash shortages or stock deficiencies. Thirdly, it has never been an objective of the Bill to limit contractual deductions from wages in respect of the disappearance of the employer's property or cash where the worker is not involved in retail transactions with the public or where he works in an industry that does not have such transactions. I ask the House to reject the amendment.
    Mr. Mikardo: Throughout the proceedings in the Standing Committee, the Minister had great difficulty in finding illustrations of cases to support his arguments. When he did find examples, in nearly every case under pressure they proved false and he had to abandon them. He has given as an example that cash collected by somebody for an office party falls within the definition of the manuscript amendment tabled by my hon. Friend the Member for Birmingham, Ladywood (Ms. Short). [Interruption.] As she has just said in a barely audible aside, that is rubbish.
    The Minister said that a collection for an office party was connected with the job, but I do not know, and I ask him whether he knows, of anybody with a contract of employment in which the job description specifies that it is a part of his job, if he is engaged in retailing or in any form of employment in which he handles his employer's cash, to collect cash for office parties. That is fantastic, imaginary, fairy-tale nonsense. If that is the only ground

    477
    the Minister can put forward—and it was the only one that he did put forward—for resisting this amendment, it is a pretty poor performance.
    Mr. Richard Wainwright: The performance of the Minister makes it clear that it is not only the Opposition parties who are suffering from the undue haste of the Government but also the Minister himself, because he has manifestly lacked time for preparation. He was wide of the mark when he said rather pompously that the manuscript amendment further extended the definition of retail employment quite outside retailing. That is not so, because the clause deals only with matters in connection with retail employment.
    I support the manuscript amendment, although not with all the arguments on which I pride myself I might have thought up if the Government had given me time to prepare. This unseemly haste has crippled them as well as the Opposition parties. One of the worst features of part I of the Bill is that it sweeps away from those outside the narrow definition of retail employment the requirement of fairness and reasonableness that was in the Truck Acts.
    In many ways the Government are going back 100 years —we all know that from their general economic policy — but it is going a bit too far to go back nearly a century by reversing what the old Truck Acts, God bless them in their antiquity, provided. Under the Truck Acts, a deduction from any worker's wages, whether he was in retail or not, had to be fair and reasonable. I need only direct hon. Members' attention to the magnificent speech of Lord Denning in another place on this matter to show how perverse the Government have been.
    I agree that the manuscript amendment is not an ideal way of helping to remedy the defect—it is not—but the Government have left us no choice. In another place, and with no argument on their side, they rejected the idea of a non-statutory code of practice to be circulated to all employers. I thought that that was the very minimum that a civilised Government would allow. Yet, in spite of eloquent speeches in favour of a code of practice, they refused to have it.
    Therefore, we are reduced to this second-best device in the manuscript amendment, which would have the valuable effect of extending to at any rate a few more workers protection against limitless arbitrary deductions. It would still leave a regrettably large number of workers subject to arbitrary deductions without even the basic requirement that they must be fair and reasonable. That is a bad position. It has been aggravated by the haste in which all this has been brought forward this evening, but it is better to support the amendment than to leave the matter to fester. I recommend my hon. Friends to do so.
    Mr. Eastham: In Committee and again tonight the Minister appears to have been riddled with guilt. In his heart he recognises that this is a rotten Bill. He has trotted out again tonight, as he did on numerous occasions in Committee, statements about the right to go to tribunals. However, he will recall that when we challenged him on that point he said that he hoped that people would not go to tribunals too often because they might clog up the works. That was a confession that he really did not believe in using the tribunal procedure. But tonight he came to the Dispatch Box and said that there is nothing to prevent people from exercising their right to go to tribunals and
    478
    he then trotted out the usual line that this measure is designed to protect the workers. He has said that several times.
    The Bill is riddled with examples of workers' protections being taken away. If the Bill is enacted there will be no protection for anyone below the age of 21. Yet the Minister will try to make it sound good. It is mealy-mouthed to say that this measure is included to protect and improve the legislation. We know that the Bill is riddled with examples of where workers are not protected.
    The Minister has been programmed, Civil servants present him with documents and he stands at the Dispatch Box and reads them out. I do not believe that he has any conviction about why he is requesting the House to approve the Bill.
    Tonight the Minister gave us a classic example of that when he talked about office parties. Anybody would think that people in their places of work go to parties about 50 times a year. Usually, they are lucky to go to office parties once a year to celebrate Christmas. We are not talking about parties once a week, for 50 weeks every year. Yet that is the inept and weak argument that the Minister puts forward to justify his case. The manuscript amendment offers reasonable protection, and I hope that the House will support it.
    11.45 pm
    Ms. Clare Short: The purpose of the manuscript amendment is to extend the 10 per cent. protection. At present that protection is given by the Government only to those workers in the retail sector who suffer cash shortages or stock dificiencies. Only then is there a limit on the deductions that workers can be subjected to for disciplinary reasons. Like the hon. Member for Colne Valley (Mr. Wainwright), who spoke for the Liberal party, we believe that the provisions in this Bill and the sweeping away of the Truck Acts will lead to a massive increase in the use of deductions for disciplinary purposes. Workers can in future expect large sums to be taken out of their pay packets because their employers have decided that they have behaved improperly.
    In Committee, the Minister gave examples of the sort of things that might lead employers to impose deductions. He spoke about lateness, absenteeism and perhaps a failure to comply with the health and safety regulations. Someone who had missed time at work through ill health might have money taken from his pay packet as well, because the employer might believe it to be absenteeism. The belief that failure to comply with health and safety regulations should lead to deductions is quite frightening, because we all know that good health and safety practices depend on a good spirit of co-operation and will not be helped by punitive sanctions.
    We argued at length in Committee that the old provisions of the Truck Acts, which required that any deductions should be fair and reasonable, should be reinserted in the Bill. But that was rejected by the Government. We then argued that at the very least the 10 per cent. limitation should be applied to all workers in all circumstances — that it should not be possible for employers to deduct more than 10 per cent. from anyone's wages in any one week—but the Government rejected that, too.
    Through the manuscript amendment, we seek to apply the 10 per cent. protection to all workers who are required to handle money as part of their job. What could be more

    479
    reasonable than that? The Minister is wrong to say that that would apply to collections for office parties. As my hon. Friend the Member for Bow and Poplar (Mr. Mikardo) clearly stated, no one has a job description that includes the organisation of office parties. The manuscript amendment makes it clear that this protection would apply also to workers who were required to handle money in the course of their work.
    Under the Bill, if workers are required to handle money, they may well be subjected to deductions. They should be protected by the 10 per cent. provision. If the Government had any grace, they would accept the amendment. But no, the Minister dismisses it without putting up any reasonable argument. We welcome amendments Nos. 3, 4 and 5. Throughout the passage of the Bill we have fought for, and won, marginal improvements in the protection of workers even though we reject the Bill and find it deeply offensive.
    The other amendments slightly extend the protection of the 10 per cent. limit to those who handle cash in connection with retailing but who might not be defined as being engaged in retailing. I think that the Minister gave the example of someone who had collected the cash after goods had been bought from someone else who may not have been protected by the Bill as drafted. That person would now he protected. That is a small improvement that will affect a relatively small group of workers, but we welcome it.
    We also welcome amendment No. 6, which ensures that the 10 per cent. protection applies to workers on a bonus scheme that makes their wages dependent on perhaps an absence of cash shortages or stock deficiencies. The wage that the 10 per cent. is calcultated on would include, not exclude, the bonus, which would make a loophole in the Bill that would allow employers to make even larger deductions. Not being confrontationist and unreasonable like the Minister, we welcome his amendments. It is a pity that he is not willing to accept the substantive amendment.
    Mr. Trippier: I was grateful to the hon. Member for Manchester, Blackley (Mr. Eastham) when he said that I was trying to make the measure sound good. I was trying to make my argument sound good, and I think that the news was good in my initial address to the House. The hon. Member for Birmingham, Ladywood (Ms. Short) has admitted that the Opposition welcome the fact that the Government have moved on several issues. I found it confusing when the hon. Member for Blackley said that I lacked conviction. He cannot have it both ways. He cannot be heard to say that I was trying to make my remarks sound good and follow that by saying that I lack coviction.
    Ms. Clare Short: My hon. Friend the Member for Manchester, Blackley (Mr. Eastham) was trying to be nice to the Minister.
    Mr. Trippier: That is characteristic of the hon. Gentleman. It was uncharacteristic of the hon. Member for Bow and Poplar (Mr. Mikardo), however, to be unfair to me. The hon. Gentleman is quite an expert on giving certain examples—for instance, "What does the Minister think would happen if this, that and the other were to apply in a small business?" I tried to give some examples of my own. If the hon. Gentleman reads the Hansard reports of our proceedings in Committee, he will find that we fairly balanced out the examples that we presented. I shall give the hon. Gentleman a few more examples
    480
    shortly. I shall think of as many as I can while I am on my feet. Perhaps the hon. Gentleman will forgive me if on this occasion I do not promise to write to him with a series of examples.
    I gave the example of a collection for an office party because the amendment is s incredibly wide in its definition. It reads:
    "the collection by the worker of amounts payable in connection with".
    That embraces any aspect of a worker's employment. I gave an example— the hon. Member for Bow and Poplar plays this game, too—which was extreme, but there are others.
    Mr. John Evans: The example of a collection for an office party was absurd.
    Mr. Trippier: If that was absurd, what about this one? Let us suppose that an employee collects the wages from the bank—
    Mr. Peter Thurnham: Will my hon. Friend give way?
    Mr. Trippier: I must complete my example.
    Let us suppose that an employee collects the wages from the bank for distribution by the employer. What about the collection of trade union dues?
    Mr. Eastham: I am obliged to the Minister for giving us the example of an employee going to a bank to collect the wages. I thought that security firms were used to undertake such dangerous and precarious tasks. What is happening these days? Are employees expected to collect a few thousand quid for their employers and to be at risk if the money is lost? Is that what he is saying?
    Mr. Trippier: I am amazed that the hon. Gentleman has advanced that argument. One of the reasons for repealing the Truck Acts was to try to pay employees in a cashless form. I think that I have given a good example. The hon. Member for Colne Valley has directed attention to "any" in the context of anything that could be linked with employment. Surely the example that I gave to the hon. Member for Bow and Poplar initially was very fair.
    Ms. Clare Short: If someone is sent to the bank to collect the wages and some of the money disappears, is the Minister suggesting that that person will be dealt with by means of a deduction from his wages rather than by calling, in the police? I think that is another absurd example.
    Mr. Trippier: I am not responsible for tabling the amendment that we are now considering. I honestly think that Opposition Members should have considered more carefully what they are tabling. The hon. Lady seems to suggest that it is a good thing—
    Mr. Evans: The Minister's stupid examples prove that he cannot even grasp the purpose of the amendment.
    Mr. Trippier: With respect to the hon. Gentleman, on such matters he is not quite the expert; he has not been as involved in the legislation as some of his hon. Friends. I welcome his interventions on most occasions, but on this occasion, as the intervention was from a sedentary position, perhaps he will allow me to refer to another example, although that is hazardous, because, after every example I now give, someone will leap up and try to question it. The point that I am trying to make is that there are so many different examples that one could give because the amendment is so wide.
    Mr. Thurnham: As we are thinking of examples, may I remind my hon. Friend of an example that we discussed in Committee of a company that was controlled by the previous Labour Government, Sealand Petroleum Ltd., which had the largest policy of deductions of any of the firms that we considered? It deducted 25 per cent. of pay.
    Mr. Trippier: I thank my hon. Friend for raising that point. When the hon. Member for Blackley made his speech, he said that I was trying to make the measure sound good, and so on. He referred several times to the word "protection". I have used it in my speeches many times in Committee. But the law as it presently stands, before the Bill becomes an Act of parliament, allows deductions to be made at the rate of 100 per cent. We are building in protection for people who are particularly involved in the retail sector by limiting the deductions to 10 per cent. on a pay day.
    Ms. Clare Short: Why not apply the protection to more workers?
    Mr. Trippier: The reason is obvious. We went through the consultation process — I referred to that on many occasions in Committee—and there was no demand for the protection to be more widespread. It is in retail employment that those problems have arisen in the past.
    Mr. Eastham: In view of the fact that the Minister is choosing to go back on the old ground of our inquiry in Committee, may I remind him that we pointed out on numerous occasions that we objected most strongly that the employer could make an arbitrary decision to make deductions from pay? We said that he should go through the process of law and prove his entitlement. Under this proposal he will not need to have any other legal right than the Bill.
    Mr. Trippier: We are in danger of rehearsing many arguments that we discussed in Committee. The truth is that the Opposition would accept—I am sure that the hon. Gentleman, in his heart of hearts does accept—that we are building in added protection for the worker with this part of the Bill. The hon. Gentleman was kind enough to admit that in Committee.
    On this group of amendments, and specifically on the Opposition amendment, the hon. Member for Ladywood suggests that, as a result of the Bill becoming law, masses of money will be taken out of employees' wage packets.
    Ms. Clare Short: And deductions will increase.
    Mr. Trippier: Frankly, I have never heard so much nonsense. I believe that the reverse will be the case.
    Ms Clare Short: That is speculation.
    Mr. Trippier: It is speculation and hypothesis at this stage, but we would not introduce a piece of legislation such as this if we thought that that would happen. It is clear to any observer that this part of the Bill gives the worker more protection than he enjoys at the moment.
    I ask the House to reject the Opposition amendment.
    Mr. Mikardo: As the Minister appeared to have the leave of the House to speak for a second time without asking for it, may I assume that I have similar leave and put a point—[HoN. MEMBERS: "No."] Why is not sauce for the goose sauce for the gander?
    We have had another example of the Minister flapping around without direction—a bit like a pterodactyl that
    482
    has strayed into the wrong geological age—as soon as he strays from the bits of paper that his advisers give him. We saw an example of that a moment ago with the Minister's nonsense about people going to collect money from banks. My hon. Friend the Member for Birmingham, Ladywood (Ms. Short) was right to make her intervention. Does the Minister really mean that if someone goes to collect money from the bank for an employer, gets mugged on the way back and the money is taken away, the employer can deduct that money from the employee at the rate of 10 per cent. every week?
    12 midnight.
    We are not dealing in theories. Unhappily, we know that many people have been mugged after collecting money from the bank. We are almost at the stage when it is dangerous to be a bank robber, because a bank robber is liable to be mugged on his way to the escape car after robbing a bank. The Minister is saying that an employee who may unwillingly and reluctantly go to collect money and who gets mugged will have the money deducted from his wages. How can the Minister call that a good example? Ye gods and little fishes!
    Mr. Deputy Speaker: I will put the Question on Lords amendments Nos. 3 and 4 and then on the manuscript amendment. That should help the House to understand how this will be done.
    Question put and agreed to.
    Subsequent Lords amendment agreed to.
    Lords amendment: No. 5, in page 4, line 11, at end insert ", or
    (b) the collection by the worker of amounts payable in connection with retail transactions carried out by other persons directly with members of the public or with fellow workers or other individuals in the personal capacities;"
    Read a Second time.
    Manuscript amendment proposed to the Lords amendment: in line 6, at end add—
    "or
    (c) the collection by the worker of amounts payable in connection with any aspect of the worker's employment."—[Mr. Nellist.]
    Question put, That the amendment be made:—
    The House divided: Ayes 40, Noes 111.

    Division No. 279]

    [12.04 am

    AYES

    Ashdown, Paddy

    Livsey, Richard

    Banks, Tony (Newham NW)

    Lloyd, Tony (Stratford)

    Bermingham, Gerald

    McKay, Allen (Penistone)

    Boyes, Roland

    Maclennan, Robert

    Brown, Gordon (D'f'mline E)

    McWilliam, John

    Caborn, Richard

    Michie, William

    Clay, Robert

    O'Neill, Martin

    Clwyd, Mrs Ann

    Owen, Rt Hon Dr David

    Cunliffe, Lawrence

    Parry, Robert

    Davies, Rt Hon Denzil (L'lli)

    Patchett, Terry

    Davies, Ronald (Caerphilly)

    Pendry, Tom

    Dixon, Donald

    Pike, Peter

    Eastham, Ken

    Powell, Raymond (Ogmore)

    Evans, John (St. Helens N)

    Randall, Stuart

    Fisher, Mark

    Short, Ms Clare (Ladywood)

    Godman, Dr Norman

    Skinner, Dennis

    Hogg, N. (C'nauld & Kilsyth)

    Smith, Rt Hon J. (M'ds E)

    Home Robertson, John

    Wainwright, R.

    Hughes, Simon (Southwark)

    John, Brynmor

    Tellers for the Ayes:

    Kirkwood, Archy

    Mr. David Nellist and

    Leighton, Ronald

    Mr. Ian Mikardo.

    483

    NOES

    Amess, David

    Jones, Gwilym (Cardiff N)

    Ashby, David

    Jones, Robert (Herts W)

    Atkins, Rt Hon Sir H.

    Jopling, Rt Hon Michael

    Baker, Nicholas (Dorset N)

    Key, Robert

    Beaumont-Dark, Anthony

    King, Roger (B'ham N'field)

    Benyon, William

    Lang, Ian

    Bevan, David Gilroy

    Lawrence, Ivan

    Biffen, Rt Hon John

    Lee, John (Pendle)

    Boscawen, Hon Robert

    Leigh, Edward (Gainsbor'gh)

    Bottomley, Mrs Virginia

    Lennox-Boyd, Hon Mark

    Bowden, Gerald (Dulwich)

    Lester, Jim

    Bright, Graham

    Lightbown, David

    Budgen, Nick

    Lilley, Peter

    Burt, Alistair

    Lord, Michael

    Butterfill, John

    Lyell, Nicholas

    Carlisle, John (Luton N)

    MacKay, John (Argyll & Bute)

    Carttiss, Michael

    McLoughlin, Patrick

    Cash, William

    Malone, Gerald

    Chapman, Sydney

    Marland, Paul

    Chope, Christopher

    Mates, Michael

    Clarke, Rt Hon K. (Rushcliffe)

    Mather, Carol

    Coombs, Simon

    Maude, Hon Francis

    Cope, John

    Mayhew, Sir Patrick

    Corrie, John

    Merchant, Piers

    Crouch, David

    Miller, Hal (B'grove)

    Currie, Mrs Edwina

    Mitchell, David (Hants NW)

    Evennett, David

    Moate, Roger

    Farr, Sir John

    Moynihan, Hon C.

    Favell, Anthony

    Neale, Gerrard

    Fookes, Miss Janet

    Neubert, Michael

    Forsyth, Michael (Stirling)

    Nicholls, Patrick

    Forth, Eric

    Norris, Steven

    Fox, Sir Marcus

    Onslow, Cranley

    Freeman, Roger

    Osborn, Sir John

    Gale, Roger

    Page, Richard (Herts SW)

    Galley, Roy

    Patten, Christopher (Bath)

    Garel-Jones, Tristan

    Portillo, Michael

    Goodlad, Alastair

    Powley, John

    Gregory, Conal

    Roe, Mrs Marion

    Griffiths, Peter (Portsm'th N)

    Sainsbury, Hon Timothy

    Ground, Patrick

    Shersby, Michael

    Gummer, Rt Hon John S

    Smith, Tim (Beaconsfield)

    Hamilton, Neil (Tatton)

    Stern, Michael

    Hargreaves, Kenneth

    Stewart, Andrew (Sherwood)

    Harris, David

    Thompson, Donald (Calder V)

    Haselhurst, Alan

    Thompson, Patrick (N'ich N)

    Hawkins, Sir Paul (N'folk SW)

    Thurnham, Peter

    Hayes, J.

    Trippier, David

    Hayward, Robert

    Wakeham, Rt Hon John

    Heddle, John

    Watts, John

    Hickmet, Richard

    Wells, Bowen (Hertford)

    Hind, Kenneth

    Wheeler, John

    Hirst, Michael

    Wood, Timothy

    Hogg, Hon Douglas (Gr'th'm)

    Howarth, Alan (Stratf'd-on-A)

    Tellers for the Noes:

    Howarth, Gerald (Cannock)

    Mr. Tony Durant and

    Jenkin, Rt Hon Patrick

    Mr. Peter Lloyd.

    Jessel, Toby

    Question accordingly negatived.
    Lords amendment No. 5 agreed to.

  Clause 4

    PROVISIONS SUPPLEMENTARY TO SECTIONS 2 AND 3
    Lords amendment: No. 7, in page 7, line 1, leave out "whether or not" and insert "notwithstanding that".
    Mr. Trippier: I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Deputy Speaker: With this it will be convenient to take the following Lords amendments: No. 8, in page 7, line 16, leave out
    "receive any amount from the worker on account"
    and insert
    "recover an amount from the worker in respect"
    484
    No. 9, in line 38, at end insert
    "; and references in this Part to the recovery from a worker of an amount in respect of a cash shortage or stock deficiency accordingly include references to the recovery from him of an amount in respect of any such conduct or event as is mentioned in paragraph (a) or (b)."
    No. 11, in clause 7, page 10, line 25, leave out "section 121(2)" and insert "paragraphs (a) to (d) of section 122(4)".
    No. 12, in line 27, leave out "and" and insert—
    "( ) statutory sick pay under Part I of the Social Security and Housing Benefits Act 1982; and".
    No. 13, in line 29, leave out "that" and insert "the 1978".
    No. 32, in schedule 5, page 40, line 34, at end insert—

    "1982 c. 24.

    Social Security and Section 23A(2)." Housing Benefits Act 1982.

    No. 33, in page 40, leave out lines 35 and 36.
    Mr. Trippier: Lords amendment No. 7 is designed to clarify the requirements of clause 4(3). The present wording of subsection (3) might suggest that, even if a payment made on or after the date of a worker's final instalment of wages fails to satisfy the requirements of clause 1(2), there is some merit in considering whether it satisfies the time limit in clause 3(3)(b). This is clearly undesirable. Replacing the words "whether or not" by "notwithstanding that" improves the clarity of the clause and makes it apparent that, if the requirements of either clause 1(2) or clause 3(3)(b) are not satisfied, there is no need to look at the requirements of the other clause. The amendment is intended to clarify the position to help employers and workers, and I ask hon. Members to accept it.
    Lords amendment No. 8, which should be read with Lords amendment No. 9, was tabled in the interests of consistency and clarity. It brings the wording of clause 4(5) into line with subsection (4) of clause 4 by changing subsection (5) to read
    "the employer … is entitled to recover any amount from the worker in respect of a cash shortage or stock deficiency",
    rather than
    "the employer is entitled to receive any amount from the worker on account of a cash shortage or stock deficiency."
    The amendment thus ensures that language is used consistently in subsections (4) and (5). The two amendments together also clarify the extent of the protection provided by subsection (5) of clause 4.
    12.15 am
    The words added by amendment No. 9 at the end of subsection (6) of clause 4 make it clear that, in proceedings by employers to recover amounts from workers, a court is required to limit the rate at which it orders the worker to make payments to the employer so that the 10 per cent. limit is not broken if the amount which the employer is entitled to recover is in respect of a cash shortage or stock deficiency with its wider meaning, that is embracing deductions and payments on account of conduct leading to a shortage or deficiency. The amendments thus help the worker and close a small possible loophole. I believe that these amendments achieve the clarity we seek. They help to ensure that the protection given to workers by the Bill cannot be evaded, and I commend them to the House.
    Amendments Nos. 11, 12 and 13 merely update a reference in the Bill to another piece of legislation and are of no consequence in terms of policy.

    485
    There is a reference in clause 7(1)(d) to section 121(2) of the Employment Protection (Consolidation) Act 1978. This section of the 1978 Act will be repealed when a provision of the Insolvency Act 1985 is brought into operation next December. The amendments simply delete the reference to section 121(2) and insert other references which achieve the same effect.
    Amendment No. 32 is a straightforward amendment. Section 23A(2) of the Social Security and Housing Benefits Act 1982, inserted by the Health and Social Security Act 1984, schedule 7, paragraph 8, applies the Truck Act 1896 to agreements to make deductions from statutory sick pay. Clause 11 repeals the Truck Act 1896. However, as statutory sick pay is within the definition of wages in clause 7, the provisions on deductions in part I will apply to it. Section 23A(2) is, therefore, redundant and can be repealed. This is achieved by the amendment.
    Amendment No. 33 is a purely technical amendment, which removes a provision of the Building Societies Bill from the list of provisions to be repealed by the Wages Bill. That provision amends the Payment of Wages Act 1960, which is itself repealed by the Wages Bill. The amendment is needed because part I of the Wages Bill may well come into operation before the Building Scocieties Bill.
    In general, these amendments are all technical amendments tabled in the interests of clarity and consistent use of language, and to update redundant references. I ask the House to agree to them.
    Ms. Clare Short: We welcome amendment No. 7 because it is another minor expansion of the protection afforded to workers. When the Bill was originally drafted, it provided that an employer could go back indefinitely in time to find stock shortages or cash deficiencies and then make a deduction. We sought a change in the Bill to limit to 12 months the length of time an employer can go back, which was some improvement.
    We are unhappy that the Bill provides that the whole of a worker's final wage can be confiscated by his employer, and even more unhappy that sickness and maternity pay are included in wages that can be confiscated for disciplinary reasons. But this amendment at least ensures that when an employer seeks to take large chunks of a final payment of wages, he can go back only 12 months to find a cash deficiency or stock shortages.
    As we said in Committee, there was a real danger that, after a worker had worked happily for an employer for many years, they might then fall out, and the employer might seek to penalise the worker who was leaving by going back over many years, claiming that there were shortages and stock deficiencies which it would be virtually impossible to disprove.
    We also support amendments Nos. 8 and 9 which limit to 10 per cent. the amount a court can deduct for behaviour leading to a stock shortage or cash deficiency. Although it is only minor, it is a slight extention of the protection in the Bill.
    I ask the Minister a question on amendment Nos. 11, 12 and 13. The Minister told us that the reference in the new legislation is similar to that in the old that has been removed. However, he has not specified what the differences are. If they are similar but not the same, it is important that we know what the differences are.
    486
    I have said that we object strongly to the inclusion of sick pay in the list of pay that can suffer deductions. That is referred to in another amendment. We fought the Government on that. We failed, in the past, to move similar amendments. The amendments are technical and simply tidy up the Bill. We have no objection to them.
    Mr. Trippier: In response to the hon. Lady's question, there are no differences.
    Question put and agreed to.
    Subsequent Lords amendments agreed to.

  Clause 6

    SUPPLEMENTARY PROVISIONS RELATING TO COMPLAINTS
    Lords amendment: No. 10, in page 10, line 7, after "of" insert "any provision of this Part"
    The Paymaster General and Minister for Employment (Mr. Kenneth Clarke): I beg to move, That this House doth agree with the Lords in the said amendment.
    The amendment was tabled by my noble Friend to honour an undertaking that he gave in Committee in the other place. It strengthens the provisions of the Bill from the point of view of the worker. The Bill as it was previously drafted made it clear that any agreement between an employer and employee that sought to exclude the complaints procedure would have no validity. The amendment makes it clear that any provision in any agreement that tries to exclude or limit the operation of any provision of part I will be void. The result is that no worker can come under pressure to agree to abrogate his rights as provided by part I.
    Mr. Nellist: As the Paymaster General has said, amendment No. 10 makes void any provision in any agreement to exclude or limit the rights of a worker to go to an industrial tribunal in respect of the unauthorised deductions that appear in clause 5. The interesting point about the amendment and the industrial tribunals to which it refers is that during the lengthy debates in Committee the industrial tribunals were the life-line that the Government offered workers to deal with all the problems that we thought could arise from part I.
    This afternoon, with my comrades, I predicted — I almost ran a raffle on it—how long it would take the Minister to refer to industrial tribunals. He did so in less than three minutes in his first contribution from the Dispatch Box. That is indicative of the fact that the industrial tribunal system is what the workers will need should there be any problems with the introduction of the legislation. Obviously the Lords amendment is designed to compound and expand on that premise put forward in Committee.
    Committee Members argued against the amendment. The whole ethos of this part of the Bill is the presumption that a worker is guilty of an offence that has led to an alleged shortage. The Government say to such a worker, "Go and prove your innocence before an industrial tribunal." Therefore, an employer becomes the judge and jury. He decides whether a worker is guilty. A worker has to prove his innocence. That is a complete turning on its head of what I was taught in school. No doubt other hon. Members were taught that the basic concept of British justice is that a person is innocent until he is proved guilty. The Government have done a 180 degree U-turn, or S-bend, in their treatment of workers.

    487
    Committee Members argued—this is crucial to Lords amendment No. 10—that for workers to be offered that lifeline meant a loss to them of some enormity. It may be that as a matter of principle a worker wants to prove his innocence in an industrial tribunal, but he would probably have to lose a day's pay to take that opportunity.
    Mr. Richard Caborn: It may be two.
    Mr. Nellist: As my hon. Friend says, it may be two. The geographical spread of industrial tribunals is not such that workers have only to walk to the end of their street to go to one. In many cases they have to travel miles, and that involves considerable travel expenses. It is not unknown for industrial tribunals to adjourn on one day and give a verdict the next. That involves overnight accommodation, and so on. Those were the basic points of disagreement. All those costs could be doubled if the worker, on a point of principle, wanted to bring a colleague from his work place as witness to back up his case.
    Mr. Caborn: Does my hon. Friend agree that the pre-hearing assessments are doubling all these costs, because of the legislation brought in by this Administration? Because of the geographical spread of those involved, the hearing could take four of five days in respect of the limited amount that the employer is trying to take off the employee.
    Mr. Nellist: My hon. Friend, with his great shop floor experience and experience of industrial tribunals, has anticipated one of the points that I shall make later. He has made a good point about the potential burdens on workers who exercise their rights. This clause carries a series of caveats because of the expense imposed on the workers.
    As ever, even when we are lucky enough to have a few weeks between a Bill being passed in the Commons and being considered in the other place, parallel developments take place about which no one tells Committee Members. One matter to which the Paymaster General and the Under-Secretary of State did not refer, and which was not considered in the other place, has a great bearing on the amendment. I am referring to a press release put out by the Department of Employment on 18 June, entitled:
    "Government seek views on industrial tribunal fee proposal".
    It mentioned the White Paper, Cmnd. 9794, "Building Businesses … Not Barriers" and it contained a proposal to charge a £25 fee for every one using the industrial tribunal system.
    In Committee the Minister gave the arguments for the industrial tribunal system, but the press release contains all the arguments against it. It states:
    "The main problem employers have encountered with employment protection legislation is the cost and management effort required to deal with ill-founded claims to industrial tribunals which also result in considerable public expenditure though they may cost the applicant little or nothing."
    I disagree with that. The press release continues:
    "The Government are therefore considering introducing a requirement for applicants to pay a fee, perhaps £25, when making an application to an industrial tribunal. Such a fee would be refundable if an applicant won the case at the tribunal or a subsequent appeal, or if the claim were withdrawn before the date for a full tribunal was fixed."
    On the one hand, despite the fact that the Bill is designed to presume their guilt, the Government are offering workers the chance to prove their innocence by
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    going to an industrial tribunal, but on the other hand, they are seeking to discourage workers from using that mechanism by charging a fee of £25 before they put any evidence to the tribunal.
    Mr. Mikardo: It is even worse than my hon. Friend says. The Government are not just discouraging people from going to the tribunals. They have built a barrier in a paper called "Building Businesses … Not Barriers".
    Mr. Nellist: That is absolutely true. It is a little difficult, because the press release and the White Paper do not make it clear whether all cases go before industrial tribunals or whether only unfair dismissal or sexual discrimination cases do so. In any case, the consultation period ends in September. Tonight we are asked to accept on our constituents' behalf the use of industrial tribunals with the possibility that, in a couple of months, the Government will bring forward their proposals to introduce a £25 fee.
    Earlier, Mr. Deputy Speaker, I raised our difficulties with you, because the Bill had received its Third Reading in the other place only last night and it was not until this morning that we saw the Government's final amendments when they were printed and available in the Vote Office. There has not been much time for people to get in touch with me.
    This morning I received a memorandum which pertains to this clause. It was from the British Institute of Management. It is not normal for me to quote the British Institute of Management, but, as somebody once said, "any port in a storm". The BIM says that it does not think it is helpful
    "to regard all cases lost at tribunals as ill-founded. Cases could be lost on technicalities. Tribunals did not divide claims into black and white, but judged from their experience where the balance lay. Such claimants should not be deterred from seeking justice."
    I submit that passing this Lords amendment, with the implication of a £25 fee in a couple of months time before people can use the facility in the Lords amendment, is a discouragement and a deterrent to those seeking to prove their innocence.
    The memorandum goes on to say that the British Institute of Management
    "was not convinced of the necessity to introduce a fee for applications; it would be preferable to encourage more use of the existing pre-hearing system."
    That was the point made by my hon. Friend the Member for Sheffield, Central (Mr. Caborn).
    The BIM added:
    "It should be noted … that in a recent consultation with its members only 17 per cent. sought to reduce employment protection legislation."
    Perhaps we might come back to that statistic on future occasions when, from the Dispatch Box, we are told what wide support the Government's measures have among British management for attacking the rights of workers and their trade union institutions and organisations.
    All the way from 25 July last year, when the bones of the Bill were announced in this Chamber, to its appearing in a more structured form later in the year to a Commit tee being set up, the message of the Minister was, "Go to the industrial tribunals." We now find that people are being discouraged from taking that avenue.
    Mr. Caborn: The cost factor of my hon. Friend's point needs underlining. In Sheffield in the past few days a case was taken to an industrial tribunal for wrongful dismissal. I have been involved in the case. The fees to the lawyers

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    on one side were over £1,000. Therefore, about £2,000 to £2,500 was spent on lawyer's fees alone, and it never went through the door of the tribunal. If people have to defend themselves and prove their innocence before industrial tribunals, we are talking about considerable amounts of money. As I said, in the case to which I referred the sum involved was in excess of £2,500 without the tribunal even being involved.
    Mr. Nellist: My hon. Friend is right. As these large sums of money are in themselves a discouragement, we may ask ourselves why there is to be a further £25 fee to rub salt into the wound and provide a further indignity to discourage workers from using industrial tribunals.
    My hon. Friend the Member for Sheffield, Central mentioned pre-hearing tribunals. There are already financial penalties under the industrial tribunal system against certain categories of dismissed claims. Tribunals are already empowered to award costs where either party acts
    "frivolously, vexatiously or otherwise unreasonably."
    To complete my argument, I checked to see what case would define those two words. It is a relief to be able to say that I have the case in front of me. "Frivolous" and "vexatious" were defined in E. T. Marler Ltd. v. Robinson in 1974 as follows:
    "If the employee knows that there is no substance in his claim and that it is bound to fail, or if the claim is on the face of it so manifestly misconceived that it can have no prospect of success it may be deemed frivolous".
    It goes on:
    "If an employee brings a hopeless claim not with any expectation of recovering compensation but out of spite to harass his employers or for some improper motives he acts vexatiously".
    There are already sufficient definitions of frivolous and vexatious for the point to be dealt with, particularly at a pre-hearing assessment level, and to see whether a worker is genuinely trying to prove his innocence or is engaged on a campaign of spite.
    Lords amendment No. 10 enhances the argument that we had throughout the Committee stage about the Government encouraging workers to use the industrial tribunal system. The hon. Member for Langbaurgh (Mr. Holt), who is not with us this evening, unfortunately, was the only Tory Member who argued against the industrial tribunal system. He used the same arguments as the Minister and Paymaster General used in their press releases to back up the £25 fee. The Government are encouraging workers to use industrial tribunals, but at the same time are trying to discourage them by the imposition of the £25 fee.
    A final indignity is that even if we pass the amendment and then the Bill, and a worker chooses the industrial tribunal to prove the innocence which, under British law, should be assumed from the outset, and wins the case, he can get back to work next morning and be sacked if he has not worked there for two years full time or for five years part-time. He cannot go back to the tribunal a second time, because he has no protection against unfair dismissal.
    I advise workers to rely, not on the amendment, on clause 5, on industrial tribunals or on the injection of the legal process into the workers' movement, but on their traditional trade union organisation, because the strength
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    of those organisations can protect them when employers act unreasonably against them by deducting money to which they are not entitled.
    Ms. Clare Short: The points that my hon. Friend the Member for Coventry, South-East (Mr. Nellist) made about tribunals and the proposal to impose, in effect, a £25 fine on anyone who tries to go to a tribunal are important and relevant. They deserve, at some point, some comment from the Ministers whether they propose that the £25 will apply in the case of tribunal applications where people are complaining that a deduction has been wrongly made.
    In Committee we talked at length about the fact that people will be subjected to deductions that will not only make them short of money—as we all know, workers in retailing are low paid — but cast a doubt on their integrity and honour. A relatively small amount of money might be involved — a £5 deduction, for example. However, the suggestion is that the individual has behaved dishonestly. He might feel deeply aggrieved and want to go to the tribunal to put the record straight and have his honour protected, but another barrier has been put in his way. In his defence of this part of the Bill, the Minister relied heavily on the ability of any worker to go to a tribunal. The introduction of a £25 fee leans against many of the undertakings that he gave in Committee and will not make it easy for workers to have access to a tribunal.
    I am glad that the Paymaster General was straightforward in saying that Lords amendment No. 10 was the implementation of an undertaking given in Committee. We said that it might be possible for an employer to impose a contract on a worker, or make one with him that would remove the protections of the Bill, but we were told that would not be possible. The Government obviously had another look, decided that it would be possible, and introduced this amendment, so that it would be impossible for an employer to go behind the door and reduce the protections, limited though they are, that are afforded to workers.
    Does this clause make it impossible for workers, through their trade unions, to get better protection than is afforded in the Bill? Does it work both ways? Does it mean that they must be subject to the 10 per cent. deduction, whether the employer wishes to impose it or whether they have the strength to impose further conditions? We welcome the change. It implements an undertaking that was given at our request, but I should be grateful for an answer on that point.
    Mr. Kenneth Clarke: The press release that was quoted by the hon. Member for Coventry, South-East (Mr. Nellist) invited comments as part of the consultation process upon our proposal to introduce a returnable fee of £25 for those who wish to apply to industrial tribunals. I listened with great care to his speech and regard it as an interesting contribution to the consultation process that is now under way. As it happens, this amendment has nothing whatever to do with access to industrial tribunals. That is already provided for and protected by the provisions of the Bill.
    This amendment was moved in another place to make it clear that, in addition to the protection already provided by the Bill, any attempt to reach an agreement between an employer and an employee that seeks to set aside or limit any provision in part I is void. The hon. Member for Birmingham, Ladywood (Ms. Short) welcomed that

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    protection. It would apply only if an agreement was entered into between an employer and an employee that sought to exclude or limit the operation of part I. I do not believe that any agreement that gave additional protection to the employee would fall foul of that provision. It would be open to the employer to give greater protection to the employee than is provided for by the Bill, if he so wishes.
    Ms. Clare Short: But if workers reach an agreement that there will he no deductions in certain circumstances, it will limit the provisions of the Bill which allow for deductions in those circumstances.
    Mr. Kenneth Clarke: No. Deductions are lawful only if there is an agreement in the first place between the employer and the employee which allows them. If the contract of employment does not allow for deductions, all it means is that the Bill does not apply. This amendment in no way weakens the protection that is given to an employee.
    Question put and agreed to.
    Subsequent Lords amendments agreed to.

  Clause 14

    WAGES ORDERS
    Lords amendment: No. 14, in page 16, line 1, leave out "section 17(4)" and insert
    "section (Computation of remuneration) (2(b) and 3(b)"
    Mr. Trippier: I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Deputy Speaker: With this it will be convenient to discuss the following Lords amendments: No. 16, in clause 16, page 18, leave out lines 12 to 32 and insert—
    "16. — (1) If, in the case of any worker to whom an order under section 14 applies, the amount of remuneration paid to the worker by his employer in respect of any week is less than the statutory minimum remuneration provided for him by the order in respect of that week, the worker shall be taken to be entitled under his contract to be paid the difference between those two amounts as additional remuneration in respect of that week."
    No. 17 in page 18, line 33, leave out "relation to" and insert "respect of"
    No. 18, in page 18, line 34, leave out "remuneration not less than" and insert
    "an amount of remuneration equal to, or exceeding,"
    No. 19, in page 19, line 16, leave out from "(a)" to "by" in line 19 and insert
    "the statutory minimum remuneration provided for the worker in respect of the week in question"
    No. 20, in page 19, line 21, leave out "actually so paid" and insert "paid to the worker"
    No. 21, in page 19, line 42, at end insert—
    "( ) Any reference in this section, in relation to a worker, to remuneration or statutory minimum remuneration in respect of a week shall be construed as a reference to remuneration or statutory minimum remuneration in respect of the following, namely—

    (a) in the case of a time worker, time worked by the worker in that week, and

    (b)in the case of a piece worker—

    (i) work executed by the worker in that week, and

    (ii) any such time as is mentioned in section 15(4) occurring during that week."

    No. 22, after Clause 16 insert the following new clause—
    Computation of remuneration
    "—(1) For the purpose of determining, for the
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    purposes of this Part, the amount of remuneration paid to a time worker by his employer in respect of time worked by the worker in any week there shall be added together—

    (a) the total amount of any money payments made by the employer to the worker, on or before the relevant pay day, by way of remuneration in respect of time worked by him in that week, and

    (b) the total amount of any deductions made by the employer (whether in accordance with Part I or not) when making the payment of wages which consisted of or included those money payments, apart from deductions falling to be left out of account under this paragraph by virtue of subsection (2),

    and then, from the aggregate of those amounts, there shall be subtracted the aggregate of—

    (i) the worker's necessary expenditure in connection with his employment to the extent that such expenditure consists of payments to persons other than the employer, is attributable to that week and is not met, or designed to be met, by an allowance paid to him by the employer, and

    (ii) the total amount of any payments received from the worker by the employer (whether in accordance with Part I or not) and falling to be taken into account under this paragraph by virtue of subsection (3).

    (2) The following deductions shall be left out of account under subsection (1)(b), namely—

    (a) any deduction in respect of the worker's necessary expenditure in connection with his employment to the extent that the deduction is attributable to the week in question,

    (b) any deduction in respect of the provision of living accommodation for the worker by the employer to the extent that the deduction exceeds any limit for the time being in force in relation to the worker by virtue of section 14(1)(c), and

    (c) subject to subsection (4), any other deduction made by the employer for his own use and benefit (and accordingly not attributable to any amount paid or payable by him to any other person, or to any authority, on behalf of the worker).

    (3) The following payments by the worker shall be taken into account under subsection W(ii), namely—

    (a) any payment in respect of the worker's necessary expenditure in connection with his employment to the extent that the payment is attributable to the week in question.

    (b) any payment due from the worker in that week in respect of the provision of living accommodation for him by the employer to the extent that the payment exceeds any limit for the time being in force in relation to the worker by virtue of section 14(1)(c) , and

    (c) subject to subsection (4), any other payment due from the worker in that week and retained by the employer for his own use and benefit (and accordingly not attributable to any amount paid or payable by him to any other person, or to any authority, on behalf of the worker).

    (4) Subsections (2)(c) and (3)(c) do not apply—

    (a) to deductions made or payments received by the employer on account of any of the following matters, namely—

    (i) any conduct of the worker or any other event in respect of which he (whether together with any other workers or not) has any contractual liability,

    (ii) any advance under an agreement for a loan or any advance of wages, or

    (iii) the purchase by the worker of any shares or other securities or of any share in a partnership; or

    (b) to deductions made or payments received by the employer on account of any goods or services supplied by the employer with the worker's prior agreement or consent to the extent that any such deductions or payments do not result in the

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    employer recovering from the worker an amount exceeding the cost to the employer of supplying the goods or services in question;

    and accordingly any such deductions shall not be left out of account under subsection (1)(b) and any such payments shall not he taken into account under subsection (1)(ii).
    (5) For the purposes of subsection (4)(b) the cost to an employer of supplying any goods or services shall—

    (a) where he supplies goods or services of the kind in question in the course of his business, be taken to be the amount which he would have obtained for the goods or services if they had been supplied in the course of that business; and

    (b) in any other case, be taken to be the amount of expenditure incurred by the employer in connection with the supply by him of the goods or services.

    (6) The preceding provisions of this section shall apply to a piece worker as they apply to a time worker but as if, in subsection (1), any reference to remuneration in respect of time worked by the worker in any week were a reference to remuneration in respect of—

    (a) work executed by him in any week, and

    (b) any such time as is mentioned in section 15(4) that occurs during the week.

    (7) In this section—
    "deduction" does not include any such deficiency in the payment of wages as is mentioned in section 8(3); "money payment" means—

    (a) a payment in cash,

    (b) a payment by cheque or by a money or postal order issued by the Post Office, or

    (c) a payment (however effected) into any account kept with a bank or other institution;

    "relevant pay day", in relation to any week of a worker's employment, means the day on which his remuneration in respect of that week is payable;
    "wages" has the same meaning as in Part I."
    No. 23, in clause 17, page 20, line 7, leave out Clause 17.
    No. 27, in clause 19, in page 23, line 44, after "of" an amount of"
    Mr. Trippier: This group of amendments relates to the enforcement of wages orders and the method of calculation of remuneration to be regarded as paid to the worker for the purposes of comparison with the statutory remuneration due under the order. They are technical amendments. I hope that the House will accept them.
    Mr. Nellist: I want to use this as an illustration of a point that has been made twice before this evening. We are debating new clause 17.
    Mr. Deputy Speaker: Order. We are debating the Lords amendments. I hope that the hon. Gentleman will stick to them.
    Mr. Nellist: These amendments have the effect of introducing new clause 17. It renumbers the clauses and alters the operation of the former clause in the Bill when it left this House.
    There was very little debate in the other place on this group of amendments. It amounts to four columns of debate in the Official Report. The typeface of the Official Report in the other place is significantly larger than that of this House. The printing of the new clause took up a further two and a half columns. A further column dealt with requests from various peers for notes on clauses. At that point Lord McCarthy said that he had not yet understood the amendments to the clause. He has wide experience of industrial law and industrial relations law.
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    If, over the days and weeks of debate in the Lords, he could not understand it, how can we be exepected to understand it in nine or 10 hours today?
    On Report in the Lords, this group of amendments was briefly discussed in a debate covering three columns of Hansard. Lord McCarthy said:
    "We feel that it is still a most dreadfully written and complicated clause." — [Official Report, House of Lords, 8 July 1986; vol. 478, c. 244.]
    12.45 am
    The reason for all the points of order yesterday and today is that last night in the Lords on Third Reading, this group of amendments was subject to further Government amendments to tidy up the introduction of new clause 17 which defines wages. Even the Government failed to understand what they were doing in early July, and last night in the Lords they were still amending the Bill. Despite that, we are expected in a few hours to comprehend and grasp everything they have done. The Government spent last night clarifying and improving the Bill by tabling this group of amendments. That is further proof of the justice of the points of order that we raised. This is a totally unacceptable way for the people that we represent, low-paid workers, to have their future decided.
    Ms. Clare Short: We all know that it is late and none of us wants to stay up any longer than necessary. I am surprised that the Minister did not talk at rather greater length about new clause 17. It is an extremely important clause, and without further comment he simply said that they are technical amendments and told us that he assumed they are acceptable.
    I have the same difficulties as my hon. Friend the Member for Coventry, South-East (Mr. Nellist) about new clause 17. I have tried to go through it and it seems to be an improvement on old clause 17, but I not sure of that because I have not had enough time to give it close scrutiny. It needs to be scrutinised in Committee, when we could go through it line by line and delve into it. When we scrutinised the other parts of the Bill in Committee we came up with all sorts of inadequacies and the Government made a number of changes. I fear that there are probably loopholes and faults in new clause 17 which none of us have had time properly to scrutinise.
    It is welcome in new clause 17 that necessary expenditure in the course of a worker's employment on such items as tools and clothing that he might have to wear in his employment is deducted before it is decided whether or not the rate he is being paid is the statutory minimum. It is also welcome that any excessive charges for accommodation should be excluded, although I find that provision odd, because under the provisions of the Bill wages councils have power to set limits to the charges for accommodation for those over 21.
    In future we expect to see under-2l-year-olds being charged for accommodation when they work, for example, in a hotel at a rate well above that charged to the adults whom they work alongside. That would be a major injustice. Given that it would be illegal to overcharge, it seems odd that that provision has been included, but perhaps there is some explanation for that.
    I am afraid I have another query on new clause 17(4). The notes circulated by the Department of Employment tell us that if a deduction is made for
    "any conduct of the worker or any event for which he is contractually liable, either personally or along with other

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    workers. This includes disciplinary deductions such as fines for lateness, recompense for damage to the employer's property, etc"
    such a deduction would not be included in a reference to the statutory minimum wages council. Why is that so? Why are deductions of that sort not to be counted in calculating the national minimum wage? That seems wrong and inappropriate.
    It is obviously right that there is a provision in the new clause which means that workers cannot in future be paid in truck by being given some of the goods that they produce. That practice is growing in my constituency in the new appalling low-paying sweatshops that are springing up in the west midlands. Some of the Asian women working in those sweatshops are given a number of garments at the end of the week together with measly and illegal sums of money. The garments are supposed to count towards their wages. There is a provision that says that vouchers and things like that which are given to workers and which can be exchanged for goods will not count towards the statutory minimum wage. That is obviously a good thing.
    It is ironical that we have been told throughout discussions on the Bill that the Government are in favour of simplification so that wages councils orders can be understood by everyone, and then we have clause 17 which is horrendously complicated and difficult to understand. I am sure that many lawyers will make a lot of money out of it on the backs of the low-paid workers who will be paid even less in future as a consequence of the Bill.
    Mr. Wainwright: Whatever the purpose of the amendment — the Government would have us believe that it is benign—it undoubtedly adds further obscurity to an already incomprehensible clause. That should not be tolerated even at this hour and under the extraordinary time pressure which the Government have thought fit to inflict upon the House.
    As the hon. Member for Birmingham, Ladywood (Ms. Short) has said, the lengthy language of the findings of some wages councils in the past is positively lucid compared with this and one or two other clauses in part II. So the Government's case that they are somehow getting rid of a lot of bureaucratic language and introducing a simple system is bogus and will be seen to be bogus when the Act is circulated to employers.
    We must ask the reason for this obscurity. I acquit Ministers of revelling in obscurity for its own sake, but there is no doubt that the obscurity arises because the Government are determined to cast a death spell over the whole system of wages councils. Rather than honestly abolish them, because that would have provoked some of the kinder Conservative Members to expostulate, they are slowly poisoning them by the grotesque device of confining wages councils to single awards only. Only a Government steeped in early Victorian attitudes could possibly suppose that single awards could conceivably even begin to cover the vast complexity of modern industrial and commercial arrangements.
    Having once set out on the demeaning path of confining wages councils to single awards and single hourly rates, the Government have been caught up in a web of bureaucratic language. I confidently predict that even this amendment will not put matters right. This will not be an effective part of the statute and the courts will soon ridicule—as I hope the courts always will ridicule
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    bad legislation—the manifest defects of this unfortunate part of the Bill. It is only with a heavy heart that one can even begin to contemplate accepting the amendment.
    Mr. William Cash: I rise to agree with much of what has just been said. The clause is particularly difficult to understand and I am amazed to find it at a time when we are doing everything possible to reduce the complexity of legislation, particularly when it affects people who are often at a considerable disadvantage. One must bear in mind that such legislation impinges on the daily lives of people who often do not have the advantage of being able to understand the law. That is therefore all the more reason why it should be less complicated.
    I speak as one who has taken a considerable interest in trying to reduce the obscurity and complexity of the law. In a previous incarnation I had some responsibility for drafting legislation. Indeed, I helped to draft the Small Business Bill, and it took only two clauses — [Interruption.] But there is a serious point to be made despite the somewhat cynical attitude displayed by Opposition Members, including one of my colleagues on the European Legislation Committee. I am sure that he will acknowledge that I have repeatedly spoken about the obscurity of legislation.
    I am anxious to ensure that we simplify the law. Ordinary people, particularly those who are less well off and less advantaged than others, find that it is not easy to gain access to legal advice, which is often expensive. They should at least be able to understand the provisions in question. I urge the Government to consider what the hon. Member for Colne Valley (Mr. Wainwright) has said. I agreed with much of it.
    Mr. Mikardo: I rise briefly to respond to what the hon. Member for Stafford (Mr. Cash) said about the obscurity of this legislation and to what the hon. Member for Colne Valley called the horrendously complicated nature of it.
    Subsection (1) of the new clause consists of a single sentence of 232 words. It should go into the "Guinness Book of Records". I defy anyone to disentangle a single sentence of 232 words, especially if it begins not with a principal clause, but with a sub-clause, and then a sub-subclause within the sub-clause in the very first line. It starts with a parenthesis and a parenthesis within the parenthesis in the first line, which consists of only 10 words or so, and then goes on for another 222 words before reaching the main clause.
    Those of us who were taught parsing and about Nesfield and the purity of the English language cannot begin to understand. The hon. Member for Stafford was right to say that we should try to draft legislation so that the ordinary chap does not have to pay a lawyer £1,000 to go to court to discover its meaning.
    Mr. Wainwright: Does the hon. Gentleman agree that Lords amendment No. 14 either has one parenthesis mark too many or one too few? It is clear from the second line of the amendment that there is an opening bracket but no closing one. Will the Government explain their drafting?
    Mr. Mikardo: We had a similar example earlier. It is a bit much if ordinary workers are supposed to understand and to rely for their protection on that sort of language. I know that it is not easy to draft legislation, but I cannot believe that it is beyond the wit of parliamentary draftsmen to split 232 words into three "short" sentences of 80 words apiece, which would be surely long enough.
    Mr. Trippier rose—
    Mr. Deputy Speaker: Does the Minister have the leave of the House to speak again? I take it that he has.
    1 am
    Mr. Trippier: It is probably stretching credulity to breaking point for the House to believe, as the hon. Member for Bow and Poplar (Mr. Mikardo) has suggested, that the man in the street is expected to understand Bills or Acts. I have never believed that, but I am sympathetic to many of the arguments which have been advanced by hon. Members on both sides of the House.
    When the Bill was in Committee, no complaint was made about the complexity of the clause. References to the Hansard reports of the debates in Committee will make that clear. Opposition Members were concerned because they did not believe that the Government were protecting workers. That was the issue raised by the hon. Member for Birmingham, Ladywood (Ms. Short). They did not accept that workers were being protected in the way that I suggested in Committee and I agreed to reconsider the clause. The main reason for presenting the clause in its proposed form—it would be silly of me to deny that it is more complex now—is to meet the objections made by Opposition Members in Committee, and many of those who are in their places this morning were members of the Committee. An effort has been made to meet what they had to say about the unscrupulousness of some employers, which would be evident if they were to circumvent their obligation to pay workers any less than the statutory minimum laid down by the wages council.
    The following are the four main changes which have been made. First, the calculation of remuneration paid now relates specifically to the amount paid to a worker for time worked, or, in the case of a piece worker, work done in any week, and to the deductions or payments made by the worker to the employer which have been made in or are attributable to the same week. Secondly, in accordance with the undertaking that I gave hon. Members in Committee,
    "the worker's necessary expenditure in connection with his employment"
    which is paid to a third party is to be subtracted from the amount of money paid to the worker by the employer unless this has been met by an allowance paid by the employer. The hon. Member for Coventry, South-East (Mr. Nellist) was especially anxious that I should try to meet that point. Perhaps he will recall that and have an opportunity to express his thanks.
    Mr. Nellist: It is not that late in the day. I accept that we are grateful that we received the departmental notes yesterday, so we have had one day more to consider them than we had to consider notes at a previous stage in the Bill's consideration. The explanation of the necessary expenditure makes a division between travel costs in connection with the employer's business and travel-to-work expenses. Why do the Department and the Minister think that it is all right to take account of travel costs on the employer's business and not the employee's costs in getting to the business in the first place?
    Mr. Trippier: If the hon. Gentleman had listened—I am sure he did, actually—to what I was saying prior to allowing him to intervene, he would understand. If we are
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    talking about outworkers or homeworkers, his case is somewhat weak. It would be travel to collect the work from where the homeworker would do the work. I was referring to the issue which was raised specifically in Committee.
    Thirdly, provision has been made for any charge made for
    "any goods or services supplied by the employer with the worker's prior agreement or consent"
    to be an allowable deduction or payment, provided that the charge made does not exceed the amount that the employer would have obtained for the goods or services in the course of his business. That was another issue that the hon. Member for Coventry, South-East asked me to meet, as did the hon. Member for Ladywood, and it has been met.
    I apologise, especially to my hon. Friend the Member for Stafford (Mr. Cash), who is as keen as I am to simplify on every conceivable occasion, for the complexity of the provisions that are before us. I hope that I can persuade my hon. Friend, if not Opposition Members, that is has not been possible to simplify and to meet the issues that were raised by hon. Members in Committee. I think that it is safe to say that if we have not been able to cover the loopholes to which I have referred, the ability of others to do so can be safely challenged.
    I know that there is a compelling case, put by the hon. Member for Bow and Poplar, when he asked how one expected the man in the street or the worker to read the legislation. Not only the average man in the street, but many Members of Parliament, do not understand the Bills that they are expected to consider on the Floor of the House or in Committee. That includes the hon. Gentleman. No one is an expert on that. The hon. Gentleman, on an earlier point of order, referred accurately to the fact that the whole Bill is complex. He is absolutely right; it is extremely detailed.
    I again apologise to the House that we have not been able to cover the loophole without this precise wording.
    Mr. Wainwright: Will the Minister give the House the correct version of the second line of Lords amendment No. 14, which, as it stands, is manifestly incorrect? A bracket starts that never ends.
    Mr. Trippier: It must be a printing error.
    Mr. Nellist: Resign.
    Mr. Trippier: I am sure that the hon. Gentleman thinks that it is a matter of resignation. He must forgive me if I do not wish to meet him on that point, because the House is about to rise and I am looking forward to the recess.
    The simple solution is to omit the first bracket. The hon. Member for Colne Valley (Mr. Wainwright) should be satisfied with that, and I shall endeavour to meet him on that point.
    Question put and agreed to.
    Lords amendment: No. 15, in page 17, line 19, after "time" insert "being"
    Mr. Trippier: I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Deputy Speaker (Mr. Harold Walker): With this it will be convenient to take the following Lords amendments: No. 26, in clause 19, page 22, line 20, leave out "has dealings" and insert "is dealing"
    No. 28, in clause 25, page 27, line 4, leave out "under his contract"

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    No. 29, in page 27, line 9, at end insert
    "and "employed", in relation to a worker, accordingly means employed under his contract;"
    Mr. Trippier: I am sure that these amendments will be widely and warmly welcomed by hon. Members on both sides of the House. I ask the House to accept them.
    Question put and agreed to.
    Subsequent Lords amendments agreed to.

  New Clause

    APPORTIONMENT OF REMUNERATION
    Lords amendment: No. 24, after clause 17, insert the following new Clause:
    " .—(1) This section applies where—

    (a) in respect of part of the time worked by a time worker in any week ("the relevant period") the worker is entitled to the statutory minimum remuneration provided for him by an order under section 14, and

    (b) in respect of the remainder of the time worked by him in the week ("the remaining period") the worker is not entitled to any such remuneration or is entitled to any such remuneration by virtue of another such order;

    and in this section any reference to the worker's computed remuneration is a reference to the amount of the remuneration paid to the worker in respect of the time worked by him in the week in question as determined in accordance with section (Computation of remuneration).
    (2) Subject to subsections (3) to (5), the amount of the worker's computed remuneration that is to be attributed to either the relevant period or the remaining period for the purposes of this Part shall, if not apparent from the terms of the worker's contract, be the amount which bears to the total amount of the workers's computed remuneration the same proportion as the relevant period, or (as the case may be) the remaining period, bears to the total time worked by the worker in the week in question.
    (3) Where any particular amount falling to be added or subtracted under section (Computation of remuneration) (1) as it applies to any week is exclusively referable to the relevant period, the amount of the worker's computed remuneration to be attributed to that period for the purposes of this Part shall be determined by either—

    (a) adding the unattributed balance of that particular amount to the amount to be attributed to that period in accordance with subsection (2) above, or

    (b) subtracting the unattributed balance of that particular amount from the amount to be attributed to that period in accordance with that subsection,

    according to whether that particular amount falls to be added or subtracted under section Cainputation of remuneration) (1); and a corresponding adjustment shall be made in the amount of the worker's computed remuneration to he attributed for the purposes of this Part to the remaining period.
    (4) In subsection (3) "the unattributed balance", in relation to the particular amount in question means so much of that amount as is not taken into account for the purpose of determining the amount to be attributed to the relevant period in accordance with subsection (2).
    (5) Where any particular amount falling to be added or subtracted under section (Computation of remuneration) (1) as it applies to any week is exclusively referable to the remaining period, subsections (3) and (4) shall apply to any particular amount as if—

    (a) any reference to the relevant period were a reference to the remaining period; and

    (b) the reference in subsection (3) to the remaining period were a reference to the relevant period.

    (6) The preceding provisions of this section shall apply to a piece worker as they apply to a time worker but as if—

    (a) any reference to time worked by the workers in any week were a reference to work executed by him in any week;

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    (b) the word "work" were substituted for the word "period" wherever occurring;

    and for the purposes of those provisions as they apply to a piece worker in accordance with this subsection the worker shall be treated as executing work during any such time as is mentioned in section 15(4)."
    Mr. Trippier: I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Deputy Speaker: With this it will be convenient to consider Lords amendment No. 30, in clause 25, page 28, line 23, leave out subsections (3) and (4) and insert—
    "( ) Notwithstanding section 14(3)—

    (a) where a worker is employed partly for the purposes of his employer's business and partly not, nothing in any order under section 14 shall apply to the worker in his employment otherwise than for the purposes of that business, and

    (b) where a worker is employed for the purposes of his employer's business both in an employment to which an order under section 14 applies and in one to which that order does not apply, nothing in that order shall apply to the worker in the second of those employments."

    Mr. Trippier: Amendment No. 24 introduces a new clause that modifies the provisions of the new clause after clause 16, which we have discussed. It states how that clause is to be applied in cases where a worker's employment is only partly within the scope of a wages order, or within the scope of more than one such order. Essentially, it is a matter of apportioning the amount of remuneration calculated as paid to the worker between the in-scope and the out-of-scope work. The apportionment is to be made according to the proportion of time spent on work of each type, except where the worker's contract provides otherwise. In the event that any element of the remuneration is attributable wholly to work of one type, the calculation of apportionment has to take account of that fact.
    Amendment No. 30 is related to the inclusion of the new clause after clause 17. As presently drafted, subsections (3) and (4) include the phrase
    "nothing in this Part …. shall be construed as applying".
    The amendment replaces that with
    "nothing in any order under section 14 shall apply".
    The amendment also qualifies clause 14(3), which would otherwise have the effect of making a wages order applicable to workers whether they were employed either fully or partly on work to which the order applied. The new clause, in effect, carries forward the similar provision in clause 18 of the Wages Councils Act 1979. I commend it to the House.
    Ms. Clare Short: This is an enormously complicated provision, similar to the one that we have just discussed. Unfortunately, my hon. Friend the Member for Bow and Poplar (Mr. Mikardo) is not here to add up the words and length of the sentences. It is all about how to calculate the relevance of the statutory minimum wage to workers who are partly covered and partly not covered by a wages council order.
    Given that position, such complicated provisions are necessary. We put it to the Minister before we discussed the Bill, and I put it to him again now, how much better it would be to rationalise the coverage of wages councils orders. We gave the Minister example after example in Committee of workers, parts of whose jobs were covered by wages councils orders and other parts which were not

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    so covered. The Minister also gave examples of someone who cleans as well as works in a shop who is covered by two different wages councils orders.
    The Government's refusal to make any provision in the Bill for the review of scope to rationalise these anomalies is another example of the point made by the hon. Member for Colne Valley (Mr. Wainwright) that the Bill has a hidden agenda underpinning it—to phase out, minimise and undercut wages councils and make them less and less effective so that they will be brought into disrepute and can eventually be killed off.
    The necessity for this very complicated provision is simply that the the Government will not rationalise the coverage of wages councils orders. We must accept that now, but the better remedy would be to ensure that most workers were covered all of the time by one wages council order and not to have people partially protected. There is the example of the post office in which someone working behind the sweet counter was protected but not protected if he went to sell the stamps. That ridiculous mess will not be put right because there are no provisions in the Bill to correct that position.
    Question put and agreed to.
    Subsequent Lords amendments agreed to.

  Clause 18

    OBLIGATION TO KEEP RECORDS ETC.
    Lords amendment: No. 25, in page 22, line 6, at end insert—
    "(2A) Where any such workers are homeworkers, the employer shall notify them in the prescribed manner of the matters mentioned in subsection (2)."
    Mr. Trippier: I beg to move, That this House doth agree with the Lords in the said amendment.
    The amendment fulfils a commitment given to the Committee to the effect that employers who make use of the services of home workers will be required, once the legislation takes effect, to notify those home workers in the prescribed manner of the contents of wages councils notices of proposals, of orders which affect them and of any other matters which may be prescribed.
    I am confident that the Opposition will welcome the amendment, and I commend it to the House.
    Ms. Clare Short: Of course we welcome the amendment. We know that home workers are some of the most exploited and under-paid workers covered by the Bill. At least the provision that requires employers to inform them of their rights will make it slightly more likely that they will receive their rights under the law. We welcome the amendment.
    Question put and agreed to.
    Subsequent Lords amendments agreed to.

  Schedule 2

    CONSTITUTION ETC. OF WAGES COUNCILS
    Lords amendment: No. 31, in page 34, line 26, leave out "3" and insert "5"
    Mr. Kenneth Clarke: I beg to move, That this House doth agree with the Lords in the said amendment.
    The amendment enables the Secretary of State to appoint up to five independent members to sit on a wages
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    council, instead of a maximum of three as at present. The amendment has been tabled to enable the Secretary of State to make additional appointments to the councils where from time to time there might be difficulty in the independen members attending in adequate numbers. There have been occasions on some councils when it has been possible for only one independent member to be present when representations are being considered. Plainly that is unsatisfactory, and we therefore seek this power.
    This power will be used by the Secretary of State only for those councils where the need arises. The power is purely discretionary and is unlikely to be used where the independent members of a council are encountering no difficulties. There was a debate in another place on this matter. I hasten to assure the House that the proposal is made purely for convenience, to ensure that the position does not arise where only one independent member is left with a key role to play in a council. We have no intention of using the power to pack a council with our supporters. The suspicions voiced by Lord McCarthy — I am not sure whether they were serious—in another place are groundless.
    Mr. Deputy Speaker: I inform the House that this amendment involves privilege.
    Mr. Mikardo: I hope that the House will not agree with the Lords in this amendment. I understand and sympathise with the kind of problem that the Minister has described, where the matter is left to one chap because only he has turned up out of the three. First, members should not be appointed unless they give an undertaking that they will, barring illness or accident, be regular attenders at their jobs. If they take on the job, they should undertake to deal with it properly and regularly. Secondly, far too many independent members are appointed to far too many wages councils. Being an independent member of a wages council is almost like being part of a profession, and some people are members of several councils. One reason for poor attendance may be that one person is a member of three wages councils which are meeting at the same time. He cannot be in three places at once.
    1.15 am
    The Government must find people who will not take on too many wages councils and who can guarantee their attendance. The Minister says that he will use the powers only in emergencies, but the power will exist and he may not be the Minister for ever. Indeed, I doubt whether he will be the Minister for ever.
    Ms. Clare Short: He is not even in charge of them. It is that other nasty fellow.
    Mr. Mikardo: My hon. Friend is right. He is not in charge of them anyway. The power to appoint five independent members is a power to distort the entire structure and to weaken the influence of the representative members contrasted with that of the independent members. It would dilute the representative character of a council. The power should not be given to the Secretary of State, and I hope that the House will not accept the amendment.
    Mr. Wainwright: On this occasion, I differ from the hon. Member for Bow and Poplar (Mr. Mikardo). I believe that the Government have sincere motives for extending the number of members to five. I shall give an example which I mentioned in Committee. More than 12

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    years ago, I and my Liberal colleagues discovered that the wages council which dealt solely with lace workers, who were based almost entirely in and around Nottingham, had not even met for several years. There had been a total failure to call the council members together. When we investigated the matter, we discovered that the reasons were that the employers did not want it to meet, the trade union representatives had been conned into believing that the workers would lose their jobs if there was an adjustment in wages and—this is the nub of the matter — the independent members, or what was left of them, were lazy and did not wish to activate the council.
    We must go behind attendance at a meeting and question whether there are enough members to ensure that the council can be called together. There is sense in the amendment, and I hope that Ministers will take the opportunity to assure the House that, under their regime, no wages council will be allowed to go for several years without meeting.
    Ms. Clare Short: The Labour party objects strongly to the amendment. The notes circulated by the Department say that the people working in the retail industry called for it. Who are they supposed to be? The National Union of Tailors and Garment Workers is strongly opposed to the amendment, as is the Union of Shop, Distributive and Allied Workers. USDAW said that, many years ago, it called for the appointment of more independent members because of the problem of non-attendance, but that the suggestion was that those additional independent members should be appointed by the trade unions and the employers. The Government are not complying with that part of the recommendation.
    All unions believe that, given the absolute determination of the Secretary of State for Employment, in everything he does, to cut the wages of the lowest paid, he will have ulterior motives and will stuff the wages councils with so-called independent members who will be in favour of low wage settlements, which will make it more difficult for the trade union representatives to achieve reasonable settlements. That is the view of major trade unions in wages council industries, and it is the serious view of the Opposition. We are not just saying it or protesting. We watched the Secretary of State start off in the Manpower Services Commission, and have seen the damage that he did there and the damage that he continues to do. We do not trust him with these powers.
    If members of wages councils are hopeless, moribund and lazy, the answer is not to appoint more hopeless, moribund and lazy independent members, but to appoint different people, to make appointments conditional upon attending meetings, and to push people off if they do not attend. Simply enlarging the number of appalling people who appear to have been members of the laceworkers' wages council, to which the hon. Member for Colne Valley (Mr. Wainwright) referred, does not necessarily remedy the problem.
    Mr. Wainwright: It is not a matter of failing to attend meetings but of a member of the council activating the process and ensuring that meetings are called.
    Ms. Short: I understand that, but I am not at all sure that increasing the number of independent members from three to five will ensure that meetings are called. I
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    understand the hon. Gentleman's reasons for supporting the amendment, but I question whether it would achieve the objective that he intends.
    Mr. Kenneth Clarke: With the leave of the House, I should like to reply to the debate.
    Mr. Deputy SpeakerDoes the right hon. and learned Gentleman have the leave of the House to speak again?
    Hon. Members: Yes.
    Mr. Clarke: It was the Retail Consortium which first raised with us increasing the number of independent members. It wanted to increase their number by agreement between both sides of industry, but that would rather contradict the definition of independent members. The problem arose because, in that council, there have been times when only one independent member has been present to hear the representations of both sides. That is unsatisfactory.
    Ms. Short: If people are not attending or doing the job, does not the Minister have any powers to get rid of them and appoint more active independent members?
    Mr. Clarke: We are not necessarily talking about lazy attenders or people who are not normally attenders. somebody is spectacularly lax as happened in the case given by the hon. Member for Colne Valley (Mr. Wainwright)—he gave a startling account of the affairs of the laceworkers' wages council — it would be necessary for the Secretary of State to appoint some more reasonable members. The best members can sometimes find it difficult to attend, however, and if there are only three members, that risk is increased. Every now and again, only one will be able to attend if there are only three members, but that risk is reduced if we increase their number to five. It is only a discretionary power, and it will be used only in those councils where that problem might arise.
    The suggestion of an increase was supported by the chairman of the all-party group on retail trade in a letter to the Secretary of State.
    Ms. Short: When?
    Mr. Clarke: That was my hon. Friend the Member for Hampstead and Highgate (Sir G. Finsberg), who I think was writing as chairman of the all-party group.
    Ms. Short: When?
    Mr. Clarke: Recently —after the Retail Consortium suggested that we should increase the number of independent members. That is why the amendment was made. When it was tabled, we did not expect it to be controversial. It ought not to be. The hon. Lady claims that it would somehow pave the way for my right hon. and noble Friend to start misusing his power of appointment and to appoint people who are not genuinely objective or independent.
    Ms. Short: Absolutely.
    Mr. Clarke: I refute the suggestion that my right hon. and noble Friend would contemplate doing any such thing. Any Secretary of State has the power, if he wants to misuse it, to appoint anybody he wants as one of the three independent members. We shall try to find conscientious and independent members, and to increase

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    the independent membership of councils in which there might be a risk of the number attending falling too low. On that basis, I commend the amendment to the House.
    Question put and agreed to.
    Subsequent Lords amendments agreed to, one with Special Entry.

  Schedule 6

    TRANSITIONAL PROVISIONS AND SAVINGS
    Lords amendment: No. 34, in page 41, leave out lines 11 to 19 and insert—
    "4. — (1) Where at any time during the period of two years ending with the date of an offence under section 16(3) of this Act an order under section 14 of the 1979 Act applied to the worker in relation to whom the offence was committed, or to any other worker employed by that worker's employer, section 16 of this Act shall have effect in relation to any such time as if—

    (a) in subsections (4) and (7), any reference to any other failure on the part of the employer to pay an amount of remuneration equal to, or exceeding, the statutory minimum remuneration provided for a worker by an order under section 14 of this Act were a reference to any failure on the part of the employer to pay an amount of remuneration equal to, or exceeding, the remuneration for the time being fixed in relation to a worker by an order under section 14 of the 1979 Act or by a permit under section 16(1) of that Act;

    (b) in subsection (5), the reference to the statutory minimum remuneration so provided were a reference to the remuneration so fixed; and

    (c) subsection (6) were omitted.
    (2) For the purposes of subsection (4) and (5) of section 16 of this Act, as they have effect in accordance with subparagraph (1), the following matters, namely—

    (a) the question whether an employer has failed to pay an amount of remuneration equal to, or exceeding, that fixed by any such order or permit under the 1979 Act as is mentioned in that sub-paragraph, and

    (b) the amount referred to in subsection (5)(b), shall be determined in accordance with sections 17 and 18 of the 1979 Act, and not in accordance with sections (Computation of remuneration) and (Apportionment of remuneration) of this Act."

