Sitting of 2 June 2003

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

Special Advisers
Lord Sheldonasked Her Majesty's Government:
Following the publication of the report of the Committee on Standards in Public Life Defining the Boundaries within the Executive: Ministers, Special Advisers and the permanent Civil Service, whether they intend to introduce legislation to cover the Civil Service and special advisers.
The Minister for the Cabinet Office and Chancellor of the Duchy of Lancaster (Lord Macdonald of Tradeston): My Lords, the Government greatly appreciate the work carried out by Sir Nigel Wicks and the Committee on Standards in Public Life in its report Defining the Boundaries within the Executive published in April. As I made clear in my Answer to a related Question on 29th April, the Government are giving careful consideration to the committee's report and will respond in due course.
Lord Sheldon: My Lords, I thank my noble friend for that reply. Can he say when we will get a Civil Service Act? Are we going to get it in this Session or even in the next? Is he aware that some special advisers have been bringing pressure to bear on civil servants which has limited their impartiality? That impartiality lies at the root of the Civil Service operation, as emphasised by the Fulton committee on the Civil Service and repeated many times since. Does my noble friend accept the recommendation of the Wicks committee that it is not right for special advisers to be temporary civil servants? They need to be defined as a category of government servant distinct from the Civil Service.
Lord Macdonald of Tradeston: My Lords, we await the imminent release of the issues and questions document from the Public Administration Select Committee which has been promised. We also await the review being conducted by Robert Phillis and his group, which is a radical and free-standing review into the organisation of the Government's information services. We are also committed to replying to Sir Nigel Wicks, whose report arrived less than two months ago. So there are a number of inquiries and reviews still in progress. The Government look forward to their decisions being informed by them.
Lord Campbell of Croy: My Lords, does the Minister recall the debate in the House on this subject, initiated by me, in which there was general agreement
1040
that legislation was needed to define the status and functions of special advisers'? The report repeats that point.
Lord Macdonald of Tradeston: My Lords. I do not resile from any commitment to Civil Service legislation. However, I am responsible for the Better Regulation Task Force, an independent body which constantly insists that departments should look for alternatives to legislation, such as codes or guidance. Many of the suggestions put forward by noble Lords and others might be dealt with through other forms of legislation, including codes of conduct for special advisers or ceilings on the number of special advisers which could be dealt with through amendments to Orders in Council.
Baroness Goudie: My Lords, has my noble friend read the report of the interview given by Sir Andrew Turnbull in the Financial Times on 14th May in which he said that the Civil Service is now achieving better results than in 1997? Does he agree with Sir Andrew that Whitehall can push ahead with improvements only if it creates an effective working partnership with other parts of the public and private sectors?
Lord Macdonald of Tradeston: My Lords, in my two years at the Cabinet Office I have certainly been very impressed by the commitment to reform of, first, Sir Richard Wilson, and now Sir Andrew Turnbull. There is no doubt that the Civil Service is engaged in a thorough process of reform. I am not suggesting that that process started in 1997—it has been in train for many years now—but it is designed to uphold the impartiality, integrity and honesty to which my noble friend alluded in his opening Question.
Lord Neill of Bladen: My Lords, the Minister referred to Sir Nigel Wicks, the chairman of the Committee on Standards in Public Life. I was his predecessor. We made a recommendation in 2000 that there should be a Civil Service Act, to which the Government replied:
"The Government remains committed to the introduction of Civil Service legislation … No Government is, however, able to commit itself firmly to a detailed timetable in respect of the future legislative programme".
That was in July 2000. How long will this commitment not be fulfilled?
Lord Macdonald of Tradeston: My Lords, those with the experience of the noble Lord, Lord Neill, will not be surprised by the ministerial answer that we cannot anticipate what might appear in a forthcoming legislative programme. Nor will he be surprised to hear that governments have changing priorities which press down on every Session of Parliament. If changes can be taken forward outside of primary legislation, I recommend, as a matter of good practice, that the Government should adopt that approach, informed of course by the reviews and reports that we have in hand.
Lord McNally: My Lords, is the Minister aware that it will come as no surprise to many of us that the Government are developing new priorities so far as concerns a Civil Service Act? As the noble Lord, Lord Neill, pointed out, the Government's pledge is more than six years old and has been contained in several reports already, including the report of the committee of the noble and learned Lord, Lord Slynn, into the public service, on which I served in 1997. In these dying days of his role as Minister, is the noble Lord content to rest on committee inquiry after committee inquiry, or will he not say now that it would be better to have a draft Civil Service Bill, which could be published and debated, on which he could join us from the radical Back Benches, as soon as possible, to campaign for its implementation?
Lord Macdonald of Tradeston: My Lords, I certainly hope that this is the last time I have to reply to questions on the future of the Civil Service. However, we have a very active Public Administration Select Committee, under the very able chairmanship of Tony Wright, which has promised to give us guidance on this issue. I understand it will be publishing a report within the next day or two although I cannot anticipate the contents. In response to an earlier request by the Select Committee we set up the review under Bob Phillis which we hope will be reporting in the autumn on reform of the Government's information services and on the role of special advisers in relation to that.
We have put a great deal of work in train. Given the longevity of this great debate on the nature of the British Civil Service, I ask the noble Lord, Lord McNally, to wait a little longer. From the Back Benches, I shall be very happy perhaps to nod approvingly at what he says.
Lord Peyton of Yeovil: My Lords, the Minister's opening words that the Government were considering the report and would in due course reply are hardly original. They make us all feel very comfortable with the exceedingly familiar. However, would it not be possible to describe such inertia in slightly different words?
Lord Macdonald of Tradeston: My Lords, I found it easier in my previous profession as a journalist to be more ambitious with language than one is allowed to be as a Minister. My original Answer was not meant to be entirely soporific. I wanted to point out that we were considering a report which had been 18 months in the making and which we received less than two months ago. To repeat what I said: we shall give it very serious consideration. It is a very full piece of work and will sit alongside the other work being carried out by Bob Phillis and by the Public Administration Select Committee.

Iran: Nuclear Weapons Programme
2.45 p.m.
Lord Wallace of Saltaireasked Her Majesty's Government:
How serious a threat they consider the development of uranium enrichment facilities within Iran poses.
Baroness Crawley: My Lords, we have longstanding concerns about Iran's nuclear weapons ambitions. Reports of the development of uranium enrichment facilities heighten those concerns. The Director-General of the International Atomic Energy Agency (IAEA) visited Iran in February this year. His report, presented in March, was discussed at the Board of Governors of the IAEA meeting that month. Further discussion of Iran's nuclear programme is scheduled for the next governors' meeting in June. The UK will play an active role in highlighting our concerns at that meeting.
Lord Wallace of Saltaire: My Lords, I thank the Minister for that reply. I believe that all in this Chamber recognise that there are real concerns about Iran's nuclear weapons programme. Does she agree that to pursue this multilaterally through the International Atomic Energy Agency is the right way forward? Apparently exaggerated estimates of what is going on, put about by exiled groups in Washington, strike some of us as alarmist and perhaps sound a note of familiarity with what we have been suffering as regards Iraq in the past year. Does the Minister recognise, too, that proposals floated in the press and elsewhere in Washington that unilateral bombing by either American or Israeli fighters to take out the facilities would be something which Her Majesty's Government would immediately condemn?
Baroness Crawley: My Lords, yes, I agree with the noble Lord, Lord Wallace of Saltaire. As his Question implied, we shall pursue this matter with great seriousness through the IAEA. We look forward to Dr El-Baradei's report to the Board of Governors of the IAEA in June. We will encourage Iran to sign up to and implement the additional protocol to the IAEA safeguards agreement and urge it to be open and fully transparent with the inspectors, and to allow access to the sites.
Lord Astor of Hever: My Lords, what action are the Government taking with the Russian Government and the former Soviet successor states to ensure that they do not supply Iran with enriched uranium?
Baroness Crawley: My Lords, we do not consider it appropriate for Russia to supply nuclear fuel until Iran has signed and implemented the additional protocol that I spoke of in my second answer to the noble Lord, Lord Wallace of Saltaire. We would encourage Iran to

1043
sign up to it and to bring the safeguards agreement into force as soon as possible. We also welcome recent Russian assurances that it shares this view.
Lord Marsh: My Lords, does the Minister agree that the core of this problem is the steady proliferation of countries which are now perfectly capable of producing enriched uranium? Can she give an indication of how many there are? We cannot simply work on the assumption that after Iraq, Iran is next and then another country after that.
Baroness Crawley: My Lords, I cannot give a precise answer. I shall write to the noble Lord with as precise an answer as I hope will satisfy him.
Baroness Whitaker: My Lords, another alarming matter about Iraq is the human rights situation. What pressure can the Government bring to stop the public executions and the stonings for adultery which are a feature of its justice?
Baroness Crawley: My Lords, while thanking my noble friend for that question, I am reminded by the Leader that it is slightly wide of the initial Question about uranium enrichment facilities. However, that has not stopped us in the past. I am pleased to say that we have seen some improvement in the Iranian human rights situation. Since President Khatami was first elected in March 1997, there have been a number of significant improvements in Iran's human rights record. However, we still have concerns. We have concerns as regards halting torture, amputations and stoning. We have concerns, too, about accusations of subjugation of some religious minorities, about freedom of expression and, to some extent, about conditions for women.
Lord Avebury: My Lords, as regards all states that decline to allow the International Atomic Energy Agency to inspect their plants, is it not possible for those states which have satellites to make available the imaging technology so that pictures of alleged clandestine sites can be examined and submitted to expert analysis in order to determine whether they contain centrifuge enrichment plants?
Baroness Crawley: My Lords, I always listen very carefully to what the noble Lord has to say on these matters as it is always worth doing so. I am sure that the IAEA in following up some of the accusations may well consider that course of action.
Lord Campbell-Savours: My Lords, are we not placed in rather a difficult position when the Russians are accused of being involved in the Iranian nuclear programme and when the Americans were involved in the North Korean programme? People throughout the peace movement in this country have now latched on to that issue.
Baroness Crawley: My Lords, every country has to be looked at differently as regards problems with
1044
proliferation. We try to persuade countries through peaceful means as far as possible and through dialogue. That is why we have a critical engagement with Iran on this matter. Russia supplies the civil nuclear programme in Iran.

Prison Sentences
2.51 p.m.
Lord Taverneasked Her Majesty's Government:
What evidence they have that longer sentences are an effective deterrent to crime.
The Minister of State, Home Office (Lord Falconer of Thoroton): My Lords, deterrence is not the only purpose of sentencing. Reconviction rates are lower for those who serve longer terms of imprisonment than for those who serve shorter terms. That, however, reflects a number of factors and deterrence cannot readily be isolated. It is difficult to obtain reliable empirical evidence on the deterrent effect of sentencing severity but it is clear that the choice of some potential offenders as to whether o offend is influenced by their perception of the risks and consequences of being apprehended and punished. This suggests that increased sentence severity can have some specific effect on sentenced offenders and a general deterrent effect on the general population.
Lord Taverne: My Lords, although I concede that there is no very direct and clear evidence of any relationship in this regard, if one compares the penal regimes of the rest of the European Union, where sentences are in general much shorter than they are here, with those in the United States, where sentences are much longer, does that not undermine the whole basis of the Home Secretary's addiction to ever longer sentences? Is it really his view that sentencing policy should be determined by popular acclaim or by the Daily Mail? Does he really want to move closer to the penal regime of the United States?
Lord Falconer of Thoroton: My Lords, the Home Secretary's view is that sentencing should be effective. It should be effective in terms of stopping reoffending and it should have the confidence of the public. That is not a populist approach. It is always dangerous to mention statistics in this area. For example, in America sentence lengths have gone up and crime has gone down, but I am the first to say that a simplistic conclusion should not be drawn from that. As I say, the right approach is that sentencing should be effective in reducing reoffending. We are introducing a range of measures in the Criminal Justice Bill to make sentencing more effective.
The Lord Bishop of Portsmouth: My Lords, following the supplementary question of the noble Lord, Lord Taverne, do the Government agree that more important than length of sentence is rehabilitation policy within the Prison Service?
Lord Falconer of Thoroton: My Lords, there is no one simple answer to that. In some cases long

1045
sentences are plainly required, for example, for public protection. But as important as length of sentence is what happens when an offender comes out of prison. If there is no support in relation to housing, family relationships and drug and alcohol abuse, there is likely to be more offending. We must be practical in ensuring that correctional options are effective in reducing reoffending. That is where the focus should be, not favouring one particular sentence over another.
Baroness Trumpington: My Lords, I believe that the Minister referred to the confidence of the public. Would I be right in thinking that the confidence of the public is sadly led astray when one sentence is given in one part of the country and a totally different sentence is given for the same offence in another part of the country? I think particularly of people being injured or killed through dangerous, ghastly driving. Does the Minister agree?
Lord Falconer of Thoroton: My Lords, I agree with the premise underlying the noble Baroness's question; namely, that if sentences are completely different in one place as opposed to another people will not have confidence in the system as they will believe that where one is sentenced will affect the length of sentence that one receives. We believe that consistency is very important. It is important that communities believe that the sentences imposed will protect them and are sensible in terms of reducing reoffending. I come back to that point time and time again.
Lord Corbett of Castle Vale: My Lords, is not a system which delivers two-thirds of prisoners back into prison within two years a system that is failing? What extra efforts is my noble and learned friend making to encourage courts to give more serious attention to non-custodial sentences? All the evidence shows that, where targeted and properly resourced, non-custodial sentences are much more successful in avoiding reoffending on the part of people who have completed their sentences.
Lord Falconer of Thoroton: My Lords, as regards both community sentences and custodial sentences the aim must be to reduce reoffending. That is why much time, effort and resources are devoted to training people whether they are serving a community or a custodial sentence and in introducing offender behaviour programmes to make people face up to their offending behaviour. That applies just as much to those on community sentences as to those on custodial sentences. In both frameworks more work needs to be done to try to reduce reoffending.
Baroness Sharples: My Lords, does the noble and learned Lord consider that tagging is an effective deterrent compared with prison?
Lord Falconer of Thoroton: My Lords, tagging is an effective and sensible way of dealing with people who
1046
are granted bail without imposing a custodial sentence to try to ensure that they do not commit further offences while on bail. Tagging allows such people to go back into the community with proper surveillance and supervision. It plainly has a part to play in our correctional policy.
Lord Stoddart of Swindon: My Lords, the prison population is projected to reach 100,000, which is 30,000 more than it is at present. What will be the extra cost of building new prisons to house those extra 30,000 prisoners? Is the 100,000 projection the highest figure that is considered by the Government and, if not, what is that figure?
Lord Falconer of Thoroton: My Lords, I have always said that it is unwise to comment on prisoner projections over the next few years as they always turn out to be inaccurate in some respect. It is projected that there will be more people in prison. For that reason in the previous Budget the Chancellor of the Exchequer made in excess of £100 million available to provide more prison places. We must ensure that there are enough prison places for those whom the courts send to prison. But, as I say, it is for the courts to decide what the appropriate sentence is; it is for the Government to ensure that those sentences can be delivered.
Lord Ackner: My Lords, does the noble and learned Lord agree that until you have effectively tackled overcrowding in prison these pious hopes to reform the experience of prison are not likely to be realised?
Lord Falconer of Thoroton: My Lords, I do not agree with that proposition. I refer to the work that has been done by the Prison Service under the leadership of Martin Narey in relation to the vast increase in the number of educational programmes, the vast number of offender behaviour programmes and the decrease in the reoffending rate. That shows that the pessimistic prognostications of the noble and learned Lord are wrong.
Lord Pilkington of Oxenford: My Lords—
The Lord Privy Seal (Lord Williams of Mostyn): My Lords, I am afraid that we have run out of time. The noble Lord, Lord Blaker, has an important Question.