    Mr. Trippier: I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Deputy SpeakerWith this it will be convenient to consider the following Lords amendments: No 35, in page 41, line 23, leave out from beginning to "and" in line 24 and insert
    "an amount of remuneration less than that fixed by any such order or permit under the 1979 Act as is mentioned in paragraph 4(1)"
    No. 36, in page 42, line 2, after "affect" insert—
    "(a)"
    No. 37, in page 42, line 3, after "(1)" insert—
    ", or
    (b) any right of a worker to any annnual holidays or to any holiday remuneration in respect of those holidays,"
    No. 38, in page 42, line 10, after second "of" insert ", or in connection with,"
    No. 39, in page 42, line 14, at end insert—
    "( ) Without prejudice to the generality of sub-paragraph (1), an order under this paragraph may make provision in connection with preserving the effect of rights to which paragraph 5(4)(b) above applies."
    506
    Manuscript amendment to Lords amendment No. 39, in line 4, leave out "(b)".
    Mr. Trippier: I wish to concentrate on amendments Nos. 36 to 39 because amendments Nos. 34 and 35 are technical, as I am sure the Opposition will accept. I shall also deal with the manuscript amendment now before the House.
    Amendments Nos 36 to 39 relate to the accrued rights of workers to holidays and holiday pay at the date a wages order ceases to apply to them. Wages council workers are not entitled to paid holidays in their first year of service. The rights they accrue in each year are based on length of service and are allowed in the following year. Schedule 6 as at present drafted enables the Secretary of State to make an order preserving such accrued rights as at the date a wages order ceases to apply to a worker. As it would have been impossible to make such an order on the date of Royal Assent and for it to take effect from that date, provision was made for it to have retrospective effect. However, as workers under the age of 21 are to be excluded from the system from Royal Assent, problems are likely to arise in safeguarding their rights through an order made at some future date. The amendments therefore preserve the accrued holiday entitlement for under 21s as at the date of Royal Assent and for other workers as at the date the relevant wages order ceases to apply to them. The existing provision enabling the Secretary of State to make an order has been retained as a safeguard should it prove necessary at some future date to clarify the preserved rights provision.
    The manuscript amendment seeks to preserve any other rights of workers under the age of 21 in addition to the accrued holiday entitlement preserved by amendment No. 39. The Government believe that it is necessary to exclude young people from the provisions of wages councils orders from the date of passing of this Bill. Any delay would have to be reckoned in terms of the number of job opportunities lost. We readily accept th4;holiday entitlement earned by service up to the date a wages council order ceases to apply to a worker should be preserved. That is only fair and proper. However, we do not accept that that exception should be extended to any other accrued rights.
    Ms. Clare Short: Our manuscript amendment, grouped with these Government amendments, to which we do not object, draws attention to how badly those under the age of 21 are being treated under the Bill. They are to lose all their protection immediately it passes into law. The indecent speed with which the Bill has been brought from the Lords to the Commons means that they will lose that protection before rather than at the end of summer.
    It is noteworthy that all other workers protected by existing wages councils orders will continue to be protected by the old orders until new orders are made under the Bill, but the minute the Bill receives Royal Assent those under 21 will cease to have any protection. That is the Bill's final nasty twist of the knife in the young.
    The Government's case is based on an enormous falsehood — that a cut in youth wages will lead to a reduction in youth unemployment, and that high youth unemployment is caused by high youth wages. The truth is that youth wages are low by international standards and have fallen massively in the past few years as youth unemployment has grown rapidly. The experience of every developed country shows that when unemployment is

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    rising, it rises faster for young people than for any other age group for obvious reasons: they are marginal to the labour force, they are seeking to join it, they lack experience, and when employers can afford to be fussy about whom they employ, they tend not to employ young people. That is the experience of the United States of America, France and Germany. Youth unemployment has nothing to do with the wages profile of young people in Britain.
    The Government's real strategy is to cut everybody's wages. To achieve that, they attack the most vulnerable, seeking to push their rates down, because it is easy to attack women's and young people's wages. If the labour of such vulnerable groups can be made cheaper, they can be made to compete with other groups and used as a lever to push down everybody's wages.
    A series of measures, intended to cut the wages of young people has been taken by the Government. They have deliberately used the youth opportunities programme and the youth training scheme to do so. The allowance was set at a low level and it did not operate in line with inflation. If the allowance had kept pace with the original YOP allowance, it would have been about £40. The Government deliberately used the community programme to get the young unemployed, in their desperation, to accept badly paid and part-time employment. The young workers scheme was designed deliberately to cut wages. That unsuccessful scheme has been replicated for an older age group. The cuts in benefits for young workers were intended to make them accept less in order to work.
    1.30 am
    One would have thought that any decent Government would wish to protect the young in the first stage of their working life. If one were asked which group of workers needed protection, the young would he the first on the list. They have not worked before, and they do not have experience in looking after themselves and their wages and conditions of work. All decent countries have minimum wages legislation for the protection of young people. Britain is the only country to move away from that. That is why we had to resile from the International Labour Organisation convention on minimum wage protection, with which many underdeveloped countries managed to comply. Britain will not do so.
    Such a removal of protection for young people will not create a large number of new jobs. If the cut in youth wages were to have done that, we would have seen a reduction in youth employment because their wages have dropped considerably. It will be a question of getting young people into work by throwing their mothers out of work. The people who work in the industries that are protected by wages councils are overwhelmingly women, and low-paid women.
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    Unemployment runs in families. If one person in a family is unemployed, it is likely that other members of his family will be unemployed. Young unemployed people are likely to have other unemployed members of their family. In so far as this nasty measure will have any effect at all, a few young people might get jobs, but a number of women, mothers and other young people, are likely to lose their jobs.
    Our amendment draws attention to the fact that the only protection the Government will continue to give to young people is to ensure that their accrued holiday pay will be paid to them. Young people are to be treated even worse than other workers who lose protection under the Bill. The existing wages councils orders will continue in force for some time for adult workers, but that is riot so for youth. On the day of Royal Assent, all their protections will be removed.
    I have only one pleasure when I contemplate the consequences of the measure. It will take some time for the Government's strategy to work—for employers to shift and cut the wages of young people. By that time, we will have had an election and we will have a new Government who will bring in a proper national minimum wage, with proper protection for young people, so that we can move towards a decently paid, decently trained and decent investment economy instead of the sweatshop economy that the Bill leads us towards.
    Mr. Caborn: Of all the hours that the Committee considered the Bill and our previous proceedings, this is the most despicable debate so far. It symbolises the Government's attitude not only to young people but to British industry. Nothing shows more clearly the drive to a low-wage economy than this section of the Bill.
    I concur with everything that my hon. Friend the Member for Birmingham, Ladywood (Ms. Short) said. The Government are driving down the wages of the under 21-year-olds simply to ensure that they will displace older workers, instead of training our young people, bringing them on to a decent wage level, and giving them protection. No other Western nation uses young people as fodder so it can have a low-wage economy. They look to young people as an investment for the future in terms of the training that is required by their industries. Anybody would think that Britain's industries have a wealth of trained talent. That is not so. The Bill will worsen that position. I hope that if the Labour party presses the 1-louse to a Division, which I favour, all those Conservative Members who cry out about British industry and its direction will join us in the Lobby.
    Question put and agreed to.
    Subsequent Lords amendments agreed to.

Agriculture Bill
Lords amendments considered.
Agriculture Bill
  Clause 1

    PROVISION OF SERVICES AND GOODS CONNECTED WITH AGRICULTURE AND COUNTRYSIDE
    Lords amendment: No. 1, in page 2, line 4, at end insert—
    "(2A) The provision which may be made under this section includes provision for the supply of such services and goods as are mentioned in subsection (1) above through any organisation; and the Minister shall establish an organisation through which such a supply may be made.".
    1.35 am
    The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John Selwyn Gummer): I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Dave Nellist: On a point of order, Mr. Deputy Speaker. I do not intend to delay the House unnecessarily, but I do not think that you put our manuscript amendment on the Wages Bill to the vote.
    Mr. Deputy Speaker (Mr. Harold Walker): We have considered that measure. The amendment was not moved.
    Ms. Clare Short: I moved it, Sir.
    Mr. Deputy Speaker: The hon. Lady spoke to the amendment, but she did not move it. I got the impression that the amendment was not to be pressed to a Division. We have passed that point now.
    Mr. Gummer: The amendment seeks to meet the fears of Committee Members that there was no obligation to maintain an advisory service. The Government were determined that that should be a false fear, but, so that there would be no misunderstanding, this amendment was moved and agreed in their Lordships' House.
    Mr. Brynmor John: To debate the Bill barely 24 hours after it was given its Third Reading in the other place is contrary to reasonable government. A clause on tenants' rights in Scotland has never appeared in the legislation before, and we are seeing for the first time a substantial number of amendments to the tenants' rights clauses. I protest, not to the Minister of State, but to the business managers who did this to him.
    I welcome the slight move on the Agricultural Development and Advisory Service. The "may" and "shall" debate seems to have ended in a draw. The Minister "may" still provide services, but, if he does, he "shall" provide a structure and organisation to carry them out.
    We want to put on record our opposition to the present cuts. We want a commitment that there will he no further reductions in ADAS, whatever the revenue charging. The first pilot scheme — the plant laboratories charging scheme — has led to an 80 per cent. loss in the throughput of work in those laboratories, which is not an auspicious start to the new regime.
    The same is true of the statement by Mr. Bawcutt, the head of the new ADAS marketing unit, that the aim of ADAS is to improve the efficiency of agriculture through the market. Does that mean producing still more? If so,
    510
    will it be in the larger public interest? We believe that the charging clause, as admitted by Mr. Bawcutt, had a big effect on staff numbers and morale. We believe that the farmers' reaction at the Royal show, where they said that they would not pay for the services of ADAS if they could get advice free from other sources, is not an auspicious start.
    I have tried to read Lord Belstead's attempts to differentiate between a chargeable and non-chargeable service. I still think that this is a recipe for disaster. The advisory work should be done free of charge, as a contribution by the Government towards re-orientating the whole of British agriculture.
    Mr. Deputy SpeakerI have to remind the House that this amendment involves privilege.
    Mr. Richard Livsey: I do not wish to detain the House for long, but I should like to place on record the fact that amendment No. 1 will at least give the Minister the power to carry on with the advisory organisation, and that is better than what we had previously. At least there will be some mechanism in operation. Perhaps in the future it will provide the possibility of a better service than we are being given in clause 1.
    We would like to place on record the fact that we regret that enshrined in clause 1 are charges for ADAS services. We deprecate this very much. At at time when farming is up against it and farm incomes are the lowest that they have been for 10 years, the slapping on of charges for the very services that could rescue the industry is totally inappropriate.
    Mr. Robert Maclennan: This amendment is a modest improvement on what was in the Bill when we first saw it. However, it must be said that it does not, of itself, describe how the Government intend to exercise their discretion to make charges. I had hoped that the Minister would use this opportunity to say something more about that. There has been considerable debate in another place about the appropriateness of charging for advice that is required to enable statutory obligations to be met. In another place the Government refused to accept an amendment along those lines. That has been a matter of great disappointment to the farming industry, which properly feels aggrieved that the Government have refused to make that change.
    It is not satisfactory that a Bill of this kind should embody such a wide discretion without any indication being given of the circumstances in which the Minister may choose to decide that it is appropriate to offer services, advice or goods free of charge. Perhaps in answering this short debate the Minister will find it possible to say something about that, because the industry is hanging on his words.
    I agree with the remarks made by the hon. Member for Pontypridd (Mr. John) about the inappropriateness of putting such an important Bill and such important amendments before us without proper time being allowed to lapse for consultations and proper consideration of appropriate amendments. This is not a serious way to treat the industry. We will have more to say about that in the context of amendments which follow this one, which is a relatively modest change from the initial Bill.
    Mr. Deputy Speaker: Does the Minister have the leave of the House to speak again? It appears that he does.
    Mr. Gummer: I am pleased that some hon. Members have seen that this amendment, like almost every amendment before the House, is an attempt by the Government to move towards the Opposition and others in the criticisms that they have made. In that sense it seems sensible to debate them tonight, even though it is a short time after their Lordships' debate, to try to ensure that the Bill goes on to the statute book so that the benefits of it can soon be seen in agriculture. I believe it to be a benefit to agriculture that in Britain, as in most of the Common Market countries, it will be seen that advice should be as close to the marketplace as possible. Payment for that advice is part of ensuring that the advice that is given is commercially valued. That is a positive good, and not a disadvantage.
    That positive good was dramatically shown at the Royal show this year, when we saw how the French and British advisory services operated side by side. What became clear to people, perhaps for the first time, was the extent to which other advisory services charge for the service that they give. In the House we hear hon. Members say how valuable those advisory services have been to those countries. I find it odd that we should be so unique that we feel that the only thing that is worth while doing is something that is done free. The amendment would be a valuable contribution to the closer working of agriculture and the market.
    1.45 am
    The need to get advice on statutory obligations is important. A large number of them are there to benefit the industry. It is not unreasonable that the industry should bear the cost of much of that, which is why we have seen to it that in future that is what will happen. The purpose of the clause is not to cast any doubt on the advisability or the wish of the Government to continue an advisory service. The intention is to make the advisory service more effective, more market oriented, and more useful to the farmer. As some doubt was put into the minds of the people because of the phrases in the Bill, we tried to insert into it a phrase that would give us the obligation to retain advisory services, while enabling the organisation to respond sensibly and quickly to changes in demand for particular goods or services. That is why the amendment should help Opposition Members who had that fear. I hope that the House will accept it.
    Mr. Maclennan: Will the right hon. Gentleman go a little further in explaining his attitude to the statutory obligations? He said that some of them would have to be paid for. Does he have it in mind to make some exceptions to the general rule about keeping close to the market?
    Mr. Gummer: With my natural reticence, I was making sure that I had covered all eventualities. It is reasonable to charge for advice on statutory duties where they benefit the industry.
    Question put and agreed to.

  Clause 4

    CONSTITUTION AND FUNCTIONS OF HOME-GROWN CEREALS AUTHORITY
    Lords amendment: No. 2, in page 3, line 20, leave out "one" and insert "two".
    Mr. Gummer: I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Deputy Speaker: With this it will be convenient to take Lords amendment No. 3, in page 4, line 17, leave out "of that subsection".
    Mr. Gummer: Amendment No. 2, to provide for at least two independent members of the authority who would fill the offices of chairman and deputy chairman, was originally tabled on Report by the Opposition but not moved. However, two other amendments that flowed from the proposed change were moved and accepted, and it was necessary to tidy up the situation. Similarly, amendment No. 3 tidies up the drafting of the clause, removing part of it.
    Mr. John Home Robertson: It is probable that one of the reasons why we are debating this Lords amendment is the fast work by you, Mr. Deputy Speaker, when you were in the Chair on Report. You caught both the Minister and I on the hop, so the amendment was not dealt with.
    We covered the point of the amendment in Committee. We were rather concerned that there would be one solitary independent member of the Home-Grown Cereals Authority who would also be the chairman. We thought that there was a need for proper representation of the independent public interest on the authority and for a guarantee for some back-up for the independent chairman, particularly when there might be conflict between the evenly balanced interests of the growers and the processors on the HGCA.
    We welcome this minor amendment, and the guarantee that there will be at least one further independent representative on the HGCA.
    Question put and agreed to.
    Subsequent Lords amendment agreed to.

  Clause 7

    CONSTITUTION AND LEVY SCHEMES OF MEAT AND LIVESTOCK COMMISSION
    Lords amendment: No. 4, in page 3, line 20, leave out "one" and insert "two".
    Mr. Gummer: I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Deputy Speaker: With this, it will be convenient to discuss the following Lords amendments: No. 5, in page 7, line 43, at end insert—
    "(d) in subsection (6) (provision in levy schemes for persons on whom levy imposed to recover all or a specified part of sums paid by them from others) the words 'all or a specified part of shall be omitted; and
    (e) after that subsection there shall be inserted—
    "(6A) Where a levy scheme makes such provision as is mentioned in subsection (6) above it shall—
    (a) authorise the Commission from time to time to determine the proportion of the sums paid under the levy scheme which shall be recoverable;
    (b) specify whether the Commission may determine that the whole of those sums shall be recoverable and, if not, the maximum proportion of them which they may determine shall be recoverable; and
    (c) specify whether the Commission may determine that none of those sums shall be recoverable and, if not, the minimum proportion of them which they may determine shall be recoverable.'."

    513
    No. 51, schedule 3, in page 27, line 55, column 3, leave out "(4)" and insert "in subsection (4)"
    No. 52, in page 27, line 57, column 3, at end insert
    "and in subsection (6) the words "all or a specified part of'
    Mr. Gummer: These amendments are intended to introduce limited additional flexibility into the Meat and Livestock Commission's levy arrangements. As originally drafted, clause 7 gave the MLC the ability to include in a levy scheme special arrangements for particular parts of the levy. This will enable the MLC to make special funding arrangements for certain activities, such as meat promotion or research and development. In particular, it will enable the commission to stipulate that the two groups of levy payers—slaughterers and livestock producers—should each pay a different proportion of these parts of the levy in line with the industry's own wishes.
    These amendments go a small step further by providing for the proportions payable by each sector to be fixed administratively within the limits laid down in the levy scheme. This will mean that where only minor adjustments are proposed the MLC will be able to act on its own initiative without having to go through the lengthy process of submitting a new or amending levy scheme. This seems to us to introduce worthwhile additional flexibility into the arrangements, but I must stress that the MLC's freedom of manoeuvre will be restricted by whatever limits are written into the basic levy scheme, which will be subject to the closest scrutiny by the industry, by Ministers and by Parliament. I am sure the House will agree that this is an important safeguard. Therefore, we have tried to introduce enough flexibility to make it a useful way of giving the MLC a chance to make small alterations while not in any way giving it a power which could be abused.
    Question put and agreed to.
    Subsequent Lords amendment agreed to.

    New Clause

      CONSOLIDATION OF AGRICULTURAL MARKETING SCHEMES
      Lords amendment: No. 6, after clause 10, insert the following new clause—
      " . After paragraph 5 of Schedule 1 to the Agricultural Marketing Act 1958 (amendment and revocation of agricultural marketing schemes) there shall be inserted—
      "5A. — (1)Where the Minister considers it appropriate to do so he may

      (a) prepare a consolidation of any scheme as it has effect with amendments ("the amended scheme"); and

      (b) by order revoke the amended scheme and approve the consolidated scheme.

      (2) An order made by virtue of this paragraph—

      (a) shall state that it is made only for the purposes of consolidation; and

      (b) may contain such transitional and consequential provision as the Minister considers necessary or expedient.".".

      Mr. Gummer: I beg to move, That this House doth agree with the Lords in the said amendment.
      Mr. Deputy Speaker: With this it will be convenient to discuss Lords amendment No. 50, Schedule 2, in page 26, line 5, at end insert—
      "In section 2(15) of the Agricultural Marketing Act 1958 for the words "or revoked" there shall be substituted the words "revoked or consolidated"."
      Mr. Gummer: This amendment is put in at the request of the Joint Committee on Statutory Instruments. It enables consolidation to take place. In many senses, therefore, it is a technical amendment.
      Question put and agreed to.

    New Clause
    Mr. Gummer: I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Deputy Speaker: With this it will be convenient to discuss Lords amendment No. 10, after clause 11, insert the following new clause—
    'Rent arbitrations: milk quotas
    . —(1) Where there is a reference under section 12 of the Agricultural Holdings Act 1986 (arbitration of rent) in respect of land which comprises or is part of a holding in relation to which quota is registered under the Dairy Produce Quotas Regulations 1986 which was transferred to the tenant by virtue of a transaction the cost of which was borne wholly or partly by him, the arbitrator shall (subject to any agreement between the land-lord and tenant to the contrary) disregard—

    (a) in a case where the land comprises the holding, any increase in the rental value of the land which is due to that quota (or, as the case may be, the corresponding part of that quota); or

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    (b) in a case where the land is part of the holding, any increase in that value which is due to so much of that quota (or part) as would fall to be apportioned to the land under those Regulations on a change of occupation of the land.

    (2) In determning for the purposes of this section whether quota was transferred to a tenant by virtue of a transaction the cost of which was borne wholly or partly by him—

    (a) any payment made by the tenant in consideration for the grant or assignment to him of the tenancy or any previous tenancy of any land comprised in the holding, shall be disregarded;

    (b) any person who would be treated under paragraph 2, 3 or 4 of Schedule 1 to this Act as having had quota transferred to him or having paid the whole or part of the cost of any transaction for the purposes of a claim under that Schedule shall be so treated for the purposes of this section; and

    (c) any person who would be so treated under paragraph 4 of that Schedule if a subtenancy to which his tenancy is subject had terminated, shall be so treated for the purposes of this section.

    (3) In this section—
    "quota" and "holding" have the same meanings as in the Dairy Produce Quotas Regulations 1986;
    "tenant" and "tenancy" have the same meanings as in the Agricultural Holdings Act 1986.
    (4) Section 95 of that Act (Crown land) applies to this section as it applies to the provisions of that Act".
    Mr. Gummer: Hon. Members may recall from our previous consideration of the Bill the provision which would enable tenants to claim compensaton at the end of their tenancies in respect of the milk quota attaching to that land. The existing provisions in clause 11(2) were intended to ensure that the prospect of compensation for the tenant in respect of milk quota should not affect the rent of the holding. It was suggested in another place that although the provision contained in clause 11(2) was fine so far as the quota allocated by the Minister was concerned, it would not be fair to apply it to the quota that the tenant effectively acquired through a land transaction and transferred to the holding covered by the tenancy. This is transferred quota in the Bill's terminology.
    We recognised that this was a point for which we should make provision. If a tenant has paid for quota it is reasonable that it should be treated similarly to a tenant's improvement and disregarded in assessing the rent. Amendment No. 10 does this.
    Subsection (1) of the new clause, which is amendment No. 10, makes it clear that transferred quota acquired by the tenant is to be disregarded at a rent review. A tenant will not be charged rent on it because it will be treated in a similar way to a tenant's improvement. The original intention of clause 11(2) is preserved in the new clause by saying that transferred quota is to be disregarded. Subsection (1) makes it clear that quota allocated by the Minister is not to be disregarded. Thus, the fact that a tenant may be eligible for compensation in respect of allocated quota when eventually he gives up the holding will not affect the rent payable in the meantime.
    Subsection (2)(a) of the new clause makes it clear that if an incoming tenant has made a payment to the landlord on taking over a holding to which quota is attached, this does not count as the acquisition of transferred quota. That is because it would not be appropriate for this legislation to intervene in private agreements involving a quite different type of transaction into which the two parties freely enter.
    Subsection (2)(b) and (c) of the new clause also make it clear that the statutory successor or assignee of the
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    original tenant who was there when the quotas were bought in and the head tenant of an original sub-tenant are to be treated in the same way as the original tenant. If the original tenant paid for the quota in connection with a land transfer, then his entitlement not to be assessed for rent on the transferred quota will pass to his successor. Hon. Members may recall this concept is similar to that already contained in the compensation provisions where the entitlement to compensation passes from the original tenant to the successor. This is to clear up what might otherwise have been an anomaly.
    Mr. John: Although the major milk quota debate is to take place later, perhaps I could raise one point at this stage about greater flexibility, because I know that flexibility is the main aim of all hon. Members when dealing with milk quotas. As the Minister will know, because I have raised it with him, I am extremely worried about the sort of case where the tenant has made an exceptional contribution, such as the provision of fixed equipment or buildings, towards the building up of the milk business.
    Although one cannot formally amend the Bill, special consideration should be extended to people in this special category. That could be done by the Minister making it clear that they merit special consideration. Perhaps he could also tell the arbitrators or the arbiters in Scotland of that fact so that when arbitrations come before them. they will be guided by what the House feels to be the case: that where a tenant contributes substantially towards the building up of a milk business that should merit special consideration.
    Mr. Maclennan: Although I accept that the proposal to require the transferred quota to be disregarded by the arbiter is sensible and a distinct improvement, the clause draws attention to the anomalies that are created by the concept of quotas allocated or transferred and excess and standard quotas. Although the clause is a modest improvement towards safeguarding the tenant's rights, I agree with the hon. Member for Pontypridd (Mr. John) and I hope that we can return to the matter and discuss it at greater length in the debate on quotas.
    Mr. Gummer rose—
    Mr. Deputy SpeakerDoes the Minister have leave to address the House again? I take it he does.
    Mr. Gummer: I agree with the hon. Member for Pontypridd (Mr. John) that it is most important that people understand exactly how they stand about quotas. I say to the hon. Member for Caithness and Sutherland (Mr. Maclennan) that any system that seeks to approach what is a matter of real disagreement—not just between tenant and landlord but between incoming and outgoing tenants—is bound to encounter difficulties. There is no way of getting over the difficulty that, for the landlord, the quota results in an increase in value but not necessarily, indeed rarely, does it result in any money in his hand. The money in his hand, if it is to be passed out to an outgoing tenant, must be gained from someone else, and the other person who can give it to the landlord will be the incoming tenant. Therefore, there is a real interest division between the incomer and the outgoer.
    2 am
    In those circumstances, we cannot avoid having a situation and a system which needs careful explanation

    517
    and consideration, and that is what the area has been given. I know that the hon. Member for Pontypridd is concerned that there should be no misunderstanding. Therefore, I accept that there are cases where the tenant has taken over a non-dairy holding—for example, what really turns out to be a greenfield site—and through his own hard work and by investing his own money turns it into a flourishing milk enterprise. That puts him in a different circumstance from many others. In those circumstances the landlord has contributed virtually nothing except the land itself. I think that all hon. Members will agree that in such a case the arbitrator should take full account of what the tenant has done, so that the tenant will be credited with much the greater part of the quota.
    I happen to be confident that the Bill, as amended in another place, will achieve that effect. Two distinct mechanisms operate to that end. First, there is the calculation of the standard quota. That calculation is now formulated in such a way as to make it clear that the tenant is to get full credit for management practices, such as milking three times a day or feeding high levels of concentrates — practices which will have boosted production in the base year above what one would normally expect. Quota earned by those practices will be excess quota—quota in excess of the standard quota for the holding—and the tenant will get 100 per cent. of the value of that quota.
    Mr. Keith Best: My hon. Friend will know that in another place my noble Friend Lord Stanley, a constituent of mine, moved an amendment which he later withdrew which was very much related to the disparity between the 500 litre difference between less favoured areas—marginal land—in Scotland, and that in England and Wales. The reply of my noble Friend Lord Belstead was to the effect that that would be a difference of no more than one fifth of 1 per cent. Can my hon. Friend confirm that that is the case? If the difference is so minimal why is it necessary to continue to have this difference of 500 litres?
    Mr. Gummer: I am sure that my hon. Friend would not expect me to do other than to support that which my noble Friend said in the other place. To the best of our knowledge, the figures that he gave are correct.
    There are differences between England and Wales and Scotland. We have sought to try to recognise those and my hon. Friend will be presenting to the House some of the changes which we have in mind which have gone through the other place in that respect. I hope that my hon. Friend will listen carefully to them. I am sure that he will see that, because the circumstances of land tenure are different, because the distribution of land on which dairy herds are found is different, because the proportion of LFAs which have dairy herds on them is different, the circumstances may be said to be completely different.
    As is the custom in these matters, the proposals to deal with the problems are different to meet different circumstances. It does not help to suggest that we should not treat Scotland in the way in which we have done in the past, because the law in Scotland is different from that in the rest of the United Kingdom and it is also true that the circumstances of dairying are different.
    518
    That is not the only way in which we are trying to meet the demands which the hon. Gentleman put. There is a calculation of a tenant's fraction which is the tenant's share of the standard quota—in other words, that which is not affected by the excess quota calculation about which we have talked. That is simply the tenant's share of the total annual value of the holding, including the land, buildings and fixed equipment.
    In a case where a tenant has taken over a greenfield site, the tenant's share will be high because of the basis of that calculation. All the buildings and fixed equipment will be his, so the full annual value of those will go into the calculation on the tenant's side. On the landlord's side there will be just the land. The annual value of the land is shown by the rent, which one would expect to be relatively low in the type of case that I am discussing. So the tenant's fraction of the standard quota will be substantial. When one adds it on to the excess quota, the tenant will be getting, under the Bill as it now stands, a very high proportion in total of the full value of the quota.
    But I have been disappointed by a tendency in certain quarters to minimise the value of the quota compensation provisions. I have even heard it suggested that there is a de facto maximum cut-off for the tenant's fraction, and that valuers will never award more than a certain percentage. I heard that again about two days ago when I was speaking in Lancashire. But that is not so. There is nothing implicit or explicit that would warrant such an interpretation. I have taken the point, and I am determined that that interpretation should not be made.
    It is important to be clear. To put people's minds at rest, I intend to write to the Royal Institution of Chartered Surveyors and to the Central Association of Agricultural Valuers, putting it on the record that there is no cut-off, and that valuers are free to award as high a tenant's fraction as they consider appropriate. I hope that I have reassured the House that the Bill leaves arbitrators free to give full credit to the tenant, who has effectively done everything with the exception of providing the land.
    Mr. William Cash: I am extremely glad to hear that. Recently I had a meeting with my branch of the NFU at which those concerns were raised. People encountered considerable difficulties when the original milk quota round was going on, over the manner in which the tribunals adjudicated. Some people felt that it was unfair. Will the Minister influence as much as possible the Royal Institution of Chartered Surveyors and others to ensure that those who are appointed are properly and fully qualified to deal with the questions, have the relevant skills—
    Mr. Deputy Speaker: Briefly, please.
    Mr. Cash: —and are in a position to judge the outcome fairly on behalf of both parties.
    Mr. Gummer: I am sure that my hon. Friend is right, that we naturally want to eliminate any sense of unfairness. However, he would probably agree with me that in so contentious a matter, where there is considerable concern among landlords and their incoming or outgoing tenants some will always feel hard done by. The same is true of the original allocation of quotas. It is most important that every effort should be made to ensure that there is no reason for that, although it may still occur. I hope that the House will accept that by agreeing to do this, I shall meet the particular concern that has been raised.
    Sir Paul Hawkins: I am a member of the Royal Institution of Chartered Surveyors and was an arbitrator for many years. The arbitration procedure is fair. People who are fully qualified are chosen to do the work. The unfortunate thing about the whole quota system is that the incomer—probably a younger man who has to go into the holding—is often forgotten. The more the outgoer has to receive, the more the ingoer faces. The incomer is often far worse off, because he has a very heavy burden in the amount of ingoing that he has to pay for everything else. I hope that that is borne in mind.
    Mr. Maclennan rose—
    Mr. Deputy Speaker: I thought that the hon. Gentleman had already addressed the House once.
    Mr. Maclennan: I have not addressed the House on this amendment.
    The House will have listened carefully to the Minister's words, which were clearly designed to reassure the industry—
    Mr. Deputy Speaker: Order. I recollect that the hon. Gentleman has already spoken once to this group of amendments. He can only address the House once on this group of amendments.
    Mr. Maclennan: With respect, I have not addressed the House. The Minister has tried to put the industry's anxieties to rest. For the avoidance of doubt, Mr. Deputy Speaker, there are a number of issues which the Minister raised which are certainly germane to a later—
    Mr. Deputy Speaker: Order. The hon. Gentleman can address the House only once on an individual amendment or a group of amendments when we are discussing Lords amendments. It was within my clear recollection that he had addressed the House once on this group. If he insists that my memory is in doubt, I shall have to accept that.
    Mr. Maclennan: I am sure that your memory is extremely good, Mr. Deputy Speaker, and at this time of night it is possible that mine is faulty.
    Question put and agreed to.

    New Clause

      VALIDATION OF APPLE AND PEAR DEVELOPMENT COUNCIL ORDERS.
      Lords amendment: No. 7, insert the following new clause—
      The Apple and Pear Development Council Order and the Apple and Pear Development Council (Amendment) Order 1980 shall be deemed to have been validly made notwithstanding that they were made by the Minister of Agriculture, Fisheries and Food acting alone rather than by that Minister and the Secretary of State acting jointly.".
      Mr. Gummer: I beg to move, That this House doth agree with the Lords in the said amendment.
      Mr. Deputy Speaker: With this it will be convenient to discuss Lords amendment No. 26, clause 16, in page 14, line 32, leave out "section 13(12)" and insert "sections (Validation of Apple and Pear Development Council Orders) and 13(12)".
      Mr. Gummer: At the time when the Government introduced this amendment my right hon. Friend the Minister of Agriculture, Fisheries and Food wrote to the hon. Members for Pontypridd (Mr. John), for Brecon and Radnor (Mr. Livsey) and for Caithness and Sutherland (Mr. Maclennan) in order to explain our reasons for introducing the amendment at a rather late stage. My noble Friend the Minister of State also gave a full explanation when moving the amendment in another place. Therefore, I propose to give only a brief summary on this occasion, unless hon. Members wish me to go into it in greater detail.
      The purpose of the new clause is to remedy a technical fault in the making of two orders in 1980. Since the main purpose of the clause is to minimise possible difficulties for the affluent Apple and Pear Development Council, a worthy body that has the support of the British top fruit industry and, I believe, both sides of the House, 1 ask the House to agree to the Lords amendments.
      Question put and agreed to.
      Lords amendment: No. 8, in page 9, line 40, leave out subsection (2).

  New Clause

    COMPENSATION TO OUTGOING TENANTS FOR MILK QUOTA
    Lords amendment: No. 9, after clause 11 insert the following new clause—
    " . Schedule (Scotland: Tenant's compensation for milk quota) to this Act shall have effect in connection with the payment to outgoing tenants who are—

    (a) tenants of agricultural holdings within the meaning of the Agricultural Holdings (Scotland) Act 1949;

    (b) landholders within the meaning of section 2 of the Small Landholders (Scotland) Act 1911;

    (c) statutory small tenants within the meaning of section 32(1) of that Act;

    (d) crofters within the meaning of section 3(2) of the Crofters (Scotland) Act 1955,

    of compensation in respect of milk quotas.".
    The Parliamentary Under-Secretary of State for Scotland (Mr. John MacKay): I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Deputy Speaker: With this it will be convenient to take Lords amendment No. 49, new schedule, before schedule 2, insert the following new schedule—

    SCOTLAND
    Interpretation
    1. — (1) In this Schedule, except where the context otherwise requires or provision is made to the contrary—
    "allocated quota" has the meaning given in paragraph 2(1) below;
    "holding" has the same meaning as in the 1986 Regulations;
    "landlord" means—

    (a) in the case of an agricultural holding to which the 1949 Act applies, the landlord within the meaning of section 93(1) of that Act;

    (b) in the case of a croft within the meaning of the 1955 Act, the landlord within the meaning of section 37(1) of that Act;

    (c) in the case of a holding within the meaning of the 1911 Act to which the 1949 Act does not apply, the same as it means in the 1911 Act;

    "milk quota" means—

    (a) in the case of a tenant registered in the direct sales register maintained under the 1986 Regulations, a direct sales quota within the meaning of those Regulations; and

    (b) in the case of a tenant registered in the wholesale register maintained under those Regulations, a wholesale quota within the meaning of those Regulations;

    "registered", in relation to milk quota, means—

    (a) in the case of direct sales quota, within the meaning of the 1986 Regulations, registered in the direct sales register maintained under those Regulations; and

    (b) in the case of a wholesale quota within the meaning of those Regulations, registered in a wholesale register maintained under those Regulations;

    "relevant quota" has the meaning given in paragraph 2(2) below;
    "standard quota" means standard quota as calculated under paragraph 6 below;
    "tenancy" means, as the case may be—

    (a) the agricultural holding, within the meaning of section 1 of the 1949 Act;

    (b) the croft within the meaning of section 3(1) of the 1955 Act;

    (c) the holding within the meaning of section 2 of the 1911 Act;

    (d) the holding of a statutory small tenant under section 32 of the 1911 Act;

    (e) any part of a tenancy which is treated as a separate entity for purposes of succession, assignation or sub-letting;

    "tenant" means—

    (a) in the case of an agricultural holding to which the 1949 Act applies, the tenant within the meaning of section 93(1) of that Act;

    (b) in the case of a croft within the meaning of the 1955 Act, the crofter within the meaning of section 3(2) of that Act;

    (c) in the case of a holding within the meaning of the 1911 Act to which the 1949 Act does not apply, the landholder within the meaning of section 2(2) of the 1911 Act;

    "tenant's fraction" has the meaning given in paragraph 7 below;
    "termination" means the resumption of possession of the whole or part of the tenancy by the landlord by virtue of any enactment, rule of law or term of the lease which makes provison for removal of or renunciation by a tenant, or resumption of possession by a landlord, and in particular includes resumption of possession following—

    (a) vacancy arising under section 11(5) of the 1955 Act;

    (b) termination of a lease in pursuance of section 16(3) of the Succession (Scotland) Act 1964;

    521
    "transferred quota" has the meaning given in paragraph 2(2) below;
    "the 1886 Act" means the Crofters Holdings (Scotland) Act 1886;
    "the 1911 Act " means the Small Landholders (Scotland) Act 1911;
    "the 1949 Act" means the Agricultural Holdings (Scotland) Act 1949;
    "the 1955 Act" means the Crofters (Scotland) Act 1955; "the 1986 Regulations" means the Dairy Produce Quotas Regulations 1986.
    (2) For the purposes of this Schedule, the designations of landlord and tenant shall continue to apply to the parties to any proceedings taken under or in pursuance of it until the conclusion of those proceedings.
    Tenant's right to compensation
    2. — (1) Subject to this Schedule, where, on the termination of the lease, the tenant has milk quota registered as his in relation to a holding consisting of or including the tenancy, he shall be entitled, on quitting the tenancy, to obtain from his landlord a payment—

    (a) if the tenant had milk quota allocated to him in relation to a holding consisting of or including the tenancy ("allocated quota"), in respect of so much of the relevant quota as consists of allocated quota; and

    (b) if the tenant had quota allocated to him as aforesaid or was in occupation of the tenancy as a tenant on 2nd April 1984 (whether or not under the lease which is terminating), in respect of so much of the relevant quota as consists of transferred quota by virtue of a transaction the cost of which was borne wholly or partly by him.

    (2) In sub-paragraph (1) above—
    "the relevant quota" means—

    (a) where the holding consists only of the tenancy, the milk quota registered in relation to the holding; and

    (b) otherwise, such part of that milk quota as falls to be apportioned to the tenancy on the termination of the lease;

    "transferred quota" means milk quota transferred to the tenant by virtue of the transfer to him of the whole or part of the holding.
    (3) A tenant shall not be entitled to more than one payment under this paragraph in respect of the same tenancy.
    (4) Nothing in this paragraph shall prejudice the right of a tenant to claim compensation to which he may be entitled under an agreement in writing, in lieu of any payment provided by this paragraph.
    Succession to lease of tenancy
    3. — (1) This paragraph applies where a person (the successor has acquired right to the lease of the tenancy after 2nd April 1984

    (a) under section 16 of the Succession (Scotland) Act 1964;

    (b) as a legatee, under section 20 of the 1949 Act or under section 16 of the 1886 Act;

    (c) under a bequest of a croft under section 10 of the 1955 Act, or following nomination under section 11 of that Act;

    (d) under a lawful assignation of the lease,

    and the person whom he succeeded or, as the case may be, who assigned the lease to him is described in this paragraph as his "predecessor".
    (2) Where this paragraph applies—

    a any milk quota allocated or transferred to the predecessor (or treated as having been allocated or transferred to him) in respect of the tenancy shall be treated as if it had been allocated or transferred to his successor;

    (b) where, under (a) above, milk quota is treated as having been transferred to the successor, he shall be treated as if he had paid so much of the cost of the transaction by virtue of which the milk quota was transferred as his predecessor bore (or is treated as having borne).

    Sub-tenants
    4. In the case of a tenancy which is sub-let, if the sub-tenant quits the tenancy—

    (a) paragraph 2 above shall apply so as to entitle the sub-tenant to obtain payment from the head tenant, and for that purpose, references to the landlord and the tenant in this Schedule shall be respectively construed as references to the head tenant and the sub-tenant; and

    (b) for the purposes of the application of paragraph 2 above as between the original landlord and the head tenant—

    (i) the head tenant shall be deemed to have had the relevant quota allocated to him, and to have been in occupation of the tenancy as a tenant on 2nd April 1984; and

    (ii) if the head tenant does not take up occupation of the tenancy when the sub-tenant quits, the head tenant shall be treated as if he had quitted the tenancy when the sub-tenant quitted it.

    Calculation of payment
    5.—(1) The amount of the payment to which a tenant is entitled under paragraph 2 above on the termination of the lease shall be determined in accordance with this paragraph.
    (2) The amount of the payment in respect of allocated quota shall be equal to the value of—

    (a) where the allocated quota exceeds the standard quota for the tenancy—

    (i) the tenant's fraction of so much of the allocated quota as does not exceed the standard quota; together with

    (ii) the amount of the excess;

    (b) where the allocated quota is equal to the standard quota, the tenant's fraction of the allocated quota;

    (c) where the allocated quota is less than the standard quota, such proportion of the tenant's fraction of the allocated quota as the allocated quota bears to the standard quota.

    (3) The amount of the payment in respect of transferred quota shall be equal to the value of—

    (a) where the tenant bore the whole of the cost of the transaction by virtue of which the transferred quota was transferred to him, the transferred quota; and

    (b) where the tenant bore only part of that cost, the corresponding part of the transferred quota.

    Standard quota
    6.—(1) Subject to this paragraph, the "standard quota" for any tenancy for the purposes of this Schedule shall be calculated by multiplying the relevant number of hectares by the standard yield per hectare.
    (2) Where by virtue of the quality of the land in question or of climatic conditions in the area the amount of milk which could reasonably be expected to have been produced from one hectare of the tenancy during the relevant period ("the reasonable amount") is greater or less than the average yield per hectare then sub-paragraph (1) above shall not apply and the standard quota shall be calculated by multiplying the relevant number of hectares by such proportion of the standard yield per hectare as the reasonable amount bears to the average yield per hectare; and the Secretary of State shall by order prescribe the amount of milk to be taken as the average yield per hectare for the purposes of this sub-paragraph.
    (3) Where the relevant quota includes milk quota allocated in pursuance of an award of quota made by the Dairy Produce Quota Tribunal for Scotland which has not been allocated in full, the standard quota shall be reduced by the amount by which the milk quota allocated in pursuance of the award falls short of the amount awarded (or, in the case where only part of the milk quota allocated in pursuance of the award is included in the relevant quota, by the corresponding proportion of that shortfall).
    (4) In sub-paragraph (3) above the references to milk quota allocated in pursuance of an award of quota include references to quota allocated by virtue of the amount awarded not originally having been allocated in full.
    (5) for the purposes of this paragraph—

    (a) "the relevant number of hectares" means the average number of hectares of the tenancy used

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    during the relevant period for the feeding of dairy cows kept on the tenancy, or if different, the average number of hectares of the tenancy which could reasonably be expected to have been so used (having regard to the number of grazing animals other than dairy cows kept on the tenancy during that period); and

    (b) "the standard yield per hectare" means such number of litres as the Secretary of State may from time to time by order prescribe for the purposes of this subparagraph.

    (6) In this and in paragraph 7 below—

    (a) references to the area of a tenancy used for the feeding of dairy cows kept on the tenancy do not include references to land used for growing cereal crops for feeding to dairy cows in the form of loose grain; and

    (b) "dairy cows" means milking cows and calved heifers.

    (7) An order under this paragraph may make different provision for different cases.
    (8) The powers to make an order under this paragraph shall be exercisable by statutory instrument and any statutory instrument containing such an order shall be subject to annulment in pursuance of a resolution of either House of Parliament.
    Tenant's .fraction
    7.—(1) For the purposes of this Schedule "the tenant's fraction" means the fraction of which—

    (a) the numerator is the annual rental value at the end of the relevant period of the tenant's dairy improvements and fixed equipment; and

    (b)the denominator is the sum of that value and such part of the rent payable by the tenant in respect of the relevant period as is attributable to the land used in that period for the feeding, accommodation or milking of dairy cows kept on the tenancy.

    (2) For the purposes of sub-paragraph (1)(a) above, in the case of an agricultural holding within the meaning of the 1949 Act, the annual rental value of the tenant's dairy improvements and fixed equipment shall be taken to be the amount which would be disregarded, on a reference to arbitration made in respect of the tenancy under section 7 of the 1949 Act (variation of rent), as being—

    (a) an increase in annual rental value due to dairy improvements at the tenant's expense (in terms of subsection (2)(a) of that section); or

    (b) the value of tenant's fixed equipment and therefore not relevant to the fixing of rent under that section,

    so far as that amount is attributable to tenant's dairy improvements and fixed equipment which are relevant to the feeding, accommodation or milking of dairy cows kept on the tenancy.

    (3) Where—

    (a) the relevant period is less than or greater than 12 months; or

    (b) rent was payable by the tenant in respect of only part of the relevant period,

    the average rent payable in respect of one month in the relevant period or, as the case may be, in that part shall be determined and the rent referred to in sub-paragraph (1)(b) above shall he taken to be the corresponding annual amount.
    (4) For the purposes of this paragraph—

    (a) "dairy improvement"—

    (i) in the case of an agricultural holding or a statutory small tenancy, means a "new improvement" or an "old improvement" within the meaning of section 93 of the 1949 Act;

    (ii) in the case of a croft, means a "permanent improvement" within the meaning of section 37 of the 1955 Act;

    (iii) in the case of a holding under the 1911 Act to which the 1949 Act does not apply, means a "permanent improvement" within the meaning of section 34 of the 1886 Act.

    so far as relevant to the feeding, accommodation or milking of dairy cows kept on the tenancy;

    524

    (b) "fixed equipment" means fixed equipment, within the meaning of section 93 of the 1949 Act, so far as relevant to the feeding, accommodation or milking of dairy cows kept on the tenancy.

    (c) all dairy improvements and fixed equipment provided by the tenant shall be taken into account for the purposes of sub-paragraph (1)(a) above, except for such improvements and fixed equipment in respect of which he has, before the end of the relevant period, received full compensation directly related to their value.

    (5) For the purposes of this paragraph—

    (a) any allowance made or benefit given by the landlord after the end of the relevant period in consideration of the execution of dairy improvements or fixed equipment wholly or partly at the expense of the tenant shall be disregarded;

    (b) any compensation received by the tenant after the end of the relevant period in respect of any dairy improvement or fixed equipment shall be disregarded; and

    (c) where paragraph 3 above applies, dairy improvements or fixed equipment which would be regarded as tenant's dairy improvements or fixed equipment on the termination of a former tenant's lease (if he were entitled to a payment under this Schedule in respect of the land) shall be regarded as the new tenant's dairy improvements or fixed equipment.

    Relevant period
    8. In this Schedule "the relevant period" means—

    (a) the period in relation to which the allocated quota was determined; or

    (b) where it was determined in relation to more than one period, the period in relation to which the majority was determined or, if equal amounts were determined in relation to different periods, the later of those periods.

    Valuation of milk quota
    9. The value of milk quota to be taken into account for the purposes of paragraph 5 above is the value of the milk quota at the time of the termination of the lease and in determining that value there shall be taken into account such evidence as is available, including evidence as to the sums being paid for interests in land—

    (a) in cases where milk quota is registered in relation to land; and

    (b) in cases where no milk quota is so registered.

    Determination of standard quota and tenant's fraction before end of lease
    10.—(1) Where it appears that on the termination of a lease, the tenant may be entitled to a payment under paragraph 2 above, the landlord or tenant may at any time before the termination of the lease by notice in writing served on the other demand that the determination of the standard quota for the land or the tenant's fraction shall be referred—

    (a) in the case of an agricultural holding within the meaning of the 1949 Act to arbitration under that Act or, under section 78 of that Act, to the Scottish Land Court;

    (b) in any other case, to the Scottish Land Court, for determination by that court,

    and where (a) above applies, section 75 (or, where the circumstances require, sections 77 and 87) of the 1949 Act shall apply, as if the matters mentioned in sub-paragraph (1) above were required by that Act to be determined by arbitration.
    (2) On a reference under this paragraph the arbiter or, as the case my be, the Scottish Land Court shall determine the standard quota for the land or, as the case may he, the tenant's 'fraction (as nearly as is practicable at the end of the relevant period).
    Settlement of tenant's claim on termination of lease
    11.—(1) Subject to this paragraph, any claim arising under paragraph 2 above shall be determined—

    (a) in the case of an agricultural holding within the meaning of the 1949 Act by arbitration under that Act or, under section 78, of that Act, by the Scottish Land Court;

    (b) in any other case, by the Scottish Land Court,

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    and no such claim shall be enforceable unless before the expiry of the period of 2 months from the termination of the lease the tenant has served notice in writing on the landlord of his intention to make the claim, specifying the nature of the claim.
    (2) The landlord and tenant may within the period of 8 months from the termination of the lease by agreement in writing settle the claim, but where the claim has not been settled during that period it shall be determined as provided in sub-paragraph (1) above.
    (3) Where a tenant lawfully remains in occupation of part of the tenancy after the termination of the lease, the references in sub-paragraphs (1) and (2) above to the termination of the lease shall be construed as references to the termination of the occupation.
    (4) In the case of an arbitration under this paragraph, section 75 (or, where the circumstances require, sections 77 and 87) of the 1949 Act (arbitrations) shall apply as if the requirements of this paragraph were requirements of that Act, but paragraph 13 of the Sixth Schedule to that Act (arbitration awards to fix day for payment not later than one month after award) shall have effect for the purposes of this paragraph with the substitution for the words "one month" of the words "three months".
    (5) In the case of an arbitration under this paragraph, section 61 of the 1949 Act (determination of claims for compensation where landlord's interest is divided) shall apply, where the circumstances require, as if compensation payable under paragraph 2 above were compensation payable under that Act.
    (6) Where—

    (a) before the termination of the lease of any land the landlord and tenant have agreed in writing the amount of the standard quota for the land or the tenant's fraction or the value of milk quota which is to be used for the purpose of calculating the payment to which the tenant will be entitled under this Schedule on the termination of the lease; or

    (b) the standard quota or the tenant's fraction has been determined by arbitration in pursuance of paragraph 10 above,

    the arbiter or, as the case may be, the Scottish Land Court in determining the claim under this paragraph shall, subject to sub-paragraph (7) below, award payment in accordance with that agreement or determination.
    (7) Where it appears to the arbiter or, as the case may be, the Scottish Land Court that any circumstances relevant to the agreement or determination mentioned in sub-paragraph (6) above were materially different at the time of the termination of the lease from those at the time the agreement or determination was made, he shall disregard so much of the agreement or determination as appears to him to be affected by the change in circumstances.
    Enforcement
    12. Section 69 of the 1949 Act (enforcement) and section 70 of that Act (power of tenant to obtain charge on holding) shall apply to any sum which becomes due to a tenant by virtue of this Schedule as they apply to the sums mentioned in those sections.
    Powers of limited owners
    13. Whatever his interest in the tenancy, the landlord may, for the purposes of this Schedule, do or have done to him anything which might be so done if he were absolute owner of the tenancy.
    Notices
    14. — (1) Any notice or other document required or authorised by this Schedule to be served on any person shall be duly served if it is delivered to him, or left at his proper address, or sent to him by post in a recorded delivery letter or a registered letter.
    (2) In the case of an incorporated company or body, any such document shall be duly served if served on the secretary or clerk of the company or body.
    (3) Any such document to be served by or on a landlord or tenant shall be duly served if served by or on any agent of the landlord or tenant.
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    (4) For the purposes of this paragraph and of section 7 of the Interpretation Act 1978, the proper address of a person is—

    (a) in the case of a secretary or clerk to a company or body, that of the registered or principal office of the company or body;

    (b) in any other case, the person's last known address.

    (5) Unless and until the tenant receives notice of a change of landlord, any document served by him on the person previously known to him as landlord shall be deemed to be duly served on the landlord under the tenancy.
    Crown land
    15.—(1) This Schedule shall apply to land belonging to Her Majesty in right of the Crown, subject to such modifications as may be prescribed; and for the purposes of this Schedule the Crown Estates Commissioners or other proper officer or body having charge of the land for the time being or, if there is no such officer or body, such person as Her Majesty may appoint in writing under the Royal Sign Manual, shall represent Her Majesty and shall be deemed to be the landlord.
    (2) Without prejudice to sub-paragraph (1) above, subject to such modifications as may be prescribed, section (Scotland: Compensation to outgoing tenants for milk quota) of this Act and this Schedule shall apply to land where the interest of the landlord or of the tenant belongs to a government department or is held on behalf of Her Majesty for the purposes of a government department"
    Mr. MacKay: These amendments introduce a new clause and associated schedule to the Bill to provide in Scotland for compensation by landlords to tenants in respect of milk quotas on the termination of the tenant's lease. The clause and schedule are broadly comparable to the provisions for England and Wales at clause 11 and schedule 1, which were introduced as amendments to the Bill by my right hon. Friend the Minister of Agriculture, Fisheries and Food and agreed to by the House on Report on 17 April. I hope that the House will bear with me if I explain the position surrounding the Scottish amendments.
    As was the case for England and Wales, the Scottish provisions represent the outcome of a great deal of discussion between the Government and the agriculture industry, in particular the bodies representing the interests of landlords and tenants. These discussions were difficult and protracted and conducted against a backdrop of highly charged public debate. We worked hard in Scotland to establish an acceptable agreement with the National Farmers Union and the Scottish Landowners Federation, and it is a matter of great disappointment to me that it was not possible to achieve a consensus view with these bodies as to how the matter should be resolved.
    In these circumstances, and given the Government's commitment to provide waygoing dairy tenants with a measure of compensation in milk quota, we had to devise a statutory framework which balanced the interests concerned and which would allow the individual circumstances of each case to be taken into account. From our consultations it was clear that fairly detailed statutory guidelines were necessary to provide sufficient flexibility to take account of these individual circumstances and to ensure uniformity of approach at arbitration.
    As the basic legislation governing milk quotas comprises European Community regulations, we had to be careful to avoid any undue discrimination between farmers in similar circumstances north and south of the border: a point mentioned by my hon. Friend the Member for Cunninghame, North (Mr. Corrie) on Report when we

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    debated the provisions for England and Wales. This has led us to adopt the same general framework for Scotland as is contained in clause 11 and schedule 1.
    Despite the similarities in approach, separate provision in the Bill for Scotland is required to cater for the different and more complex body of Scottish land tenure legislation and this accounts for the main differences from the provisions for England and Wales. I must apologise to the House for the fact that the complexity of Scottish land tenure legislation and the need to give due consideration to the specific circumstances of Scottish tenant dairy farmers prevented these Scottish provisions being tabled in the House concurrently with those for England and Wales.
    As I said a few moments ago, the Scottish provisions are broadly comparable to those accepted for England and Wales, and as the House has already agreed to the Government's overall approach I shall spare hon. Members a detailed exposition of the Scottish provisions, but it might be helpful if I were to summarise the main elements before highlighting the differences with the provisions for England and Wales.
    The majority of qualifying tenants will be those to whom the original milk quota allocations were made—producers who were occupying their holdings on 2 April 1984. These producers will normally have had primary quota allocated to them based on their production in the base year, which is "the relevant period". In most cases it is 1983. In the case of successions and assignments, compensation is not payable at the end of the original tenancy but the right is passed to the successor or assignee.
    Despite the apparent complexity of the provisions the principle of the system for calculating compensation is a simply one. The actual circumstances on the tenancy at the relevant period are assessed and compared with a standard based on figures to be prescribed by the Secretary of State. If the quota allocated to the farm exceeds the "standard quota" the tenant receives the full value of the excess plus a share of the standard quota, the "tenant's fraction", based on the relative contributions made by the tenant and the landlord to the quota level achieved. Under the formula, even if the quota earned by the tenant is not greater than the standard, he will still qualify for some compensation via the tenant's fraction calculation.
    2.15 am
    As to the differences north and south of the border, the first and most significant is the need in Scotland to cater for four different land tenure systems and categories of tenant farmer—tenants of agricultural holdings, crofters, small landholders and statutory small tenants. Within those various systems there are differences in provision for arbitration, in certain circumstances involving the Scottish Land Court instead of, or as an alternative to, an agricultural arbiter, and in provision for succession.
    The arbitration and succession provisions in the context of the amendment are also the main differences between the land tenure legislation north and south of the border. The succession provisions in particular are much more liberal in Scotland in their protection of the security of tenure enjoyed by the tenant farmer. The House may he interested to note that one result of that will be that we anticipate far fewer cases in Scotland than might be expected as a direct proportion of those likely to arise in England and Wales.
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    A further difference in paragraph 2(4) of the schedule is the inclusion of provision to override the schedule where a landlord and tenant agree in writing as to the amount of compensation to be paid. That reflects the situation which obtains for compensation available under existing legislation. In addition, we have made provision in paragraph 7(4)(c) of the schedule to ensure that certain private agreements between landlords and tenants in relation to waygoing compensation payable under existing legislation, which are a feature of the Scottish system, do not unfairly disadvantage the tenant in the calculation of the amount he is due in respect of quota compensation.
    I refer now to the detailed operation of those arrangements in Scotland. Clearly, it is essential to ensure that recognition will be given to the particular circumstances of the Scottish dairy tenant where they differ from his counterpart south of the border. Those circumstances, such as a greater dependence on marginal land and bought-in feed, and the longer periods during which dairy cows must be kept indoors, are of greater significance in general terms in the case of dairy farmers in the original less favoured areas in Scotland and will be reflected in the standard yield per hectare figure, which will be prescribed by the Secretary of State by statutory instrument. The figure that we have in mind for the original LFAs in Scotland is 5,500 litres per hectare. That concession is particularly significant for Scottish dairy tenants since most are located in the original LFAs. The related average yield per hectare figure will be 6,200 litres. It is likely that the standard yield and average yield figures for the extended LFA and non-LFAs land in Scotland will be as for England and Wales. We also have it in mind to define different yield figures for different breeds — for example Ayrshire cows on average yield less than Friesians.
    I associate myself with the remarks made by my right hon. Friend the Minister of State, Ministry of Agriculture, Fisheries and Food during the debate on the previous amendment, in response to the requests by the hon. Member for Pontypridd (Mr. John).
    All in all, I believe that the arrangements that we have devised for Scotland in the new clause and schedule provide a practical, balanced and fair solution to this difficult and emotive issue, which takes account not only of our complex body of existing legislation but of the practical circumstances, production patterns and farming practices of the Scottish dairy tenant.
    Mr. Home Robertson: The Minister of State said that there had been previous consideration of compensation for waygoing dairy farm tenants in England and Wales, but that is not the case for Scotland. This is the first sight that the House of Commons has had of this fairly substantial piece of legislation. We have a new clause and a new schedule, which fill 12 pages of legislative small print, dealing with compensation to outgoing tenants of Scottish dairy farms for the value of their milk quota. Therefore, I am grateful to the Minister for going into more detail than might be normal at this time of night. Indeed, I suspect that most dairy farmers in Scotland are not thinking about getting up and milking their cows rather than finishing off the previous day's work.
    Anyone who has been reading the Scottish farming press or talking to the National Farmers Union of Scotland recently will know that the matter is arousing pretty strong feelings. There is little support for the

    529
    Government's proposals, although the concession that the Secretary of State appears to have obtained, affecting dairy farmers in the Scottish less-favoured areas, is welcome as far as it goes.
    This debate, in these circumstances, at this hour, is a pretty sloppy way of legislating for an important group of people. The history of this affair goes back to the memorable day in the summer of 1984 when the Minister of Agriculture, Fisheries and Food was forced to accept a milk quota scheme at about two weeks' notice. At that stage he did not give the matter very much consideration, as he did not have much time to do that. He failed to comprehend the fact that he had chosen to create a new form of capital asset.
    We would have preferred to avoid that pitfall by providing for the re-allocation of quota on a fairer basis than is ever likely to be achieved by buying and selling quota in a free market. That opportunity has been missed and we will have to make the best of the scheme as it is at present. We do not like the fact that the quota is now a capital commodity, but now that it is a capital commodity we are determined that tenant farmers should receive the benefit of the value of that quota where that is appropriate.
    The quota market began to evolve throughout the country back in 1984, and nothing was done to protect tenants' rights. The Bill was introduced in November 1985, but nothing was done for the tenants. Nothing was done for them during the Committee stage, but on Report a dog's breakfast in relation to England and Wales was produced and at the last gasp we have a modified dog's breakfast in relation to Scottish farm tenants.
    The Lords completed consideration of the Bill last night, so the first official knowledge that we had of the new clause and the schedule came this morning. That presents us with certain difficulties. We do not like the package, and Scottish farmers are not very keen on it. On 11 June the Scottish National Farmers Union wrote to Members of the House of Lords urging them
    "to reject the Government's recommendations and to call for their replacement by a simpler, more objective and commercial approach."
    The difficulty that we face tonight is that that is all that there appears to be on offer. Any delay might prevent some tenants from receiving even this limited compensation for the three months of the summer recess.
    The package is unbelievably complicated and there must obviously be simpler ways of achieving a fairer solution. We have standard quotas, tenant's fractions and relevant periods, all leading to evaluation and a settlement at the end of the lease provided that the tenant or his heir remembers to lodge his written notice within two months in order to beat a potentially very difficult time bar under paragraph 11. We have been advised by people who understand these matters that the formula is likely to mean that the most that any tenant can hope to obtain is about 70 per cent. of the value of his quota, unless we can get further guidance for arbiters and the Land Court on the lines suggested by the Minister of State.
    We have been trying to encourage the Minister and the Government, by various means, to ensure that tenants can get the full value of their quota where such compensation is justified. I understood the Minister of State to say that he was giving the same undertaking as his right hon.
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    Friend gave some moments ago. This is important. There are tenanted dairy farms in Scotland where the tenant has made more than the normal tenant's contribution towards the value of the dairy unit. In addition to his contribution towards the dairy herd, his husbandry, management and machinery, he may also have invested heavily in the buildings and fixed equipment in the dairy enterprise. He may indeed have been entirely responsible for establishing the dairy unit.
    In these circumstances, there can be no justification for giving a landlord, who may have contributed nothing towards the value of the quota, a windfall of 30 per cent. of the value of that quota. Paragraph 6(2) refers to certain physical factors to be taken into account in calculating the standard quota—the land, the climate and the average yield.
    The full proportion of the tenant's investment in the value of the quota should also be considered. If he has contributed 100 per cent., he should be eligible to receive 100 per cent. in compensation for his investment under such circumstances.
    The Government have a bit of a nerve to ask the House to deal with a matter of this nature as a Lords amendment at 24 hours' notice. We will probably not be too keen on facilitating the passage of the Bill this week unless we are given an assurance that the Government will take the necessary steps to ensure that tenants can be compensated in full.
    I ask the Under-Secretary of State for Scotland to confirm that it is his intention that to ensure that arbiters and the Scottish Land Court will take into account a tenant's investment and contributions, and that there need be no ceiling on the proportion of the value of quota that will be subject to compensation at a tenant's waygoing.
    Sir Hector Monro: I agree with the hon. Member for East Lothian (Mr. Home Robertson) that it is unfortunate that the consideration of the Scottish part of the Bill must start with this important passage at 2 30am, but I agree with my right hon. and hon. Friends that the Bill must pass into law as soon as possible. Therefore, we must accept the position. The matter is highly contentious, and I appreciate that Ministers in England and in Scotlad have consulted in great depth the National Farmers Union and the Scottish Landowners Federation, but have not, sadly, brought both together in a common solution, much as we would have wished them to do so.
    To put the matter in context, we must accept that only a remarkably small number of tenant dairy farmers give up their business each year — perhaps 10 a year in Scotland, only half of whom will be the special cases mentioned by the hon. Member for East Lothian. I am glad to note that my hon. Friend the Under-Secretary of State for Scotland managed to achieve less-favoured area weighting in Scotland, which will be of great benefit.
    The issue started in April 1984, when there were no quotas and, therefore, no right to compensation for a tenant farmer giving up his lease. He would have had to depart under the normal outgoing settlement made by an arbiter. But quotas were created in April 1984, under the jurisdiction of the EEC, and at the same time we created a new asset and a windfall for tenant farmers, although I appreciate that they have gone through a difficult period in mastering the quota system.
    We must put on record, as did my hon. Friend the Member for Norfolk, South-West (Sir P. Hawkins), the

    531
    fact that whatever we do tonight will make it much more difficult for new entrants into dairy farming to obtain leases and to pay the large sum that will be necessary to gain occupation.
    I agree with most farmers that it is difficult to understand why the legislation must be so complex. Why cannot we have a normal waygoing, with valuation by an arbiter, who is highly skilled and highly qualified? He would take into account everything that is covered by the lease, and the landlord and tenant would accept his decision. I realise that these are special cases, but they are not too far away from a parallel with the hill sheep farmer on waygoing. where the sheep stock is bound to the ground and must be taken over after arbitration. I do not understand why we do not have something similar for milk quotas.
    If it is impossible to introduce such an amendment at this stage it is impossible — I hope that my hon. Friend will be as flexible as possible when he drafts the statutory instruments. This is a highly complicated matter, which few farmers will be able to understand, and which has failed to satisfy the NFU and the Scottish Landowners Federation. The statutory instruments, which of course will be debated in due course, must be carefully drafted.
    I was not too happy about the English amendment, but I am much more happy about the Scottish one, provided that we can introduce greater flexibility, especially in regard to paragraph 6(2) of the proposed schedule. We must consider the quality of the land. Part of the formula means multiplying hectares by the standard yield. The production from a hectare of less-favoured area land or of low-quality land will be much lower than from high-quality land.
    We must also consider the possibility of the tenant putting in a great deal of equipment—perhaps all of it—but still being eligible for only 70 per cent. of the arbitration. In exceptional circumstances, the tenant should be able to obtain more than 70 per cent. I hope that the statutory instrument will allow that.
    I agree with the hon. Member for East Lothian that the tenant's fraction is difficult. This will be new ground for the arbiter and the Scottish Land Court. There is no history of dealing with tenants' improvements relative to annual rental value, and guidance to all concerned will be very important.
    2.30 am
    The structure of land tenure in Scotland is important, and we must try to retain harmony between landlord and tenant if we are to develop the rural community as we want. I beg my hon. Friend the Minister to bear what I have said in mind when formulating the statutory instrument. We must make the legislation much more simple and understandable for the average farmer, and give good guidelines to the arbiters who are to implement it.
    Mr. Maclennan: I must express my censure of the Government for bringing forward this new clause at this stage of the Bill's passage through Parliament. It is impossible to do justice to important legislation such as this while having to compress Second Reading, Committee stage, Report and Third Reading into this short debate. This issue is central to the prosperity of the tenanted and landowning sector.
    I acknowledge that the Government had the perfectly worthy objective of trying to obtain the agreement of all
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    those affected, but it became clear quite early on that such agreement would not be forthcoming. The Government are charged with the task of making decisions and recommending them to the House in such circumstances. The consequence of their delay is that the House has not been able to give its opinion of what would be the equitable solution. It is quite clear that the solution that the Government have advanced is not regarded as equitable by most of those who are principally engaged in dairy farming. It has been made quite clear by the National Farmers Union of Scotland, and it was repeated at a council meeting as recently as 9 July, that it regards the clause as most unsatisfactory and tilted in favour of the landowner, which is not entirely surprising.
    Mr. David Harris: It would.
    Mr. Maclennan: It would, naturally, because it is coming to realise that the Government are not all that interested in tenant farmers.
    I do not propose to go over the ground that has been admirably covered by the hon. Members for Dumfries (Sir H. Monro) and for East Lothian (Mr. Home Robertson), but will the Minister take this opportunity to go further than the Minister of State, Ministry of Agriculture, Fisheries and Food did earlier about what the Government mean by the statement that an arbiter may allow a tenant the full value of his improvements in making the decision on compensation?
    The Minister of State seemed to set at naught the provisions of the schedule, which are certainly complicated and hard to understand. I do not pretend to have been able wholly to follow the precise mathematical calculations. Even the most cursory examination of them suggests that the arbiters must follow these formulae in reaching their decisions and that they do not have discretion in the matter. If the Minister is saying that arbiters have discretion, like the hon. Member for Dumfries, I cannot see why it is necessary to insert all these complicated formulae in the schedule. This seems to fetter the discretion of the arbiters, not to give them the capacity to make an award to a tenant of 100 per cent. if that is thought appropriate. It is almost inconceivable that 100 per cent. would be appropriate, but a percentage considerably higher than the 70 per cent., which the National Farmers Union of Scotland perceives to he the maximum likely under the schedule's provisions could be appropriate.
    It will assist the comprehension of the Scottish farming industry if the Minister can say whether this complex, 12-page provision, setting out the formula which the arbiters must apply, can be modified by the exercise of their judgment and discretion. If so, there will be general relief. We shall remain puzzled by the mysteries of draftsmanship which require this complex provision, but comforted in the knowledge that arbiters may be guided, but not bound, by it. I hope that the Minister can explain that mystery.
    This is exactly the sort of matter that we would wish to probe in Committee. It is most unsatisfactory that we can have only one bite of the cherry and cannot come back to probe if the Minister's explanation is unclear. I regret that, and it is a mistake that flows from the Government's initial error of being unprepared to introduce quotas and of having quotas thrust on them without any preliminary thinking about how they would be applied. The

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    Government had been warned by me on many occasions — the Minister knows that perfectly well — that this would be discussed and was an important possibility. The Government's answer throughout was that they were not thinking of and were not in favour of, quotas. Therefore, no preliminary work was done, which is why we are in this mess today. I hope that the Minister will answer that simple point which is troubling many farmers in Scotland.
    Sir Paul Hawkins: Although I know nothing about the law of Scotland or the valuation of Scottish holdings, I ask a question and I hope that it will be answered. I believe that, in any valuation, discretion must be left to the valuer or arbiter. I hope that that will be the case. Sometimes we talk about the full value being paid in exceptional circumstances. If a tenant has put far too expensive and elaborate equipment on to a holding, he should not be paid the full cost of that. Those points should be made clear for the benefit of any future valuer or arbiter.
    Mr. John MacKay: Arbiters are skilled in such matters. They take all the things that they see and that are put to them into account when they reach their conclusions and decisions. I am certain that the arbiter will be well able to make the kinds of judgments that my hon. Friend the Member for Norfolk, South-West (Sir P. Hawkins) mentioned.
    The hon. Member for East Lothian (Mr. Home Robertson) rightly recognises that any delay could prevent some tenants from receiving compensation. I appreciate that he accepts that we must move on, so that a tenant moving out of his tenancy will be in a position to get some compensation for his quota.
    We shall be giving guidance to the arbiters. I assure my hon. Friend the Member for Dumfries (Sir H. Monro) that when we draw up the statutory instruments we shall take great care to do that in as simple a way as possible. However, I think that the definition of the word "simple" may vary from one person to another.
    The hon. Member for Caithness and Sutherland (Mr. Maclennan) and others raised the perception—I think that the hon. Gentleman expressed it in that way—of the National Farmers Union. It was precisely because of that perception that my right hon. Friend the Minister of State, Ministry of Agriculture, Fisheries and Food made a statement earlier this evening. I echo what he said in conclusion. He said:
    "I hope this will provide reassurance that the Bill leaves arbitrators free to give full credit to the tenant who has effectively done everything except provide the land."
    Even in the best case of a tenant's investment, the landlord makes a contribution of the land. That must be reflected in the apportionment. A 100 per cent. share for the tenant would not be conceivable. I believe that the hon. Member for Caithness and Sutherland conceded that point. With those few remarks, I hope that the House will agree to the Lords amendment.
    Question put and agreed to.

  New Clause

    RENT ARBITRATIONS: MILK QUOTAS, SCOTLAND
    Lords amendment: No. 11, after clause 11, insert the following new clause—
    ". — (1) Paragraph 1 and the other provisions of Schedule (Scotland: Tenant 's compensation for milk quota) to
    534
    this Act referred to therein shall have effect for the interpretation of this section, as they do in relation to that Schedule.
    (2) This section applies where an arbiter or the Scottish Land Court is dealing with a reference under—

    (a) section 6 of the 1886 Act;

    (b) section 32(7) of the 1911 Act;

    (c) section 7 of the 1949 Act; or

    (d) section 5(3) of the 1955 Act.

    (determination of rent) and the tenant has milk quota, including transferred quota by virtue of a transaction the cost of which was borne wholly or partly by him, registered as his in relation to a holding consisting of or including the tenancy.
    (3) Where this section applies, the arbiter or, as the case may be, the Land Court shall disregard any increase in the rental value of the tenancy which is due to—

    (a) where the tenancy comprises the holding, the proportion of the transferred quota which reflects the proportion of the cost of the transaction borne by the tenant;

    (b) where such transferred quota affects part only of the tenancy, that proportion of so much of the transferred quota as would fall to be apportioned to the tenancy under the 1986 Regulations on a change of occupation of the tenancy.

    (4) For the purposes of determining whether transferred quota has been acquired by virtue of a transaction the cost of which was borne wholly or partly by the tenant any payment by a tenant when he was granted a lease, or when a lease was assigned to him, shall be disregarded.
    (5) Paragraph 3 of Schedule (Scotland: Tenant's compensation for milk quota) to this Act (insofar as it relates to transferred quota) shall apply in relation to the operation of this section as it applies in relation to the operation of that Schedule.
    (6) This section shall apply where paragraph 4 of Schedule (Scotland: Tenant's compensation for milk quota) to this Act applies, and in any question between the original landlord and the head tenant, this section shall apply as if any transferred quota acquired by the sub-tenant by virtue of any transaction during the subsistence of the sub-lease had been acquired by the head tenant by virtue of that transaction.
    (7) Section 86 of the 1949 Act (Crown land) shall have effect in relation to this section as it does in relation to that Act."
    Mr. John MacKay: I beg to move, That this House doth agree with the Lords in the said amendment.
    This amendment parallels for Scotland amendments Nos. 8 and 10 regarding England and Wales.
    Question put and agreed to.
    Subsequent Lords amendment agreed to.

  Clause 13

    DESIGNATION AND MANAGEMENT OF ENVIRONMENTALLY SENSITIVE AREAS
    Lords amendment: No. 13, in page 10, line 33, after "may" insert
    "with the consent of the Treasury and after consulting the persons mentioned in subsection (3) below as to the inclusion of the area in the order and the features for which conservation, enhancement or protection is desirable".
    Mr. Gummer: I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Deputy Speaker: With this it will be convenient to take the following Lords amendments: No. 14, in page 10, line 35, leave out subsection (2).
    No. 15, in page 11, line 1, leave out "(2)" and insert "(1)".
    No. 16, in page 11, line 35, leave out "are" and insert "is".
    No. 17, in page 11, line 36, at end insert—

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    "(6A) The Minister shall not make an agreement with any person under subsection (4) above in respect of any land unless that person has certified to the Minister—

    (a) that no person other than he is the owner of the land: or

    (b) that he has notified any other person who is an owner of the land of his intention to make an agreement under subsection (4) above in respect of the land;

    and in this subsection references to the owner of the land are to the estate owner in respect of the fee simple in the land or, in Scotland, the absolute owner of the land within the meaning of section 93 of the Agricultural Holdings (Scotland) Act 1949."
    No. 18, in page 11, line 38, leave out "as respects any land" and insert
    "with any person interested in any land in England or Wales"
    No. 19, in page 11, line 39, leave out from "title" to "and" in line 40 and insert
    "under or from that person"
    No. 20, in page 11, line 41 at end insert—
    "(7A) Where agreements have been made under subsection (4) above with persons having an interest in land in a designated area the Minister shall arrange for the effect on the area as a whole of the performance of the agreements to be kept under review and shall from time to time publish such information as he considers appropriate about those effects.".
    No. 21, after clause 13, insert the following new clause—
    Supplementary provisions regarding agreements under section 13(4) in Scotland
    " —(1) Where a person having an interest of a kind described in section 13(4) above in land in Scotland, being an interest which enables him to bind the land, enters into an agreement under that subsection—

    (a) where the land is registered in the Land Register of Scotland, the agreement may be registered in that Register;

    (b) in any other case the agreement may be recorded in the appropriate Division of the General Register of Sasines.

    (2) An agreement registered or recorded under subsection (1) above shall be enforceable at the instance of the Secretary of State against persons deriving title to the land (including any person acquiring right to a tenancy by assignation or succession) from the person who entered into the agreement; provided that such an agreement shall not be enforceable against a third party who shall have in good faith and for value acquired right (whether completed by infeftment or not) to the land prior to the agreement being registered or recorded as aforesaid, or against any person deriving title from such third party.
    (3) Notwithstanding the terms of any agreement registered or recorded under subsection (1) above, the parties to the agreement or any persons deriving title from them may at any time agree to terminate it; and such an agreement to terminate it shall be registered or recorded in the same manner as was the original agreement.
    (4) A grazings committee appointed under section 24 of the Crofters (Scotland) Act 1955 may, with the consent of a majority of the crofters ordinarily resident in the township, enter into an agreement under section 13(4) above in relation to any part of the common grazings and may agree to the revocation or variation of any such agreement, and such agreement, revocation or variation shall be binding upon all their successors.
    (5) In the case of an agreement of a kind referred to in subsection (4) above, the payments by the Secretary of State shall be made to 'the grazings committee and shall be applied by them either—

    (a) by division among the crofters who share in the common grazings in proportion to their respective rights therein; or

    (b) subject to subsection (6) below, in carrying out works for the improvement of the common grazings or the fixed equipment required in connection therewith.

    (6) A grazings committee to whom such a payment as is referred to in subsection (5) above has been made and who
    536
    are proposing to apply the payment in carrying out works in accordance with paragraph (b) of that subsection shall give notice in writing to each crofter sharing in the common grazings of their proposals: and any such crofter may within one month of the date of such notice make representations in respect of the proposals to the Crofters Commission who may approve them with or without modifications or reject them.
    (7) "Crofter" and other expressions used in any of subsections (4) to (6) above and in section 3 of the Crofters (Scotland) Act 1955 have the same meaning in this section as they have in that section as read with section 15(6) of the Crofters (Scotland) Act 1961.".
    Mr. Gummer: Amendments Nos. 16, 18. 19 and 21 are technical in nature. During our earlier debate on environmentally sensitive areas, I gave various commitments to the House. Those commitments have been built into the clause. Amendments Nos. 13, 14 and 15 seek to allay fears that the Treasury would have a power of veto over the designation of ESAs. We had a merry debate about that. We heard a great deal of the abilities or, very often, the disabilities of Treasury Ministers to make such judgments. However I tried to explain that that was the phrase always used, it struck an evil note, and 1 was concerned that this series of propositions, which has been so widely welcomed, should not be soured in that way.
    I must be perfectly frank and say that the amendments do not materially alter the arrangements for consultation with the Treasury. They more positively and accurately reflect the extent of the Treasury's role. It is clear that the Treasury is concerned with the financial provision, not with vetoing the environmental case for any particular area. I hope that this will set at rest minds which had been considerably stirred on this matter.
    2.45 am
    Amendment No. 17 places a duty on the Minister not to enter into an environmentally sensitive area agreement with someone other than the owner of the land, unless that owner has been notified. We agreed that we would do that, but it seemed sensible to have statutory backing.
    I turn to amendment No. 20. It is important that the Government and the public know how ESAs are working. In the discussions on the Bill, I made a point of saying how important it was that the Ministry of Agriculture, Fisheries and Food should be involved in the direction of ESAs and that this should not be farmed out to anyone else. We wanted those concerned to learn from experience particular conservation needs because that would in some way counter the belief still held in some quarters that the Ministry did not have that kind of practical day-to-day experience. This emphasises the Government's commitment to effective implementation of ESAs. We have made provision for reports to be published on how the scheme operates. I am sure that they will be reviewed with great interest.
    Once the Bill receives the Royal Assent, my right hon. Friend the Minister of Agriculture, Fisheries and Food will consult my right hon. Friend the Secretary of State for the Environment on a list of ESAs, as the Bill requires. That cannot be done until the Bill is passed. We plan to announce our decision on this as early as possible, but it will be obvious that that cannot be before the House rises. It is obviously important that the announcement should be made, and we shall try to make it relatively soon after the House rises.
    In the circumstances, I hope that the alterations. all of which move in the direction of helping those hon. Members with fears about the presentation of the

    537
    provisions, will enable this clause, of all clauses, to go forward with the united support of all who want greater concern shown for the environment.
    Mr. John: I thank the Minister especially for the monitoring provision. It is a welcome advance. The right hon. Gentleman wants to set our minds at rest. I think we all want to do that at about a quarter to three in the morning. Although in presentation the Treasury's role is much diminished, in practice I fear that it will be as baneful as ever. I am not totally reassured on that point.
    I thank the Minister for stating his intention to issue the list of ESAs. I should like to press him on some further points. We shall go into the programme of drawing up the detailed management scheme in consultation with the Countryside Commission and the Nature Conservancy Council. How long does the Minister expect the process to take? On 12 June, the Minister of Agriculture, Fisheries and Food, answering my hon. Friend the Member for Caerphilly (Mr. Davies), said that he expected the first payments under the scheme to be made in 1987, with the date being somewhat imprecise. Can the right hon. Gentleman now announce a more specific time?
    What sort of payments will be made? Will they be made on the single flat-rate basis, or will there be different grants for different environmental purposes? Will the Minister be more explicit than the Parliamentary Secretary, whose absence we regret, on 8 July when we were discussing agriculture structures? The hon. Lady was pressed by my hon. Friend the Member for East Lothian (Mr. Home Robertson) as to whether the additional £1·5 million available for ESAs, which was likely to come from the Commission, was going to be new money to be added to the £6 million already committed to ESAs in this country or whether it was going to be used by the same baneful Treasury as a sort of contribution towards reducing its net expenditure. We very much want the £1.5 million to be added to the £6 million already committed, which is little enough. I should be grateful if the Minister would confirm that.
    Mr. Livsey: We welcome wholeheartedly the establishment of ESAs. The element of voluntary accession by farmers and the payments concerned are extremely helpful. However, I would like to back up what the hon. Member for Pontypridd (Mr. John) has slid. We would like more information about the type of payments to be made and whether they will follow the pattern that has occurred in Norfolk, for example, and what alternatives to them will be forthcoming.
    We hope that there will be sufficient ADAS staff to administer the payments after what has happened in clause 1 of the Bill. It is all very well to say that they will be trained, but will they be there in sufficient numbers to carry out the job?
    In part of the Bill referring to national parks —although it impinges on ESAs — we are concerned in Wales about the vetting of capital grants and whether there are implications for the expansion of farming enterprises with those grants. We fear that there will be a regression by those vetting the grants so that farmers will not have the opportunity to expand their businesses in the way that they might be able to do outside national parks. That is of considerable concern in some of the national park areas.
    Mr. Maclennan: My questions arise on amendment No. 21 which relates to Scotland and deals with the entitlements of those who acquire land on which an agreement has been entered by the original owner. First, is it the Government's intention that all agreements should be registered with the Land Register, or the appropriate division of the General Register of Sasines, before they enter into a final commitment? Amendment No. 21 appears to provide that someone who has acquired title to land which is unregistered shall not be deemed to be bound by the agreement without notice. That might defeat the purpose of the agreement and of the Government's policy underlying it. I hope that the Minister may feel able to say something about whether it is felt appropriate, when entering into an agreement, to seek to obtain the assurance of the farmer that it will be registered. It would seem desirable to put subsequent tenants of the land on notice in that way.
    My second point relates to crofting. There is a certain obscurity in the language. This is really a Committee point, but, unfortunately, we are not having a Committee stage on this amendment. Under the provisions of the proposed subsection (3) of the new clause contained in amendment No. 21.
    "parties to the agreement… may at any time agree to terminate it".
    That does not appear to be the case with respect to crofters who, according to the proposed subsection (4), are subject to the provision that
    "such agreement … shall be binding upon all their successors."
    That is, to the successors of the grazings committee.
    I may have misunderstood this point. It looks as though it is an agreement that operates in perpetuity for crofters, but not in respect of other parties. This point may be difficult for the Minister to answer, and in any event the amendment is not capable of being changed. I should be satisfied if the Minister would prefer to write to me about it.
    Mr. Gummer: With the leave of the House. I cannot claim to be expert enough about the crofters to give the hon. Member for Caithness and Sutherland (Mr. Maclennan) exactly the answer that he would like, but my hon. Friend the Under-Secretary of State for Scotland has said that he will write to the hon. Gentleman on that point.
    Registration depends on the agreement, because some agreements, for example to build a wall, do not need to be registered. Others, of a longer-lasting kind, may be registered, as the Bill makes clear. I assure the hon. Member for Pontypridd (Mr. John) that I am wary about talking about EEC funding only because we are discussing a proposal that has not yet got to a final state. I took part, as he will imagine, given the circumstances of the presidency, in detailed discussion on this, and I do not yet want to say anything about it.
    I shall be looking at the matter carefully, because the EEC proposals sometimes mean that they cannot be used in the same way as the present structure of the ESAs. As we are taking the lead on this—my right hon. Friend the Minister first pressed it on the Commission — we have implemented it early. We shall want to watch this carefully, and I do not see that it has a direct bearing on what we propose to do.
    I cannot continue to go into more detailed discussion on the type of payments, because we have sought in our discussions so far, although they are not complete, to look

    539
    at the various areas that we might choose for this in an effort to pick areas that offer a wide range of experience. We discussed this in Committee, and both sides were agreed. As that is the case, I can envisage that the types of payment would not always be the same. We see this as experimental, and that point has been generally accepted.
    Consultations with the NCC and the Countryside Commission, and the consequential timing of introducing ESA arrangements have already taken place, and we hope that it may he possible to introduce the arrangements early in 1987. Our aim is to get this under way as rapidly as possible because that would be the wish of the House. I shall not give any particular month, but we are doing this as rapidly as possible.
    We have sufficient A DAS staff. The hon. Member for Brecon and Radnor (Mr. Livsey) keeps suggesting that we do not. He is as wrong on this — this is an uncontroversial statement—as he is on so many other things. I confirm entirely the assurances given in another place on this. It is important that it is realised that we put high priority on what we are trying to do here, and I am sure that that is in accordance with what the House would like.
    The only other point of consequence that should be answered is that in dealing with these environmentally sensitive areas, we have to ensure that everybody can learn what is going on. That is why the reporting arrangements are being put into the Bill, and why I am pleased about the welcome given by the hon. Member for Pontypridd. The more we know about the success or failure of particular parts of it, the more we shall be able to learn about the future. This is the beginning, rather than the end, of the process.
    Question put and agreed to.
    Subsequent Lords amendments agreed to, some with Special Entry.

  New Clause

    FARM CAPITAL GRANTS: ANCILLARY BUSINESSES ETC.
    Lords amendment: No. 23, after clause 14, insert the following new clause—
    (1) In section 28 of the Agriculture Act 1970 (interpretation of provisions relating to capital and other grants) at the end of the definition of "agricultural business" there shall be inserted the words "and includes any other business, of a kind for the time being specified by an order made by the appropriate authority, which is carried on by a person also carrying on a business consisting in or partly in the pursuit of agriculture and is carried on on the same or adjacent land".
    (2) The existing provisions of that section shall become subsection (1) of that section and after that subsection there shall be inserted—
    "(2) An order under subsection (1) above shall be made by statutory instrument and any statutory instrument containing such an order shall be subject to annulment in pursuance of a resolution of either House of Parliament.".".
    Mr. Gummer: I beg to move, That this House doth agree with the Lords in the said amendment.
    The amendment extends Minister's power over agriculture capital grants to cover ancillary farm-based businesses. We discussed this in Committee, and listened carefully to what was said. I gave an assurance that I would look to see whether there was a way in which we
    540
    could put forward what was necessary. My hon. Friend who pressed this amendment on us was very concerned that we should be able to take account of the changing circumstances for agriculture and the urgent need to find alternatives for farmers whose products are in surplus. Farm diversification is one of the most promising of these avenues.
    3 am
    Therefore, the Government have listened very sympathetically to the proposition that the Agriculture Ministers should give financial aid to help farmers to develop other enterprises on their farms. The wide support that this idea has attracted in both Houses of Parliament has encouraged us in the belief that now is the appropriate time for the Ministry to take the necessary powers. Accordingly, this amendment would permit agriculture Ministers to make grants to ancillary businesses specified by order, provided that the person carrying on the business has a farm on the same or adjacent land.
    I should, however, warn hon. Members that at this stage we are taking only an enabling power. Before any schemes could be introduced under it, they would need to be cleared with the European Commission as state aids. Also, we have still to resolve the question of how the new schemes might be funded. Nevertheless, to miss this opportunity of enabling the Ministry to take these measures would be quite wrong. This is a good opportunity to ensure that the Ministry's powers cover what is a much more appropriate definition of agriculture.
    Mr. Deputy Speaker: I have to inform the House that this amendment involves privilege.
    Mr. John: I extend a welcome to the principle. In Committee many hon. Members felt that this would be a worthwhile extension of the Ministry's powers. I am glad that candidly, but in rather less lurid language than that used by the Ministry spokesman in Big Farm Weekly, the Minister has announced that, although the principle has been accepted, it does not mean that any cash will be forthcoming. The Ministry spokesman said that the Ministry had taken on board exciting new powers but that it was not saying that it would provide any new cash. It is the prospect of new cash and of translating the principle into actuality that interests us.
    When, therefore, may we expect such grants to be introduced? When will an approach be made to the European Commission? And what sorts of grants will be on offer? If the Minister could provide a realistic assessment of what he believes will happen, it would add realism to what is regarded as a heady concept by the Ministry. However, without money it will remain a matter of principle.
    Mr. Cash: I welcome this provision. I have sought in various ways to secure the creation of a provision of this kind, and I am delighted that it has been introduced. However, I hope that it will not be too restrictively construed and that it will not be confined to questions relating to agriculture and agricultural land. The object of the exercise is to enable farmers to sustain their incomes by going in for other small business activities — for example, bed and breakfast.
    When these grants are made available, will people be able to use the land in the way for which the money is

    541
    provided? This question relates to the White Paper "Food from Our Own Resources" that was published in 1975 and the guidelines that followed from it.
    I hope that some steps can be taken to ensure that maximum flexibility is built into the planning process so that when grants and/or advice under clause I are made available, it will be open to the farmers affected — in order to sustain their incomes at a time of over-production and when they are having considerable pressure put upon them — to go into other businesses. I hope that the planning process can be eased to that end.
    Mr. Maclennan: The Government's decision to take the power to make farm capital grants available for ancillary businesses is entirely welcome. I was rather disappointed that the Minister hedged it round with caveats about having to go to the European Community to clear these proposals for state aid before he was prepared to state the Government's intention. It is clear that certain aids of this kind would conform completely to European Community legislation.
    The integrated development programme for the Western Isles involves grants to non-agricultural enterprises and I understand that that is done on regional grounds. I recognise that this power goes beyond that and more towards the guidance part of the farm fund. Is it the Minister's intention to pursue this quickly with the Commission to make sure that there is no obstacle in the way of diversification out of normal farming activity and into other businesses that can be carried on from a farm? It would be acceptable if he could give us an idea of his sense of urgency.
    Mr. Deputy Speaker: I take it that the Minister has the leave of the House to speak again.
    Mr. Gummer: I want to be frank about the points that have been raised; to do that one has to look at the matter in the following sequence. First, the Bill gives us an opportunity to take powers. That opportunity will not arise again in the near future and for that reason it seemed necessary to make a clear decision in principle. Secondly, anybody who has been involved in Government will know perfectly well that such powers are not taken unless there is the intention to use them.
    I think the word "baleful" was used in describing the eye of the Treasury, but naturally the Treasury would not wish powers with implied use to be taken when it would not allow them to be used. There is a stage before one goes to the European Commission and it is to look much more closely at the kind of scheme that might be available, and not only at schemes which would work and which would meet the requirements, but also at schemes that would be acceptable to the Commission and to the Community.
    The hon. Member for Caithness and Sutherland (Mr. Maclennan) was right to say that there ought to be nothing in this Bill contrary to the intentions of the Community. However, these things are often seen as national aids. They can be misused and the Community rightly keeps a close eye on them. We are keen that it should do so because, as the hon. Gentleman knows, one of the problems in the industry is the feeling by our farmers that farmers elsewhere are aided in ways that are not open to them. If we press other Governments to be as careful as we wish them to be, and if we demand that their proposals are
    542
    properly scrutinised, we must do those things ourselves. These matters must be looked at carefully and after that we will go to the Commission when we decide that we have something that we ought to present. Then we will have to resolve how such schemes should be funded.
    I hope that the House will accept that this Bill is an earnest of our intentions. First, we will look at agriculture in the wider sense presaged by the change in the definition of agriculture contained in the Bill. That is probably the most important thing in the Bill, because it says that agriculture is different to the very narrow view of it which was to be found in the Acts under which we worked in the past.
    In future, people will look back at the Act and see it as beginning a new era in agriculture. The major difference will be the definition of agriculture. The House should be grateful, not only to my hon. Friend the Member for Stafford (Mr. Cash) but also to my hon. Friend the Member for Hereford (Mr. Shepherd) who has fought the battle through and pushed it in Committee and explained it in a way that has enable us to take this step.
    The planning aspect is overwhelmingly a matter for my right hon. Friend the Secretary of State for the Environment. However, there is every intention, as has been outlined particularly in the White Paper "Lifting the Burden", to be much more flexible in the way in which we deal with planning. But even then we have to accept that there is a real responsibility to ensure that the planning laws are so enforced that we get flexibility for new jobs and enterprises without destroying the very environment which makes those jobs and enterprises possible. It is a balance. It is not easy and it is one which we should take seriously, because the countryside is also a place of refreshment for those who live in the towns.
    Question put and agreed to.
    Subsequent Lords amendments agreed to, some with Special Entry.

  Schedule 1

    TENANTS' COMPENSATION FOR MILK QUOTA
    Lords amendment: No. 38, in page 19, line 2, leave out paragraph 6 and insert—
    "6. — (1) Subject to the following provisions of this paragraph the standard quota for any land for the purposes of this Schedule shall be calculated by multiplying the relevant number of hectares by the prescribed quota per hectare; and for the purposes of this paragraph—

    (a) "the relevant number of hectares" means the average number of hectares of the land in question used during the relevant period for the feeding of dairy cows kept on the land or, if different, the average number of hectares of the land which could reasonably be expected to have been so used (having regard to the number of grazing animals other than dairy cows kept on the land during that period; and

    (b) "the prescribed quota per hectare" means such number of litres as the Minister may from time to time by order prescribe for the purposes of this subparagraph.

    (2) Where by virtue of the quality of the land in question or climatic conditions in the area the amount of milk which could reasonably be expected to have been produced from one hectare of the land during the relevant period ("the reasonable amount") is greater or less than the prescribed average yield per hectare, then sub-paragraph (1) above shall not apply and the standard quota shall be calculated by multiplying the relevant number of hectares by such proportion of the prescribed quota per hectare as the reasonable amount bears to the prescribed average yield per hectare; and the Minister

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    shall by order prescribe the amount of milk to be taken as the average yield per hectare for the purposes of this subparagraph.
    (3) Where the relevant quota of the land includes milk quota allocated in pursuance of an award of quota made by the Dairy Produce Quota Tribunal for England and Wales which has not been allocated in full, the standard quota for the land shall be reduced by the amount by which the milk quota allocated in pursuance of the award falls short of the amount awarded (or, in a case where only part of the milk quota allocated in pursuance of the award is included in the relevant quota, by the corresponding proportion of that shortfall).
    (4) In sub-paragraph (3) above the references to milk quota allocated in pursuance of an award of quota include references to quota allocated by virtue of the amount awarded not originally having been allocated in full.
    (5) In this paragraph—

    (a) references to land used for the feeding of dairy cows kept on the land do not include land used for growing cereal crops for feeding to dairy cows in the form of loose grain; and

    (b) references to dairy cows are to cows kept for milk production (other than uncalved heifers).

    (6) An order under this paragraph may make different provision for different cases.
    (7) The power to make an order under this paragraph shall be exercisable by statutory instrument and any instrument containing such an order shall be subject to annulment in pursuance of a resolution of either House of Parliament.".
    Mr. Gummer: I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Deputy Speaker: With this it will be convenient to take the following Lords amendments: No. 39, in page 20, line 9, leave out
    "in connection with the production of cow's milk"
    and insert
    "for the feeding, accommodation or milking of dairy cows kept on the land".
    No. 40, in page 20, line 17, leave out from "improvements"
    to end of line 18 and insert "to, or tenant's fixed equipment on, land used for the feeding, accommodation or milking of dairy cows kept on the land in question".
    No. 48, in page 25, line 47, at end insert—
    "(1A) In this Schedule references to land used for the feeding of dairy cows kept on the land and to dairy cows have the same meaning as in paragraph 6 above.".
    Mr. Gummer: The House will want to pay a little attention to this group of amendments. Hon. Members may recall from discussions on 17 April that the level of standard quota is at the heart of the calculation of compensation which may be payable.
    There are those who have produced all sorts of ways of trying to make a fair arrangement between landlord and tenant, between outgoer and incomer, but we have tried to find the fairest method. In doing so we discussed a number of disadvantages and I assured the House that I would seek to meet some of the concerns which existed.
    One of my hon. Friends was concerned to suggest that in marginal land, particularly in his county, the arrangements might not be satisfactory for tenant farmers. So we have tried to meet some of those considerations. Not least, we have removed the 20 per cent. restriction on variations in the standard quota about which so much concern was expressed, particularly by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop), who is not here this evening only because of his illness. He would want me to say that he is pleased with the changes.
    My hon. Friend has an eagle eye, so I know that the House will appreciate his view. He has pointed out that we
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    have tried to meet the issues that he raised. For practical reasons, we have concluded that the area of land to be taken into account in the calculation of both the standard quota and the tenant's fraction will be limited to the land used by dairy cows alone, excluding the land used by followers. The calculation of the standard quota should therefore reflect the yield achievable on that basis.
    3.15 am
    Similarly, when it comes to the tenant's fraction calculation, the tenant's share would be assessed on the basis of the improvements that he has made that relate to the dairy cows. The landlord's share would be based on the rent paid for the land used by the dairy cows. Followers will be excluded from the calculations at all stages.
    Hon. Members will note that there is a change to the definition of dairy cows. In case any hon. Member is worried about that, I had better make it clear that it is not merely that they are not bulls. The new definition is purely intended to improve the clarity of drafting. It takes account of the dictionary definition of a cow as any female bovine animal. We want to make it clear that uncalved heifers are not included. Although the reason for that involves a tiny detail, it means that the tenant is not disadvantaged, which might happen, by a distortion in the calculations.
    As I have said, we have removed the 20 per cent. restriction on variations in standard quota. We have already announced that, in setting the figures in this subordinate legislation for the prescribed quota and the prescribed average yield per hectare, we intend to use 8,000 and 9,000 litres respectively. The difference between those two figures reflects the cut in production following the introduction of quotas. It means that the prescribed quota figure will normally be some 11 per cent. below the yield that would be reasonable for the holding, having regard to the quality of the land and the climatic conditions.
    We have also announced that we intend to set lower figures for the less favoured areas. Here we intend to prescribe quota per hectare of 7,000 litres for disadvantaged land and 6,000 litres for severely disadvantaged land. Concern has also been expressed by hon. Members on both sides of the House on two other points. First, it was argued that tenants who had received an award of development quota should not be penalised simply because that award had not been allocated in full. Secondly, there was concern that tenant's compensation should not be reduced as a result of any future general cuts in quota. Both those points are covered by the amendments.
    Amendment No. 48 extends the definition of
    "land used for the feeding of dairy cows kept on the land"
    and the definition of "dairy cows" contained in the new paragraph 6, so that they apply to paragraph 7 of schedule 1 as well. As I have said, the intention is that in the calculation of the standard quota and the tenant's fraction, land used by followers should be excluded. The purpose of the amendments is to meet many of the concerns that have been expressed.
    I hope that the House will accept that, even though we have been unable to go as far as some wanted us to go, we have corrected those things that people thought might create a distortion in the equity that we sought to achieve. I remind that House that every penny paid to the outgoer is in the end paid by the incomer. There is a balance to be struck between those two sides. Hon. Members have

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    suggested that tenants are somehow being done down, but both incoming and outgoing tenants are affected by what happens to others, If we want young people coming into our dairy industry, we must not set the price of entry too high, as that would gravely damage the landlord-tenant system.
    In sorting out some of the anomalies that might otherwise arise, I believe that it would have been wrong for us to go any further towards making it expensive to go into dairying. That would have done something that this Government have always set their face against. It would have increased the difficulties for those entering farming, thus making it a much more enclosed and separate part of the economy. None of us wants that.
    Mr. John: There is a simple answer to the agonising of the Minister of State and the hon. Member for Norfolk, South-West (Sir P. Hawkins). It is the creation, quite uncovenanted, of a capital asset out of a milk quota that is causing tension between the incoming and outgoing tenant, and I think that on reflection it will be acepted that that should never have been allowed to happen. I do not think that any of us anticipated the result.
    As the milk quota is, in theory, a temporary phenomenon that is to be reviwed in 1989, a Labour Government would undertake to review whether the capital trading in milk quotas should continue. A surrender and redistribution of the quota to where it would be most needed, and where it would do most good, would be a far better concept for the incoming tenant as well as for the outgoing one. Compensation is called for by the initial mistake, and it is the Government who made the mistake. It is they who have created the capital asset.
    Having made those comments in the same non-controversial manner as the Minister of State adopted, I accept that this is a series of amendments which slightly assist the tenant farmer, and for that reason we would not dream of opposing them, but it is not only the NFU and the Scottish NFU which have said that the Government take too rosy a picture of the tenant's share. The examples that have been given do not match some of the percentage predictions. On 27 June Farming News described Lord Belstead's conclusion and produced some figures which showed that his figure of 19,000 was only a quarter share of the total compensation payable in his example.
    We are talking about an average share for tenant dairy farmers of 30 per cent. of the quota value, which I do not think is fair or just. As the Ministry's own research booklet observes, the stocking rate per hectare for cows means that if the grass is left without treatment—it is the tenant who treats the grass with nitrogen—the cows will not provide any milk and they will be only partly maintained. That is the real argument in favour of the tenant having a much larger share of the value of the quota, and the Opposition believe that that share should have been achieved.
    Mr. Livsey: The guts of the compensation arrangement for tenant farmers in respect of milk quotas will come in the form of a statutory instrument, and the Minister of State has outlined some of the Ministry's thinking on the subject. We still do not know exactly what the stocking rate will be, but perhaps it will be 1·8 cows per hectare. It is clear that more information is to come. When the
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    statutory instrument comes before us, we shall be able to judge precisely the deal that tenants and landlords will have on the standard quota.
    I believe that insufficient will be left for the tenant. Although the Minister has said that the tenant's share may be higher than 30 per cent., my hon. Friends and I still need to be convinced on that score. The way to overcome the concerns of many hon. Members about the incoming milk producer and the cost of the quota is to create a pool of quotas, or to have a quota bank of the sort that exists in Canada, where special amounts of quota are put aside for the purposes of incomers. It has been said already that the Government created the value of the quota in 1984.
    Arbitration on quotas should be much more open-ended. A more even start, with a 50:50 shareout, providing fair valuation should take place with regard to landlords and tenants, incorporating valuation methods that are accepted across the industry, this would be far more equitable. It can be argued that the energy requirements of cows for maintenance, growth and pregnancy can be produced from unfertilised grass. In applying fertiliser and feeding the cows properly, the tenant creates the additional milk production, which has additional value. That is the crux of the argument about why the tenant should have more of the quota value.
    I regret very much not having been a member of the Committee, because that would have been an advantage and would have contributed to my input in the debate. I merely add that my hon. Friend the Member for Yeovil (Mr. Ashdown) wishes to protest by proxy, because he was here for two hours of the debate—
    Mr. Deputy Speaker: Order. It is very late, and I do not think that we should start, at this hour of the morning, referring to what other hon. Members might have said had they been here. I hope that we can stick to the matter before the House.
    Mr. Livsey: I accept that, Mr. Deputy Speaker. I say merely that this series of amendments could have gone further for tenant farmers.
    Mr. Gummer rose—
    Mr. Deputy Speaker: Does the right hon. Gentleman have the leave of the House to speak again?
    Hon. Members: Yes.
    Mr. Gummer: The quota has a value not because the Government created it but because the European Community argues that the quota cannot legally be taken away from the land: the land is tied to the quota and the quota to the land. Opposition Members are not right on that. What we know now — it is important—is that if there were a Labour Government, the tenants would get nothing, because it would all be taken away from them. Under the proposal, every tenant gets something that he would not have expected to get when he went into the tenancy. The intentions of Opposition Members, we have now discovered, have been wholly unacceptable. They complained that the tenants would not get enough, when they intended to give them nothing whatsoever. I hope that tenants are perfectly aware of that. Quotas would have no value, and they would not get that from a Labour Government.
    Mr. John: Is the Minister of State rehearsing for the role of Mr. Facing Both Ways? He was crying over the plight of the incoming tenant a moment ago, and now he

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    is complaining that he will not have to pay more. If he says that the outgoing tenant will not have compensation, by his own argument that will help the incomer. As he is so concerned about newcomers to farming, he cannot argue the case both ways.
    Mr. Gummer: The hon. Gentleman has spent three or four months complaining that the outgoing tenant has not been getting enough. Now he tells us that if there is a Labour Government, the outgoing tenant will get nothing whatsoever. I hope that the National Farmers Union knows what the Labour party would do and will therefore again make sure that there is not a Labour Government to implement such a nonsensical scheme.
    Question put and agreed to.
    Subsequent Lords amendments agreed to.

Dockyard Services Bill
Lords amendments considered
Dockyard Services Bill
  Clause 1

    TRANSFER OF PERSONS ENGAGED IN DOCKYARD SERVICES TRANSFERRED TO PRIVATE SECTOR
    Lords amendment: No. 1, in page 2, leave out lines 3 to 12 and insert
    "makes arrangements—

    (a) for a company to provide designated dockyard services at the dockyard under contract whit him, and

    (b) for that or another company—

    (i) to become the employer of such of the qualified dockyard service employees at the dockyard as are employees to whom the arrangements apply, and

    (ii) to acquire from him rights in or over the dockyard or any part of it and any property used for the purposes of the dockyard undertaking, with a view to their services and that property being made available for the provision of the designated dockyard services at the dockyard,"

    3.30 am
    The Parliamentary Under-Secretary of State for Defence Procurement (Mr. John Lee): I beg to move, That this House doth agree with the Lords in the said amendment.
    Mr. Deputy Speaker (Mr. Harold Walker): With this it will be convenient to consider the following Lords amendments: No. 4, in page 2, line 28, leave out "(a)" and insert "(b)"
    No. 5, in line 33, leave "(a)" and insert "(b)"
    No. 6 in page 3, line 14, after "provides" insert "services which are"
    No. 7, in line 16, leave out from "by" to "enables" in line 17 and insert
    "making the services of employees or property available,"
    No. 8, in clause 2, page 3, line 41, leave out
    "by the Secretary of State".
    Mr. Lee: This amendment and amendments Nos. 4 to 8 refer to the possible company structure at each dockyard.
    As the House will recall, my right hon. Friend the Secretary of State will set up a Companies Act company at each dockyard into which the respective work force would transfer on vesting day in April 1987. Each of these two companies will then be transferred into the ownership of whichever company had successfully tendered to manage the particular dockyard. So far as the structure of the companies which my right hon. Friend sets up is concerned, the Bill allows him to decide which of a number of options is preferable.
    Under one option, the company which my right hon. Friend forms would not only employ the work force but would be the company with which he would place the term contract, set initially for a period of seven years, and individual contracts for ship and other refit work. Under this option, there would be one company both contracting and employing at each dockyard. That has been called the concept of the operating company.
    Under another option, the term contract and the individual work packages would be placed directly with the successful bidder. The services of the work force employed by the company set up by my right hon. Friend

    549
    would then be used by the contractor to perform the contract. There would, therefore, be one company contracting — the managing company — and another company — the dockyard or employing company — at each dockyard. On vesting day the dockyard or employing company would become a wholly owned subsidiary of the managing company formed by the successful bidder, at each dockyard. This has been described as the concept of the employing company.
    We have always said that there was another option, that of a Government-owned plc—if there were insufficient interest from companies in managing the dockyards or if their responses to our invitation to tender were unacceptable for any reason. I am, however, glad to say that, with three companies, or consortia, interested in bidding for each dockyard, we expect a good competition, which should produce very satisfactory results.
    Mr. Gordon Brown: Will the Minister explain when he expects vesting day to be? What will be the final date for the submission of tenders? Will he comment on the application by Brown and Root (UK) Ltd., which might lead to an extension of the date by which tenders must be submitted?
    Mr. Lee: I shall come to the hon. Gentleman's points in due course. There has been no change from the position in Committee about vesting day. Vesting day will be 1 April 1987.
    The third of the three companies which have been invited to bid for the contract to manage Devonport dockyard is Brown and Root (UK) Ltd. The company, which was formally invited to tender only last week, has requested an extension to the tender period. The Government welcome the interest which Brown and Root is showing and believe that the competition at Devonport will be significantly improved if an additional bid is made. I should tell the House that the Government have, therefore, agreed to a limited extension of the bid closing date for Devonport by four weeks, to 29 August. This extension will, of course, apply to all potential bidders for Devonport and will not delay the date for the introduction of commercial management to both dockyards of 6 April 1987. I must correct my previous statement that vesting day is to be 1 April 1987. That is incorrect. It is to be 6 April 1987. The date for responses to the invitation to tender for Rosyth remains 1 August.
    Returning to the Bill, I was saying that it had always contained the three options for the corporate structure at each dockyard, as amended in another place, the Bill continues to retain all three options. The amendments which we are considering do not relate to the operating company or to the Government-owned plc with which, in relation to the provisions in the Bill, there was general satisfaction in another place. The amendments relate to the employing company concept — the two-company structure.
    In another place concern was expressed about the separation of the dockyard work force, which would be in the employing company set up by my right hon. Friend, from the dockyard assets which would be used by the managing company under a licence granted to it by the Ministry of Defence. It was not, however, disputed that the assets should, as has always been our intention, remain in Government ownership.
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    Our view at one time was that the single company option represented the most attractive scheme for introducing commercial management into the dockyards. However, the principal difficulty with this option is associated with the termination, without renewal with the same contractor, of the term contract. The difficulty that I have in mind concerns the need in those circumstances to disentangle the liabilities of the company. No such difficulty would have to be faced under the two-company structure, where the employees are employed by a company which has attached to it none of the liabilities and obligations of a company which operates the dockyard under one contract.
    I can tell the House that we have not ruled out the operating company concept if the difficulties that I have described can be overcome, but in our opinion the two-company structure offers more advantages for the employees and their representatives and for the Government. The companies which have been invited to tender for the contracts to manage the dockyards have been invited, when responding to that invitation, to state their views. In the meantime, however, the Government gave further consideration to ways in which the dislike expressed in another place for the two-company structure could be overcome. The amendments which we are considering were introduced by the Government in another place to address those concerns.
    Effectively, the amendments ensure that, in the event of a two-company structure being adopted, the licence to use the assets would be an integral part, not of the managing company set up by the contractor, but of that set up by my right hon. Friend the Secretary of State, and into which would be transferred the dockyard work force. The terms of the licence would, of course, have to be negotiated between the Ministry of Defence and the selected contractor, but on vesting day that licence would come into effect directly between the Department and the company containing the work force. Their Lordships believed that those amendments had met their concerns.
    Although these are Government amendments, they were introduced in response to concerns expressed in another place, and I invite the House to accept them.
    Mr. Denzil Davies: I am grateful to the Minister for writing to me on 14 July setting out the reasons for the Lords amendments, which he has reiterated. His comments demonstrate what a shambles the Bill is. It began as a shambles and, with the assistance of Lord Denning, it has become an even greater shambles. First, the Government said — and the Minister confirmed—that there would be one company. But we could not have one company, because there was a problem over the determination of the contract in relation to the employees if they were employed by the same company as held the contract and the licence to operate the assets.
    In Committee, we were told that there would be two companies — a managing company and an employing company. The employing company was to be formed by the Secretary of State and the employees would be transferred to it. Presumably the shares in the employing company would be transferred to the managing company. The latter was to be owned by a consortium or by a company, if the contract went to only one company, and that management company was to hold the licence to operate the assets.

    551
    However, when the Bill went to the House of Lords, Lord Denning discovered the concept of the bees and the hive, and said that we cannot put the workers in one company and the licence to operate the assets—I see the Minister nodding—in another company. I do not know about that. I have read the debates in the other place. The Government were impressed by the arguments about the hive and the bees. Now it seems that the bees and the hive will be in one company — as the Under-Secretary of State said, in the employing company. The managing company will not have anything except shares in the hive and the bees. It will merely operate the dockyards under a managing contract. It will be a strange company, with no assets except, presumably, shares in the employing company.
    I think that I preferred the original scheme, when the hive was in the hands of the managing company—I do not know whether the Minister would care to introduce a manuscript amendment to change it again — and the bees were with the employing company. The changes demonstrate the nonsense of the scheme. The nonsense is that the Government retain assets and transfer individuals, but nothing else. There is no transfer, except of employees.
    The Government pretend that they are transferring a business, and they have redrafted the Bill to show it; but they are merely transferring people, who are being treated as chattels. The company gets only a licence to operate assets which are owned by the Government. It is a farcical system. Once the Government decided against complete privatization — hiving everything off — they came out with this hybrid scheme, which is neither private nor public ownership. The problem is that the Bill does not make sense in terms of the Transfer of Undertakings (Protection of Employees) Regulations 1981 or the framework of privatisation.
    We do not oppose the amendments, because we think that they are nonsense. If the Government are prepared to carry on with this nonsense, that is a matter for them. Nothing is really affected. Will there be one or two companies? Where will the assets be? Presumably they will be with the employing company. Have the Government decided to have two companies? No. They still do not know, although the Minister has said that, if there was one company, there would be great problems with the termination of contracts at the end of seven years or, although it is extremely unlikely, earlier.
    There will he the problems of the company's liabilities and debts, of employees being in the company and of the Government's licence to operate the assets. The problems are horrendous. It would have been better if the Government had dropped the Bill rather than grafted one nonsense on to another, which is what the Minister is doing.
    No doubt the Minister will tell us more about the company that he has found at the last minute to bid for Devonport — to the relief, no doubt, of the Ministry of Defence. I understand that it is an American company. We will not oppose the amendments. We believe that they are nonsense and that they highlight the nonsense of the Bill.
    Dr. David Owen: This miserable Bill is before us again. The fact that it is 3.30 in the morning and the two other, Conservative, Members of Parliament for Plymouth are not present is a marked criticism of how we conduct our business.
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    I understand that the Bill was thought to be illegal in European Community law. Lord Denning drew attention to European Commission directive 77 in so far as the assets were being separated from the contractor. I understand that it is because of the threat of a challenge to the Bill that the Government have changed it.
    It is extraordinary that we are still talking about three options. It is high time that the Government told the House straight what they intend to do. The company's structure is still utterly unclear. The fundamental flaw in the Bill is its separation of the work force from the assets.
    The Minister is a sensible man. He has heard all these arguments and they must drive him towards the logic of a Government-owned public limited company. That is by far the most sensible way out of this largely self-created mess. Now that the former Secretary of State, the right hon. Member for Henley (Mr. Heseltine), has flown the coop, we can all agree to drop this nonsense. The agency management proposal has been adjusted and adapted, and it must have taken hours of Civil Service and parliamentary time, to no avail. The Minister now tells us that, because the tenders for the contract in Devonport are wholly inadequate, he as had to extend the contract period by one months and has introduced a new company.
    We used to hear about the management option which would solve all our problems. I understand that there have been financial difficulties, but it would have been a great deal better if management had spent its time persuading the Government to opt for a Government-owned plc. If the trade unions were taken into discussions, they would co-operate to make a Government-owned plc the least unsuccessful of all the options. I hope that the Government will consider that in the coming weeks.
    3.45 am
    The co-operation of the trade unions and the city of Plymouth would be much greater if the Government-owned plc option is chosen and if it was made abundantly clear that the enterprise would stay permamently in Government control and that this was not a stepping stone to later privatisation. The only purpose of keeping open the later privatisation option is to save the Government's face. If that option is kept open, it will undermine the morale of the work force and will not make for a successful Government-owned plc. Ministers know perfectly well that no nationalised company with these expensive asset; can possibly be floated. That is why the dockyards cannot be privatised normally.
    I agree with the right hon. Member for Llanelli (Mr. Davies) that these amendments do not make a hap'orth of difference, except to expose the absurdity of the legislation. We accept them, but hope that the Government will stop proceeding on three options, will opt clearly for a Government-owned plc and will stop the farce of introducing Brown and Root as a new tenderer at this late stage.
    Mr. Dick Douglas: This is an early hour of the morning to debate these amendments.
    I must go back to 27 November 1985 and the second report on this matter by the Defence Select Committee. One would think that the Government had suddenly discovered something new in the concept of operating companies. Page 49 of that report contains all the

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    arguments, now suddenly discovered by the Under-Secretary, which were then submitted by the Ministry of Defence to the Select Committee. We must ask ourselves what is new, apart from what happened in the other place?
    We are dealing with a small enabling Bill of about 119 lines and we have debated it on Second Reading and in a long Committee stage. It has now returned from the other place. We are sorry that the new Secretary of State does not see fit to grace us with his presence, but I think he wants to distance himself as much as possible from the Bill. The right hon. Member for Ayr (Mr. Younger) has more sense than the right hon. Member for Henley (Mr. Heseltine) in pursuing this stupid proposal.
    The idea of operating companies was canvassed by the Ministry of Defence. Hon. Members can read the report and see the criticisms made by potential bidders. The report states:
    "The companies interested in the commercial management proposals have seen the concept as an unnecessary complication, since it divorces the company responsible for employing the workforce from the one operating the Dockyard and managing the programme of work."
    The balance canvassed at that time was to have the company doing the two things. The Minister, having examined what took place in the House of Lords, has introduced a variation on that theme. He tried to con the House—my hon. Friend the Member for Dunfermline, East (Mr. Brown) made, as usual, a succinct intervention — into believing that, notwithstanding, the sacred vesting day of 6 April 1987 will still be met. We do not believe that. We shall turn to the reasons we do not believe that when we consider the further amendments.
    The Minister should come clean in parading, at such an early hour of the morning, that he has three consortia bidding for Devonport and, I believe, three consortia bidding for Rosyth. He has not told us anything about the quality of those consortia. He has not told us anything about the balance of expertise they have. I do not think that he will be embarrassed if I refer to a meeting that my hon. Friend and I had with the Secretary of State yesterday. The Minister was present. He introduced the amazing concept that Appledore International had persuaded him that offshore oil work would go to Rosyth. I do not know whether he has been studying the offshore oil industry, but it is difficult to get any sort of contract from the North sea. If the Minister has been persuaded on that, he could be persuaded on almost anything.
    Mr. Martin J. O'Neill: Surely my hon. Friend cannot be surprised at Appledore's suggestion when at one stage Touche Ross suggested that the Argentine Navy might be a possible client.
    Mr. Douglas: My hon. Friend is perfectly right. Appledore made many suggestions. Knowing your trade union background, Mr. Deputy Speaker—I share it—I am sure that you would quickly call me to order were Ito develop those. The Government are desperate to concoct any consortia that will look favourably at bidding for the dockyard contract. We must be careful of accepting what even this pleasant Under-Secretary of State puts forward. I do not think that the exercise will be to the benefit of the Navy, Devonport or Rosyth. I do not think that the Under-Secretary, in his better judment, believes that. We would do better to scrap the whole procedure.
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    My hon. Friend the Member for Dunfermline, East is quite right. I do not think that we can oppose the amendments. However, the Under-Secretary has not given the House a proper justification for how the Government propose to proceed and meet their timetable. He has not given us the necessary information so that hon. Members, trade unions and communities can evalute the consortia that are likely to bid — whatever concept of operating and employing companies is brought into being.
    My hon. Friend mentioned Brown and Root. My understanding is that Brown and Root is a wholly-owned subsidiary of Halliburton. As far as I know—I may be wrong—Brown and Root has no experience in operating dockyards but lots of experience in building production platforms for the North sea and elsewhere, in managing construction sites and playing its part in oil refineries and chemical plants.
    I should like to probe into what is happening with the management consortium of Devonport plc. I ask the Under-Secretary of State to tell us what is happening at Devonport and Rosyth. The dock's managing directors are simultaneously embarking on what might loosely be called a "management buy-out" and trying to manage the complicated workings of dockyards such as Rosyth and Devonport. How can that be done? What assurances will be given?
    When the Select Committee on Defence probed this matter, we were given some vague assurances. We received a letter stating that certain cut-offs and restrictions were imposed on the management preventing them from using the dockyards' facilities. It cannot be true that people of such calibre and expertise in the dockyards can do their job of servicing the Navy while being in cahoots with the Brown and Roots and Foster-Wheelers of this world so that they can collectively make a bid for the operation of the dockyards come vesting day.
    At the risk of repeating myself, I must say that, if Conservative Members are concerned about managing the nation, even in the early hours of the morning, they will say, "Take this measure away. It is too daft for words."
    Mr. Lee: By leave of the House, Mr. Deputy Speaker I should like to take up some of the main points raised out of courtesy and, I hope, to add to my earlier explanation. I confirm that there are still three options— the single company concept, the two-company concept and the Government-owned plc.
    Mr. Gordon Brown: Will the hon. Gentleman tell us exactly when a decision will be made on the option to be favoured by the Ministry of Defence? Can he give us some idea of the Government's timetable?
    Mr. Lee: I am sure that the hon. Gentleman will have an opportunity to speak a little later. I shall come to the timetable later in these overall comments.
    As the hon. Member for Dunfermline, East (Mr. Brown) said, Brown and Root is a wholly owned subsidiary of Halliburton Holdings, which was formed in December 1984 as a holding company for the United Kingdom interests of its American parent company, Halliburton Holdings Inc.
    There are three contenders for the Devonport dockyard — [Interruption.] Hon. Members asked me questions, and I am endeavouring to answer them. There is the

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    consortium of Foster-Wheeler, A and P Appledore and VSEL; the Devonport Dockyard Ltd management involvement; and Brown and Root.
    I confirm that vesting day has not changed. We are talking about 6 April 1987. As the hon. Member for Dunfermline, East will know, the management at Rosyth has not formed itself into a company and is not one of the bidders.
    I should like to explain the timetable. Tenders were issued on 3 April 1986. We expect receipt of tenders for Rosyth on 1 August and for Devonport on 29 August, which is the adjusted day to which I referred earlier. Broadly in the period August to November, there will be an evaluation of tenders and consideration by the Navy Board and Ministers. By late November, we hope that the contract award will be announced. By early December we hope that the contractors will enter what we term their phasing in period, with a view to commercial management commencing, as I have said, on 6 April 1987.
    Question put and agreed to
    Lords amendment: No. 2, in page 2, line 19, leave out subsection (4) and insert—
    "(4) The Transfer of Undertakings (Protection of Employment) Regulations 1981 shall apply to the transfer of the dockyard undertaking or any part of it whether or not, apart from this provision, the undertaking would be treated as an undertaking in the nature of a commercial venture for the purposes of those Regulations, and, for those purposes, the services of the qualified dockyard service employees together with the rights in or over th dockyard and property used for the purposes of the undertaking shall be treated as a part of that undertaking capable of being transferred as a business whether or not the company which is to become their employer also provides designated dockyard services."
    Read a Second time.
    Mr. Lee: I beg to move, as an amendment to the proposed amendment, in line 2, after 'shall', insert 'subject to subsection (4A) below.'.
    Mr. Deputy Speaker: With this it will be convenient to considering the following: Lords amendment No. 3, in page 2, line 26, at end insert—
    "(4A) Before any employee in a Royal Dockyard is trans-ferred compulsorily without his consent from the service of the Crown to the service of any other employer the following provisions of the Transfer of Undertakings (Protection of Employment) Regulations 1981 shall be fulfilled.
    (4B) Long enough before the transfer to enable consultations to take place between the Secretary of State and the representatives of the trade unions, the Secretary of State shall inform those representatives of—

    (a) the fact that the transfer is to take place, when approximately it is to take place, and the reasons for it;

    (b) the legal, economic and social implications of the transfer for the effected employees;

    (c) the measures which he envisages he (the Secretary of State) will, in connection with the transfer, take in relation to those employees; and

    (d) the measures which the transferee envisages he (the transferee) will, in connection with the transfer, take in relation to such of those employees as become employees of the transferee after the transfer.

    (4C) The Secretary of State shall enter into consultations with the representatives of the trade unions and in the course of those consultations shall—

    (a) consider any representations made by the trade union representatives, and

    (b) reply to those representations, and, if he rejects any of those representations, give his reasons."

    Government amendments to the proposed amendment:
    (a), leave out lines 1 to 5 and insert—
    '(4A) The Transfer of Undertakings (Protection of Employment Regulations 1981, in their application to the
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    transfer of the dockyard undertaking or any part of it, shall have effect as if, for regulation 10 (duty to inform and consult trade union representatives), there Were substituted the provisions of subsections (4B) to (4D) below, and (unless the remedy provided by section (Failure to inform or consult trade unions: High Court and Court of Session remedies) is invoked) the remedies by way of complaint to a industrial tribunal provided for by, and the other provisions of, regulation 11 shall be available and shall apply in relation to those subsections as they would in relation to regulation 10 or any corresponding provision of it.'.
    (b), in line 8, leave out 'trade unions' and insert
    `independent trade unions recognised by him in respect of the employees'.
    (c), in line 9, after 'shall', insert 'in accordance with subsection (8) below,'.
    (d), in line 14, leave out 'effected'.
    (e), in line 15, leave out '(the Secretary of State)'.
    (f), in line 17, after 'employees', insert
    'or, if he envisages that no measures will be so taken, that fact'.
    (g), in line 18, leave out
    'transferee envisages he (the transferee)'
    and insert
    'company which is to become their employer envisages that it'.
    (h), in line 20, leave out from `to' to end of line 21 and insert
    'those employees or, if the company envisages that no measures will be so taken, that fact.
    (4BB) The company which is to become their employer shall give to the Secretary of State such information at such a time as will enable him to perform the duty imposed on him by virtue of subsection (4B)(d) above.'.
    (i), in line 22, after 'State', insert
    ',where he envisages that he will, in connection with the transfer, be taking measures in relation to employees in respect of whom an independent trade union is recognised by him,'.
    (j), in line 28, at end insert—
    '(4D) If in any case there are special circumstances which render it not reasonably practicable for the Secretary of State to perform a duty imposed on him by subsection (4B) or (4C) above, he shall take all such steps towards performing that duty as are reasonably practicable in the circumstances.'.
    Consequential amendments to the Bill: (k), in page 2, line 13, leave out 'each employee' and insert 'the employees'.
    (1), in page 3, line 19, at end insert—
    "'trade union" and "independent trade union" have the same meaning as in the Trade Union and Labour Relations Act 1974 and "recognised", in relation to an independent trade union, means recognised to any extent for the purpose of collective bargaining (within the meaning of the Employment Protection Act 1975);
    and any information which is to he given to the representatives of a trade union shall be delivered to them, or sent by post to an address notified by them to the employer, or sent by post to the union at the address of its head or main office.'.
    (m), new clause— Failure to inform or consult trade unions: High Court and Court of Session remedies—
    '(1) A trade union as respects which the Secretary of State has a duty under section 1(4B) or (4C) above to give information or enter into consultations may, where it alleges that the Secretary of State has failed to fulfil that duty, bring an action in the High Court for a declaration as to whether or not he has failed to fulfil that duty, and the Court may make a declaration accordingly.
    (2) In Scotland, a trade union as respects which the Secretary of State has a duty under section 1(4B) or (4C) above to give information or enter into consultations may, where it alleges that the Secretary of State has failed to fulfil

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    that duty, raise an action in the Court of Session for a declarator as to whether or not he has failed to fulfil that duty, and the Court may make a declarator accordingly.
    (3) No proceedings may be brought under this section if a complaint to an industrial tribunal has been made under the provisions applied by section 1(4A) above.'.
    4 am
    Mr. Lee: You have said, Mr. Deputy Speaker, that we are to consider together Lords amendments Nos. 2 and 3 and all the Government amendments and consequential amendments to those two amendments. Since they all concern the same regulations it may be for the convenience of the House—particularly at this rather late hour—if I speak about all of them now.
    Amendments Nos. 2 and 3 concern the Transfer of Undertakings (Protection of Employment) Regulations 1981. As the House will recall, these regulations are the implementation in domestic law of the European Community's acquired rights directive, and their main aim is to safeguard employees' rights when an undertaking is transferred from one employer to another. The sort of rights which are protected include continuity of employment, terms and conditions of service generally, collective agreements and trade union representation.
    I should explain that the word "undertaking" is not itself defined in the acquired rights directive, but the 1981 regulations define it so as to exclude any undertaking which is not
    "in the nature of a commercial venture".
    In Committee the right hon. Member for Llanelli (Mr. Davies) expressed doubts about whether, given that definition, the regulations would apply to the transfer of the dockyard employees. The Government's view has always been — and remains — that the dockyard undertaking is indeed an undertaking within the meaning of the regulations. The only doubt, in our view, was whether the transfer of the work force alone would be considered a transfer of part of an undertaking within the regulations. Clause 1(4) of this Bill was originally drafted to remove that one doubt.
    When the Bill was considered in another place, doubt was again cast on the applicability of the 1981 regulations to the transfer of the dockyards. Although the Government's position on this had not changed, we took the view that the dockyard work force, which had been led by others to believe—wrongly in our view—that their conditions of service might not be protected, should be left in no doubt that the regulations would apply. The Government therefore decided to include in the Bill itself the statement that the regulations
    "shall apply to the transfer of the dockyard undertaking or any part of it whether or not, apart from this provision, the undertaking would be treated as an undertaking in the nature of a commercial venture for the purposes of those regulations."
    As the Bill has passed through its various stages in this House and in another place it has become clear that all sides wish to ensure that the 1981 regulations will apply in this case. Amendment No. 2 puts it beyond argument that, as the Government have always maintained, the 1981 regulations will apply in the case of the transfer of the royal dockyards. I hope that the Opposition will welcome the amendment.
    Mr. Denzil Davies: The hon. Gentleman said that there were doubts originally as to whether a transfer of the
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    workers alone would come within TUPE '81, whether that was because of the commercial point or because there was no undertaking. Now the amendments are tabled to try to put that right. Will the Under-Secretary tell the House what extra is being transferred — the workers are still being transferred — in order to meet TUPE '81? Is anything else being transferred?
    Mr. Lee: In a two-company situation, the managing company would hold the term contract for the provision of services and project contracts. The dockyard or employing company, which my right hon. Friend the Secretary of State would set up with a capital of £50,000, would have the work force and the licence to use the assets. On vesting day the dockyard company becomes the subsidiary company of the managing company. As we have said, our intention is to retain the ownership of the fixed assets without change. Nothing additional is passing in that sense.
    Mr. Denzil Davies: The hon. Gentleman has now answered the question. Nothing additional is being passed. The transfer is still a transfer of the workers alone. How can we then say that TUPE '81 applies? Presumably, it is because, by a form of words, we have deemed it to apply, but nothing more is being transferred. I still think that the Minister has considerable problems.
    Mr. Lee: If the right hon. Gentleman will let me finish covering Lords amendments Nos. 2 and 3, I shall refer to those points. I acknowledge that, as far as I am aware, nothing extra is being transferred.
    The Government did not support Lords amendment No. 3 in another place. The amendment seeks to set out in the Bill particular provisions in the 1981 regulations. As it is clear that the regulations will apply in their entirety, there is no need to spell out in the Bill any individual regulation or any part of a regulation. These regulations are not there to be followed or ignored by the Government as they see fit. They are the law of the land and there is no question of our not complying with them.
    It was not, however, only on a point of principle that the Government opposed the amendment, but also because it did not achieve its main aim of clarifying the Bill. The courts do not read the Official Report when interpreting legislation, and the Government have the duty to ask what a court would make of an Act which provides in one clause that the 1981 regulations will apply but then singles out one particular clause for special mention and provides specifically that that particular regulation is to be fulfilled. The provisions in the Bill, when enacted could well override the similar provisions in the regulations. That would give rise to problems with other parts of the regulations which refer to those provisions which might have been overridden by the Act. In short, there would be a statutory muddle.
    Amendment No. 3 cannot, therefore, remain in the Bill in its present form, and to overcome the drafting problems, my noble Friend the Minister of State for Defence Procurement has had a number of discussions with representatives of both sides in another place. I am glad to say that they have said that they are content with the amendments that stand in my name — (a) to (m). These remove any doubts caused by the original wording and ensure that the amendments accurately reflect the wishes expressed in another place that the particular

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    sections of the 1981 regulations relating to the duty imposed on an employer to inform and consult trade union representatives should be repeated in the Bill itself.
    In the particular circumstances of the dockyards, it was argued in another place that the trade unions should be able to approach the High Court if, in the opinion of the unions, the Secretary of State had failed in his duty to inform or consult them, as necessary. The new clause which I have tabled, and which has been discussed with those concerned in another place, for consideration as a consequential amendment to the Bill, gives the relevant unions the right to bring an action in the High Court or, in Scotland, the Court of Session, for a declaration or a declarator respectively to that effect. Alternatively, the unions could make a complaint to an industrial tribunal, as provided for under regulation I1 of the 1981 regulations.
    It is not, of course, for me, or indeed for this House, to anticipate the reactions of another place if these amendments have to be considered there again, but it is my hope that another place will not insist on its amendments and will accept the amendments which the Government now propose.
    I should make clear that the need for compliance with the regulations in this and in all other respects has always been recognised in our plans for introducing commercial management to the royal dockyards by April 1987. No new obligations are imposed on the Ministry of Defence as a result of repeating in the Bill itself some of the provisions of the 1981 regulations, and our time scale remains unchanged.
    What the amendment does—this was, I believe, the main intention of another place — is to highlight the need for consultation. The Government continue to hope for realistic discussions with the trade unions representing the work force at the dockyards. If the inclusion of this part of the regulations helps to bring this about, this amendment will have served some purpose. So that no one should be in any doubt, however, the amendment also refers, in words which echo the 1981 regulations, to the fact that if it is not reasonably practicable for the Secretary of State to consult—for example, because of a refusal on the part of the unions to take part in such consultations —it will be sufficient that he shall have taken all such steps to consult
    "as are reasonably practicable in the circumstances."
    I hope that when the Bill has completed its parliamentary stages, the trade unions will start in earnest the process of consultations.
    Mr. O'Neill: This group of amendments, which are primarily concerned with implementing TUPE '81 and seek to ensure that proper consultations take place, are long overdue. The consultation process relating to the contractorisation of the dockyards has had a chequered history. In paragraph 19 of its report dated 10 July 1985 the Select Committee on Defence said:
    "The Committee accepts the view of a majority of witnesses that the time allowed for consultation was much too short. We further consider that the MOD's handling of the consultation process has been inept and insensitive."
    Tribute must be paid to Lord Denning for taking the relevant phrases and words out of TUPE '81 and enshrining them explicitly in this proposal.
    We are still implacably opposed to the contractorisation concept, but we are not blind to the fact that the Government have a large majority and that they may have
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    the legislation in the bag by the end of this week. Therefore, it is essential to establish appropriate means whereby the trade union movement can be consulted and, I hope, conciliated.
    We are talking about a relatively short consultation period. The Select Committee on Defence appropriately condemned the Government for their failures on the last occasion. Therefore we hope that they will reconsider the timetable and the proposed date of 6 April 1987. TUPE '81 referred to the consultation period being long enough. Amendment (1) says that the information should be provided in writing. Adequate time should he given to enable the trade unions to respond in writing, and that might take a considerable time.
    One notes the recent record of the Ministry of Defence on the amount of time and notice that it has given the trade unions over the manpower target consultation procedures. The manpower target for 1985 should have been notified to the trade unions in April 1984, but it was not notified to the unions until January 1985. The manpower target for 1986 should have been available in April 1985, but it was not available until August 1985. Despite the strictures of the Select Committee on Defence, the Ministry of Defence has a deplorable record over providing information and making it available to the trade unions in a form that they can handle and deal with quickly and effectively.
    I am sure, Mr. Deputy Speaker, that you will remember from your previous incarnation as a Minister with responsibility for employment that consultation procedures on redundancy were made available to the unions. When there would have been redundancies involving more than 100 people, 90 days were allowed for consultations and discussions. In a letter to my hon. Friend the Member for Dunfermline, East (Mr. Brown) reference was made to the likelihood of even more redundancies because of the introduction of new work practices in the dockyards.
    Perhaps the proposed consultative process is not new, but we are certainly led to believe that there has to be enough time and that adequate information has to be provided to discuss the legal, economic and social impact on employees. That makes it perfectly clear that at any stage the trade unions will be able to question the selection of a company. They can raise the matter of the legal status of the company and whether or not it has a sufficiency of British interest.
    During the debate two firms with substantial American shareholdings were mentioned, and the trade unions could ask whether or not those shareholdings are consistent with undertakings already given. One might say that that is the first fence at which the Government could fall. By that I mean that the unions could if they wished apply to the High Court. In the case of the Court of Session I have been advised that a declarator ab ante could be applied for, and that would stop the Government in their tracks. It would not simply be a matter of the Government having to make a response, because it would enable the objectors to prevent the Government from carrying on with any of the other aspects of giving effect to the contract.
    If that is the case, this could be a legal minefield for the Government. If it is not the case, the Under-Secretary's noble Friend in another place will have rather a difficult job convincing the noble Lords that the exercise they have gone through was worth while. In the words of the Government, substantial concessions have been made to the representations in another place. Is the Minister telling

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    us that those substantial concessions will enable the whole consultative process to be carried through in three or four weeks? It seems that in the case of Devonport the period is getting shorter because we have already taken a month out of the process.
    If the Minister intends that the result of this wretched Bill will be a consultative process lasting perhaps three or four weeks, he has another think coming, because he will find that difficult. If the trade unions are to fulfil their responsibilities to their members, they will need to take far longer than that. The record of the Ministry of Defence on consultations is not a good one. If the trade unions are not given sufficient time, we will see long legal wrangles on legality and on the economic and social impacts on the communities in Devonport and Rosyth.
    These things are matters of interpretation and the courts will have to decide. We can only indicate what we consider to be the substance of this group of amendments. As I said earlier, Lord Denning has spelt that out in detail in his amendment and the Minister's amendment clearly shows that the unions will have a means of raising their misgivings.
    As I understand it — perhaps the Minister can confirm my understanding—they will be able to do that only when the Government have finally chosen a contractor for each of the two yards. The process of consultation cannot start until the Government have chosen the contracting company.
    Mr. Lee indicated dissent.
    Mr. O'Neill: The Minister is shaking his head and others will have to advise us what the outcome may be. But, as we understand it, the words are drawn in such a way that it will be only when the contractors have been selected that the process of consultation can start. If the Minister does not think that that is the case I can only say that trade unions will not waste their time entering into consultations about hypothetical firms which may or may not have plans for the contractual process. If he believes that the contractual process can somehow start as soon as the Bill receives the Royal Assent, he is living in a fool's paradise.
    Labour Members know that that is a fool's paradise which he and his hon. Friends have constructed over the years and months that have preceded this evening. We do not wish the legislation well. We recognise that this is an improvement, in the sense that it affords workers clearer and more explicit rights than they have enjoyed before and remedies which we suspect they will have to exercise sooner rather than later on the whole question of consultation. We get the impression that, despite the negotiations and discussions that have taken place with another place, the Government, like the Bourbons, have learned nothing and forgotten nothing.
    Dr. Owen: This is a much more important amendment. Indeed, like the hon. Member for Clackmannan (Mr. O'Neill), I think that it is important to congratulate the noble Lord, Lord Denning. It is important, too, to remember that Lord Denning was a Recorder of the city of Plymouth and that he has great affection for the city. Indeed, when he began to examine the legislation he started his memorandum by saying that he was on the side
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    of the dockyard matey. I must say that I am, too. It is apparent that the Government have taken no notice whatever of the interests of the dockyard matey.
    I do not want to embarrass the Minister, but on 16 July he wrote to the hon. Member for Clackmannan saying:
    "I really do think that the amendment"—
    effectively the one that we have now—
    "would be unwise from all our points of view."
    He went on to say:
    "We could not go as far as adding Lord Denning's new point on the High Court"—
    but now on 24 July we suddenly have it.
    The reason is that the Bill is under serious threat of not being able to meet its timetables. The Government fear that in another place they would not be able to sustain the Bill. The importance of this is that one would no longer be able to go through the industrial tribunal, but would have to go too the High Court.
    First, let us be clear, that there is no doubt whatever that the consultations must be with the contracting party. There is no way that they can be with the Government. Take the case of Devonport and Mr. Johnston, the general manager of the dockyard there. Mr. Johnston, as general manager of the dockyard, cannot have a consultation wearing one hat, while in another hat he is putting his application in to be the contractor who will be the commercial organisation who will employ those people. There is no way that the High Court will accept that Mr. Johnston is capable of conducting negotiations under two hats. There is no question that the wording of the amendment means that the consultations will have to come after the tenders have been taken and the contracts awarded.
    The Government may think that they will now have a generalised consultation with the dear old Ministry of Defence, that that will meet the book and that there will be no other questions, but that will be challenged in the High Court. They have not got a prayer. The whole purpose of the consultations is that the contracting parties are in effect making arrangements under the terms of this new legislation. The importance of that is that the Government cannot possibly meet any of the deadlines. I do not know whether the Minister in accepting the amendment knows that. I suspect that he does, and that he is getting his legislation and saving the face of the former Secretary of State, the right hon. Member for Henley (Mr. Heseltine). The latter has landed us all in the cart with this ludicrous legislation. The Minister will then, I hope, announce shortly that he is going for a Government plc. I hope that he also does the same for Rosyth. There is no possibility of going ahead in Devonport, unless the Minister wants to face an action in the High Court. I understand that there is every intention to take the matter to the High Court.
    There was one marvellous moment in the Minister's speech when he implied that there was a great tradition of Ministry of Defence consultation. That is just a joke. There has been no consultation on this legislation. The lack of consultation has been criticised by the all-party Select Committees, all of which have looked at the matter. During the process of this legislation great damage has been done to the word consultation. No one in the dockyard believes that the Minister has ever been consulted seriously. The Minister should be under no illusion. As a result of the new clause, proper consultation on the Bill will be forced. It will be consultation with the

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    contracting party,. and things are likely to go to the High Court. There is no way that this legislation can now be squeezed in without the contractor facing the certainty of legal action, with all the costs and delay that that will involve. The amendment is, therefore, important, and I congratulate Lord Denning, former Master of the Rolls, on being so effective.
    Mr. Gordon Brown: There are good reasons why the House should not be detained to consider these amendments, hut, like other hon. Members, I do not believe that the Minister appreciates the seriousness or importance of the amendments passed in the other place.
    The Minister does not seem to appreciate the full extent of the duty that is placed on him and his Department in respect of consultation. The amendments passed in the other place, which have been refined before being brought before us, call for a process of consultation. They call, not just for a meeting here and there, but for a process of continuous consultation. They also state that that consultation must take place long before the transfer of the dockyards to private contractors. The amendments also make it clear that that consultation must involve the transfer of information in a written form and that the Government must await the response of the trade unions and the workers' representatives to their information.
    Above all, the amendments make it clear that the consultation is about the biggest questions as they affect employees —the legal, economic and social implications of any transfer of the dockyard management to the private sector. The legal, social and economic consequences involve everything affecting the individual employees and the collective group of them at Rosyth and Devonport. The Government will have to be honest about the likely job losses as a result of the transfer, and about the threat to apprenticeships. They must explain what is likely to happen to the local economies in those dockyard areas, and they must also explain in detail what is likely to happen to the rights of individual employees, and of employees as trade union members.
    Having read the reports of the debates in another place, I cannot understand how the Minister can say that his timetable remains entirely unchanged. It is worse than that, because he has told us that his timetable has slipped for tenders coming into his office. That means that there will be less time for consultation on the tenders and on what any preferred contractor is to do. The Minister insists, however, that he will transfer the dockyards to the private sector in April 1987.
    4.30 pm
    The position is even worse than that, because the Minister has told us bluntly that he intends that the private contractors shall be in the dockyards in December. In 1985, when the Ministry of Defence announced its first timetable for the transfer to the private sector, it hinted that there would be a period of parallel running with a private contractor and the Ministry of Defence from the spring of 1987. However, the Minister has confirmed that it is intended that the period of parallel running will begin in December.
    In one sense, the transfer will take place in December, although the formal vesting day will be April 1987. The Minister leaves us with the possibility that he will make a decision about a private contractor, the preferred contractor, in November, and that the contractor will be in each yard in December.
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    The Ministry's record on consultation over this entire business is pathetic and shabby. That has been said by the right hon. Member for Plymouth, Devonport (Dr. Owen) and by my hon. Friend the Member for Clackmannan (Mr. O'Neill), and my hon. Friend drew attention to what the Select Committee on Defence had said about previous consultations. Having issued a consultative document, the Ministry tried to complete the consultation within 13 weeks. The Select Committee took the view that it was not serious about consultation and claimed that through their handling of the consultation process the Government had forfeited much of the good will that might have been forthcoming for any attempt to secure a long-term future for the yard. Having received a severe and serious rebuke from the Select Committee, I would have thought the Minister would learn from the mistakes that had been made and construct a timetable, with or without the amendment that has been introduced by Lord Denning, that would allow for proper consultation.
    I shall give the Minister one example of the problem that he faces, and I hope that he will explain how he will overcome it. Amendment No. 3 says that the Secretary of State must inform the representatives of the trade unions long enough before the transfer about the measures which the transferee
    "envisages he … will, in connection with the transfer, take in relation to such of those employees as become employees of the transferee after the transfer."
    That is a detailed requirement that is placed on the Secretary of State. It is a period of consultation within which information must be exchanged between the trade unions and the Government, and they must be given time to respond.
    For that period of consultation to begin, there must be a transferee and a nominated contractor. There must be someone who has been nominated as the contractor to take over Devonport, and someone else who has likewise been nominated to take over Rosyth. The Minister tells us, however, that he will not be in a position to make an announcement until the middle, or towards the end, of November. That period of consultation cannot begin until the announcement is made, and I hope that if he is going ahead with the transfer the announcement will be made at the first instance.
    Towards the end of November the Minister will announce the contractor who will take over the dockyard, and he proposes that the contractor will be inside the yard and working at the beginning of December. The period of consultation on the implications of the transfer will probably be about three or four days, and the maximum of 10 days. Does the Minister ask us seriously to accept that that is a long enough period for consultation to allow all the legal, social and economic implications of what he is doing to be understood? There is no doubt in my mind, and the minds of all Opposition Members, I think, that the Minister plans to effect part of the transfer by the beginning of December. It is an unacceptable timetable, and quite the worst possible circumstances in which to expect reasonable consultation. I can hardly believe that letters could be delivered and exchanged within the time, far less that serious consultation can take place.
    There is one other problem that the Minister has to resolve. The Secretry of State for Scotland wrote me a letter on 16 July, in which there was a new announcement of Government policy affecting the Ministry of Defence, but announced by the Secretary of State for Scotland. He

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    said that there were potential reductions in the numbers of people required in Rosyth and Devonport dockyards, and that it had been known for some time that the defence work load available to Rosyth and Devonport would decline. Although some of the unallocated programme may go to Devonport and Rosyth as a result of the changes, and perhaps also some additional commercial work, the implication of the letter is that that could do nothing more than offset some of the job losses that have for some time been a possibility.
    The Ministry of Defence talks about how serious it is about consultation. A policy has been announced in a letter from the Secretary of State for Scotland that the defence work load at Rosyth will decline. The Minister has never consulted the trade unions on that nor previously informed Members of Parliament during 70 hours of Committee work on the Bill. An assumption that there will be job losses is written into the letter. There was a lack of consultation with the trades unions before the Secretary of State for Scotland—not the Ministry of Defence —announced that to me in a letter. It seems that the Minister has learnt nothing from the period of discussion and debate, which has been fraught with so many difficulties and criticisms from such a wideranging group of people about the Minister's failure to consult.
    If the Minister does not change his timetable, he faces not only one court action in either the Court of Session in Scotland or courts in England, but a series of court actions on a range of different issues, which will make the life of the Ministry of Defence intolerable and mean that the fate of the dockyards will be decided in the courts of law instead of where it should properly be decided, in the House, after proper consultation with the trade unions.
    We have said all along that the Bill and its proposals are bad for the taxpayer because they will cost more; that they are bad for the work force because they will mean redundancies and deteriorating conditions of service; and that they are bad for the proper defences of the country. Under the Minister's new announcement, the running of the dockyards may be put in the hands of yet another foreign company. It is equally bad that the Minister is prepared to accept Lord Denning's amendment — I praise his work in another place — in theory, but in practice will do nothing to make a reality of the consultation that he promises. He is therefore treating the work force and the trades unions with contempt. If he does not change his mind over the next few weeks, he will face a series of legal actions in the courts that will force him to climb down. I wish that he would be honest with the House and say that his timetable has to change and that his Bill has no chance of being implemented before a general election, which should properly decide the issue in the constituency that I represent.
    4.38 am
    Sitting suspended.
    4.50 am
    On resuming—
    Mr. Douglas: I shall be brief, but not because the amendment is not important.
    Others have paid tribute to Lord Denning. He has drawn attention to consultation and revealed what we did not previously know about the Government in that regard.
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    They have laid on a veneer of consultation, but tried to drive through their views, which have been essentially those of the right hon. Member for Henley (Mr. Heseltine). They have tried to convince the work force that the option that they always had in mind was the realistic one.
    The Select Committee on Defence drew attention to the farce of consultation in two unanimous reports, the Government's responses to which were pretty pithy. Nobody could have had any faith that the Government's consultation process was meaningful. We know that the Government intend to attack fairly severely the load on dockyards, and to reduce the naval load from 80 per cent. to 70 per cent. Unless there is some other work about which we know nothing, that represents an attack on and an undermining of the work force.
    The Government acknowledge—my hon. Friend the Member for Dunfermline, East (Mr. Brown) mentioned the Secretary of State for Scotland's letter — that the naval ships that are being developed and built will require less manpower than earlier ones. That also will entail a reduction in the work force. The Government tell the Select Committee and the Public Accounts Committee that they will achieve a saving. They will quantify the saving in money terms, but not in employment terms.
    Perhaps the Minister will tell us how there will be a reduction in the load factor, a change of quality, a saving and, more important, what will happen to the labour force. The Minister has an obligation to the communities that will be affected to come clean. Communities can make adjustments to employment changes in time. In Fife, we have had to make enormous adjustments to the decline in the mining labour force. Unfortunately, that process continues, but communities can adjust if they are given time and proper Government support.
    All those factors are missing in the legislation. I shall not plead that we should employ people in the dockyards because it is a socially worthy thing to do, but the dockyards are in the public domain and the Government employ those people, so there is an overwhelming obligation on the House to ensure that the Government discharge their duties responsibly.
    The Defence Select Committee unanimously criticised the Government for a lack of consultation and unanimously cast doubts on the measure. Government expect the Opposition to oppose and criticise legislation, but legislation with any merit will gather friends and support during its passage. At each stage, this paltry four-clause Bill has had fewer friends. There is no supporter from any dockyard community on the Government Benches. I know that the hon. Member for Plymouth, Drake (Miss Fookes) has difficulties because she is a member of the Chairman's Panel.
    I plead with the Minister, if he cannot scrap the proposals, at least to declare that the Government's intention is to opt for a Government-owned plc — I would prefer no change—and to see that the timetable for consultation is adhered to meaningfully and discussed with an extremely loyal labour force which has brought benefit to the nation.
    Mr. Lee: No one would welcome a lengthy reply, but I must make some brief points.
    We are and have been ready to consult since April 1985. Contractor selection will be completed by late November and consultation will continue through to vesting day. As

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    I said in relation to the timetable which I set out earlier, we are talking about a full four months between the selection of the contractor for the particular yards and the date of 6 April when commercial management begins.
    We have provided alternative procedures by which a union may allege that my right hon. Friend the Secretary of State has failed in his obligation to inform or consult. My Department will continue to spare no effort to comply with what will be its statutory obligations. For that reason, we are confident that proceedings alleging a failure to inform or consult will be bound to fail, whether they are commenced in an industrial tribunal, the High Court or the Court of Session. At an industrial tribunal, a union may seek a declaration under regulation 11 of the 1981 regulations that my right hon. Friend the Secretary of State has failed to inform or consult. If that allegation is well founded, the tribunal will make a declaration to that effect, and if appropriate, order the payment of compensation to affected employees of up to two weeks' pay. A tribunal's declaration would not vitiate the effectiveness in law of a transfer. An appeal from an industrial tribunal would lie on a point of law to an employment appeal tribunal and thereafter, with leave, an appeal would be taken to the Court of Appeal or, in Scotland, to the Court of Session.
    The Bill will now also provide for an alternative procedure for establishing a failure to fulfil statutory obligations. A union will have to choose. It could not begin in the High Court and then decide to go to an industrial tribunal; the procedures are mutually exclusive. The High Court can make a declaration as to whether or not the Secretary of State has failed to fulfil his duty to inform or consult. In Scotland the Court of Session may make a declarator to the same effect. The alternative procedure would not allow the High Court or Court of Session to set aside the transfer of the dockyard undertaking at either dockyard authorised by the Secretary of State.
    Mr. O'Neill: The courts cannot stop the process of transfer, but they can freeze it until such time as the consultations are properly conducted. That could seriously delay the programme that we consider to be far too short. That is the significant change from Lord Denning's suggestion.
    Mr. Lee: That is the hon. Gentleman's judgment. It is not mine, the Government's or Ministers'. We have every intention of bringing in commercial management by 6 April 1987.
    Question put and agreed to.
    Lords amendment No. 2, as amended, agreed to. Government amendments (a) to (j) to Lords amendment No. 3 agreed to.
    Lords amendment No. 3, as amended, agreed to.
    Consequential Government amendments (k) to (m) agreed to.