Convention on the Future of Europe: Referendum
2.59 p.m.
Lord Blakerasked Her Majesty's Government:
Whether they will hold a referendum on the proposals resulting from the European convention.
Baroness Crawley: My Lords, as the Prime Minister has made clear, the Government see no case for having a national referendum on the proposals for a

1047
constitutional treaty for the European Union. A new constitutional treaty would require to be ratified in accordance with the individual constitutional arrangements of each member state. The Government are committed to our system of parliamentary democracy in Britain, whereby Parliament rigorously scrutinises any new treaty before it is ratified. Or, to be succinct, no.
Lord Blaker: My Lords, does the noble Baroness recall that, in rejecting the proposal for a referendum, the Government described the work of the convention as a tidying-up exercise? Is she aware that the distinguished president of the convention, Mr Giscard d'Estaing, an ex-president of France, has described the convention as in his view being comparable to that of the founding fathers on the constitution of the United States of America?
Is the noble Baroness also aware that three members of the presidium of the convention are ex-prime ministers of European countries, and two are ex-foreign ministers of European countries? Does she think that, if they had been told that they were going to take part in a tidying-up exercise, they would have accepted, or would they have insisted that it be something much more important?
Baroness Crawley: My Lords, the Government take the work of the convention extremely seriously. As noble Lords will know, the convention is looking at ways to identify how the EU can become more effective and able to deliver with a membership of 25 and more countries. We do not dismiss the work of the convention in any way, as I rather thought was implied by the noble Lord's follow-up question. The Prime Minister himself said of the convention:
"The objective for Britain, from the Convention, should be a Europe that is strong, effective and democratic".
We are very positive about the work of the convention. In this House, with the noble Lords who are actively involved in the convention, we have an embarrassment of riches.
Lord Wallace of Saltaire: My Lords, does the noble Baroness understand the Question as meaning that the Conservatives would like to have a referendum on the outcome of the convention, and then another on the outcome of the inter-governmental conference after the further negotiation? Would the Government not provide greater help to public opinion if they were to make sure that there was a worthwhile information campaign on proposals as they come out from the convention? When may we expect a White Paper and some very thorough parliamentary scrutiny of the outcomes of the convention over the summer?
Baroness Crawley: My Lords, I absolutely agree with the noble Lord on ensuring that we have a treaty that is not complex and overlapping but simple and clear, and that can be a very important information document in itself. That is an important aim of the Government. I am sure that there will be a good information campaign, but we are at a very early stage.
1048
The draft treaty will be put to the summit in Thessaloniki later this month. It will then be discussed at great length, I am sure, by the inter-governmental conference later this year and into next year. Then it will be scrutinised by both Houses of Parliament. It is early doors.
Lord Carter: My Lords, is my noble friend aware that a number of us are rather puzzled by the newfound Conservative enthusiasm for a referendum on the European convention? I believe that there was no referendum on the Single European Act or the Maastricht Treaty. My memory is not as good as it was. When did a Conservative government, or indeed a Liberal government, last allow a constitutional referendum?
Baroness Crawley: Never, my Lords.
Lord Lamont of Lerwick: My Lords, on the very point that has just been raised, would the noble Baroness not admit that the previous Conservative government promised a referendum on the single European currency, which was the most important outcome of the Maastricht Treaty? To say that that government did not promise a referendum on the Maastricht Treaty is therefore completely untrue.
What is the Government's reply to the remarks of Mr Dini, a former prime minister of Italy, who this weekend said that if Mr Blair says that the convention is merely tidying up he is trying to deceive the British people?
Baroness Crawley: My Lords, I am afraid that I did not hear the remarks to which the noble Lord refers, so I cannot respond to them. On his becoming slightly aerated about the record of former Conservative governments on the issue, I am sure that noble Lords appreciate delivery rather than promises.
Lord Hogg of Cumbernauld: My Lords, does my noble friend recognise that, on these not-quite-so-radical Back Benches, there are those of us who are pro-European but none the less in favour of a referendum on this important matter, recognising that the Government have set precedents for referendums? There were referendums ahead of devolution in Scotland and Wales, there are proposals for referendums on regional authorities, and we are promised a referendum on the euro. Has the precedent not been set that how the people are governed, and the arrangements for government, are put before the people in a referendum? Why have the Government changed their mind?
Baroness Crawley: My Lords, my noble friend obviously feels very strongly on the issue. However, I have to say to him, as I said to the noble Lord, Lord Blaker, in my original reply, that in Britain a national referendum is only for exceptional changes to our system of government. We had referendums so far as Scotland and Wales were concerned, as my noble

1049
friend mentioned, but that was because there was a considerable and fundamental change in the way those new nations were to be governed.
Noble Lords: Oh!
Baroness Crawley: My Lords—if I can make myself heard—there is no suggestion that the draft constitution being debated by the Convention on the Future of Europe will lead to significant changes in the relationship between the European Union and its citizens.

Taxation (Information) Bill [H.L.]
3.7 p.m.
Lord Saatchi: My Lords, I beg to introduce a Bill to make provision for public information about the burden of taxation, for a public holiday in each calendar year to mark in symbolic fashion the date on which the national burden of taxation may be said to have been discharged, and for connected purposes. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(Lord Saatchi.)
On Question, Bill read a first time, and ordered to be printed.

Business of the House: Standing Order 41
Lord Williams of Mostyn: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That Standing Order 41 (Arrangement of the Order Paper) be dispensed with on 17th June to allow the Motion standing in the name of the Lord Lester of Herne Hill to be taken before the two Motions standing in the name of the Lord Sainsbury of Turville.—(Lord Williams of Mostyn.)
On Question, Motion agreed to.

Sexual Offences Bill [H.L.]
Report received.
Lord Campbell of Allowaymoved Amendment No. 1:
Before Clause 1, insert the following new clause—
"DEFENCE OF HONEST BELIEF AS TO CONSENT
The provisions of this Act as concerns England and Wales shall not abrogate the jurisdiction of the judiciary to entertain the defence of honest but mistaken belief as to consent as judicially established, and to ensure that an accused who had no guilty mind should not be convicted."
The noble Lord said: My Lords, I am grateful to the noble and learned Lord, Lord Ackner, for his support. We were on the western circuit together after the war, conducting at times this very sort of case on assize or
1050
a Court of Session long before the defence asserted by the amendment had been established by the Appellate Committee of this House in 1975.
I am particularly fortified by the presence of the noble and learned Lord, Lord Lloyd of Berwick, who spoke with authority on Second Reading and in Committee when there was a substantial division of opinion. On this matter, one defers—at least I do—to the expertise of noble and learned Lords and to the common sense of this House as to fair play.
If the amendment were to commend itself, it would slight the structure of seven clauses of the Bill. It would conflict with the amendments to Clauses 1, 3, 5 and 7, as implemented by Clauses 77 to 79, tabled by the noble and learned Lord, Lord Falconer of Thoroton, and others. Your Lordships may consider it appropriate at all events that the amendment be debated in principle at the outset to save the tedium of repetition and to try to clear the day.
As to when this conflict of principle, for that is what it is, will be resolved, one defers to the sense of this House. The fundamental objection to the abolition of the defence of honest belief as to consent has not been removed by any of the amendments—especially those tabled by the noble and learned Lord, Lord Falconer of Thoroton.
Those amendments substitute an abstract reasonable expectation of doubt for the actual guilty intent of the accused. The decisions of the Appellate Committee of your Lordships' House established and applied this defence, which will be considered later, but only as to substance. Those decisions reflected our indigenous concepts of the due and fair administration of justice with which all your Lordships are familiar, as applied throughout the United Kingdom.
It is said that this defence, judicially established at the highest, has to be set aside to bolster up convictions only in England and Wales. On objective examination, no case has yet been made for the abolition of this defence. There are causes for the low conviction rate, which have been spoken to by the noble Baroness, Lady Mallalieu, the noble and learned Lord, Lord Ackner, and others, whose speeches in Committee have not been called in question. Apart from enhancing the risk of erroneous convictions, tinkering with the presumption of innocence and tampering with juries as arbiters of the actual guilty intent of the accused, abolition is not justified. It would constitute an unwarranted trespass of the executive on the functions of the judiciary over which this House stands as sole guardian.
The common sense, simple, straightforward question to be resolved by your Lordships is the justification for the abolition of that defence. It may not be pre-empted as a matter of convenience to enable the Government to have their business, or to even up the odds on the rails at the "tough on crime" selling plate. Your Lordships may either support or reject clauses and amendments whose effect will abolish this defence.

1051
As to the causes of the low conviction rate, I refer in particular to the failure of the Crown Prosecution Service to instruct counsel with appropriate experience to advise on the prospects of success before settling the indictment. There is a failure to advise on evidence or to have the conduct of the case in court as was once the practice, as most noble Lords will remember from their younger days. Now a case goes to trial on a sort of in-house assessment as to whether it is credible lest criticism for an action engenders unwelcome publicity.
As to the salient issues, why was this defence judicially established? How has it been judicially applied? Why should it be abolished? Are the consequences of abolition acceptable? Should the scales be weighted against acquittal in favour of conviction—the collateral damage of unintended consequence? Have the Government made out a case?
As to the first question, the defence, as explained by the noble and learned Lord, Lord Lloyd of Berwick, was established in 1975 by the Appellate Committee to seek to ensure that the accused who had no guilty mind should not be convicted. It was applied by another decision of the Appellate Committee in 1999 on indecent assault in which the noble and learned Lord, Lord Bingham of Cornhill, gave the leading opinion. It was decided unanimously that belief, if honest, did not have to be reasonable, albeit unreasonableness would cast doubt on whether the belief was genuine.
In February this year, the High Court of Justiciary in Scotland decided that this defence was separate and distinct, and to be put to the jury as such: the Crown has to satisfy the jury beyond reasonable doubt either that the belief was not genuine or that there was no such belief.
Why should those decisions be set aside? Is not the burden on the Government to justify setting aside by some reasoned argument?
As to the consequences of abolition, Clauses 1, 3, 5 and 7, whether or not they are amended as proposed, remove the presumption of innocence and, as implemented by Clauses 77 to 79, shift the burden of proof to the defence to show that in all the circumstances the accused could not by an abstract standard of reasonableness have been expected to have a doubt as to consent. Even if he honestly believed that there was consent, the jury may not acquit in such a case. That is a complex direction to be given to the jury that sets aside the decisions of the Appellate Committee in your Lordships' House and the High Court of Justiciary—a complexity of direction, compounded with compulsory presumptions of non-consent. Again, is this not but a Setting the Boundaries placebo beyond the reach of justice as administered generally throughout the kingdoms? Is the reason given for that wholly exceptional proposal justifiable?
As to the collateral damage of unintended consequences, that could well have been foreseen, but I do not suggest that it was. It is the enhancement of the risk of erroneous conviction, spoken to by the noble Baroness, Lady Mallalieu, and the noble Lord, Lord Campbell-Savours, on Second Reading and in Committee. I am delighted to see that they are both in their places.
1052
Since then, there has been the Catlin case referred to in The Times of 11th April in which, after seven years' imprisonment, conviction for rape on a false accusation was quashed because the Crown Prosecution Service had failed to disclose evidence that could have cleared the accused. Who are the true victims of a rape trial: those whose evidence is not accepted by the jury or those erroneously convicted of false accusations, whose lives and livelihood are destroyed?
Have the Government made out their case? I believe that I may have spoken for some noble Lords on all sides of the House, lest even-handed justice be slighted by inhibiting the defence to secure more convictions. I beg to move.
3.15 p.m.
Lord Ackner: My Lords, I support the amendment. I put my name down to do so because it seems to me to isolate the very issue that runs through so many clauses and has produced so many varying amendments. It seeks to establish in clear terms between the two contests—should a defendant only be convicted if he realised that there was no consent; or should he be convicted if he made a mistake about that and should not have made that mistake? The matter has frequently been considered, but it arose from the Morgan case.
I shall make only a brief reference to the career of the Morgan case. After the decision, which required the proof of the guilty mind of the accused—that he did not honestly believe, a subjective test—a committee was set up especially to consider the validity of that decision because of some public outcry against it. That committee, the Heilbron committee, considered the matter in great detail and concluded that the law as adumbrated was sound. It was thereafter re-enacted, but with the additional proposition that the jury should take into account in considering the validity of the honest belief all matters that related to the reasonableness of what had happened.
That has now remained in existence for several decades without challenge. The Law Commission was invited to consider the matter some time ago. Properly, the Law Commission said that the choice between whether the test should be a subjective one—the guilty mind of the accused—or an objective one—what a reasonable person would consider appropriate—was essentially a matter of policy, having set out the arguments pro and con. It stated:
"The law, as stated … accords with the principles upon which criminal liability for serious crimes has habitually been fixed in England and Wales ('the Golden Thread').
"Where it is sought to derogate from this principle and to seek to establish criminal liability for rape on some or other degree of negligence, our view, as a principle of law reform, is that it must be demonstrated by the proponents of such a departure that it is necessary to remove a serious shortcoming in the way the law is applied in the courts.
"There is no such evidence. Accordingly, on that ground, we do not support that proposed change".

1053
That is strong stuff. It was saying: if you are going to depart from established principle, you must be able to justify that. You cannot justify it by protest or pressure groups, however well-meaning; you must have the material.
The arguments against altering were set out by the Law Commission with commendable succinctness. It stated:
"(1) A person should not be guilty of a serious criminal offence on the basis of strict liability or on the basis of negligence. Liability at this level of seriousness should be based only on intent on recklessness.
"(2) The burden is on those who argue for a change to an objective basis to demonstrate that persons are being inappropriately acquitted by running a bogus 'unreasonable belief defence. No such evidence has been produced. It appears that Morgan is not, in practice, a problem.
"(3) If the availability of the defence is based upon 'reasonableness', then whose reasonableness is being applied? Is it that of the defendant, the members of the jury, the person on the Clapham omnibus? The concept of 'reasonableness' has been a source of endless, and continuing, difficulty in relation to provocation in homicide … Any proposal to reform the law should not be lightly made which carries the risk of making it more complex and unpredictable.
"(4) This difficulty would be even more pronounced if, instead of a test of reasonableness, the test were to be akin to 'gross negligence', as a further level of complexity would be involved.
"(5) A modern jury, properly directed on the question whether the person did or did not have such a belief, will be well able to root out the true from the bogus defence of belief in consent. Anyway, it is seldom, if ever, that a defendant would put forward a defence that he had such a belief for which he acknowledged there were no reasonable grounds.
"(6) The rate of conviction for rape is … alarmingly low. Juries appear already to be uncomfortable in convicting men of a very serious offence in circumstances which appear to them to be ambiguous. If there were a rule of law that, however honest a belief, the jury had no option but to convict in the absence of reasonable grounds for it, a perception of unfairness might arise, which might result in fewer convictions than were the jury left themselves to judge whether an assertion of belief is genuine or just a fanciful story unworthy of belief".
On the first day in Committee, I sought to summarise the reasons why the conviction rate was low. I do not wish to go through all of those reasons again—noble Lords can read them in Hansard. They include the fact that the prosecution some time ago was penny-pinching and paid less to prosecuting counsel than was paid, under legal aid, to defence counsel, with the result that counsel rejected the prosecution briefs. My arguments varied from that to ill- preparation, to the absence of the need in practice to find some corroborative evidence, to bogus allegations for one reason or another and, lastly, to the law of unintended consequences. That involved the argument that in order to assist vulnerable witnesses it has been made permissible merely to read their statements, so the jury has no chance to see and evaluate the credit-worthiness of the complainant although it has the defendant's sworn evidence.
1054
In a sentence—
3.30 p.m.
Lord Campbell-Savours: My Lords, I am sorry to interrupt the noble and learned Lord but he has missed one very good reason that he gave in his contributions at Second Reading and in Committee. It was that the attitude of the jury to a penalty when it knew that if it was to convict on what it viewed as a lesser offence it would not be prepared to see a maximum penalty imposed.
Lord Ackner: Yes, my Lords, I pointed out that the defendant, having given his evidence in a seemingly sensible way, is supported at the back of the court by a wife weeping and two young children. The jury knows, because it has been hammered home so hard, that rape is a terribly serious case and that the starting rate is five years or thereabouts. I have no doubt that some will say that that is too long. They may be quite wrong, but that may be their sense. In all the circumstances, when the onus of proof is so high, the jury must be satisfied that it is sure. It is very easy for it to say, "We are not sure", and thus acquit.
For the reasons that I have set out, I strongly support the amendment.
Lord Lloyd of Berwick: My Lords, I regret to say that on this occasion I find it impossible to support the amendment of the noble Lord, Lord Campbell of Alloway, not for any want of good will—I have masses of good will—but for technical reasons. If Clause 1 is amended by leaving out subsection (3), which is the purpose of the next amendment of the noble Lord, Lord Campbell—Amendment No. 4—his new clause would simply be unnecessary. However, if Clause 1(3) remains as it is or is amended—that is proposed by the noble Lord, Lord Thomas of Gresford, and now by the Minister—the new clause would be wholly contradictory to what would then be subsection (3). To have contradictory provisions of that kind in the same piece of legislation would be a recipe for disaster. It is surely better first to see what view we will take of Amendment No. 2, which is the amendment of the noble Lord, Lord Thomas of Gresford, and Amendment No. 6, which is the Minister's amendment, before we make any further progress on this amendment.
Lord Thomas of Gresford: My Lords, the clause as drafted by the Government retains a subjective element. It is a defence that one had an honest and mistaken belief in consent, but to that is added the objective consideration that that belief be reasonable. We believe with the Government that a defendant should no longer even in theory be able to rely on an unreasonable belief. A balance must be struck between the interests of the complainant, who has suffered penetration without his or her consent—the first two elements of the offence of rape—and the interests of the perpetrator with regard to the third element; that is, his belief, or lack of belief, in the complainant's consent.

1055
On these Benches, we consider that it is unacceptable that a defendant should rely on a belief that is unreasonable and that he should be allowed to say, "I have an honest but mistaken and, I now recognise, entirely daft belief that the lady in question consented". She remains raped. It is wrong that he should walk away because of an unreasonable belief. However, we believe that it is for the jury to consider the reasonableness of his belief, having regard not to some hypothetical anthropormorphised reasonable man—the man on the Clapham omnibus—but to the reasonable conduct of the defendant and to all the surrounding circumstances of the actual offence. We believe that it is perfectly possible for a jury to come to sensible conclusions about what is or is not a reasonable belief.
I draw a parallel with the fact that the defence of reasonable self-defence is very well known. I have no doubt that Mr Tony Martin had an honest but mistaken belief that he was defending himself when he shot an intruder in the back. He thought then and, according to the press, still thinks today that he acted reasonably. A number of people in this country appear to agree with him. However, a jury objectively said that that was unreasonable. It was perfectly capable of coming to that conclusion, and we believe that juries arc perfectly capable of coming to a conclusion as to whether an honest but mistaken belief is reasonable or not. We oppose the amendment.
Baroness Kennedy of The Shaws: My Lords, I support what the noble Lord, Lord Thomas of Gresford, said. The issue is not, as the noble and learned Lord, Lord Ackner, described it, simply the Government's response to lobbying by interest groups. It is about the interests of women who at times believe that the law has not reflected their world view. Happily, over the past 10 years there has been a recognition of the ways in which the law has failed women because it was essentially created from a male perspective. There are certain areas of the law that show us that in a very pronounced way. One of those areas relates to domestic violence and the other relates to rape. That is the reason; it involves more than simply a response to lobbying groups. It involves any group, whether women in church groups, women and students, black women or white women. Women up and down the country feel failed by the rape laws as they stand.
The Government are seeking to find a way of gaining the confidence of half of the public that the law can work for them. When a man claims that he has a belief, that it might have been unreasonable but that it was honest, women up and down the country find that unacceptable, and we must listen to them. We seem to he seeking a thread which in some ways will exclude their world view.
As a practitioner, I know—it has been stated in previous debates—that the Morgan defence is rarely used. I, like others, have never heard anyone in the courtroom say, "She was saying no. She was screaming her head off. She was fighting and beating me. but I
1056
thought she liked it that way and so I proceeded to have sexual intercourse with her." That is not what is said.
Juries faced with a man saying "I didn't force her to have sexual intercourse" and a woman saying "Yes, he did" listen to the judge, who invariably directs the jury on Morgan even if it has not been raised.
The judge says to the jury, "Members of the jury, if this man honestly believes she was consenting, then he has a defence". It is that formula in the judge's summing up which leaves juries saying, "Even though he is not saying it, maybe he did honestly believe it although she was saying no". Therefore, on the balance between the two, they use it to acquit men who are clearly guilty of the alleged offence.
I found extraordinary, although I do not count this against him, that the noble Viscount, Lord Bledisloe, should have chosen an unfortunate but telling example from which to draw the principle. He said:
"If I am accused of stealing your property, it is a defence if I show an honest belief that I had a claim of right to that property. That is the general test of the criminal law". [Official Report, 31/3/03; col. 1069.]
And, of course, it is the general test of the criminal law. But what is extraordinary is applying a principle that relates to property to our personal and intimate relationships as human beings. I think we can look for other kinds of principle.
The question is whether the protection of human beings, not property, from a profoundly damaging experience might justify higher expectations in human behaviour and greater care and respect for the humanity of others. We are really talking about human rights. Human rights are not just about things that happen in the third world; they are about our relationships with each other.
Is the principle drawing on the experience of women as well as men? I am glad that the noble and learned Lord, Lord Lloyd of Berwick, one of our most eminent, retired judges, is here today. Speaking about rape, the noble and learned Lord sensitively enunciated its kernel when he said that,
"forcible penetration of the vagina is a corruption of the deepest and tenderest of emotions of which human beings are capable". [Official Report, 31/3/03; col. 1051.]
I am sure homosexuals do not feel any differently, even if their form of intimacy is different.
Forcing intercourse upon someone and securing their engagement in sexual activity through fear is a corruption of love-making. Although sometimes people may do it casually and sometimes without profound emotions attached to it, love-making remains for most of us an expression of our most profound emotions.
That is why sexual offences are so lasting in the damage they do to life. They contaminate what is precious. That is why sexual offences are different from property offences and why, when we have offences involving an abuse of intimacy and our most intimate and precious feelings, we may look for ways of dealing with them that may be different.

1057
That does not mean reversing burdens of proof. As noble Lords know, I feel strongly committed to the civil liberties of defendants in the courts. I do not want to see any reneging from the civil liberties that protect defendants accused of serious crimes. I do not want to see the reversing of burdens of proof or any undermining of the standard of proof in criminal cases. I do not want to see accused people having to prove they are innocent. But we should be prohibiting people from being negligent in their disregard for others when it comes to intimate abuse. If human rights mean anything, then we are walking on the terrain of human rights here. That is why this is important; it is not an issue to be left to lawyering or to the technocrat in the legal world. We are seeking to do something about what is wrong in the law. The fact that so few cases ever lead to conviction would mean that between 93 and 97 per cent of women were making this up. Of course that is not so. We know that men walk free having abused women and children. No doubt it happens in homosexual relationships too.
The reason for trying to make things better is that the law, as it is, is failing. I urge everyone to recognise the effort being made by the Government to put it right.
3.45 p.m.
Baroness Noakes: My Lords, it may help the House if I make clear the position of these Benches. In doing so I pay tribute to my noble friend Lord Campbell of Alloway for his tireless work on this Bill and the dedication he has shown in drafting amendments. However, we cannot support his amendment.
From the outset, we have been open to the possibility that the formulation of the existing law of rape should be changed to one involving reasonableness. Our caveats have been that any change has to be workable and effective. That is what many of our debates have centred upon.
My noble friend's amendment is an attempt to keep the law as it is. That is not something we find attractive. We think that the conviction rate for rape is such a serious issue that we should look to change the law. I was interested to hear the noble Baroness, Lady Kennedy, supporting that position.
We will be looking again at the Government's newest attempt in Clause 1(3) to deal with reasonableness, and at the version of the noble Lord, Lord Thomas of Gresford. We can debate the issues and detail at that point. We believe this House would spend its time better by finding an effective way towards a good reasonableness test than by trying to keep the law as it is.
Earl Russell: My Lords, the noble Baroness, Lady Kennedy, made an extremely powerful and interesting speech. She is undoubtedly right that there is a balance here that needs to be redressed. Men are congenital optimists in these matters. Being congenital optimists, from time to time our congenital optimism needs to be restrained.
1058
A belief in consent may be based only on such optimism reached in a mood of unbounded wishful thinking. Therefore, one cannot have a test purely of abstract belief in consent. The Government are right. There is a balance that needs to be redressed. The question is whether the Government's attempt at redressing the balance is right.
Clause 1(3) of the Bill as it stands seems to set a hurdle that no one could successively get over. I doubt whether there is a perfect resolution. When looking at conviction rates, I do not need to tell the noble Baroness, Lady Kennedy, that this is in part a problem of culture as well as law and that changes must apply to both. When we look at the law, I think the amendment in the name of my noble friend Lord Thomas of Gresford, may not be perfect. However, in 10 years of thinking about the matter, I have not managed to produce a better one and so I shall vote for it.
Lord Alexander of Weedon: My Lords, in Committee, speaking as chairman of Justice, I indicated that I found this issue extremely difficult. So did our members, who were perhaps uncharacteristically divided as a law reform group as to the merits of the position put forward by the noble Lord, Lord Campbell of Alloway, and the noble and learned Lord, Lord Ackner, and the merits of the case so eloquently argued by the noble Baroness, Lady Kennedy of The Shaws. The position for which I speak is not a formulated, firm Justice position.
I have read the reports of the debates in committees over recent years. I believe that thought and sentiment have moved on since the timing of the admirable Heilbron report. As I understand it, an amelioration of the law which tilts the balance towards the protection of the legitimate and important rights of women has been accepted in some other jurisdictions, including Canada, without any allegations of notable unfairness. I have no wish to take up time in this debate because I agree—although I cannot express it as eloquently nor from the perception of the same sex—with the views expressed by the noble Baroness, Lady Kennedy. I also agree with every word spoken by the noble Earl, Lord Russell. In Committee I said that, while I found the original government drafting cumbersome, if an amendment along the lines tabled by the noble Lord, Lord Thomas of Gresford, were accepted, I would gladly support that. I hope that the House will move in that direction.
Lord Cooke of Thorndon: My Lords, I do not often trouble your Lordships, being constrained by the convention that one does not speak in your Lordships' House unless one knows something about the subject. But it chances that I have a certain degree of expertise in the matter of non-consensual sex. It leads me to a position in principle not far removed from that of the previous four speakers in the debate.
In New Zealand the legislation requires reasonable grounds for a defence of belief in consent to sexual violation. That change came into force in 1986. In the same year I became President of the Court of Appeal.

1059
However, the two events were apparently not connected. In the 10 years of my presidency, and since, the legislation has operated without much difficulty and to general public satisfaction. Comparatively few cases have reached the Court of Appeal and only a mere handful considered worth reporting in the Law Reports. There is no move towards a return to Morgan and no likelihood of one. The subject has become simply a non-issue.
The significance of this change cannot be separately identified. It was part of a series of reforms, largely promoted by women's organisations. Some of those already have their counterpart in the United Kingdom, for instance, the abolition of the rule of practice requiring the judge to warn the jury that it is dangerous to convict on the uncorroborated evidence of the complainant. Together, these various changes were followed in New Zealand by a surge in complaints, prosecutions and convictions. In 10 years the number of convictions for rape rose 180 per cent.
There is another reason why the introduction of an objective ingredient cannot be isolated as a catalyst. As the noble Baroness, Lady Kennedy, said, a defence accepting that the victim did not consent, but asserting a belief in consent, is very rare indeed. Commonly, the defence is that she did consent, though both counsel and judge will tell the jury that it is enough if the defendant believed so on reasonable grounds. The jury's task is thus simplified, while prosecution is encouraged. For those reasons, I am led to favour the introduction of a partly objective test here. Dramatic changes in the rate of a conviction, as distinct from the number of convictions, should perhaps not be expected.
In New Zealand more than 50 per cent of sexual violation complaints are either not established or are ultimately decided by the police not to be well-founded. Of those complaints that are ultimately prosecuted, only about 35 per cent result in guilty verdicts. As to the formulation of a partly objective test, I favour the amendments tabled by the noble and learned Lord, Lord Falconer. They are not overcomplicated and by asking whether the accused could reasonably be expected to doubt whether the complainant consented, they focused on the particular accused and his characteristics.
Alternative formulae, such as a reasonable belief or a reasonably held belief, are less clear in that respect, as indeed is the New Zealand section which has led to High Court decisions that even intellectual impairment should be disregarded.
In New Zealand, when the reasonable grounds requirement was enacted, some professional voices were raised in opposition, invoking a purely subjective approach to mens rea, such as has been so skilfully urged before your Lordships by the noble and learned Lords, Lord Ackner and Lord Lloyd of Berwick, and others. But ultimately, the New Zealand Bill was
1060
passed without a Division—a circumstance which I mention as a happy fact, not necessarily as a prediction.
Lord Falconer of Thoroton: My Lords, I agree with the noble and learned Lord, Lord Lloyd of Berwick, that it would be unwise to allow the amendment for technical reasons. But I do not believe that it is right to debate it on the basis of the technicalities in relation to it. The amendment tabled by the noble Lord. Lord Campbell of Alloway, puts four square before the House one of the most critical changes that the Bill is introducing. As the noble and learned Lord, Lord Ackner, rightly said, the introduction of an objective element into the mens rea for rape affects a number of other clauses in the Bill. The amendment tabled by the noble Lord, Lord Campbell, therefore gives us another opportunity to debate that principle.
It was made clear at Second Reading and in Committee and I repeat that the Government are of the firm opinion that where the victim did not consent, but the defendant honestly believed that he or she did consent and if the prosecution can prove that that belief was unreasonable, then the defendant should be convicted of an offence.
We believe that that test is right in principle because it is currently unacceptable that an honest belief in consent, regardless of how unreasonable, can lead to an acquittal. We believe that it undermines the faith that victims are prepared to place in the justice system and we believe that it discourages them from bringing cases to court. If we remove the reasonableness tests then we will go back to the current position.
The unsatisfactory elements of the current position are, first, that it implicitly authorises the assumption of consent regardless of the views of the victim. Secondly, it is easy for the defendant to seek consent—the cost to him is very slight and the cost to the victim of forced sexual activity is very high indeed. We believe that it is not unfair to ask any person to take care to ensure that their partner is consenting and for them to be at risk of a prosecution if they do not do so.
Our position is simple. We can find no justice in leaving the law on consent as it is. One must remember that the issue applies when the victim has been raped and has been forced to have sexual activity without his or her consent, because the question of reasonable belief only arises when the act has occurred without his or her consent.
So we take the strong view that there should be an objective element in the matter. We do not believe that it is in any way unfair to require that the defendant should act reasonably in those circumstances. We believe that that is more just. I draw attention to the speech of the noble and learned Lord, Lord Cooke, not just because he supported the Government's amendment, but because he spoke with the experience of that or a similar provision being in force in New Zealand over a period of time. He supports the analysis that it would lead to more cases and more convictions and that it would not lead to miscarriages of justice.

1061
I am grateful to the noble Lord, Lord Campbell, for giving us an opportunity to debate the issue again, but I earnestly implore noble Lords to support the significant change that we are seeking to make by introducing objectiveness into the mens rea for rape.
4 p.m.
Lord Campbell of Alloway: My Lords, I am grateful to the Minister and to all noble Lords who have spoken in this debate. As to the technicality, I am leaving that aside because the whole sense of the House is against the principle of the amendment. It is a sheer waste of time to deal with a technicality. I agree with and was impressed by the noble and learned Lord, Lord Falconer, and with the speech of the noble and learned Lord, Lord Cooke. In that speech there was the first glimmer—and more than that, light—of a justification for altering the whole substratum of our present legal approach. The sense of the House is that we should do that: that we should do away with Morgan; that we should do away with the decision of the Appellate Committee in which the noble and learned Lord, Lord Bingham of Cornhill, gave the leading opinion; we should do away with the decision of the High Court of Justiciary in Scotland and start again; and—as I think the noble Baroness, Lady Kennedy, put it—we should seek some kind of thread to right what is wrong in the law. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 1 [Rape]:
The Deputy Speaker (Lord Carter): My Lords, before calling Amendment No. 2, I must inform the House that if that amendment is agreed to, I cannot call Amendments Nos. 3 to 9.
Lord Thomas of Gresfordmoved Amendment No. 2:
Page 1, line 5, leave out subsections (1) to (4) and insert—
"(1) A person (A) commits an offence if—

(a) he intentionally penetrates the vagina, anus or mouth of another person (B) with his penis;

(b) B does not consent: and

(c) A does not reasonably believe that B consents.

(2) Sections 77 and 78 apply to an offence under this section."
The noble Lord said: My Lords, in this group of amendments I am concerned with simplicity, but more properly with the fair trial that a defendant has to face. I am concerned with the reverse onus of proof that exists in the presumptions that are set out in Clauses 77 and 78. I note that another practitioner, the noble Baroness, Lady Kennedy of The Shaws, indicated that she was against reverse onuses of proof.
I start with the basic statement of principle made by Viscount Sankey, the Lord Chancellor in the well known case of Woolmington:
"Throughout the web of the English criminal law one golden thread is always to be seen, that it is the duty of the prosecution to prove the prisoner's guilt … subject to any statutory exception."
1062
The importance of the presumption of innocence was set out by Mr. Justice Sachs, whom some of us had the privilege to meet recently in this House, sitting in the South African constitutional court in the State v Coetzee in 1997. His statement of principle has been quoted with approval by the noble and learned Lords, Lord Bingham and Lord Steyn, in recent House of Lords cases. He said:
"There is a paradox at the heart of all criminal procedure, in that the more serious the crime and the greater the public interest in securing convictions of the guilty, the more important the constitutional protections of the accused become. The starting point of any balancing inquiry where constitutional rights are concerned must be that the public interest in ensuring that innocent people are not convicted and subjected to ignominy and heavy sentences massively outweighs the public interest in ensuring that a particular criminal is brought to book…Hence the presumption of innocence, which serves not only to protect a particular individual on trial, but to maintain public confidence in the enduring integrity and security of the legal system."
That last sentence of maintaining public confidence is a theme that I have played many times before your Lordships in connection with much legislation that has passed through this House.
There are three essential elements sought in the offence of rape—penetration by the defendant, lack of consent by the complainant and lack of reasonable belief in consent by the defendant. Those three elements are stated simply in Amendment No. 2. That is how I have set out how the offence should be defined. I also say that Clauses 77 and 78 should apply, but I shall come to that in due course.
In stranger rape, generally the issue is whether penetration took place and, if so, whether it was by the defendant. It is frequently an identity issue. In marital or acquaintance rape, generally the issue is consent or, in the alternative, belief by the defendant in consent. That was the way that the noble and learned Lord, Lord Cooke, expressed the matter a moment ago, and the noble Baroness, Lady Kennedy, said much the same. Regarding reasonable belief, we agree with the Government that it can be no defence for the defendant to say that he gave no thought as to whether the complainant consented. That is the purpose of Amendment No. 175 tabled in my name and that of my noble friend Lady Walmsley to replace Clause 77 simply to make that statement.
We have had that debate on reasonable or unreasonable belief already and I do not propose to say any more about that.
However, we part company with the Government on where the burden of proof on the third essential element of the offence should lie; that is, lack of reasonable belief in consent by the defendant, the rebuttable presumption set out in Clause 77 as presently drafted and the conclusive presumptions in Clause 78.
To make the defendant disprove a lack of reasonable belief in consent in the arbitrarily chosen circumstances set out in Clause 77—a number of circumstances are set out there but by no means all that could possibly arise in a rape case—we say is a fundamental derogation from the presumption of innocence. To presume conclusively that in other