STATUTORY INSTRUMENTS, &c.

  CONSUMER PROTECTION
  Motion made, and Question put forthwith pursuant to Standing Order No. 79(5) (Standing Committee on Statutory Instruments, &c.)
  That the draft Firewords (Safety) Regulations 1986, which were laid before this House on 30th June, be approved.—[Mr. Mather.]
  Question agreed to.

  NEW TOWNS
  Motion made, and Question put forthwith pursuant to Standing Order No. 79(5) (Standing Committee on Statutory Instruments, &c.)
  That the draft Development Board for Rural Wales (Extinguishment of Liabilities) Order 1986, which was laid before this House on 4th July, be approved. — [Mr.Mather.]
  Question agreed to.

£2 Note
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Mather.]
5.2 am
Sir Marcus Fox: I thought that it was a stroke of luck when I heard that I had succeeded in getting an Adjournment debate. At 5 o'clock in the morning, I am reviewing that rather rapidly. I assure my hon. Friend the Economic Secretary to the Treasury that I shall not keep him any longer than necessary to put across the points I wish to make. I thought that today was going to be a memorable day, which it was. It was memorable because of the royal wedding, especially as we now have a Duke and Duchess of York, which gives me particular gratification. The memorable day has extended into a memorable morning. I hope the good news will not stop there. Perhaps my hon. Friend will say a few kind words about my subject for debate and suggest that we should introduce a £2 note.
I do not ask my hon. Friend to go back to the debate we had on 20 December 1983. It only seems like yesterday when we debated the introduction of a plastic pound. That was thrown out of court, for a number of reasons, one of which was the ease of counterfeiting, the difficulties of watermarks, and so on. The Minister accepted that the policy of introducing a £1 coin was too well advanced.
A number of things have happened since then. One is that we have virtually conquered inflation. Only in the past few days, a Bank of England spokesman said that there were no plans to introduce a £2 note. He said:
"the spending power of a £2 note today would be less than that of the old 10 shilling note before its withdrawal 17 years ago."
That would be a dangerous argument for the Treasury to accept. It would be to assume that inflation would not be held at its present level, or go lower, as we expect, but that it might go back to the level of the old days when it was in the teens or, dare I suggest, the 26 per cent. under another Government. The argument of inflation as mentioned in our last debate has, I think, receded.
The acceptance of the pound coin is a fact. I do not argue that there should be a change in that direction. The general public feel that there are far too many coins in our purses and pockets, and there are constant complaints. My proposal will go a considerable way towards readjusting the balance.
In the earlier debate on the £1 coin, the Minister said that he would reconsider if there were a more durable substance. I am happy to tell my hon. Friend the Economic Secretary that perhaps the largest company making banknote paper has confirmed that paper is now available which has twice the life of the old £1 note. If such paper had been available a couple of years ago, the £1 coin might not have been introduced.
The company to which I refer exports to about 120 companies around the world which use this high-durability paper to produce banknotes; yet in the United Kingdom, where one would expect this use to be encouraged, it is used only for higher denomination notes. My hon. Friend the Economic Secretary told me that it would cost £3 million a year to keep the old £1 note in circulation. In the case of a higher denomination note of more lasting quality, presumably the cost would be
570
nothing like £3 million a year. If private banks in Scotland can produce their own £1 notes, and bear the cost, is it beyond the Treasury's capability to introduce such notes?
Another reason why I thought that I should raise this subject is that there seems to be a plot to introduce the £2 coin. Indeed, I saw my hon. Friend the Economic Secretary pull one out of his pocket a few minutes ago. To my horror, today's newspaper contains an advertisement by the Royal Mint which tells us that a new £2 coin is available from post offices now. Such coins have been available for several weeks from the parliamentary post office. They have been passed around. One member of the Whips Office — that certainly gives substance to the story—has been regularly passing the new £2 coin to taxi drivers whenever he can. He enjoys it.
The advertisement says that the £2 coin has been struck for a special reason, but, like the £1 coin, it is legal tender. I believe that we should therefore have a full debate on it. As I was outmanoeuvred last time, because the £1 coin had been produced before I could debate the matter, I hope that my hon. Friend the Economic Secretary will confirm that at the moment there are no plans to introduce a £2 coin. We can argue a great deal about whether there should be a £2 note or coin.
Seven coins are in circulation—too many. If another coin is introduced, the time will rapidly approach when our coinage system has to be reorganised. Coin size bears no resemblance to value. The cost to the Treasury of that reorganisation will be considerable. The introduction of a £2 note would lessen the need to embark upon such costs.
I am sure that my hon. Friend the Economic Secretary accepts that there is a gap in our currency. In the chemistry laboratory, the weights one, two, and five are important. The same proportions apply to some of our coins, with the 10p, 20p and 50p, but there has always been a gap between £1 and £5. There is nothing in the middle. However, we have £10 notes, £20 notes and £50 notes. It would have helped us a considerable time ago if there had been a £2 note. It was never obvious when change was being given in pound notes. However, now if one changes a fiver for a small purchase and gets four £1 coins, it is obvious to many people that there is a need for something in the middle range. I could give numerous examples. Canada, for example, only needs four coins—one cent. five cent, 10 cent and 25 cent pieces—and they manage extremely well with the rest in bank notes. The United States has been quoted regularly.
These are early days in this debate. However, I have had support from people in all walks of life and from retailers and traders. Let us have our £1 coin but look to the future. I believe that a £2 note would make the Treasury a little more popular than at present—I am trying to be kind. Perhaps the time is approaching when popularity may be acceptable, even in that important Department.
5.10 am
The Economic Secretary to the Treasury (Mr. Ian Stewart): I was going to congratulate my hon. Friend the Member for Shipley (Sir M. Fox) on obtaining this debate. However, my compliments and congratulations would have been in better order a few hours ago, and perhaps this is not the ideal time to discuss such important matters as possible £2 notes and the structure of the currency. Nevertheless, I would like to thank my hon. Friend for the courtesy with which he has put forward his ideas and also for their relative brevity. I shall try to respond in kind.

571
I should like to add one or two footnotes to the debate we had two and a half years ago. It is interesting that one of the advantages of the £1 coin, which I then mentioned, was that it would be useful for slot machines and vending machines. I am glad to say that in gas and electricity meters, telephones, ticket machines, food and cigarette dispensing machines and so on there has now been a substantial measure of conversion and the coin is useful for that purpose.
I was much criticised at the time by the charities, which said that people would never slip a £1 coin into an envelope and send it and that they would lose out. What has happened is that some people now send fivers. Of course, we need only one person to send a fiver and we get as much as five people sending a pound note each. Charities also found that whereas nobody would fold up notes to put in collection tins, people have now been putting £1 coins into the tins. Therefore, the pattern has changed a little differently from what was expected at the time and I am glad that the ideas we had have been borne out in practice.
We are not replaying that debate. My hon. Friend fairly accepts that the £1 coin is now established. I think that the point he raised about the gap between the £5 note and the £1 coin is interesting. However, historically it is not very different from the gap when I was a schoolboy, between the 10-shilling note and the half crown. Indeed, going back a few years before that, when the pattern of currency was the same, the purchasing power of the 10-shilling note and the half crown was relatively greater.
The problem with a £2 note is that there is not much to lead us to believe that it would be treated by the public in a manner different from the £1 note. Double denomination notes have not proved very satisfactory in the few countries where they have been tried. For example, in France the 20-franc note has obtained only about 4 per cent. of the note circulation. In the United States, the 52 note has achieved less than that—only about 3 per cent. of the note circulation. If there ever were a case for a £2 note, it has probably passed. The difficulty, which I explained to my hon. Friend and to many others when we introduced the £1 coin, was not just the cost of replacing notes rapidly but the difficulty of keeping notes in circulation in good enough condition.
My hon. Friend referred to the better quality paper that can be used. I can identify from what he said the company to which he was referring, and I have discussed the matter with it. However, it is not just the paper, but the treatment of it, and the way in which the note is used. The pound note was circulating like a coin, by being folded up into a small size and stuffed into pockets and purses. No note will last long in those conditions. I remain to be convinced that the same sort of thing would not happen to a £2 note.
One of the things that leads me to say that is that there has been a shift in the public's use of notes in the past few years towards the higher denominations. This is not part of Government policy in the management of the currency; it is the choice of the public. In 1982, the number of £5 notes in circulation formed 27·6 per cent.—well over a quarter—of the notes in circulation, by value. Today, it is below 20 per cent., as the proportion taken by £10 and £20 notes rises. That suggests that the £2 note would be more likely to be treated like the old £1 than like a £5 note, which is becoming less used.
On that basis, I am not convinced that there is a powerful case for a £2 note. At one time there might have
572
been a useful slot for it. I accept my hon. Friend's explanation of £1, £2 and £5, and also that we have rather a lot of coins. This is inevitably what happens after a period of rapid inflation, such as we had in the 1970s. One has to reorganise the coinage, because in the coins of the old sizes, the lower denominations are much too large for their purchasing power.
We have taken a number of steps. First, decimalisation gave us an opportunity to change the size of the penny, and subsequently there have been other changes—for example, the introduction of the 20p coin, which does service for two large 10p coins. That has served to reduce the weight of the currency. I agree that so many different coins make a certain untidiness, and I have no doubt that there will be changes to make a better balance without too much weight.
Although many people have said that the 1 coin contributes a great deal extra to the weight of the coinage, it is substantially lighter than the 10p coin. The 10p and 5p, and to some extent the 50p, coins cause the main weight in the purse or pocket. I am sure that my hon. Friend is conscious of that, and of the fact that we are considering what changes might be needed. None is immediately planned, but we consider the subject, and research is being done on it.
My hon. Friend pointed out that Scottish banks can maintain a circulation of pound notes at their own expense. That is true, but they do not have a national responsibility for keeping that type of currency in good condition. The Bank of England, on behalf of the Government, would be bound to keep it in good condition. Although Scottish pound notes are still quite plentiful, I am afraid that they are beginning to show signs of rapid deterioration, just as English pound notes did a few years ago. Even in America I understand that much more serious consideration is now being given to replacing the dollar bill by a dollar coin. I am told that what will swing it will be when the dollar is a minimum basic amount for subway fares. As soon as slot machine requirements reach a certain point, a coin will be needed.
My hon. Friend also asked me about the £2 coin. I assure him absolutely that at present there are no plans to introduce a £2 coin for general circulation. The reason for the £2 denomination of the Commonwealth Games coin is partly because the tradition of having a crown, which is only 25p, has made it rather expensive to produce suitable commemorative coins with so low a face value. It costs quite a lot to produce a special coin for such an occasion. In many respects, 25p does not now meet the costs of production and distribution. It was felt that the new denomination, which was not already in circulation, might be suitable. For that purpose, the £2 coin was chosen.
That amount has been represented by a coin in the past. It was a gold coin then. In modern times, however, a £2 coin is an innovation. For practical reasons, we could not have a £2 coin of the kind that we have struck for the Commonwealth Games this week in general circulation alongside the lop coin, which is of almost identical diameter. It would be much too confusing. This is not an attempt to upstage my hon. Friend's idea. We wanted merely to have a convenient denomination for a commemorative coin. I am glad that it has received a good welcome, and it will serve very well its purpose as a commemorative coin.
My hon. Friend said that it is legal tender, and he is quite right. Technically, all commemorative coins are legal

573
tender. We could go into a sweet shop with one of the old commemorative crowns and use it to buy a bar of chocolate, just as we could use the £2 Commonwealth Games coin. However, that does not mean that we plan to introduce it as a general currency coin. If ever that time came, it would have to be considered in the light of the circumstances.
I apologise for having been unable to give a more enthusiastic welcome to my hon. Friend's idea. A £2 note might have been convenient at one time, but it would not be convenient now. My hon. Friend referred to the most telling statistic: that £2 buys less now than a 10-shilling note would have bought when it was withdrawn from circulation. In 1969 it was felt that that amount of purchasing power would no longer sensibly be represented
574
by a note. The same reasons led us to issue the £1 coin and phase out the £1 note. The arguments since 1969 over the lowest note denomination and what should be represented by a coin have changed very little.
I hope that my hon. Friend will accept that we have given careful thought to his idea. As he may know, I have a personal interest in coinage and currency. I have studied the subject for many years, and for that reason I always look at ideas of the kind put forward by my hon. Friend with an open mind to see whether they might be worth following up. I have looked at his idea, but I am not convinced that it would be right to introduce a £2 note. However, I thank him for the way in which he has put forward the suggestion.
Question put and agreed to.
Adjourned accordingly at twenty-five minutes past Five o'clock am.

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  Radiation
  Carsington Reservoir
  Carsington Reservoir
TRANSPORT
  Tourist Buses (Westminster)
  Tourist Buses (Westminster)
  Aircraft Noise
  Aircraft Noise
  Motor Cycles (Noise)
  Motor Cycles (Noise)
  Drivers' Hours
  Drivers' Hours
  British Rail
  British Rail
SCOTLAND
  Inverclyde Initiative
  Inverclyde Initiative
  Nurses (Pay)
  Nurses (Pay)
  School Meals
  School Meals
  Paramilitary Activity (Deaths)
  Paramilitary Activity (Deaths)
  Prisoners (Transfers)
  Prisoners (Transfers)
  Fur Production
  Fur Production
  Court of Session (Delays)
  Court of Session (Delays)
  Scottish Women's Aid
  Scottish Women's Aid
  Dog Licences
  Dog Licences
  Student Finance
  Student Finance
  Students (Planning Courses)
  Students (Planning Courses)
  Dounreay
  Dounreay
HOUSE OF COMMONS
  Visitors
  Visitors
ENERGY
  Nuclear Fuel
  Nuclear Fuel
  Electricity Supply Industry
  Electricity Supply Industry
  Coal Industry
  Coal Industry
  Sellafield
  Sellafield
  Nuclear Reactors
  Nuclear Reactors
  Voltage Variations
  Voltage Variations
  Advance Petroleum Revenue Tax
  Advance Petroleum Revenue Tax
SOCIAL SERVICES
  Sickness Benefit
  Sickness Benefit
  Mortgage Interest
  Mortgage Interest
  Disabled People (Survey)
  Disabled People (Survey)
  Supplementary Benefit
  Supplementary Benefit
  Prescription Items
  Prescription Items
  Means-tested Benefits
  Means-tested Benefits
  Rent and Rate Rebates and Allowances
  Rent and Rate Rebates and Allowances
  Students (Benefits)
  Students (Benefits)
  Board and Lodging Allowance
  Board and Lodging Allowance
  Supplementary Pensions
  Supplementary Pensions
  Family Income Supplement
  Family Income Supplement
  Patient-Doctor Ratio
  Patient-Doctor Ratio
  Nurses (Pay)
  Nurses (Pay)
  Leukaemia
  Leukaemia
  Eye Testing
  Eye Testing
  Glaucoma
  Glaucoma
  Cervical Cancer (Wandsworth)
  Cervical Cancer (Wandsworth)
  Cigarette Advertising
  Cigarette Advertising
  Benefits
  Benefits
  Social Security Budget
  Social Security Budget
  Yttrium-Aluminium-Garnet Lasers
  Yttrium-Aluminium-Garnet Lasers
  St. Helens and Knowsley District Health Authority
  St. Helens and Knowsley District Health Authority
  Single and Homeless Persons (Care Facilities)
  Single and Homeless Persons (Care Facilities)
  Darwen Caller Office
  Darwen Caller Office
  Unemployment Review
  Unemployment Review
  Chronically Sick and Disabled Persons Act 1970
  Chronically Sick and Disabled Persons Act 1970
  National Assistance Act 1948
  National Assistance Act 1948
  Drugs (Safety)
  Drugs (Safety)
  AIDS
  AIDS
  Community Care
  Community Care
  Tobacco Industry (Agreement)
  Tobacco Industry (Agreement)
  Glucose Testing Strips
  Glucose Testing Strips
  Diabetics (Syringes)
  Diabetics (Syringes)
  Road Accidents (Records System)
  Road Accidents (Records System)
  Fuel Payment
  Fuel Payment
  Statistics (Publication)
  Statistics (Publication)
  Dental Amalgam
  Dental Amalgam
  Medicines Commission (Report)
  Medicines Commission (Report)
  Labour Statistics (Liverpool)
  Labour Statistics (Liverpool)
  Unemployment Benefit
  Unemployment Benefit
  Psoriasis
  Psoriasis
  Personal Social Services
  Personal Social Services
NATIONAL FINANCE
  Customs and Excise
  Customs and Excise
  Portsmouth Ferry Terminal
  Portsmouth Ferry Terminal
  Taxation
  Taxation
  Hospital Radio Organisations
  Hospital Radio Organisations
  Income Tax
  Income Tax
  Advance Petroleum Revenue Tax
  Advance Petroleum Revenue Tax
  EC Budget
  EC Budget
  Pensions
  Pensions
DEFENCE
  Overseas Personnel
  Overseas Personnel
DEFENCE
  "Low-level Flying"
  "Low-level Flying"
  Chemical Weapons and Plutonium
  Chemical Weapons and Plutonium
  Weapons Statistics
  Weapons Statistics
  Veterinary Corps Dog School, Melton Mowbray.
  Veterinary Corps Dog School, Melton Mowbray.
  Dogs (Veterinary Care)
  Dogs (Veterinary Care)
  El Salvador
  El Salvador
  Land Purchases (County Derry)
  Land Purchases (County Derry)

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

Farming and the Countryside Week
Baroness Sharples: My Lords, on this very happy day I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what activities were organised during the Farming and the Countryside Week.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead): My Lords, 33 events were held on farms in England which provided farmers and the general public with an opportunity to see a wide range of countryside conservation subjects being undertaken on farms.
Baroness Sharples: My Lords, I thank my noble friend for that reply. In view of the success of Farming and Countryside Week, can he say whether that experiment will be repeated in future years?
Lord Belstead: My Lords, I am grateful to my noble friend for her question. We think it was successful; more than 10,000 farmers, members of the general public, schoolchildren and general interest groups visited the 33 events that were held. We certainly should like to repeat it either in whole or in part. We must look at our budget to see whether that will be possible.

Underground Stations: Escalators
2.36 p.m.
Lord Nugent of Guildford: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will ask London Regional Transport what arrangements they can make to keep the escalators of the underground stations in regular working order.
Viscount Davidson: Yes, my Lords, we shall continue to mention that matter in our discussions with London Regional Transport's board and management, but ultimately it is their responsibility.
Lord Nugent of Guildford: My Lords, I thank my noble friend for that Answer, which has more courtesy than substance in it. Is he aware that there are two new escalators that connect the Bakerloo line to the District line at Embankment Station which were installed about two years ago, and that one of them has been
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shut away completely and the other has been stationary for about a month? That is very much to the inconvenience of passengers trying to connect from one line to another. Will my noble friend ask LRT to give a little attention to those matters for the convenience of its passengers?
Viscount Davidson: My Lords, I understand from LRT that one of the escalators was taken out of service because of the station modernisation works currently under way. It is expected to be back in use in the autumn. Unfortunately, the second escalator had to be taken out of service temporarily because of the failure of the handrail tracks. Those have now been replaced and I gather that it is hoped to have the escalator working again today. The escalator concerned is only two years old and I believe that its premature failure is a matter that LRT is taking up with the manufacturers.
Lord Nugent of Guildford: My Lords, is my noble friend aware that I can confirm that the escalator is working today? I am most grateful to him for his obvious influence in the matter; it was very much to my convenience this morning in travelling to this place.
Viscount Davidson: My Lords, I was aware that LRT hoped to have the escalator working today, but I am not aware that there is any direct connection between the fact that it is working and the fact that my noble friend is asking his Question today.
Lord Grimond: My Lords, is the Minister aware that added importance is given to this matter by the fact that, in this age of high technology, it has taken as long to install lifts at one station on the Underground as it did in the days of the horse and cart to build the whole Central line?
Viscount Davidson: My Lords, that is probably due to the fact that the Central line was built in the days of the horse and cart.
Lord Underhill: My Lords, does the noble Viscount realise that as much as I should like to take this opportunity to criticise some operations of LRT, believing that the decision to transfer responsibility to it was wrong, I appreciate the problems that exist? For instances, at Liverpool Street Station the escalators have been out of operation for months because of the reconstruction work there, and one has to go out into the open air in order to make a connection. Having said that, since there are so many complaints about escalators breaking down, I wonder whether there is any problem with regard to the saving of money, shortage of staff, or a lack of skilled personnel.
Viscount Davidson: My Lords, the replacement programme that is under way at the moment is massive. It is not a matter of lack of funds; on the contrary—the Government's policy of reducing demands on revenue subsidies has made more money available for capital investment. The replacement of the escalators is a very complicated job that takes a lot of time. Much of the work has to be done at night. The problem is that although LRT's policy is to invite

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tenders from private contractors for major repairs and renewals, only a limited number of companies are interested in tendering for such highly specialised work.
Lord Broxbourne: My Lords, is it not a sad paradox that at Westminster Station in the capital city of this country, at the heart of the Commonwealth, there is neither lift nor escalator and aged legislators are left to toil up the stairs?
Viscount Davidson: My Lords, it sounds a little like "Upstairs, Downstairs". I shall certainly convey my noble friend's remarks to the chairman of LRT.
Baroness Seear: My Lords, may I ask why the work must be done at night if the escalators are not in action?
Viscount Davidson: My Lords, I was referring to the maintenance work.
Baroness Elliot of Harwood: My Lords, one of the escalators at Sloane Square has broken down and I asked one of the attendants yesterday why that had happened. He told me that it was because the spare parts came from Germany and that there were no spare parts available. Is that true?
Viscount Davidson: My Lords, I have absolutely no idea.

Metropolitan Police Recruits: Acceptance Time
2.42 p.m.
Lord Allen of Abbeydale: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government, in view of the need to strengthen the Metropolitan Police, what steps are being taken to reduce the average time of nine months which it now takes before a successful applicant to join is finally accepted.
Viscount Davidson: My Lords, the commissioner is well aware of the need to process applications to join the force as quickly as possible and keeps his procedures under constant review. I understand that improvements made over the last year have contributed towards a 50 per cent. increase in the number of recruits attested in the first six months of this year compared with the same period last year. Some of the causes of delay are beyond the commissioner's control.
Lord Allen of Abbeydale: My Lords, it is obviously important to take the greatest possible care over selection, but even so I learnt with something approaching incredulity, in reply to a Written Question of mine that the process of dealing with applications averaged 39 weeks. Grateful though I am
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to the noble Viscount for his Answer, I am afraid that it falls some way short of giving complete enlightenment.
Therefore, may I ask whether the young people who apply to join the force are told at the outset that they will have to wait eight, nine or 10 months before they know their fate? Has any estimate been made of the number of promising applicants who, as the months go by, find that they simply cannot afford to wait any longer or get fed up and withdraw their applications?
Viscount Davidson: My Lords, the figure of 39 weeks was the average figure for the intake of recruits who joined the force last January. Figures for earlier intakes are not available. The 50 per cent. increase in the number of recruits attested in the first half of this year strongly suggests that the average elapsed time has decreased.
The delay in individual cases in that particular intake ranged between 24 and 77 weeks. Many applicants are therefore processed rather more quickly than the average figure would suggest. The Metropolitan Police are well aware of the need to streamline their procedures wherever possible and are taking steps to ensure that that is done.
Lord Inglewood: My Lords, can my noble friend inform the House what sort of interval exists when men apply to our provincial police forces? It would be helpful to know whether or not the figures given for the Metropolitan Police are typical for England.
Viscount Davidson: My Lords, I am afraid that I do not have figures for the provincial forces. However, I can say further to the noble Lord, Lord Allen, that there are certain factors under the commissioner's control. One factor is the time taken to make inquiries about applicants and to interview them; and the second is the time which elapses before a successful candidate can join an intake. There are other factors outside the commissioner's control.
Lord Mellish: My Lords, is the noble Viscount aware that I asked a Question some time ago about the training period for police? The noble Viscount assured me that it was being cut down and that it was not as long as it used to be. That was very encouraging. Is the noble Viscount further aware that the establishment figures he gave recently are very pleasing indeed in that today we are not far away, for the first time in many years, from the Metropolitan Police having the numbers required?
I pose again a question which I doubt the noble Viscount can answer. In the event of the Metropolitan Police reaching the establishment figure, would he then kindly tell Sir Kenneth Newman that he has permission to ask for more?
Viscount Davidson: My Lords, the commissioner has already been told that he will be able to have increases of up to 1,850 in the operational strength of the force over the next four years. The commissioner is making every effort to reach the new establishment figure as quickly as possible. He cannot give any firm guarantees, but he aims to reach the new figure by the end of March next year.
Lord Rochester: My Lords, 24 weeks may be shorter than the average period, but is not a delay of 77 weeks much longer?
Viscount Davidson: Yes, my Lords, but that is probably due to the fact that the period of notice required by the applicants' existing employers can be as much as four months and the fact that some applicants are in the final year of university or college. There is also the time taken by the provincial forces to carry out some of the initial work on applicants living outside the Metropolitan Police district.
Lord Mishcon: My Lords, while sharing completely the description given by the noble Baroness, Lady Sharpies, of this being a happy day, I have, I hope, no intention of drawing your Lordships' attention to the period of time mentioned in this Question. Does not the noble Viscount the Minister agree that the answers he has given about time relate to the time between an application and acceptance of the application as against the time between application and joining the force, which is a very different time indeed? Is the noble Viscount aware that in regard to the time between application and acceptance there have been periods as short as 12 weeks and as long as 65 weeks, and that applications vary so much that to take an average is terribly misleading?
Viscount Davidson: My Lords, I am most grateful to the noble Lord, Lord Mishcon. I cannot say anything other than that I agree with him.
Baroness Masham of Ilton: My Lords, in view of the vast, increasing problem of illegal drugs, may I ask the Minister what is the increase in the drug squad in the Metropolitan Police area?
Viscount Davidson: My Lords, I gave the answer to that question some time ago and I am afraid that I cannot find it. However, there has been an increase.
Viscount St. Davids: My Lords, is the noble Viscount aware that there is a method of shortening this period? I am sure he knows that the actual training to be a policeman takes a fairly long time. Could not an applicant at least start on this training and have a few weeks of it, which would do no harm to the public or to the applicant, while his application was still being considered? If he is rejected, no harm will have been done, and if he is accepted the period will have been considerably shortened.
Viscount Davidson: My Lords, all I can do is to draw the noble Viscount's views to the attention of the commissioner.
If I may be allowed to say so, I have now found the answer to the question asked by the noble Baroness, Lady Masham of Ilton. Another 50 officers will be attached to the drug squad.

Nicaragua: United States Policy
2.53 p.m.
Lord Hatch of Lusby: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they have made any representations to the United States Administration regarding its decision to provide extra funds for the "contras" for their attempts to overthrow the elected government of Nicaragua.
The Minister of State, Foreign and Commonwealth Office (Baroness Young): My Lords, We discuss all important issues with the United States Government Recently my right honourable and learned friend the Foreign Secretary and I had comprehensive discussions with Ambassador Philip Habib, President Reagan's special envoy to Central America. Details of such conversations are confidential.
Lord Hatch of Lusby: My Lords, does the noble Baroness agree that this support for the "contras" in Nicaragua is an example of state supported terrorism against the people of a sovereign state? Is she aware that the decision was taken just at the most delicate moment, when there was at least a possibility of the peace treaty that was prepared by the Contadora Group being signed by Nicaragua?
Baroness Young: My Lords, we have made clear quite consistently that we have our own policy on Central America. We have advocated a political solution to the problems of Central America on the basis of the Contadora objectives. I should like to make it quite clear that the "contras" are in fact Nicaraguans who have resorted to armed struggle against their own government.
Lord Cledwyn of Penrhos: My Lords, I wonder whether the noble Baroness can help the House by defining the policy of Her Majesty's Government toward the "contras" in Nicaragua and the decision of the United States Administration to support the "contras". Do Her Majesty's Government approve of the policy of the United States Administration on this point, given that the Government of Nicaragua are a democratically elected government? Secondly, there have been reports of a scheduled date for the ratification of the Contadora treaty. Can the noble Baroness say a word about this? Was it successful?
Baroness Young: My Lords, it may be helpful to remind the noble Lord, Lord Cledwyn, and other noble Lords that the United States Senate has still to act over the allocation of the funds in aid to the "contras". However, as I have already made clear, we have consistently advocated a political solution to the problem of Central America on the basis of the Contadora objectives and so far as I know no date has been set for a final signing of the Contadora Act. We do not consider that the problems of the region can be solved by armed force and we ensure that the United States Government are made aware of our views.
Lord Molloy: My Lords, can the noble Baroness at least inform the House whether in the discussions that have been held with Mr. Philip Habib there has been expressed apprehension at the attitude of the United States to Central America? If that has been done, is it possible to convey to the President of the United States Britain's misgivings about US attitudes and behaviour toward certain Central and South American states?
Baroness Young: My Lords, I have made clear the Government's view on this matter.
Lord Wilberforce: My Lords, may I ask the noble Baroness whether it is the intention of Her Majesty's Government to urge on the United States the necessity of complying with the decision of the International Court of Justice that was given in the case of the United States against Nicaragua, in which most of the activities of the United States in supporting interests in Nicaragua were condemned in strong terms by the great majority of the judges?
Baroness Young: My Lords, in answer to the question of the noble and learned Lord, Lord Wilberforce, adherence to the rule of law is fundamental to our foreign policy. We are still studying the reasoned and lengthy judgment of the court, but we have consistently made it clear that we advocate a political rather than a military solution to the problems of Central America.
Lord Hatch of Lusby: My Lords, is the answer to the question that was asked by my noble friend Lord Cledwyn that the date set for the peace treaty was 8th June and the decision of the American Congress sabotaged any chance of it being agreed? Can the noble Baroness state the attitude of Her Majesty's Government to the summary made by one of the leading Latin American experts in Washington who when describing this decision of Congress said:
"The new money will make no differences in bringing about a military defeat of the Sandinistas but it will allow the 'contras' to widen their war in the more remote parts of the country, causing death and destruction in their wake"?
Baroness Young: My Lords, the answer to the first part of the noble Lord's supplementary question is, no. The answer to the second part is that the Government really have to pay attention to what the United States Government are saying and not to the unnamed spokesman.

Business
Lord Denham: My Lords, it may be for the convenience of the House if I announce that the Committee stage of the Financial Services Bill will be adjourned at approximately 7 p.m. for approximately one hour and that during this adjournment the Third Reading of the Building Societies Bill will be taken.

Lords' Expenses
2.56 p.m.
The Lord President of the Council (Viscount Whitelaw): My Lords, last Thursday the noble Lord, Lord Cledwyn, asked me how the decision of the House of Commons last Wednesday on secretarial allowances will affect the Motion passed in this House on the same subject. In reply I said that following consultations through the usual channels I would make a statement to the House this week. The facts will be familiar to all your Lordships. Resolutions were tabled in each House to increase secretarial allowances
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by 6 per cent. and these were debated last Wednesday. This House agreed to the resolution; another place amended their Motion before agreeing to it. This had the effect of increasing the allowance payable in that House by 52½ per cent. for 1986–87. Obviously, this gives rise to a considerable anomaly.
As I have already announced, the whole question of secretarial allowances in both Houses has already been referred to the Top Salaries Review Body. I think that the Top Salaries Review Body is also very well placed to consider the anomaly that has now arisen. On behalf of your Lordships' House I shall ensure that it is asked to do so and that evidence is placed before it to enable it to carry out this function. I understand that the Top Salaries Review Body may be able to report by January 1987 and that any decision made on the basis of its report could be laid before your Lordships' House for agreement soon thereafter. I hope that noble Lords will agree that this is the most satisfactory way of proceeding in this matter.
Lord Cledwyn of Penrhos: My Lords, we are very grateful to the noble Viscount for responding so readily and courteously to my inquiry last week. I welcome his reference to the TSRB and the expectation of a report in January with a response from the Government soon thereafter. As he will understand, it is nonetheless unfortunate that after having supported the Motion proposed by the Deputy Leader of the House, the noble Lord, Lord Belstead, we are confronted with a new situation following the vote in another place. This is the anomaly referred to by the noble Viscount.
This increases the disparity between the two Houses. Of course we recognise that there must be a disparity between the Houses for obvious reasons. For example, we have no constituencies, while every honourable and right honourable Member in the other place has a constituency with all the responsibilities that that implies. On the other hand, the volume of work and the hours of attendance in this Chamber have increased substantially and must be taken into account especially when we consider the subsistence element as well as the secretarial element. I am bound to say to your Lordships that I regard the subsistence element as being more significant and of more importance in this House than the secretarial element. Comparatively speaking, subsistence paid to the noble Lords in this House is modest, especially for London-based Peers. I shall be most grateful if the noble Viscount will comment on this question of subsistence and tell us whether there is any possible development in this particular area and whether that will be studied by the TSRB when it proceeds with its work over the next few weeks.
Baroness Seear: My Lords, from these Benches we also should like to thank the noble Viscount for making this Statement and to say that we agree that this is much the most appropriate way of dealing with the slightly absurd situation which has arisen. Nonetheless, perhaps I may ask the noble Viscount whether this means that the 6 per cent. that we had agreed will in fact come into force as arranged, or whether we shall have to wait until the TSRB produces its report in January. May I also add, not as from these

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Benches but speaking as a former member of the TSRB, that having had the reference to the body, it would be rather a good idea if; exceptionally, the Government then accepted the recommendations?
Viscount Whitelaw: My Lords, I am grateful to both the noble Lord and the noble Baroness for their comments. With regard to what the noble Lord said, it has to be accepted that another place must make its own decisions. It would be wrong for me in all the circumstances, and in view of much that has been written in the press, to make any comment on what it decided to do, though your Lordships may be able to guess what that comment might be if I did!
The noble Lord asked about subsistence allowance payable in your Lordships' House. That is quite different from anything given in another place and it is very much more in our own hands. At present subsistence allowances are, depending on claims, up to £47 a day for night subsistence and £19 a day for day subsistence. In 1984, the House agreed that increases in the subsistence rates should be linked to increases in the equivalent Civil Service rates. Last year, that arrangement produced an increase of 10 per cent. The 1986 uprating, based on the same equivalent Civil Service rates, is currently being determined and will probably have been decided by the spill-over. Up-rating takes effect from 1st August. I understand that the accountant will be able to pay in arrears any increase which may be awarded.
In answer to the noble Baroness, I think that I am right in saying that, as the House has passed the secretarial allowance, the 6 per cent. comes into effect from 1st August. It is always useful to be given the answer at the last moment! I should otherwise have said that it comes into effect now.
I sympathise a good deal with the noble Baroness in what she said about the TSRB, as one who from time to time gave evidence before it when she was a member. I hope that what she asks will be possible, but I can give no guarantee.
Lord Taylor of Blackburn: My Lords, why is it taking so long for the TSRB to answer a query that seems simple to so many of us?
Viscount Whitelaw: My Lords, I am slightly at a loss to answer that. I thought that the TSRB had only just had the question put to it and it was about to consider it.
Lord Taylor of Blackburn: My Lords, if it is not to reply until January, the consideration will be taking six months, and that is a long time.
Viscount Whitelaw: My Lords, I understand now what the noble Lord is saying. The TRSB has to take evidence both from another place and from here and consider it. If it produces the answer in that time, that is as quickly as I think we can expect. I shall make what representations I can that it should be quicker, but that is what I am advised and it would be wrong for me to encourage expectations beyond what can be achieved.
Lord Nugent of Guildford: My Lords, is my noble friend aware that there is a distinct difference between what is provided for this noble House and for the Commons? Here, we simply make claims for expenses to be refunded. What they amount to depends for each one of us on our personal circumstances and judgment. In the Commons, the situation is totally different: they are allowances. We are talking simply about a refund of expenses. I cannot see how the 6 per cent. increase could possibly interfere with anyone. It is more than the increase in the cost of living in the past year. As most Peers, in any event, claim rather less than the totals that are allowed because their expenses do not reach that amount, it seems to me that there should be no difficulty here at all.
Viscount Whitelaw: My Lords, I am grateful to my noble friend. What he says is correct. Another place has different problems and different circumstances and it would be totally wrong for me to comment on them. There was a time when I had some responsibility for these matters. Since I had that responsibility I have to say that some of the actions of another place have departed somewhat from what I should believe to be the best way of going had I still been there. But as I am not there, that does not matter in any way at all. I totally accept what my noble friend says so far as we are concerned.
It is important for us to accept that today this House is bearing a much heavier load than ever before. If noble Lords wish to blame the Government and myself, they are entitled to do so. This House has much more correspondence and there is much more pressure put on it. But, equally, what my noble friend says is perfectly correct. Members of this House are reimbursed in accordance with expenses incurred, which is very different from the other place.
Lord Marsh: My Lords, as a general point, and given the noble Viscount's wide experience in the area, will he recognise that most Members of your Lordships' House are not paid at all, but that expense allowances which far exceed salaries would be totally unacceptable anywhere outside the Palace of Westminster?
Viscount Whitelaw: My Lords, your Lordships have been most reasonable and modest in what you believe to be the way of carrying on the business of the House in circumstances very different from how it was originally proposed that it should work. I believe that the country as a whole will see that the costs of running this House and the reimbursement of your Lordships' expenses are in the circumstances most reasonable, taking into account the considerable amount of work that the House does on what I have to say is a voluntary basis. I am not speaking for myself but for a large number of other Members of the House. This is something which I think is widely recognised, and I am glad that your Lordships feel it right that that should be so.
Lord Marsh: My Lords, may I make the point that I recognise totally that Members of your Lordships' House do an enormous amount of work totally free, except for expenses? I am simply asking whether, if

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they were salaried, as in other parts of the building, it would be justifiable to have expenses which are so far in excess of salaries, whereas in your Lordships' House even the very people who are salaried have limited expenses.
Viscount Whitelaw: My Lords, I am sorry if I slightly misunderstood the point that the noble Lord was making. What he says is perfectly true. But from what I divine from what he is saying, I think that if I went too far down the road that he is suggesting I might be getting near to criticising some of the things that another place is doing and I have gone as near to that already as I should.
Lord Mellish: My Lords, I apologise to your Lordships as a new boy for making any comment at a time like this, but for 34 years I had experience of the problems in another place and I appreciated very much the way in which the noble Viscount, who was then the Leader of the House of Commons, did a first-class job. I put that on record.
An anomaly was mentioned by the Leader of the Opposition. May I pose some more problems? I am just observing the scene, but another anomaly I find is this. On the Opposition Front Benches are many noble Lords who speak as shadow spokesmen in opposition to Ministers on the Government Front Bench. For example, on the Gas Bill, some of my noble friends had to be equally well briefed and spent many long hours on the Opposition Front Benches, and yet for that they get nothing whatsoever—no remuneration and, so far as I know, no other acknowledgment. Is it not about time that the anomalies created by the differences between the two Front Benches and who is paid were cleared up? The noble Viscount will understand that I am impartial, because I have no hope of ever sitting on anyone's Front Bench.
Viscount Whitelaw: My Lords, I should be careful before going too far in responding to the noble Lord. I fully accept that there are certain difficulties. A limited number of my noble friends have enormous responsibilities in looking after the affairs of more than one department in your Lordships' House. I hope that some day somebody may realise that they, too, are not wholly recognised. I should like to say only that.
Lord Molloy: My Lords, is the noble Viscount aware that his qualities of leadership have been recognised by everybody in this House? Many of us believe that he has strong qualities of trade union negotiation and of trade union leadership. Will he use those qualities on our behalf in places where he needs to do so? We all have complete confidence in him.
Viscount Whitelaw: My Lords, I am grateful to the noble Lord. People have all sorts of views about me which I read in the press from time to time. I find many of them fairly inaccurate. If I have qualities of leadership, I am glad because that is what I am put here for on behalf of your Lordships. I shall seek to use those qualities. However, over a very long life, nobody seems to have thought that I had the qualities of a trade union leader.
Lord Glenamara: My Lords, will the noble Lord bear in mind the effect which I think the televising of the House has had on our postbags? Is he aware for example, that my postbag is bigger than it was 10 years ago when I was a Member of Parliament? I think that the same applies to many noble Lords.
Viscount Whitelaw: My Lords, that was one of the problems to which I was referring when I said that the load on your Lordships and the extra amount of attention paid to your Lordships' business imposed a considerable extra burden on many Members of the House. I fully accept that.
Lord Winstanley: My Lords, will the noble Lord accept, bearing in mind the amount of time that we now have necessarily to spend in the House, that the time is now coming when noble Lords should receive some assistance in having their wives visit them in London in the same way that Members of another place have assistance for that purpose?
Viscount Whitelaw: My Lords, we are straying a long way beyond the matters about which I initially started to answer. The facilities available to your Lordships and your Lordships' wives have been under discussion by various bodies. With regard to your Lordships and our refreshment arrangements, we have many accommodation problems. Everybody is trying to solve them and to help in what is inevitably a difficult matter. If we do not have the accommodation sufficient to do all the things that we want to do, there is almost no way to overcome the problem. We are still seeking to see whether we can do something to effect improvements.

Aberystwyth Harbour Bill
The Earl of Listowel: My Lords, on behalf of my noble friend the Chairman of Committees, I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read a second time.—(The Earl of Listowel.)
Lord Elwyn-Jones: My Lords, perhaps I may express the hope that the House will give unanimous support to this highly important piece of legislation.
On Question, Bill read a second time, and committed to a Select Committee.

Financial Services Bill
3.13 p.m.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.—(Lord Lucas of Chilworth.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD AIREDALE in the Chair.]
Clause 3 [Persons entitled to carry on investment business]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 54:
Page 3, line 6, at end insert—
("() No person who is authorised to carry on investment business in "managing investments", "advising on investments" or "establishing etc. collective investment schemes" shall be authorised at the same time to carry on investment business in "dealing in investments" or "arranging deals in investments".")
The noble Lord said: The amendment seeks to address itself to an important problem which faces the financial services industry, and that is the problem of a conflict of interests. I accept at the outset that the amendment is imperfect and that if it were accepted by the Committee it would involve a series of consequential amendments which I have not set down. I accept also that it would involve certain problems of timing, which I shall come to later, and certain problems of definition of conflicts to which I shall come later.
The fundamental principle that I wish to assert in moving the amendment is that the duties of those who set themselves up to manage other people's money are towards the people whose money they manage and not to anybody else. There is a fiduciary duty here which the Committee should appreciate.
Until now in the City of London and elsewhere, we have lived with a system where organisations such as merchant banks and others have various activities. As we go forward and as the Bill is enacted, they will undoubtedly be extending those activities. I should like to select two activities among many which I regard as being in fundamental conflict. The first is dealing in securities and acting in a finance corporate capacity for clients in advising underwriting takeovers, and the second is investment management, by which I mean money management on behalf of other clients. Generally speaking, the two sets of clients are different.
A number of merchant banks and other organisations have sought to solve that conflict of interest by erecting what is known as the Chinese wall, under which on an informal basis those who are in charge of managing investments do not talk to those in the same organisation who are dealing and who have corporate finance responsibilities or they have gone a little further and set up separate companies one of which is an investment management company and the other is the bank or other organisation which does the dealing and carries on the corporate finance activity.
There are those of us who feel that the whole concept of the Chinese wall is one which bears serious examination. A number of people feel that that distinction does not work in reality. I am not for a moment impugning the honour and honesty of people who work in the City of London. In many cases, that informal arrangement has worked and continues to work, but there are some fairly spectacular cases where it has not worked.
If I may address four aspects of the problem, I should start by saying that where an organisation, be it a merchant bank, a stockbroker or, in the modern term, a financial conglomerate, has directors who are common to both the investment management side and the corporate finance and dealing side—in other words where a top company has directors who are
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responsible to the shareholders for the profits of the whole organisation—it seems to me to put them in an impossible position if, on the one side, they are not allowed to know what their investment management department is doing or on the other side, they are not allowed to know what their corporate finance department is doing. Indeed, in those circumstances it is extremely difficult to be a director of such an organisation and to perform the proper responsibilities of a director under the companies legislation.
The second aspect of the problem is in marketing investment advisory or investment management services. There are many cases—I speak from very personal experience—where investment managers seek to obtain business on the grounds that they have access to good deals that come out of the dealing operations or corporate finance operations with which they are associated. I shall not quote cases, and I shall not name names, because it would be improper in this Committee to do so. Nevertheless, it is true that organisations market their investment advisory services at least in part on the basis that they have access to privileged information from the other sides of the business of which they are part.
The third aspect of the problem is that the marketing, not only of investment management services but also of corporate finance services on the other side, involves, as I know again from personal experience, being able to persuade a prospective client that the investment department of a bank or the investment department of a broker has substantial underwriting power in its own right. Merchant banks will go to a prospective client—indeed, I have done it myself—and say "You know, we have an investment management department that handles £5 billion, £2 billion or £3 billion, or whatever the figure is, and you understand we have substantial underwriting capability in that". It is a plus factor when the bank or broker in question is selling corporate finance services. The conflict of interest is again absolutely clear.
The last aspect of the problem with which I should like to deal is the fiduciary nature of those in investment management. We have, in the past, defined the duties of trustees in pension funds and in other trusts. Parliament has defined the relationship of life insurance funds—that is to say, the funds that are set aside for the beneficiaries of a life policy. These are segregated clearly in the legislation. We have not, in legislation, any sense of the trustee relationship that should exist between an investment manager and the person on whose behalf he manages those investments. I believe that it is time that the Committee addressed this problem.
Our solution is to have separation of ownership between investment management companies and companies that deal or act as underwriters or corporate finance advisers. I realise that this is a radical proposal. I realise that it would upset a great number of people in the City of London who have built much of their business on exactly the conflicts of interest that I have tried to describe. I realise that it would take time to achieve.
It is no good passing legislation and expecting what I am suggesting to be achieved tomorow. There would have to be a timetable, saying that within five years,

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three years or whatever period may be decided there must be a separation of ownership between the different functions. There would have to be some definition of cross-share holdings, the level of interest that, for instance, a dealing organisation or corporate finance organisation might hold in an investment trust, or in a unit trust management company, or other investment management bodies.
Finally, there would have to be recognition of the fact that overseas operators would not come within United Kingdom jurisdiction and might be able to evade what we are seeking to achieve. I recognise these problems. Nevertheless, the problem of conflict of interest is one that will be exacerbated by the passage of the Social Security Bill, which has left this Chamber, and the Building Societies Bill that we are to consider later this evening and that we expect to leave the House this evening.
The problem is exacerbated because there will be, probably rightly, an attempt to engage the attention of many people who, until now, have not put their money under management with an organisation, to do so; in other words, to market services of an investment nature. It seems to me that if that is going to happen—I do not believe that there is any way the Committee can stop it happening if the various Bills that I have mentioned are enacted—the independence of investment management must not only be there, for the reasons that I have specified, but must also be seen to be there. I believe that anything else would be wrong and deceptive of those whose money a number of institutions will try to attract under management.
Schedule 1 to the Bill, in fact, defines investment businesses in a very convenient form for this amendment. I have not used Schedule 1 in referring to my amendment. I have simply taken the titles out of Schedule 1 because, at the time I drafted the amendment, I did not realise that Schedule 1 would still stand part of the Bill. Nevertheless, Schedule 1 is part of the Bill. And had I been drafting this amendment yesterday, as opposed to the day before yesterday or whenever it was, I would probably have referred to Schedule 1.
The specific activities that I have listed in the amendment correspond to the investment businesses under Schedule 1. So the Government appear to me to be moving towards a clear distinction between the different types of business that I have outlined. We would like to see them moving a little further and saying that there must be, and there should be, a complete separation of ownership, in the course of time and in conditions that remain to be determined, so that the fund management, the money management, can properly be a trustee relationship between the manager and the client on whose behalf he is managing the funds. We shall therefore get away once and for all from the question of conflict of interest. We shall do away once and for all with the Chinese wall that has given rise to so many difficulties. I beg to move.
Lord Denning: I wish to support the principle that underlies the amendment. It has been well settled in law for at least 100 years or more that no person should have an interest conflicting with his duty. It is
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for the simple reason that he is not able to do his duty properly if he has an interest of his own or in any other way. There are often cases in the courts involving a director of a company, perhaps the director of a buying company but also a selling company. How can he act properly in relation to any transaction of buying or selling between those companies? It is not only a matter of buying and selling. There is the question of an agency and the like. There have been dozens of cases.
It has been argued that somehow the City of London manages to deal with the situation. And so it does. If a director of one company is interested in a transaction, he does not sit or vote on the matter in which he is concerned. In this Chamber one ought at least to disclose an interest if one is going to be affected in the argument. In the courts we have had many cases of the problem of common directors of two companies. How does one solve it? Somehow the City of London manages it reasonably well. The person who has an interest takes no part in the discussions. That shows well the integrity and honesty of the City of London, but will it not be very difficult in this new situation? Can the City of London manage with bamboo walls, or Chinese walls, or whatever they are called? Ought we not to have the principle stated somehow?
I am not sure that this can cover all the ground, but is it not a matter for close consideration, perhaps by further amendment to the Bill or the schedules, to make it clear that no person, or shall I say, no company—because one may not have common directors; that might be a way out of it—in investment or other business shall have an interest conflicting with his duty? He ought not to be able to wear his investor's hat one moment and to take it off the next moment and wear his dealer's hat. I support the principle of the amendment.
3.30 p.m.
Lord Grimond: I should like to say that I very strongly support this proposed amendment. As the noble Lord, Lord Williams, has pointed out, there are obvious difficulties about it. I imagine that as drafted it would defeat the whole purpose of the Big Bang. I am not sure that would be a bad thing, but it would certainly arouse strong feelings in the City. As I undertand it, it would affect the operations of many people concerned in the City, even under the present regime. Therefore, as the noble Lord says, it may be a matter which has to be thought over very carefully and brought in after further discussion.
However, like the noble Lord, I am not impressed by the promise of Chinese walls. As somebody has already said, every Chinese wall has a grapevine growing up it, and it is very difficult to believe that they will enforce this absolute separation which is vital if conflicts of interest are to be avoided.
It must also be said that while the City of London has in general had an extremely high reputation, and investors have been able to rely upon the senior partners of the major firms, and upon the Bank of England, to ensure that their interests are looked after, it is not so clear to me that this will now continue. For one thing we have had the instance in Lloyd's and

221
Johnson Matthey which shows that there are people in the City who are prepared to go a very long way to make money. We have also the example of what has been going on in America, where the most reputable banks and other financial firms have been breaking the law in a perfectly monstrous but unashamed fashion. The City of London will become more and more international and I am afraid that we cannot rule out the possibility that these habits will spread to it.
Therefore, once again I feel that the small investors do not have adequate protection under this Bill as it stands at present. I would welcome any move such as this to ensure that they are safeguarded against conflicts of interest and that over and above the safeguards which are incorporated in the Bill there is a clear legal obligation that people shall not indulge in operations in which one interest clearly clashes with another. That may be a matter of great difficulty. It may be a matter which would cause the City grave difficulty. But if we want to extend investment in this country, as we do, I think that it is absolutely vital to ensure that the reputation of the City is upheld and to ensure that the ordinary investor gets a square deal.
Lord Harmar-Nicholls: It is very difficult to be against the arguments that the noble Lord who introduced this amendment has put forward. If it is the view that things could happen if certain people were prepared to move from the proper standards, one can always in theory find a good reason for saying that nothing is safe anywhere at any time. I therefore do not and cannot argue against the particular points as they have been put by the noble Lord and supported by other noble Lords.
However, my instinct is against this. My instinct is against statutory intervention in these matters. I do not believe that by making it a crime—which is what statutory intervention does—it will achieve what the noble Lord, Lord Grimond, said he wants: that is, to encourage investment in this country and to encourage confidence in the City of London which is a very important part of this nation's income. We may reach the situation where we disillusion people about the overall integrity of the City of London by saying that we have to have these statutory protections, which we have never had before. When that reputation was being built and when we were the centre of international investment and financial leadership we did not have a problem because we enjoyed confidence throughout the world and encouraged people to feel that those who were actually in the driver's seat could be trusted.
There will always be people who will try to take advantage of knowing two sides of an argument. However, to be both a director of an investment company and a money manager does not necessarily automatically cause a conflict. It is possible for people to dissociate their knowledge of one sphere of their life and activities from that of another. If one wants good, experienced money management, for instance, it is not a bad thing to have it done by people who know the other side of the coin. If one makes it statutory that they must be confined to the one narrow aspect, I do not believe that the attraction of investment and the general good will will be as good as it is now.
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I am all for finding some way of removing the apprehensions that certain people may have because of certain things that have happened. But to make it a statutory obligation will, I am convinced, undermine what we want more than anything else. We want to retain our country, and the City of London in particular, as the centre of these activities.
With regard to the rogues—as the noble and learned Lord, Lord Denning mentioned—who will take advantage of the conflict of interest, they will get round the statutory obligation whatever one does; or they will try to. One will never have perfect protection by statutory means for the standard that one requires. In trying to do so we may be undermining the confidence we need so that an activity which has been continuing for a century or more can expand in the way we would wish.
Lord Denning: I sympathise a great deal with that view. One does not want to hamper business. It is being done very well at the moment. The City of London has done very well on the whole. Perhaps it can continue to do so without statutory intervention which I gather is what is desired.
Lord Tryon: I must quickly add my voice to this debate. This amendment has a very large element of overkill in it. It is fascinating to discuss this matter, but if the amendment were to be carried, the effects would make so-called Big Bang look like a very small squib indeed. It is tremendously radical. I think that the noble Lord, Lord Williams, admitted that.
I spent many years dodging from one side of a Chinese wall to another. I made a declaration of interest at Second Reading. I shall not do so again. However, I spent many years as investment director of a merchant bank. I do not want any impression to be left with noble Lords that Chinese walls do not work in well-ordered societies; and most of them are very well ordered. It was not unusual for one to be in possession of information which was market sensitive as a result of one's directorship of the main board of the merchant bank company. But it was quite possible—and it worked very well in the merchant bank that I was then with, and in many others—that one could carry out one's duties perfectly well without rushing over to the investment department to tell them to stop dealing in that share or to mind their eye in this, that or the other. It works, provided that the senior positions in the City are filled by honest men, and I believe that on the whole they are.
Lord Lucas of Chilworth: I really am most grateful to the noble Lord, Lord Williams, for the manner in which he has explained to the Committee what lies behind his amendments. Certainly if by his amendment he intended to emphasise that there must be regulatory provision to ensure that a business authorised to give investment advice does not improperly use its position to influence customers to use its other services, then I do not think that I would dissent from that objective. There should be proper regulatory provision for preventing conflicts of interest, and we believe that Clause 45 provides just that regulatory provision.

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My noble friend Lord Harmar-Nicholls said that things could happen, and I think that the Committee will understand what he meant by that remark. That they can happen but should happen within the rules is perfectly correct. Certainly the rules suggested by Clause 45 provide for the kind of flexibility for which I think we are all looking. The rules of which we are thinking will require information obtained by an authorised person in the course of one part of his investment business to be withheld from a person employed in another part of that business. That can be found in Clause 45(2)(h).
The principles for rule-making in Schedule 6 make clear the importance attached to the need for the rules to make proper provision to ensure that authorised persons do not put their interests before their clients and that they act fairly between them. Rules of self-regulating organisations and professional bodies must provide at least equivalent protection. If a business breaches such a rule, it will be open to disciplinary action up to and including—for gross breaches—withdrawal of authorisation; and if anyone suffers loss or is adversely affected as a result of such a breach, he may sue under Clause 57 of the Bill.
However, this amendment seeks to alter the way in which investment businesses are organised to prevent the same authorised person from carrying on certain types of investment activity under the same authorisation, and it imposes a criminal sanction for such a breach. We believe that criminal offences should be defined clearly and precisely. Vagueness about the boundaries of a criminal offence should, so far as possible, be avoided. Nor should criminal offences be created unless they are clearly necessary. The amendments that we are discussing would create criminal offences which do not meet either of those tests. The boundaries between the different types of investment business defined in the amendment are inevitably blurred, and it could be possible unwittingly to stray across the boundary between what was permitted and what was not.
No one has yet demonstrated why a criminal offence is needed here. It has not been suggested that the system of rules and the civil and disciplinary sanctions which the Bill provides for breach of such rules are inadequate. The rules will require an authorised person to have an effective Chinese wall. His compliance with those requirements will be monitored by the appropriate supervisor, and discipline and civil sanctions will follow a breach. Those sanctions will be underpinned by the criminal law in that if a person transgresses the rules seriously enough, he will lose his authorisation. He will then be committing a criminal offence if he continues to carry on investment business. However, the criminal offence will then be the straightforward one of carrying on business without authorisation. We believe that this reliance on civil and disciplinary sanctions with criminal sanction only as the ultimate back-up is the best way of achieving the objective.
I certainly agree with the noble Lord, Lord Williams, in that a person who manages a client's funds should owe a duty to that client, but the amendment is not necessary to achieve that. A person managing someone else's funds acts really in an agency
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capacity, and agency law imposes specific obligations on him to act in the interests of his clients and to subordinate his own interests to those of his client. As my noble friend Lord Harmar-Nicholls said, I think that it would be extremely damaging to the United Kingdom's competitiveness as a financial centre to impose by statute artificial restrictions on the kinds of business in which companies may engage.
I think it is notable that countries where such restrictions are imposed have in general lost business to those where they are not imposed. I thought that in his opening remarks the noble and learned Lord, Lord Denning, was somewhat in favour of the amendment. I am not quite sure whether I understood him correctly because later, in an intervention, I rather took the view that he agreed with my noble friend Lord Harmar-Nicholls.
Lord Denning: That is quite right. In view of the good arguments of my noble friend Lord Harmar-Nicholls, I changed my mind.
3.45 p.m.
Lord Lucas of Chilworth: Then I think that I have understood the noble and learned Lord aright, because the conduct of business rules—and this can be found in paragraph 4 of Schedule 6—must make provision for subordination of the authorised person's interests to those of the client. I do not believe that of itself separate ownership does not guarantee that conflicts of interest can be avoided. An unscrupulous operator (and I think that the noble Lord, Lord Tryon, said this) could easily arrange for the business to be conducted separately and yet in such a way that those separate businesses could work together to the detriment of clients. I welcomed what the noble Lord, Lord Tryon, said.
Perhaps the Members of the Committee will allow me to recall what the noble Lord, Lord O'Brien, had to say about the efficacy of Chinese walls during the course of our Second Reading debate. The noble Lord was talking about the challenges that the City would face after the Big Bang and as a result of the Financial Services Bill. The noble Lord said that he hoped,
"that the present inhabitants of the City will be equal to the challenge facing them. From long experience, I should be surprised if they are not".—[Official Report, 11/7/86; col. 606.]
I believe that that is really what the noble Lord, Lord Tryon, was saying. I take comfort from the comments of both noble Lords; they are comments by men with a wealth of experience in the City. I believe that both noble Lords are right. I do not think that it is necessary for us to have this amendment in the Bill. I believe that there is adequate provision to look after the interests of the investor, which is the purport of the Bill, and I would urge the noble Lord opposite to withdraw his amendment.
Lord Williams of Elvel: I am most grateful to the noble Lord, Lord Lucas, for his response, and I am also most grateful to noble Lords who have joined in this debate. I am bound to say that I found the first intervention by the noble and learned Lord, Lord Denning, rather more to my taste than his second intervention, and I am sure that the noble and learned Lord will understand why.

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I believe that in his first intervention he made a very important point, which answers the point made by the noble Lord, Lord Lucas, when he quoted the noble Lord, Lord O'Brien of Lothbury, on Second Reading, that up to now things have probably gone all right. However, we are moving into a different era, and I am quite uncertain whether what has happened—and I refer to the remarks of the noble Lord, Lord Tryon—20, 15 or 10 years ago, or even three weeks ago, will be relevant after 27th October. This, I think, is a major problem we have to address.
The noble Lord, Lord Grimond, very kindly supported what I had to say, but pointed out, quite rightly, that there were great difficulties in the amendment, and I accept that this is what I would call in a curious way an amendment in principle. I accept at the outset that it is not something which can go as it is worded into the Bill. Nevertheless, it is a principle on which we can feel either for or against.
The noble Lord, Lord Harmar-Nicholls, said it was difficult to be against the sentiments I was putting forward, but his instinct was against statutory intervention. This whole Bill is about statutory intervention. We are trying to make rules. As I understand it, we have so many clauses and so many schedules which are trying to make rules, which are trying to set up a statutory framework for the whole business; and if it is not that, I do not know what we are talking about.
The noble Lord, Lord Lucas of Chilworth, said in reply that there were certain powers under the Bill which would satisfy the points I have in mind. I am bound to say to him that he was in fact making my argument for me, because I said at the outset that I thought the position of directors—and this is what the noble and learned Lord, Lord Denning, said in his first intervention—became intolerable when they were directors of organisations which were essentially in conflict. This is a point which is absolutely central to the amendment I am moving, and I am afraid it is no good simply saying that we can do this or that and that directors must do this or that. There is a basic and inherent conflict which one cannot get away with unless one adopts the principle in my amendment.
The noble Lord, Lord Lucas of Chilworth, also said that we should define clearly and precisely what is and what is not a criminal offence. I certainly would agree with him in that. In the amendment we are talking about authorisation, and, as he rightly pointed out, anyone who does business who is not authorised commits a criminal offence. I am not talking about making it a criminal offence to do one investment business and another investment business in the terms of the amendment; I am simply saying no one shall be authorised; and it is the authorisation question to which I am addressing myself.
Again, I come back to the principle that there is an inherent conflict of interest. But I believe that we have a chance here to set a standard for ourselves and, indeed, for the rest of the world. If I may say so, the United States came very near to doing this in the late 1960s and early 1970s, when there was a draft Securities Act, and it was only the arrival of, I think, President Nixon in power which stopped that Act from taking effect. But they were moving very far in that direction at that time, and I believe there is
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nothing inherently wrong in this. Indeed, I think there is something inherently right in it. I recognise the defects of the amendment. I recognise that it will take time and will need considerable study if the proposals that are enshrined in the amendment are to be put into effect. Nevertheless, I wish to press this amendment.
3.53 p.m.
On Question, Whether the said amendment (No. 54) shall be agreed to?
Their Lordships divided: Contents, 80; Not-Contents, 116.

DIVISION NO.1

CONTENTS

Addington, L.

Listowel, E.

Airedale, L.

Llewelyn-Davies of Hastoe, B.

Ardwick, L.

Lloyd of Hampstead, L.

Barnett, L.

Longford. E.

Blyton, L.

Mackie of Benshie, L.

Bottomley, L.

McNair, L.

Briginshaw, L.

Mais, L.

Brockway, L.

Mishcon, L.

Brooks of Tremorfa, L.

Molloy, L.

Bruce of Donington, L.

Morris of Grasmere, L.

Burton of Coventry, B.

Nicol, B.

Caradon, L.

Northfield, L.

Carmichael of Kelvingrove, L.

Oram, L.

Cledwyn of Penrhos, L.

Phillips, B.

David, B.

Ponsonby of Shulbrede, L.

Davies of Penrhys, L.

[Teller.]

Dean of Beswick, L.

Prys-Davies, L.

Denington, B.

Rea, L.

Ennals, L.

Rhodes, L.

Ewart-Biggs, B.

Rochester, L.

Ezra, L.

Seear, B.

Fisher of Rednal, B.

Sefton of Garston, L.

Gallacher, L.

Shackleton, L.

Gladwyn, L.

Shepherd, L.

Glenamara, L.

Silkin of Dulwich L.

Graham of Edmonton, L.

Stallard, L.

Grimond, L.

Stedman, B.

Hacking, L.

Stewart of Fulham, L.

Hampton, L.

Stoddart of Swindon, L.

Hanworth, V.

Strabolgi, L.

Hatch of Lusby, L.

Taylor of Blackburn. L.

Henniker, L.

Taylor of Mansfield. L.

Houghton of Sowerby, L.

Tordoff, L. [Teller.]

Hughes, L.

Underhill, L.

Jenkins of Putney, L.

Wallace of Coslany, L.

John-Mackie, L.

Walston, L.

Kagan, L.

Wells-Pestell, L.

Kearton, L.

Wigoder, L.

Kilbracken, L.

Williams of Elvel, L.

Kirkhill, L.

Winstanley, L.

Leatherland, L.

NOT-CONTENTS

Ampthill, L.

Cameron of Lochbroom, L.

Auckland, L.

Campbell of Alloway, L.

Bauer, L.

Carnegy of Lour, B.

Belhaven and Stenton, L.

Carnock, L.

Beloff, L.

Coleraine, L.

Belstead, L.

Colville of Culross, V.

Benson, L.

Cork and Orrery, E.

Blyth, L.

Cranbrook, E.

Boardman, L.

Crawford and Balcarres, E.

Brabazon of Tara, L.

Crawshaw, L.

Brougham and Vaux, L.

Croft, L.

Broxbourne, L.

Davidson, V.

Bruce-Gardyne, L.

De La Warr, E.

Butterworth, L.

Denham, L. [Teller.]

Caithness, E.

Denning, L.

227

Dilhorne, V.

Mersey, V.

Drumalbyn, L.

Middleton, L.

Effingham, E.

Milverton, L.

Ellenborough, L.

Monk Bretton, L.

Elles, B.

Montagu of Beaulieu, L.

Elliot of Harwood, B.

Morris, L.

Elton, L.

Mottistone, L.

Fairhaven, L.

Mowbray and Stourton, L.

Faithfull, B.

Munster, E.

Fortescue, E.

Nugent of Guildford, L.

Fraser of Kilmorack, L.

O'Brien of Lothbury, L.

Gisborough, L.

Orkney, E.

Gray of Contin, L.

Pender, L.

Gridley, L.

Perth, E.

Grimston of Westbury, L.

Radnor, E.

Hailsham of Saint

Rankeillour, L.

Marylebone, L.

Reigate, L.

Halsbury, E.

Renton, L.

Harmar-Nicholls, L.

Rochdale, V.

Henley, L.

St. Aldwyn, E.

Hives, L.

St. Davids, V.

Holderness, L.

Sanderson of Bowden, L.

Home of the Hirsel, L.

Sandford, L.

Hooper, B.

Seebohm, L.

Hylton-Foster, B.

Selkirk, E.

Inglewood, L.

Sempill, Ly.

Kimball, L.

Shannon, E.

Kinloss, Ly.

Sharples, B.

Knollys, V.

Skelmersdale, L.

Lane-Fox, B.

Slim, V.

Lawrence, L.

Strathcarron, L.

Layton, L.

Sudeley, L.

Long, V.

Swinton, E.[Teller.]

Lothian, M.

Terrington, L.

Lucas of Chilworth, L.

Teviot, L.

Lyell, L.

Tranmire, L.

McAlpine of Moffat, L.

Tryon, L.

McFadzean, L.

Ullswater, V.

Mancroft, L.

Vaux of Harrowden, L.

Masham of Ilton, B.

Vivian, L.

Massereene and Ferrard, V.

Westbury, L.

Maude of Stratford-upon-

Whitelaw, V.

Avon, L.

Wilberforce, L.