1063
circumstances and in particular deception or impersonation, two of the three essential elements of the offence of rape are automatically proved—that is, both the complainant's lack of consent and the defendant's lack of belief in it—is, we say, a violation of the presumption of innocence.
When one comes to that position, that the presumption of innocence is attacked both by the rebuttable and the conclusive presumptions set out in the Government's Bill, we then have to consider whether such presumptions are compatible with a fair trial under the provisions of Article 6(2) of the European Convention on Human Rights. On that topic, the European Court in Salabiaku v France in 1988 stated:
"Presumptions of fact or law operate in every legal system. Clearly, the Convention does not prohibit such presumptions in principle. It does, however, require the contracting states to remain within certain limits in this respect as regards criminal law….
Article 6(2) does not regard presumptions of fact or law provided in the criminal law with indifference. It requires states to confine them within reasonable limits which take into account the importance of what is at stake and maintains the rights of the defence".
So, where there are presumptions of law or fact, the convention is not silent about it and does not view it with indifference.
The noble and learned Lord, Lord Steyn, in the case of Lambert in 2002 quoted that passage and added:
"This test is dependent upon the circumstances of the individual case. It follows that a legislative interference with the presumption of innocence requires justification and must not be greater than necessary".
Similarly, the noble and learned Lord, Lord Hope, in the Kebilene case in 2000 stated:
"as a matter of general principle, a fair balance must be struck between the demands of the general interest of the community and the protection of the fundamental rights of the individual".
In summary, a derogation from, or what I would call a violation of, the presumption of innocence will satisfy the constitutional protections of an accused person only if it can be shown to be necessary, justified and proportionate.
Shortly after the convention became part of our law through the Human Rights Act, the Anti-terrorism, Crime and Security Act 2001 was passed, which included an offence of possession of nuclear weapons. One might think that that is a fairly serious offence but the statute, bearing in mind what had been said in Kebilene, was drafted in this way:
"(1) In proceedings for an offence … relating to an object it is a defence for the accused to show that he did not know and had no reason to believe that the object was a nuclear weapon.
(2) But he shall be taken to have shown that fact if—
(a) sufficient evidence is adduced to raise an issue with respect to it; and,
(b) the contrary is not proved by the prosecution beyond reasonable doubt".
In the anti-terrorism Act an evidential burden was passed to the defendant to raise the possibility on the evidence that he did not know and had no reason to believe that the object he possessed was a nuclear weapon. But even with something as serious as that the
1064
legislation provided that it was for the prosecution to continue to have the persuasive burden of establishing beyond reasonable doubt that he did have that possession with knowledge of the fact.
Here, as regards the first element, it is not necessary to have a reverse onus of proof. In the circumstances postulated in Clause 77(2)(a) to (e) and even more so in Clause 78—for example, circumstances where violence is used; where the complainant is asleep, or where there is deception and so forth—the jury will have no difficulty whatever in determining the defendant's belief and whether it is reasonable, just as juries daily up and down this country determine intent, dishonesty and other states of mind.
So, we say that it is not necessary to reverse the onus of proof. If a man uses violence against a woman, it is not difficult to show that he had no reasonable belief that she consented. He raises the issue, it can be destroyed by the prosecution and it does not necessarily require a great deal of effort to do that by cross-examination or whatever.
We also say that it is not justified—the second of the three tests—because, unlike the relatively few instances in serious crime where the persuasive burden is on the defendant in relation to an essential element of the offence, there is nothing peculiarly within the defendant's knowledge in a rape case as opposed, for example, to a case involving accounting systems or fraud, which the prosecution would have any difficulty in disproving. Even if there were, a reverse evidential burden could be justified only with the onus of proving guilt ultimately remaining on the prosecution.
In the recent case of Carass in 2002 the Court of Appeal stated:
"the proper approach has to be that if a reverse burden is to be imposed on an accused it must be justified and in particular it must be demonstrated why a legal or persuasive rather than an evidential burden is necessary".
For it to pass the tests of Article 6(2) of a fair trial it has to be shown why a legal or persuasive burden rather than an evidential burden is necessary.
Finally, these reverse onuses of proof are not proportionate. All the sex offences in question carry heavy sentences up to life imprisonment. We consider that it would be quite wrong for a jury to convict if there were a doubt about the third essential element, reasonable belief in consent. If, as regards the third essential element, the burden is placed on the defendant who has to satisfy it on a balance of probabilities, the jury could find against him but yet retain up to 49 per cent of a doubt about his guilt. Lord Justice Waller stated in the case of Carass, to which I have referred,
"With an evidential burden it will be for the defendant to produce some evidence that any concealment established against him was not with the intention to defraud".
That was a fraud case.
"Common sense dictates that if concealment is proved the evidential burden will be quite a difficult burden for the defendant to surmount. If however he were to surmount it, then it would be less than satisfactory if he could still be convicted if the jury were not sure that he had intended to defraud".

1065
How much less satisfactory is it in the crime of rape punishable with life imprisonment that juries would find themselves obliged to find a person guilty while there was still a doubt in their minds? Lord Justice Clarke in Sheldrake, another recent case, stated:
"Since the inherent danger of the reverse burden technique is that an innocent accused may fail on the balance of probabilities to establish his innocence, the consequences of failure are relevant".
The amount of punishment that is likely to arise is a relevant matter in considering whether a reverse onus is necessary, justified and proportionate.
I invite your Lordships to consider the amendments in that light. I have attempted to define the offence simply, with the three necessary elements. New Clause 77 states that belief should not be satisfied by a person not having given any thought to the matter. Amendments relating to Clause 78 set out the circumstances that a jury ought to bear in mind when it comes to its conclusion as to whether the prosecution has proved the third element of a reasonable belief.
The matters that I have set out in amendments to Clause 78 are taken straight from the elements that the Government want to make the subject of a rebuttable or conclusive presumption. We say that is not the right way of going about it. The jury should simply be reminded of all the circumstances, including—to take a point made by the noble and learned Lord, Lord Cooke—that the characteristics of the particular defendant should be considered.
In light of that, I am convinced that a defendant would have a fair trial but that the public interest would be properly served in ensuring that the guilty are convicted and that those who are not guilty are acquitted. I beg to move.
Baroness Noakes: My Lords, I shall speak to Amendments Nos. 7, 8, 19, 20, 29, 30, 38 and 39 in my name and that of my noble friend Lord Astor of Hever.
We on these Benches share with Government and Liberal Democrat members a desire to produce a formulation for sexual offences that works and contains a reasonableness test that works. The Government listened to the concerns expressed on Second Reading and in Committee and have tried to respond. The noble and learned Lord the Minister will speak to Amendment No. 6 and others in due course. We welcome that the Government have thought again. We particularly welcome that they have moved away from the concept of the hypothetical reasonable person to reasonableness in relation to the defendant.
We have concerns, however, about amended Clause 1(3), which would abandon the formulation of the offence of rape in terms of belief and consent in favour of one based on doubt about consent. I can see the logic, but is it simple enough?
In contrast, the amendments tabled by the noble Lord, Lord Thomas of Gresford—to whom I pay tribute for working extremely hard on producing amendments for Committee and Report stages,
1066
despite his many other commitments—are much simpler and more traditional. The conservative in me values the link to tradition.
Amendments Nos. 7 and 8 seek to insert "sharing the characteristics of A" into the existing formulation for reasonableness. For example, if A had severe learning difficulties, the test would be formulated by reference to A. The Government's new formulation refers to all the circumstances being taken into account. If that were adopted, I would want to add "including the characteristics of A".
The Minister knows of my concerns and I would be pleased to hear how he can be sure that his formulation would require the defendant's extreme learning difficulties or youth to be taken into account. In Committee, the noble Viscount, Lord Bledisloe—who I am pleased to see in his place—said that "circumstances" meant surrounding facts, not the individual's particular characteristics. Does the Minister believe that the wording of the Government amendment is absolutely clear? Amendment No. 178 in the name of the noble Lord, Lord Thomas, explicitly refers to the characteristics of the defendant.
A final concern is the role of presumptions in Clauses 77 and 78, to which a later group of amendments refers. We fully support the comments of the noble Lord, Lord Thomas, in that regard.
We want the law on rape and other sexual offences to be workable and effective, which is how we shall judge the amendments before us. The noble Lord, Lord Thomas, made a powerful case for his amendments. I look forward to the Minister's reply.
4.30 p.m.
Lord Lloyd of Berwick: My Lords, I regret that I cannot support the amendments in the name of the noble Lord, Lord Thomas of Gresford. I shall speak also to Government Amendment No. 6, the amendments to which the noble Baroness, Lady Noakes, spoke, and my Amendment No. 17 to omit Clause 3(3).
Clauses 1 to 15 are a huge improvement on the law as it is at the moment. They set things out clearly and well and will be widely welcomed by the judiciary and those who practice in the criminal courts. I wish that I could say the same about Clause 1(3) but I cannot.
As recently as 2000, the Law Commission—after an exhaustive and lengthy inquiry— recommended that the definition of rape should remain as it is. The noble and learned Lord, Lord Ackner, has already read the relevant passage to your Lordships. Even more recently, the Home Office steering group was against introducing any objective element into the law of rape. In light of that recommendation, one looks for some satisfactory explanation as to why that recommendation has not been accepted. One can find none.
This may be a good moment to stand back and remind ourselves of the existing law. One can do that best by taking Clause 1(2) and reading in a few words at the end. It states:
"This subsection applies if A does not believe that B consents (whether because he knows that B does not consent, gives no thought to whether B consents, or otherwise)".

1067
Then:
"In deciding"—
this is existing law—
"whether A does not so believe, the jury shall have regard to all the circumstances of the case and in particular to the presence or absence of reasonable grounds for such belief".
Having read that to your Lordships, I am inclined to ask what is wrong with it? What more could one want? If there are no reasonable grounds for the belief, the jury will reject the defendant's evidence and convict. If there are reasonable grounds for the belief, the jury will very probably acquit—but obviously depending on the impression that the evidence of both sides has left.
Why is a change needed at all? Does not the existing law in practice give the Minister everything that he wants with regard to the requirement for reasonableness? It is there in the Sexual Offences (Amendment) Act 1976.
Perhaps I may deal in advance with two of the arguments the Minister will no doubt put forward in reply. The first is that the defendant should not get off by asserting an honest belief in the lady's consent however unreasonable. One hears that argument over and again. It was used by the Minister in the letter he was good enough to write to me after the Second Reading debate. He said:
"We believe that the test is right in principle because it aims to correct the situation in the law at present whereby an honest belief in consent is sufficient to negate the mens rea of the offence, regardless of how unreasonable the actions of the defendant might have been".
That first argument is, I submit, misconceived. None of the judges who spoke in Committee had ever heard of such a case in practice. I am sure noble Lords who were present will remember the remarkable speeches of the noble and learned Lords from north of the Border, Lord McCluskey, and Lord Cameron. They regarded as outlandish the suggestion that such a case could arise. All the English judges with experience of applying this part of the criminal law were of the same view. What can one put against all that practical experience? What is put against it is nothing but a theoretical objection expressed in a rather tendentious way.
The second argument is this. It is said that we need to change the law because defendants who are in truth guilty must be getting off because of the low conviction rate. That needs to be examined in stages. One has often read, or heard it said, that there must be something wrong with a conviction rate for rape as low as 7 per cent. But that again is a complete misconception. Seven per cent is not the conviction rate. In the course of his reply, the Minister gave the conviction rate as 45 per cent, subsequently correcting it to 41 per cent. Many people may have found that surprising, and much higher than they had been led to expect. But if that figure is correct—I have no reason to doubt it—is it all that surprising?
In considering the offence of rape, it is helpful to refer to the crime of murder. Between 1991 and 2001 the number of those tried for murder varied each year between 557 and 661, a very narrow margin, as it
1068
always is. The number of those convicted of murder varied between 197 and 277, another very narrow margin. If one adds the figures for those eleven years and applies one to the other, one will find a conviction rate of 40 per cent—1 per cent less than the rate of conviction for rape.
The Minister will undoubtedly say, and others with knowledge of the criminal law will know, that many of those acquitted of murder will have been convicted of the lesser crime, manslaughter, on the ground of either provocation or diminished responsibility. If he were to say that, of course, he would be right. However, in the case of murder no one argues that there must be something wrong with the law because only 40 per cent of those tried are convicted of murder. So why is it so different in the case of rape? Why do we have this impression that somehow the conviction rate for rape is too low? The answer is, I think, because in the case of rape there are powerful and vocal pressure groups at work. The noble Baroness, Lady Kennedy, referred to them in her wonderful speech. No one doubts that they are doing the job they feel they must do. The truth is that these powerful groups influence the press; the press influence public opinion; and public opinion influences the main political parties far beyond what is justified.
I have in mind a very short and pertinent speech made in Committee by the noble Baroness, Lady Carnegy of Lour. Without her permission—I wish she were present—I read one sentence:
"However, I want to remind the Government that, in their laudable intent to assist women who are raped and whose assailant is not convicted, they may not be meeting what the public want in the way they want it. In my experience, which is mostly local, there is a world of difference between the reaction of ordinary members of the public to rape trials and rape accusations and the reaction of the groups who exist to stand up and speak for women".—[Official Report, 31/03/03; col. 1084.]
The noble Baroness went on to say that she thought that the Government were misguided in their approach to the question, and altogether barking up the wrong tree. I suggest that there is a great deal in what the noble Baroness said. I entirely agree with it. I fear that the same is as true of the Conservative and Liberal parties as it is of the Government.
The trouble with pressure groups is always that the more vocal and powerful they are, the more likely they are to distort sound judgment. The burden of resisting what seems to me to be unnecessary changes in the law falls on the Cross Benches who have little power but at least no political axe to grind.
Let us suppose that I am wrong about all that. Let us suppose that the conviction rate for rape is lower than for other comparable offences. Is that not exactly what one would expect? I suggest that that is so for two reasons. First, there is evidence, admittedly anecdotal, that in rape cases the Crown Prosecution Service does not always apply the 51 per cent guideline the Attorney-General says that it should. That would explain why the conviction rate for rape may be less than 50 per cent.
Secondly, in cases of other crimes where the conviction rate is or may be higher, there is almost always some other evidence to support the prosecution

1069
case whereas in many, if not most, rape cases there is not. It is word against word with nothing else for the jury to go on. Therefore, one can well understand why a jury in those circumstances, with convincing evidence on both sides, will give the benefit of the doubt to the defendant. That is exactly what they should do and what judges always tell them to do; it is their duty. I suggest that it is not in the least surprising to find that the conviction rate is 41 per cent. Indeed, that is just what one would expect, and no ground for changing the law.
However, let us suppose that for political reasons the Government are determined to increase the number of rape convictions. There are two ways in which they can do so. They could either make rape a crime of strict liability—in other words, it would be enough to prove that the woman is not consenting—or they could say that the jury need not be convinced beyond reasonable doubt but that proof on the balance of probability would be enough. Neither of those solutions would be remotely acceptable to any Member of this House but at least they would work.
What have the Government proposed in its stead? They propose the creation—it is nothing short of a creation—of a brand new crime of rape, not dependent on knowledge, recklessness, or the guilty state of mind, but on negligence; not even gross negligence as in the case of manslaughter but ordinary negligence—not taking steps which could reasonably be expected in all the circumstances—as if the victim were claiming damages for tort. I suggest that it is totally unacceptable to have a crime of rape by negligence, where the crime carries a sentence of life imprisonment. It would not work. It would not result in one further conviction: it would merely result in more appeals.
Let us suppose that the Government are determined to create this new offence of rape by negligence, alongside the existing offence of rape. What do they do? They lump both offences together in the same clause, with the same maximum sentence of life imprisonment. That is nothing short of dotty. It must surely be obvious that rape by negligence under subsection (3) is a much less serious offence than rape when the defendant knows that the woman is not consenting, or is reckless in that respect. Putting those two separate offences in one clause shows, as much in the Bill does, that this legislation has been drafted by civil servants with, one regrets to say, little experience of how courts work and limited knowledge of what actually happens within them. They cannot have consulted the judges on this change—or, if they have, the advice of those judges has been rejected.
One cannot have a single offence with two alternative states of mind—incompatible mental elements—as in subsections (2) and (3). I entreat the Minister simply to read page 103 of the current edition of Smith and Hogan and to study what is said there about that suggestion. How can a defendant plead to a count that contains alternatives, as set out in subsections (2) and (3)? How can a judge sentence when he has two alternatives before him, on either of
1070
which the jury might convict? As the noble Lord, Lord Thomas, I am sure, will tell us, a count with alternatives of this kind would be struck out as being bad for duplicity. If we are to have this new-fangled offence of rape by negligence, please may we have it in a separate section with a lesser maximum sentence? That would make sense, and might at least result in a few extra convictions: the present version as set out in subsection (3), and the alternative proposed by the noble Lord, Lord Gresford, will not.
Baroness Mallalieu: My Lords, I agree with every word just spoken by the noble and learned Lord. I am always troubled when I hear it said that a balance must be struck. It indicates that an important matter of principle is about to be ditched. There is at present, quite rightly, a serious stigma attached to the offence of rape. The provisions suggested by several sides of the House reflect the pressure groups to which the noble and learned Lord referred. I am bound to say that my experience is very much akin to that of the noble Baroness, Lady Carnegy, when I talk to people about the sort of cases in which, as a criminal barrister concerned with rape, I am involved. Much as I admire her eloquence, the way in which the matter was put by the noble Baroness, Lady Kennedy, does not reflect the general view.
I am also troubled by the proposed law of unintended consequences. The stigma that currently attaches to rape is rightly attached to a situation where one person forces himself on another against the will of the other and without concern for his or her objections. The stigma is not attached to carelessness, inadvertence, mistake or negligence. I pay tribute to the Minister for his response to those of us who raised concerns at an early stage. I recognise that the noble and learned Lord has moved a considerable distance. But, ironically, the proposed change might well be to downgrade the seriousness of the crime, which I do not believe to be the intention of the Government. Nor is it what some of those in favour of change wish to see. I shall support later amendments proposed by the noble and learned Lord, Lord Lloyd.
4.45 p.m.
Lord Campbell of Alloway: My Lords, I agree with the noble Baroness, Lady Mallalieu. I agree also with the comments made by the noble and learned Lord, Lord Lloyd of Berwick, on, effectively, Amendments Nos. 4 and 5—though he actually spoke to subsection (3) as regards the latter amendment—to which he has attached his name.
The grouping begins with Amendment No. 2 moved by the noble Lord, Lord Thomas of Gresford. I am in difficulties with the amendment because it includes the word "mouth". I have tabled a later amendment that proposes to exclude the reference to "mouth". I do not wish to anticipate the debate, or to take up the time of the House by repeating myself when I move that amendment, but, basically, that is the reason behind my objection to the noble Lord's amendment. I shall greatly regret it if we are to have the "reasonable" defence, but not "guilty intent". It is wrong to remove

1071
"guilty intent" from the offence of rape. However, if the House proposes to go that way, then I am with the noble Lord, Lord Thomas of Gresford, on paragraph (c) of his amendment, because noble Lords would accept "reasonably believe".
I am also very much with the noble Lord on the violation of the presumption of innocence. I am, therefore, in a split position, which I thought I should declare to the House in the presence of the noble Lord. I do not wish to detain noble Lords. I shall deal in due course with my amendment, which proposes to delete the reference to "mouth". The issue may well have been spoken to by the time that Amendments Nos. 4 and 5 are called. I simply do not know.
The wording of government Amendment No. 6 is repeated throughout this grouping as regards Clauses 1, 3, 5, and 7, which is the run to which I referred earlier. When moving Amendment No. 1, I said that I would be opposed to that change. However, if the House is to take another route, I should still find this unacceptable in rape because it would substitute an artificial, abstract standard of "reasonableness" for guilty intent. For my part, I cannot get away from that position. Having made the point, I should add that I am grateful for having had the opportunity to make myself plain.
Lord Ackner: My Lords, I agree entirely with my noble and learned friend Lord Lloyd of Berwick. That is not surprising, because I am bracketed with him in regard to Amendments Nos. 4 and 5. I do not know whether I misheard what was said on the rate of conviction—this happens from time to time nowadays—but I understood from the most informative speech made by the noble and learned Lord, Lord Cooke of Thorndon, that since New Zealand amended its legislation to introduce the objective test the conviction rate stands at 35 per cent. Have I got that wrong?
Lord Cooke of Thorndon: My Lords, that is substantially correct, but it must be remembered that the number of convictions for rape has dramatically increased. However, the rate of convictions as against complaints—complaints have also increased—is about 35 per cent.
Lord Ackner: My Lords, I am very grateful. That is appreciably below what we have at present, without any amendments. I thought it might be worth reminding the House of that.
Lord Falconer of Thoroton: My Lords, three issues are raised by this group of amendments. The first is the objectiveness test, again. All the amendments in the group have some formulation in relation to an objective test. The second issue is what that objective test should be. The third is the presumptions issue: have we gone too far in placing too many burdens on the defendant? That is the point raised by the noble Lord, Lord Thomas of Gresford.
1072
With regard to the objectiveness test, the noble and learned Lord, Lord Lloyd of Berwick, made a very powerful speech which in effect supported the point made by the noble Lord, Lord Campbell of Alloway. It completely ignored the speech by the noble and learned Lord, Lord Cooke of Thorndon; it was delivered as if the hypothesis had never been tested in practice. The noble and learned Lord, Lord Cooke, who was the President of the Court of Appeal in New Zealand from the time such a test was introduced, said that it was part of a number of measures that were introduced, and also said candidly that it was not possible to tell precisely which effect which measure had had. But his broad thrust was that it worked and worked well, and, along with the other measures, increased the number of cases brought to trial.
From all round the House there was support for the introduction of an objective element, to the extent that the noble Lord, Lord Campbell of Alloway, said that the sense of the House was that it wanted to have an objective element, for the reasons given by the noble Lord, Lord Thomas of Gresford, by the noble Baroness, Lady Noakes, and by my noble friend Lady Kennedy of the Shaws. We strongly take the view that the time has come for there to be that objective element, because I ask the House to remember that the victim has been raped, has been forced to have sexual activity without her consent. The issue is whether or not the defendant honestly and reasonably believed that she consented. There is no question in these cases over there not having been consent, because only after that has been established does the issue arise. Therefore, with the greatest respect to the powerful speech delivered by the noble and learned Lord, I rely on the arguments advanced not just by me but by other noble Lords in the first part of the debate.
The second issue is how to formulate the reasonableness test. The Bill is as it is. The amendments of the noble Lord, Lord Thomas of Gresford, and the noble Baroness, Lady Walmsley, would strike out the existing test of mens rea from subsections (2) and (3) and replace it with a requirement that the defendant does not reasonably believe that the complainant consents. Those of us who are following the debate by reference to the documents will note that in Amendment No. 175, to Clause 77, they then have a seven-line explanation of what is meant by absence of belief in consent. I suggest that noble Lords look at that to see the precise nature of the reasonableness test proposed as being simpler than ours.
We believe that considerable and effective points were made about our test in subsection (3), and in response to the criticisms levelled against the way in which our own reasonableness test was framed, we propose our own amendments to Clauses 1, 3, 5 and 7 to introduce a new, simpler version of the reasonableness test, one that we believe effectively addresses the concerns that have been raised, while still meeting our policy objectives of focusing on the actions taken by the defendant.

1073
I appreciate that the noble Lord, Lord Thomas of Gresford, and I both assert that our test is the simpler, but in some respects the noble Lord's test loses some key elements. The test that the Government propose in Amendment No. 6 and the amendments dependent upon it focuses upon whether the defendant should have doubted that there was consent. The test directs the jury to look at all the circumstances in considering this issue, including whether the defendant took any steps to ascertain consent. These are utterly straightforward issues that the noble Lord would be the first to agree the jury would have no difficulty in understanding.
The jury's consideration will also take account, where necessary, and subject to any directions of the judge, of any relevant characteristics of the defendant. But the really important matter is that our test will be easier for the jury to apply than the negative formulation—
Lord Campbell of Alloway: My Lords, will the noble and learned Lord deal with what I think could be the crunch issue: the burden of proof? There is a sticking point.
Lord Falconer of Thoroton: My Lords, I shall certainly come to the question of the burden of proof, but I shall first deal with how one formulates the reasonableness test.
The reasonableness test of the noble Lord, Lord Thomas of Gresford, is a negative formulation: does the defendant not reasonably believe? It is far simpler for the jury to be asked to consider positive facts—should the defendant have had doubts about consent in all the circumstances?—rather than being asked to decide whether the defendant should not have believed in consent.
Amendment No. 175 of the noble Lord and the noble Baroness, Lady Walmsley, would retain the focus of the reasonableness test on the steps that the defendant took, but this issue needs to be clearly spelt out in the relevant non-consensual clauses. In any event, that amendment does not detract from the problems of the negative formulation that the noble Lord proposes, the "does not reasonably believe" test, which I have already outlined.
The amendments of the noble Baroness, Lady Noakes, and the noble Lord, Lord Astor of Hever, Amendments Nos. 7, 8, 19, 20, 29, 30, 38 and 39, are all designed to require the jury to take into account the personal characteristics of the defendant when applying the reasonableness test. Those are amendments to our old subsection (3), which, whether we take my test or the test of the noble Lord, Lord Thomas of Gresford, would not survive.
However, I should deal with the point that is raised in the amendments. Introducing a requirement that all the personal characteristics of the defendant should be taken into account would mean that the jury would be asked to take into account characteristics that should not absolve him of guilt: for example, the fact that he
1074
has a quick temper or that the sight of a girl in a miniskirt will always turn him on and make him unable to resist her. That cannot be the intention.
I have indicated that the judge and the jury together can be relied on to identify those characteristics which could be taken into account, and I stand by that. That applies just as much to government Amendment No. 6, and it would apply equally to the amendment of the noble Lord, Lord Thomas of Gresford. He can express his own view about that.
As I explained in Committee, it is for the jury to decide whether any of the defendant's attributes are relevant to their deliberations, subject to the judge's directions where necessary.
I have dealt with Amendment No. 175. It retains the effect of the provisions in subsection (2) of Clauses 1, 3, 5 and 7, but is much more complicated. Subsection (2) of each clause contains a "does not believe" test. As I have already explained, since this negative formulation is difficult to understand, we have given examples in brackets of what it covers. One example is where the defendant gives no thought to whether the complainant consents. The noble Lord achieves the same end, but by means of a presumption. We consider that that is unnecessarily complicated. It is obvious that a person who gave no thought to the question of consent cannot have believed in consent. It is worth mentioning but it is not worth creating a presumption about it. It is more helpful for this explanation to be in the relevant clauses than in Clause 77.
We favour our approach rather than that of the noble Lord, Lord Thomas of Gresford. We bear in mind the points made by the noble Baroness, Lady Noakes. All three proposals—ours, the noble Baroness's and the noble Lord's—seek to arrive at broadly the same point. The right course is for the Government to consider all three amendments, to talk to parliamentary counsel and to come back at Third Reading with a formulation to deliver the result that I anticipate we all want to achieve. The issues between us are not about achieving a particular end but about the best way of formulating that end. That is all I want to say in relation to the reasonableness test.
The rebuttable and conclusive presumptions raise different issues, with which the noble Lord, Lord Thomas of Gresford, has quite rightly dealt.
5 p.m.
Lord Lloyd of Berwick: My Lords, before the noble and learned Lord leaves the reasonableness test, is he saying that a person could be charged in the same count with the alternatives of the objective and subjective offence? If not, would it not be better to have the objective and subjective offences in separate sections with different penalties, otherwise we are bound to get into trouble?
Lord Falconer of Thoroton: My Lords, we are not persuaded of that. We believe that the right course is to keep them within the same offence. Rape is charged now in an indictment simply as the defendant on such and such a day raped X—X being the name of the

1075
victim. It is right that it should be left that way. It would be quite wrong to require the prosecution, in drafting the indictment, to formulate specifically which of two ways it puts the case. I am sure that that is the right course.
Lord Lloyd of Berwick: My Lords, how does a defendant plead to such a count?
Lord Falconer of Thoroton: My Lords, there will be absolutely no difficulty at all in relation to that. There will be no difficulty in the defendant deciding whether or not he pleads guilty to a charge of having sexual intercourse with the victim without her consent. With the greatest respect, the noble and learned Lord is exaggerating the difficulties in relation to that.
Lord Thomas of Gresford: My Lords, perhaps I may assist the noble and learned Lord. The position today is that if a person pleads guilty to a charge such as rape he will almost inevitably agree the basis of plea to avoid a hearing as to what is the basis of his plea. He will therefore set out the basis—whether it is subjective or objective, to use the noble and learned Lord's expression—and, if the prosecution accepts that basis of plea, the plea will then go forward and sentencing will occur.
Baroness Kennedy of The Shaws: My Lords, in accepting that a judge would direct the jury as to enduring characteristics, I should be grateful if the Minister could make it clear to the House that we are talking about enduring characteristics such as youth or mental impairment and not cultural differences or people being able to pray in aid that because of their culture a woman who presents in a particular way may be indicating availability. It is very important that a licence is not given under which it could be claimed that there is a characteristic in the accused which would allow for a certain degree of unfair practice.
Lord Falconer of Thoroton: My Lords, I am grateful to the noble Lord, Lord Thomas of Gresford, for dealing with the point raised so effectively by the noble and learned Lord, Lord Lloyd. As to the point raised by my noble friend Lady Kennedy of The Shaws, it would be unwise for me to restrict the precise characteristics to which a judge could direct a jury. It will depend upon the circumstances of a case. The noble Baroness is obviously right to refer to the enduring characteristics of age and mental impairment but I should not like to rule out other circumstances. One will have to leave it to the good sense of judges and juries.
As to the question of presumption, we propose that where the victim has not consented and where, for example, immediately before or during the sexual act which founds the charge she is subjected to violence, it is for the defendant to prove on a balance of probabilities that he believed that she was consenting. In other words, he has to give evidence of something that was completely in his own mind where it is accepted, or it is proved, that the victim was not
1076
consenting and there had been violence beforehand. Is that reasonable and sensible? We believe that it is because the defendant has to give evidence of what went through his mind. He has to establish to the satisfaction of the jury—on the balance of probabilities, not beyond a reasonable doubt—that, despite the fact that she did not consent, despite the fact that he was inflicting violence on her at the time, he nevertheless believed she consented. It is a fair, just, proportionate and appropriate way to deal with the issue. That is the basis of our case in relation to the presumptions. It is sensible and will assist.
On previous occasions the noble Lord has said in the course of debates that that is how the judge and the jury would operate anyway in relation to such a case. If that is how they would operate anyway, let us make the law reflect the way that a judge and jury would operate in a sensible case. There is a place for the presumptions. They have been sensibly and appropriately limited and will assist in the good administration of justice.
In conclusion, with the greatest respect to the noble and learned Lord, we reject his arguments in relation to reasonableness. As to how we formulate it, the right course is to see whether we can reach a solution which is acceptable to everyone and to come back with an amendment. In relation to the presumptions—which, although separate, it is right to deal with them in this clause; plainly, any vote on reasonableness would not determine any vote on presumptions—we believe, with the greatest respect to the noble Lord, Lord Thomas of Gresford, that we have the policy about right in that regard.
Lord Thomas of Gresford: My Lords, as regards the competing tests of how one introduces the objective element, the noble and learned Lord believes that his formulation,
"A could reasonably be expected to doubt whether B consents",
is simple. I do not believe that it is. It invites the jury to enter into a hypothetical discussion as to whether A could reasonably he expected to doubt at the time of the alleged offence. It is far easier for a jury to grapple with the concept of what he believed at the time. Did he believe she consented? It is a very simple matter. Having come to the conclusion that he did, did he reasonably believe it? That is a simple way to deal with the issue.
As to the question of presumptions, we on these Benches do not believe in presumptions at all. But, if there are to be presumptions, surely they should shift only the evidential burden and not the persuasive burden to the defendant. In other words, if he should raise the issue in evidence given either by himself or in the course of the prosecution case, ultimately, in a serious matter such as a charge of rape, the burden of proving the case, of rebutting the presumption of innocence, of finding the defendant guilty, should always remain on the prosecution.
In the spirit of the Minister's reply I shall not press a Division at this stage. I hope that we will have further constructive discussions as to how to formulate the