Merrivale, L.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.
4.2 p.m.
Clause 3 agreed to.
Clause 4 agreed to.
Clause 5 [Agreements made by or through unauthorised persons]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 55:
Page 3, line 33, after ("entitled") insert ("either").
The noble Lord said: I beg to move Amendment No. 55 standing in my name and that of my noble friend Lord Morton of Shuna. It may be for the convenience of the Committee if I speak also to Amendments Nos. 56, 57, 58 and 59. I understand that they are grouped.
Lord Lucas of Chilworth: I think I heard the noble Lord aright—Nos. 55, 56, 57, 58 and 59.
Lord Williams of Elvel: Yes. Perhaps I may speak to Amendments Nos. 55 and 56, because I have no particular comments to offer on the amendments tabled by the noble Viscount, Lord Colville of Culross. The thrust of Amendments Nos. 55 and 56 is as a result of a submission to us from the Law Society of Scotland. They adhere to the view that they expressed
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in a memorandum of observations to Parliament that greater latitude should be given to the courts to decide the extent to which the other party should be entitled to restitution in cases where an investment agreement is entered into in contravention of subsection (3). I should be grateful if the Government would consider the concern of the Law Society of Scotland. I beg to move.
The Lord Advocate (Lord Cameron of Lochbroom): I have listened to the noble Lord and I have read the submission made by the Law Society of Scotland. It seems to me that there may be material which will require further consideration arising out of it in that a court's discretion, in the event that a party applies to the court, is limited simply to recovery of money or other property paid or transferred under the agreement, which is in terms of Clause 5(1) to be held to be unenforceable against the other party.
The only addition that the clause provides for is of course interest on any such money, bearing in mind that that definition of the property that has passed is to be read along with subsection (5) which deals with the position where the property has been transferred to a third party, in which event it is to be the value at the time of the transfer under the agreement.
I am happy to be able to indicate to the Committee that we would wish to look not only at the matters that are raised in the amendments in the noble Lord's name but also at the points which appear in the remaining amendments to which the noble Lord referred, Amendments 57 to 59.
Lord Williams of Elvel: I am grateful to the noble and learned Lord the Lord Advocate. It is not for me to cross swords in any way with Scottish lawyers. I have to apologise for the absence of my noble friend Lord Morton of Shuna, and I am grateful to the noble and learned Lord for his assurance that he will take these points away and look at them. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 56 not moved.]
The Deputy Chairman of Committees (Lord Airedale): I have to point out that if Amendment No. were agreed to, I could not call Amendments Nos. or 59.
Viscount Colville of Culross Viscount Colville of Culross moved Amendment No. 57:
Page 4, line 10, leave out from beginning to end of line 13 and insert
(" on the application of the person mentioned in sub-paragraph (i) of that paragraph, that the person mentioned in sub-paragraph (ii) of that paragraph should, for the purposes of that transaction, be treated as if he had not been in contravention of that section").
The noble Viscount said: I hope that there has not been some confusion about this matter, and I certainly do not want to cross swords with the noble Lord, Lord Williams of Elvel, about it, but I thought that the groupings had been done separately and that my amendment was going to be taken independently because it is on a slightly finer point than the two that have just been discussed.
This amendment relates to a situation where there will be three parties involved. There would be the

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investor, an authorised or an exempted person—a bank, stockbroker, or something of that sort—and there would be somebody who had persuaded the investor to suggest that the investment transaction should take place. That third person should have been either authorised or exempted but was not, and was acting in contravention of the provisions of this Bill and consequently was not entitled to make the suggestion in the first place and is indeed subject to a criminal offence, as my noble friend Lord Lucas mentioned just now.
The Bill as drafted, dealing with this situation, says something about it in Clause 5(3)(b). There it puts a burden of proof upon the various people who would be involved when the investor said that he was entitled to recover his money because the person who introduced him to the situation was not either authorised or exempted. Burdens of proof have quite a lot to do with the way in which cases are decided. It is difficult to prove a negative, and that is what the Bill at the present moment requires should be done by the stockbroker, the bank, or whoever it is.
There is a similar situation under the Consumer Credit Act 1974. If persons who ought to be licensed as credit brokers under that Act introduce arrangements or agreements, there is a system whereby the people concerned can go to the Director General of Fair Trading and he has, as it were, a discretion on the facts of the case whether to allow the transaction to persist or to disallow it. I should have thought that in the enormous variety of circumstances that could arise in this sort of situation it would be better to leave it to the discretion of the county court or, I suppose, if it is a big enough case, the High Court. 1 should have thought that the judges would be just as good at that as the Director General of Fair Trading, and that is what this amendment does. It requires that an application should be made and then it is in the discretion of the court.
My noble and learned friend Lord Cameron has said that this is another of the matters that he is prepared to consider. I hope he will consider that analogy that I have described because I imagine it has worked well since it is run by the department whose representative here is my noble friend Lord Lucas, and it has presumably been going for the past 12 years without any great problem. Therefore if that is a sensible solution I suggest it should be used on this occasion as well. I beg to move.
Lord Bruce-Gardyne: I should like to support my noble friend Lord Colville on this amendment. I should declare an interest as a director of the Trustee Savings Bank. In common with the Committee of London and Scottish Bankers, the Trustee Savings Bank strongly supports this amendment and the change which my noble friend has proposed, I think for the reasons that he has explained.
All I should like to add in this context is that it seems to me that this also comes back to the discussion we had on Monday night on Schedule 1. When we were discussing the interpretation and the weight to be laid upon the phrase "engaging upon a business" my noble friend replying from the Front Bench gave as his belief that "engaging upon a business" involved something more than very occasionally doing so. Here I revert to
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the subject matter we were discussing on Schedule 1—the representations from the Association of Corporate treasurers, to whom his department pointed out that where corporate treasurers, for example, were acting in the normal commercial course of their activities, it would clearly not be a question of the Department of Trade embarking upon criminal proceedings against them.
However, I raised the question that as I understood it an individual could seek to have annulled a transaction which had been entered into in good faith by another party because it turned out subsequently that the transaction had not worked out as he wished it to do, simply because he could claim that the other party could not establish qualification under paragraph 12 of Schedule 1 to this Bill. In replying, my noble friend said that this was where the question of the onus of proof would arise under this clause and this particular amendment. It seems to me that if my noble and learned friend could accept this amendment moved by my noble friend Lord Colville, this would go a considerable part of the way to alleviate anxieties on that score.
4.15 p.m.
Lord Cameron of Lochbroom: I am grateful to both my noble friends for what they have said in explanation of this amendment. While making clear that I am happy to take it away to look at in the light of those remarks, I should set out that the object of Clause 5—apart from providing a remedy for investors who are affected by the carrying on of investment business unlawfully—is to impose some obligation on an authorised business to take care that none of its investment agreements arise because of the involvement of an unauthorised person. Thus, for example, if a business regularly uses introducers it ought to make sure that those who need to be authorised because of the nature of their business have secured authorisation. I think my noble friends will understand that that is the purpose at which subsection (3)(b) is aimed.
We are trying to secure the proper balance by seeing that the investor does not suffer and is able to secure adequate recompense and, at the same time, that authorised businesses are not unreasonably penalised by having agreements entered into in good faith deemed unenforceable. I take from the gist of what my noble friend Lord Colville said that really he is looking perhaps to give more discretion to the court in this matter. I am conscious of the advantage of doing so, both for the reasons I referred to earlier when replying to the noble Lord opposite and also concerning this point. I shall carefully consider what has been said on this matter.
Viscount Colville of Culross: I am grateful to my noble and learned friend. I should have thought that if any investment broker regularly had an introducer as part of the scene and did not check out that he was properly authorised there could not be any question but that he ought to have his transaction disallowed. The difficulty is where the client comes along at the instance of an unauthorised introducer about whom the investment dealer knows nothing at all. It is those circumstances which cause some anxiety. My noble

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and learned friend has said that he will look at this matter. I am grateful to him, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hacking Lord Hacking moved Amendment No. 58:
Page 4, line 11, leave out ("neither knew nor ought to have known") and insert ("did not know").
The noble Lord said: As Amendment No. 59 is closely related to Amendment No. 58, with the leave of the Committee I shall address the Committee on both amendments. These amendments attempt to tackle again the discretion that ought to be given to the courts when dealing with agreements which for one reason or another are unenforceable, although they have been entered into in good faith by the parties. It has already been established in this Committee that Clause 5 makes agreements unenforceable if entered into by unauthorised persons. It also makes them unenforceable, even if they are entered into by authorised persons or by exempt persons, if for one reason or another that agreement otherwise falls into contravention of the terms of the Bill.
When considering the court's discretion, we turn to Clause 5(3)(b). The court is entitled in the exercise of its discretion to apply the test as to whether the party seeking to enforce the investment agreement knew or ought to have known that the agreement was unenforceable at the time it was made.
My amendment seeks to apply a simpler test and in doing so gives a wider discretion to the court—a factor that the noble and learned Lord the Lord Advocate welcomed just now in relation to the amendment moved by the noble Viscount, Lord Colville. The wider discretion, therefore, that my amendment seeks to give is to remove the words,
"neither knew nor ought to have known"
and to base the court's discretion on the much simpler test of whether the party seeking to enforce the discretion did not know that the agreement was unenforceable. It then goes on to give a wider berth for the court also in applying the test that in the circumstances it would be just and equitable to allow the agreement still to be enforceable notwithstanding that there has been some illegality in the sense that it has not fallen strictly within the terms of the Bill.
I suggest to the Committee that we give the court that wider discretion which, incidentally, would also include applying the test of whether the party who is seeking to enforce this agreement should have known or ought to have known that there was some illegality about it. So it incorporates the test that is set out in the statute, but gives a wider area of discretion to the courts. I hope therefore that the Government will consider my amendment with favour. I beg to move.
Lord Cameron of Lochbroom: Again, the noble Lord has raised a point giving more discretion to the court. I think that I would have to say that I would be cautious in perhaps going along the road that he suggests of removing the words "ought to have known" from paragraph (b), the problem being that if you have simply contained in that paragraph reference to knowledge, it may well be thought that the reference
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to imputed knowledge is not available to the court in exercising its discretion. Certainly I would say that a business which blindly shuts its eyes to the fact that the business has been introduced by someone who had no authority is, I suggest, in like case as a business which does know, and particularly when we are thinking about a remedy for investors who are affected by that particular transaction.
Certainly the indication of discretion as based upon the just and equitable basis is something which I should be very happy to look at. It perhaps narrows the point and gives the court a more obvious indication of what is being looked at in the way of exercising its discretion than does the amendment of my noble friend Lord Colville of Culross. These are all matters which I should be very happy to look at in the light of what has been said.
Lord Silkin of Dulwich: The noble and learned Lord the Lord Advocate began his remarks by saying that he would wish to be cautious about removal of the phrase, "ought to have known". I hope that he will be very cautious indeed about that. It seems to me that that would very much reduce the effectiveness of this provision. While there may well be a good case for Amendment No. 59, or something on the lines of the principle of Amendment No. 59, giving the court powers which reflect the justice of the situation, it does not seem to me at any rate that that should be confined to the region to which Amendment No. 58 would confine it—the situation where there was knowledge but not imputed knowledge.
Lord Hacking: I have heard the Committee's observations, including the observation of the noble and learned Lord, Lord Silkin. In view of the willingness of the noble and learned Lord the Lord Advocate to give consideration at least to my Amendment No. 59, I am only too happy to withdraw Amendment No. 58 and, in a moment, not to move Amendment No. 59.
Amendment, by leave, withdrawn.
[Amendment No. 59 not moved.]
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 60:
Page 4, line 31, at end insert ("and is not excluded by Part HI or IV of that Schedule.").
The noble and learned Lord said: This amendment ensures that if a person carries on business in contravention of Clause 3 but also carries on investment business which he may lawfully carry on by virtue of the exclusions in Part III and IV of Schedule 1, only those investment agreements which he has entered into unlawfully will be unenforceable. The amendment is consequential upon certain amendments made earlier in another place to Clause 1 and Schedule 1. I beg to move.
On Question, amendment agreed to.
Clause 5, as amended, agreed to.
Clause 6 [Injunctions and restitution orders]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 61:
Page 4, line 39, leave out ("or, in Scotland, an interdict").
The noble and learned Lord said: For the convenience of the Committee I shall speak also to Amendments Nos. 62, 159 and 160. These are all technical amendments which are designed to clarify certain of the provisions of the Bill which bring it into line with the terminology more commonly used in the Scottish legal system. I beg to move.
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 62:
Page 4, line 40. at end insert ("or, in Scotland, and interdict prohibiting the contravention").
On Question, amendment agreed to.
Clause 6, as amended, agreed to.
Clause 7 agreed to.
Clasue 8 [Self-regulating organisations]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 63:
Pager 6. line 21, after ("by") insert ("making and ")
The noble Lord said: I beg to move Amendment No. 63, which stands in my name on the Marshalled List. It may be for the convenience of the Committee if I speak also to Amendments Nos. 64 and 65. We are here dealing with the self-regulating organisations. These amendments are designed to elicit a response from the Minister by way of clarification. As I understand it, the self-regulating organisations will be entitled, subject to certain restrictions, to make rules as well as to enforce rules. It seems to me that that is a clarification which needs to be made in the Bill.
Then in Clause 8(3) there is the expression in brackets about,
"rules (whether or not laid down by the organisation itself)".
That seems to presuppose that the organisation may be enforcing rules which are not laid down by itself. I wonder whether that is exactly what the Government want to say—whether they wish to say that the SIB has powers under certain clauses that we shall come to later to change the rules, and therefore those rules cannot be considered as being laid down by the organisation itself; or whether they have anything else in mind that I do not know about.
My original point is that the rules of a self-regulating organisation should be laid down by the organisation itself and can be changed by a certain procedure which the Bill describes, but that the self-regulating organisation is not in a position to enforce other rules. If my understanding is wrong, I should be most grateful if the Minister could help me on that.
Amendment No. 65 again seeks to address itself to the same point: where rules may or may not be laid down by the organisation itself, so guidance may or may not be laid down by the organisation itself. Again, I should be grateful if the noble Lord the Minister could help me on whether a self-regulating organisation will be in a position to support guidance in some way laid down by somebody else. I beg to move.
Lord Lucas of Chilworth: I am grateful to the noble Lord for making it clear that he is seeking further information. Certainly we envisage that the SROs will
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make their own rules and, as he so rightly points out, there are provisions as to what those rules shall contain. We shall later discuss the SROs' rules alongside those of the head body, the SIB.
SROs will have the responsibility of enforcing their own rules, but they cannot of course enforce those rules of another organisation even if their member belongs to that other organisation. I think that was largely the point the noble Lord was seeking to elicit. Certainly the guidance that SROs are expected to give have to be supported by the rules and so in effect, although they do not have the same statutory backing that the rules have, they could or should be taken as being part of the rules.
4.30 p.m.
Lord Williams of Elvel: I wonder whether I may ask for a little more help from the noble Lord. Do I take it that the expression,
"(whether or not laid down by the organisation itself)"
might refer to the rules of the SRO which are imposed in some way by the Secretary of State or the SIB? I fully understand that, but in that case it seems to me that, by virtue of the clauses we shall come to later, they are in effect to be laid down by the organisation itself. From what the noble Lord said, it seemed to me that those words are redundant, but perhaps he can help us on that point.
Lord Lucas of Chilworth: I am sorry if I misunderstood the noble Lord. Perhaps I can make it a little clearer by saying that the noble Lord's second amendment deletes the reference in the definition of an SRO's rules and changes it to refer to rules laid down other than by the organisation itself. That reflects the fact that SROs may incorporate into their rulebooks rules made by another body, in which case of course they then enforce their own rules. Some may wish to incorporate into their rules accountancy standards or other kinds of rules. The clause, as drafted, makes clear that if they do so those standards and those rules become part of the SRO's rules for the purposes of the Bill.
They may have rules and guidance which apply only to matters not related to investment business. For example, they may provide other facilities for members and they may have rules about their use. The definition of rules and guidance in subsections (3) and (4) of Clause 8, which we shall be dealing with, restricts the definition for the purposes of the Bill to rules and guidance which are relevant to matters regulated by the Bill and not to those which are not encompassed by the Bill.
Lord Williams of Elvel: I am sorry to keep on wearying the Committee with this question. If an SRO incorporates into its rules accountancy standards or anything else, as I would understand it, those rules are laid down by that SRO. Therefore the expression,
"(whether or not laid down by the organisation itself)"
is redundant. That is the point I was trying to make. Either the rules are made by the SRO, from whatever source they come, whether it is from the Institute of Chartered Accountants or anybody else, or they are not made by them. What was worrying me was that

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the SROs, under the Bill as drafted, do have some curious power which I have seen defined to enforce rules which may be laid down by somebody else. I do not see how an SRO can have rules laid down by somebody else, unless it is by the Secretary of State or the SIB.
Lord Lucas of Chilworth: In fact, that is exactly the point. It is the rules that could be laid down by the Secretary of State or the designated agency, as, for example, in Clause 50, which we will come to, dealing with clients' money. I am very sorry that I did not make it abundantly clear.
Lord Williams of Elvel: I am now clear on what this means, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 64 and 65 not moved.]
Clause 8 agreed to.
Clause 9 [Applications for recognition]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 66:
Page 7, line 19, leave out ("or other legible form").
The noble Lord said: Again, this is an attempt to clarify what is meant by "or other legible form". I understand that the phrase occurs in a number of statutes, but is it possible that rules are made other than in writing or in a language other than English—ancient Sanskrit, for example? Can the noble Lord help me on this?
Lord Lucas of Chilworth: The point we have in mind here is that guidance may not be issued only in a written document. With modern technology, guidance may be stored on computers with the facility to call it up on a screen when it is necessary to refer to it. We did not find it very easy to find the right words to explain the concept, and perhaps the words we have chosen are not altogether satisfactory. However, I think they convey the intention clearly enough: at least I hope they do.
Lord Harmar-Nicholls: If one has in mind computers, I do not think that "legible" is the right word. I think that something a little more in keeping with what we mean by the use of a computer ought to be found if at all possible.
Lord Boyd-Carpenter: Can my noble friend say whether there is any precedent for this form of words in a statute?
Lord Lucas of Chilworth: If memory serves me right, I think we embraced this form only a few weeks ago when we were discussing the Patents, Designs and Marks Bill, because of the change in technology which was envisaged in that area. We were talking at that time about a register. The old statute implied a register which was in a book that could be looked at and photocopied. During the passage of that Bill we enlarged it so as to include a computer printout; so I think that there is already a precedent accepted.
Lord Boyd-Carpenter: If I may follow that up with my noble friend, would it exclude a document where handwriting was used—and here I must declare an interest—which is difficult to read?
Lord Silkin of Dulwich: If I may leave the area of semantics and come to the area of practicalities, I wonder why this is confined to that which in any form is legible. Why not any guidance, whether it be legible or not?
Lord Lloyd of Hampstead: I wonder whether I may suggest that the appropriate word might be "intelligible" rather than "legible".
Lord Harmar-Nicholls: Or even the word "identifiable", if it might be identified by picture, by computer or whatever it is. I do not think "legible" is the right word. Doctors would not have a chance.
Lord Lucas of Chilworth: A number of suggestions have been made. As I said, I am not sure that we actually found the right wording. I think the intention is quite clear to the Committee. Suppose I invite the Committee to accept that intention. Of course we will look to see whether we can find a better word, but I have a suspicion that at the end of the day we will find another word and then some other Member of the Committee will find that objectionable and suggest yet another one. That sort of thing frequently happens in this kind of area.
Lord Silkin of Dulwich: I wonder whether it is right that the intention is quite clear. With respect, it certainly is not clear to me. As it stands, whatever word you use it would seem to be intended to rule out guidance that is given verbally. Is that what is intended and, if so, why?
Lord Lucas of Chilworth: One would expect, because of the very nature of the arrangements one envisages for SROs, that word of mouth would not transmit easily. Mistakes are made, and if SROs are going to do their job properly one would expect them to put in some kind of documentary form or legible form which can be referred to and not easily forgotten.
Lord Boardman: At the risk of prolonging this discussion, may I suggest to my noble friend that we miss all those words out and we just have "a copy of any guidance issued", without referring to writing or "legible form"? They seem to me to be quite unnecessary.
Lord Lucas of Chilworth: I am grateful to my noble friend Lord Boardman. As I said earlier, we shall have another think about it, but I believe that the intention is quite clear.
Lord Williams of Elvel: I am most grateful to the Minister. We have had a very interesting debate. The more the debate goes on, the more matters of substance seem to arise out of what appeared originally to be an entirely semantic problem. I think there is a problem of substance as to how guidance is to be issued by SROs, and I take issue with the noble

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Lord in saying that SROs will have to put everything in writing. The whole point about practitioner-based legislation is that there is a lot of guidance given verbally, and it is right that it should be so. But on the noble Lord's assurance that he will look at the wording again, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 9 agreed to.
Clause 10 [Grant and refusal of recognition]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 67:
Page 7, line 33, leave out subsection (3).
The noble Lord said: I move this amendment simply to express a concern which a number of people have in the City of London, that they will have to belong to a great number of SROs in order to carry on the business that they carry on at present. I shall be grateful for any guidance that the Minister can give us on how many SROs there will be, and whether it will be necessary for everybody to join every one, in order to continue to do the business that they do at present. It is an area which is causing a certain amount of confusion at the moment, and any guidance that the noble Lord can give us would be welcome. I beg to move.
Lord Lucas of Chilworth: It is envisaged that there will probably be five or six SROs. This depends entirely on the range of products that each organisation is intending to cover. It may be that an SRO will deal with a very narrow band of products which do not encompass all the activities of one of its members, in which case, yes, certainly, a member may have to join more than one. It is designed in that way so that the SROs can properly enforce the area which they have chosen to represent as an organisation.
It would be quite wrong of course if the membership of one SRO which had a specific activity had the responsibility of enforcing the rules of another organisation which the original SRO's member may wish to join. It may be a little cumbersome and a little expensive, but it will certainly be necessary for some authorised persons to belong to more than one. I think it is only the conglomerates which would probably need to join more than one, or possibly three or four. The way matters are shaping up, we see that most people deal with only one kind of investment business, and therefore their activities would be looked after by the one organisation.
Lord Williams of Elvel: I am grateful to the noble Lord. In moving this amendment I ought, as it were, to have redeclared the interest I declared on Second Reading, that I am on the national board of a Spanish bank. That particular Spanish bank has one branch in London, and apparently finds itself having to join four SROs for the different activities in which it engages. That is the point which I wish to bring to the noble Lord's attention. It seemed to be slightly unreason-able. But having said that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 68:
Page 7, line 37, at end insert ("or an exempted person in respect of that business.").
The noble Lord said: This amendment corrects an oversight. A member of a recognised self-regulating organisation may also be an exempted person for certain types of business. This amendment provides that he is not to be precluded from carrying on the business in respect of which he is exempt by the organisation's "scope" rule. I beg to move.
On Question, amendment agreed to.
4.45 p.m.
Lord Ezra Lord Ezra moved Amendment No. 68A:
Page 7, line 40 after ("regard") insert ("to the desirability of restricting the number of recognised self-regulating organisations and").
The noble Lord said: I beg to move this amendment, which links up with the point raised by the noble Lord, Lord Williams of Elvel, in moving Amendment No. 67. It is obviously desirable that the number of SROs should be limited to the minimum necessary. It is, after all, one of the objectives of this Bill that, while providing proper safeguards for investors, there should not be undue encumbrance on practitioners. It is known that the SIB, which will eventually, presumably, be taking on these responsibilities, is seeking to reduce the number of SROs by creating mergers. Six have been talked about, but there may be five or even four. I should have thought it would help to achieve that desirable objective if this wording were introduced into this clause. I beg to move.
Lord Lucas of Chilworth: I readily accept—and I have sought to demonstrate our acceptance—the desirability of keeping the number of SROs to the minimum, but it has to be consistent with the effective regulation of the whole range of investment business. The purpose of Clause 10(4) is to allow the Secretary of State, or the designated agency, to refuse recognition on the grounds that there is no need for it, having regard to the existence of other organisations which are, or are likely to be, recognised. We have always expected that one of the factors to be taken into account is the desirability of keeping the numbers down, though there will also be other factors.
For example, it may be that in a particular area regulation would be more effective if it were divided among two organisations rather than one, or it could be that tidier demarcations between the areas regulated could be achieved if three organisations rather than two were recognised. I would be hesitant about letting the desirability of restricting numbers, as such, be the basis of the recognition decision. We believe that the existing provision, enabling recognition to be refused on the grounds that it is not necessary, is sufficiently flexible to allow due weight to be attached to the considerations to which the noble Lord, Lord Ezra, has drawn our attention, as well as other considerations of the type to which I have referred. I hope that that explanation is sufficiently wide to explain why I am going to suggest to the noble Lord that his amendment is not necessary and to invite him to withdraw it.
Lord Ezra: I am grateful to the noble Lord for saying that he agrees with the principle underlying this amendment. It may well be that it is in the wrong place. It may even be that it does not need to be explicitly stated. But I should have thought it was in the interests of all concerned that the number of SROs should be kept down to the minimum. Having aired this point, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 10, as amended, agreed to.
Schedule 2 [Requirements for recognition of self-regulating organisation]:
Viscount Colville of Culross Viscount Colville of Culross moved Amendment No. 69:
Page 154, line 8, leave out ("to") and insert ("which may").
The noble Viscount said: I see that this amendment has been grouped with Amendments Nos. 70 and 71. They are actually slightly separate points; but if it is for the convenience of the Committee, I shall deal with them together, provided that my noble friend gives me two answers because there are two points. The first one is essentially a matter of drafting. It relates to paragraph 1(3) of the second schedule, and the matters that are to be taken or should be taken into account by an SRO when it is making its own rules. The point is very simple. In Clause 26, the Secretary of State, or I suppose the SIB, is given a collection of matters that have to be looked at. One of them, in subsection (3), is the question of people who will be employed by or associated with the applicant for the necessary authorisation. That is absolutely right and I am not in any way trying to alter the Government's intention in this or in either of my other two amendments.
The difficulty comes in the wording of the schedule. In Clause 26, the Secretary of State is allowed discretion as to whether or not to take the point concerned into account. However, if one examines Schedule 2, in paragraph 1(3) it appears that the self-regulating organisation must take it into account because of the phrase that is used. I do not suppose that such is intended. I imagine that the same discretion exists as with the SIB. However, if that is so, it ought to be spelt out. There will be circumstances when, for instance, the SIB could not possibly know about the persons who will be employed by or associated with the business.
My second point concerns, on the face of it, a matter of drafting. However, it is important. In paragraph 3 of Schedule 2, the SRO must provide in its rules for protection,
"at least equivalent to that afforded",
essentially, to those given under the SIB rules. However, the SIB will not be making rules in all the areas that SROs will be covering in their own rules. What is more, the SIB may not be sufficiently quick to spot changes in rules that the SROs themselves would like to make to keep up with the way in which business develops.
If one uses the word "equivalent" it presumes that there is in the first place an SIB rule to which the SRO's rules will be equivalent. I do not believe the Government intend that to be so. I believe the Government mean that the SROs should have rules
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that are no less advantageous but that they do not require something similar in the SIB's rules that can then be photocopied, as it were, by the SROs.
The two points to be considered are, first, that if the SIB does not make rules that are specifically required for the SRO's areas of activity, then it will not be possible to have anything that is equivalent. Secondly, there is the matter of change. I wish in no way to reduce the protection that is being given by the Bill; I simply want to make it more workable and flexible. I hope that my noble friend will be able to help in respect of both points. I beg to move.
Lord Lucas of Chilworth: I am grateful to my noble friend Lord Colville for grouping his amendments. He asked me particularly to give two answers. I am delighted to do so. The first answer is yes, and the second answer is no. Perhaps I could be a little more helpful. What I mean is that, yes, I am happy to accept my noble friend's first amendment because it really is a helpful clarification, and I am grateful to him for it.
However, as to my noble friend's second and third amendments, I do not believe that they would have any substantive effect. The test provided for in paragraph 2(1) of Schedule 2 is that the recognised self-regulating organisation's rules must provide at least the standard of investor protection that is provided by the rules made by the Secretary of State or by the probable designated agency. In other words, the standard of investor protection provided by the rules must be as high as or higher than that provided under the rules of the Secretary of State or the designated agency. As I understand it, that is also the intention of my noble friend's second amendment, and I hope he will agree on reflection that his amendment is not really necessary.
The rules with which the organisation's rules will be compared will be corresponding ones made under Chapter V—that is, the rules concerning the kind of investment business with which the organisation is concerned. If the Chapter V rules make different provisions for different cases—for example, by making less onerous provisions for transactions with a sophisticated investor—then so may the organisation's rules do the same. Again, as I understand the matter, that is the intention underlying my noble friend's third amendment.
I do not believe that there is any substantive difference between us. My noble friend will recall that some little while ago, he discussed with me the exact meaning of the word "equivalent" or "equivalence". I draw his attention in particular to paragraph 3(1) of Schedule 2, at line 23 on page 154 of the Bill, which makes mention of
"investors protection at least equivalent to that afforded".
That implies that there is movement; that there is not a totality of equivalence but that the protection must be no less than that afforded under Chapter V and may be higher. It must be at least equivalent to Chapter V protection. I hope that that explanation is satisfactory to my noble friend, and that he will find it sufficiently so not to move his two other amendments.
Lord Bruce of Donington: The noble Viscount has afforded the Committee an opportunity of discussing paragraph 1(3) of Schedule 2, which states that:

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"The matters to be taken into account under the rules in determining whether a person is a fit and proper person must include those that the Secretary of State may take into account under section 26 above".
The noble Lord will be aware that I have expressed some anxiety in your Lordships' House on occasion about the distinct possibility, amounting to a probability, that people will seek membership of SROs, or will seek the authorisation of the Secretary of State—and more likely the former—who are themselves resident outside this country. They may seek, possibly under a respectable guise or by reason of a shareholding in a concern in this country, to apply for authorisation, albeit indirectly.
The question I have to ask the Minister is this: what kind of liaison is being established between the Secretary of State and the SIB, and through the SIB to the SROs, to determine the extent of the matters that are to be taken into account? The Secretary of State normally has far more resources to ascertain the authenticity and desirability of aliens seeking to come to this country under the cover of respectable organisations than have either the SIB or the SROs. To what extent will the position be safeguarded? To what extent will information be exchanged concerning matters of that kind?
Lord Lucas of Chilworth: I recall the noble Lord, Lord Bruce, raising this point by way of a Parliamentary Question a few weeks ago. I said at that time that every person would have to be authorised. A person may be in a recognised professional body today, which might offer automaticity. Such a person may apply to a self-regulating organisation on his own account, or he may seek direct authorisation. Whichever route the person takes, and even if he is an existing member of, for example, a recognised professional body, it will be for that recognised professional body to satisfy itself that newcomers, and all those in existing membership, have the right qualities and qualifications.
Of course there will be a day-to-day relationship between the designated authority and the SROs. The relationship of the Secretary of State's department and my department would not be quite so close, although from time to time it would be absolutely necessary for the department to engage in consultation with the designated agency. So there is a sufficent intention—it is certainly not set down in the Bill that they shall meet at certain prescribed times—to ensure that the rules are adequate.
The Secretary of State has an overriding discretion with regard to the designated agency's rules, and the designated agency's rules will have to cover all the particular businesses covered by SROs, otherwise no comparision could be made between the SRO's rules and the designated agency's rules: in other words, the head rules as such. The SRO's rules must provide for any relevant matter relating to any of the persons specified in Clause 26(3). They all have to be taken into account.
In Schedule 2, paragraph 7, and Schedule 5, paragraph 5, and others, there is a provision for the regulatory bodies to co-operate one with another and also for developing contacts with overseas regulators for an exchange of information.
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I genuinely understand what lies behind the question put by the noble Lord, Lord Bruce of Donington. It goes back a long way and I believe that it is a very genuine concern. I should like the noble Lord to consider tomorrow exactly what I have said. If he has a particular example rolling in the back of his mind, I should be grateful if he would instance it to me. I can then look at it and give him a categorical answer. I do not think that is possible during the course of our Committee proceedings.
5.p.m.
Viscount Colville of Culross: As regards Amendment No. 69, it is enormously agreeable to find a form of words that appeals to my noble friend. I hope that they will now go into the Bill.
As to the other two amendments, I hope my noble friend can help me further. I do not think it matters whether we have the word "equivalent" or some other adjective in the Bill provided his department acts in a sensible way. My noble friend will be able to tell the Committee about this because it is a matter of administration, not law. Is my noble friend's department going to recognise SROs who include in their rules matters that are not encompassed by what the SIB has put down?
Is my noble friend's department going to continue the recognition of an SRO, and not revoke it under Clause 11, if, because the type of business or the way the business is carried out is changed, the SRO includes in new rules things that the SIB has not got round to? That is the substance of the matter. Nobody is trying to do anything to put an obstacle in the way of protection for investors. All that is being thought about at the moment is the way that the schedule is drafted which indicates that a blueprint will be necessary from the SIB before the SRO can make a rule or change its rules.
If the department is not going to pay any attention to that and is going to allow the SROs to make sensible rules and amendments to their rules to deal with exigencies and circumstances—and I shall continue for a moment so that my noble friend can read the note just handed to him—there is no problem whatever in having the word "equivalent". My objective is to make it sufficiently flexible to keep up, in the case of any particular SRO, with what happens in the business world. If my noble friend can give an assurance about that, it is perfectly acceptable to leave the schedule as it is.
Lord Lucas of Chilworth: The SROs can alter their own rules, and provided any alteration makes a provision over and above the designated agency's rules then of course everything is perfectly all right. It is for the SIB, as the regulatory authority, to advise the Secretary of State of the acceptance of a self-regulatory organisation. It is not for the Secretary of State so to do. It will be for the SRO to satisfy the SIB in the event of there being no SIB rule to which the SRO's new rule can be compared. It will not be able to bring it into force until it has the necessary authority, which may well mean the SIB having to change its rules.
We come a little later—I cannot recall the clause—to the challenge which can be made with regard to the rule-making procedures. I think that

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might be the better place to discuss what happens if the SIB does not accept an SRO rule. I hope that is helpful.
Viscount Colville of Culross: I suspect that it is not, but perhaps we can come back to it later. I think that my noble friend has confirmed the fears that if an SRO wishes to change its rules to meet some new facet of business and the SIB has not got round to considering it, the SRO will not be able to do it under the way the schedule is amended until the SIB itself has been moved into action to take some equivalent activity. That cannot be sensible because if the SRO is going to be responsible for the rules which deal with the sort of investment business within its own sphere, it is going to be much better equipped to bring up to date the changes that need to be made. It should not have to wait for the SIB to get round to doing something similar. It ought to be able to do it without being blocked.
The purpose is to provide protection for the investor. What I think my noble friend is saying is that the SROs will not be able to provide adequate protection under their own rules until the SIB has made an equivalent change. If that is wrong, it is extremely important that that should be said now. I see my noble friend is shaking his head. Perhaps he would like another opportunity to clarify the matter.
Lord Lucas of Chilworth: I apologise to the Committee if I have not made myself clear—and it is obvious that I have not done so. Provided an SRO makes rules in addition to and over and above the basic ones contained in the SIB rules, it can do so without let or hindrance. Therefore, the SRO's have the flexibility which I think my noble friend is seeking.
Viscount Colville of Culross: I am grateful to my noble friend. That explanation is very much better and clearer, and I should like to read the whole passage to see whether this matter is taken up under the Clause referred to. Meanwhile, since we are dealing with Amendment No. 69, I beg to move.
On Question, amendment agreed to.
[Amendments Nos. 70 and 71 not moved.]
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 72:
Page 154, line 42, at end insert ("in respect of investment business of a kind regulated by the organisation.").
The noble Lord said: For the convenience of the Committee, I shall speak at the same time to Amendments Nos. 75, 105, 251 and 267. I shall refer also to Amendments Nos. 73, 74 and 76 which also apply to Schedule 2.
This group of amendments tidies up some of the requirements for recognition or designation under the Bill. The first amendment clarifies the scope of paragraph 4(1) of Schedule 2. It makes clear that while a recognised self-regulating organisation has to monitor and enforce compliance with directly applicable rules which apply when a member is carrying on investment business of a kind with which the organisation is concerned, it does not have to monitor and enforce compliance with rules to which a member is subject simply because he is also directly authorised.
The other Government amendments all concern the bodies to whom monitoring functions can be delegated by the bodies regulating investment business under the Bill. At present these bodies are specified in lists included in the relevant schedules, but it is already becoming clear that it may be desirable for monitoring to be delegated to persons who are not on the various lists; for example, in the case of a foreign business it would be its own domestic regulator. It may well be that other bodies will emerge in the course of time who are capable of performing this monitoring function. It therefore seems preferable to delete the lists and to permit the delegation of the monitoring function to any person or any body who is able and willing to perform it. Of course, it will be for the Secretary of State or the designated agency to be quite satisfied that that person or that body in question is in fact able and willing and that the arrangements are adequate for effective monitoring. With that explanation I hope that the Committee will be able to accept these amendments. I beg to move.
Lord Ezra: Included in the grouping which the noble Lord mentioned are three amendments in the names of my noble friend Lord Taylor of Gryfe and myself; namely, Amendments Nos. 73, 74 and 76. I believe that they are all in line with what the noble Lord has just told us.
The intention of Amendments Nos. 73 and 74 is simply to make sure that the enforcement aspect is not lost sight of in sub-paragraph (2) at the bottom of page 154. The purpose of Amendment No. 76 is to make it absolutely clear that a separate monitoring and enforcement body could be established if it were thought fit to carry out these functions. That is not in fact stated in sub-paragraph (3) at the top of page 155. We believe that this amendment will be entirely in line with what the noble Lord has just said.
Lord Lucas of Chilworth: When I said that I intended to speak to these amendments I rather wanted to suggest to the Committee that we resist these three amendments, but I thought that it might be preferable for the noble Lord to explain what he had in mind before I over-guessed him perhaps. These three amendments would permit the enforcement as well as the monitoring function of recognised self-regulating organisations to be delegated to another body. I can see the force of the argument that these SROs, in the absence of any other pressures, might in some cases at least tend to be too lenient toward their own members in the interests of good relations. But in fact the Bill contains safeguards which are designed to prevent this. For instance, the governing body will have to include a significant independent element if it is to satisfy the requirements of paragraph 5 of Schedule 2. That in itself should help to prevent any drift toward leniency.
Of course, behind all this will be the powers of the agency to withdraw recognition fully under Clause 11, partly under Clause 13, or indeed to seek a compliance order from the courts under Clause 12. We hope and, frankly, expect that these powers will rarely, if ever, be used, but they are there of course if they are needed.
There is a need to avoid overlapping supervision in appropriate cases. That is why the Bill provides for monitoring to be undertaken on behalf of a self-

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regulating organisation by another body. This would allow monitoring to be delegated to a joint body of the kind proposed by the noble Lord. But I believe that enforcement and discipline must remain the responsibility of the SRO itself. Were it otherwise, both the authority of the organisation over its members and its responsibility or indeed its ability to uphold standards of investor protection in our view would be quite seriously weakened. I suggest to the Committee that the effect of the noble Lord's proposals would be the very opposite of what he is seeking to achieve.
5.15 p.m.
Lord Ezra: In order to avoid any confusion in my mind, may I take it in regard to Amendment No. 76 that if the word "enforcement" were left out, the noble Lord will accept it? Where it seems to me that sub-paragraph (3) is deficient is that it does not give a sufficiently wide range of options.
Sub-paragraph (2) states that:
"The arrangements for monitoring may make provision for that function to be performed on behalf of the organisation … by any such body or person as is mentioned in sub-paragraph (3) below".
But sub-paragraph (3) does not suggest an independent body, which is obviously one option.
Lord Lucas of Chilworth: I can respond to the noble Lord's invitation only perhaps by saying that I am quite prepared to have a look at the suggestion. I should like to do this with more advice to hand than I have this afternoon, though I do not believe that this amendment is at all necessary because anybody can now carry out this function. However, I shall of course have a look at it with the best will in the world.
Lord Bruce of Donington: I think that the noble Lord has spoken to Amendment No. 75. The noble Lord will be aware that his amendment, Amendment No. 75, is quite sweeping in the sense that the original paragraph 4(2) read:
"The arrangements for monitoring may make provision for that function to be performed on behalf of the organisation (and without affecting its responsibility) by any such body or person as is mentioned in sub-paragraph (3) below who is able and willing to perform it".
The noble Lord will observe that at sub-paragraph (3) these bodies are listed in some detail. I shall not weary the Committee by repeating them. The noble Lord is moving for the deletion of all those particulars relating to the Bank of England and so on and wants simply to put in its place:
"other body or person who is able and willing to perform it".
May we have some indication as to the noble Lord's thinking behind that proposal and why he now finds it necessary to make the definition more general and much wider?
Lord Lucas of Chilworth: Frankly, I do not think I can go any further than my original remarks. I said then that it had become very clear to us that it would be very difficult for monitoring to be delegated to persons not on a list; for example, in the case of a foreign business. Because things are changing so fast, it seems totally undesirable to have a firm list which would then have to be altered. It is far better in the case
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which I instanced of a foreign business to look for its domestic regulator to be the body. Other bodies could quite easily emerge in the course of time. That is exactly what I said. So long as they can demonstrate a capability of performance, they should be allowed to get on with it.
The safeguard is that the monitoring has to be effective. Even if that function were delegated as a condition for recognition, the designated agency would have to be totally satisfied that the SRO's arrangements for monitoring, as it has now been sub-contracted, are still effective.
I do not think that I can add any more. This is only an expansion of what I said at the outset. I do not think that the noble Lord needs to fear that any authority will be lost by a sub-contractor organisation. It falls back at the end of the day on the SRO to ensure that the monitoring is effective.
On Question, amendment agreed to.
[Amendments Nos. 73 and 74 not moved.]
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 75:
Page 154, line 45, leave out from ("any") to end of line 8 on page 155 and insert ("other body or person who is able and willing to perform it").
On Question, amendment agreed to.
Lord Ezra Lord Ezra had given notice of his intention to move Amendment No. 76:
Page 155, line 3, after ("are") insert ("a monitoring and enforce-ment body established and operated only for the purposes of monitoring and enforcing functions delegated to it such as are mentioned in sub-paragraph (2) above, ").
The noble Lord said: On the understanding that the noble Lord will have a look at the point raised, I shall not move the amendment.
[Amendment No. 76 not moved. ]
Viscount Chandos Viscount Chandos moved Amendment No. 77:
Page 155, line 19, after ("unless") insert ("at least one third of).
The noble Viscount said: With the leave of the Committee, I propose to speak also to Amendment No. 78. I hope that the Committee will find these two brief amendments simple and self-explanatory. I think that the presence of lay members on SRO governing bodies is important and can be seen as a central part of the principles of self-regulation on which the Bill is founded. If we go back to the agreement in 1983 between the then Secretary of State for Trade and Industry and the chairman of the Stock Exchange, one of the three specific concessions agreed by the Stock Exchange at that point was the appointment of lay members of the Stock Exchange Council.
In view of the importance of that principle, my noble friends and I find the phrasing in the Bill, "a sufficient number", a little vague and perhaps potentially unhelpful to SROs in determining the composition of their governing bodies. It is also a central point for the public in establishing their confidence in the SROs.
A ratio of 2:1 between professionals and lay members seems to be on a rule-of-thumb basis about right, although there is no magic in that proportion. This is an important point and I think that the Bill

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would benefit from the specific requirement that at least one-third of the members be effectively lay members and not involved directly in the business which the SRO is set up to monitor. I beg to move.
Lord Graham of Edmonton: I had intended to raise this matter on the Question whether Schedule 2 should be agreed to, but perhaps when the Minister deals with the amendment he can tell the Committee where the Government see a place for those employed in the industry on the governing body. Paragraph 5 of the schedule talks about:
"The arrangements of the organisation with respect to the appointment, removal from office and functions of the persons responsible".
The noble Viscount talks about what he considers to be a proper balance of the interests affected by the work of and the conduct of business rules appertaining to the SRO. Those employed in the business are as entitled as any other element affected by the business to be heard or at least to have their opinions considered.
When the Minister deals with the question of the balance on the governing body and whose interests should be represented, I hope that he can deal with that point also, rather than taking up time with it on the Question whether the schedule should be agreed to. Hundreds of thousands of individuals in financial services may be affected. I have in mind not merely insurance agents or members of bona fide trade unions. They may be members of other bodies or they may be working as individuals. The powers that be, company directors and senior officials, may well be able to look after themselves, but the employees are entitled to access to the governing body in order to influence particularly the conduct of business rules. I hope that the Minister can deal with that when replying to the amendment.
Lord Lucas of Chilworth: I accept fully what the noble Viscount and the noble Lord say about the importance of having effective independent representation on the governing bodies of SROs to help to prevent them from becoming cosy clubs (which I think is an expression that has crept into our discussions) and to ensure that proper account is taken of the interests of users and of the public. Paragraph 5 of Schedule 2 seeks to achieve that objective by making it clear that effective independent representation will be required, while leaving it open to individual SROs to decide the detailed composition of their governing bodies.
The amendment seeks to impose a precise numerical requirement that the independent members—the noble Viscount used the term "lay members", but I am sure that we mean the same thing—should constitute a third of the membership of the governing body or any other body which exercised effective control. He said that there was no magic about the proportion of one-third. If he will allow me to say so, I could not have put it better.
Lord Grimond: The amendment says "at least one-third". It is not precise.
5.30 p.m.
Lord Lucas of Chilworth: The noble Lord is right. I was merely quoting the noble Viscount, who said that there was no great magic about a third. I agree. As a general statement, I would not differ from the proposi-tion that something like a third of the members should be independent. The SIB has said that, if powers to recognise SROs are transferred to it, it will expect them to have a number of independent individuals of high standing in appropriate positions on their governing bodies. It has explained that it is thinking in terms of about one-quarter to one-third of the members of the governing body being independent of the organisation. I welcome that statement. I think that the Committee will probably welcome it also.
The Bill does not impose specific numerical requirements because it seems to us right to leave it to organisations to decide on the precise composition of their body in the light of particular circumstances and needs, provided always of course that the basic requirement of securing a proper balance is met.
A specific requirement for a stated percentage of the governing body to represent particular interests would be undesirably rigid. It would involve deciding into which category an individual fell. For example, if one-third of the governing body had to be made up of independents how would an accountant who did some work for members but who was otherwise independent be regarded? What about the non-executive director of a member company who had been appointed to that company because of his wide knowledge and independent judgment? Would he qualify as an independent member or would he have to be grouped with the members' representatives, even if not elected by them as one of their representatives?
We must avoid the situation in which somebody with no relevant experience may be appointed merely to make up the number of independents or satisfy a certain category of independents. We think that the quality of the people appointed is rather more important than the precise numbers.
The provisions as they stand in the Bill avoid that problem by requiring that there is a sufficient number of independent persons. Even if there is doubt about how an individual may be classified, the Secretary of State or the designated agency would be able to look at the constitution of the governing body in the round when determining whether there was a sufficient number of independents to secure the proper balance for which we are all looking. That is the balance between the interests of the organisation or its members and the interests of the public. I believe that that is a preferable approach.
I am grateful to the noble Lord, Lord Graham. He made the point that the governing body should include employees' representatives. SROs are concerned with the interests of investors in those investors' dealings with investment businesses, not necessarily—I do not wish to be too harsh about this—with the relations between employers and their employees. There is a fundamental difference. I do not think therefore that it would be appropriate to require employee representation on governing bodies. That is the difficulty one has when deciding into which category a person of sufficient high standing, knowledge and so on should

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fall. I do no believe that there is any suggestion of discrimination. Again, I come back to the generality that we have left the SROs to determine their own governing body within a rather wider framework.
Lord Graham of Edmonton: Good industrial relations figure more prominently now than ever before. There is a need for those employed in a business to be satisfied about the conduct of that business by those who have executive authority who should take into account the needs and views of those employed in the business. I merely want to leave that on the record for those who will study with care what the Minister and other Members of the Committee have said. I believe a case can be made out for that. We are looking for individuals of high standing and ability. Many employees of a company or business have been employed in it for many years. Many of those serving in the higher echelons of companies may well have served for a short time only. They may be clever and able and they will certainly be able to make a contribution.
I merely wish to leave on the record the fact that when SROs meet, their members should pay due regard to the fact that good employee relations are better obtained if employees consider that their interests are taken into account.
Lord O'Brien of Lothbury: I hope that it is not out of order for me to intervene on what the noble Lord, Lord Graham, has said. From my long experience in the City, I have come to the conclusion that industrial relations in that part of our economy are in a far healthier state than those in any other part. Trade union intervention has been small. I do not think that there is any case for having trade union or employee representation on a body that is designed for a specific purpose. It should fulfil that purpose, and to do so it does not need representatives; it needs effective executives.
Lord Boyd-Carpenter: I agree wholly with what has just been said about trade union and employee representation, but I am less happy about the use of the word "sufficient". I ask my noble friend who is about to reply whether he will say: sufficient for what? If one is laying down something in a statute which the courts may have to consider, surely the courts should be given some guidance as to what is the purpose, sufficiency for which in numbers is required by the clause. It is not clear to me.
Lord Lucas of Chilworth: Before the noble Viscount whose amendments we are discussing replies, would it be helpful if I responded to the points which have been put to me? I understand what the noble Lord, Lord Graham, wishes to get on the record. Equally, I appreciate what the noble Lord, Lord O'Brien, had to say. I do not think that there is any difference. In the Bill, we are not seeking, in any shape or form, to introduce any point about industrial relations. I think that the noble Lord wanted to make the point so that SROs and others can take note of what he feels about the matter. There is no doubt that this little debate on that point will bring it to their attention without in any way upsetting the position that the noble Lord, Lord O'Brien, puts to us.
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My noble friend Lord Boyd-Carpenter asked, as he so frequently does, a blunt question about "sufficient". It is a matter of its being sufficient to secure a proper balance between the interests of the organisation or its members and the interests of the public. It is therefore for the SROs, with guidance from the SIBs, to determine where that balance is to be struck. It could be different for different SROs. That is why 1 have suggested to the noble Viscount that we should not be specific about numbers.
Lord Silkin of Dulwich: The Minister has clearly and admirably defined what is meant by "sufficient". Might not words similar to those which he has used be inserted into the schedule at the next stage of the Bill?
Viscount Chandos: I should like to thank the noble Lord, Lord Lucas, for his response, though there are still some aspects of the matter which concern me. I shall make a few comments on the intervention of the noble Lord, Lord Graham. In this case, there is a danger of trying to kill two birds with one stone and to use the Bill to ensure and safeguard the position of employees in the financial services industry.
However, there is, I believe, still something extremely useful that we can consider arising from the comments of the noble Lord, Lord Graham. It is the composition of the governing bodies relative to the seniority of the nominees from member companies. In a very complex and fast-changing industry, there is often a deeper understanding of some of the problems at a relatively junior level within an organisation. Many industry associations and working parties, looking at the problems emerging in the market, actually comprise people who are not all that senior in the organisations in which they work. This is a matter that could fairly be borne in mind.
I was concerned by what the noble Lord, Lord Lucas, said. It seemed to me that in trying to get away from the cosy club syndrome—that was, I think, his phrase—the example that he gave of whether a non-executive director of a member firm was really independent or not seems potentially to raise valid concerns on the part of the public as to whether the independent representation on the SRO's governing body is really sufficient to ensure a proper balance. I accept that the more precisely one defines a minimum representation of independent members of the governing body, the more precisely one has to define who is independent. We have to face the fact, however, that in very complex markets a self-regulatory organisation, with a majority of members who come from the industry, will, if given the chance, limit the number of independent members because it will make life easier. It will be able to discuss the problems in shorthand without going through the laborious process of explaining some of the problems and some of the market practices to people who are genuinely independent and inexperienced in those markets. It is for that sort of reason that I am concerned that the general phrase of a sufficient number of independent members to ensure proper balance is not really helpful to the SROs' governing bodies in resolving conflict between an efficient and smooth-running governing body and one that has adequate representation of independent members.

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I was encouraged, however, to be reminded of the SIB's guidelines on minimum representation of between a quarter and a third. That, if anything, reinforces my view that the Bill should include a minimum requirement of, say, 25 per cent. rather than one-third. I wonder, in the light of those comments, whether the noble Lord, Lord Lucas, has anything to add.
Lord Lucas of Chilworth: The only addition that I can offer the Committee is to reiterate that it has always been the intention that governing bodies should include a significant independent element. Frankly, we believed that this was implicit in paragraph 5(1). At Committee stage in another place a large number of amendments was proposed, all seeking to set a precise formula for the constitution and all including an explicit reference to independent members. In response to pressure on this point we inserted paragraph 5(2) which, we believed, brought out much more explicitly the requirement for independent members.
I suggested in my earlier remarks why we wanted to resist precise numbers. I have to tell the noble Viscount that I now invite the Committee to reject his amendment for the reasons I have given. Frankly, we do not wish to see any precise number, whether given in fractional terms or in percentage terms. We do not believe that this would serve the interests of the investors, the members, the RSROs and all the bodies to which I have referred.
Viscount Chandos: In the hope that the SIB success-fully enforces the guidelines mentioned by the noble Lord, Lord Lucas, and despite maintaining some reservations, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 78 not moved.]
Schedule 2, as amended, agreed to.
5.45 p.m.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 79:
After Schedule 2, insert the following new schedule:

SCHEDULE
("REQUIREMENTS FOR RECOGNITION OF PROFESSIONAL BODY
Statutory status
1. The body must:—

(a) regulate the practice of a profession in the exercise of statutory powers; or

(b) be recognised (otherwise than under this Act) for a statutory purpose by a Minister of the Crown or by, or by the head of, a Northern Ireland department; or

(c) be specified in a provision contained in or made under an enactment as a body whose members are qualified to exercise functions or hold offices specified in that provision.

Certification
2.— (1) The body must have rules, practices and arrangements for securing that no person can be certified by the body for the purposes of Part I of this Act unless the following conditions are satisfied.

(2) The certified person must be either—

(a) an individual who is a member of the body; or

(b) a person managed and controlled by one or more individuals each of whom is a member of a recognised professional body and at least one of whom is a member of the certifying body.

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(3) Where the certified person is an individual his main business must be the practice of the profession regulated by the certifying body and he must be practising that profession otherwise than in partnership; and where the certified person is not an individual that person's main business must be the practice of the profession or professions regulated by the recognised professional body or bodies of which the individual or individuals mentioned in subparagraph (2)(b) above are members.

Safeguards for investors
3. The body must have rules regulating the carrying on of investment business by persons certified by it; and those rules must in respect of investment business of any kind regulated by them afford to investors protection at least equivalent to that afforded in respect of investment business of that kind by the rules and regulations for the time being in force under Chapter V of Part I of this Act.
Monitoring and enforcement
4.—(1) The body must have adequate arrangements and resources for the effective monitoring of the continued compliance by persons certified by it with the conditions mentioned in paragraph 2 above and rules, practices and arrangements for the withdrawal or suspension of certification (subject to appropriate transitional provisions) in the event of any of those conditions ceasing to be satisfied.
(2) The body must have adequate arrangements and resources for the effective monitoring and enforcement of compliance by persons certified by it with the rules of the body relating to the carrying on of investment business and with any rules or regulations to which those persons are subject under Chapter V of Part I of this Act in respect of business of a kind regulated by the body.
(3) The arrangements for enforcement must include provision for the withdrawal or suspension of certification and may include provision for disciplining members of the body who manage or control a certified person.
(4) The arrangements for enforcement must be such as to secure a proper balance between the interests of persons certified by the body and the interests of the public; and the arrangements shall not be regarded as satisfying that requirement unless the persons responsible for enforcement include a sufficient number of persons who are independent of the body and its members and of persons certified by it.
(5) The arrangements for monitoring may make provision for that function to be performed on behalf of the body (and without affecting its responsibility) by any other body or person who is able and willing to perform it.
Investigation of complaints
5. The body must have effective arrangements for the investigation of complaints relating to—

(a) the carrying on by persons certified by it of investment business in respect of which they are subject to its rules; and

(b) its regulation of investment business.

Promotion and maintenance of standards
6. The body must be able and willing to promote and maintain high standards of integrity and fair dealing in the carrying on of investment business and to co-operate, by the sharing of information and otherwise, with the Secretary of State and any other authority, body or person having responsibility for the supervision or regulation of investment business or other financial services.").
The noble and learned Lord said: In speaking to this amendment, I should like, with the leave of the Committee, to speak also to amendments Nos. 84, 84A, 86 to 92, 104, 128, 139, 141, 144, 145, 148, 163, 164, 171, 174, 219, 226 to 229, 232, 233, 238, 245, 340, 346 to 348, 354 to 356, 361, 363 to 368, 382, 385 to 387, 389, and 392 to 400.
I wish that I could be as brief in what I have to say, but it would be helpful, I believe, to give some background to the overall purpose of the amendments. The Government recognise that a large number of professional people—solicitors, accountants, surveyors and so on—engage in investment business incidentally to the practice of their professions.

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Indeed, in some cases, the investment business that they carry on has come to be regarded as an ancillary service that someone practising the profession in question is widely expected to provide. Clearly, there has to be a system of regulation for investment business carried on in this way. But it did not seem to us necessary that many thousands of professionals should be effectively forced into joining recognised self-regulating organisations if other arrangements could be equally effective. In particular, it seems sensible to build on the professional monitoring and disciplinary arrangements that the main professional bodies already have if this could provide adequate investor protection. That principle underlay our original proposals and indeed has not changed.
Clauses 15 and 16 as originally drafted provided for the authorisation of individual members of recognised professional bodies who were practising their profession on their own account or in partnership. This was because, at present, membership of such bodies is generally confined to individuals and the bodies' disciplinary sanctions are generally available only against individual members. However, it has been suggested that it would be desirable to allow in the Bill for the authorisation of other forms of practice, particularly corporate practices. The Royal Institute of Chartered Surveyors already allows its members to practise in corporate form. The Committee will be well aware that there are similar developments under way in other professional bodies. The Government accept that it would not be desirable to stand in the way of such developments. The first two new clauses, Amendments Nos. 84 and 84A, allow authorisation to be conferred on corporate practices as well as partner-ships and individuals practising on their own account. This apparently simple change—
Lord Bruce of Donington: The noble and learned Lord referred to the first of the two new clauses and mentioned Amendment No. 84. Is he dealing, too, with Amendment No. 79 to which I understand he is speaking?
Lord Cameron of Lochbroom: I think that Amendment No. 79 is a schedule. It is unfortunate that on the Marshalled List the schedule comes before the clauses. I am very grateful to the noble Lord.
The first two new clauses allow authorisation to be conferred on corporate practices as well as on partner-ships and individuals. This apparently simple change necessitates a large number of amendments to take account of the fact that the firm certified by a recognised professional body may not itself be a member of the body, although it must be subject to the body's rules.
The second purpose of the amendments is to clarify and extend the requirements for recognition. Some critics have suggested that the special regime for professional bodies will be what is sometimes termed a "soft option". We have always made clear that that was not our intention. The Committee will recognise that the new schedule—which is the amendment to which I am immediately speaking—includes many requirements which are derived from the correspond-ing provisions of Schedule 2 for recognised self-
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regulating organisations. I particularly should like to draw the Committee's attention to paragraph 3. It is there made clear that the investment business rules of the body must satisfy the same equivalence test as the rules of recognised self-regulating organisations. I also draw attention to paragraph 4 which sets out the requirement for compliance of the rules to be effectively maintained and enforced.
The third main change is introduced by the third new clause, which is Amendment No. 88. That gives the Secretary of State or the designated agency an intermediate sanction, short of revocation under Clause 19, against a recognised body which fails to comply with a requirement for recognition or, indeed, with any obligation, such as an obligation to provide information to which it is subject by virtue of the Bill. The sanction is a powerful one. If a recognised body were to disregard an order of the court, it would be in contempt and liable to punishment accordingly.
It will also not have escaped the Committee's attention that while there are close similarities between the provisions relating to recognised professional bodies and those for recognised self-regulating organisations, there are two major provisions relating to the latter which have no parallel for recognised professional bodies. These are the provisions in Clause 13 for the Secretary of State or designated agency to change the rules of a recognised self-regulating organisation's rules in certain circumstances; and secondly, the immunity from liability in damages which is conferred by Clause 156.
The reason for these differences in both cases is the same. Recognised professional bodies will be regulating a limited range of investment activities on a limited scale. The power to change a recognised self-regulating organisation's rules is designed for use in circumstances where a major new abuse needs to be dealt with rapidly. But given the limited kind and scale of the business the recognised professional bodies will be regulating, it seems unlikely that such circumstances will arise in their case. Similarly, there seems to be much less risk of major claims against the body of the kind that we feared in the case of recognised self-regulating organisations and which persuaded us that it was desirable to provide immunity in their case. It would certainly be anomalous, I suggest to the Members of the Committee, to provide these bodies with immunity in relation to regulation of incidental aspects of their members' business when they do not have it, and indeed do not appear to have needed it, in relation to the regulation of their main professional business.
These amendments represent the outcome of detailed consultation with the professional bodies which are most likely to apply for recognition. I believe that they are now in general satisfied with them. They will enable a greater range of businesses to be authorised by this route while ensuring fully adequate protection to investors. I beg to move.
Lord Denning: May I say how much this is to be welcomed. There is the tendency nowadays in some professional bodies for them to attain corporate capacity. I think that is dealt with in one provision with regard to the Law Society which has not been put into effect yet. If these professional bodies are to come

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in as recognised professional bodies, it is certainly very important that there should be rules attaching to them that are properly enforced.
If they conduct investment business, it must be only incidental to their main business. I remember cases in the past where solicitors used to carry on investment business on a large scale. Defendants have come before the courts saying that they were not really solicitors but moneylenders; they are caught by the moneylenders Act. We had many cases of that kind. They are to involve themselves in investment business, or to advise on investments, only when it is incidental to their main professional activity. It is therefore very important that there should be proper rules to regulate the way in which they conduct any incidental investment business. I believe those provisions are here.
With regard to the self-regulating organisations, the new Clause 156 expressly states that they are not to be liable for damages for negligence. It is their legal immunity. On Second Reading we said how good that was to enable the self-regulating bodies to be able to carry on without fear of actions for negligence being taken against them. Although it is not yet provided in Clause 156—the immunity is only at the moment for the self-regulating organisations—I expect an amendment will come later for the immunity also to apply to these self-regulating professions.
Subject to those details it seems to me that this amendment to put professional bodies on a basis so as to be properly regulated is most desirable.
6 p.m.
Lord Bruce of Donington: I should like to endorse in general what the noble and learned Lord has just said about the desirability of proper rules and regulations being laid down which cover those prospective recognised professional bodies who may apply to the Secretary of State for recognition. But before doing so I have to issue a mild protest. This is a non-controversial Bill. It is highly technical. The amendments which we are now discussing, including Amendments Nos. 79, 84, 89 and so on, came into our hands only very recently—in my own case last Friday. This does not give adequate opportunity to study them in very great detail. I have spent many hours seeking to trace them through myself. My own way of proceeding is not normally slow, but I have not yet completed the task.
The noble and learned Lord listed a series of amendments to which he was speaking which exceed the list with which we were originally provided. He announced the amendments to which he was speaking so fast that I found it impossible to list them while he was talking. This is not a satisfactory position. I quite understand that in a Bill of this kind the Government have to do their best to respond to the representations that were made in Committee in another place. They must have time to phrase the appropriate amendments to give effect to the undertakings that were given in Committee in another place. I also fully understand that in that process it is necessary to consult the prospective recognised professional bodies to see whether a suitable accommodation can be
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arrived at between those bodies and the Government, bearing in mind that it is the Government's responsibility to govern and that they must not devote themselves exclusively to those sectional interests that quite properly represent their views to them. Here, I must declare an interest in that I am a member of the Institute of Chartered Accountants, which is one of the prospective bodies applying for recognition.
I am bound to say that so extensive are the amendments, which cover additions to schedules, then switch to amendments to clauses and then switch to new clauses after existing clauses, that it makes the Bill very difficult to comprehend as a whole. Therefore, it is certainly the case that these matters will have to be discussed far more extensively on Report than would otherwise have been the case. It would have been far better if the Government had not rushed this Bill so as to get its Committee stage completed before the Recess. The Bill is not a controversial Bill in the ordinary party sense of the term, and one really cannot see the urgency for this highly complex measure being pressed through at such a speed, and necessitating late sittings.
I shall refer only to three or four of the amendments on which I have some observations to make. I would refer the Committee to Amendment No. 79, and specifically to paragraph 2(3), which says:
"Where the certified person is an individual his main business must be the practice of the profession regulated by the certifying body and he must be practising that profession otherwise than in partnership; and where the certified person is not an individual that person's main business must be the practice of the profession or professions regulated by the recognised professional body or bodies of which the individual or individuals mentioned in subparagraph (2)(b) above are members".
I hope that the precise meaning of that is very clear to us all. However, I would refer to the noble and learned Lord's initial observation that we have to take into account surveyors of incorporated practices, and, with respect, I am bound to point out to the noble and learned Lord that this particular section carries no reference to incorporated practices. It may well be that further consideration will have to be given to that part of the schedule.
As regards Amendment No. 84, I am happy to inform the noble and learned Lord that so far as I can see, we are in agreement with him. It does not appear—at any rate now—to call for any special treatment. Turning to Amendment No. 86, which deals with an amendment to Clause 18, perhaps I may read to Members of the Committee the wording of the proposed subsection (2A) which is incorporated in the amendment. It states:
"The body must have rules which impose acceptable limits on the kinds of investment business which may be carried on by persons certified by it and the circumstances in which they may carry on such business and which preclude a person certified by that body from carrying on any investment business outside those limits unless he is an authorised person otherwise than by virtue of the certification or an exempted person in respect of that business."
With the greatest possible respect and in complete sympathy with the noble and learned Lord's general intention, I would make the observation that that is not drafted with the utmost clarity. Perhaps I may ask the noble and learned Lord to say what they cannot do and list it as A, B, C, D, and E. In that way, I think that the noble and learned Lord will probably achieve exactly the same purpose but in a less convoluted manner.

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Turning to the remaining amendments—or those that I could hear, because the noble and learned Lord read out the list very rapidly—I am bound to say that I think it is only fair that the recognised professional bodies concerned should be given an opportunity, once the Government have passed these amendments, of reviewing their effect in its totality against the ever-changing nature of the Bill itself. In that way adequate opportunity may be given to re-examine these matters on Report and, if necessary, to make more detailed amendments at that particular stage, though I sincerely hope that that will not be necessary.
I know that the noble and learned Lord is very pressed in relation to these particular matters, but perhaps I may urge him that when the proceedings on Committee are completed he takes steps to ensure that the printed text of the Bill as amended in Committee is made available with the utmost speed, so that the consultations to which I have referred may take place within adequate time before the Report stage, and so that at the Report stage we can amend those particular amendments which so far we have not had an opportunity of considering in detail.
Lord Ezra: I should like to associate myself with the mild strictures indicated by the noble Lord, Lord Bruce of Donington. We are here presented with over 50 amendments by the Government en bloc, and at such short notice it is very difficult for us to give them proper consideration. Those of us who prepared ourselves for the debates on this Bill have taken a great deal of trouble to consult outside organisations of relevant knowledge and experience so as to guide us in making a proper contribution to these debates. To be presented with these 50 amendments in this way has made it quite impossible for any sort of consultation. Therefore, I can only agree entirely with the noble Lord, Lord Bruce, that, when the Bill is amended in the light of the discussions at the Committee stage, we should have plenty of time to take the amended version to our various advisers. That means that inevitably we shall have a longer Report stage than might otherwise have been necessary.
Lord Cameron of Lochbroom: I have obviously taken note of the remarks that have been made about the tabling of amendments. I understand that the main amendments were tabled last Tuesday and that briefing notes on the government amendments have been made available through the Whip's office. The briefing note on this group of amendments has been available for some days and it spells out all the consequential and transitional provisions that are included in this group as well as the substantive provisions. However, obviously I take note of what has been said by noble Lords opposite.
Perhaps I may just respond to one or two of the detailed points which were raised. As regards immunity, which I think was raised by the noble and learned Lord, Lord Denning, that would be deferred until we come to Amendment No. 358. Paragraph 2(3) in the schedule deals with the intention that these bodies should only certify and regulate practices which undertake investment business incidental to their profession. I think that the noble Lord, Lord Bruce, was concerned about the matter of authorisation of bodies corporate, and that can be found in subsection '2) of Amendment No. 84.
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So far as the substantial number of amendments is concerned—and I am sorry I read out the list at such length—in fact the main and very substantial proportion of them are simply amendments which showed references from members of these bodies to certified persons in the later clauses of the Act. Certainly I would hope that with the Recess, when they are incorporated within the Bill as amended, there will be ample time for consultation with professional bodies. I would simply say that it is the main amendments to which the noble Lord opposite spoke particularly which present, as it were, the full meaning of these amendments.
Lord Bruce of Donington: In the case of contentious legislation I have been known to express myself somewhat forcibly on the arguments that are involved. In this particular case, I think it will be agreed that I raised a very mild protest at the way in which this whole business has been handled. The noble Lord opposite offered no contrition in respect of that. The noble Lord seemed to think that because some of the amendments were available last Tuesday, and the explanatory notes and the remainder of the amendments arrived on Friday, that is somehow adequate time; or at any rate that is what he implied. Having expressed my objections mildly, I must now express them strongly. This is not the way in which the Committee should be treated on a Bill of this kind, and I express the hope at least that some expression of contrition will come from the Government for the way they have treated the Committee over the whole of the Bill so far.
Lord Cameron of Lochbroom: I obviously regret that the noble Lord feels as strongly as he does. His was a mild protest at the start, and I merely took note of it. Certainly I regret that the noble Lord did not have sufficient time. Of course, these matters are dealt with through the usual channels. I merely pointed out that we have endeavoured to assist by making the Notes on Clauses available. However, I take note of what the noble Lord has said.
On Question, amendment agreed to.
Clause 11 agreed to.
Clause 12 [Compliance orders]:
6.15 p.m.
Lord Silkin of Dulwich Lord Silkin of Dulwich moved Amendment No. 80:
Page 9, line 36, after ("steps") insert ("including any alteration to its rules proposed by the organisation where the Court is satisfied that such alteration would result in the rules satisfying subsection (3) of section 10 or the requirement in question, as the case may be.)").
The noble and learned Lord said: I beg to move Amendment No. 80 standing in my name and that of my noble friend Lord Williams of Elvel. I am glad to say that, with the permission of the Committee, I wish to speak only to Amendments Nos. 81, 82 and 83.
These amendments are concerned with Clauses 10, 11, 12 and 13 of the Bill. Clause 10, the Committee will recall, is the clause which provides for the grant and refusal of recognition in the form of a recognition order to an SRO, and lays down certain conditions for that recognition. Clause 11 provides for the power of

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the Secretary of State to revoke the recognition order where the conditions concerned have not been complied with either by action or by the rules of the organisation.
Clause 12 comes to a different method of dealing with the same situation in that it provides that the Secretary of State, instead of revoking the recognition order under Clause 11, may make an application to the court under Clause 12. It goes on to provide that if the court decides that the requirement has not been met, or the condition not satisfied, then it may order the organisation to take such steps as the court directs for securing that the requirement or condition is satisfied, or the obligation complied with, as the case may be.
Clause 13 provides yet a third possible way of dealing with this situation in that the Secretary of State, instead of using his powers under Clause 11 to revoke, or Clause 12 to make an application to the court, may direct the organisation to alter, or may himself alter, its rules to bring it into compliance with the requirements. That clause then provides that if the SRO fails to comply with that direction, the Secretary of State may go to the court and obtain an order by way of mandamus or, in Scotland, specific performance, requiring the SRO to give effect to the direction.
This clause provides a futher recourse to the court, in this case by the SRO itself. Under subsection (5), it provides that an SRO whose rules have been altered in this way may apply to the court. It also provides that if the court is satisfied that the rules without the alteration satisfy the requirements mentioned, or alternatively that other alterations proposed by the organisation would result in the rules satisfying the requirement, then the court can set aside the alteration or the direction, as the case may be, and it can order the organisation to make the alteration proposed.
I shall come to subsection (8) later, because it is not wholly or directly connected with the point I am now making. One has a number of different methods by which the matter can be put right where one has the situation of a requirement not being met in the rules. What is peculiar about this group of clauses, particularly Clauses 12 and 13, is that there are a number of different methods of reference to the court which seem to provide different results.
Thus, on the application of the Secretary of State to the court under Clause 12, one has a power in the court to require the SRO to take such steps as the court directs to secure the requirement is complied with. In the case of Clause 12, one has, first of all, provision for an order by way of mandamus and, following that, provision for the SRO itself to apply to the court, and for the court then to allow alterations to be made to the rules, not necessarily those which the Secretary of State requires, but alterations which the SRO itself thinks would give effect to the compliance with the requirements where the court agrees. But that power is not provided for in Clause 12, and I am not altogether clear why.
The amendments to which I am speaking now, and that which I am moving, No. 80, seek to assimilate these various procedures to one another so that, first of all, there is no duplicity of court proceedings. In
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relation to Clause 12, for example, if the Secretary of State uses the mandamus provision, it enables the SRO upon that provision to ask the court for whatever remedies can be made in any of these clauses. It excludes altogether the provision which enables the SRO to go to the court. Take the view—which I suggest is the right one—that if you have a mandamus provision so that the Secretary of State is required to go to the court, if the SRO does not wish to comply with the direction, if it does not think it right to comply with the direction, then upon the application for the mandamus it ought to be possible for the court to exercise all the powers that it otherwise could to order that the rule be altered, or that it be in accordance with the direction of the Secretary of State, or that it be altered in accordance with the proposal put forward by the SRO, provided that the court is satisfied that that would fulfil the purpose.
I should be grateful if the noble and learned Lord the Lord Advocate, who I imagine is to reply, or the noble Lord the Minister, if he is to reply, would explain why it is thought necessary to have so many different recourses to the court in these clauses, and whether one could not simplify it in the sort of way—I do not say necessarily exactly as I propose in my various amendments—which follows the principle of avoiding both an excess of litigation and also different forms of litigation which may produce totally different results.
The remaining amendment is Amendment No. 83. That is on slightly different lines from those I have spoken to up to now. It refers to a subsection that I find very odd. It is the subsection in Clause 13 which makes this provision:
"The fact that the rules of a recognised organisation have been altered by or pursuant to a direction given by the Secretary of State or pursuant to an order made by the court, under this section shall not preclude their subsequent alteration or revocation by that organisation.",
that is to say, the self-regulating organisation.
You have a direction by the Secretary of State saying, "Alter your rules", or an order by the court saying, "Alter your rules". The SRO must do so; but under subsection (8) it can then make a new alteration apparently going back to the first provision of the rules. On the face of it it looks as though one can have a perpetual game of ping-pong between the SRO and either the Secretary of State or the court, as the case may be. I am sure that is not intended, but that is how it appears to read. I should be grateful if the Minister could explain the point of that. I beg to move.
Lord Lucas of Chilworth: I am quite sure that the noble and learned Lord opposite will appreciate that in legal matters I certainly do not have any of the knowledge or indeed wealth of experience that he has, but I shall do my best to explain our intention in these arrangements. Perhaps I may turn in my explanation to the noble Lord's first amendment in the group. It might be helpful were I to say that the powers of the court under Clause 12(2) already allow it to give a direction of the kind specified in the noble Lord's amendment. Therefore, I do not think that anything is to be gained here.
Perhaps I may now turn to Amendments Nos. 81 and 82, the first two to Clause 13. They relate to the mechanism by which a recognised self-regulating

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organisation may ask the court to set aside a rule change made by the Secretary of State or designated agency. I think it is important to bear in mind that the provisions of this clause have to strike a delicate balance. On the one hand, it is I think generally agreed that the Secretary of State or designated agency must have the ability to move quickly to change an organisation's rules when investor protection requires it.
On the other hand, if the organisation is to maintain authority over its members and the prestige necessary to attract the right kind of personnel it will need to fulfil its role, it must have a considerable degree of autonomy and must feel itself free of day-to-day interference. The provisions of this clause we believe strike the right balance between these objectives, but they do have to be viewed as a package. As a package they have been accepted by both the SIB and the self-regulating organisations which are so arranging their affairs so as formally to apply for recognition. Therefore, all of them have been brought along with this, and they have accepted this package.
Any change to one of the elements of the package would upset the balance. The change that the noble Lord proposes would be particularly damaging as it would deprive the self-regulating organisation of its right to ask the court to review a rule change imposed by SIB. To get a review it would have to defy SIB and wait for SIB to take action against it. This would hardly be conducive to good relations. It would leave the investors without the benefit of the rule change in the meantime.
So far as Amendment No. 83 is concerned (the third amendment to Clause 13) I ought to start by explaining the purpose of subsection (8). The real purpose here is to prevent a rule, once changed by the Secretary of State or designated agency, from being set in stone despite later changes in circumstances in which a change would be not only acceptable but positively desirable. If a recognised self-regulating organisation were to use this provision in an attempt to frustrate a change of rule imposed by the Secretary of State or designated agency, there would be a number of safeguards available.
For instance, an application could be made to the court under Clause 12 for an order directing the organisation not to change the imposed rules; and I understand that a breach of such an order would constitute contempt of court. And, of course, behaviour of this kind by a self-regulating organisation would form grounds for the revocation of its recognition under Clause 11. We believe that these sanctions will be an adequate safeguard against abuse of the ability to change rules by virtue of subsection (8).
It must be recognised that the variety of ways of referring to the court is important. These routes were quite intentional. The provisions are intended to deal with different circumstances. The availability of mandamus or specific performance in Clause 13 is to ensure that the Secretary of State's direction is enforce-able. Quite frankly, we hope that it never would happen, that an SRO would defy a direction and trigger the proceedings. But the three different routes all have different, but at the same time,
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complementary purposes, and that is the reason it is set down in this way. I hope that is helpful to the noble and learned Lord, Lord Silkin.
6.30 p.m.
Lord Silkin of Dulwich: I am grateful to the Minister for his explanation. He has explained—I am not sure whether wholly satisfactorily: I shall need to read what he has said in the Official Report before making my mind clear on that—the need for a number of different ways of reaching the court. I am still not wholly convinced that could not be simplified and if it can it is clearly desirable to simpify it. However, we shall look at that. What 1 do not think he has answered is why there should be different varying remedies in relation to the powers of the court when one reaches the court. In other words, why, by whatever route one reaches the court, should not the court have exactly the same powers under each of these clauses? It is manifest from the provisions set out, which are different in the clauses concerned, that it must be intended that there should be different remedies according to which route is taken. That I do not follow and I hope the Minister will undertake (even if he feels that the agreed balance prevents him from entering the number of different ways of approaching the court) to consider that to see whether it can be simplified so that the same remedies are available in each case.
Lord Cameron of Lochbroom: Perhaps I may assist the noble and learned Lord. I think the reason for what appear to be different remedies is that if one deals with Clause 13, one is dealing with an application by the Secretary of State to enforce an order or a direction which he himself has made. Therefore, it is appropri-ate as I understand it in English procedure to seek a mandamus and in Scotland an order for specific performance.
Clause 12 deals with different situations, not the failure to obey a direction of the Secretary of State, but a failure to satisfy a requirement or a failure to comply with an obligation under Clause 12(1). In those circumstances in which the failure may have arisen, it must mean that the court must have a certain discretion about how it is to secure that that require-ment is satisfied or that that obligation is complied with. Hence one finds in subsection (2) that the discretion given is a discretion to the court to take such steps as the court directs to secure the object which is that the requirement is satisfied or the obligation complied with. In certain circumstances it may simply be a direction, but in other circumstances one could see that it would set out specific steps that have to be taken; a much more specific order.
Lord Silkin of Dulwich: I thank the noble and learned Lord for that helpful explanation. At the same time the dispute between the Secretary of State or the SIB, as the case may be, and the SRO may precisely be whether the rule that has been made brings the SRO into compliance with the requirements. The SRO says "Yes", the SIB says "No", and the SRO says "We shall adhere to our rule. We do not agree with you". They may be right. They are then taken to court by way of mandamus and that at that stage they cannot

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say to the court. "We are prepared to amend our rule in a way which we think, if there is any doubt at all, will bring it into conformity". The court has no power to order that that amended rule be substituted. That is the major point I have in mind. I hope the noble and learned Lord the Lord Advocate will look at that. On the assumption from his appearance he is prepared to do so, I ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 12 agreed to.
Clause 13 [Alteration of rules for protection of investors]:
[Amendments Nos. 81 to 83 not moved.]
Clause 13 agreed to.
Clause 14 agreed to.
Clause 15 [Authorisation by membership of recognised professional body]:
On Question, Whether Clause 15 shall stand Part of the Bill?
Lord Cameron of Lochbroom: I spoke to the new clauses which are contained in Amendments Nos. 84 and 84A and in the light of those I beg to move that Clause 15 shall not stand part of the Bill.
Clause 15 disagreed to.
Clause 16 [Professional bodies]:
On Question, Whether Clause 16 shall stand part of the Bill.
Lord Cameron of Lochbroom: In like manner I beg to move that Clause 16 shall not stand Part of the Bill.
Clause 16 disagreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 84:
After Clause 16, insert the following new clause:
Authorisation by certification by recognised professional body. ("Persons authorised by recognised professional bodies.

.—(1) A person holding a certificate issued for the purposes of this Part of this Act by a recognised professional body is an authorised person.

(2) Such a certificate may be issued by a recognised professional body to an individual, a body corporate, a partner-ship or an unincorporated association.").

The noble and learned Lord said: Amendments Nos. 84 and 84A have already been spoken to.
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 84A:
Insert the following new Clause:
("Professional bodies.

.—(1) In this Act a "professional body'' means a body which regulates the practice of a profession and references to the practice of a profession do not include references to carrying on a business consisting wholly or mainly of investment business.

(2) In this Act references to the members of a professional body are references to individuals who, whether or not members of the body, are entitled to practise the profession in question and, in practising it, are subject to the rules of that body.

(3) In this Act references to the rules of a professional body are references to the rules (whether or not laid down by the body
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itself) which the body has power to enforce in relation to the practice of the profession in question and the carrying on of investment business by persons practising that profession or which relate to the grant, suspension or withdrawal of certificates under this section, the admission and expulsion of members or otherwise to the constitution of the body.

(4) In this Act references to guidance issued by a professional body are references to guidance issued or any recommendation made by it to all or any class of its members or persons seeking to become members, or to persons or any class of persons who are or are seeking to be certified by the body, and which would, if it were a rule, fall within subsection (3) above.").