1077
test, as he suggested. I thank the Minister and those advising him for the considerable assistance they have been to me in the course of the period that has elapsed between the Committee stage and today. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Campbell of Allowaymoved Amendment No. 3:
Page 1, line 6, leave out ", anus or mouth" and insert "or anus"
The noble Lord said: My Lords, I shall put this very simply. Oral penetration without consent is a serious sexual assault, but has never been hitherto defined or understood to be rape. The noble and learned Lord, Lord Lloyd of Berwick, has already, to some degree, spoken to this today. The noble and learned Lord, Lord Bingham of Cornhill, in a decision of the Appellate Committee of your Lordships' House concerned with the defence of honest and genuine belief as to consent—but it would have been said in any other context—said:
"Nothing in this opinion should be taken to minimise the potential seriousness of the offence of indecent assault. While some instances of the offence may be relatively minor, others may be scarcely less serious than rape itself. This is reflected in the maximum penalty, now increased to 10 years', and the mandatory requirement that those convicted be subject to the notification requirements of the Sex Offenders Act 1997".
Your Lordships should know that, by chance, after I moved and withdrew this amendment in Committee, the noble and learned Lord, Lord Lane, who happened to be passing by in the Library, said to me, "I heard you talking about another offence or altering Clause 3 or something like that". I said, "Yes, my Lord, I did". He said, "That is a lot of nonsense. What is wrong with indecent assault? Indecent assault would cover this. It has this wide range.". It was then that I decided to look up the law and I found what the noble and learned Lord, Lord Bingham, had said.
The essence of the argument has already been put better than I could put it. Oral penetration is not rape. What is the justification for changing it and calling it rape? There is an alternative suggested for Clause 3. That is a matter for your Lordships to consider. But I particularly defer to the opinion expressed in Committee by the noble Baroness, Lady Mallalieu, who opposed the redefinition of rape in this way. She said, and I agree, that it degrades the seriousness of the label of rape and could confuse juries, who might well decline to convict of rape. There is nothing much more that I could usefully say to persuade your Lordships. I beg to move.
Lord Lloyd of Berwick: My Lords, I support this amendment. It is a very short point. All the arguments were advanced in Committee. In particular, we all remember the speech made by the noble Baroness, Lady Mallalieu. No one advanced any argument in Committee for including oral penetration for the first time in the offence of rape other than to say that it is a very serious offence. That it is a very serious offence we are all agreed,but it is not rape as ordinarily
1078
understood. For that reason, in Amendment No. 14A I have proposed to put this offence in Clause 3, which is where it belongs, under the heading of assault and with the same maximum sentence of life imprisonment.
When the Minister replied on the previous occasion, he did not completely shut the door. In that respect, he seemed to have an open mind. I invite him to consider again whether it would not be better to include what he wants—he will get all he wants—by inserting oral penetration in the offence under Clause 3 and not under Clause 1 where it does not belong.
5.15 p.m.
Baroness Mallalieu: My Lords, I shall add briefly to all that has been said in earlier debates on this topic. Whether victims of this type of sexual offence regard it as as serious and as damaging as rape I cannot say. That may be right. It is perhaps a subjective view as to whether it is as serious, more serious or less serious. It is clearly serious but, above all, it is a different offence. That is why I support the proposal made by the noble and learned Lord, Lord Lloyd of Berwick, that if it is regarded as inadequately dealt with at present under the provisions for indecent assault, there should be a separate offence with a separate penalty to cover it. It would be a mistake to extend the word rape, which has an ordinary meaning that everyone understands, to cover something that at present no one would understand actually to mean rape. I hope that the Minister will consider what has been said and perhaps adopt the approach of the noble and learned Lord.
Lord Falconer of Thoroton: My Lords, the noble and learned Lord, Lord Lloyd of Berwick, is correct that the debates were very fully canvassed on the previous occasion when I made clear that that which had weighed with the Government in this respect was the very persuasive evidence submitted to the Sexual Offences Review by victims and victim support groups. From the perspective of victims—I fully accept that the noble Lord, Lord Campbell, and the noble and learned Lord, Lord Lloyd, do not dispute any of this—forced penile penetration of the mouth can be just as horrible, demeaning and traumatising as other forms of forced penile penetration and is equally, if not more, psychologically harmful in certain cases than vaginal and anal rape.
As the evidence given to the inquiry revealed, it is not unusual for women and children who have been violated in this way to develop long-term difficulties in eating and drinking. They may also have difficulties in visiting the dentist, leading to poor health care. I appreciate that including forced oral penetration within the scope of Clauses 3 and 4 recognises the serious nature of this particular form of offending behaviour and also provides for a maximum life sentence. I listened, too, to the arguments that perhaps the public and, in particular, juries might not take the view that it is rape.
Rape is already clearly understood by everyone to be an offence of non-consensual penile penetration committed by men on women and on men. Juries have

1079
had no difficulty in accepting past changes to legislation that broadened the scope to cover both rape within marriage and anal penetration of one male by another. Once it is made clear in statute that the offence of rape includes forced oral penetration, there is no reason to believe that juries will have any difficulty with this change either.
Penile penetration is of a particularly personal kind. It carries risks of disease transmission and I believe that it should be treated separately from other penetrative assaults. In our view, it makes good sense for all forms of non-consensual penile penetration to be grouped together within the offences of rape. Broadening the scope of the rape offence in this way also ensures that legislation properly reflects the seriousness of the offence of forced oral penetration and its effects on the victim. For all the reasons given, we object to the amendments advanced.
Lord Campbell of Alloway: My Lords, I cannot say that I am exactly grateful to the noble and learned Lord for his response, but I am grateful to noble Lords who have spoken. Although there is a real temptation to take the opinion of the House to clear the deck of this point, which crosses the point of difficulty to which I referred in regard to the amendment of the noble Lord, Lord Thomas, I believe that it would be wrong to take the opinion of a "thin" House. I also believe that it would be wrong to return to the matter on Third Reading because I do not think, quite contrary to the other matter being left over to Third Reading, that this is really a Third Reading point. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 4 to 8 not moved.]
Baroness Noakesmoved Amendment No. 9:
Page 1. line 18, leave out subsection (4).
The noble Baroness said: My Lords, in moving Amendment No. 9, I wish to speak also to the amendments with which it is grouped.
The effect of these amendments is to remove the rebuttable presumptions about absence of belief in consent in Clause 77 and the conclusive presumptions about consent in Clause 78.
I shall not rehearse the detailed arguments on which we spent well over an hour in Committee or go over the ground that we covered earlier in the second group of amendments when the noble Lord, Lord Thomas of Gresford, spoke powerfully about the effect on the presumption of innocence. I shall confine my remarks to three matters.
First, the rebuttable presumptions are at one level a statement of the obvious. To take the circumstances in subsection (2)(a) of Clause 77, if the prosecution proves that the defendant used violence against the complainant and knew that, why do we need a rebuttable presumption of lack of belief in consent? To use the formulation in the Government's latest version of Clause 1(3), the defendant who has used the violence could reasonably be expected to doubt whether the complainant consented. That is why he used the
1080
violence. So what is added by a rebuttable presumption? Are the Government saying that juries are so perverse that they cannot work out what is or is not reasonable when violence is used? In Committee several noble Lords actually thought that the rebuttable presumptions would make the matter even more confusing for the jury.
Secondly, the list of rebuttable presumptions is too narrow. The Government said in their White Paper Protecting the Public that the definitive list of rebuttable presumptions would send a clear signal of the circumstances in which sexual activity is likely to be wrong. However, that list excludes some important circumstances, including the threat of future physical or economic harm. If a defendant says to a complainant, "You will lose your job if you do not have sex with me", why is there no rebuttable presumption that says that the defendant did not believe in consent? If the threat is made, surely that goes to the heart of belief in consent. That is another area of confusion for juries.
Thirdly, I cannot accept that the conclusive presumptions in Clause 78 are anything but a route to injustice. Conclusive presumptions leave no safety valve for the facts of a particular case. If we cannot trust the jury to reach the right result on the basis of the facts before it, we have a problem. The conclusive presumptions would have the effect of telling juries to reach a particular conclusion. One could end up with a perverse result in certain circumstances. I do not believe that justice and fairness are served by conclusive presumptions. For those reasons, and for the reasons mentioned earlier, I believe that the Bill would be a better Bill without Clauses 77 and 78. I beg to move.
Lord Thomas of Gresford: My Lords, I do not propose to repeat everything that I said in relation to the earlier group of amendments. I simply add that it is my view—I do not claim infallibility or even particular expertise in this area—that the provisions we are discussing would be struck down in the courts as being incompatible with Article 6(2). I have given the reasons for that. If the Government wish to proceed with the provisions, I am sure that the first time that they come before a court there will be an appeal which may be taken all the way to this House.
Lord Campbell of Alloway: My Lords, on the assumption that the House is moving towards some form of reasonable test and removing the extant law which derives from Morgan, I still take the point that Clauses 77 and 78 as they stand are not acceptable and that serious consideration should be given to accepting Amendments Nos. 175 and 178 in lieu tabled by the noble Lord, Lord Thomas of Gresford. If I have the matter right—I hope that I shall be corrected if I have not—the noble and learned Lord, Lord Falconer of Thoroton, will consult on the position with a view to

1081
seeing whether some accommodation may be made. If that is right, I welcome it. One could reserve one's position until Third Reading. If, however—
Lord Falconer of Thoroton: My Lords, I am sorry to give the noble Lord bad news. He will not be able to reserve his position. I indicated clearly that we would discuss the question of reasonableness and I did not move my amendment as a result. However, I am afraid that I gave no such assurance in relation to the rebuttable presumptions. I do not want the noble Lord to be under any illusions that he should keep his powder dry.
Lord Campbell of Alloway: My Lords, I am very much obliged. If there were a Division, I should have to support the noble Lord, Lord Thomas of Gresford. I take the view that Clauses 77 and 78 as they stand are not acceptable.
Lord Falconer of Thoroton: My Lords, there are in effect three points with which I should deal. First, I refer to the point raised by the noble Baroness, Lady Noakes, that one should not have rebuttable presumptions at all. With respect we disagree with that proposition. We believe that in many cases the rebuttable presumption will in effect reflect the way in which a jury would address the issue. We also believe that having the rebuttable presumption, without any unfairness to the defendant, sends the clearest possible signal of the way in which the law deals with such issues.
I give a further example to that which I gave in answer to the points raised by the noble Lord, Lord Thomas of Gresford, today. I refer to people suffering from a very severe physical disability where there has not been consent and where there has been an inability to communicate. That is referred to in one of the examples relating to the rebuttable presumption. We think it right in those circumstances that the defendant should satisfy the jury on the balance of probabilities—where there was no consent and the victim could not communicate—of the basis of his belief that the victim consented. No other specific protection has been given. We think it right that there should be such protection. We think that there is a place for these rebuttable presumptions. They certainly do not lead to any injustice.
Secondly, I hope that the noble Baroness, Lady Noakes, will forgive my saying that she changed her position completely. Having said that there should not be any rebuttable presumptions of the kind we are discussing, she then said that there were not enough.
Baroness Noakes: My Lords, I said that if we were to have them, they had to be wider.
Lord Falconer of Thoroton: My Lords, we think that they have to be limited sensibly, which is what we have done.
1082
We dealt with the issue of future economic or other harm being threatened and leading to sex. The difficulty with that is that such a wide range is covered. Something that might frighten someone in a particular condition might not frighten someone else. I gave various examples on the last day in Committee.
The third point with which I should deal is conclusive presumptions. The noble Baroness says that they are always unfair. Again, we had that debate on the previous occasion. She will be aware that the conclusive presumptions are in relation to where the defendant relies on what is said by a third party as a justification for believing in consent, and to impersonation. That is already the current law, so they apply in pretty limited circumstances.
In the light of what I have said, I hope that noble Lords will withdraw or not move their amendments.
5.30 p.m.
Baroness Noakes: My Lords, I thank all noble Lords who have spoken and the Minister for his reply. As I am sure he is aware, I shall not test the opinion of the House on the subject today. However, I would not like to leave him in any doubt: we regard the issue as important and outstanding. He indicated to my noble friend Lord Campbell of Alloway that he had no desire to debate it further in the discussions that he promised on the objective test, but I sincerely hope that he will entertain it in those discussions. Indeed, I have every confidence that he will do so. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Acknerhad given notice of his intention to move Amendment No. 10:
Leave out Clause 1.
The noble and learned Lord said: My Lords, in view of the further discussions that will take place on Clause 1, I shall not move the amendment.
[Amendment No. 10 not moved.]
Clause 2 [Rape of a child under 13]:
[Amendments Nos. 11 and 12 not moved.]
Lord Falconer of Thorotonmoved Amendment No. 13:
Transpose Clause 2 to after Clause 7.
The noble and learned Lord said: My Lords, government Amendments Nos. 13, 24 and 33 rearrange Clauses 1 to 8 into two groups. The first comprises the non-consensual offences, and the second all the offences specifically intended to protect those aged under 13. Government Amendments Nos. 42, 45, 47, 53, 69, 74, 98, 99, 100, 111, 112, 117, 123, 124, 125, 129 and 131 merge the causing and inciting limbs of the child sex, abuse of trust, mental disorder, inducements and care worker offences. They also add an inciting limb to Clause 8 to provide a specific offence for cases in which a child under 13 is incited to engage in sexual activity. The purpose is to simplify the drafting of the Bill and reduce duplicated wording.

1083
The merging is made possible by the removal of Clause 76. In the introductory print of the Bill, Clause 76 had the effect of providing that a person could not be convicted of the offences to which it applied if the victim of such an offence was under 13. In those cases, one of the offences specifically designed to protect that age group was to be charged. However, Clause 76 applied only to the causing limbs of the groups of offences to which I referred, because it was intended that Clause 8 should be charged in cases involving the under-13s. However, Clause 76 did not apply to the inciting limbs of those offences, because there was no equivalent offence specifically for the under-13s. The reason for that is that the issue of consent is not relevant to incitement, as one cannot incite a person not to consent to sexual activity. "Causing" and "inciting" were therefore drafted as separate offences.
A government amendment in Committee removed Clause 76. We did so because it would have caused difficulties in cases where evidence that the child was under 13 emerged only during the trial. The removal of Clause 76 therefore made it possible to merge the causing and inciting limbs of the offences. However, as I have said, there was no specific offence in the Bill of inciting a child under 13, so Amendments Nos. 42 and 45 provide a specific offence to cover situations in which a child under 13 is incited to engage in sexual activity.
The amendments will mean that whenever the causing or inciting limbs of the offences on abuse of trust, mental disorder, care workers and so on are committed against a child under 13, a specific "under-13" offence will be available for the CPS to charge. That offence will provide a penalty of life imprisonment where penetration was caused or incited, or 14 years in other cases. However, unlike the position under the previous Clause 76, it will still be possible to secure a conviction under the abuse of the trust and mental disorder offences and so on where the evidence unexpectedly shows that the victim was under 13.
The amendments also have the effect of reducing duplicated wording in the Bill and the number of clauses. I apologise for the complicated explanation, but its purpose is to try to increase the simplicity of the Bill.
Amendment No. 116 was tabled by the noble Baroness, Lady Noakes, and the noble Lord, Lord Astor of Hever. It proposes that, for the offence of inciting a person with a mental disorder or learning disability to engage in sexual activity, the maximum penalty should be life imprisonment where penetration is involved and 14 years in other cases. By deleting Clause 34 and amending Clause 33 to include incitement, government Amendments Nos. 111, 112 and 117 have the same effect as proposed in Amendment No. 116, so I invite those who tabled the amendment not to move it when the time comes.
I am afraid that I can offer no such comfort with respect to Amendments Nos. 43, 44, 51 and 52. Those have the effect of providing a maximum penalty of life imprisonment for the offences of causing a child under
1084
13 to engage in sexual activity and inciting a child under 16 to engage in sexual activity. The Bill provides for a maximum penalty of life for those offences where the activity is penetrative; in other cases it is 14 years.
Although we regard the offences as serious criminal behaviour, they involve activity ranging from penetration to sexual kissing. I think it right to retain a penalty structure that recognises the most serious abuse that can be inflicted. However, providing for a maximum 14-year penalty for non-penetrative activity none the less recognises the extent of the harm caused in other cases. Fourteen years is the maximum determinate penalty that can be imposed and is itself very severe. Therefore, if the time comes, I shall seek to argue against Amendments Nos. 43, 44, 51 and 52. I beg to move.
Baroness Noakes: My Lords, I thank the Minister for introducing his amendments, which we support. I tabled Amendments Nos. 43, 44, 51, 52 and 116 to the group as probing amendments to draw attention to the disparity of sentencing between the incitement offences involving under-13s in Clauses 8 and 11, and that for mentally disordered offenders in Clause 34. In effect, the Government's solution deals with the points. I have some remaining concerns on parity of sentencing, but I shall raise them under a later group of amendments.
Lord Thomas of Gresford: My Lords, I was delighted to hear the Minister use the word simplicity. How can I resist the amendments in that case?
On Question, amendment agreed to.
Lord Ackner moved Amendment No. 14:
After Clause 2, insert the following new clause—
"ANONYMITY OF DEFENDANT IN RAPE ETC. CASES
The defendant in rape etc. cases shall enjoy the same right to anonymity as is enjoyed by the complainant."
The noble and learned Lord said: My Lords, since the Committee stage a short time ago, I have been informed by an entirely impeccable source of the following facts. A local GP, carrying on a one-man practice, was suddenly charged by the police with having raped a girl under 16. I am not sure whether or not she was his patient. He was arrested in front of his family and was remanded in custody. He remained in custody for more than a week. He was then granted bail on terms that he left the county and lived with his father, only crossing the county boundaries for the purpose of obtaining legal advice. Very recently, and before he was due to go back to court, he was informed by the police that all charges had been withdrawn.
That incident focused my attention on why we have removed anonymity from the defendant. A defendant was granted anonymity by Section 6 of the Sexual Offences (Amendment) Act 1976 and enjoyed such anonymity for 12 years until Section 158 of the Criminal Justice Act 1988 withdrew it.
The Government's cri de coeur has been that we must adjust any imbalance that exists between complainant and defendant in criminal trials. Here is