On Question, amendment agreed to.
Clause 17 agreed to.
Clause 18 [Grant and refusal of recognition]:
[Amendment No. 85 not moved].
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 86:
Page 12, line 39, leave out from ("that") to end of line 18 on page 13 and insert ("the requirements of subsection (2A) below and of Schedule (Requirements for recognition of professional body) to this Act are satisfied as respects that body.
(2A) The body must have rules which impose acceptable limits on the kinds of investment business which may be carried on by persons certified by it and the circumstances in which they may carry on such business and which preclude a person certified by that body from carrying on any investment business outside those limits unless he is an authorised person otherwise than by virtue of the certification or an exempted person in respect of that business.").
The noble Lord said: Amendments Nos. 86 to 90 have already been spoken to.
On Question, amendment agreed to.
The Deputy Chairman: I cannot now call Amendment No. 86A.
Clause 18, as amended, agreed to.
Clause 19 [Revocation of recognition]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 87:
Page 13, line 27, leave out ("any of the requirements of subsection (2) of that section are") and insert ("section 18(2A) above or any requirement of Schedule (Requirements for recognition of professional body) to this Act is").
On Question, amendment agreed to.
Clause 19, as amended, agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 88:
After Clause 19, insert the following new clause:
("Compliance orders.
.—(1) If at any time it appears to the Secretary of State—

(a) that subsection (2A) of section 18 above or any requirement of Schedule (Requirements for recognition of professional body) to this Act is not satisfied in the case of a recognised professional body; or

(b) that such a body has failed to comply with any obligation to which it is subject by virtue of this Act,

he may, instead of revoking the recognition order under section 19 above, make an application to the court under this section.
(2) If on any such application the court decides that subsection (2A) of section 18 above or the requirement in question is not satisfied or, as the case may be, that the body has failed to comply

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with the obligation in question it may order the body to take such steps as the court directs for securing that that subsection or requirement is satisfied or that that obligation is complied with.
(3) The jurisdiction conferred by this section shall be exercisable by the High Court and the Court of Session.").
On Question, amendment agreed to.
Clause 20 [Notification requirements]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 89:
Page 13, line 36, leave out subsections (1) to (3) and insert—
("(1) The Secretary of State may make regulations requiring a recognised professional body to give him forthwith notice of the occurrence of such events relating to the body, its members or persons certified by it as are specified in the regulations and such information in respect of those events as is so specified.
(2) The Secretary of State may make regulations requiring a recognised professional body to furnish him at such times or in respect of such periods as are specified in the regulations with such information relating to the body, its members and persons certified by it as is so specified.
(3) The notices and information required to be given or furnished under the foregoing provisions of this section shall be such as the Secretary of State may reasonably require for the exercise of his functions under this Act.
(3 A) Regulations under the foregoing provisions of this section may require information to be given in a specified form and to be verified in a specified manner.
(3B) Any notice or information required to be given or furnished under the foregoing provisions of this section shall be given in writing or in such other manner as the Secretary of State may approve.").
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 90:
Page 14, line 14, after ("but") insert ("(a)").
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 91:
Page 14, line 18, at end insert ("; and
(b) notice need not be given in respect of any rule or guidance, or rules or guidance of any description, in the case of which the Secretary of State has waived compliance with this subsection by notice in writing to the body concerned; and any such waiver may be varied or revoked by a further notice in writing.").
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No.92:
Page 14, line 19, after ("of) insert (", or of regulations under,").
On Question, amendment agreed to.
Lord Hacking Lord Hacking moved Amendment No. 93:
Page 14, line 19, at end insert ("and shall not be actionable except at the suit of the Secretary of State".).
The noble Lord said: I am sorry to stop the Committee in its grand gallop through so many amendments, but perhaps I may ask the Committee to pause for a short time on Amendment No. 93 which stands in my name. Clause 20 requires that recognised professional bodies notify the Secretary of State if they prohibit one of their members from carrying on an investment business or rescind such prohibition. Subsection (5) states:
"Contravention of this section [or any regulations made under it] shall not be an offence".
Previously, subsection (5) stated that a contravention would, however, be actionable at the suit of any person who suffered loss or was otherwise adversely affected. The latter provision was deleted, as I understand it, during the passage of the Bill in another place.
Subsection (5) is now silent as to whether the contravention is actionable. However, in view of the absence of any penalty for contravention, it is likely, I submit, that as a matter of general law a person who suffers loss as a result of a breach of statutory duty would have a right of action against a recognised professional body. If no immunity is granted to recognised professional bodies—and this is a subject to which the noble Lord, Lord Bruce, and I will come back again in this Committee—on the lines of the immunity afforded to SROs, it is important, in my submission, that subsection (5) should make clear that no right of action arises against a recognised professional body in respect of a contravention, at least in so far as the general public are concerned. That is the purpose of my amendment. I beg to move.
Lord Denning: I hope that later on it will not be actionable at all, that there will be immunity similar to that for SROs for professional bodies, that is, immunity from civil action. In case that is not carried at a later stage, I would certainly welcome this amendment. It should not be actionable except at the suit of the Secretary of State. In other words, I hope that later on it will not be actionable at all. Meanwhile, let this pass through.
Lord Cameron of Lochbroom: When this clause was amended in another place, we deliberately did not go further, say, expressly to remove remedies which were available at common law. I would suggest to the Committee (as I stated earlier) that we would be going too far in doing this in regard to the recognised professional bodies. There may be some doubt as to whether such remedies would be granted to an individual, but it should be open to someone who is suffering loss as a result of a failure to notify—for example, one thinks of a member whose name has been omitted from the register of authorised persons—to seek a remedy from the courts.
If the amendment were accepted he would be deprived of that option and his only recourse in those circumstances would be to persuade the Secretary of State to act; and it might be difficult to see why in such circumstances the Secretary of State should have any interest to secure that. For those reasons, I would suggest to the Committee that this amendment should not be accepted. Perhaps the noble Lord might like to think about what I have said and perhaps withdraw it.
Lord Denning: I think that later on when, after Amendment No. 156, we come to deal with the liabilities of recognised professional bodies, the real debate can take place.
Lord Hacking: I readily adopt the proposal by the noble and learned Lord, Lord Denning, that the appropriate time to come back to this subject—and I do not accept the argument presented by the noble and learned Lord the Lord Advocate; but perhaps I may

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leave that aside for a moment—will be when we come to Clause 156. So, may the gallop continue! I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 20, as amended, agreed to.
Clause 21 [Authorised insurers]:
6.45 p.m.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 94:
Page 14, line 28, at end insert—
("provided that such investment business is conducted in the same manner as it would be if that body were a member of the relevant self-regulating organisation")
The noble Lord said: I beg to move Amendment No. 94 which stands on the Marshalled List in my name and that of my noble friend Lord Bruce of Donington. It may be for the convenience of the Committee if I were to speak also to Amendment No. 95.
We are here dealing with insurance companies and (in Amendment No. 95) friendly societies which, to a certain extent, come outside the provisions relating to authorised persons conducting investment business. There has been considerable debate about whether these companies or friendly societies should be within the ambit of the Bill. The Government decided that they should not be within the ambit of the Bill. Nevertheless, there is a certain amount of feeling in various quarters that the rules which apply to other people who are conducting similar investment business should apply to insurance companies and to friendly societies.
I am sure that noble Lords opposite are aware of the controversy that surrounds this matter. I believe that insurance companies and, equally, friendly societies ought in some measure—and our amendments try to stipulate in what measure—be required to set rules which ensure that the conduct of their investment business is exactly the same and is conducted on the same lines as if they were members of the relevant self-regulating organisation. I beg to move.
Lord Lucas of Chilworth: I shall do my best to give the noble Lord some explanation because I fear that the amendments are based on a misunderstanding about how the insurance companies and the friendly societies are treated under the Bill. Both these organisations, the insurance companies and the friendly societies, are already subject to statutory systems of authorisation and regulation. These are designed to protect the policyholders from the risk of their insolvency. Clearly, there will continue to be a need for such regulation after the regulatory system in this Bill has come into effect.
The treatment of insurance companies and friendly societies in the Bill reflects the need to integrate in a sensible fashion parallel systems of authorisation and regulation where the activities covered are common and central to the business of insurance companies and friendly societies.
Clauses 21 and 22 of the Bill now provide automatic authorisation for, respectively, insurance companies and friendly societies whose activities fall within the
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scope of the Bill. This automatic authorisation is provided for two reasons. First, as I have sought to explain, there are already regulatory systems for these businesses and they already have to satisfy the authorities about their fitness to carry on the business. Once authorised, they will be subjected to stringent supervision, in the case of insurance companies, by the Secretary of State, and, and in the case of friendly societies, by the Chief Registrar of Friendly Societies.
We believe that it would not be desirable if insurance companies and friendly societies were to be placed in a position in which they had to satisfy more than one authorising body in order to carry on their business. In particular, it would be unfortunate if there were to be any conflict between the requirements for authorisation under the Bill and the regulation of the solvency of insurance companies and friendly societies.
The second reason arises out of our European Community obligations. There is a Community directive which lays down how bodies carrying on insurance businesses should be authorised and regulated. We have, as I have said, such authorising and regulatory systems for insurance companies and friendly societies, but we could not impose a further authorisation requirement because the directive prohibits any restrictions on the establishment of insurance businesses except those required or permitted by the directive itself. It follows therefore that making the further requirement which the noble Lord seeks would be contrary to our obligations under the Community directive.
The amendments and the way in which the noble Lord, Lord Williams, presented them and his justification seem perhaps misconceived in that insurance companies and friendly societies are not exempt from all rules made under the Bill. They receive automatic authorisation, but will still be subject to regulation. Schedules 8 and 9 to the Bill restrict the rule-making power over insurance companies and friendly societies so as not to interfere with the system for the regulation of their solvency; but there remains a substantial area in which the rules will apply.
In particular, the marketing and promotion of policies by insurance companies and friendly societies will be regulated under the Bill. That will be so whether or not the company or the society is a member of a self-regulating organisation. If it is not, rules made by the Secretary of State or the designated agency will apply. I think that is fairly straightforward. I noticed the noble Lord winced at one moment and I think I can guess why, but I believe he will find that fairly clear in regard to the need to meet our obligations in the Community.
Lord Williams of Elvel: I am most grateful to the noble Lord for I find it admirably clear; but it does not answer the point I was trying to make. The noble Lord will be aware that there has been extensive correspon-dence between the chairman of the City Capital Markets Committee and the noble Lord's honourable friend on the question of how insurance companies manage their investments. His honourable friend in another place has indicated, I think, that there will be some form of letter or assurance under these arrange-

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ments to make sure that, even though they get automatic authorisation, insurance companies will be required to conduct their investment management more or less similarly to other organisations.
What I am seeking to do is to make sure that this is absolutely crystal clear because, as the chairman of the City Capital Markets Committee has pointed out in the correspondence with the noble Lord's honourable friend, which has lasted quite a long time, to have certain investment management businesses carefully controlled under the authorisation principle and to have others given automatic authorisation without having similar rules creates an imbalance. It means that many people who manage great volumes of funds are not necessarily bound by the same rules as those who are managing investments as authorised persons. That is the point I was trying to make.
Lord Lucas of Chilworth: I am grateful to the noble Lord. I suggest to him that since there is an amendment down in my name (No. 260) which puts forward proposals for dealing with the way in which insurance companies manage their funds, it might be better if we were to discuss the particular point which the noble Lord, Lord Williams, is now raising when we come to my amendment rather than connect it with the way in which insurance companies and friendly societies generally are dealt with in the Bill, which is really what his amendment seeks to do.
Lord Williams of Elvel: I am very happy to discuss this question at whatever point the noble Lord the Minister seeks to discuss it. In fact, as he will notice, I have put down another amendment to one of the schedules which seeks to achieve the same thing. I am perfectly happy to discuss it when we reach Amendment No. 260. I would only plead in my defence that these amendments are coming along at a very rapid rate and sometimes it is rather difficult to catch up with all the Government amendments that are coming through.
I apologise to the noble Lord the Minister if I have raised a point which properly should be dealt with after Clause 115. In the light of what the noble Lord has said, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 21 agreed to.
Lord Williams of Elvel: I am sorry to interrupt at this stage, but did I also understand the noble Lord to say that there was a subsequent Government amendment tabled on similar lines as regards friendly societies, as well as insurance companies?
Lord Lucas of Chilworth: No; it is to deal only with insurance companies.
Lord Williams of Elvel: Then, with the leave of the Committee, I should like to discuss the question of the funds of friendly societies, because I would make exactly the same arguments about friendly societies and the way they manage their funds.
The Deputy Chairman of Committees (Lord Nugent of Guildford): In order to get the Question before the committee, I shall call Amendment No. 95, so that the noble Lord, Lord Williams, can address his remarks to that.
Clause 22 [Registered friendly societies]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 95:
Page 14, line 40, at end insert ("provided that such investment business is conducted in the same manner as it would be if that body were a member of the relevant self-regulating organisation")
The noble Lord said: I am most grateful to the noble Lord the Deputy Chairman of Committees. The arguments are essentially the same. I do not want to go through the speech I have made which the noble Lord the Minister told me was quite out of place and which he said I should make at a later stage. Nevertheless, even at this stage I must make this point about any organisations such as friendly societies which manage very large volumes of funds. While perhaps they should not be subject to the same rules—because I understand what the noble Lord the Minister has said about automatic authorisation—they should at least have rules regarding their investment management which are consistent and coherent with those which pertain in the case of authorised persons. Having made my speech, I am afraid for the second time, I beg to move.
Lord Lucas of Chilworth: I would prefer to take this point on board when we discuss the insurance companies, purely and simply because I think there will have to be much greater consideration of the need for similar provisions for friendly societies. Up to now we have not thought that the need was similar to that of insurance companies. The noble Lord, Lord Williams, makes the point that in his view there is an equal need. I will just have to take that on board and give further consideration to it.
Lord Williams of Elvel: I am most grateful to the noble Lord the Minister for his words, and in the light of his assurance that he will take this on board and that we will discuss it at a later stage of the Bill I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 22 shall stand Part of the Bill?
Lord Graham of Edmonton: I am sorry to appear tiresome, but the Minister will recall that during the Second Reading on 1lth July, at col. 632, I made a brief reference to Clause 22. What I understood, following exchanges in the Standing Committee between the Minister in charge of the Bill and my honourable friend Bryan Gould, was that some clarity and understanding had been reached on the import of Clause 22 to friendly societies, because that is what the clause deals with, and also to those friendly societies which have what are known as branch societies, where they are not only centralised, but have in addition many branches.

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The Minister will recall that he was kind enough to say at col. 654 of the Official Report of 1lth July 1986:
"I understand that officials in my department have today written to the friendly societies liaison committee concerning the authorisation of the business of branches of friendly societies, which was the point of concern. The letter seeks to assure them that Clause 22 authorises such business. No doubt if the noble Lord has further questions he will come back to us, perhaps directly rather than by way of amendment".
As the Committee knows, and as the Marshalled List indicates, this matter is not important enough to put down amendments and I merely seek clarification.
I understand that correspondence has taken place but that the friendly societies liaison committee would very much like the Minister to indicate that nothing in Clause 22 is intended to affect the relationship of branch societies with the order, the nature of that relationship being governed by the Friendly Societies Act 1974. If the Minister can indicate that that is correct and has his approval, that will certainly be satisfactory to the friendly societies.
7 p.m.
Lord Lucas of Chilworth: I am most grateful to the noble Lord, Lord Graham, for indicating his intention to raise this point about the impact which the provisions of this Bill—in particular, Clause 22—will have purely on the relationship between the central office and the branches of orders of friendly societies. It is not the intention that this provision should alter that relationship. I think all that the noble Lord, Lord Graham, wants from me is that assurance, which I gladly give.
Lord Graham of Edmonton: I am most grateful.
Clause 22 agreed to.
Clause 23 [Operators and trustees of recognised schemes]:
On Question, Whether Clause 23 shall stand part of the Bill?
Lord Williams of Elvel: I should like to seek clarification on something which I am afraid I do not understand; it is on Clause 23(b). From the Notes on Clauses and from what is in the Bill, I think I understand Clause 23(a), but I do not quite understand how an authorised person under Clause 78 can be authorised to conduct,
"investment business which is carried on by him in connection with or for the purposes of that scheme".
It seems to me a very wide definition of an authorisation that is given to somebody under a collective investment scheme, which Clause 78 refers to as an overseas scheme. I wonder whether the noble Lord the Minister could very kindly help me on that point.
Lord Lucas of Chilworth: I shall try to help the noble Lord. This clause is essential to give effect to our obligations under the undertakings for collective investment in the transferable securities directive. It
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confers on the operator or trustee of a collective investment scheme, which is authorised in another EC member state in accordance with the provisions of that directive and recognised under Clause 78, automatic authorisation in respect of two categories of investment business.
The directive that was adopted last year is intended to harmonise the laws applying to certain collective investment undertakings, in order to facilitate intra-Community trade. However, when selling units in another member state the operator must comply with local marketing laws.
The directive will be implemented in this Bill. Clause 78 provides for the recognition of UCITS based in other member states which satisfies the require-ments of that clause. The requirements will limit the application of that clause to UCITS which come within the scope of the directive, though it would be possible to extend the use of that clause to other collective investment undertakings, subject to future harmonisation directives. Recognition under Clause 78 may be refused only where the manner in which the units are to be marketed breaches our marketing rules.
The automatic authorisation under this clause follows the requirements of the directive, and the automatic authorisation is limited to only that kind of investment business. If, however, they conduct other investment business not connected with the operation of the UCITS scheme, then the operator or trustee must obtain authorisation under one of the other ways provided by the Bill. It is because the authorisation is so limited that, by virtue of Clause 78, the application to them of the conduct of business rules under Clause 45 is similarly limited.
The clause extends to activities carried on,
"in connection with or for the purposes of that scheme".
In addition to providing authorisation under the Bill actually to operate the scheme, the clause also covers any investment activities which are a necessary and incidental part of operating the scheme. They must arise directly from the operation of the scheme. An example might be a share exchange scheme operated by a UCITS operator—where shares may be exchanged for units of UCITS. That would not be part of operating the scheme, but would be in connection with its operation. The conduct of business rules would extend to these incidental activities, and that is provided for in Clause 78(7). I think that that answers the specific question that the noble Lord raised.
Lord Williams of Elvel: Not quite. I am sorry to come back to the noble Lord. Does the noble Lord mean that any operator of a scheme approved under Clause 78 in a Community country can conduct any investment business as defined in Schedule 1 to the Bill, so long as it is,
"in connection with or for the purposes of that scheme?"
In other words, can he deal, can he underwrite, can he procure underwriting, can he procure dealing and can he do all the things that are listed in the schedule as investment businesses, if he is an authorised person under the clause?
Lord Lucas of Chilworth: Yes, he can do those things provided, as I have already said, that it is part of the scheme. It has to be related to that. I do not think I can expand any further, because one would have to find a situation where the activity was conducted away from the scheme, in which case the person would not be able to operate. He can do all the things that the noble Lord suggests, provided that it is in connection with the scheme.
Acting as trustee of a scheme could, under the terms of the scheme, result in the trustee or the company to which the noble Lord referred undertaking investment activities. Provided that what the trustee does is in connection with the operation of the scheme, the directive to which I have referred prevents us from requiring that person to be separately authorised.
In fact, it is likely that the trustee's activities would be in connection with the buying and selling of securities, or acting in the capacity of a principal. Those are activities which are not to be caught by the Bill, except in certain circumstances which I do not think are likely to occur. However, though unlikely, it is conceivable that by being authorised under Clause 23 the operator or the trustee could do things in connection with the operation of the scheme which can only be undertaken by authorised persons.
Because of the limit in Clause 78(7) the conduct of business rules would not apply. As an example, there might be an offer made to the general public to buy shares for the scheme. It is unlikely that such would ever occur. Unit trust managers and others buy shares in quantity on the markets and they do not go around making such private offers. However, even if that were to occur, the ordinary rules on cold calling would apply, although the advertising provisions of the conduct of business rules would not.
That in turn would not mean that the designated agency could take no action. There are various powers under Chapter VI that could be used if it was considered that investors' interests were at risk. They could prevent the UCITS operator from continuing to advertise for shares. So an effective action could be taken to deal with any situation that might arise. In addition, the United Kingdom authorities would be able to take up the matter with the home state authority under the terms of the directive. The fact that a UCITS operator had advertised for shares in a way that was considered to put investors' interests at risk would undoubtedly call into question the fitness of the person to continue to be involved in that operation.
Lord Williams of Elvel: I am most grateful to the noble Lord. I do not want to weary the Committee with my argument, but I shall summarise if I can the stage that we have reached. I shall take the example of Robeco, which is a Dutch unit trust. As I understand it, Robeco would be recognised. Its operator would therefore be automatically authorised. As a Dutch unit trust, Robeco's operator would be allowed to conduct investment business in connection with or for the purposes of Robeco MV. Specifically in Clause 75 of the Bill, the Government wish to place restrictions on the activities of authorised unit trust schemes in the United Kingdom. So the operator of a Dutch unit trust
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could do all sorts of things under the Bill which the operator, if one may put it like that, of a United Kingdom unit trust would not be able to do. Am I clear about that, and is my understanding correct? If it is, perhaps we shall have to accept it, but it does seem rather an odd situation.
Lord Morris: I hope that I may be helpful, but I doubt it. I believe that the underlying purpose of the provision is that it is restrictive in that the trustee or the operator of the scheme has a fiduciary duty to those who benefit from the scheme to ensure that he stays strictly within the terms of the scheme, and that paragraphs (a) and (b) are observed. I am sure that is understood. I am not absolutely certain how that fits in with Clause 78 because I have become rather lost, but I believe that the fundamental reason for the provision is as I have described it.
Lord Lucas of Chilworth: My noble friend may be absolutely right, but I fear that I did not quite manage to put the two together. The noble Lord, Lord Williams, is not correct in his understanding. The case that he quoted could not benefit from Clause 23 because it is not part of the undertakings for the collective investment and transferable securities scheme itself. I am given to understand that they dc not belong.
Foreign UCITS are controlled by their own home authorities. That is a directive requirement. So at the end of the day—and this is the point where the noble Lord opposite was wrong—there will be no disadvan-tage to a home-based unit trust as against a foreign-based unit trust because the directive is binding across all members. The foreign UCITS are controlled by the home authorities. We would have to be satisfied—and because we have the directive, we are already satisfied—that the home control was equally good as our own control. So the companies would be on a level footing.
The noble Lord, Lord Williams, indicates his dissent. He must make his point much clearer. I have tried very hard and I have given four different answers.
Lord Bruce of Donington: Quite so.
Lord Lucas of Chilworth: I have given four supporting answers. It is no use the noble Lord, Lord Bruce, laughing like that. The noble Lord, Lord Williams, has raised a number of issues and I have given him answers to each of them. I suggest to the noble Lord that he has not made his point clear enough for me to give the answer which he is seeking.
Lord Williams of Elvel: I am sorry if my expositior has been less clear than the Minister requires. I shall read in Hansard what he has said. I still believe that there is a serious point here to which the noble Lord would do well to give his attention.
Clause 23 agreed to.
The Deputy Chairman of Committees: If no noble Lord has an objection, I propose to put the Question, That Clauses 24 and 25 stand part of the Bill.
Clauses 24 and 25 agreed to.
Lord Skelmersdale: In moving that the House do now resume I suggest that we do not return to this Committee stage until a quarter past eight. I beg to move.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Rate Support Grants Bill
Brought from the Commons; read a first time, and to be printed.

Building Societies Bill
7.16 p.m.
Lord Brabazon of Tara: My Lords, I beg to move that this Bill be now read a third time.
When I moved the Second Reading of this Bill I expressed the hope that its central purpose—to reform and modernise building society legislation, and to give the societies new freedoms—would not be a controversial one in your Lordships' House. I am glad to say that, in the main, that has turned out to be the case. However, it has not stood in the way of the close and detailed scrutiny that the Bill has merited and has received.
I should like to thank all those who have played a part in our proceedings. I am grateful to the noble Lord, Lord Williams of Elvel, for the contructive way in which he has led for the Opposition on much of the Bill. I am grateful also to the noble Lord, Lord Barnett, for what I understand may have been among his last speeches from the Opposition Front Bench. We on this side shall miss his contributions, but we wish him well for the future.
There have been many interesting and authoritative contributions from noble Lords on all sides of the House with closer experience than I of building society matters. I must mention in particular my noble friend Lady Gardner of Parkes, who so ably moved a series of amendments on Report, and my noble friends Lord Selkirk, Lord Campbell of Croy, and Lord Plummer for their contributions throughout our proceedings. One noble Lord who spoke to nobody's brief but his own was of course the noble Lord, Lord Houghton of Sowerby. His trenchant contributions enthralled us, and I am glad that the Government were able to accept at least one of the amendments that he tabled.
I owe a particular debt of gratitude to my noble and learned friend the Lord Chancellor for tackling the thorny question of conveyancing. The noble Lord, Lord Foot, spoke with eloquence on those provisions. I should mention also my noble friend Lord Morris for his carefully thought out contributions both on that
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subject and on other parts of the Bill. Finally, I thank my noble friend Lord Skelmersdale for his help and support throughout the passage of the Bill in your Lordships' House.
While the debate during Committee and Report naturally tended to concentrate on the more contentious issues such as conveyancing and the conversion to company status, it is worth recalling now those many other provisions that have been welcomed on all sides. I refer to the fuller and improved services that the societies will be able to offer their members, the greater contribution they will now be able to make to the development of the nation's housing, the improved competition that will follow between building societies and others, and the improved arrangements for supervising the societies' custody of their investors' money.
The Bill will give building societies the ability to develop and evolve in a changing world. I believe that it leaves your Lordships' House in better shape than when it arrived. I beg to move.
Moved, that the Bill be now read a third time.—(Lord Brabazon of Tara.)
Lord Williams of Elvel: My Lords, we on this side of the House express our gratitude to the noble Lords, Lord Brabazon and Lord Skelmersdale, for the way they have conducted the proceedings on this Bill. It is an extremely complex measure and we have had some very interesting debates, but we have always felt that we have had the best possible co-operation from the Government Front Bench and I should like to record our appreciation of that fact.
So far as the Bill itself is concerned, I agree with the noble Lord that it is probably a better Bill on leaving this House than when it arrived. Nevertheless, we have certain reservations about it, as the noble Lord, Lord Brabazon, will have recognised from our debates. We are particularly concerned that the mutuality of the building societies should be preserved. We are concerned about the whole question of what I call the secondary market in mortgages. We are concerned still about the relationship between auditors and their clients; although the noble Lord was kind enough to accept one of our amendments on the subject which made some improvement. Nevertheless, it is an abiding matter of concern, as we shall see when we come to other Bills.
We still take the view that, over time, building societies will need to develop in the direction of the German mortgage banks and use the wholesale market more than the retail market. We believe that in the course of time the same kind of competition for retail deposits will break out among building societies and banks as broke out among banks and led to the closing down of many branches, and indeed to many amalgamations. It comes as no surprise to hear the announcement today that the Leeds Building Society is trying to merge with another building society in Yorkshire. We think that this is a feature of the future of building societies.
In expressing gratitude and reservations that we have about the Bill, we are nevertheless glad that the Bill has passed through your Lordships' House with

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good debate and co-operation from all sides. As my honourable friend Dr. McDonald said on Third Reading in another place, we wish the building societies well and we hope the Bill will enable them to move ahead in the right, sensible and cautious manner which we think they should.
Lord Campbell of Croy: My Lords, as this Bill leaves your Lordships' House, I should like to draw attention to two points. First, this is the first new legislation for building societies for about 100 years. Previous Acts have been virtually re-enactments of earlier arrange-ments. Secondly, the Bill, with cautionary and prudential provisos, enables building societies to carry out new functions which will promote competition in markets and enable them to carry out more services for the public. That is for the benefit of the general public and their convenience. I remind the Committee that it has been estimated that about half the adult population of the country is a saver or a borrower with a building society; so this is a measure which really does affect the general public.
I particularly congratulate the Members of the Government who have handled this Bill—my noble friends Lord Brabazon and Lord Skelmersdale. They have had the task of explaining the Government's intentions, answering questions about parts of the Bill—sometimes at very short notice—and dealing with amendments in quick succession. They have performed a great service in helping the House with the Bill. They carried out those tasks diligently and effectively. A particular burden has fallen on my noble friend Lord Brabazon who has been speaking in this House for the Treasury.
I should also like to join my noble friend Lord Brabazon in what he said about the noble Lords, Lord Barnett and Lord Williams who made sure that the important relevant matters about the Bill were raised and discussed. I too am sorry that the noble Lord, Lord Barnett, is going to the BBC, and therefore presumably has to be muzzled or at any rate can no longer speak from the Opposition Front Bench. We were of course for many years together in another place.
The Government adjusted the programme to provide a second Committee day, although at one time that looked absolutely impossible. I know that the building societies will be grateful that it has now been made possible for enactment of the Bill to take place before the other place goes into Recess at the end of this week. Provided nothing unexpected happens, that looks to be the position. I am grateful to my noble friend the Chief Whip because I know the problems he has had in trying to get a number of major Bills through this House. Both he and the Opposition Whips had to find this extra time and arrange the stages at appropriate intervals. I acknowledge that achievement because, on Second Reading I pointed out that there would be a great difference for the building society movement between completion this week and just missing completion and having to wait for three or four months—which would have been the effect for the building societies so far as concerns the
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commencement dates. As the societies have to deal with special meetings and all kinds of other procedures, the fact that they will shortly be able to see where they are will be extremely helpful to them.
The debates in your Lordships' House, and the differences of opinion that have take place, have not followed party political lines. The noble Lord, Lord Houghton, followed his own path, and there was much experience and logic in what he had to say. All points were clearly and cogently argued and discussed. It is now up to the building society movement to do the best it can for the British public with the new mandate and new powers it will have.
7.30 p.m.
Lord Houghton of Sowerby: My Lords, may I first of all say how much I agree with the concluding remarks of the noble Lord, Lord Campbell of Croy, and how much I appreciate the kind references to me by the noble Lord, Lord Brabazon.
We have been well served by both Front Benches during the debates on this Bill. I am grateful for all the courtesy I received during my interventions, which were probably too frequent and too long. However, for a number of years I have felt very keenly about much relating to building societies.
We must also remember that this is one of the major Bills of the Session. It is one of the longest and heaviest Bills. It rivals the Finance Bill, which we have just received, and that is always a good basis for comparison. There are 285 pages, containing 126 clauses and 21 schedules.
I felt at one stage that we were coming under a little pressure. When we were concluding the first day of the Committee stage some impatience was expressed by noble Lords—and if not impatience, anxiety—about the progress of the Bill. However, I should like to point out the strange career that this Bill has had in recent months. At this season of the year your Lordships' House is the whipping boy of Parliament and we suffer greatly. We are suffering now and are going to be here longer than the other place and come back from the Recess earlier. That is the pressure we are under.
The strange fact is that this Bill was introduced in another place on 19th December, 1985. It went into Standing Committee which had its first meeting on 21st January with the second meeting on 25th February. There was then a long waiting period. It took over three months for the next stage of the Bill to be reached in another place. It was not until 4th June that the Report and Third Reading of this Bill were taken both on the same day.
I think we can guess at what was happening in those three months. The Government found so much in the original Bill which was subject to criticism and suggestion by the Building Societies Association that I think those three months must have been taken up by reconsideration of much in the original Bill. Certainly large government amendments were put down for the Report stage in another place on 4th June. The Bill came to us on' 20th June and our first day of Committee took place on 3rd July and the second day on 10th July. The Report stage was last Friday and

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today we are at Third Reading. This great and complicated Bill is today reduced to supper break status. Another important Bill, the Finance Bill, is reduced to Friday morning status this week.
This is the humiliation of parliamentary procedure on great measures of state. As the noble Lord, Lord Campbell, reminded us a moment ago, this is the first major Bill for 100 years to review the functions and powers of building societies. I shall not make any complaints now. There has perhaps been a surprisingly small amount of parliamentary interest in this Bill, probably because of its complexity and because only those of us who have worked with and for building societies have been attracted to its many provisions. When Members of both Houses have declared an interest, more frequently than not that interest has been an honorary and unpaid one, for which they received one free lunch a year if they were lucky. I was one of those people and I know how valuable the vice-presidents have been to the Building Societies Association over the years.
As the noble Lord, Lord Campbell, and other noble Lords, have said, with the passing of this Bill we are starting a new era in the life and times of building societies. They will take quite big leap forward in providing ancillary financial services and, as regards the larger societies, unsecured money lending business which is already attracting considerable funds from overseas and into which the Building Societies Association wish to enter.
This is a principal purpose of the Bill and concerns me most this evening. So I hereby give up my self-appointed role as the lord protector of the security of tenure of boards of building societies, which I have been undertaking all through the discussions on this Bill. I now cast them adrift to the tender mercies of shareholders who possess votes but have no share, and to the big black crow known as the Building Societies Commission, the beating of whose wings will be heard in every building society boardroom for many years to come. I wish them well—I really do—but I am bound to say that in doing so I bid farewell to my own part in a movement in which I have spent so long, now that it has become really and truly an industry.
Movements which have generated a satisfying spirit of common endeavour are being absorbed into the motivations of the new age. Building societies, trustee savings banks and friendly societies all began as grass-roots collectives. They showed the way for commercial enterprise to come in and operate on a larger scale, very often more efficiently. But is it not ironic that while trustee savings banks, co-operatives and building societies were showing the way forward, those who built up the work and prosperity of those voluntary societies had no share whatever in the equity? All have carried the movement forward to be enjoyed by others and in a few cases it has been lost on the way. That is the end of my lamentations.
The range, limits, curbs and controls of the societies are numerous and complex. The Building Societies Commission has been given wide powers, but in some material matters even its judgment has to be submitted for the approval of both Houses of
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Parliament or be subject to the procedure of negative approval of both Houses. The Treasury and Parliament are therefore in the forefront of the background and they will certainly have a good deal to say to building societies in the course of their development. I think that the network of checks and balances, however irksome to the management, will be of great benefit to the societies during the rather long transitional period that lies ahead. They will retain the confidence of the public while gaining qualifications and experience in a wider field of financial wizardry.
The effect of changes brought about by the Bill, coupled with the forces of change already at work, gives rise to considerable speculation about the future. I am an avid reader of everything that comes from building societies, including the journal of the Chartered Building Societies Institute. The first thing that my eye saw when I looked at the current issue was that three new mergers were announced this week. One of them concerned a society of which I am a member. It is the first that I have heard of it. However, that is a sign of the times. In all three cases, it looks as though the merger is to establish a building society which will have an asset qualification. They want to go into the bigger category.
As regards the future, I was interested in a speech made by Mr. Leslie Priestley, who is the chief general manager of the TSB England and Wales, when he spoke at the Building Societies Association conference. He said:
"Based on the rationalisation of the industry to date, and in parallel with experience in the world of banking, it seems likely that by the year 2000 there will be no more than five major societies, with a maximum of 20 smaller ones, who will probably be operating in partnership with other financial organisations".
That is his prediction. Small may be beautiful, but beauty fades and we have to console ourselves with that well-known comment, "You can't stop progress".
To begin with, the societies will have to pick their way through their numerous opportunities. The strain on their staff will be heavy and the need for the recruitment of expertise will be strong. When societies begin their new activities, members such as myself will want to know the route that they will follow. It seems that in this wider field of opportunity there will be profits and losses to be made. It appears that the losses of subsidiaries will have to be borne by the societies. Yet one might ask: where do the profits go? This is one of the reasons for strict control. I should be much comforted to know that the societies are much more eager to devote their resources to the provision of housing to rent than to use them to enter the field of uneasy lending to people on reasonable incomes but who have no visible security.
I presume, as I asked the Minister earlier, that the societies must change their rules in numerous ways before they can proceed further. I hope that the period of apathy of large numbers of members of societies will end and that we can question our respective societies on their intentions. I hope that the communication between the boards and their members will be much better in future than it has been in the past. Some important questions of policy will have to be decided.
The other day a young lady of 18 told me that she was going to buy a car. The bank was willing to lend

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her the money, and she said that it was better to go to the bank, which charged only 5 per cent., than to take up hire purchase, where the rate was 8 per cent. I asked her what were the terms of the loan. It was £1,000 over two years repaid by instalments of £70 a month. I thought that with O-levels she should be able to calculate the true rate of interest.
Are the building societies going into that business? If so, they will have a choice between the going market rate, which may be nearer 25 per cent., or lending at a lower rate, with all the implications that that carries. They would certainly be competitive, but they have a limit on the resources that they can devote to such lending.
I was interested to note that in the same speech, Mr. Priestley said:
"Although half of the loans made by banks and finance houses were for car purchase"—
listen to that, my Lords!—
"at least 40 per cent. related to the home, for such things as central heating, double glazing, kitchens and bathrooms; a market to which the societies might feel they had a natural right of access".
I can only hope that the building societies will be prudent and cautious in the use of that new field of lending and have regard to their name, their traditions and one of the purposes which, as my noble friend Lord Williams of Elvel said, should be their main interest.
In general, in the past 30 years or so we seem to have gone through the welfare state and the subsidy state and now we are in the borrowing state. We have the PSBR to set the example; the personal mortgage borrowing requirement following on; and the financing of consumer credit, which is both pressing and profitable and amounts to many billions of pounds. We are told that industry is in need of investment. There are proposals to repatriate profitable investments in the United States and to bring them home to put into British industry. I hope that industry will get the investment that it needs. The market in financial transactions is growing so fast and is so profitable that it is difficult to imagine how industry can compete.
If I could see that the Bill contributed anything whatsoever to the nation's wealth, earning capacity or even a great deal to the building of houses to rent, I should be happy about it and welcome it. As long as industrial investment is likely to have a lower return than the interest that people are prepared to pay for money to spend on themselves, the country will continue to be in difficulties. Financial institutions are springing up all over the place, and they are putting the building societies under pressure. Financial transactions are a growing business, but factories continue to close.
7.45 p.m.
The Earl of Selkirk: My Lords, I am glad that the noble Lord, Lord Houghton, mentioned the story of the Bill, but he utterly forgot one thing. It is a magnificent example of the flexibility of our constitution. Many people never thought for a moment that we should have Royal Assent by August, but we stand a reasonable chance of that. That is because we have an extremely flexible constitution.
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This is an important Bill. Let there be no illusion. The standard of living in this country today depends more on building societies than on governments. That is a bold statement but it is just about true, and we should recognise the significance of that.
I thank the Government especially for their close consultation with those engaged in the business. I know of no Bill that has been examined more closely by those who work in the area and by the Government. I wish that they would do that more extensively on a number of other Bills that I can think of.
Looking a little further ahead, do we really think that the will of Parliament can be expressed and serve the best interests of the public only in 300 pages? But we continue to make such assumptions day after day in this House. Sometimes the Government should consider whether there is a better way to serve the public interest with greater brevity and clarity. I endorse what my noble friend Lord Campbell of Croy said, particularly concerning the care and the clarity with which the Government have dealt with the many complicated issues on the Bill. The House is greatly indebted to them and I thank them very much. I wish the Bill every good fortune and I hope that it will come into operation at the beginning of August.
Lord Gallacher: My Lords, I intervene briefly in no sense to detract from the significance of the Bill which your Lordships are about to pass, but rather to draw attention to what I regard as a piece of fiscal impartiality which will flow following the passing of the Bill on to the statute book. I refer to the impact of the new powers being given to the building society movement to make unsecured loans upon credit unions and in particular to what I regard as the probable demise of the credit union movement as a result of those powers unless certain action is taken by the Government to achieve what I have already described as fiscal impartiality between the two movements.
So far as legislation is concerned the credit union movement in Britain has been in existence only since 1979. It is severely restricted by the Act of that year in the matter of the rates of interest which it may pay to lenders, on the one hand, and the rates which it can charge to borrowers on the other. While those rates of interest, which are variable by order, were realistic in 1979 when the Act was passed, as a result of more expensive money they have become increasingly unrealistic and, as a consequence, the credit union movement now faces a building society movement which has complete freedom to fix both its borrowing and its lending rates. As I say, under Clause 16(8) of the Bill, there is further freedom to give unsecured loans to the extent of £5,000, or even more if subsequently that figure is varied by order.
I have written to the Treasury about that and I had a fairly dusty answer from one of the Ministers in that great department of state. It would appear that the basis for not doing anything to ease the problem is that the Minister is somewhat disappointed with the returns of certain building societies already registered. On making inquiry I found that the credit union movement, which is a shoestring organisation and totally insignificant in terms of the building society movement, made the mistake, unlike the Rochdale

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pioneers of a century ago, of seeking to interest the deprived and needy classes in the movement, as a consequence of which the Chief Registrar of Friendly Societies is dissatisfied with the way in which certain of those credit unions have been keeping or not keeping their books, as the case may be. While the Minister has said to me that once existing credit unions put their house in order he may be prepared to do something about it, he has said nothing about the restrictions which are currently imposed on those who would like to form credit unions but who are in no way able to do so by reason of the limitations on interest rates to borrowers and to lenders.
I hope that the Minister will bring this matter to the attention of his right honourable friend in another place. My plea is that, coincident with the passing of this Bill onto the statute book, action should be taken to ensure equality of opportunity and competition between the building society movement and the credit union movement, because it would be a great pity if an organisation which Parliament, with all-party support, as recently as 1979 decided should have legislation to enable it to flourish, is now doomed to die merely because this Government choose to give building societies the freedom which they currently deny to credit unions.
I echo what has already been said round the Chamber in support of the Bill. I regard the building society movement as a shining example of voluntary endeavour to the world. I hope that under the additional powers now being given to it, it will continue to flourish.
Lord Brabazon of Tara: My Lords, it only remains for me to thank all noble Lords who have been so kind about my noble friend Lord Skelmersdale and myself during the passage of the Bill. I shall draw the remarks of the noble Lord, Lord Gallacher, to the attention of my right honourable friend the Chancellor and the Chief Registrar of Friendly Societies. I cannot say any more than that at the moment.
On Question, Bill read a third time.
Lord Brabazon of Tara: My Lords, I beg to move that this Bill do now pass.
Moved, That the Bill do now pass.—(Lord Brabazon of Tara.)
On Question, Bill passed, and returned to the Commons with amendments.
Lord Skelmersdale: My Lords, I beg to move that the House do now adjourn during pleasure until 8.15 p.m.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 7.54 to 8.15 p.m.]

Financial Services Bill
House again in Committee.
Clause 26 [Grant and refusal of authorisation]:
Viscount Chandos Viscount Chandos moved Amendment No. 96:
Page 16, line 23, at end insert—
("() Notwithstanding subsection (2) above, the Secretary of State shall refuse the application if he considers that it is unnecessary due to the existence of one or more such organisations which are concerned with investment business of a kind with which the applicant is concerned and which have been or are likely to be recognised under section 10 above.")
The noble Viscount said: The purpose of the amendment is to give the Secretary of State or the designated agency the power to require a firm to use the relevant self-regulating organisation to gain authorisation rather than to register directly with the designated agency. Reviewing the precise wording of the amendment, I should say at this stage that I would prefer perhaps to have said that the Secretary of State shall have the right to refuse rather than shall refuse. Nevertheless, I hope that the import of the amendment can still be considered. It seems to me vital that we do not allow an easy escape route for firms to register with the SIB as a soft option if they believe that the SRO that covers the area of their business is too tough for their taste. Self-regulation must be wholehearted if it is to work effectively. An over-easy option for firms to register direct with the SIB would weaken the whole principle of self-regulation.
There is also the question of whether the SIB can have the resources to cope with any significant volume of direct registration or, if it does have those resources, whether it is inefficient through the duplication of facilities that the SROs have been set up to provide. In short, I believe that this amendment would strengthen the hand of the designated agency of the SIB in handling applications that may be seeking to circumvent the effective exercise of the SROs' powers and that, in turn, it would strengthen the SROs' ability to bring some of their more difficult members, or potential members, to heel. For that reason I beg to move the amendment.
Lord Cameron of Lochbroom: I am aware that the noble Viscount is echoing views expressed by his honourable friends in another place on this point. I would suggest that the power that is sought is unnecessary for the proper function of the regulatory system. It is expected that most businesses will choose to become authorised through membership of a SRO. Indeed, these bodies form the cornerstone of practitioner-based regulation. Those SROs now in the process of formation are being created at the initiative of practitioners who are making their contribution to the development of effective regulation in their area of expertise. These bodies, with their strong practitioner input, will be close to the market place.
I am confident that most businesses will see SRO authorisation as the most practicable route for them. At present there is no evidence to the contrary. I should say that SROs will be private bodies exercising powers over their membership by the contractual agreement between them. If powers are taken which could in effect, as here, be used to direct individual businesses to join SROs, I would strongly suggest that the status of these bodies will be affected. I do not believe that they should be forced to consider, and regard as fit and proper to admit to membership, applicants who are not keen to become members.

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The noble Viscount spoke about wholehearted self-regulation. I would accept that. However, that requires that all the participants in SROs are of the same mind; otherwise there would be cause for friction. I would suggest that a successful SRO depends on members who will be ready to co-operate with the spirit as well as the letter of the rule. An unwilling member who would prefer direct authorisation to SRO membership may well not have that kind of attitude.
There is also the fact that a business may feel that a SRO is not the right body to regulate its activities: for instance, that its charge is excessive, or its rule book or methods present problems for that particular business's activities. So why in that circumstance should the agency be able to upset the business's commercial judgment and force it to apply to a SRO? That is not supplying an easy escape route; it is facing, I suggest, proper commercial realities.
I realise that there is concern among some conglom-erates that they may have to join several SROs for various aspects of their business, and it is suggested that this would be costly and bureaucratic. But the SIB have made proposals for the creation of a lead regulator which would be responsible in particular for handling overall financial surveillance and this should minimise duplication of effort and over-bureaucracy. Even conglomerates should find SRO membership a convenient route for authorisation.
It is suggested that if many businesses were to seek direct authorisation, the system might become inefficient. Certainly, the agency would have to take on more staff both to consider applications and to monitor businesses thereafter. I do not believe that that would swamp the agency and make the system unworkable. By building up its resources and with extra staff the agency would cope. I would hope and expect, however, that most businesses will join SROs; but if they do not, the system that we are proposing is flexible enough to deal with them.
With those comments I hope that the noble Viscount feels able to withdraw his amendment; otherwise I must invite the Committee to reject it.
Viscount Chandos: I should like to thank the noble and learned Lord the Minister for that reply. I was aware of the problem of forcing firms to become unwilling members of SROs. We have to face the fact that some firms are potentially unwilling members of the whole self-regulatory and supervisory system that is being set up. It seems to me that if we are to avoid the risk of somewhat wasteful duplication of facilities, it might be preferable to have firms become unwilling members of the SRO rather than unwilling members of the SIB, imposing a strain on the SIB's resources to allow that direct representation. Nonetheless, I fully accept that the Government are aware of the problems of conflict inherent in this area and I therefore beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 97:
Page 17, line 9, after ("one") insert ("and the partnership shall notify the Secretary of State of any change in the partners").
The noble Lord said: I beg to move Amendment No. 97, standing in my name and the name of my
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noble friend Lord Morton of Shuna, in the words as on the Marshalled List. This is a fairly straightforward amendment which attempts to clarify a point which may be missing in the Bill as presently drafted. I beg to move.
Lord Cameron of Lochbroom: I would agree with the noble Lord that it is important for changes in partner-ship to be notified to the regulator. I would suggest that the powers already in Clause 48—that is to deal with notification regulations—will enable just that end effect to be achieved. The Secretary of State or the agency will be able to make regulations about notification of specified events and I would certainly expect changes in a partnership to be covered by those regulations.
Failure to comply will be a breach of rules and would make the partnership liable to all sanctions available under the Bill, ranging from a reprimand to, in an extreme and persistent case, perhaps even suspension or revocation of authorisation. Perhaps with that explanation the noble Lord might see fit to withdraw his amendment.
Lord Williams of Elvel: I am most grateful to the noble and learned Lord the Lord Advocate for his response. Can we take it from what he said that such a provision will form part of the regulations that will be imposed?
Lord Cameron of Lochbroom: Obviously, I cannot give an undertaking. As I have said, I would expect that regulations would require notification of changes. What has been said in Committee tonight I have no doubt will be noted in other quarters.
Lord Williams of Elvel: I thank the noble and learned Lord the Lord Advocate. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 26 agreed to.
Clause 27 [Withdrawal and suspension of authorisation]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 98:
Page 17, line 30, at end insert ("or has contravened any prohibition or requirement imposed under this Act").
The noble and learned Lord said: In moving this amendment, with leave and for the convenience of the Committee, I shall speak also to the following amendments—and I hope that this time the list is correct: Amendments Nos. 99, 102, 103, 155 to 158, 161, 168, 183, and 196 to 198. These amendments extend the circumstances in which the Secretary of State or agency may consider taking action. They will have the discretion, however, whether or not to act. In certain cases the clauses provide for the authorised person concerned to have his case referred to the tribunal or to make representations. I shall be happy to explain the amendments in more detail, but perhaps noble Lords will feel that that is sufficient. I beg to move.
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 99:
Page 17, line 33, at end insert—
("() Where the holder of the authorisation is a member of a recognised self-regulating organisation the rules, prohibitions and requirements referred to in paragraph (b) of subsection (1) above include the rules of that organisation and any prohibition or requirement imposed by virtue of those rules; and where he is a person certified by a recognised professional body the rules, prohibitions and requirements referred to in that paragraph include the rules of that body which regulate the carrying on by him of investment business and any prohibition or requirement imposed by virtue of those rules.").
The noble and learned Lord said: I have just spoken to this amendment. I beg to move.
On Question, amendment agreed to.
Clause 27, as amended, agreed to.
Clauses 28 and 29 agreed to.
Clause 30 [Authorisation in other member State]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 100:
Page 19, line 22, leave out from the first ("business") to end of line 23.
The noble Lord said: I beg to move Amendment No. 100 which stands in my name. It may be for the convenience of the Committee if I speak also to Amendment No. 101, in the words as on the Marshalled List. Again, these two amendments are designed to elicit certain clarity from the Government as to what exactly is intended in the Bill. Clause 30(1)(c) refers to,
"investment business of any particular kind".
I should be grateful if the noble Lord could clarify what exactly that means. If it does not mean anything, I think it should be omitted.
With regard to Amendment No. 101, on page 20 the Bill says:
"the absence or revocation of such a certificate shall not be regarded as indicating that those requirements are not complied with".
I am not quite sure that it is right to say that the absence of a certificate "shall not be regarded" as doing anything at all. I think it would be better to put it in a slightly more positive form. I beg to move.
8.30 p.m.
Lord Cameron of Lochbroom: I appreciate that the noble Lord opposite regards this as a probing amendment. Clause 30 fulfils a European Communities treaty obligation. It provides that a person from another member state is authorised to carry on investment business in the United Kingdom on a services basis—that is, a person from another country without a permanent place of business here—provided that he is authorised to carry on some or all kinds of investment business by his home state and provided that the law under which he is authorised affords investors in the United Kingdom protection at least equivalent to the Bill's provisions concerning the granting and revocation of authorisation. I think that that explains the first point about the phrase "of any kind".
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The second matter is simply that the amendment which the noble Lord has tabled would of course enable the Secretary of State to make a final judgment on whether the equivalence test is met, but under the treaty a person is entitled to do services business here if the test is met, and that of course is a matter of fact which is ultimately for the courts and, if necessary, the European Court to decide. That is why the qualification to the certificate that it cannot be final, that it must be subject to the qualification of the court's final decision, has been included. With those explanations, I hope that the noble Lord opposite will feel able to withdraw his amendments.
Lord Williams of Elvel: I am most grateful to the noble and learned Lord for his response. I accept that his explanation of what is in the Bill as at present drafted is a requirement of European directives. I think that I shall have to read what the noble and learned Lord has said, consider it and perhaps return to this whole question of how people who are authorised in the Community to do certain things can be authorised either automatically or not, or under certain circumstances, in the United Kingdom to do certain things. This is a question to which we shall return at a later stage of the Bill. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 101 not moved.]
Clause 30 agreed to.
Clause 31 agreed to.
Clause 32 [Termination and suspension of authorisation]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendments Nos. 102 and 103:
Page 21, line 10, after ("information") insert ("or has contravened any prohibition or requirement imposed under this Act").
Page 21, line 19, leave out from ("rules") to end of line 21 and insert (" , prohibitions and requirements referred to in subsection (1) above include the rules of that organisation and any prohibition or requirement imposed by virtue of those rules; and in the case of a person who is certified by a recognised professional body the rules, prohibitions and reqirements referred to in that subsection include the rules of that body which regulate the carrying on by him of investment business and any prohibition or requirement imposed by virture of those rules.").
The noble and learned Lord said: With the leave of the Committee, I beg to move Amendments Nos. 102 and 103, which I spoke to when I dealt with Amendment No. 79.
On Question, amendments agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 104:
Page 22, line 2, after ("or") insert ("certification by a").
The noble and learned Lord said: I beg to move Amendment No. 104. I spoke to this amendment when I moved Amendment No. 79.
On Question, amendment agreed to.
Clause 32, as amended, agreed to.
Clauses 33 to 35 agreed to.
Schedule 3 [Requirements for recognition of investment exchange]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 105:
Page 156, line 27, leave out from ("any") to end of line 31 and insert ("other body or person who is able and willing to perform it").
The noble Lord said: I spoke to this amendment when I moved Amendment No. 72. I beg to move.
On Question, amendment agreed to.
Schedule 3, as amended, agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 106:
After Schedule 3. insert the following new Schedule—

(SCHEDULE
LISTED MONEY MARKET INSTITUTIONS
PART I
TRANSACTIONS BY LISTED INSTITUTIONS WITH OTHER LISTED INSTITUTIONS OR THE BANK OF ENGLAND
1.—(1) This Part of this Schedule applies to any transaction between a listed institution and another such institution or the Bank of England in respect of any investment specified in sub-paragraph (2) below if—

(a) in the case of an investment within any of paragraphs (a) to (d) of that sub-paragraph, the transaction is not regulated by the rules of a recognised investment exchange; and

(b) in the case of any other investment specified in that sub-paragraph, the transaction is not made on such an exchange or expressed to be as so made.

(2) The investments referred to above are—

(a) a debenture or other instrument falling within paragraph 2 of Schedule 1 to this Act which is issued—

(i) by a recognised bank or licensed institution within the meaning of the Banking Act 1979 or a building society incorporated in, or in any part of, the United Kingdom; and

(ii) on terms requiring repayment not later than five years from the date of issue;

(b) any other debenture or instrument falling within paragraph 2 of Schedule 1 to this Act which is issued on terms requiring repayment not later than one year from the date of issue;

(c)loan stock, or any other instrument, falling within paragraph 3 of Schedule 1 to this Act which is issued on terms requiring repayment not later than one year or, if issued by a local authority in the United Kingdom, five years from the date of issue;

(d) any certificate or other instrument falling within paragraph 5 or 11 of Schedule 1 to this Act and relating to an investment within paragraph (a), (b) or (c) above;

(e) an option falling within paragraph 7 of Schedule 1 to this Act and relating to—

(i) an investment within paragraph (a), (b) or (c) above;

(ii) currency of the United Kingdom or of any other country or territory; or

(iii) gold or silver,

(f) rights under a contract falling within paragraph 8 of Schedule 1 to this Act for the sale of—

(i) an investment within paragraph (a), (b) or (c) above;

(ii) currency of the United Kingdom or of any other country or territory; or

(iii) gold or silver,

(g) rights under a contract falling within paragraph 9 of Schedule 1 to this Act by reference to fluctuations in—

(i) the value or price of any investment falling within any of the foregoing paragraphs; or

(ii) currency of the United Kingdom or of any other country or territory; or

(iii) the rate of interest on loans in any such currency or any index of such rates.

2.—(1) This Part of this Schedule also applies to any transaction between a listed institution and another such institution or the Bank of England by which one of the parties agrees to sell or transfer an investment falling within paragraph 2 or 3 of
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Schedule 1 to this Act if by the same or a collateral agreement that party agrees, or acquires an option, to buy back or re-acquire that investment or an equivalent amount of a similar investment within twelve months of the sale or transfer.
(2) For the purposes of this paragraph investments shall be regarded as similar if they entitle their holders to the same right; against the same persons as to capital and interest and the same remedies for the enforcement of those rights.

PART II
TRANSACTIONS BY LISTED INSTITUTIONS WITH PERSONS OTHER THAN LISTED INSTITUTIONS OR THE BANK OF ENGLAND
3. This Part of this Schedule applies to any transaction between a listed institution and a person other than such an institution or the Bank of England in respect of any investment specified in paragraph 1(2) above if the conditions in paragraph 4 below are satisfied.
4.—(1) Subject to sub-paragraph (6) below, the condition; referred to above are as follows.
(2) The consideration for a transaction in respect of an investment falling within any of paragraphs l(2)(a) to (d) above must be not less than £100,000.
(3) The value or price of the property in respect of which an option within paragraph 1 (2)(e) above is granted must be not lest than £500,000.
(4) The price payable under a contract within paragraph 1(2)(f) above must be not less than £500,000.
(5) The value or price the fluctuation in which, or the amount the fluctuation in the interest on which, is relevant for the purposes of a contract within paragraph 1(2)(g) above must not be less than £500,000.
(6) The above conditions do not apply if the person entering into the transaction has in the previous twelve months entered into another transaction with the same person, being a transaction in respect of an investment specified in paragraph 1(2) above in the case of which those conditions were satisfied
5. This Part of this Schedule also applies to any transaction between a listed institution and a person other than another such Institution or the Bank of England by which one of the parties agrees to sell or transfer an investment falling within paragraph I or 3 of Schedule 1 to this Act if—

(a) by the same or a collateral agreement that party agrees, or acquires an option, to buy back or re-acquire that investment or an equivalent amount of a similar investment within twelve months of the sale or transfer, and

(b) the consideration for the sale or transfer is not less than £100,000.

(2) Paragraph 2(2) above applies also for the purposes of this paragraph.
6. The monetary limits mentioned in this Part of this Schedule refer to the time when the transaction is entered into; and when the consideration, value, price or amount referred to above is not in sterling it shall be converted at the rate of exchange prevailing at that time.").
The noble Lord said: I beg to move Amendmen No. 106, and for the convenience of the Committee should like to speak to Amendments Nos. 113 and 123. With the agreement of the Members of the Committee, I should also like to speak to Amendment No. 106A being moved in the name of the noble Viscount, Lord Chandos, which is an amendment to Amendment No. 106.
I realise that this is a new schedule. It is of some length and I shall try to encapsulate what we are trying to do as best I can. The amendments to which I an speaking reflect the decision announced by my honourable friend the Economic Secretary in May. 1. was that the Bank of England should regulate the wholesale money, bullion and foreign currency markets. The behaviour of these markets is closely connected with the money supply, and the Bank of England as part of its economic responsibilities, has by tradition been closely involved with them and has generally supervised them.
Under the Bill as it was originally drafted some of these activities in these markets were covered by the Bill and others were not. I do not think that Members of the Committee would agree that this is an altogether satisfactory position. On reflection, it was decided that the Bank should be made responsible for these markets. The Government will be publishing a consultative document about their future regulation in the autumn.
As a consequence of this decision and in order to reduce supervisory overlap, the Economic Secretary announced that the Bill would be amended so as to remove from regulation under it certain transactions in the wholesale market undertaken by institutions, subject to supervision by the Bank under the new arrangements. These amendments implement that undertaking. They have been the subject of widespread consultation with interested parties; their general approach has been welcomed. We have sought to meet the detailed difficulties which have been drawn to our attention. However, we shall be happy to look at any further points which may arise when all those concerned have had the proper opportunity to study these amendments in detail.
Perhaps it might be helpful if I outline the main features. First, it applies only to institutions on a list which will be drawn up by the Bank of England. In order to ensure proper accountability, the criteria for admission to the list and arrangements for additions to it and removals from it will be subject to approval by the Treasury. The list is expected to include all those banks, building societies and licensed deposit-takers who are competent to operate in these markets, together with other institutions which satisfy the Bank that they are fit and proper so to do.
The exemption applies to certain transactions in the investments which are traditionally regarded as money market instruments. These are short bonds and debentures, including certificates of deposits; also currency futures and options, bullion futures and options, contracts for differences on interest rates, currency and other money market investments. For the benefit of noble Lords who are as unfamiliar as perhaps I am with some of the terminology—and I do not think that there are very many in the Committee right now—perhaps I should explain that a "repo" is an agreement to sell investments subject to an arrangement to buy them back at an agreed future date. I suppose that they could most simply be regarded as the equivalent of secured lending.
Transactions in relevant investments between two institutions, both of which are on the Bank's list or between such an institution and the Bank of England are exempt, whatever the size of the transaction. Such institutions will be large, professional operations well able to look after themselves and subject to Bank supervision. In the case of transactions between an institution on the list and someone else, the exemption applies only if the size of the transaction exceeds the limits set out in the new schedule or if it is with a person who can be treated as a wholesale counter-party. The size limits are deliberately set high: £100,000 sterling for transactions in bonds and debentures, and £500,000 sterling for futures and
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options. So the ordinary private investor is not deprived of the protections provided by the Bill. It is only wholesale market transactions which are to be exempted, and they will then come instead under the supervision of the Bank of England.
But even wholesale market operators sometimes need to do small deals. This is why the schedule provides that where a person has entered into at least one transaction over the prescribed limits within the previous year, he may be treated as a wholesale counter-party, and subsequent transactions with him are covered by the exemption, whatever the size.
I fear that I have spoken rather quickly and at some length, but I recognise I may well not have been able fully to explain the amendments. These are complex matters. The development of the markets and of new investment products has blurred the old distinctions between the straightforward money market instruments such as certificates of deposit and securities. These amendments seek to move the dividing line between the areas regulated by the Bank of England and those regulated under the Bill. The principle behind the move is widely supported. The dividing line inevitably is arbitrary. Everyone will have their own views about the details and, of course, matters will change. That is why Amendment No. 183 adds the new subsection to those listed in Clause 43 so as to ensure that amendments can be made by order if in future they are found to be necessary.
Before I sit down, I should say something about the amendment to the new schedule which is in the name of the noble Viscount, Lord Chandos. His amendment seeks to extend the exemption to a broker who is on the bank's list, who arranges transactions between two institutions not on the list if both those institutions were wholesale counter-parties so far as the broker was concerned. We think that this would be a sensible extension of the exemption. We are not sure that the wording suggested is totally satisfactory, but I can give the noble Viscount an undertaking to deal with what lies behind his amendment, as we see it, and bring forward an amendment which is acceptable. Of course, we will be in touch with him about it at a later stage.
The Deputy Chairman of Committees (Lord Alport): There is an amendment to Amendment No. 106 —Amendment No. 106A.
8.45 p.m.
Viscount Chandos Viscount Chandos moved, as an amendment to Amendment No. 106, Amendment No. 106A:
After Schedule 3, at end insert—
("7. This Part of this Schedule also applies to any transaction effected or arranged by a listed institution pursuant to paragraph 13 of Schedule 1 of this Act with or between persons other than listed institutions if such transaction would, if made between each of the persons with or between whom the transaction is effected or arranged and the listed institution, have been the transaction to which this Part of this Schedule would have applied.").
The noble Viscount said: The amendment to Amendment No. 106 moved by the noble Lord, Lord Lucas of Chilworth, is an important amendment and one which I think we should welcome unequivocally. I am delighted to hear (and I am very grateful to the noble Lord) that in principle what I am trying to

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achieve in Amendment No. 106A is acceptable to the Government. Again, looking at the wording of my own amendment, I feel this one is worthy of Groucho Marx on a good day, so I welcome the assistance of the noble Lord in trying to refine the wording to something that is perhaps easier for all of us to understand.
If I may take this opportunity to raise one or two points on Amendment No. 106 the role of the Bank of England is clearly a sensible and logical one in taking responsibility for supervising a broad range of instruments and markets that are related to the money markets. But this raises the question to which other noble Lords have already referred this evening—that of the lead regulator. I think it would be most important to try to clarify, if possible, the extent to which the Bank of England will follow the recommendations of the registered SROs as to acceptable firms to join the category of listed institutions not otherwise regulated by the Bank of England.
I think it would cause considerable problems if, in this instance, the Bank of England attempted to apply its own requirements on matters such as capital adequacy to firms which were not otherwise within its supervisory ambit. Clearly, one of the purposes of this Bill is to establish the concept of "level playing fields" for capital adequacy between different institutions subject to different SROs or different regulatory regimes. But nonetheless there will probably be variants, and I hope that those variants will still be accepted even where firms are being granted position under the title of listed institutions.
In passing, the area of "repo"—repurchase contracts—is one that should be included in the instruments that are subject to this schedule. But we should bear in mind nonetheless—this is something that I know the Bank of England is very conscious of—that the "repo" market in United States Government securities has been a graveyard for firms and an area of very substantial losses.
Finally, perhaps unintentionally in the drafting of this amendment the exemption that I think is from the Gaming Act 1845 that is being introduced in Clause 58 is unfortunately lost in the case of listed institutions operating in these markets; at least that is my understanding of this amendment. Given that that was a valuable exemption or clarification of the position where contracts for differences were questionably covered by the Gaming Act, if my understanding is correct, I would certainly hope that at a later stage it might be possible for that to be corrected. However, with the reassurances of the noble Lord, Lord Lucas of Chilworth, that the Government will use their best efforts to improve the wording of Amendment No. 106A, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Viscount Colville of Culross: With respect, the Motion that my noble friend has moved about the insertion of the new schedule is still before the Committee, and I hope I may be allowed to ask him some questions about it. I wished to leave this until after the amendment of the noble Viscount had been dealt with, and perhaps it would now be convenient for the Committee if I were to ask him some questions.
The Deputy Chairman of Committees: We are now back on the original amendment, and therefore it is perfectly in order.
Viscount Colville of Culross: I hope my noble friend Lord Lucas of Chilworth will forgive me for throwing these questions at him, but he will appreciate that this amendment has not been available to us for very long. Indeed, he talked about the possibility of further consultations and response to views put forward.
If I may, I should like to ask my noble friend three questions. First of all, as he said, there will be certain bodies, such as building societies and banks, which, in relation to the sort of investment transactions that are spelt out in his new schedule, will be exempted persons for that purpose and that purpose only. The very strong probability is that they will also be authorised persons for large quantities of other investment transactions.
If they are authorised persons, they will fall within various rules to be made by the SIB, or, I suppose, by one of the SROs, and will then come under Clauses 44 and 45 and the schedules we have already discussed. If they are to be exempt for the purpose of these money market transactions, what is the point of that exemption unless there is an undertaking at this stage that the SIB or the SROs will not make rules affecting them in relation to these very transactions? If that were to happen there would be no object in making them exempt. They would still be subject to rules and the exemption would have no effect.
Can my noble friends tell the Committee whether or not the SIB will be making rules about these very matters which would automatically then bring the persons, the organisations, the banks, whatever it is, who would otherwise be exempt, into the whole realm of being authorised persons and subject to the rules made thereby? That is the first point. In other words, is there going to be a complete differentiation between the rules made by the Bank of England, as is envisaged in this series of amendments, and rules made by the SIB so that they will not interfere with each other, they will be mutually independent?
The second question relates to the financial limits to which my noble friend referred in Part II of the new schedule. He said that they were intended to be somewhat on the high side, I think. I wonder why, when he refers to the wholesale market, for instance in relation to certificates of deposit, his department has chosen £100,000? The way that this was dealt with recently in the Finance Act 1984 related to the level above which the banks no longer automatically deducted tax from deposits placed with them.
The limit that was placed in Section 27 of that Act and in the eighth schedule, paragraph 3(8), was £50,000. That was thought, a matter of only two years ago, to be an adequate definition of the wholesale market for the purposes of certificates of deposit, which is one of the examples that my noble friend gave of the type of investment that this new schedule is supposed to be dealing with. Indeed, it obviously does, because it is one of the ones listed in Schedule 1 to the Bill. Why then have a different standard for the wholesale market as between the Finance Act of two years ago and the Bill now before us? That is the second question.

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The third question is something that I think my noble friend would be happy to deal with immediately. The new clause that he has spoken to, which is Amendment No. 113, not only deals with the actual tansaction—and he will see this in subsection (1) of his new clause—but also deals with "anything done for the purposes of that transaction. That presumably includes advice given leading up to somebody deciding whether or not they are going to embark upon that transaction.
How on earth is anybody giving that service going to know whether or not the person whom he is advising is going to limit himself to £100,000, or £500,000, particularly if the advice is being given in relation to a number of different transactions? If you have these words in then it seems to me that the whole question of the limit is difficult to understand. There is no way in which the person giving that advice can tell whether at that stage he is or is not exempt. He does not know whether he is going to be subject to a whole collection of different rules which will be made if the transaction that ultimately turns out to take place is below the limit now in the schedule.
Those are some of the points that have occurred to people I have been speaking to immediately upon looking at the new schedule. I hope that my noble friend does not think that they are hostile criticisms. They are not intended to be that at all. The undertaking that was given in another place has been admirable fulfilled, and nobody wishes to belittle that, but nevertheless there are still some details that need dealing with.
Lord Williams of Elvel: The noble Lord, Lord Lucas, in introducing this seems to have presented us with a new Bill. I was grateful to him when he said that a consultative document on this schedule would be issued. I hope that it will be issued before the Report stage in your Lordships' House, because we now have a completely new list in addition to other lists which are there under the Banking Act and other Acts such as the Companies Act. We have another list of money market institutions which the noble Lord defined in rather broad-brush terms. We on our side are interested to know exactly who qualifies for this list and what are the criteria for getting on this list, because obviously membership of this list confers considerable benefits on those who are there.
Having read through the schedule I share the doubts of the noble Viscount, and I also have, in addition to the noble Viscount's questions—and as he said these are immediate questions, they are not questions on reflection—doubts as to whether options as expressed in the new schedule are in fact money market instruments at all. After all, options are dealt with in the commodity exchanges. That is not by any definition a money market or a wholesale operation. Options are dealt in internationally. I have doubts about whether money brokers are going to be involved in this. Where do they fit into this whole equation?
With the noble Viscount, Lord Colville, I have doubts about the limits. After all, on the question of an option, £500,000 is not a very large amount. A number of operators on the London Metal Exchange
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will go in for options of that amount without any problem whatsoever.
All I can say is that we look forward to the consultative document. We wait to see what this all really means, what is the thrust of this new schedule. I understand clearly that there is, if I may say, a turf problem between the Bank of England and the Department of Trade and Industry. I understand that that turf problem has to be resolved. I obviously appreciate the Government's efforts in trying to resolve it, but until we have had clarification in the consultative document of what this all means I do not think I can comment further. I shall reserve my comments for the Report stage when it comes.
9 p.m.
Lord Lucas of Chilworth: Perhaps at the outset I may clear up something that may have been my misunderstanding. I said that the Government would be publishing a consultative document about their future regulation in the autumn. If the Committee will be kind enough to check Hansard they will see that I was talking about the Bill as originally drafted, and that some of the activities in the foreign bullion and wholesale markets and so on were covered by the Bill and others were not. I said that this was not an altogether satisfactory position and that on reflection it had been decided that the Bank should be made responsible for these markets. The Government will be publishing a consultative document about their future regulation in the autumn. We are not proposing to publish a consultative document about Amendment No. 106. Perhaps I should say here and now that we have already published that document in the form of Notes on Clauses, which I am sure the Committee will find helpful in giving consideration to what we have been discussing.
My noble friend Lord Colville asked me one or two questions, and I certainly did not think of them in any way in hostile terms. On the question of the SIB rules, the banks and so on, most banks will need to be authorised. We certainly would not expect the SIB or the SROs to make rules about the wholesale market transactions which would apply to exempt persons even if those persons were authorised by an SRO for another activity. The banks, SIB and SROs will in any case be co-operating. Indeed under the Bill they are required to co-operate about drawing up rules. So I do not think there will be any difficulty there.
On monetary limits, the moment when my noble friend started introducing tax schedules struck a little note of horror in me. I wonder whether I may put it to my noble friend this way? Limits are inevitably arbitrary. They were set high in this instance because only one transaction over the limit makes a client a wholesale counter-party for the following year. If we lowered the limits, perhaps down to the figure of £50,000 (which is the tax limit in the Finance Act 1984 to which he referred), we believe we should have to tighten up the definition of wholesale counter-party. So, frankly, a balance here had to be struck. On practical grounds we believe it preferable to have a very high limit but a rather more relaxed definition of "wholesale counter-party" than the other way round, which I hope gives my noble friend a real explanation

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of why the £100,000 and the £500,000 sterling figures were chosen.
My noble friend also asked whether the new clause in Amendment No. 123 includes advice and if so—
Viscount Colville of Culross: It was Amendment No. 113.
Lord Lucas of Chilworth: I am obliged to my noble friend—how this proposed transaction will be covered? The monetary limits are only relevant to the first deal with the wholesale counter-party. It is unlikely that any person advising others will confine himself to advice on these instruments. In practice we think there is no problem. If my noble friend can see a problem, as I said in my opening remarks, we should be very glad to talk further about it, because, as the noble Viscount acknowledged, we want to get this huge improvement as correct as we possibly can. I should be only too happy to engage in discussions between now and Report if that would help any member of the Committee.
Lord Williams of Elvel: I am most grateful to the noble Lord for his explanation. I am sorry, as he corrected me in my interpretation of what he said about a consultative document, that gloom suddenly descended upon the Chamber. Indeed gloom descended on me. I had rather expected that we were to receive a document which would explain the details of all this. However, I am grateful for his assurance that he will consult other parties. Perhaps I can issue myself an invitation as one of those who might be consulted as I might have something constructive to offer.
On Question, amendment agreed to.
Clause 36 agreed to.
Clause 37 [Clearing houses]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 107:
Page 24, line 36, at end insert ("or off the exchange if the rules of the clearing house so allow").
The noble Lord said: This is a simple amendment to try to extend the ability to operations which are off the Exchange but nevertheless form part of the clearing house activities. This happens frequently in a number of markets and I hope the noble Lord will find no particular difficulty with this.
Lord Lucas of Chilworth: Simple the amendment may be, but I have to confess to questioning whether it is necessary because the clause as it stands covers arrangements with a recognised investment exchange for transactions effected on the exchange. I realise that there is a type of transaction—in colloquial parlance, "off exchange dealing"—which takes place outside normal trading hours, for example. But on a well-run exchange—here I pause for a moment because I remind the Committee, if I may, that all recognised exchanges will be required to be well run—there are rules on reporting, clearing and so on which apply to such deals. I suggest therefore that the existence of
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these rules means, for the purposes of the Bill, that, however transactions are referred to colloquially, deals are effected on the exchange and are therefore covered by those rules to which I have referred. Therefore I do not believe that the amendment is necessary and I ask the noble Lord, Lord Williams, wherher perhaps on reflection he might like to withdraw it.
Lord Williams of Elvel: I am referring in particular to deals concluded on the commodity exchanges and, particularly on the London Metal Exchange. We do not know whether when the LME joins ICCH the contracts which will be dealt in outside what is known as the Memo (the 90-day basic contract which is dealt in on the ring) will be cleared in a clearing house or not. It seems to me that the clearing house may decide that, although they are not dealt in on the ring, they may well be part of the operations in the clearing house. Therefore the expression "on the exchange" is perhaps too narrow for that purpose. This is what I had in mind; but if the noble Lord assures me that that will be covered, then I am very happy to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 37 agreed to.
Clause 38 [Grant and revocation of recognition.]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 108.
Page 25, line 27, leave out ('and') and insert—
(" () has adequate arrangements and resources for the effective monitoring and enforcement of compliance with its rules or, as respects monitoring, arrangements providing for that function to be performed on behalf of the clearing house (and without affecting its responsibility) by another body or person who is able and willing to perform it;")
The noble Lord said: I beg to move Amendment No. 108 and with it perhaps I may speak to Amendment No. 110. The amendments impose additional requirements which have to be satisfied if a clearing house is to be recognised under this Bill. These requirements are similar to some of those which an investment exchange must satisfy if it is to be recognised. I am quite sure that the Committee will agree that a clearing house which is to benefit from the status of recognition should have proper arrangements for enforcing and monitoring compliance with its rules and should be able and willing to promote high standards of integrity and to co-operate with other supervisors. That is the purpose of these amendments. I beg to move.
On Question, amendment agreed to.
Lord Hacking Lord Hacking moved Amendment No. 109:
Page 25, line 28, after ("provides") insert ("or is able to provide")
The noble Lord said: As has already been expressed in Committee by the noble Lord the Minister, the Bill enables the Secretary of State under Clause 38 to declare a clearing house to be recognised for the purposes of the Bill. The Bill then sets out certain requirements that have to be met by a clearing house applicant to get his recognition under the Bill. Those conditions are set out in subsection (4), which has two paragraphs, (a) and (b). If the Minister moves his Amendment No. 110 (which I anticipate he will be

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moving shortly) and it is accepted by the Committee, there will be a third condition under a new paragraph, paragraph (c) as I anticipate it will appear in the Bill.
These conditions are as follows: First—and I am reading from subsection (4)(a)—that the applicant
"has financial resources sufficient for the proper performance of its functions".
I now read from subsection
"provides clearing services which would enable a recognised investment exchange to make arrangements with it that satisfy the requirements of Schedule 3 to this Act."
Then there is the proposed third condition under subsection (4)—and I read from Amendment No. 110—
"is able and willing to comply with duties corresponding to those imposed in the case of a recognised investment exchange by paragraph (5) of that Schedule".
My concern is—and this is the reason I move this amendment—that during the currency of the applica-tion the applicant to the Secretary of State has to show that he is providing clearing services; and this—unless the noble Lord, the Minister can help me and help the Committee and indicate that the presumption I am making is wrong—will if my presumption is not wrong, effectively exclude newcomers who are not currently providing clearing services but who have the capacity to do so.
My amendment seeks to give the Secretary of State power to grant recognition not only when the clearing house applicant is providing clearing services but is able to provide them. It is significant, if I may say so, that in the Minister's amendment the proposed third condition under subsection (4) actually uses the terminology, "is able and willing". It will therefore appear that my amendment fits rather neatly with the amendment that the Minister is about to move.
Lord Lucas of Chilworth: The last time that I had the pleasure of commending one of the amendments of the noble Lord, Lord Hacking, he accused me of being a little churlish. May I say how warmly I welcome his amendment which fills a technical omission. I commend it to the Committee.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 110:
Page 25, line 31, at end insert ("; and
() is able and willing to comply with duties corresponding to those imposed in the case of a recognised investment exchange by paragraph 5 of that Schedule.").
On Question, amendment agreed to.
Clause 38, as amended, agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 111:
After Clause 38, insert the following new clause:
("Overseas investment exchanges and clearing houses.
.—(1) Any application under section 36(1) or 38(1) above by a body or association whose head office is situated in a country outside the United Kingdom shall contain the address of a place in the United Kingdom for the service on that body or association of notices or other documents required or authorised to be served on it under this Act.
(2) If on any such application it appears to the Secretary of State that compliance, or full compliance, with the requirements for the making of a recognition order mentioned in section 36(4)
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or, as the case may be, 38(4) above is precluded in the case of the body or association making the application by—

(a) the law of the country in which its head office is situated; or,

(b) any action taken by or the practices of the government or any other authority or body in that country,

he may, subject to subsection (3) below, make a recognition order notwithstanding that those requirements are not complied with.
(3) The Secretary of State shall not make a recognition order by virtue of subsection (2) above unless it appears to him—

(a) that the body or association is, in the country mentioned in subsection (2) above, subject to supervision which, together with the rules and practices of that body or association, is such that investors in the United Kingdom are afforded protection in relation to that body or association at least equivalent to that provided by the provisions of this Act in relation to investment exchanges and clearing houses in respect of which recognition orders are made otherwise than by virtue of that subsection; and

(b) that the body or association is able and willing to co-operate, by the sharing of information and otherwise, with the authorities, bodies and persons responsible in the United Kingdom for the supervision and regulation of investment business or other financial services; and

(c) that adequate arrangements exist for such co-operation between those responsible for the supervision of the body or association in the country mentioned in that subsection and the authorities, bodies and persons mentioned in paragraph (b) above.

(4) In determining whether to make a recognition order by virtue of subsection (2) above the Secretary of State may have regard to the extent to which persons in the United Kingdom and persons in the country mentioned in that subsection have access to the financial markets in each others' countries.
(5) In relation to a body or association declared to be a recognised investment exchange or recognised clearing house by a recognition order made by virtue of subsection (2) above—

(a) the reference in section 35(2) above to the matters dealt with in Schedule 3 to this Act shall be construed as a reference to corresponding matters;

(b) sections 36(7) and (8) and 38(7) and (8) above shall have effect as if the requirements mentioned in section 36(7)(a) and in section 38(7)(a) were those of subsection (3)(a) and (b) above; and

(c) the grounds on which the order may be revoked under section 36(7) or 38(7) above shall include the ground that it appears to the Secretary of State that revocation is desirable in the interests of investors and potential investors in the United Kingdom.

(6) In this section "country" includes any territory or any part of a country or territory.
(7)A body or association declared to be a recognized investment exchange or recognised clearing house by a recognition order made by virtue of subsection (2) above is in this Act referred to as an "overseas investment exchange" or an "overseas clearing house".").
The noble Lord said: I beg to move Amendment No. 111. I should like to speak at the same time to Amendments Nos. 244, 247, 255, 345, 371, 373, 379 and 403. All these amendments will facilitate the proposed trading links between exchanges and clearing houses in the United Kingdom and those overseas. The principal amendment is a new clause dealing with overseas investment exchanges and clearing houses. This is desirable in view of the increasingly international nature of the financial services industry. A number of links are being planned between exchanges and clearing houses here and overseas which will enable investors in the United Kingdom to benefit from the increasingly diverse variety of investment services available throughout the world. It will also help to promote foreign investor services provided by investment businesses in the United Kingdom.
There are already some major overseas exchanges and clearing houses which are participating in discussions with the Department of Trade and Industry and others in this country with a view to co-operation in the provision of investor protection across international boundaries. This is in keeping with the recognition given to such overseas exchanges as the New York, Toronto and Tokyo stock exchanges under the provisions of the Prevention of Fraud (Investments) Act which this Bill will replace. Members of the three exchanges I have mentioned have had special status for many years through their United Kingdom associations. Furthermore, as investment opportunities become increasingly international, so our regulatory framework should be able to take into account arrangements which exist overseas for the protection of United Kingdom investors who transact investment business there.
These amendments respect the sovereignty of overseas governments just as we hope they will respect our own. Furthermore, they contain provisions which permit the Secretary of State to have regard to the extent to which persons in the United Kingdom and countries overseas have access to the financial markets in each other's countries. They require the Secretary of State to be satisfied that adequate arrangements exist for mutual co-operation by the sharing of information or otherwise. They also provide that the Secretary of State may not make a recognition order in respect of an overseas investment exchange or clearing house unless it appears to the Secretary of State that the overseas investment exchange or clearing house is subject to supervision which, together with its rules and practices, is such that investors in the United Kingdom are afforded protection in relation to that exchange or clearing house at least equivalent to that provided by compliance with the requirements of Clauses 36(4) and 38(4) respectively.
We discussed those clauses earlier and touched very gently on this subject. The object of course is to ensure that the protection is at least equivalent to that provided here so that there is no advantage to an overseas exchange and no disadvantage to a United Kingdom investor. The amendments I am proposing to the Committee respond to the need for the Bill to reflect the increasingly international nature of financial services. They make the appropriate provisions for overseas investment exchanges and overseas clearing houses. I commend this group of amendments to the Committee.
Lord Bruce of Donington: We are grateful to the noble Lord for having explained Amendment No. 111, and for having given us a list of the other amendments that we understand are associated with it. In so far as the noble Lord described the purposes of
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this series of amendments to us, they appear to be quite satisfactory.
However, the noble Lord mentioned by name three reputable exchanges that are of international standing and very widely respected in the financial community. There are, of course, other investment exchanges which although perhaps in formal terms might stand up to the requirements of this particular clause, nevertheless, in the experience of some investors in the United Kingdom, lack enforcement powers in their respective states. I shall not mention any particular exchanges, because it would be quite invidious, but the noble Lord must know which exchanges I have in mind.
I would ask that the noble Lord give the Committee an assurance that some attention will be paid by the Secretary of State not only to the formal claims and formal statutes of these exchanges, other than those I have already mentioned, but also that he will generally satisfy himself, if necessary by detailed reference to our overseas representatives in the states concerned, that the powers of enforcement are equal to the formal powers that apparently exist.
As I said, we have not really had the opportunity of examining this series of amendments in detail. In general, we agree with the purpose of the noble Lord, but he will quite understand, in view of the time factor, that we reserve our right to come back if necessary on Report or possibly, if the noble Lord is available—as I know he very often is—to make unofficial representation before Report stage.
Lord Lucas of Chilworth: May I quickly respond to the noble Lord? The first answer is, yes, I shall be very happy to talk about this and I shall make myself as available as one reasonably can at this time of the year. Secondly, I mentioned those three exchanges only because they have had special status. Other exchanges have not necessarily had that status, and I should like to give the noble Lord the assurance that he seeks. We would want to make sure whether the laws in an overseas country in which an exchange has its head office, or the regulatory authorities in that country, might prevent an exchange from complying fully with each and every requirement of Schedule 3 and whether there might be some restriction on the showing of information. Notwithstanding that, the rules and the practices of the exchange, taken together with the overseas country's laws, must afford to investors in the UK equivalent protection to that afforded by our own. So I can give the noble Lord that assurance quite categorically.
On Question, amendment agreed to.
Clause 39 agreed to.
9.25 p.m.
Clause 40 [Lloyd's]:
Viscount Chandos Viscount Chandos moved Amendment No. 112:
Page 27, line 6, after ("persons") insert ("only fora period of three years commencing when this Act is passed").
The noble Viscount said: On the Second Reading of this Bill in your Lordships' House I gave a trailer to the fact that the question of the exemption of Lloyd's remained a matter of considerable concern both to the general public and to members of the financial community. We heard from the Government Benches during the Second Reading debate—and there were long discussions in another place—about why the Government believed it was correct that Lloyd's should be exempted from the Financial Services Bill; that many of the offences or malpractices that appear to have been committed in the insurance market were committed before the Lloyd's Act was passed in 1982; that more time was needed to assess the efficacy of the 1982 Act, and that the inquiry set up under the chairmanship of Sir Patrick Neill would assist in doing this.
So, while I was initially inclined to believe that there was a case that Lloyd's be brought immediately under the provisions of the Financial Services Bill, I think I have been persuaded that it would be wrong to attempt to bring it forthwith under the purview of the Bill, because of the transitional state that the market is in, the need for more time to assess the efficacy of the 1982 Act and, perhaps more pragmatically, because of the major task faced by the SIB in grappling with the legislation as it will affect all other markets. Nonetheless, it seems that the investment aspects of the insurance business and conceivably even the marketing of Lloyd's membership—and we have seen reports of Lloyd's membership being marketed to people of quite modest wealth—should potentially come within a broad interpretation of financial services.
The compromise that this amendment proposes is that Lloyd's will be exempted for a period of three years from the enactment of the Bill, during which period it would be perfectly reasonable to expect the 1982 Act to be fully and comprehensively reviewed for its efficiency. During that time, clearly, the Neill inquiry will report. If the amendment were accepted by the Government, it would mean that Parliament would necessarily have the chance to reconsider the position of Lloyd's in respect of financial services legislation once the Lloyd's Act and the Neill inquiry have been fully reviewed. For that reason, I beg to move.
Lord Fanshawe of Richmond: I have spent 38 years working at Lloyd's. I have been with the same firm for all that time, since 1948, and I am now a director. When I first joined 38 years ago, there were 100 employees and today there are something like 15,000. It is now the largest insurance broking firm operating in the United Kingdom and indeed the largest based outside the United States. I have also been for 35 years a member of Lloyd's, and obviously I am very concerned about the fact that many people outside this
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Committee have been making the comment that Lloyd's should be included in the Bill when it becomes an Act.
The noble Viscount, Lord Chandos, told the Committee that he has been persuaded by the various arguments put to him that Lloyd's is covered, and covered properly, in the 1982 Act. Indeed, I played some part in helping that Bill pass through another place. I believe that it would be a pity if the amendment of the noble Viscount were to be agreed to this evening because it would continue the uncertainty that has caused so much concern in Lloyd's over the past few years. The 1982 Act, as the noble Viscount himself said, has been working. It has worked extremely effectively, contrary to some reports that one has seen in the national press recently. Exemption of Lloyd's from the Bill will enable the Lloyd's Act to continue to work over the years ahead. To introduce any form of uncertainty such as the amendment would provide could undermine the workings of that Act.
As the noble Viscount stressed, all the scandals and problems of Lloyd's have horrified those of us who work in that community just as much as those outside who are interested in Lloyd's, particularly in other areas of the City of London; but one must accept the fact that the actions taken have been dealing with incidents that occurred before the 1982 Act came into existence. This new tailor-made regulatory system was designed specifically to take account of the fact that Lloyd's names are not investors in the ordinary sense, but are themselves in business as insurers. A normal investor can put his money into a business and can presumably—sometimes at a disadvantage to himself—take out the money. An investor in Lloyd's is not an investor because he cannot do that. A name at Lloyd's puts his money into Lloyd's and insures not for other people but on behalf of himself through an agent at Lloyd's—and an underwriter at Lloyd's. He therefore cannot suddenly take his money out or be treated in the same way as an investor can be treated in other parts of the City of London; or, indeed, outside the City.
It is clear also that all the wrongdoings which have been made the subject of so much publicity, and which took place before the 1982 Act came into force, have been tackled by the new and enlarged Council of Lloyd's. Therefore, I think it is misplaced to judge the present quality of regulation of the Lloyd's market on past malpractices. As someone who is working in that community it seems to me that Lloyd's has acted with commendable speed and vigour to put in place since January 1983 a comprehensive and stringent body of rules which set the standards of conduct of Lloyd's members and underwriting agents. In no less than 40 by-laws Lloyd's has enacted conduct of business rules which it believes will ensure high standards of behaviour. Certainly as someone involved in that market, that is my view.
If, however, any of those rules are breached in the future, Lloyd's have a thorough, effective and fair procedure for investigating and disciplining any misconduct which may have taken place. In fact, its active pursuit of cases of misconduct contrasts with the apparently less active policy of the Director of Public

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Prosecutions. There is some considerable concern in the City and in Lloyd's that various individuals who have been proved to have carried out malpractices in Lloyd's, have not yet been brought to account in public and put on trial.
Lloyd's bylaws, which have been put into effect since the Act became effective in 1983, have concentrated on enforcing very similar principles to those enshrined in the Bill we are now discussing—disclosure, avoidance of conflict of interests and a fit and proper test for practitioners. Lloyd's has made extensive reforms on reporting and disclosure. Of particular importance are the comprehensive rules on accounting and auditing. Lloyd's has also taken a firm stand on conflict of interests, which is very important. In order to ensure that Lloyd's market is run by fit and proper—that is, honest, competent and solvent—underwriting agents, all agents have been required to go through a new vetting procedure for registration and any unsuitable agents are weeded out.
I believe that since the 1982 Act came into force—it was very controversial at the time and caused a great deal of debate in both Houses of Parliament—an efficient regulatory and protection system has been evolved and is now in action. That is not an academic statement from someone looking at the scene from outside. It is a statement from someone involved in the business and working there daily who is very much aware of the effect that these new rules are already having on business life in Lloyd's. In my opinion, they were well overdue.
It would be much better if we leave matters as they are, see how the Act develops and what the Neill Committee reports. If the situation then arises in which Parliament has to look at the position again, it can always take place. There is no need, and it can only provide more uncertainty, to have an amendment such as that proposed by the noble Viscount, Lord Chandos. I hope that the Committee will reject it.
Lord Hacking: I, too, am opposed to this amendment. After the words of the noble Lord, Lord Fanshawe, I do not intend at this stage to advance any further detailed argument on what steps have been taken at Lloyd's since the passing of the Lloyd's Act 1982. It may be necessary for further argument to be put forward if the noble Lord, Lord Bruce, moves his motion to oppose the Question that Clause 40 stand part of the Bill, but at this stage, particularly after the words of the noble Lord, Lord Fanshawe, I shall not advance any such further argument.
I am opposed to this amendment because I am applying the test which the noble Viscount, Lord Chandos, applied when he tabled his amendment which is now before the Committee. That test was: at this stage should Lloyd's be taken out of the exempt status under this Bill? Having thought about the matter and considered it in more detail, the noble Viscount has fairly conceded to the Committee that it would not be right at this stage to take Lloyd's out of the exempt status of the Bill. If that is correct, my submission to the Committee is that we should not try
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to foresee the future or place anything in this Bill which deals with a time, three years ahead, when we do not know what then will be the functioning of Lloyd's, nor what then will be the effective functioning of this Bill.
There are therefore two areas which require consideration. One is the continued effectiveness of the new Council of Lloyd's under the Lloyd's Act 1982; the other is the effectiveness of the provisions of this Bill. In my submission to the Committee both those things should be considered before we consider taking Lloyd's out of the exempt status of this Bill. If that is right—and this is the test which the noble Viscount has applied—it is not appropriate at this stage to judge what the scene in the market will be three years from now.
Lord Cameron of Lochbroom: I know that this is one of the contentious issues in the Bill. Although the noble Lords opposite have not spoken, I think it is only right that in what I say now I should cover the whole of the Government's case both as regards this amendment and generally on the matter of Lloyd's. The case is quite simple. In essence it is that it is not only wrong to make a judgment on Lloyd's before Sir Patrick Neill's inquiry is complete, but that in any event this Bill is ill-equipped for the task of regulating Lloyd's.
I have been reminded by my noble friend Lord Fanshawe of the general background against which this debate takes place. Perhaps I may just add to what he has said—that it is only four years since Lloyd's itself embarked on a major reform of its system of regulation. It did so in a private Act. That is to be noted. It is an earnest of the good faith of Lloyd's. It made some major changes at Lloyd's, as my noble friend reminded the Committee. For instance, it introduced the Council of Lloyd's so as to facilitate the process by which by-laws are made. It introduced on to the council an independent element of persons whose appointment has to be confirmed by the Governor of the Bank of England. It introduced a new disciplinary system and gave the council very wide by-law-making powers.
The Act set in train a process at Lloyd's which is still under way. My noble friend, of course, has reminded us of the 40 by-laws and the areas which are covered: matters such as disciplinary procedures, the conduct of underwriting agents, and the nature of the agency agreement between a member of Lloyd's and his underwriting agent. However, the Government have come to recognise that the present Bill sets new standards in investor protection. Indeed, all our perceptions have changed since Professor Gower was asked to undertake his review in July 1981.
In January this year the then Secretary of State for Trade and Industry set up an inquiry, headed by Sir Patrick Neill, to consider the regulatory system at Lloyd's. The inquiry is considering whether the regulatory arrangements set up at Lloyd's under the 1982 Act provide protection for the interests of members of Lloyd's comparable to that proposed for investors under the Bill. The Neill inquiry is now well under way and Sir Patrick and his colleagues have been at work for some months. They have now

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received the bulk of the evidence, and indeed we look forward to their report, which we now expect to receive in the autumn. When we have the inquiry's report we shall then consider what to do. Should government legislation be necessary—and that is only one of a number of possible outcomes—we will bring forward the necessary proposals.
Let me just remind the Committee of what my right honourable friend the Prime Minister has said on the matter. Before the Neill Committee was set up, she said in December of last year:
"We are watching events at Lloyd's carefully and will not hesitate to take whatever legislative or other action is necessary".
We have both set up an inquiry and expressed our will to act should that be necessary.
I think that we must consider the proposal from the opposite Benches against that background. It is not just or fair, I suggest, to apply the Bill to Lloyd's when such an inquiry has been set up and has to report. We must now let the inquiry do its work and not pre-empt its conclusions. Deleting Clause 40 amounts to pre-empting that conclusion, since it would subject underwriting agents at Lloyd's to a quite new and separate regime from Lloyd's Acts.
I now turn to the amendment which the noble Viscount moved. I am bound to say that I find it curious. It has the effect that whatever happens—however Sir Patrick Neill's committee reports and however the Government and Lloyd's respond to that report—Lloyd's will not be covered by this legislation for three years, but thereafter it will fall within it. I cannot think that that is a wise course both because of its inherent lack of flexibility and because this Bill anyway is not equipped to regulate Lloyd's.
The amendment has another effect which I think is undesirable. Under it, Lloyd's will be subjected to this legislation unless there is primary legislation. But Lloyd's has a new system of regulation set in place by its Act of 1982 which was not in place at the time that the troubles at Lloyd's took place. We do not regard it as proved that the new system is not sufficient. We are looking to Sir Patrick Neill's inquiry to provide a comprehensive and authoritative answer to that question. Nevertheless, at the moment I should have thought that it was only proper that Lloyd's, like any other person, should be able to call in aid the presumption of innocence. The amendment, on the other hand, shifts the burden the other way. It assumes that the present system at Lloyd's is unsatisfactory. It provides that unless the Government subsequently ask Parliament for different legislation, Lloyd's is covered by the Bill.
I listened to the noble Viscount. He said that he was persuaded. I ask: persuaded by what? What evidence was there to satisfy him that Lloyd's was after three years to be regarded as guilty? Is this some kind of suspended sentence? That is no way to legislate. As my noble friend Lord Fanshawe said, it leaves the matter uncertain. We should be providing for certainty and not uncertainty in the Bill.
That brings me to the Government's second objection to the amendment and also indeed to the proposal to delete Clause 40 entirely. As was made quite clear from the start of the debates in the other
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place, we do not think that this Bill is an appropriate vehicle for regulating Lloyd's, even if it were shown that such regulation was necessary.
The regulation of Lloyd's is not simply a matter of investor protection, which of course is the sole subject of the relevant part of this Bill. Indeed, my noble friend Lord Fanshawe reminded us of the difference in the nature of Lloyd's members as names as compared with the investor with whom we are dealing here. It is true that a major part of the regulation of Lloyd's, and the part which has received the greatest recent attention, and which of course is the subject of Sir Patrick Neill's inquiry, is the protection of the interests of members of Lloyd's as providers of capital for insurance business.
The regulation of Lloyd's must also cover policyholder protection—that is, looking after the interests of those who take out a policy of insurance at Lloyd's. The paramount public interest lies in ensuring that insurers can meet their liabilities and in that Lloyd's has been singularly successful.
Those two aims—policyholder and investment protection—must necessarily often conflict. For example, the time-honoured principle of the unlimited liability of members of Lloyd's is an important piece of policyholder protection. It is hardly in the interests of members of Lloyd's themselves. Any regulation of such matters must strike a careful balance between the two aims, as must any system of regulating Lloyd's.
The Bill contains no provisions for policyholder protection. It does not even repeal the Lloyd's Act. The amendment thus would have the effect that in three years a fresh set of rules would be laid on top of Lloyd's statutory rules. Those rules would take no account of the need to protect policyholders. Deleting Clause 40 would have the same effect but would occur as soon as the Bill comes into operation. That is a sure recipe for legislative chaos.
As I said, we have set up an inquiry into the protection of the interests of members of Lloyd's. We have made it clear that it is our intention to legislate if, as a result of the inquiry, we believe that to be necessary. Let us wait for the results of that inquiry before jumping into any hasty or ill-fitting solutions. In particular, we should recognise that the Bill is not one which is suitable to regulate Lloyd's. I ask the Committee to reject the amendment, and if the matter arises to keep this clause in place in the Bill.
9.45 p.m.
Viscount Chandos: I feel that I have a formidable task in trying to justify my amendment after the comments of the noble and learned Lord the Lord Advocate, as well as those of the noble Lords, Lord Fanshawe and Lord Hacking.
I am still essentially unrepentant. The last thing I want to create is legislative chaos. Nonetheless, I should like to create a time limit on the presumption that Lloyd's should not be subject to a further review of legislation. I have no doubt that if that is the conclusion of the Neill inquiry it may well be most appropriately done through an amendment to the Lloyd's Act.

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It is difficult, however, not to be conscious of the extreme pressure on parliamentary time that there has been during the past year or even longer. It is not easy to be confident that that will necessarily be different in years to come. I believe that the public concern about Lloyd's is at a sufficiently high level, and is justifiably at that level notwithstanding the enactment of the Lloyd's Act 1982, for a requirement for Parliament to reconsider the matter within the next three years to be in the public interest.
The noble Lord, Lord Fanshawe, repeated the suggestion that other noble Lords have made on other occasions, that the 1982 Act can be seen to be working. He may have suggested that I may have believed that. My view on that is that the jury is out and with the jury being chaired by as formidable a foreman as Sir Patrick Neill, there should be no attempt by me to prejudge the issue. I still think that it would be helpful to have the framework of a time limit within which both he and all other interested parties could be confident that the necessary parliamentary time would be available.
I am not sure that I agree with the argument that the Bill is, as it were, ill-equipped to cover Lloyd's. There are products and markets that we have just included as exempt but subject to the supervision of the Bank of England in co-operation with the Secretary of State or the designated agency which are as far removed, I would suggest, from conventional investment as Lloyd's is from ordinary investment. Nonetheless, waiting perhaps with bated breath to hear what the heavy guns on the Labour Benches are going to say in support of the removal of Clause 40 as a whole, I would propose to withdraw my amendment, encouraged once more by the assurance of the noble and learned Lord the Lord Advocate and the Prime Minister herself, that if the Neill inquiry finds that further legislation is needed, then time will be made for it. I hope that it will be treated with some urgency. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 40 shall stand part of the Bill?
Lord Bruce of Donington: I beg to oppose the Motion that Clause 40 stand part of the Bill. The noble and learned Lord the Lord Advocate approached this part of the Bill with far less diffidence and ambiguity than he has approached other sections of it. This is quite clearly a matter on which the Government are in no doubt at all. They are in absolutely no doubt that the exacting standards for investor protection as set out in the Bill should not apply to Lloyd's or to members of Lloyd's.
I should perhaps read out Clause 40 since this is what we, on this side of the Committee, feel should be eliminated from the Bill. Clause 40 says:
"The Society of Lloyd's and persons permitted by the Council of Lloyd's to act as underwriting agents at Lloyd's are exempted persons as respects investment business carried on in connection with or for the purpose of insurance business at Lloyd's".
So immediately we are faced with the fact that but for this clause, the Government themselves consider that the activities of Lloyd's and persons permitted by the council to act as underwriting agents at Lloyd's do, in
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fact, carry on investment business in connection with or for the purpose of insurance business at Lloyd's. There is no question, if I may say this to the noble Lord, Lord Fanshawe, of this particular part of the business not being investment. According to the Government, it is investment. It is investment in a different form, but investment nevertheless. Otherwise, there would be no necessity to have Clause 40 in the Bill at all. The Government do not seriously contend—and did not contend in another place—that part of Lloyd's business was in connection with investment. There is no doubt about it. The Government admitted it. Nothing was raised in contradiction to that.
Lord Fanshawe of Richmond: Will the noble Lord give way?
Lord Bruce of Donington: I must continue for the moment, but I shall come back to the noble Lord. If the noble Lord wishes to argue with Her Majesty's Government that this particular business to which he refers is not investment business as set out in the Bill, he is quite at liberty to do so. According to the Government, it is. Otherwise, Clause 40 would have been unnecessary.
I hasten to say immediately, for the avoidance of doubt, that in moving that this clause do not stand part of the Bill it is not part of an attempt by me to cast any mud at Lloyd's. The misdeeds of certain members of Lloyd's—which do not yet appear to have attracted the urgent attention of the DPP—are very well known to the world at large. I willingly accept that they are all pre-1982 and it is not my purpose here to scandalise further by regurgitating what has happened in the past. I ask the noble Lords to accept that. Whatever anxieties have been raised—and there has been much cause for anxiety—the noble Lord himself will be aware of the report in the press only two or three days ago of the suicide of one of the outside names because of the monstrous injustice and fraud done upon him. I have no wish in any way to associate the current council of Lloyd's with any kind of misdeeds whatsoever. I am quite willing to accept that since the passing of the Act the council has carried on in a completely lily-white fashion and is beyond all reproach.
It is not my case that Lloyd's is guilty of something until it proves itself innocent. My case is this. So well ought it to have done in the past four years that it is fully capable as of now of complying with the conditions laid down in the Act for investment protection and that all it needs to do now in order to bring itself within the general comity of investor protection is to place itself under the SIB.
What harm is done to the individual name at Lloyd's? What harm is done to the policyholders if members of Lloyd's, and its regulations, were placed under the supervision of the Securities and Investments Board? People seem to think that one can harm an organisation, or a structure. One cannot. One harms only individuals. What harm would it do—it might be to any individual member of Lloyd's or any individual name—if they came under the supervision of the SIB? It might irritate them because Lloyd's is a nice cosy club all on its own and wants to

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maintain—for quite sentimental and proper reasons—its own doughty independence from the rest of the City. This is all. Nobody will be ill-treated by the fact that this organisation comes under the SIB.
Let us see what the chief of the SIB has to say about it. By kind courtesy of Sir Kenneth Berrill, he was good enough to forward me a copy of a speech given by him to the Financial Times Conference on regulating the financial services industry. With permission of noble Lords, I should like to quote from it. The date is important. The date is 21st January 1986. He said this:
"There is one other aspect of the Financial Services Bill that has attracted much public comment, and that is the position of Lloyd's. There is quite understandable concern about the working of the Lloyd's regulatory system, even as amended under the 1982 Act, in terms of the protection that is afforded to external names. But to bring Lloyd's within the scope of the financial services legislation would introduce a number of extremely difficult technical and practical problems for both Lloyd's and for my board. Put briefly it would mean my board acquiring the expertise to monitor an insurance market which is quite different from the markets in securities and commodities. Both organisations have pretty full agendas at present. Before embarking on such a course we should, I believe, await the outcome of the inquiry to be undertaken by Sir Patrick Neill at the request of the Secretary of State".
Perhaps it should be made quite clear that Sir Kenneth Berrill is not entirely disinterested in the matter because he is of course a member of the Council at Lloyd's. However, no question of law was raised by Sir Kenneth. The noble and learned Lord the Lord Advocate referred to legislative chaos. That is the pot calling the kettle black. If anybody has caused legislative chaos over the last three months in this House, it has been Her Majesty's Government, and they are still busily doing so. However, there is no suggestion in what Sir Kenneth said that, from the legal standpoint, it was in any way repugnant to bring it under the SIB—the difficulties were practical.
I also believe that Sir Kenneth is being unnecessarily modest. The SIB will be at the head of many different self-regulating organisations, including the International Securities Regulatory Organisation, which has a technique all of its own; the Investment Management Regulatory Organisation, IMRO, which also has a technique all of its own; the Life and Unit Trust Regulatory Organisation, which has another set of techniques; and the Financial Intermediaries Managers and Brokers Regulatory Association, FIMBRA, which also has a mystique and technique all of its own. All professions create around themselves their own mystique. Most of them break down to common sense. There is also the National Association of Security Dealers and Investment Managers— NASDIM. To supervise that will also involve many technical problems and unless one is associated with them, unless one is a member of those organisations, they appear very mysterious organisations of high technical complexity.
There is the Association of Futures, Brokers and Dealers. If there is a newly created mystique in that field, surely that is also technical. What is so special about the insurance function that elevates it completely to some highly mysterious level which will require very considerable intellectual effort on the part of either Sir Kenneth Berrill or his staff?
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In this connection I should perhaps say that if Lloyd's came within the ambit of the SIB, it would be quite capable of supplying the necessary expertise and, if necessary, of seconding people to the SIB in order that these matters of insurance, upon which the noble Lord, Lord Fanshawe, has expatiated so eloquently, are readily and easily understood.
Mr. Ian Hay Davison, a distinguished chartered accountant, knew very little about Lloyd's when he went there. He functioned in accountancy and in consultancy. It did not take him long to find out what was wrong with Lloyd's. I am quite sure that, although he departed from Lloyd's under circumstances that have not really been fully and publicly explained, Lloyd's very largely took his advice. I read what Sir Kenneth Berrill said in January. But this is what he said recently, when he departed slightly from what he said before. If one reads the interview he gave to the Observer, and which was in the issue of Sunday 13th July last, one sees that he said this:
"We are not really looking for more work. Lloyd's markets are different from any of our other markets, so if Lloyd's was included we would have to develop a competence to understand the system and the reinsurance arrangements. People have asked why we do not handle property as well. But you have to draw the line somewhere".
No mention there as to the lack of feasibility in law, as to any kind of legal incompatibility in bringing Lloyd's under the supervision of the SIB. Once again, things are purely practical.
Lloyd's has very often been referred to as though it were an organisation completely on its own, a very exclusive club with its own colossal building. I am not sure which style the building is in; it makes one crook one's neck to look up at it and I have never yet experienced its lift system. But I am aware it has its own physical mystique, its own facilities. But is it really unique and cut off from the City?
This evening, I have been through a list of the council members of Lloyd's to find out what connections it has. I am not going to call out names, because they will be immediately recognisable. One of the directors, for example, has an interest in Massey-Harris-Ferguson and in Wiggins, and so on. This is a very reputable industry. Another director has a wide interest in BFS Investments and also in various financial services, in the Royal Trust of Canada, and so on. Other members have interests in technical management trusts. That is all right: but they are not isolated from everyone else. They are part of the normal machinery of the City. Indeed, one is a director of the Bank of England. So they are not isolated from the rest of the City stream; they are part of it. They probably meet socially very frequently, so we should not treat them in isolation. There are other directors, too, who have other and quite proper City connections.
An endeavour to keep Lloyd's out of it for the moment on the grounds that the matter is under review by Sir Patrick Neill really will not wash. Of course his report may well assist Lloyd's further in its progress. Many organisations call in consultants from time to time in order that their own performance and everything else may be improved, though according to what other noble Lords have said (and the noble Lord, Lord Fanshawe, indicated this) there is little need for improvement at all. If there is no need for

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improvement at all, and if the standards established by Lloyd's are already up to and equal to those provided for investor protection in this Bill, there is no reason whatsoever, other than a desire for independence and clubbiness among Lloyd's, to prevent it happening.
I trust that the noble Lord will not persist in trying to keep Lloyd's away from the SIB and keep it thereby away from that system of thorough supervision which, according to the noble Lord, is the hallmark of this Bill.
Lord Kimball: I am certain that the members of the British Field Sports Society will be thrilled to know that the noble Lord, Lord Bruce of Donington, regards BFSS Investments as a major City fund. I should remind him that it was in fact a fund set up to protect the interests of those in the countryside. The noble Lord, Lord Bruce of Donington, did not seem to realise that he was talking about a unique institution in the shape of Lloyd's. It is within two years of its 300th anniversary and is bringing in £1,400 million in foreign exchange to this country. The first thing a Labour government have to do when they come to power is go down Lime Street and assure themselves that that amount of foreign exchange is still coming in, despite the threat that they always pose to the economy of this country.
It employs indirectly some 83,000 people, and over those 298 years no single valid claim of insurance has not been met. It is a proud record. It is a unique institution and an institution that has always had the respect and support of previous Labour adminis-trations. The noble Lord, Lord Bruce, was fair about the miscreants of Lloyd's, the people who have committed crimes. Ever since I have been a council member of Lloyd's since that Act was passed I have been on the Investigations Committee of Lloyd's. We have set up a disciplinary organisation equal to the law courts in this country, and as thorough. We have dealt with no less than 14 cases at Lloyd's. Charges against some 29 people have been determined. Nine people have been expelled and I am happy to tell the Committee that we very nearly have a nil agenda. In fact, every single case that has come before the Investigation Committee of Lloyd's started before the passing of the Act.
The noble Lord, Lord Bruce, asked what would be the disadvantage of bringing Lloyd's under a SIB? Sir Kenneth Berrill himself went down to another place and met an all-party group of Members there. He said that the last thing he wanted was to have Lloyd's, and if he did have Lloyd's, he would turn round and tell the council to get on with it in exactly the same way as they are getting on with it now. The principal disadvantage if Lloyd's were included in the Bill would be the loss of flexibility that we now have under our present Act. We can amend our by-laws as soon as something starts to go wrong. There would be no incentive for Lloyd's itself to take the initiative.
The other and more serious point is that to bring Lloyd's under the umbrella of a SIB would be perceived as a failure of the present Lloyd's regulatory system, which is demonstrably untrue. This could have serious repercussions in the United States where two thirds of our business is now done.
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Finally, I think that the noble Lord, Lord Bruce, was misleading the Committee on the question of investment at Lloyd's. An investment at Lloyd's is not the same as another investment. There is a period in all insurance matters when the premiums are held by the underwriting agent as trustee for the name until the time comes to pay the claim, or the risk is reinsured. At no point is that premium money, that investment money, available to the investor. He cannot withdraw it. He has no say on how it is invested. It is a special type of investment, and it does not fall into line with the other investments that this Bill seeks to protect. I hope on those three points that the Committee will reject the argument of the noble Lord, Lord Bruce of Donington.
Lord Cameron of Lochbroom: I shall be brief because I have already spoken on the general matter to which the noble Lord opposite addressed himself. I listened, as I always do, to the noble Lord opposite, to find out why he was suggesting that Lloyd's should be brought within the provisions of the Bill other than as an exempt person. I listened throughout his speech, and by the end of it I had not heard one ground from him to suggest that there was any good reason for bringing Lloyd's within the Bill.
All he said was, "What harm would it do?" That is no argument. The truth of the matter—the noble Lord carefully skirted around this—is that the investor protection that we are talking about in this Bill is for a type of investor wholly different from that we are thinking about in terms of Lloyd's. It was the external names that the noble Lord opposite spoke about. But he does not suggest that the effects of the 1982 Act and what has been done since then have left them unprotected. As I say, there was nothing in what he said that produced any case whatsoever or any evidence that the Lloyd's regulatory system now does not fully protect those who are to be regarded as investors; which means that for the purposes of this Bill it has been necessary to regard Lloyd's and the insurance agents as investors.
As I said, the arguments I presented earlier in my submission have not been answered by the noble Lord. He even took a phrase of mine out of context when he spoke about "legislative chaos". What I was speaking about was the effect it would have if this Motion in the noble Lord's name were to be agreed to. It had nothing to do with the criticism he made about the work of this Chamber in dealing with general legislation. That quality of argument simply will not do in a "stand part" debate. I must therefore urge the Committee to reject the Motion which the noble Lord opposite has pressed upon us.
Lord Bruce of Donington: I am sorry that the noble and learned Lord has found it necessary to be so defensive about this whole business. The onus does not lie upon me to explain why Lloyd's have been excluded from the Bill. If this clause had not been in the Bill, this matter would not have been raised at all. Listening to the noble and learned Lord even now he is saying that Lloyd's already conforms to the very high standards of investment protection in the Bill. What is he afraid of? It is up to the noble and learned Lord to explain. 1 am not attacking Lloyd's. Noble

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Lords may have prepared their speeches in anticipation that I might attack Lloyd's, but the Committee knows perfectly well that I have done nothing of the kind. All I have done is to suggest that things have so improved at Lloyd's over the past four years that matters have now, as the noble and learned Lord himself says, reached the standard laid down in the Bill for ordinary investors. What therefore is the case for removing Lloyd's from the supervision? The Stock Exchange is to be supervised. That is a pretty reputable institution of longer life possibly than Lloyd's—I am not quite sure about that so I shall not be dogmatic about it. What are the Government afraid of?
The onus does not lie on me to explain any inconsistency. What I have said from the beginning is quite consistent. The noble and learned Lord has the anomaly to explain. It is for the noble and learned Lord to explain why he is so apprehensive and why he is so defensive. When he rose this afternoon he obviously feared an onslaught on the honour of Lloyd's. He got nothing but praise from me. Maybe this is what troubled him.
In all honesty this clause has no place in the Bill at all. I hope the Committee, for the sake of plain common sense, will use its vote to vote it out.
10.20 p.m.
On Question, Whether Clause 40 shall stand part of the Bill?
Their Lordships divided: Contents, 53; Not-Contents, 11.

DIVISION NO. 2

CONTENTS

Bauer, L.

Hives, L.

Beaverbrook, L.

Hooper, B.

Belstead, L.

Kimball, L.

Boardman, L.

Layton, L.

Brabazon of Tara, L.

Limerick, E.

Brougham and Vaux, L.

Lindsey and Abingdon, E.

Bruce-Gardyne, L.

Long, V.

Caithness, E.

Lucas of Chilworth, L.

Cameron of Lochbroom, L.

Lyell, E.

Carnegy of Lour, B.

Merrivale, L.

Carnock, L.

Middleton, L.

Colville of Culross, V.

Milverton, L.

Craigmyle, L.

Monk Bretton, L.

Croft, L.

Mountevans, L.

Davidson, V.

Orkney, E.

Denham, L. [Teller.]

Radnor, E.

Effingham, E.

Renton, L.

Elles, B.

Sandford, L.

Elliott of Morpeth, L.

Shannon, E.

Elton, L.

Skelmersdale, L.

Faithfull, B.

Strathalmond, L.

Fanshawe of Richmond, L.

Swinton, E. [Teller.]

Glenarthur, L.

Terrington, L.

Greenway, L.

Torphichen, L.

Hacking, L.

Vinson, L.

Halsbury, E.

Whitelaw, V.

Henley, L.

NOT-CONTENTS

Bruce of Donington, L.

Molloy, L.

Carmichael of Kelvingrove, L.

Nicol, B.

David, B. [Teller.]

Stoddart of Swindon, L.

Dean of Beswick, L.

[Teller.]

Graham of Edmonton, L.

Williams of Elvel, L.

McIntosh of Haringey, L.

Ypres, E.

Resolved in the affirmative, and Clause 40 agreed to accordingly.
10.25 p.m.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 113:
After Clause 40, insert the following new Clause:—
"(Listed money market in institutions.
.—(1) A person for the time being included in a list maintained by the Bank of England for the purposes of this section ("a listed institution") is an exempted person in respect of, and of anything done for the purposes of, any transaction to which Part I or Part II of Schedule (Listed money market institutions) to this Act applies.
(2) The conditions imposed by the Bank of England for admission to the list referred to in this section and the arrangements made by it for a person's admission to and removal from the list shall require the approval of the Treasury; and this section shall cease to have effect if that approval is withdrawn but without prejudice to its again having effect if approval is given for fresh conditions or arrangements.
(3) The Bank of England shall publish the list as for the time being in force and provide a certified copy of it at the request of any person wishing to refer to it in legal proceedings.
(4) Such a certified copy shall be evidence or, in Scotland, sufficient evidence of the contents of the list; and a copy purporting to be certified by or on behalf of the Bank shall be deemed to have been duly certified unless the contrary is shown.")
The noble Lord said: I discussed this amendment with Amendment No. 106; and I beg to move.
On Question, amendment agreed to.
Clause 41 [Appointed representatives]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 114:
Page 27, leave out lines 21 and 22 and insert ("writing")
The noble Lord said: In moving Amendment No. 114, I should at the same time like to speak to Amendments Nos. 115 to 122 inclusive, 150, 167 to 170 inclusive, 172, 173 and 175 to 181 inclusive.
These are a series of technical amendments, designed to ensure that Clause 41 and related clauses on appointed representatives more nearly meet the original intentions. I think the Committee will probably be aware that it is a common practice in the insurance industry for company representatives often to be self-employed rather than to be direct employees of the insurance company concerned. Without Clause 41 such persons would either have to become employees or become authorised in their own right.
We have no wish to change the employment status of these persons, but equally it would clearly strain the resources of the regulatory system to accommodate the separate authorisation of the numbers involved, and there are an estimated 100,000 people who make their living as self-employed insurance company representatives. Accordingly, the White Paper proposed that a special category of appointed representative be created and our aim in creating this special category has been to secure that they do not need separate authorisation but that in return for this their authorised principal is made responsible for their actions, and if the appointed representative offends against any of the rules laid down under the Bill, it will be the same as if the authorised person had himself broken the rules.
I think the Committee will recognise that underlying this is an intention to ensure that in all respects that matter to this Bill, appointed representatives are treated effectively as if they were employees of their

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authorised principal and not independent businesses. Achieving this effect, which must take proper account of a large and well-developed area of common law, in a few lines of statute has proved technically difficult. Most of the amendments before the Committee this evening on this subject are designed to achieve this aim more precisely.
Thus, there is an important amendment to subsection (7) of Clause 41 which ensures that authorised principals are only made criminally liable for the activities of their appointed representatives in circumstances broadly comparable to those in which a corporate employer would be made criminally responsible for the criminal actions of their employees. At present, the Bill may go too far and could be interpreted always to make them liable. Another important change is to the powers of intervention, where we propose to ensure that protection can be given to assets held by appointed representatives as well as those held by their authorised principal. I beg to move.
On Question, amendment agreed to.
10.30 p.m.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendments Nos. 115 to 122:
Page 27, line 28, leave out ("authorised").
Page 27, line 32, leave out ("authorised").
Page 27, line 36, leave out ("authorised").
Page 27, line 39, leave out ("authorised").
Page 27, line 40, at end insert—
("(4A) If the contract between an appointed representative and his principal does not prohibit the representative from giving advice about entering into investment agreements with persons other than his principal it must make provision for enabling the principal either to impose such a prohibition or to restrict the kinds of advice which the representative may give by reference to the kinds of investment in relation to which or the persons with whom the representative may advise that investment agreements should be made.").
Page 28, line 1, leave out subsection (5).
Page 28, line 9, after ("done") insert ("or omitted").
Page 28, leave out lines 13 to 15 and insert ("or any rules of any recognised self-regulating organisation or recognised professional body of which he is or at the material time was a member, anything said or done or omitted by a person who is or at the material time was an appointed representative in relation to that authorised person shall be treated as if it had been said or done or omitted by that person; but nothing in this subsection shall cause the knowledge or intentions of an appointed representative to be attributed to his principal for the purpose of determining whether the principal has committed a criminal offence unless in all the circumstances it is reasonable for them to be attributed to him.").
On Question, amendments agreed to.
Clause 41, as amended, agreed to.
Clause 42 agreed to.
Clause 43 [Power to extend or restrict exemptions]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 123:
Page 29, line 24, after ("40") insert (", (Listed money market institutions)").
The noble Lord said: I have already spoken to this amendment earlier in our proceedings. I beg to move.
On Question, amendment agreed to.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 124:
Page 29, leave out lines 27 to 29.
The noble Lord said: I beg to move Amendment No. 124, and it may be for the convenience of the Committee if I speak also to Amendment No. 125.
These amendments refer to the power to extend or restrict exemptions. It is indeed a very important power, because anybody who is exempt from the provisions of the Bill enjoys a privileged status and will undoubtedly be able to do a great number of things that the people who are caught within this Bill would not be able to do. Therefore, the process of granting further exemptions seems to us to require some form of restriction, and the restriction that we propose is that an order should be submitted at least to parliamentary approval and that it cannot be automatic, containing such,
"provisions as the Secretary of State thinks necessary or expedient".
Amendment No. 125 is, again, designed to achieve the same effect, but we should like to see this as an ability which is confined only to orders which are subject to the affirmative procedure rather than the negative procedure. I beg to move.
Lord Cameron of Lochbroom: I fully understand the noble Lord's wish to have a proper scrutiny of additions to the list of exemptions in Chapter IV but I think that the Bill as it stands meets his point. The majority of additional exemptions to be considered under this provision would, I expect, fall into one of two categories. First, they will add to the list of miscellaneous exemptions as in Clause 42. Thus, they will concern persons who perform a function under another statute, part of which may be regarded as investment business. Additions may be necessary, for instance, to take account of changing legislation, changing titles or changing functions.
Secondly, they will be technical adjustments to the schedules on money markets—for example, to keep abreast of changes in the nature of the investments covered by that exemption. It would seem over-elaborate to subject those categories of additional exemption to the process of affirmative resolution. If the House were to take the view that a particular instrument contained additions that merited a debate, then the procedures of the House make it possible for such a debate to be held.
I believe that the balance in the Bill as presently drafted is correct, and perhaps the noble Lord would like to ponder what I have said at this stage and withdraw his amendment.
Lord Williams of Elvel: I am most grateful to the noble and learned Lord for his response. As I understand him, he is saying in his typically clear manner that we shall be discussing miscellaneous exemptions and technical adjustments. If that is so, and if that is all we are talking about, then I shall be happy to accept the noble Lord's assurance and withdraw my amendment. If, on the other hand, the noble and learned Lord has any reservations, then perhaps he will say so, and I shall think again.
Lord Cameron of Lochbroom: I can go no further. I did say that the majority of the additional exemptions to be considered would fall within one of two categories. The affirmative resolution procedure is where there is a restriction, and there I do see that it would be proper to have the affirmative procedure. I feel that there is, however, a difference with additions as opposed to subtractions. It is for that reason that the balance has been taken here.
Lord Williams of Elvel: I shall study carefully the noble and learned Lord's remarks. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 125 and 126 not moved.]
Clause 43, as amended, agreed to.
Clause 44 [Misleading statements and practices]:
[Amendment No. 127 not moved.] Clause 44 agreed to.
Clause 45 [Conduct of business rules]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 128:
Page 30, line 43, after ("or") insert ("perons certified by a").
The noble Lord said: I have already spoken to this amendment—I believe on Monday. I beg to move.
On Question, amendment agreed to.
[Amendment No. 129 not moved.]
Viscount Colville of Culross Viscount Colville of Culross moved Amendment No. 130:
Page 31, line 43, leave out ("international") and insert ("eligible").
The noble Viscount said: This amendment goes with Amendment No. 133, and I hope the Committee will forgive me if I do not go into all the intricacies at this time of night. It is a matter that I know is very much in the mind of my noble friend Lord Lucas. It concerns stabilisation of issues of equity stock and other such stock, which at the moment is not covered by the Bill at all.
I am seeking an extension of what is already in the Bill, and I believe that there is a good reason for doing so, provided of course that such a provision is accompanied by proper safeguards as to the people who are allowed to apply it. That is what I have attempted to provide in the drafting of both amendments.
It is an extraordinary difficult task, by virtue of the way in which Clauses 44 and 45 have been drawn, to get it right. I hope that my noble friend will not make a point about technicalities. I am after the substance of my amendments, and if he will agree to try to meet me in that respect, then I am sure that others will be very much better at the drafting than I have been.
The point is this. The existing market, which has been used for ages, has built up a practice whereby when a new stock is issued, the people who are dealing with it—the leading dealer—provide an arrangement whereby the price is held for a period of time in order that the issue shall succeed.
This does not apply only to government bonds and debentures, which is what the Bill at present covers. It has also been used frequently—or at any rate fairly frequently—for equity issues of the sort that are very much wider than the Bill at present encompasses. That is why my second amendment extends greatly the number and list of investment commodities that may be covered by this matter.
The formula that is used for this sort of exercise is described by the American SEC. I quote from a particular prospectus:
"In connection with this offering, the underwriters may over-allot or effect transactions which stabilize or maintain the market price of the ordinary shares or the American depositary shares at levels above those which might otherwise prevail in the open market. Such transactions may be effected on the New York Stock Exchange, the London Stock Exchange, any other Stock Exchange on which the ordinary shares have been admitted to trading privileges, or in the over-the-counter market. Such stabilising, if commenced, may be discontinued at any time."
This is not in any way a matter of party politics because my quote came from an issue of British Petroleum equity stock in 1977, under the control of a previous government, and exactly the same happened with the recent British Telecom issue. It was not, in fact, necessary to stabilise the price because the issue was so successful, but the same formula was used because the issue also took place in the North American market where there is a standard method of dealing with it.
I should have thought it would be insanity for us to prevent that sort of exercise from taking place. No doubt my noble friend has in mind future privatisation exercises such as British Gas, where I believe managers have already been appointed in at least one North American market. To prevent, by virtue of this Bill, that well-known sort of exercise from taking place would deprive this country of a great deal of business and an opportunity to use the international markets for the purposes that people wish to do.
It is perfectly true that it must be kept under control. People ought to know what is going on, and my second amendment provides that the Secretary of State shall take control of the investment exchange through which any exercise of this sort would be carried on. Therefore, I hope that my noble friend will take the view that the provision at present in the Bill needs to be extended in order to take account of this important activity which results in billions of pounds of turnover in this country. If my noble friend cannot accept these amendments, I hope that he can meet me in principle. I beg to move.
Viscount Chandos: I should like briefly to add my support to the amendments proposed by the noble Viscount, Lord Colville of Culross. I mentioned this subject on Second Reading and I should like to remind the Committee of a couple of points which I believe are important.
The grounds on which the SEC approved the practice of stabilisation in the early 1940s was essentially that fund raisers would be unnecessarily handicapped if the practice of stabilisation were disallowed; and in the interest of effecting a fair balance between the interests of investors and the interests of fund raisers. I think that stabilisation, in the broad definition that the noble Viscount, Lord

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Colville, has suggested, is clearly in the interests of fund raisers. Equally, I do not think that there is necessarily any disadvantage to investors, since clearly there are circumstances whereby stabilisation can actually protect them in an issue which may appear to be satisfactorily subscribed but in which, in reality, the level of long-term investment demand may not match up to the full amount on offer. The immediate after-market may see a fall in price in which the genuine investors, who may be relatively small investors, on seeing such a fall in price, may seek to sell their own holdings, cut their losses and in turn cause a further fall and a sort of vicious spiral.
So the objective of achieving a balance between the interests of investors and issuers does not necessarily imply a concomitant disadvantage to investors compared with the position if no stabilisation were allowed. I should like to support also the principle that the noble Viscount, Lord Colville, has suggested, that the Secretary of State, most probably through the designated agency, if stabilisation were permitted, should establish fairly detailed and well defined guidelines within which stabilisation would be allowed. The sort of matter that should be covered is the prohibition of any intervention at a price level above the issue price at which the offer has been made.
10.45 p.m.
Lord Lucas of Chilworth: I am grateful to my noble friend Lord Colville for the way in which he put his amendment to the Committee. As I am sure the Committee appreciate, he knows that this is a subject which has been considered and is indeed still being considered most carefully by me and my honourable friend in another place, the Parliamentary Under-secretary of State for Corporate and Consumer Affairs. We also discussed this matter quite fully during our Second Reading debate on 1lth July, when the noble Viscount, Lord Chandos, the noble Lords, Lord Roll of Ipsden and Lord Williams of Elvel—in fact noble Lords of all shades of opinion and from all sides of the House—spoke in favour of an amendment to permit lawful stabilisation of price, not only of course of Eurobonds (which was then the example taken), but also of stocks and shares which may be bought and sold by the wider public.
The issue is a sensitive one for the securities market, and the amendment which my noble friend brings forward exempts stabilisation from the scope of a serious criminal offence—the offence of market manipulation as in Clause 44. To be complete, the amendment also needs to create exemption from another serious criminal offence—that of insider dealing in the Company Securities (Insider Dealing) Act 1985, which the Bill currently provides in respect of stabilisation of Eurobonds.
My honourable friend in another place said that the Government would only consider extending the qualifying class of investments to be exempted from both offences if there were a convincing case. Adequate rules would need to be devised to protect investors if the investments whose price was being stabilised were likely to be bought and sold by investors other than the professional business investor
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who could be expected to understand the risks. These amendments go some way to providing that protection.
I feel, however, that we need something further. We shall need to see that there exist arrangements through rules of business conduct which ensure that investors understand the implications of stabilisation for investments that they are thinking of buying or they are being advised to buy. After all, the price may be artificially higher than what it would be without stabilisation.
As we have heard, stabilisation for all securities is already lawful in the United States of America, but there the rules of the SEC and the New York Stock Exchange offer investors some powerful protections. They insist on disclosure. They require the brokers and the dealers to give price priority to the orders from the general public. If we were to permit stabilisation in those areas, we again should have to look to the Securities and Investments Board to develop rules on similar lines. I understand that it has drafted such rules on a consultative basis.
In agreeing to consider my noble friend's amendments I anticipate that we shall want to look at the principles already contained in Schedule 6 to see whether they should be supplemented by a requirement that the rules must be accompanied by adequate safeguards.
Finally, there is the scope of the eligible securities, which are defined in my noble friend's amendments. The effect would be to add shares, warrants, certificates representing shares in securities, options, rights and interest in investments in respect of any of the foregoing, plus debentures and government and public securities, which, subject to Clause 45, are already open to stabilisation. We shall want to consider such a broad range of investments quite critically. At the moment we feel that perhaps the amendment goes a little too far.
With the invitation that we should welcome views from noble Lords and from the futures exchanges, I give my noble friend an assurance that we are thinking along the same lines. We should like to give greater consideration to the implications of his rather general amendments and come back at a later stage with firm proposals.
Viscount Colville of Culross: I am grateful to the noble Viscount for supporting this amendment and also to my noble friend for what he said. If I may say so, there has been quite a long time already in which the Government have been able to consider the matter. They are now saying—and I am glad to hear it—that they are prepared to go a little further than they have so far in the Bill.
I said that such a provision is extremely difficult to draft. Nothing that I put forward on the Marshalled List either at this stage or Report stage will be right. Therefore I suggest to my noble friend that what we want is a text from him. Unless we have from him a text—it can be a provisional text—of something which he thinks is capable of being properly put into the Bill, with the safeguards that he has talked about (because he does not like mine) it will not be possible to discuss this with the people who engage in these operations in the market; and there are large numbers of them, they

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are substantial concerns, and they are very much worried about the future of the activity.
I accept entirely what my noble friend says, but I hope that we can now have on a piece of paper something that his department thinks would be, at any rate provisionally, a suitable new insertion into the Bill. If he can promise to have discussions about that between now and the Report stage so that we can come back to it in October, or whenever it is, with positive and well discussed provisions which will be going in at that stage, I think we shall make progress. But I ask him to do a little more than just make the kind of concession which he has. I think we want some words on a piece of paper.
The Earl of Limerick: I rise merely to support the procedural point made by my noble friend Lord Colville. I believe in a complex matter of this nature that that is the only practical way to make progress.
Lord Lucas of Chilworth: I take the point that both my noble friends have made. I am always reluctant to make promises, particularly late at night when I am not totally sure that I can keep them. We should want to consult before we put down an amendment for consideration. I should not like to say what form that will take, whether it will be a text, a piece of paper or consultation in the more popular way. I take on board the valid points that both my noble friends have made and will seek to meet them.
Viscount Colville of Culross: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 131:
Page 31, line 45, at end insert—
("(jj) requiring the keeping of accounts and other records, as to their form and content and for their inspection;").
The noble Lord said: The amendment makes it clear that conduct of business rules may require directly authorised persons to keep accounts and other records. If such rules are made, recognised SROs and RPBs will have to demonstrate that their rules provide equivalent protection for investors in this respect. The rules may also cover the inspection of accounts and other records. Such rules could, for example, enable the Secretary of State or the designated agency to carry out spot checks of the records in order to find out whether the business concerned was complying with its obligations.
Lord McIntosh of Haringey: On these Benches, we should like to welcome the amendment which provides a useful paving stone for some of the require-ments on disclosure that we shall be discussing in a few minutes.
On Question, amendment agreed to.
11 p.m.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 132:
Page 32, line 4, at end insert—
("() requiring the disclosure of the amount of the investment which will be available for further investment.").
The noble Lord said: With the permission of the Committee, I should like to discuss Amendments Nos. 254A and 254B with this amendment. Before going on to say why it is necessary to make that grouping (which I hope has been adequately notified to the Government, because I made the point this morning), I want to make it clear that we are not talking about the determination of the level of commission; we are talking about the disclosure of commission.
It is necessary to say that because there was a good deal of confusion on that matter in Committee in another place. It should be clear that we appreciate the difference. We appreciate that the ROLAC rules may be adequate for the determination of commission, but we believe that the Bill should go a good deal further in the disclosure of the amount of commission and the investment margin.
The noble Viscount, Lord Colville, said a few minutes ago that Clauses 44 and 45 were difficult to amend. I agree with him. There are three ways of trying to achieve our objectives. The first would be to make the rules under Clause 45(2) mandatory. In other words, to insert the word "shall" instead of "may". We have been forced to do that in later amendments although clearly it is a less than satisfactory procedure.
The second possibility is to do what we have done in Amendment No. 132, which is to add to the "may" rules, and the third is to add to Schedule 6 which expresses the principles to which the rules must conform and provides the overriding control of the contents of the rules. We have done that in Amendments Nos. 254A and 254B.
Let there be no doubt that a change or firming up of the rules is necessary. One principal reason for that is that although the SIB has sweeping powers to control the rules of SROs and professional organisations, it lacks the ability to fine-tune the regulations, if it is not satisfied that the rules meet its requirements. The Parliamentary Under-Secretary in another place was fond of saying that he could get rid of the members of the board. That seems to us to be using a very heavy piece of artillery indeed to deal with an issue that should perhaps be handled in a much more sensitive and sometimes low-key way. It is the gap between the very wide powers available in theory to the board and the ability to negotiate the detailed content, with the power behind them, of rules which can be exercised in a flexible way that is missing.
Let there be no doubt that the Government have been aware, and have been made aware for some time, of the necessity for further provision on disclosure both on commission and on investment margin. The question of commission was discussed on a number of occasions in another place and has been referred to, not least by my noble friend Lord Graham at Second Reading. The question of investment margin was specifically referred to by Mr Michael Howard, the Parliamentary Under-Secretary of State, at col. 466, during the Committee stage in another place, when he said:
"I have asked MIBOC to study whether it is possible to require the disclosure of the amount of money given in premiums that is devoted to investments rather than to expenses."
If that request has been adequately answered by MIBOC and if it is the intention of the Government to

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give satisfactory answer to that request either in regulation or on the face of the Bill, I shall have the greatest pleasure in withdrawing Amendment No. 254B. At the moment, however, despite many months of negotiation, despite a recognition in the SIB document of December 1985 of the importance both of disclosing the investment margin and of disclosing the amount of commission, there has as yet been no positive response from the Government to these very necessary requirements from the point of view of the protection of the investors.
It is not a matter, as I said at the beginning, of determining the level of commission. But many investors, who are being offered a range of options by investment advisers, or insurance salesmen, or whoever they may be, are not necessarily aware that the level of commission may not be in proportion to the premium but may be different as between different products, and that the person selling to them is sorely tempted to temper his advice to meet his own personal needs.
It may not be adequately clear to many investors that the expenses incurred by different investment businesses and charged ultimately to the investor differ very widely. There are indications of these matters in the national press and in the business press. There are those who make it their business to expose the differences in the expenses and the investment margins that are actually available. But at present the Bill does not adequately provide for either of these pieces of information which, in our view, are essential if both the individual investor and the corporate investor are to have their interests adequately protected.
We hope very much that the Government will find it possible, whatever the technicalities of amendment to this clause, to give a clearer indication of their determination to meet these legitimate demands than they have done so far. I beg to move.
Lord Lucas of Chilworth: I am not sure that there is anything to be gained by these amendments which perhaps, in any case, do not express exactly the intentions behind them. We can all agree, I believe, that it is important that the investor should be given sufficient information about investments on offer to enable him to make an informed decision about where to put his money and indeed whether to invest at all.
There was general recognition of this in the debate in Committee in the other place. After that debate the Bill was amended at Report stage in the House of Commons so as to make explicit that the rules of a designated agency must make proper provision for requiring authorised persons to give those to whom they are selling or advising upon investments such information about the nature of the investment and its financial implications as to enable them to make an informed decision. This is now in paragraph 7 of Schedule 6 to the Bill. Since the rules of any SRO must provide at lest equivalent protection for investors as those applied by a designated agency, the effect of this paragraph will also be felt in SRO rules. I think this makes well enough the provision which I agree with the noble Lord opposite is necessary in this area.
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SIB and MIBOC have now produced proposals on how this principle in Schedule 6 should be applied to the sale of insurance policies and, by analogy, unit trusts. In drawing up their proposals they have had in mind that to be useful to the investor the information which is to be disclosed must be readily understandable, manageable in quality, relevant and factual, or certainly based on realistic and stated assumptions. They suggest that the investor should be given information about the characteristics of the product, the financial commitment involved, the tax implications, the charges where these can be identified, the surrender values, the consequences of early termination, and the ultimate benefits. We welcome these proposals, which we believe will enhance the ability of investors to choose the appropriate policy for them.
I think that the noble Lord opposite suggested that SIB's and MIBOC's proposals fell short of the ideal in that they do not provide for the disclosure of charges, in particular on with-profits policies. There can be no doubt about the commitment to the disclosure of charges where these are identifiable. There are substantial problems about identifying expenses on individual with-profits policies because there is no mechanism for allocating some of the with-profits policyholder's premium to expenses and identifying the balance available for investment. This has led the two authorities to the view that it is not possible to require disclosure of charges on these policies. If a workable method can be drawn up, I am quite confident that SIB and MIBOC will support it.
I should add that both have said that the particular characteristics of with-profits policies should be clearly explained to the investor. Their proposals concerning the disclosure of surrender values should also put the investor on warning about the sometimes high proportion of the investor's money which goes to cover the cost selling him the policy.
The point has been raised on a number of occasions about the two organisations' proposals on the disclosure of commissions by independent insurance intermediaries. The role of disclosure as a means of mitigating the consequences of conflict of interest, and as a way of enabling more informed decisions to be made by investors, is an important theme in the Bill. Paragraph 5 of Schedule 6 provides that the rules of a designated agency must make proper provision for the disclosure of interests in, and facts material to, transactions, including the disclosure of information about commissions or other inducements. The proposals on the disclosure of commission by independent intermediaries stem from the organisations' concern about the potential there is for abuse in the fact that although an independent intermediary acts as the agent of the investor, he is remunerated by the insurance company whose policy the investor buys.
In these circumstances, SIB and MIBOC believe that the interests of the investor would best be served by an industry agreement on commission levels which would minimise the potential for bias in the choice of company recommended by the intermediary. Steps are being taken to incorporate such an agreement in the rules of the Life Assurance and Unit Trust Regulatory Organisation—LAUTRO—which is aiming to become the body which will regulate

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insurance companies under the Bill and which has attracted the support of most of the industry.
Where commission is paid by a company which is bound by a voluntary industry agreement, and the scope for bias has therefore been reduced, SIB and MIBOC envisage that the intermediary will simply have to state that commission is within the terms of an industry agreement. Where commission is paid by a company outside the agreement, the intermediary would disclose the actual amount of commission payable and the amount, if any, by which it exceeded the level laid down in that industry agreement.
Perhaps I should turn briefly to company representatives. Their position is of course fundamentally different from that of independent intermediaries in that they are not acting as impartial advisers to the investor: they are selling their company's policies. SIB and MIBOC propose that these representatives should work on behalf of only one company. They say that there should be a strict conduct of business rule requiring a company to ensure that the status of its representatives is made clear to the investor at the outset. The cooling-off notice, which is sent to new policyholders to inform them of their right to withdraw from the contract at that stage if they have had second thoughts, would, under SIB's and MIBOC's proposals, confirm the status of the representative and make it clear that he was unable to offer the policies of any other company.
For that reason the question of "company bias" does not arise for company representatives in the way in which it does for independent intermediaries. The possible abuse which might occur is what is called "product bias"—that is, the representative being influenced in recommending a particular policy by the fact that the company paid him a higher commission on it than on other policies. This is a potential abuse which could arise also for independent intermediaries, even if the commission scale was within a voluntary industry agreement, because the companies could agree upon a commission structure which involved large differentials in commission on different policies. As in the case of company representatives, there would be no disclosure of commission in this instance.
In these circumstances, SIB and MIBOC propose that there should be a conduct of business rule which would require a firm not to weight commission on one or more of its policies in a way which would be likely to result in biased advice being given. Such a rule would apply both to companies' remuneration packages for their sales representatives and to the structure of commission agreements affecting independent intermediaries. I hope that that is helpful to the noble Lord.
Lord McIntosh of Haringey: I am grateful to the noble Lord for reminding me of the detailed terms of Schedule 6. He need be in no doubt that I was aware of the terms of Schedule 6 before framing my amendments, which are intended to push the frontiers of principles applicable to regulations as far as they could possibly be pushed. The explanation we have had has confirmed what a complex area it is, how there have to be different rules for company representatives and independent representatives, and the precautions which have to be taken to deal with the kind of abuse
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to which the noble Lord and I were both referring. The further details the noble Lord has given of the proposed SIB and MIBOC rules go some way to calming my fears, if I may put it that way. I think it is better that I should study very carefully what he has said rather than press the matter to a Division at the present time, and therefore I beg leave to withdraw the amendment.
Amendement, by leave, withdrawn.
[Amendment No. 133 not moved.]
11.15 p.m.
Lord Hacking Lord Hacking moved second Amendment No. 133:
Page 32, line 40, at end insert—
("(9) Rules made under this section shall not, except so far as they expressly provide to the contrary, regulate the conduct of investment business outside the United Kingdom.").
The noble Lord said: As the Committee will know, rules made under Clause 45 will govern the conduct of investment business by authorised persons. As the Committee will also know, by Clause 57 the contravention of the rules gives a right of action to any person who has suffered loss or is adversely affected by the contravention.
The power as set out in Clause 45 raises a problem of extra-territoriality in the application of these rules. The extra-territorial application of other countries' laws, particularly the extra-territorial application of the laws of the United States of America, has caused considerable concern abroad and considerable concern in this country to our companies, to our courts and, indeed, to our Parliament; because it was after a particularly rough time on the application of United States laws abroad that a few years ago noble Lords passed the Protection of Trading Interest Bill, which became the Protection of Trading Interest Act. Indeed, it was the predecessor in office of the noble and learned Lord the Lord Advocate who took that Bill through this Chamber on behalf of the Government.
It is worthy of observation that the laws which have caused trouble in this country from the United States of America have been not only laws concerning their discovery procedures but laws concerning their anti-trusts, which are of particular significance when considering this Bill, and laws relating to their Securities Exchange Commission.
To look at this problem in a little more detail in this Act, for the purposes of the Act investment business is not confined to business carried on in the United Kingdom. The Committee may remember the debate we had earlier, when we were considering Clause 1 (2) of this Bill and, indeed, Clause 1(3) of the Bill which refers to persons who have business overseas as well as within the United Kingdom. Therefore, a person who is an authorised person in respect of his investment business in the United Kingdom could also be subject to the rules in respect of an investment business he carries on abroad.
Therefore, if such rules have effect in respect of his overseas investment business and he fails to observe them, the persons with whom he had dealings overseas might be able to claim against him to recover their loss. So if my amendment is not put into the Bill, the English courts could hold that the provisions of the Bill confer a right of action with extra-territorial effect. Moreover, if the overseas agreement was made subject

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to English law, it is likely the courts would hold that the Bill did not have this extra-territorial effect.
In general terms, I suggest to this Committee that that is undesirable. The application of the rules to overseas activities of authorised persons may discour-age overseas investment firms from setting up branches in the United Kingdom, and for that purpose having to become authorised persons—and I speak with some sensitivity as an English lawyer—might also act to discourage the use of agreement subject to English law or indeed to Scots law.
Of course, there may be circumstances in which it would be appropriate for rules made under Clause 45 to have extra-territorial effect. In such cases, however, the rules should expressly so state. That is why I have moved my amendment, which falls into two parts. The first part is that there is a general statement that,
"Rules made under this section shall not… regulate the conduct of investment business outside the United Kingdom"
except in the special circumstances, which is the other part of my amendment, in which the rule itself expressly provides to the contrary: that these rules should not, as recorded on the face of the statute, have extra-territorial effect. I beg to move.
Lord Cameron of Lochbroom: I am grateful to the noble Lord for having raised this point. I am aware that there has been much concern about the question of extra-territoriality. We have to face the fact, however, that modern communications mean that persons situated in overseas territories are able easily to transact business with investors in the United Kingdom, and equally, since one of the objectives of the Bill is to establish the United Kingdom as a clean place to do business in, we do not want to exclude from the protection of the Bill foreigners, including those located overseas, who transact business with firms situated in the United Kingdom.
There may well be cases in which the application of particular rules to businesses conducted overseas would be inappropriate—for example where the rule was directed at a particular national requirement such as those concerning form and contents of advertisements which might conceivably conflict with requirements imposed in another jurisdiction. On the other hand there may be cases in which the application of conduct of business rules to business overseas is appropriate. An example would be where rules were made as to subordination of an authorised person's interest to those of his clients.
I understand the purpose behind the noble Lord's amendment but I would suggest that an express provision on the face of the Bill is not the place or the way to solve the problem. I think he would agree that there may well be circumstances, as I have suggested, where it would be desirable to apply a particular rule to particular things done by an authorised person wherever he does them. However, I would agree with him that there may be circumstances in which it is not desirable to do so. But the amendment is cast in general terms and it gives no indication of when the business is to be regarded as conducted overseas. This is understandable because the definition of the circumstances in which business is to be so regarded would no doubt be difficult and complex.
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However I would suggest that this is not the route we should go down. Since the problem is with the scope of particular rules, the right approach is to ensure that those rules do not extend to things done by authorised persons abroad in cases where that would be inappropriate, and the rule-making power is sufficiently flexible to accommodate such an approach. Perhaps the noble Lord might like to consider what I have said and withdraw his amendment.
Lord Hacking: It is my intention to withdraw this amendment. It is more of a probing amendment than one I intended should go into the Bill. The noble and learned Lord has criticised the wideness of the proposal contained in my amendment but has recognised that there are circumstances in which it would be undesirable to have extra-territorial application, and also stated, as I conceded, that there are other circumstances in which it is desirable to have extra-territorial application of our rules.
The difficulty is that the Bill as drafted does not commit itself one way or the other. If I have chosen the wrong route to deal with this problem I should be grateful if the Government could give the matter further consideration to see whether there is another route by which this problem can be dealt with.
Lord Cameron of Lochbroom: I am happy to look again at what the noble Lord has said, and see whether there is some way in which this might be taken into the Bill, though I give no undertaking that it is possible.
Lord Hacking: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 45, as amended, agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 134:
After Clause 45, insert the following new Clause:—
"Financial resources rules.
(1) The Secretary of State may make rules requiring persons authorised to carry on investment business by virtue of section 24 or 30 above to have and maintain in respect of that business such financial resources as are required by the rules.
(2) Without prejudice to the generality of subsection (1) above, rules under this section may—

(a) impose requirements which are absolute or which are to vary from time to time by reference to such factors as are specified in or determined in accordance with the rules;

(b) impose requirements which take account of any business (whether or not investment business) carried on by the person concerned in conjunction with or in addition to the business mentioned in subsection (1) above;

(c) make provision as to the assets, liabilities and other matters to be taken into account in determining a person's financial resources for the purposes of the rules and the extent to which and the manner in which they are to be taken into account for that purpose.".