1085
an imbalance that calls vociferously for an adjustment. I know of no reason for depriving the defendant of that immunity. If he does not want it he can in terms resile from it, but if he wants it, he should be entitled to retain it. If one considers the damage that must have been done to the reputation of that general practitioner locally—he has not yet been able to resume his practice—and what has happened in a number of cases when the press reveal that false allegations have been withdrawn at an early or a late stage, one wonders why this protection has been removed. From such inquiries that I have made, I can find no sensible justification for so doing. I beg to move.
Baroness Kennedy of The Shaws: My Lords, there is a sensible justification. There is the principle of open justice in which we should believe, and that anonymity should be rare and only in the most exceptional circumstances drawn down on someone involved in the system. There is anonymity in relation to children and for rape victims because of the terrible stigma and the problem of getting women to come forward and going through the process.
I agree with the noble and learned Lord, Lord Ackner, to the extent that there should be anonymity until the point of charging. There has been ignominy and scarring on the lives of people when no charge has been forthcoming, but when in the run-up to a charge, there is huge speculation in the newspapers. That damages people's lives.
However, once someone is charged, it is important, as with any other serious crime, that there is no anonymity because, as the police have found from experience, it is one of the ways in which evidence comes forward. Witnesses come forward saying, "I was also raped by this man". It happens particularly in relation to cases involving medical practitioners. A charge brought against a medical practitioner unearths many other instances of abuse.
I strongly urge that this House does not consider allowing anonymity for anyone who is charged with rape. But the Government might look sensitively at the issue of whether someone should be covered with anonymity until the point of being charged.
5.45 p.m.
Baroness Walmsley: My Lords, from these Benches we support the amendment tabled by the noble and learned Lord, Lord Ackner. We strongly believe in equality under the law. In the exceptional circumstance referred to by the noble Baroness, Lady Kennedy, the complainant has anonymity. However, an exceptional amount of stigma attaches to a person who is accused and charged with rape, but who may eventually be proved innocent.
I raised this subject at Second Reading, as did the noble Lord, Lord Lucas. It is important when making new law that is designed to increase the number of sound convictions for rape that we are seen to be as fair to the defendant as we are to the complainant. I recall
1086
that the Minister in response said, "Well, if rapists; why not murderers or shoplifters?". The difference is the press. Murderers and shoplifters—unless they are movie stars—do not have the same amount of coverage from the press as possible rapists.
The noble Baroness, Lady Kennedy of The Shaws, said that others may come forward. If someone has a complaint, he or she should make it. It is rare for people to come forward when there is publicity. It is much more important that both the defendant and the complainant are treated equally in these exceptional circumstances. That is why we support the amendment.
Baroness Kennedy of The Shaws: My Lords, perhaps I may raise one matter. When talking about equality before the law, it is important to look beyond the courtroom door. We have come to understand that formal equality does not do justice. To create formal equality and not take account of the inequalities in our society beyond the courtroom door creates greater injustice. To treat as equal those who are unequal only creates further injustice.
The point at issue is that we created protection for women because without it women would not come forward. The reason that women will come forward when they see that a man has been charged with rape is because they are confident that they will not be so readily disbelieved if he is clearly doing it to other women. Almost every woman in those circumstances is most concerned to protect other women. The majority of people when interviewed say, "I want to make sure that it doesn't happen to anybody else".
The Liberal Democrats are getting it wrong. Formal equality has to be replaced with substantive equality. That is what will make the difference to women's lives.
Lord Campbell of Alloway: My Lords—
Baroness Walmsley: My Lords, first let me respond to the points made by the noble Baroness, Lady Kennedy. She said that justice does not end at the courtroom door. But that is why the defendant needs to have the same protection as the complainant. I am absolutely in favour of doing everything possible to encourage women to come forward when they have been raped. I have enormous sympathy for them. However, we cannot give them that encouragement at the expense of a possible lifetime stigma for an innocent person. That is why we support the amendment.
Baroness Noakes: My Lords, we have considerable sympathy with the amendment. The issue of the stigma associated with an accusation of rape is so important that there should be measures to protect defendants. Of course there is a question of balance, as there is in many matters arising from the Bill. In certain circumstances, there may be a need to get women to come forward about offences involving a defendant, but that must be balanced against the need for fairness to the defendant.

1087
To my mind, the amendment before us does not deal with all the problems, because, as the noble Baroness, Lady Kennedy of the Shaws, pointed out, the biggest problems relate to the publicity that may occur before charge where it is much more difficult to provide remedy in the Bill. In recent cases involving Mr John Leslie and Mr and Mrs Neil Hamilton, they were subjected to appalling adverse publicity with no charges pressed. But there are people who will always say, "There is no smoke without fire". The intention behind the amendment is wholly laudable. I hope that the Government will say that they are prepared to consider introducing a provision to deal with the issue both pre-charge and during the course of a case, once it is decided to press a charge.
Lord Campbell of Alloway: My Lords, I apologise to the noble Baroness, Lady Walmsley; I did not realise that she was in the middle of her speech. I also apologise to the House.
The noble Baroness, Lady Kennedy of the Shaws, said that there was a form of inequality between the complainant and the accused. They both enjoy the presumption of innocence before they start.
The real problem is not tackled by the amendment as drafted. It is the pre-trial publicity that causes the great problems to which the noble and learned Lord, Lord Ackner, referred. I am sure that his amendment could be redrafted in some way clearly to cover that.
When charges are made and we get to trial, it is a question of reciprocity of treatment. If there is anonymity for the complainant, there should certainly be anonymity for the accused. My noble friend Lady Noakes is right: that should receive further government consideration. In certain circumstances, the damage done to a man or woman's reputation is terrific. At present, there is no way that one can escape those consequences.
Baroness Howarth of Breckland: My Lords, I am deeply tempted to support the amendment because I have worked with men who have been falsely accused, as well as with women who have not won their cases in court. However, I must stand today with the noble Baroness, Lady Kennedy, simply because it is the existence of anonymity for women that has brought more women forward. There is no doubt that other victims come forward when cases are being heard.
I was impressed by the earlier suggestion of the noble and learned Lord, Lord Lloyd, that those groups of women have enormous power and can so influence the press. My experience is that those women are emotionally frail. Although we are here debating in good, clear, intellectual terms with lawyers—I chance my arm again by speaking in this hornet's nest of lawyers—it is the sheer emotion, depression and subjection that those women experience that means that they do not come forward, but if someone else comes forward, they will clearly find some support.
However, I have sympathy with the amendment. I hope that the Government can find a place in the process that is less harmful to men who are innocent
1088
and not charged but does not provide anonymity to the assailant, because that is when we have a hope of more evidence being brought forward.
Baroness Mallalieu: My Lords, I, too, ask my noble and learned friend to respond to the spirit of the amendment and to consider what the Government can do to provide what is clearly needed: some protection for those who are not subsequently charged, as well as those who are awaiting trial. That is a real problem. As noble Lords have said, whether or not there is ultimately a charge, reputations are wrongly ruined and a great degree of suffering is caused. Perhaps my noble and learned friend will be sympathetic to what the House would like done.
Baroness Blotch: My Lords, like the noble Baroness, Lady Mallalieu, I hope that the Minister will take the amendment away and even consider the half-way house suggestion of anonymity beyond the point of charge. I prefer the amendment moved by the noble and learned Lord, Lord Ackner, but if that cannot be agreed to, some form of anonymity post-charge should be considered.
Some men in such situations are driven not just to the point of, but to actual, suicide. I cannot think of anything more dreadful to someone who is completely innocent and vexatiously charged with such a serious offence than having to live through the kind of publicity that goes with it. We should not underestimate the effect of that.
I am reminded of the noble Earl, Lord Russell, who for a long period—in all about a year, I think—stood by a young student who was vexatiously charged with a serious sex offence about two or three years after the offence was meant to have occurred. The charge turned out to be vexatious. The support given that young man by the noble Earl, Lord Russell, kept him sane throughout that period.
I personally know of a senior American military person who invited some friends to spend an evening and the night with his children. Two of the girls accused him of having entered their bedroom in the night with no clothes on and having touched them. He was given the choice of all that going public if a complaint was made and risking the downside of the attendant publicity, or returning to America out of uniform and out of the service as a senior officer.
He was innocent, but he took that choice: he went back to America; he could not convince anyone of his innocence. He was the father of two girls and held a respected position. He returned to America but, during the following two years, the girls admitted that they had cooked it up.
I agree with the noble Baroness, Lady Walmsley, who said that the damage done to such people lasts for their lifetime. I am fairly certain that the Minister will not accept the noble and learned Lord's amendment, but, along with many others, I implore him to think hard of some way to minimise adverse publicity on some innocent people. If they ultimately turn out to be guilty, they will receive all the publicity that they

1089
deserve. Protection is owed to those who are subject to cases, such as arise all too frequently, that are dropped before they come to court. As my noble friend Lady Noakes said, after all the attendant publicity, the rest of the world simply says, "There is no smoke without fire", and those people are damned and their personal life and, often, their working lives, destroyed.
The Lord Bishop of Chester: My Lords, I speak from this Bench in support of the amendment. The issue of emotional frailty cuts across both the accused and the victim. One can only imagine what it is like to be falsely accused, especially if one is in a prominent position. Occasionally I come across cases of clergy who are accused. The facts are often difficult to prove: in such cases, it is one person's word against another's. The point that more victims may come forward is important. One must weigh that carefully against the other considerations to which noble Lords have referred. On balance, the argument comes down in favour of granting the same rights of anonymity in principle to those who are accused. I support the amendment.
6 p.m.
Lord Lester of Herne Hill: My Lords, I was not intending to take part in the debate until I listened to speeches from all sides of the House.
I strongly support the way in which the Bill secures a better balance between the rights of defendants and the rights of victims in rape cases. That is entirely sensible. Introducing the objective elements into guilty intent is highly beneficial. Precisely because we have a fairer balance between the rights of defendants and those of victims, it is important that we also secure a fair balance between the rights of defendants and the rights of victims in rape cases so far as publicity and anonymity are concerned.
I fully take the general point made by the noble Baroness, Lady Kennedy of The Shaws, about the difference between formal equality and substantive equality, and open justice. Normally, I should use those concepts in a similar direction. However, I do not believe that this issue is about formal or substantive equality or open justice. No one is suggesting that the rights of alleged rape victims to anonymity should in any way be withdrawn. I entirely agree with the noble Baroness that that anonymity is crucial in encouraging women to come forward with complaints and to go all the way to trial.
The real question is: what harm does it do if we treat rape trials or the proceedings leading up to rape trials in much the same way as we treat issues that arise in the family courts? We do not regard open justice or anything of that kind as creating an absolute right to publicity for all stages of very intimate details of sexual and family matters in family courts. The same applies to the highly adversarial open system of criminal justice in this country, which often does not sufficiently respect the rights of third parties, children or other vulnerable people.
1090
The amendment seeks to do something compassionate and sensible; that is, to provide greater protection for the defendant who turns out not to be guilty in a way that does not produce any detriment that I can see either to the public interest at large or to the alleged victim of the rape. For those reasons, I support the amendment, as others from all sides of the House have done.
Lord Lucas: My Lords, first, the arguments that have been raised by many noble Lords will also apply with equal force to some child sex offences, which we shall consider later in the Bill and which have a similar stigma for the people who are accused. When someone is accused of that, it is extremely difficult to rid oneself of it because there is absolutely no public acceptance by anyone, including the inmates of prisons, of child sex offences. However, there are sections of society who are prepared to regard as least some varieties of rape as excusable.
Secondly, in relation to a charge of rape against a defendant, will the noble and learned Lord tell us—if not now, by letter—whether publicity either before the charge or at the moment of charge frequently brings forward other people who wish to support the charge or to produce other instances of it? How frequent is that? If it is not that common, perhaps we could have a system by which the defendant had anonymity but that anonymity was removable by application to the court on the grounds that the prosecution wished to see whether other people wished to bring forward similar accusations. That would protect those more difficult sets of charges, such as an alleged child sex offence as a result of recovered memory syndrome within a family, where it is unlikely that there are other people outside who were similarly affected, as against abuse in a children's home, where one very much wants to know whether others have been affected. Such a flexible arrangement would be a way of getting over some of the objections.
Lord Falconer of Thoroton: My Lords, a charge of a sexual offence that is not proved can be extraordinarily damaging. The amendment deals only with the position post-charge, not the position pre-charge. I shall deal with the position post-charge first and then with the position pre-charge.
My noble friend Lady Kennedy of The Shaws described the starting point exactly. It remains a principle of our criminal justice system that it is open and transparent. People must be able to see what is going on in a criminal case. Introducing anonymity for defendants for those categories of cases could reduce our chances of bringing more offenders to justice and might well impact on public confidence in the system; and we would risk giving out mixed messages, especially within the context of needing to do more for victims and witnesses.
As noble Lords know, anonymity for defendants was granted in 1976. The effect of that was considered by Mrs Justice Heilbron's committee—the very same Mrs Justice Heilbron whom the noble and learned Lord, Lord Ackner, relied on to justify his position in

1091
terms of not introducing an objective element in relation to mens rea for rape. Mrs Justice Heilbron recommended that anonymity be repealed and the government of the day acted in relation to that proposal. She gave a number of arguments, one of which involved the extent to which anonymity for the victim encouraged victims to come forward while withdrawing anonymity for the defendant would in certain cases help other victims of that defendant to come forward as well. She considered that delicate balance and recommended after the period of anonymity that it he withdrawn.
We believe that the law presently strikes a proper balance between the principle of open justice, in which the public has the wider interest, and the very important need to ensure that victims of sexual offences are encouraged to report such crimes.
Baroness Walmsley: My Lords, am I correct in thinking that Mrs Justice Heilbron's committee sat more than 30 years ago, at a time when the media's coverage of such cases was not as extensive or as headline-making—colourful, perhaps we should say—as it is today?
Lord Falconer of Thoroton: My Lords, Mrs Justice Heilbron's committee sat at the end of the 1970s, which is close enough to 30 years ago. I suspect that the noble Baroness is wrong if she is suggesting that the press in the 1970s were not vigorously and salaciously reporting sex crime cases. I have absolutely no doubt that the press in the 1970s had just as much interest in reporting those cases as they do now, although I cannot give a scientific assessment of that.
The rationale for protecting victims alone is not only to protect them from hurtful publicity but also to encourage other victims to come forward to report the offence and co-operate with the prosecution. Those arguments do not apply to the accused. Even in the case of the complainant, the court has the power to lift the prohibition on publicity if it is necessary to encourage witnesses to come forward and the defence is likely to be prejudiced if the anonymity of a complainant stays in place.
The noble Baroness, Lady Kennedy of The Shaws, was absolutely right when she said that talking about equality of arms is completely misleading. Equality of arms means that when the prosecution and defence are in court, there must he a level playing field between them. However, that does not mean that at every stage of proceedings they must be treated differently. I do not believe that anyone in the House would doubt that anonymity for victims is entirely appropriate as a means of encouraging people to complain.
Singling out defendants in cases of sexual offences, as is being proposed, might also give the impression that there exists a presumption of doubt about the credibility of the complainant in sex offence cases which does not exist with other kinds of offences. That could hamper efforts to encourage more victims—mainly women—to come forward to report sex offences committed against them, and it would be
1092
unwelcome to risk implying that such a change was being made because complainants in such cases were making false or malicious accusations.
We think it would be wrong in terms of promoting proper prosecution of these cases to single them out as those where there is a special protection for the defendant. We have considered the matter carefully but we do not think it would be right to give anonymity after charge.
The Association of Chief Police Officers has issued all police forces with guidance on the pre-charge position applying to all offences. The guidance makes it clear that anyone tinder investigation but not charged should not be named or have details provided that might lead to their identification before they are charged.
Lord Ackner: My Lords, the case I gave was an example of the flagrant way the press deals with the situation. In the local journal—the Advertiser I think it was called —all the details I have given and more were provided. Where does he get this protection from?
The noble Baroness, Lady Kennedy, did not seem to think there was any protection pre-trial, hence her modest suggestion. Am I to understand that the noble and learned Lord rejects even that?
Lord Falconer of Thoroton: My Lords, with respect to the noble and learned Lord, I understood him to be saying that there was a complaint made against the general practitioner, a charge was brought and the defendant was held in custody for a week. This was presumably imposed by a court, which must mean there was a charge. If a charge had been imposed, then all that can be reported is that which was referred to in court and that which would not prejudice a fair trial. I am not sure what particular part of the process the noble and learned Lord is complaining about—it is all post-charge as I understand the noble and learned Lord's case.
Lord Ackner: My Lords, I cannot be categoric on that because I am anxious that the person concerned at least has anonymity in this Chamber. However, there is nothing to stop the public being aware of what has happened. The wife herself could have complained.
Lord Falconer of Thoroton: My Lords, in addition to the guidance issued by ACPO, the Attorney-General, speaking at an event earlier this year, acknowledged the existence of the Press Complaints Commission's code of practice and said that he had issued further guidance to editors.
Baroness Kennedy of The Shaws: My Lords, I thank the Minister for giving way. The editor of one of our tabloid newspapers recently gave evidence before the Home Office Select Committee and said that her newspaper had paid money to police officers for information. It is well known that there are leaks from the police, particularly when the people involved have