The noble Lord said: In moving Amendment No. 134 I should like to speak also to Amendments Nos. 135, 165, 166 and 258. This is a new clause which will provide an explicit power to make financial resources or capital adequacy rules. Requirements as to capital adequacy are recognised as an important safeguard for investors both directly in helping to head off financial problems in the firms they are dealing with and more generally in helping to avoid knock-on problems in the

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markets as a whole. They are a feature of the banking and insurance regimes and of existing self-regulation, for example in the Stock Exchange.
It always has been the Government's intention that regulators, such as SIB, the Bank of England, the recognised professional bodies and so on, should be able to set capital adequacy requirements. Doubts were expressed in another place about whether these fit and proper tests for authorisation and the general power to make conduct of business rules were a sufficient basis. We concluded that it would be more desirable to put the matter beyond any doubt by introducing an explicit power. It is this group of amendments which expresses that intention. I beg to move.
On Question, amendment agreed to.
Clause 46 [Modification of conduct of business rules for particular cases]:
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 135:
Page 32, line 42, after ("45") insert ("or (Financial resources rules)").
On Question, amendment agreed to.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 136:
Page 33, line 3, leave out subsection (2).
The noble Lord said: This relates to Clause 46. The note in the margin reads,
"Modification of conduct of business rules for particular cases".
This clearly is designed to provide flexibility and also a very wide discretion. Clause 46(1) reads:
"The Secretary of State may, on the application of any person to whom any rules made under section 45 above apply, alter the requirements of the rules so as to adapt them to the circumstances of that person or to any particular kind of business carried on or to be carried on by him".
Clause 46(1) gives the Secretary of State carte blanche and discretion not to apply the provisions of Clause 45 almost at will.
The subsection I am seeking to delete is subsection (2). It provides that the Secretary of State can exercise the power to modify conduct of business rules and, in my view, they are insufficiently described and probably hard to comply with in a satisfactory way for consumers particularly.
Let us examine precisely what I mean. In subsection (2)(a) how is the phrase "unduly burdensome" to be interpreted? Perhaps the Minister will tell us the frequency with which the phrase "unduly burdensome" has been used in the past in other legislation; and if that is not the case, what is the genesis for deciding to put it into this legislation?
In current government-speak the phrase is associated with the burdens of small businesses and the inability of small businesses to compete with large businesses. In investment business surely if a company is so small that it cannot compete with larger companies, it is a more risky investment for consumers, which makes a nonsense of subsection (2)(b). If this is not what is intended, does not the phrase "unduly burdensome" simply leave a loophole
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for intelligent lawyers to exploit and give their clients an opportunity to compete unfairly?
In subsection (2) how will the Secretary of State or the designated agency properly be able to assess undue risk to investors when the Bill as a whole describes a system of self-regulation so far removed from the knowledge and control of the Secretary of State or the designated agency? Does not this clause permit the self-regulating organisation to claim exemption on behalf of its members? If this is the case, the main evidence on risk to investors will come from the same self-regulating organisation. In other words, subsection (2)(b) is thoroughly unclear and, in my view, adds nothing to the Bill. I beg to move.
11.30 p.m.
Lord Lucas of Chilworth: If I could come straight to the heart of the matter, the safeguards in subsection (2) mean that the rules cannot be altered in this way unless they are unduly burdensome and the alteration does not expose investors to undue risk. If the amendment which the noble Lord is proposing were made, it could mean that the rules might be altered so as to put investors at risk. The onus to make a case for alteration will at all times lie with the person making the application; and I think that is really quite important.
The "unduly burdensome" test is a strong safeguard for the investors because how that burden on a firm is to be weighed against the benefit to investors and how the risk to investors is to be assessed are really matters for the judgment of the Secretary of State or the designated agency. Here, one has to have a balance. As I say, the onus to make a case for alteration lies with the person. The power to alter the rules of business conduct in individual circumstances is a considerable one. It has to be used with great care. That is why we believe that this safeguard provided by subsection (2) should remain part of the Bill.
Lord Graham of Edmonton: The noble Lord describes the provision as a safeguard. I think it is a cop-out. One is not talking about anything other than honesty and integrity. But it is so capable of wide interpretation that I do not think that it provides very much protection at all for the investor. I have heard what the Minister has said, I shall read very carefully what he has said, and it may be that I will come back at a later stage. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 46, as amended, agreed to.
Clause 47 [Cancellation rules]:
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 137:
Page 33, line 14, leave out ("may") and insert ("shall")
The noble Lord said: With the leave of the Committee, in moving this amendment, I should like to speak to Amendment No. 138 but not to Amendment Nos. 142 and 143 which deal with clients' money, a quite different matter from cancellation. My purpose in moving these amendments—admitting the unsatisfactory form of the amendment and admitting that it is in principle

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undesirable to seek to use this type of clause to specify precisely what regulations should contain—is to seek information on the Government's current thinking about cancellation clauses; because there is no precision at the moment in the Bill or in regulations. The Bill simply says,
"such period and such manner as may be determined."
We think that a stake should be made for a substantial cooling-off period particularly when one comes to dealing with cold calling.
The position I should like to put to the Government is that there could be a cancellation period for cold calling of not less than 28 days and that something, perhaps not quite the same, for other investment deals (but still a substantial period) should be imposed. We should be very grateful to learn what is in the Government's mind and what they understand to be in the minds of the SIB and MIBOC.
In order to cut a little out of the Minister's speech, perhaps I should make it clear that I understand that SROs are regulated by Schedule 2 and that other organisations are regulated in a comparable way. These amendments were not put down in ignorance of the significance of that schedule. I beg to move.
Lord Lucas of Chilworth: I think we have first to be quite clear that the powers in Clause 47 are there to be used. The expectation is that it will be the SIB which will wield these powers. Before the SIB can have the powers transferred to it, it will have to show that its rules and regulations will comply with Clause 96(8)(b) and the schedule attached to that clause.
I think it would be unusual to impose an obligation on the Secretary of State about making rules in advance of the transfer to SIB. If the Secretary of State chooses not to use the powers which Parliament has given him, with the clear intention that rules and regulations should be made in these areas, it is to Parliament that he has to answer.
The mechansim that we adopt seems to me rather more preferable to the approach that I see in the amendment, because the amendment would introduce a quite undesirable inflexibility into the rules. The noble Lord himself knows that the financial services sector is complex. Some of the rules which the Secretary of State or the designated agency would be required to make would be quite inappropriate in some areas. I do not really think we want to see cooling-off periods for all investment agreements. How could they possibly be operated in the case of shares—perhaps options or futures—where the market is moving all the time? Certainly I suggest that we do not really want to see separate client accounts set up for business and professional investors, who are quite able to look after themselves. That moves slightly into an area which I think the noble Lord wishes to treat separately; but it is in fact very similar.
We are thinking in the rule-making procedure that perhaps a cooling-off period, where it is applicable, should be perhaps no more than 15 days. That is the intention, and we would of course be looking to see what the SIB and the SROs come up with in that direction. But the suggestion which the noble Lord makes of the much extended time would, I think, not be very practical.
Lord McIntosh of Haringey: I feared that the Minister was going to respond to the form of my amendment, which I admitted was defective, rather than to my invitation to him to be a little more explicit. But I am grateful to him for the indication he gave towards the end of his speech about the way in which the Government's mind was moving. I have to say at once that I do not believe, and consumer organisations will not believe, that a period of 15 days for a cancellation period for applicable deals—and I accept that not all investment deals are applicable—is adequate. That means that we shall have to put down, if we can find a way of doing it, some suitable amendment at a later stage. In the meantime I think it is appropriate for me to beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 138 not moved.]
Clause 47 agreed to.
Clause 48 [Notification regulations]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 139:
Page 33. line 36, after ("or") insert ("a person certified by a").
The noble and learned Lord said: I spoke to this amendment with Amendment No. 79. I beg to move.
On Question, amendment agreed to.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 140:
Page 34, line 16, leave out ("verified") and insert ("reported on").
The noble Lord said: With the leave of the Committee, I think that what was in the mind of my noble friend Lord Bruce was simply that the word "verified" is not a term of art in accountancy, whereas "reported on" is. On his behalf, I should like to commend this amendment to the Committee. I beg to move.
Lord Lucas of Chilworth: I am grateful to the noble Lord, Lord McIntosh, for the brevity of his proposal. I fear that I cannot copy him, however, because there is, and always has been, wide concern within the accountancy profession over the word "verify". We think that the concern is misplaced.
The obligation in Clause 48, and in Clause 91 for that matter, is on the authorised person furnishing the information to provide, when required, verification of the information he provides in a manner to be specified. That verification may take a number of forms—copies of documents may have to be certified as such, the accounts required may be those which have been audited, statutory declarations might in such circumstances be required—apart from reports from third parties. I use the word "reports" deliberately, since it is quite possible that the regulations might require verification by way of an accountant's report on the information in question. That is a matter to be covered in the regulations, and I have no doubt that the accountancy bodies will make their concerns known if draft regulations were to envisage what they would regard as unrealistic requirements.
Additionally, the proposed amendment would also narrow quite unacceptably the way in which

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verification might be required. It might restrict it to reports on the information provided and would rule out the other corroboration to which I have referred. That would damage the effectiveness of these powers and that is not desirable. On the basis of that, I very much urge the noble Lord to withdraw his amendment.
Lord McIntosh of Haringey: That response may not make sense to my noble friend, but it certainly makes sense to me. I am sure that he will read carefully what the Minister said. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn,
Clause 48, as amended, agreed to.
Clause 49 [Indemnity rules]:
The Deputy Chairman of Committees (Lord Airedale): In calling Amendment No. 140A, I have to say that if it were agreed to I could not call Amendment No. 141.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 140A:
Page 34, line 25, leave out subsection (2) and insert:
(" (2) Rules under this section may require recognised self-regulating organisations and recognised professional bodies and their members who are authorised persons for the purposes of investment business to participate in any scheme for indemnity established under those rules, irrespective of any additional scheme which such organisations, bodies and their members may themselves operate.").
The noble Lord said: We now come to a vital element of the safeguards which are proposed in the Bill, and I want to put it to the Committee that the admirable example which the Government set in Amendment No. 134, in seeing that there are adequate financial resources maintained in respect of those authorised to carry on investment businesses, ought also to apply to compensation to the indemnity schemes which are maintained by self-regulating organisations and recognised professional bodies and their members.
There are, of course, potential SROs to whom this amendment need not apply. I am not casting any doubt on the financial stability of the Stock Exchange or on its ability to meet any claim made under an indemnity agreement. But even with the amalgamation of SROs and with the simplification of the SRO sructure that has been discussed in the Committee, it is still not certain, or certain enough, that there are equivalent protection arrangements available to those who do business with members of SROs.
That concern has been expressed not only by myself in the amendment; the SIB in its regulation document of December 1985 made the point that a number of SROs will be unable to arrange satisfactory schemes. It is for that reason that the SIB proposes to set up a scheme of its own. It is suggested that SROs may well wish to have top-up schemes in addition, but that if they are to contract out entirely from the SIB scheme, they must match the conditions and the security given.
In addition to the question of security, there is the matter of the economy and viability of indemnity schemes. If they are, as far as possible, operated by the
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SIB, there ought to be an economy in management costs. There ought to be a degree of uniformity across the SROs that will make not only for economy but also for clearer understanding of what indemnity and compensation schemes are likely to be available.
In addition, there is the issue that was raised in another place and to which Government Ministers sympathetically referred, concerning the problem of precipitative withdrawal from indemnity schemes. It will be helpful if the Government can give the Committee a further indication of their current thinking on all those issues and on how the concerns expressed by the SIB are to be met in legislation or in regulations. I beg to move.
11.45 p.m.
Lord Lucas of Chilworth: Before I reply in detail to the noble Lord, Lord McIntosh, I may give him an indication that we shall want to consider this matter further. I shall return to some of his arguments, but first I want to address much the same point to my noble friend Lord Limerick. I may say to him that we should like to consider what we understand to be the purport of his Amendment No. 141A. Perhaps the Committee, to save time, will allow my noble friend to speak to his amendment. I could then draw the two together; otherwise I shall have to make virtually the same reply to both.
The Earl of Limerick: That would probably be for the convenience of the Committee. The proposed new clause that stands in my name is a probing amendment that is connected with the concerns felt by the Securities and Investments Board. Indeed, it has been the subject of some exploratory discussion between the parties concerned.
There are two separate points covered by the four subsections, the first three being connected and the last being independent. I understand from the SIB that the Government consider that the powers in Clause 49 of the Bill are appropriate to provide for indemnity to investment businesses but would not extend to investors themselves. So the powers in Clause 48, for example, could be used to require businesses to take out insurance to protect themselves against claims from investors, but not to set up compensation arrangements purely for the benefit of investors.
My further understanding is that while the SIB may indeed wish to require investment businesses to take out insurance in some cases, it believes that the greatest need is for arrangements for compensation for investors. It is far from clear that Clause 49 allows for such compensation for investors as opposed to guarantees of insolvency through indemnity for firms engaged in investment businesses. First and foremost, it is that which this amendment seeks to provide.
There are of course different ways in which such a compensation scheme could be established. My understanding is that the method which is preferred by the Securities and Investment Board will involve taking out a loan facility with a consortium of banking institutions so that in the event of a default by an investment business the board would be able to make drawdowns on the facility in order to indemnify investors up to a limit of not less than £30,000 against their losses.

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In order to make it clear that such a method is permissible, my amendment specifically refers to the use of a loan facility. This should not, however, be taken to imply that this should be the only method permissible if other arrangements can be made. Specifically, it would not exclude any of the three methods specified in Clause 49(3). Subsection (1) of the new clause therefore leaves all these options open.
I turn to subsection (2). As at present worded, the powers in Clause 49 would not apply to members of a recognised self-regulating organisation or a recognised professional body unless the organisation or body had requested that they should. My amendment takes a different approach. I understand from the SIB that it believes very strongly in the importance of having one central scheme to provide for compensation to investors. In its view such a scheme would promote confidence in the system as a whole in a way that a number of disparate schemes would not. It would also avoid confusion among investors and regulators as to who is responsible for providing compensation in any particular case.
Finally, it would make for a stronger scheme, better able to withstand the changes and chances of the investment world. Subsection (2) would accordingly provide for regulations establishing a scheme for compensating investors to apply to members of recognised SROs and those authorised by certification by a recognised professional body. Such a centralised compensation scheme, however, would require one important safeguard. This is addressed by subsection (3). Members of those organisations and bodies could legitimately be concerned that, by participating in a central scheme, they would be required to subsidise different kinds of investment business or those authorised by different routes. For this reason subsection (3) would impose a duty on the Secretary of State to have regard to the need to secure, so far as it is practicable, that no class of authorised business subsidises any other such class.
What I have in mind is that, except in the case of the very largest demands on the scheme, the cost of meeting claims against a member of any particular self-regulating organisation or professional body should be borne exclusively by the members of that organisation or body: that is, by the class of practitioners undertaking that particular class of business, and not vicariously by those undertaking different classes of business. Only in the case of the very largest demands would the scheme need to provide for a subsidy between different classes of authorised business. Even then, the scheme would have to make the maximum effort practicable to reduce the impact of any cross-subsidy. In the absence of such a safeguard, members of the best controlled and most tightly regulated and managed SROs might find themselves subject to levy to compensate claimants against other SROs which engaged in more risky business or business managed less successfully or prudently. Such cross-subsidisation would not only be unfair to the prudent or low-risk practitioners but could also introduce undesirable pricing differentials between different classes of business.
Lastly, subsection (4) of the new clause deals with a different yet not wholly unrelated problem. When an investment business ceases to be able to meet its
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commitments, any clearing house responsible for ensuring the settlement of that firm's transactions on a particular market will wish to establish certainty in the positions of the parties to bargains transacted, and by so doing to stabilise and minimise the impact of the failure on that market. In order to do so, the clearing house needs to close out transactions for which the troubled firm is responsible. By reducing the continuing exposure of the firm to the market, it protects the market's integrity and the interests of members and others who deal on it.
However, it has never been entirely clear, so far as I am aware, what rights and liabilities, if any, such a procedure engenders and what claims might be sustained from an innocent counter-party who, having been thus closed out by the clearing house, considers himself thereby to be disadvantaged. This final part of my amendment would therefore enable the Secretary of State to resolve issues of this kind by means of regulations under the Bill.
These points are important and I believe that the Government recognise their importance. They are also complex. Some of the issues raised by the new clause, if they are valid, as I believe them to be, may well have relevance to Clause 49 as much as to this new clause. Those who drafted this amendment are certainly cleverer than I, but they are not parliamentary draftsmen and the proposals may have technical defects. If my noble friend were to accept this new clause, I think that my gratification would be exceeded only by my surprise. My purpose in advancing the new clause is to see how far my noble friend from the Front Bench can be drawn at this stage into accepting the principles which underlie this new clause.
12 midnight.
Lord Lucas of Chilworth: I am greatly obliged to the noble Lord, Lord McIntosh, and to my noble friend Lord Limerick for explaining to the Committee the purpose behind these two amendments. Let me say straight away that it is important that we get these compensation arrangements right. They are an important part of the framework of the Bill and it is right that we should give the matter careful thought.
The amendment of the noble Lord, Lord McIntosh, is essentially the same one that was considered in another place. The core of the amendment of my noble friend Lord Limerick covers very similar ground. Since the matter was discussed in another place, the SIB have made representations expressing concern that the fragmented compensation schemes will result in a lower overall level of protection than a centralised scheme could offer. There is also concern that the mechanism provided in the Bill allowing SROs and RPBs to join voluntarily in any SIB arrangements may not necessarily produce the best arrangements. These are views to which I think we must listen.
Recently the SIB put to the department revised proposals which they hoped would ease the concerns of the SROs and RPBs which might be affected by such arrangements. We are considering those proposals and certainly we shall have to collect the views of those who will be most directly affected.
One of the major reservations about an industry-wide scheme is that firms in the low-risk areas will end

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up bearing a disproportionate share of the contributions burden compared to firms in those areas which give rise to the greatest claims. Subsection (3) in my noble friend's new clause gives some recognition to that point. However, we have to explore this in much greater detail, although I certainly undertake to consider the matter further.
I have to tell my noble friend that I cannot at this stage undertake that we will change the Bill in the way proposed. Having considered the views expressed in Committee and the other views that we are seeking, we may conclude that the balance of advantage lies in retaining the present structure—perhaps, admittedly, with minor changes to make it more workable. But we shall consider the arguments put to us.
The noble Lord raised a number of technical points. For example, my noble friend's amendment envisages a different kind of compensation scheme, such as that under the Banking, Policyholders Protection and Air Travel Reserve Fund Acts. We shall look to see whether such a scheme is possible. We should equally be sympathetic to any proposal to operate such a scheme by way of a loan facility.
The final point to which my noble friend referred, that of subsection (4), has, I understand, only recently been raised. As I am sure he knows, there are great technical difficulties to be solved. We have to consider the position of clearing houses within the context also of insolvency law.
I cannot satisfy the points raised by direct answer. Indeed, I do not want to. As I say, we want to take into account the views expressed to us in Committee and by other bodies with a view to providing something that is acceptable. I remind the Committee that in the undertaking that I gave I did not promise to accept all or indeed any part of the amendments. We might, as I said, at that time consider that the balance remains with what is currently in the Bill.
Lord McIntosh of Haringey: There are two ways of responding to that. Wearing my Mr. Hyde hat I might say that the Government are continuing to make up the Bill as they go along, which is not a very satisfactory procedure in matters as complex and important as this. But—
Lord Lucas of Chilworth: Let me just nail that one. That is a disgraceful way to answer what I hoped was a helpful response. My noble and learned friend made it abundantly clear at Second Reading, and we have both made it abundantly clear during the course of this Committee, that we and my honourable friend in another place, the Minister responsible, remain ready and willing to listen to anything that anybody wishes to represent and to embrace it in the Bill where we can. It is not a question of making up the Bill as we go along. We are responding to the representations made to us.
If the noble Lord is going to be ill-willed about that, I assure him that I shall advise my honourable friend that we had better put before the Committee in the next two days that we have the Bill as it stands and cease to have an open-door policy in the department.
Lord McIntosh of Haringey: It is after midnight and I forgive the noble Lord for over-reacting. Had he
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allowed me to finish the phrase that I was using, let alone the sentence, he would have heard me say that wearing my Dr. Jekyll hat I am grateful to him—and I am saying nothing more than I would have said before his intervention—for the constructive way in which he has approached my amendment and that of the noble Earl. It would be unreasonable to expect him to go further than he has in recognition of the problems which have arisen and have been noted by the SIB. I understand that he can go no further than to say that the matters will be considered but that he can give no guarantee that either of our solutions will be adopted.
With those comments, which are no different from those that I would have made before he so intemperately interrupted me, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Cameron of Loch broom Lord Cameron of Loch broom moved Amendment No. 141:
Page 34, line 26, after ("or") insert ("a person certified by a").
The noble and learned Lord said: I spoke to this amendment with Amendment No. 79. I beg to move.
On Question, amendment agreed to. Clause 49, as amended, agreed to.
The Earl of Limerick The Earl of Limerick moved Amendment No. 141A:
After Clause 49, insert the following new clause:—
("Compensation for investors.
.—(1) The Secretary of State may by regulations establish arrangements (including arrangements operating by means of a loan facility) to provide compensation to investors in the event of a default by an authorised person.
(2) Regulations under this section may apply to members of recognised self-regulating organisations and persons authorised by certification by a recognised professional body.
(3) In making regulations applying to such members or persons, the Secretary of State shall have regard to the need to secure, so far as that is practicable, that no class of authorized business subsidises any other such class.
(4) Regulations under this section may also include provision as to the rights of creditors against any recognised clearing house.").
The noble Lord said: I thought that I had moved the amendment, but I may have been out of order. I shall move it now merely for the sake of saying that I am grateful that the welcome mat will remain at my noble friend's door. I am grateful for the response that he felt able to give. I had hoped that he might have gone just one inch further. He said that he was sympathetic to the question of the loan facility. That seems to me to be a simple, straightforward and uncontentious matter. I hoped that he may be able to give an assurance on that part of the amendment at least that the Government propose to come forward with some measure of their own. I beg to move.
Lord Williams of Elvel: I should like to comment on subsection (3) of the new clause. I imagine that I address my remarks to the noble Earl who moved the amendment. Are the Committee and the noble Earl satisfied that in practical terms it is possible to avoid cross-subsidisation among different classes of investment business in the same firm?
The Earl of Limerick: Certainly not. That was the problem addressed by subsection (3). I hope that there may be an acknowledgment of it to ensure that whatever regulations are introduced would have regard to the necessity to minimise such undesirable cross-subsidisation. If no other noble Lord wishes to comment on the amendment, I beg leave to withdraw it.
Amendment, by leave, withdrawn.
Clause 50 [Clients' money]:
[Amendments Nos. 142 and 143 not moved. ]
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 144:
Page 36, line 3, after ("or") insert (" a person certified by a").
The noble and learned Lord said: I spoke to this amendment with Amendment No. 79. I beg to move.
On Question, amendment agreed to.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 144A:
Page 36, line 12, at end insert ("and interest thereon")
The noble Lord said: This must be a probing amendment because I am conscious that it does not fully achieve my wishes on this issue. It has an honourable history in that it was carried in Committee in another place and was removed on Report without Mr. Tim Smith, who had moved it in Committee, even noticing that it was being taken out until it was too late.
It is worth reviving the issue now, even in this form, despite the fact that an amendment to a similar effect was introduced by the Government on Report in another place because the SIB has now published draft regulations on this matter. I have to say straight away that these are wholly unsatisfactory. We are talking about the issue of clients' money. We are talking about a separate fund for clients' money and for the interest thereon.
The government amendment now incorporated in the Bill provides for separate account-keeping of the interest on clients' money. The Government sought to convince another place that the very phrase that clients' money is held on trust is an adequate safeguard and that clients' money embraces the interest. However, the draft dated May 1986 from the SIB recognises that clients' money is held on trust but goes on to say that, notwithstanding the paragraph stating that it is held on trust,
"any interest earned on a firm's client money shall be payable to and belong to the firm and not to the clients".
That is wholly unacceptable. We could be dealing with substantial amounts of money. Even without going into the question that may have to be raised later of the interest on the amount of any claim in respect of which indemnity is to be available, I do not believe that the ordinary investor, professional or private, will be satisfied with the interest on his money held in trust accruing to the investment business rather than to himself. It is contrary to any principle of natural justice. The fact that investment businesses have got away with it for many years is no justification. I seek from the Government in this probing amendment an indication that they will discipline the SIB and indicate
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to it in the strongest terms that this is not an acceptable use of the interest on clients' money. I beg to move.
Lord Lucas of Chilworth: The intention of this amendment that Clause 50 should allow regulations to be made concerning the keeping of accounts and records of the interest on clients' funds held by an authorised person is already achieved by the current drafting. Amendments introduced in another place made clear that the list of powers in subsection (2) is without prejudice to the generality of the power in subsection (1) to make regulations with respect to money held in the circumstances specified in the regulations.
The wording of subsection (2)(f) makes clear that the phrase "clients' money" embraces interest. In the light of this, I am quite clear that regulations under existing Clause 50 can be made in respect of interest including the keeping of accounts and records on such interest, and that this amendment is not really necessary. However, the noble Lord said that this was a probing amendment and that he wished to hear our view on it.
The amendment could undermine the position of those who wish to see clients entitled to interest on their money. The wording of subsection (2)(d) of Clause 50 if amended would run counter to the basis of the rest of the subsection; namely, that interest forms part of the client's money. I am aware that the SIB has questioned in its draft client money regulations whether the approach of stating that clients' money includes interest is the right one. I have no doubt, however, that clients should be entitled to the interest on their money.
The Government's position on this was made clear in the White Paper. I do not believe, therefore, that provisions which would cast doubt on the entitlement of clients to the interest on their money are helpful. That is not to say that a business should not be able to agree with a client that the business should be able to keep the interest. That I think is a different issue, because that can still be possible. But the initial assumption should be that interest belongs to the client; in particular, such money should itself be covered by the client money protections, rather than fall to be dealt with as a debt from the firm to the client, with all the problems that might flow in the event of insolvency. I think that I have made the Government's position abundantly clear. I hope that will satisfy the noble Lord, Lord McIntosh.
12.15 a.m.
Lord McIntosh of Haringey: I am grateful to the noble Lord. He has indeed made the Government's position clear and he has made the Government's opposition to the SIB's draft regulations of May 1986 clear, and for that we must be grateful. I expect therefore that we shall see from the SIB before we come to Report stage revised draft regulations which reflect the attitude of the Government in this matter which is one which has the full support of Her Majesty's Opposition. If we do not see revised draft regulations which reflect these views, we shall of course take appropriate steps to see that the proper protection for investors is written into the Bill. With that I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 145:
Page 36, line 16, leave out from third (" of") to (" to ") in line 18 and insert (" a recognised self-regulating organisation or a person certified by a recognised professional body ").
The noble and learned Lord said: This amendment was spoken to with Amendment No. 79. I beg to move.
On Question, amendment agreed to.
Viscount Colville of Culross Viscount Colville of Culross moved Amendment No. 146:
Page 36, line 24, at end insert—
(" () other than as provided specifically by a contract, where an authorised person keeps an account with a bank pursuant to rules made under this Chapter or under Schedule 2 to this Act and the bank acting in good faith and in the ordinary course of business causes or permits to be carried out in relation to that account any transaction or any part of any transaction, that bank shall not incur any liability by reason only of its failure to concern itself with the right of that authorised person to carry out that transaction. ")
The noble Viscount said: I am sorry to have at this time of the morning to raise the first of three amendments which are all quite different but which all have substance in them. However, that is the way in which this Bill is proceeding. Perhaps the Committee and my noble friend will forgive me if I take this rather more briefly than might otherwise have been the case.
The Bill at present provides that a bank which is dealing with the account of an authorised person—and that authorised person is dealing with individual clients—shall keep the money upon trust. The result of that is that if the client of the bank, that is to say, the authorised business, becomes insolvent, or if one of the persons involved in that business defalcates in some way in connection with the financial transactions, it will be the bank which is ultimately liable to the lay client, the individual investor. This is not an entirely unfamiliar situation. There are a number of other provisions including those relating to solicitors which have provided for this in law.
The dilemma is this. We are confronted by a potential number of transactions which are of very great size indeed. I have asked about the kind of examples that might be given, and I am told that a particular bank with an account with a stockbroker in the quarter ended in June this year had a turnover on that account of over £18,000 million, represented by some 13,000 transactions. The proposition is that the bank will have to look at each and every one of these transactions and make the necessary inquiries in order to make certain for its own purposes—and so as to protect the investor—that nothing has gone amiss and there is no dishonesty or any other failing on behalf of the investment organisation which has the account with the bank.
It can either do that—and if it does, the delay and the amount of manpower that would have to go into it would obviously be absolutely enormous—or have to insure. This point was raised on Second Reading, and I think that the indication given by my noble friend Lord Lucas in his speech at the end of the debate was that the banks should charge for this. The banks would simply have to carry the liability and this would have to be passed on to those who dealt with them and took their accounts.
If that is so, so be it. However, it is worth discussing because in other circumstances, for instance in solicitors' clients' accounts, there are already provisions in the law which provide for a certain protection. I am not saying that it is an indemnity, because my amendment does not provide a complete indemnity. It provides for something in between, and this is the sort of balance which I hope I have been putting forward in all the amendments which I have moved during this Bill. I do not wish to go for extremes; I believe that there should be a balance.
I hope that my noble friend will look at this matter again, because it could be a very great burden. I believe that the alternative is a charge, which would make it more expensive to carry out the ordinary transactions in the market, which is exactly the sort of thing which I should have thought this Bill is intended to avoid. I beg to move.
Lord Boardman: I speak in support of my noble friend's amendment. I raised this point during the Second Reading debate in my capacity as chairman of one of the clearing banks, an interest which I then declared. I find particularly disturbing the apparent lack of understanding about the mechanics of the operation of clearing banks. Indeed, the SIB, with which the Committee of London Scottish Bankers has been in correspondence on this matter, looks upon this particular clause in the Bill as one of the main supports of the framework for protection for investors which is intended to be afforded by the Bill.
It appears to assume that there is some mechanism by which the clearing banks are able to check the authenticity and integrity of each transaction that goes through. My noble friend Lord Colville has referred to the volume that goes through, but I think that my noble friend the Minister must also appreciate the timing. In fact, cheques presented have to be cleared on that day. In the case of town clearing—that is, cheques cleared within the City of London and presented by banks there—they have to be cleared within a matter of minutes.
It is an extremely rapid transaction in order that the wheels of commerce can operate smoothly and efficiently. There is not the slightest opportunity for any clearing bank to verify whether the transaction which is being presented, the transaction for which the clearing bank takes responsibility, is carried out on behalf of the authorised persons or organisation perfectly honourably, or whether that person is carrying it out dishonourably. Indeed, I do not know how it could be done.
Therefore, the clause as drafted at the moment, and which my noble friend seeks to amend, would provide that the clearing bank would be the bondsman for all transactions; it would have to underwrite the whole authenticity and integrity of the authorised bodies which were banking with it. I cannot believe that that is the intention of this Bill. Indeed, if that were so, much of the rest of the Bill becomes absolutely unnecessary and all it would be necessary to say is that the clearing banks will be the bondsman for every operation carried on in the City of London and they must charge accordingly.
As my noble friend said, if this obligation remains in the Bill and the banks are required to underwrite all

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these transactions—and that is what it would mean—their charges for doing so would have to reflect the very considerable risk that they run, and there would be no possible way in which they could protect themselves except by charging, because there is no possible way in which they could verify the transaction. Therefore, I hope that my noble friend the Minister will give support to my noble friend's amendment.
Lord Lucas of Chilworth: It is always difficult when noble friends behind one put forward such a persuasive case in defence of what in particular my noble friend Lord Boardman declares as a particular interest, but I have to say that there is on behalf of both my noble friends an element of exaggeration.
But let us start at the beginning. We have to accept, surely, that it is an important part of the approach in Clause 50 that clients' money held by authorised persons shuld be clearly seen as being held on trust. Naturally that provision is aimed primarily at imposing duties on the investment businesses to which clients entrust their money. But we believe, however, that it may be appropriate for the regulations to require not only that such money is kept separate from the funds of the business, but also in certain circumstances that it is placed in the hands of persons of a kind specified in the regulation; for instance, recognised banks.
The fact that such persons, having been notified that the money is held by the account holder on trust, can be expected to play their part in ensuring that such money is not misused is a really important additional safeguard for investors. Of course, it is quite understandable that the banks should look very carefully at a provision which they fear might impose on them an onerous, unusual or exceptional burden. We believe that these fears are exaggerated. The position in the Bill will be the same as it is with client money accounts opened under the Estate Agents Act or the current licensed dealers rules or the increasing number of firms which open accounts for clients other than under statutory provisions. Certainly we have not been made aware of any particular difficulties arising from those provisions.
Of course there are differences. I appreciate there are differences of opinion on the extent of banks' responsibilities under the present law; but I do not think it has been suggested at all that it goes beyond circumstances which put the bank on inquiry, or where it should have been aware that the customer was acting in breach of trust. What is necessary to put a bank on inquiry must be decided in all the circumstances. We do not believe a bank could reasonably be held responsible except where something strikingly unusual was attempted with respect to a client money account. For instance, in a well used account, a pattern emerges. If a large withdrawal by unfamiliar people occurred, breaking the usual pattern, we think it would be reasonable for the bank to take note of that and make an investigation. That does not seem to be unreasonable when we really are trying to protect investors' rights to their money. This is not a question at all of the—
Lord Boardman: If I may just interrupt my noble friend, can he explain to me how a branch which receives in one short period 1,000 cheques for nearly £1,000 million on one day, in a matter of minutes, or hours if you wish, is able to see whether there is anything unusual; how it could possibly trace and look through that reputable firm as it appears that all the cheques are drawn in favour of people who they believe to be absolutely reputable? How can it possibly be done? It really is a quite unrealistic picture that is being painted, and I hope that my noble friend will reflect and take further advice on it before pursuing that line.
Lord Williams of Elvel: May I say that it is not because I have taken a Trappist vow that I remain silent, but becaue the noble Lord's noble friend in my view has put an extremely cogent case, and on our side we would support it.
Lord Lucas of Chilworth: I must say I am very disappointed at my noble friend Lord Boardman. With all the technology available today in his own bank and in the whole of the banking system—with all the technology employed for the transmission of documents, of money, of information, and with all the technology that is employed to persuade us to buy different products from the bank, the fact that the banks cannot devise a system that would give them a reasonable broad check on an account which shows a variation just staggers me.
12.30 a.m.
Lord Boardman: I have not made myself clear. How is it possible among those thousand cheques to verify the payee on each of those cheques, and to say that that payee is a respectable and responsible person? No amount of computers and the rest of it can identify that Mr. Smith, or Mr. Brown, to whom a cheque for £500,000 is made payable, is a genuine person, or whether it is someone proposing to run off with the money. To do so it would be necessary to operate inside the very offices of the payer, and as I understand it no technology could possibly deal with the particular problems it would impose. If my noble friend has a solution I should be happy to hear it from him, but I cannot suggest one.
Lord Lucas of Chilworth: I think I could find a solution for my noble friend. I do not believe that it is beyond the bounds of possibility, given the other side being enjoined in it. I do not believe that the enormous manpower problem that my noble friend Lord Colville raised is at all a reasonable argument. When one looks around some of the institutions that have for years been labour intensive and have now gone on to machinery and high technology, I think it is unfair of him to suggest that to me.
I have made the position of the Government clear. The SIB in their draft regulations firmly expressed the view that a provision along the lines of that in the Solicitors Act, to which reference has been made, would largely destroy the efficacy of these regulations. We naturally attach a great deal of weight to the views expressed by the SIB on a matter of this kind.
It is late, and my noble friend Lord Colville said that because of the hour he was going to be rather briefer

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than he otherwise might have been. Perhaps my noble friend Lord Boardman would have liked to deploy his arguments at greater length had time been on his side. Having said that and given the view of the Government in this matter, I am without any qualification prepared to discuss the matter further with my honourable friend, but that is as far as I would go. I should not like to imply that we would change our minds in any way, but if that is helpful to my noble friends I am prepared to do that.
Lord Bruce-Gardyne: Before we return to this matter on Report, I wonder whether my noble friend would ask his officials to work out what would be the likely additional cost to those who are using the services of banks as a result of the clause standing as it is? I am sure that my noble friend Lord Boardman is entirely right that the additional cost could by miles outweigh any conceivable consequential benefit to the customers of the bank, and that surely is the crucial consideration.
Lord Lucas of Chilworth: No, that is not the crucial consideration at all. The crucial consideration is the protection of the client's money. I shall resist the invitation that my noble friend Lord Bruce-Gardyne makes. I do not believe it is for officials in my department to work out the costs. I believe that if the banks want to advance the argument that this will be a crippling expense then it is for them to produce the figures to advance that argument, not for my department.
Viscount Colville of Culross: I hope that we can leave this matter in a fairly equable way because my noble friend has said without any commitment that he will look at it again. There are two things—I shall not ask him to comment upon them—that need to be done. First, he takes the view that there are technological methods whereby one can somehow distinguish the dishonest business from the ordinary run of business. If that is the case, I have no doubt that his officials will be glad to expand on this matter that he has raised before the Committee tonight. I do not wish to go into it now.
The other thing I believe is that when one considers the extent of the burden—much of what my noble friend has said has already been rehearsed in correspondence between the SIB and the banks and I do not necessarily want to go into the merits of the arguments tonight—we shall have to deal in the end, if the Bill stays as it is, with the insurance market. It will be the insurers who will decide what is the extent of the risk and what they will charge for an insurance policy which will guarantee the client's money. I understand my noble friend's point about the client's money. Somebody in the end will have to pay for it. The way that the law works, the way that the market works and the extent of the risk are matters that the insurers in the end will have to come to grips with. I am sure that we can find out from them between now and Report stage how much this will cost. Very likely, it is not necessary for my noble friend to do that.
Perhaps we could go forward on those two constructive expeditions: one to look at the technology and the other to see what it is likely to cost. I leave my noble friend with this point. It is not actually in the ordinary
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run of business that the one-off major defalcation that cause the trouble in these matters arise. If he sat and listened to what happened in the criminal courts of this country he would realise that it is small amounts of money being fiddled over a long period of time in quite small individual transactions which subsequently turn out to be a substantial amount at the cost of the client. It will not be the individual large transaction that stands out. There will be no way in which the bank, as a bank passing cheques through in accordance with commercial transactions, will be able to spot that. They are being asked to be insurers and, in their turn, they will have to take insurance policies to deal with that.
I hope that when my noble friend bears these matters in mind and has a look at this later on this morning, he will be prepared to enter into discussions as he has promised. I do not wish to take him up on any commitment, but I am sure we shall be able to have further discussions on this point. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 147:
Page 36, line 24, at end insert—
(" () Where an authorised person is required to have an auditor, whether by virtue of any provision contained in or made under any enactment (including this Act) or of the rules of any such organisation or body as is mentioned in paragraph (b) of subsection (2) above, the regulations may require the examination and report referred to in paragraph (e) of that subsection to be carried out and made by that auditor. ").
The noble Lord said: This is a provision enabling the regulations made under this clause to stipulate that examination of clients' accounts shall be undertaken by the auditor of the authorised business concern. This will be, for most businesses, the most cost-effective way of proceeding. In addition, there may be benefit for investor protection by insisting on a report from this source. An auditor will have the benefit of a continuing relationship with a business; he will know his way round its accounting system and thus he is very much more likely to spot any error. I beg to move.
On Question, amendment agreed to.
Clause 50, as amended, agreed to.
Clause 51 [Unsolicited calls]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 148:
Page 38, line 2, after (" or ") insert (" a person certified by a ").
The noble and learned Lord said: This amendment was spoken to with Amendment No. 79. I beg to move.
On Question, amendment agreed to.
Viscount Colville of Culross Viscount Colville of Culross moved Amendment No. 149:
Page 38, line 8, leave out subsection (8) and insert—
(" (8) In this section " unsolicited call" means a personal visit or oral communication made without express invitation to a person other than on the trade premises of the person who makes the call; and " trade premises " means a place where business is carried on, whether on a permanent or temporary basis, by that person.")
The noble Viscount said: Unsolicited calls, in Clause 51, have the result of the person who has been persuaded to embark upon an investment transaction being able to recover his money, and I have no doubt that that is absolutely right and I am not in any way attempting to attack the principle of the clause. The difficulty is in subsection (8) of the clause (at the top of page 38), because it is not entirely clear what the words,
"oral communication made without express invitation"—
and that is a quotation from the subsection—mean.
If one takes a very obvious and absolutely everyday situation, a customer goes into a bank or, it may be, any other financial organisation, to get advice about what he is to do with his money. The person who is advising him deals with the immediate question that the client or customer puts, but he has some other quite good ideas of his own, as possible alternatives. On a very strict interpretation of the words in subsection (8) he would not actually be able to put forward any of those alternative suggestions unless he was specifically asked by the customer or client to do so. I cannot believe that that is what the Government mean, because it simply does not take any account of the realities of what people do in the course of their daily life. I think that my noble friend is going to say that that is not what subsection (8) means.
The difficulty about this is that he will immediately appreciate that the essence of Clause 51 is that the client who is dissatisfied subsequently about something that has happened is able to recover his money or otherwise go to court about it. And it is no use, I am afraid, making explanations in this House or giving undertakings or anything of that sort because the courts are not able to look at Hansard. Therefore, if it is intended that people should not be able to renege upon whatever investment was made as a result of advice given, without them specifically asking, while they were sitting, for instance, in the bank manager's office, we shall have to say something about it in the Bill because it is of no use just giving an undertaking in Parliament.
Until we change the law about what the courts can look at, all the understandings in the world in the Department of Trade and Industry and in the mind of my noble friend will avail us nothing. Therefore I suggest that this is one of those occasions which I have heard argued ten thousand times in your Lordships' House that it should be put in the Bill rather than left on the basis of something that is thought to be involved in this particular clause as it stands. I hope that my noble friend will be able to help me. This is very much different from the previous amendment. There is nothing between us, as I understand it. It is simply a matter of expression and draftsmanship. I beg to move.
12.45 a.m.
Lord Bruce-Gardyne: I should like briefly to support what my noble friend Lord Colville has said. I think this is a crucially important point. I have declared on a previous occasion my interest in these matters as a director of the TSB. The TSB is to some extent perhaps more concerned about this than the other
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clearing banks, because arguably the nature of its clientele is such that the branch bank manager of the TSB is liable to be an investment counsellor perhaps to a greater and more fundamental extent than is the case with the other clearing banks.
I could not agree more with my noble friend Lord Colville in what he said concerning the importance of not relying on what the department may say by way of interpretation of the present wording of the clause. The fact is, for the reasons my noble friend has explained, unless we have a clear definition of the ability of the branch bank manager to carry on his normal business of service to the customer along the lines of my noble friend's amendment, he is not going to be able to do that job, because the risk of the customer who finds that perfectly bona fide advice happens not to work out to his satisfaction coming back and demanding the unravelling of the consequential investment at the expense of the bank is too great. To my mind, this is one of the most important amendments which your Lordships are discussing if normal branch banking business is to continue; and I hope that my noble friend will be able to give Lord Colville the sort of reassurance that he sought.
Lord McIntosh of Haringey: We have already indicated our intention to seek to secure an effective and adequate cooling off period or cancellation period for unsolicited calls. It would not in any way strengthen our argument if the definition of "unsolicited calls" were to be too wide and if the situation, as expressed by noble Lords opposite, of the customer in a bank manager's office were to be included. Therefore, subject to the answer the Government give, in general we are in support of this amendment.
Lord Lucas of Chilworth: I should say at the outset that I am very sympathetic to the concerns which have given rise to this amendment, particularly in the case of bank managers and others who are worried about what subjects they may or may not raise when a client visits them, or indeed approaches them. There is certainly no wish on the Government's part to fetter unreasonably the advice which an authorised business may give to a client who approaches it. I know of course that SIB share that view.
However, I think that the amendment is based on a misunderstanding of the clause and in particular of the phrase "oral communication". That phrase is to bring in the unsolicited telephone call or the encounter in the street, which are as much a cold call as is the visit from the doorstep salesman. I am advised that it refers to the conversation as a whole, and not to individual subjects in that conversation. In other words, if a bank customer visits or telephones his bank manager, or perhaps communicates in any other way that he might well be able to in the not very distant future, the bank manager cannot, by virtue of changing the subject matter under discussion, be regarded as making an unsolicited call on his customer. All the bank managers that I have ever met or had conversations with have always kept a diary note of the subject of the conversation. Indeed, I have always kept a diary note of my conversations with them. I should have thought that that would outline the broad areas that had been

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covered. Perhaps it would not be a total defence, but it would support the contention that this was not a cold call.
We do not believe that the amendment is necessary to achieve the end which all noble Lords wish. Concentrating on where the conversation takes place, rather than on who has initiated it, gives it quite the wrong emphasis. There is some concern that Clause 51, as I have described it, does not perhaps catch some. One is invited perhaps to call to discuss one subject—the investment business, or something totally different—but the occasion is then used to discuss some unrelated investment agreement. We believe that such matters can be handled by conduct of business rules.
I have the impression from my noble friend Lord Colville that he suspected I would say something of that kind, but would not really be overly satisfied. We believe that this can be dealt within that way. We believe that there is a misunderstanding. But if what I have said does not reassure him, I would be very happy to have a further look to see whether we can tighten it, so that the misgivings which he and my noble friend Lord Bruce-Gardyne foresee are allayed in some way.
Viscount Colville of Culross: I am very grateful to my noble friend for that. The difficulty is this. He is absolutely right in trying to deal with the unsolicited telephone call and other sorts of cold calling. What will happen—and I think this is really where he needs to discuss this with his advisers and, perhaps, the draftsmen—is that there will be a number of small transactions which have taken place, pehaps in the bank manager's office, and, for all I know, accompanied by the sort of notes that my noble friend has talked about.
It will be a matter of law whether that was an oral communication which falls within subsection (8) or whether it was not. This will start in England, at any rate, in the county court, and it will go to the Court of Appeal on a particular set of facts and it will take quite a long time before a body of law is sorted out which indicates what is and what is not within the contemplation of the subsection. Far be it from me to try to deprive lawyers of their excellent fees, but I should have thought that it was the business of government to make clear what it is that they mean, so that we do not need litigation in order to establish what subsection (8) of Clause 51 means.
I think my noble friend would be very wise indeed if he looked at this a bit further. He may not like my solution—I do not mind about that in the least—but I think enough worry has been expressed here this morning for him to be enabled to go back and have another try. I think it could be tightened up and I should be grateful if he would do so as he has promised. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 51, as amended, shall stand part of the Bill?
Lord McIntosh of Haringey: We have not put down an amendment to Clause 51, although unsolicited calls is a matter of very great concern to us, because,—I may have failed to secure them—we have not seen the
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draft rules which the SIB and MIBOC are preparing on this matter. We understood from the Parliamentary Secretary in Committee in another place many months ago that these dratft rules were expected imminently, and might even have been produced before Report in another place. In the absence of those draft rules it has been very difficult for us to see the extent to which we ought to seek to have the protections which we know will be wanted on the face of the Bill. All that I seek at the moment is any indication that the Government can give the Committee as to when we may expect to see the SIB draft rules, in the firm hope that we shall have them in adequate time before Report stage, so that we may take appropriate action.
Lord Lucas of Chilworth: I cannot help the noble Lord very much. The rules were available and published in May. They are already being redrafted in the light of the comments made. I must say that I am extremely surprised to learn that the noble Lord has not been advised of that situation and has not had an opportunity to make a study of the rules. What procedure the noble Lord adopts at Report stage is absolutely in his hands. I should not like to advise him at all.
Lord Williams of Elvel: We are not on the SIB mailing list. If we were, or if we had civil servants to back us up, perhaps we would be better informed.
Clause 51, as amended, agreed to.
Clause 52 [Restrictions on advertising]:
On Question, Whether Clause 52 shall stand part of the Bill?
Lord Cameron of Lochbroom: It is appropriate to advise the Committee that certain representations on the precise wording of Clause 52 have been received from the Law Society and from others involved in advertising. I ought to tell the Committee that in the light of those comments I expect that amendments to the drafting rather than to the substance of the clause, and to those clauses related to it, will be brought before noble Lords at a later stage in our proceedings.
Lord Williams of Elvel: Can the noble and learned Lord say whether those amendments will be available in Committee or whether they will come to us at the Report stage?
Lord Cameron of Lochbroom: I regret that it will be too late to deal with them in Committee, and that is why I have given the information I have on Clause 52 stand part. The amendments will obviously be presented on Report, or later.
Lord Hacking: Not later, I hope.
Clause 52 agreed to.
Clause 53 [Exceptions from restrictions on advertising]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 150:
Page 40, line 24, after ("40") insert (", 41")
The noble and learned Lord said: This amendment was spoken to with Amendment No. 114. I beg to move.
Viscount Colville of Culross: My noble and learned friend may have spoken to Amendment No. 150, but now we have reached it. Is it Clause 41 or is it Amendment No. 113 which was inserted after Clause 40—or is it both? It would seem to me that one might consider at least the new clause in Amendment No. 113 in relation to advertisements—and it refers also, of course, to exempt persons—as another candidate to be inserted at this point. I am not sure which is meant.
Lord Cameron of Lochbroom: I can only say to my noble friend that I shall have to take advice and perhaps I may write to him, to let him know what is the position. As I said, Amendment No. 150 was spoken to with an earlier amendment. I understand that it just includes Clause 41 after the reference to Clause 40.
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 151:
Page 40, line 34, leave out ("is") and insert "(consists of or any part of listing particulars, supplementary listing particulars or any other document").
The noble and learned Lord said: With the leave of the Committee I shall speak also to Amendments Nos. 152 and 153. These amendments have been introduced in response to concern that the exemptions in Clause 53 for documents published in connection with a public offer of securities were too narrow, in that they did not allow issuers to publish listing particulars and prospectuses without falling foul of Clause 52. That was not the intention and these amendments are intended to put the matter beyond doubt.
The amendments also allow issuers to publish documents in accordance with the rules of a recognised investment exchange which has been approved for the purposes of Part V; that is, it can substitute the exchange's prospectus rules for those of the Secretary of State. An exchange will not be approved unless its rules on public offers provide effective investor protection. Certainly I would expect an approved exchange to impose rigorous standards on the non-prospectus documents it allows issuers to publish. Therefore, it seems reasonable for Clause 53 to allow documents subject to those standards to be published. I beg to move.
On Question, amendment agreed to.
1 a.m.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendments Nos. 152 and 153:
Page 40, line 35, leave out from ("Act") to end of line 37 and insert ("or by an approved exchange under Part V of this Act").
Page 40, line 42, after ("and") insert ("either the advertisement consists of a prospectus registered in accordance with that Part or").
On Question, amendments agreed to.
Clause 53, as amended, agreed to.
Clause 54 [Employment of prohibited persons]:
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 154:
Page 42, line 5, after ("effect") insert (", the period for which it is to have effect").
The noble Lord said: The purpose of this amendment and Amendment No. 231 to which, with the leave of the Committee, I will speak also, is to seek more flexibility in the term of suspension or disqualification of a prohibited person.
There is a whole range of degrees of fault which may cause a person to be prohibited from employment on investment business. Some of them clearly will demand indefinite and permanent suspension. Serious fraud is clearly a matter which demands permanent disqualification. But there could be cases relating to more minor faults which ought to be reported and command disqualification, though for a more limited period. The thinking behind this amendment is that there should be an opportunity for the Secretary of State or, in this case, the SIB to prohibit a person from being employed in investment business for a more limited period which should be specified in the disqualification order.
Amendment No. 231 is on very much the same subject. It relates to Clause 89, which is connected with Clause 54 in the sense that Clause 89 provides for employers to be able to check the register which is established for disqualification purposes. Amendment No. 231 adds to the information which may be obtained by employers the reasons for and extent of the disqualification direction. This is a relatively minor matter but it seems to move in the direction of flexibility and justice. I hope that the Government will be able to treat it with some sympathy. I beg to move.
Lord Cameron of Lochbroom: I have taken note of what the noble Lord said but I think that I should make clear that the purpose of a disqualification direction is not to punish the individual but to protect investors. If an individual has been shown not to be fit and proper, it is difficult to say when he will become fit and proper or indeed whether he ever will be fit and proper.
If investors are to be protected the answer must be to make the direction for an indefinite period, and if the individual subsequently mends his ways the clause provides the Secretary of State or the agency with the power to revoke the direction. In the meantime, of course, the individual will be able to apply for consent to employment and the consent may not be refused without giving him an opportunity to have his case referred to the tribunal. For those reasons I regret that I cannot accede to the noble Lord's amendment.
Lord McIntosh of Haringey: I am of course sympathetic to the idea that disqualification should not be a punishment but should be a protection for investors. I was, and am, aware of the possibility of a revocation. I am still somewhat at a loss to understand what it is that a disqualified person may do to show after what period of time he becomes fit again to be employed on investment business. It seems to me that the revocation procedure could end up by being somewhat clumsy and in many cases this could be avoided by a definite period of disqualification rather

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than an indefinite period. However, I can see that there are arguments on the other side, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 54 agreed to.
Clause 55 [Public statement as to person's misconduct]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 155:
Page 42, line 36, leave out from ("contravened") to end of line 38 and insert—

("(a) any provision of rules or regulations made under this Chapter or of section 51 or 54 above; or

(b) any condition imposed under section 46 above,").

The noble and learned Lord said: I spoke to this amendment with Amendment No. 98. I beg to move.
On Question, amendment agreed to. Clause 55, as amended, agreed to.
Clause 56 [Injunctions and restitution orders]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendments No. 156 to 158:
Page 43, line 32, at end insert—
("or any condition imposed under section 46 above;"),
Page 43, line 33, after ("provision") insert ("or condition").
Page 43, line 36, after ("provision") insert ("or condition").
The noble and learned Lord said: With leave, I should like to move Amendments Nos. 156, 157 and 158 en bloc. I spoke to these amendments with Amendment No. 98. I beg to move.
On Question, amendments agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 159:
Page 43, line 39, leave out ("or, in Scotland, an interdict").
The noble and learned Lord said: I spoke to this amendment and the succeeding Amendment No. 160 when speaking to Amendment No. 61.I beg to move.
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 160:
Page 43, line 40, after ("contravention") insert ("or, in Scotland, an interdict prohibiting the contravention").
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 161:
Page 44, line 12, after ("provision") insert ("or condition").
The noble and learned Lord said: I spoke to this amendment with Amendment No. 98. I beg to move.
On Question, amendment agreed to.
Clause 56, as amended, agreed to.
Clause 57 [Actions for damages]:
Lord Hacking Lord Hacking moved Amendment No. 162:
Page 45, line 17, leave out ("or is otherwise adversely affected by it").
The noble Lord said: This is a very short, purist's amendment, which is perhaps fitting at this early hour
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of the day. Clause 57, regarding contravention of certain parts of Chapter V of the Bill, states that persons who have suffered loss as a result of such contravention can bring civil suits. But, as well as suffering loss as a result of contravention, there are added the further words:
"or is otherwise adversely affected by it".
The normal principle for civil suits is that a person has to suffer damage or loss; otherwise he is not entitled to proceed in the bringing of that suit. Subject to what the noble and learned Lord has to say about the other words, "otherwise adversely affected", it is my submission that those words are unnecessary and that purity will be added to the clause by their deletion. I beg to move.
Lord Cameron of Lochbroom: I am grateful to the noble Lord for moving the amendment. We were concerned to make sure that where an investor, for example, failed to realise a profit to which he was entitled, the use of the phrase,
"any person who suffers loss as a result of the contravention",
might not be sufficient. I should like to think about that again. I would only say that in a later amendment in the name of my noble friend Lord Colville, No. 165A, I observe that he too uses the phrase in relation to a contravention,
"the loss or adverse effect".
It may be that he was taking it from this clause.
With that undertaking, I hope the noble Lord may feel able to withdraw the amendment.
Lord Hacking: Indeed, I do.
Amendment, by leave, withdrawn.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 163:
Page 45, line 20, after (" or ") insert (" a person certified by a").
The noble and learned Lord said: I spoke to this and to Amendment No. 164 with Amendment No. 79. I beg to move.
On Question, amendment agreed to.
Lord Camerom of Lochbroom Lord Camerom of Lochbroom moved Amendment No. 164:
Page 45, line 24, leave out (" a member of such an organisation or body ") and insert (" such a member or so certified ").
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 165:
Page 45, line 24, at end insert— (" (2A) Subsection (1) above does not apply—

(a) to a contravention of rules made under section (Financial resources rules) or conditions imposed under section 46 in connection with an alteration of the requirements of those rules; or

(b) by virtue of subsection (2) above to a contravention of rules relating to a matter in respect of which rules have been or could be made under section (Financial resources rules).").

The noble and learned Lord said: My noble friend spoke to this amendment with Amendment No. 134. I beg to move.
On Question, amendment agreed to.
1.15 a.m.
Viscount Colville of Culross Viscount Colville of Culross moved Amendment No. 165A:
Page 45, line 24 at end insert—
(" () Where any person suffers loss or is adversely affected by a contravention falling within subsection (1) as a result partly of his own fault and partly of the fault of any other person or persons, any damages recoverable in respect thereof shall be reduced to such an extent as the court thinks just and equitable having regard to the claimant's share of the responsibility; and it shall be a defendant to show that, at the time of the contravention the loss or adverse effect could not reasonably have been foreseen by him.")
The noble Viscount said: I am afraid that this is a fairly important point. It is not confined to this Bill but related to legislation in general. I wholly applaud what the Government have done, which is to provide in Clause 57 that a breach of the various regulations, rules, and so on, shall give rise to an action in civil law for those who have been caused loss or adverse effect as a result. All too often in legislation a duty has been placed upon somebody, and often it is accompanied by a criminal liability, and Parliament has not bothered to say one way or the other whether there is a statutory duty which is answerable in civil courts as well if somebody is damaged by the person who has failed properly to carry out the duty.
Here the Government have done exactly that. They have said this sort of failure shall be actionable. That is absolutely fine and it is exactly what ought to be done more often. I congratulate my noble friend. The trouble is that it does not go far enough. The Law Commission quite a long time ago in its Report No. 21 had a look at that matter in one paragraph and found that there were a number of instances where Parliament when legislating had said that there was not to be civil liability or that there was. It gave some examples which are interesting, because although it reported a long time ago and there may be other examples, they all come from the department represented so ably in this Chamber by my noble friend Lord Lucas. They all relate to consumer protection in one shape or another. For instance, we have Section 3(1) of the Consumer Protection Act 1961, Section 4(2) of the Resale Prices Act 1964 and Section 7(2) of the Restrictive Trade Practices Act 1956.
Those Acts all say that the failure to comply with whatever it is shall give rise to an action in the courts, but they add the magic words:
"subject to the defences and other incidents applying to actions for breach of statutory duty".
Heaven knows that that means! It must have been the same draftsman for all three Acts. He took the view that there was such a thing as a defence or incident for breach of statutory duty.
I venture to suggest to the Committee that that is wrong because in practice the courts have had to look at the whole ambit of each of the Acts in which this matter has arisen and spell out the extent of the statutory duty and the defences and other incidents.
It is a pity that the noble and learned Lord, Lord Denning, is not here, because in about 1968 he took part in a case which reached the House of Lords in its judicial capacity. The case was about the duties of a manager under the Mines and Quarries Act. He
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eventually took the view that it was not part of the statutory duty for the manager of the mine to take precautions to deal with something which was not reasonably foreseeable. That matter had to come to the House of Lords to be decided. It was one of the incidents of that statutory duty.
In the amendment, I suggest that if we are properly putting civil liability into Clause 57 we should go that little bit further and sort out the various defences and incidents which the Department of Trade and Industry, or its predecessor, put into its legislation, so that we do not have to come to the House of Lords on litigation to find out what they are. I have invented two good ones. The first is contributory negligence. The second is reasonable foreseeability. That is an adaptation of what is now law in negligence and other kinds of tort. I have left one out because I have not dealt with joint tortfeasors.
Will my noble and learned friend the Lord Advocate please look at this matter, because we have an opportunity to make clear and certain something which at the moment has been left in a vacuum. This is an excellent opportunity to do something properly for once and not leave the Bill half-baked, as it is at the moment. I beg to move.
Lord Cameron of Lochbroom: I am grateful to my noble friend for raising this point. I shall make just two comments. The right of action which is given by the clause is given to a person who suffers loss as a result of the contravention or is otherwise adversely affected by the contravention. The problem is that the investor here is envisaged as taking the action with regard to misconduct by the other party or parties. It is difficult, at least at the moment, to see how there could be any basis for suggesting that the claimant should bear some share of responsibility for such a contravention as is set out in Clause 57.
The other matter relates to the defence of reasonable foreseeability. In one sense the clause makes quite clear that there is no issue of reasonable foreseeability in the sense that the party sued will be sued on the basis of a contravention and he must be aware, from the very terms of the clause, that if loss or other adverse effect were to arise, the investor will be entitled to take action. Again, I have some difficulty in seeing how a defence of reasonable foreseeability could arise. This is an early hour of the morning, and I do not wish to cavil at the point brought up by my noble friend. I should certainly like to consider the matter further. But it is only right that I should make my reservations known to him on both these matters. Of course, the question of joint tortfeasors is slightly different. I take note of what my noble friend said. It is not covered in the amendment. Obviously I shall also look at that matter.
Viscount Colville of Culross: I wonder whether my noble and learned friend can tell me this. He is not, I think saying that this liability is intended to be a strict liability of the sort concerned for instance, with fencing or factory machinery. Is that correct? I imagine that he envisages that there is some latitude that prevents it becoming absolutely strict.
Lord Cameron of Lochbroom: This is a matter on which I should like to think again. Judging from the way in which the clause is framed, if the person who

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sues establishes that there was a contravention, and that is a matter of fact, and thereafter establishes that he suffered loss or was otherwise adversely affected, it seems to me—and this seems consistent with the general principle of the Bill—that in those circumstances the business must pay for its misconduct, misconduct being the fact that it has contravened the various obligations or rules set out in Clause 57. To that extent it can be something like strict liability, although that is used, I think, in a very different context.
Viscount Colville of Culross: In that case I suggest that my noble and learned friend would be well advised to look at this again, as I am sure he will. I say that for this reason. If we, at this stage, can establish whether or not we are intending to have a strict liability, that would be a very good thing. It is not very helpful to leave it when even my noble and learned friend does not know. This is the time, when we are still at the parliamentary stage, to deal with the matter rather than leave it to the courts.
As to foreseeability, I would have thought that it was all too probable, if one has a technical contravention of one of the rules and regulations that give rise to a loss, that someone would turn up, in due course, in the courts with a situation where there was a chain of events that eventually led to a loss but where there was an argument about causation or about reasonable foreseeability and where it would not be good enough simply to say, "Ah, but there was a contravention of the rules." There will be subsidiary points. The examples that I gave about the 1960 legislation are not altogether inapposite. They are also for the purpose of protecting various people who are dealing with bodies of the sort we are concerned with here. At that time this very department put into its legislation some qualifications of the liability of the sort that I read out a moment ago. There is, therefore, a very good precedent for this when one is creating a statutory tort of this sort. There is a good deal of substantial homework that needs to be done on this matter. My noble and learned friend has said that he will do it. I am very grateful to him. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 166:
Page 45, line 26, leave out ("this section") and insert ("subsection (1) above applies or of a contravention of rules made under section (Financial resources rules) above or such conditions as are mentioned in subsection (2A)(a) above").
The noble and learned Lord said: This amendment was spoken to with Amendment No. 134. I beg to move.
On Question, amendment agreed to.
Clause 57, as amended, agreed to.
Clause 58 [Gaming contracts]:
Lord Hacking Lord Hacking moved Amendment No. 166A:
Page 45, line 35, at end insert—
("; or
(c) any rule of the law of England and Wales whereby a contract by way of gaming or wagering is not legally enforce-able.").
The noble Lord said: It was a surprise for me, and possibly for other noble Lords, to learn that our Gaming Acts could adversely affect the investment business of an authorised person and could imperil transactions by making them void or unenforceable. However, I have done my research. It is right that there are cases from the end of the last century—in a very different world from today—which technically could affect contracts used today in the investment business in futures, and in another form of investment identified in paragraph 9 of Schedule 1; namely, contracts for differences.
At this late hour of the evening I shall not attempt to educate noble Lords on futures, let alone contracts for differences; but they are both defined in the schedule. I am satisfied, having looked up the Victorian authorities, that both those forms of investment business could fall foul of the Gaming Acts. Therefore, the question is: have the Government, in Clause 58, chosen the right formula to deal with English law? I use that terminology carefully because I am not quarrelling with the treatment that is being sought concerning the law of Scotland. I have no authority about the law of Scotland but the manner in which the Government are attempting to deal with it in Clause 58(b) concerning the law of Scotland seems to be the right way.
The difficulty concerns the English law. Noble Lords will see that it is treated differently in the Act because, with regard to the law of Scotland, the Bill simply says:
"any rule of the law of Scotland whereby a contract by way of gaming or wagering is not legally enforceable"
will not bring an investment transaction in an investment business to the position of its being void or unenforceable. Instead of using that formula with regard to England, the Government have specified in paragraph (a):
"section 18 of the Gaming Act 1845, section 1 of the Gaming Act 1892 or any corresponding provisions in force in Northern Ireland".
Instead of treating it with the more general approach, they are limiting it to gaming contracts falling either under the Gaming Act 1845 or under the Gaming Act 1892.
This is the difficulty. After research, I find that under common law there has certainly always been doubt as to whether wagering contracts are enforceable. There is certain authority prior to 1845 in which considerable doubt was expressed about the validity of gaming or wagering contracts. It seems to me—this is the reason I have tabled this amendment—the more sensible way of approaching it would be to use the same formula as has been used for Scotland. That would remove all difficulties under both statutory and common law.
I should say that my amendment does not seek to delete paragraph (a). I have done it by way of adding another clause which, if noble Lords approved of my amendment, would become paragraph (c). The pure way of doing it—and the way that I am presenting this amendment to the Committee, albeit not in accordance with the way I have tabled it—is that paragraph (a) should go and should be replaced by the amendment that stands in my name on the Marshalled List. I beg to move.
1.30 a.m.
Lord McIntosh of Haringey: No one could have less knowledge of the law and less experience of gaming than I, but I had always thought that the enforcement of gaming contracts was exacted by taking out a contract on the life of somebody.
Viscount Chandos: Perhaps I may just refer back to the point that I made in speaking to Amendment No. 106. In that both futures contracts and contracts for differences covering in particular interest rate and currency swaps are instruments that would be predominantly, if not wholly, transacted by listed institutions, it is my understanding of Clause 58 as currently drafted that it is only authorised persons, and not exempted persons, who would thereby be clearly removed from the Gaming Acts. I do not know whether the noble and learned Lord the Lord Advocate has had a chance to clarify that since I first raised it, but I very much hope that at least before the Report stage that could be done.
Lord Cameron of Lochbroom: I am grateful to the noble Lords who have spoken. Perhaps I may say at the outset that there is no Gaming Act for Scotland, and accordingly the common law has not been ousted there, and that gives rise to the distinction between the two laws. The view which is taken and the advice which I have been given is that the common law in England and Wales has been ousted by the Gaming Acts. The Bill as a whole provides the statutory basis for regulation of business involving investment agreements and in Clause 5 specifically provides for the circumstances in which such contracts may be unenforceable and the consequences that would follow. It is therefore, I am advised, inconceivable that any court in England and Wales would attempt as a matter of public policy to apply a rule of common law to an investment agreement governed by the provisions of the Bill instead of seeking to apply the appropriate statutory provisions, and so the amendment is, in effect, unnecessary.
However, as I say, we would not wish to create any doubt as to what I understand to be the general view that the common law has indeed been ousted by statute in England and Wales, and that would be the effect of the noble Lord's amendment.
As regards the point raised by the noble Viscount, Lord Chandos, it is perfectly true that Clause 58 would apply to clearing houses, such as the International Commodities Clearing House, which may seek recognition under the Bill. Of course, once recognised, they will become exempted persons rather than authorised persons. As the noble Viscount properly observed, Clause 58 applies at the moment only to authorised persons. This matter is being looked into and we shall be returning to it on Report. I hope that that will at least resolve the noble Viscount's doubts. I hope that what I have said has been of some help to the noble Lord who moved the amendment, and that he will feel able to withdraw it.
Lord Hacking: I am not at all sure whether these statutes, or indeed statutes in general, can ever get to the position of ousting the common law, and therefore I have some doubts about the advice that has been
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given to the noble and learned Lord the Lord Advocate which caused him to say that my amendment was not necessary. I shall not take the debate further now. I have made the point and in the circumstances beg leave to withdraw the amendment. Perhaps a little further reflection could be taken; it is always nice to have purity, particularly if we can take that purity in Scottish form in our Bill.
Lord Cameron of Lochbroom: I shall look again with those who advise us at what the noble Lord, Lord Hacking, has said.
Amendment, by leave, withdrawn.
Clause 58 agreed to.
Clause 59 [Scope of powers]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 167:
Page 46, line 5, after ("person") insert ("or, except in the case of the power conferred by section 60 below, any apppointed representative of his").
The noble and learned Lord said: I beg to move Amendment No. 167. My noble friend spoke to this when speaking to Amendment No. 114.
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 168:
Page 46, line 16, at end insert ("or has contravened any prohibition or requirement imposed under this Act").
The noble and learned Lord said: I beg to move Amendment No. 168. I spoke to this amendment with Amendment No. 98.
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 169:
Page 46, line 27, leave out ("a person") and insert ("(a) an authorised person").
The noble and learned Lord said: My noble friend spoke to this Amendment with Amendment No. 170 when speaking to Amendment No. 114, and I beg to move.
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 170:
Page 46, line 38, leave out ("(a)").
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 171:
Page 46, line 29, after ("or") insert ("a person certified by a").
The noble and learned Lord said: I beg to move Amendment No. 171. I spoke to this amendment with Amendment No. 79.
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 172:
Page 46, line 30, leave out ("(b").
The noble and learned Lord said: My noble friend spoke to this amendment with Amendment No. 173 when speaking to Amendment No. 114. I beg to move.
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 173:
Page 46, line 32, at end insert ("or
(b) an appointed representative whose principal is a member of such an organisation or body and is subject to the rules of such an organisation or body in carrying on the investment business in respect of which his principal has accepted responsibility for his activities;").
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 174:
Page 46, line 36, leave out ("or body of which he is a member") and insert ("of which he is a member or any such body by which he is certified").
The noble and learned Lord said: I spoke to this amendment with Amendment No. 79, and I beg to move.
On Question, amendment agreed to.
Clause 59, as amended, agreed to.
Clause 60 agreed to.
Clause 61 [Restriction on dealing with assets]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 175:
Page 47, line 8, after ("person") insert ("or appointed representative").
The noble and learned Lord said: My noble friend spoke to this amendment and Amendment No. 176 when speaking to Amendment No. 114, and I beg to move.
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 176:
Page 47, line 9, after ("person") insert ("or, as the case may be, representative").
On Question, amendment agreed to.
Clause 61, as amended, agreed to.
Clause 62 [Vesting of assets in trustee]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 177:
Page 47, line 16, after ("person") insert ("or appointed representative").
The noble and learned Lord said: This amendment and Amendments Nos. 178 and 179 were spoken to by my noble friend when speaking to Amendment No. 114, and I beg to move.
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 178:
Page 47, line 18, at end insert ("or appointed representative").
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 179:
Page 47, line 22, after ("person") insert (or, as the case may be, appointed representative").
On Question, amendment agreed to.
Clause 62, as amended, agreed to.
Clause 63 [Maintenance of assets in United Kingdom]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 180:
Page 47, line 33, after ("person") insert ("or appointed representative").
The noble and learned Lord said: My noble friend spoke to this amendment and Amendment No. 181 in speaking to Amendment No. 114. I beg to move.
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 181:
Page 47, line 35, after ("person") insert ("or, as the case may be, appointed representative").
On Question, amendment agreed to.
Clause 63, as amended, agreed to.
Clause 64 agreed to.
Clause 65 [Notices]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 182:
Page 48, line 19, leave out ("at the request") and insert ("on the application").
The noble and learned Lord said: This is a technical amendment. I beg to move.
On Question, amendment agreed to.
Clause 65, as amended, agreed to.
Clause 66 [Breach of prohibition or requirement]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendent No. 183:
Page 49, line 1, leave out ("27, 32").
The noble and learned Lord said: I spoke to this with Amendment No. 98. I beg to move.
On Question, amendment agreed to.
Clause 66, as amended, agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 184:
After Clause 66 insert the following new clause—

CHAPTER VIA
WINDING UP AND ADMINISTRATION ORDERS
Power to petition for winding up orders.

(1) On a petition presented by the Secretary of State by virtue of this section, the court having jurisdiction under the Insolvency Act 1986 may wind up an authorised person or appointed representative to whom this subsection applies if—

(a) the person is unable to pay his debts within the meaning of section 123 or, as the case may be, section 221 of that Act; or

(b) the court is of the opinion that it is just and equitable that the person should be wound up.

(2) Subsection (1) above applies to any authorised person (including a person whose authorisation has been suspended) or appointed representative who is—

(a) a company within the meaning of section 735 of the Companies Act 1985;

(b) an unregistered company within the meaning of section 220 of the Insolvency Act 1986;

(c) an overseas company within the meaning of section 744 of the Companies Act 1985; or

(d) a partnership.

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(3) For the purposes of a petition under subsection (1) above a person who defaults in an obligation to pay any sum due and payable under any investment shall be deemed to be unable to pay his debts.

(4) An agreement shall be regarded as an investment agreement for the purposes of subsection (1) above if the making or performance of it by either party constitutes an activity which falls within any paragraph in Part II of Schedule 1 to this Act (or would do so if Parts III and IV of that Schedule were disregarded).

(5) Where a petition is presented under subsection (1) above for the winding up of a partnership on the ground mentioned in paragraph (b) of subsection (1) above, the court shall have jurisdiction and the Insolvency Act 1986 shall have effect as if the partnership were an unregistered company within the meaning of section 220 of that Act.

(6) The Secretary of State shall not present a petition under subsection (1) above for the winding up of any person who is an authorised person by virtue of membership of a recognized self-regulating organisatiion or certification by a recognized professional body and is subject to the rules of the organization or body in the carrying on of all investment business carried on by him, unless that organisation or body has consented to his doing so.").

The noble Lord said: In moving Amendment No. 184, it might be for the convenience of the Committee if I speak also, as briefly as I can, to Amendments Nos. 248 and 259. The new clause enables the Secretary of State or the designated agency to petition the court for the winding up of an authorised person which is a company or partnership. The court may wind up the authorised person if it cannot pay its debts or if the court considers that it is just and equitable to do so. This power is based on a similar provision in the Banking Act.
The Companies Act has long conferred a power on the Secretary of State to petition for the winding-up of a company, and experience has shown how useful such a power can be, and it seems right to give a similar power to the Secretary of State and designated agency in the financial services sector.
Such a power would not be used lightly. But there may be occasions when information about a business, perhaps uncovered in the course of an investigation, reveals so sorry a state of affairs—perhaps involving fraud or other unlawful conduct—that the winding-up of the business provides the speediest and most effective means of preventing further abuse and ensuring as fair a disposal of the available assets as is possible in the circumstances. The involvement of the court in judging whether the petition is warranted ensures that such a power cannot be misused. I commend the provision to the Committee, and I beg to move.
Lord Williams of Elvel: We shall have to look at this because it raises some important issues, but I do not want at this stage to discuss them. We shall not oppose the amendments. We shall look at it and come back on Report if we feel it necessary.
On Question, amendment agreed to.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 185:
Insert the following new clause—
("Power to petition for administration orders.
.A petition may be presented under section 9 of the Insolvency Act 1986 (applications for administration orders) in relation to a
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company to which section 8 of that Act applies which is an authorised person (including a person whose authorisation has been suspended) or an appointed representative—

(a) in the case of an authorised person who is an authorized person by virtue of membership of a recognised self-regulating organisation or certification by a recognized professional body, by that organisation or body; and

(b) in the case of an appointed representative or an authorized person who is not authorised as mentioned in paragraph (a) above or is so authorised but is not subject to the rules of the organisation or body in question in carrying on of all investment business carried on by him, by the Secretary of State.").

The noble Lord said: Amendment No. 185 inserts a new clause relative to the power to petition for administration orders. This provision enables a regulator, be it an agency, SRO, or RPB, to petition a court for appointment of an administrator under the Insolvency Act to take over the affairs of an authorised business which is a company. At present, such a petition may be presented only by a creditor or by the company or its directors. The court will have to be satisfied that the criteria set out in the Insolvency Act for the appointment of an administrator are fulfilled before it grants such an application. So it would be the court that would have to judge whether the company is, or is likely to become, unable to pay its debts; that the appointment of an administrator will lead to the survival of the company as a going concern; that it will lead to a more advantageous realisation of assets or that other of the criteria in Section 27 of the Insolvency Act will be satisfied.
The administrator will be subject to the provisions of the Insolvency Act in the course of his adminis-tration. This adjustment to the existing provisions of insolvency law acknowledges that regulators will often be well placed from their knowledge of the business and through the information obtained in the course of monitoring its compliance with their rules. They will be well placed to judge when a business is becoming insolvent and when a change of management will have a particularly remedial effect.
The appointment of an administrator will give a company a breathing space in which solutions to its problems may be found. This may often be in the interests of both its creditors and its investors. We believe that this is a useful power that should on occasion help to rehabilitate investment businesses that have run into difficulties. I commend this amendment to the Committee, and I beg to move.
On Question, amendment agreed to.
Lord Brabazon of Tara: I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Great Yarmouth Outer Harbour Bill
The Queen's consent signified, and Bill reported from the Unopposed Bill Committee with amendments.
House adjourned at thirteen minutes before two o'clock.

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  HEROIN AND COCAINE SEIZURES 1978–86
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  HULL PRISON: USE OF "A" WING
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  YOUNG OFFENDERS: SENTENCES 1980–84
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  PRISON: SENTENCE REVIEW STATISTICS
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  CIVIL DEFENCE: LOCAL AUTHORITY PREPAREDNESS
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  METROPOLITAN AREAS AND LONDON POLICE AND FIRE AND CIVIL DEFENCE AUTHORITIES EXPENDITURE LEVELS
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