1093
a public profile or an eminent position, whatever it might be. There are frequently leaks because it makes for good tabloid coverage.
Whatever the guidance is from the police and the Press Complaints Commission or from the Attorney-General, none of it works. There needs to be pre-charging anonymity. Once a charge is made, it should go to the traditional position. Perhaps the Minister might consider anonymity before a charge is made. This is because of the terrible impact on lives as has been described.
Lord Falconer of Thoroton: My Lords, what the noble Baroness describes is a practice between the police and the press not just in relation to sex offences but in relation to all investigations. It is made absolutely clear by the Association of Chief Police Officers and by my right honourable friend the Attorney-General that this should not happen. This is not the Bill in which to introduce any provision to cover this sort of matter. It is a matter for consideration in another context and in relation to another Bill.
6.15 p.m.
Lord Lester of Herne Hill: My Lords, I thank the Minister for giving way. Since we are dealing with this Bill and sexual offences in particular, what policy objection could there be to adopting the approach of the noble baroness, Lady Kennedy, and giving statutory safeguards for the pre-trial stage but not for the trial stage? Given that the Government's position is "it is happening in practice already"—or should be happening according to guidelines although that is not what always happens—what possible objection would there be to an amendment that dealt only with pre-trial in the context of this Bill?
Lord Falconer of Thoroton: My Lords, first, I do not want to single out a particular sort of offence. Secondly, the question of pre-charge anonymity has not been canvassed with the wide range of people who should be canvassed before any such change is made. For those reasons I respectfully submit it is not remotely appropriate to deal with it in this Bill.
Baroness Blatch: My Lords, anonymity for women has been singled out for a particular sort of offence so how can that be used as an argument against anonymity for men?
Lord Falconer of Thoroton: My Lords, for reasons that I have indicated, which are special to sexual offences, the reasoning advanced by the noble Baroness, Lady Kennedy, applies to all charges.
With the greatest of respect, there is no analogy to be drawn with the fact that people who are complainants in sexual offences have anonymity and the fact that in relation to the pre-charge position relating to sexual offences there must be a special rule.
Baroness Howarth of Breckland: My Lords, I am in total agreement with what the Minister has said. I am
1094
more familiar with guidance in the social care field and I wonder whether the Home Office could issue similar guidance? I do not know what kind of remedies there are if police officers leak information and whether that is a disciplinary offence. We could look at whether guidance could be consulted upon, which is the usual process, because as much as I want to speak for victims—I spend my life working with them—I also know the terrible damage that happens in these circumstances.
Lord Falconer of Thoroton: My Lords, again the right course is for me to send noble Lords a copy of the guidance issued by ACPO. I think it is, as the noble Baroness, Lady Howarth implies, a matter for guidance—
The Lord Bishop of Chester: My Lords, the noble and learned Lord referred to the guidance issued last November. Soon after that a well-known entertainer, Matthew Kelly, was dragged through the papers in an unfortunate way. He was dragged from his pantomime performance and it was in the press within five minutes. This was on the back of the guidance being issued. I happen to know this because his wife is involved in charitable affairs in my diocese. I know the impact on him and his family. Unless the guidance the Association of Chief Police Officers has issued is given some teeth, it is not worth the paper it is written on.
Lord Falconer of Thoroton: My Lords, this is not an appropriate issue to be dealt with simply in relation to sex offences. I respectfully submit that it is an issue to be dealt with by reference to guidance and not by the creation of what would be a special offence, which is what is being proposed here.
Lord Lucas: My Lords, this is not the procedure the Government are following in relation to Clause 73 in this Bill. That clause introduces a new offence of violating a corpse without, as far as I can see, tackling the many other ways people can violate the corpse or memory of somebody. Indeed, it is an offence for which the noble Lord could produce no actual instances. In this Bill, the Government are introducing something which is special to sexual offences and which does not relate to the wider and more common instances of similar offences—indeed, the question of the lady who was covered in bacon is in the news again today.
The Government are already dealing with an offence which is a general one but introducing it in this Bill as a specific offence just because this Bill is limited to sexual offences, in this case involving a corpse. If the Government are doing it in Clause 73, they can do it elsewhere.
Lord Falconer of Thoroton: My Lords, sexual penetration of a corpse should be appropriately dealt with in the Sexual Offences Bill. What people are talking about here is the practice in relation to pre-charge publicity and where information for pre-charge publicity comes to the press. That is a much bigger topic than simply in relation to sex offences.

1095
The amendment as tabled deals only with the post-charge position. We believe it wrong that anonymity should be given to defendants in relation to that. In relation to the pre-charge position, the amendment raises issues much wider than the Sex Offences Bill which we respectfully submit are better dealt with by guidance.
I hope that, in the light of what I have said, the noble and learned Lord will feel able to withdraw his amendment.
Lord Ackner: My Lords, my noble and learned friend has done nothing to encourage me to withdraw my amendment. For 12 years this anonymity was enjoyed. I have heard nothing to suggest that during those 12 years there were occasions when it worked to the disadvantage of justice. I have not limited my request to pre-trial because pre-trial is only part of the issue.
If there had been a ray of generosity, which one sometimes associates with my noble and learned friend, and he was prepared to give way on that, I would reluctantly have withdrawn my amendment. But as I cannot achieve even that, I am forced to ask for that which I have tabled. It may perhaps be a novel occasion for him, but I ask to test the opinion of the House.
6.21 p.m.
On Question, Whether the said amendment (No. 14) shall be agreed to?
Their Lordships divided: Contents, 109; Not-Contents, 105.

Division No. 1

CONTENTS

Ackner, L. [Teller]

Elton, L.

Addington, L.

Falkland, V.

Alexander of Weedon, L.

Fearn, L.

Alton of Liverpool, L.

Flather, B.

Anelay of St Johns, B.

Gardner of Parkes, B.

Astor, V.

Geddes, L.

Astor of Hever, L.

Glentoran, L.

Avebury, L.

Goodhart, L.

Barker, B.

Griffiths of Fforestfach, L.

Beaumont of Whitley, L.

Hamwee, B.

Blatch, B.

Hanham, B.

Bowness, L.

Hanningfield, L.

Brooke of Sutton Mandeville, L.

Harris of Richmond, B.

Brougham and Vaux, L.

Henley, L.

Burnham, L.

Hooson, L.

Buscombe, B.

Lester of Herne Hill, L.

Byford, B.

Lindsay, E.

Caithness, E.

Linklater of Butterstone, B.

Carlisle of Bucklow, L.

Livsey of Talgarth, L.

Chester, Bp.

Lucas, L.

Clement-Jones, L.

Luke, L.

Colwyn, L.

Lyell, L.

Cope of Berkeley, L.

McNally, L.

Cox, B.

Maddock, B.

Craigavon, V.

Mallalieu, B.

Crathorne, L.

Manchester, Bp.

Dahrendorf, L.

Mancroft, L.

Darcy de Knayth, B.

Mar and Kellie, E.

Dixon-Smith, L.

Marlesford, L.

1096

Masham of Ilton, B.

Scott of Needham Market, B.

Mayhew of Twysden, L.

Seccombe, B.

Methuen, L.

Sharp of Guildford, B.

Miller of Chilthorne Domer, B.

Sheldon, L.

Monro of Langholm, L.

Shutt of Greetland, L.

Monson, L.

Smith of Clifton, L.

Montrose, D.

Soulsby of Swaffham Prior, L.

Newby, L.

Stoddart of Swindon, L.

Newton of Braintree, L.

Taverne, L.

Noakes, B.

Thomas of Gresford, L.

Northesk, E.

Thomas of Walliswood, B.

Northover, B.

Thomson of Monifieth, L.

Norton of Louth, L.

Tope, L.

Oakeshott of Seagrove Bay, L.

Tordoff, L.

Onslow, E.

Tugendhat, L.

Pearson of Rannoch, L.

Ullswater, V.

Pilkington of Oxenford, L.

Waddington, L.

Plumb, L.

Wakeham, L.

Razzall, L.

Wallace of Saltaire, L.

Rennard, L.

Walmsley, B.

Renton, L.

Watson of Richmond, L.

Rodgers of Quarry Bank, L.

Weatherill, L.

Roper, L.

Wedderburn of Charlton, L.

Saltoun of Abernethy, Ly. [Teller]

Wilcox, B.

Williams of Crosby, B.

Sandberg, L.

Williamson of Horton. L.

NOT-CONTENTS

Ahmed, L.

Hardy of Wath, L.

Alli, L.

Harris of Haringey, L.

Amos, B.

Haskel, L.

Andrews, B.

Hattersley, L.

Archer of Sandwell, L.

Hayman, B.

Ashton of Upholland, B.

Hollis of Heigham, B.

Bach, L.

Howarth of Breckland, B.

Barnett, L.

Howe of Idlicote, B.

Bassam of Brighton, L.

Howells of St. Davids, B.

Berkeley, L.

Howie of Troon, L.

Bernstein of Craigweil, L.

Hoyle, L.

Billingham, B.

Hughes of Woodside, L.

Blackstone, B.

Hunt of Chesterton, L.

Borrie, L.

Hunt of Kings Heath, L.

Bragg, L.

Irvine of Lairg, L. (Lord Chancellor)

Brooke of Alverthorpe, L.

Brookman, L.

Janner of Braunstone, L.

Campbell-Savours, L.

Jay of Paddington, B.

Carter, L.

Jones, L.

Christopher, L.

Kennedy of The Shaws, B.

Clark of Windermere, L.

Kirkhill, L.

Clinton-Davis, L.

Layard, L.

Corbett of Castle Vale, L.

Lea of Crondall, L.

Crawley, B.

Lipsey, L.

David, B.

Lloyd of Berwick, L.

Davies of Coity, L.

Lofthouse of Pontefract, L.

Davies of Oldham, L.

McIntosh of Haringey, L. [Teller]

Desai, L.

Dixon, L.

McIntosh of Hudnall, B.

Dormand of Easington, L.

MacKenzie of Culkein, L.

Dubs, L.

Mackenzie of Framwellgate, L.

Eatwell, L.

Mar, C.

Elder, L.

Mason of Barnsley, L.

Evans of Parkside, L.

Merlyn-Rees, L.

Evans of Temple Guiting, L.

Mitchell, L.

Falconer of Thoroton, L.

Morgan, L.

Farrington of Ribbleton, B.

Morris of Manchester, L.

Faulkner of Worcester, L.

Palmer, L.

Filkin, L.

Patel, L.

Fyfe of Fairfield, L.

Patel of Blackburn, L.

Gale, B.

Pitkeathley, B.

Goldsmith, L.

Ramsay of Cartvale, B.

Gordon of Strathblane, L.

Randall of St. Budeaux, L.

Goudie, B.

Renwick of Clifton, L.

Gould of Potternewton, B.

Rooker, L.

Graham of Edmonton, L.

Sawyer, L.

Grocott, L. [Teller]

Simon, V.

1097

Smith of Leigh, L.

Whitaker, B.

Taylor of Blackburn, L.

Whitty, L.

Temple-Morris, L.

Wilkins, B.

Thornton, B.

Williams of Elvel, L.

Tomlinson, L.

Williams of Mostyn, L. (Lord Privy Seal)

Turnberg, L.

Walker of Doncaster, L.

Woolmer of Leeds, L.

Resolved in the affirmative, and amendment agreed to accordingly.
6.32 p.m.
Clause 3 [Assault by penetration]:
[Amendments Nos. 14A to 22 not moved.]
Clause 4 [Assault of a child under 13 by penetration]:
[Amendment No. 23 not moved.]
Lord Falconer of Thorotonmoved Amendment No. 24:
Transpose Clause 4 to after Clause 7.
On Question, amendment agreed to.
Clause 5 [Sexual assault]:
[Amendments Nos. 25 to 32 not moved.]
Clause 6 [Sexual assault of a child under 13]:
Lord Falconer of Thorotonmoved Amendment No. 33:
Transpose Clause 6 to after Clause 7.
On Question, amendment agreed to.
Clause 7 [Causing a person to engage in sexual activity without consent]:
[Amendments Nos. 34 to 41 not moved.]
Clause 8 [Causing a child under 13 to engage in sexual activity]:
Lord Falconer of Thorotonmoved Amendment No. 42:
Page 4, line 18, after "causes" insert "or incites"
On Question, amendment agreed to.
[Amendments Nos. 43 and 44 not moved.]
Lord Falconer of Thorotonmoved Amendment No. 45:
Page 4, line 25, after "caused" insert "or incited"
On Question, amendment agreed to.
Clause 9 [Sexual activity with a child]:
Lord Falconer of Thorotonmoved Amendment No. 46:
Page 4, line 36, leave out paragraph (c).
The noble and learned Lord said: My Lords, the offences in Clauses 9 and 10 relate ostensibly to consensual activity with a child aged under 16. Our policy is that children under 13 cannot consent to sexual activity in any circumstances. Therefore, where the child was under 13 we would expect charges to be brought under one of the specific child under 13 offences.
1098
Following the deletion of Clause 76 of the introductory print (which made specific provisions relating to the offences to be charged where the child was under 13) the wording of Clauses 9 and 10 has been amended. They provide that the prosecution must prove that the defendant did not reasonably believe that the victim was 16 or over at the time of the sexual activity. Now that the clauses may apply where the victim was under 13, the amendment made in Committee at paragraph (d) provides that where the child was under 13 at the time of the alleged offence, the mistaken belief in age provisions do not apply.
The new paragraph (d) that was agreed to in Committee makes paragraph (c) (which provides that the victim must be under 16) redundant. The Government amendments are purely a tidying-up exercise to remove the redundant paragraph (c) from each clause. I beg to move.
On Question, amendment agreed to.
Clause 10 [Causing a child to engage in sexual activity]:
Lord Falconer of Thorotonmoved Amendment No. 47:
Page 5, line 3, after "causes" insert "or incites"
On Question, amendment agreed to.
Lord Falconer of Thorotonmoved Amendment No. 48:
Page 5, line 5, leave out paragraph (c).
On Question, amendment agreed to.
Baroness Noakesmoved Amendment No. 49:
Page 5, line 11, after "indictment" insert—
"(a) where subsection (3) applies, to imprisonment for life; (b) in any other case"
The noble Baroness said: My Lords, in moving Amendment No. 49, I shall speak also to Amendments Nos. 50, 54 and 55 in the group. Amendments Nos. 49 and 50 amend the sentencing provisions of Clause 10, which now covers both causing and inciting a child to engage in sexual activity, so that the sentence can be life where penetration of a child under 13 is involved. The amendments align the sentence both with that under Clause 8, which deals exclusively with under-13s, and with that under Clause 33, where a mentally disordered person who lacks capacity to consent is involved.
Would the Minister explain why it is possible for an offence involving a child under 13 to carry a life sentence under Clause 8, but only 14 years under Clause 10? I do not believe that we should create the possibility that an offence involving a child under 13 could be tried where the sentence is the lesser one. That should not be an option open to prosecutors. I hope that the Minister will explain why, given the offences under Clause 8, it is necessary to include under-13s within the ambit of the Clause 10 offence. If I had been more focused when I tabled the amendments I should also have tabled a probing amendment to draw

1099
attention to a similar disparity between Clauses 6 and 9. As the same point of principle arises, I hope that the Minister will cover that as well.
Amendments Nos. 54 and 55 seek to amend the sentencing provision of Clauses 12 and 13 so that for under-13s the sentence will be aligned with that for mentally-disordered persons who lack capacity to consent under Clauses 35 and 36.
Under Clauses 35 and 36 the offence is always triable on indictment and carries a possible 10-year sentence. Under Clauses 12 and 13 there is an option of summary conviction carrying six months or a fine. We do not think that that is right where under-13s are involved. I believe that the Government's approach to the Bill is that where a child is under 13 the question of consent should not arise. Why is it that a person who cannot consent under Clauses 35 and 36 receives greater protection than a child under Clauses 12 and 13? Why is it possible that an offence involving an under-13 could be tried summarily with its much lower sentence? Our amendments seek to eliminate disparity and ensure that offences involving under-13s are always treated as serious offences. I beg to move.
Baroness Blatch: My Lords, my noble friend's amendment deals with the internal inconsistency of the Bill and the comparisons between the penalty for causing a child to engage in sexual activity and that for causing a person with a mental disorder to do the same thing. I rise not to take issue with my noble friend but simply to take this opportunity to point out that all the child sex offences in Clauses 9 to 13, welcome though they are, are limited in their effect where the victim—the child—will not make a complaint to the police against the perpetrator or will not give evidence.
We know that all too often children are frightened to get involved in a prosecution. The perpetrator may have threatened all kinds of dire consequences or at least have created an air of intimidation. Then there are cases where the child will not give evidence because that child believes that she is in love with the perpetrator. An under-age child may be engaging in frequent sexual intercourse with an older person but if the only source of evidence about the intercourse is the child herself, the police often say that they are powerless to act.
I was written to some weeks ago by my friend Mr Andrew Turner, MP for the Isle of Wight. He had a case in his constituency of an under-aged girl who was sexually involved with two males. Hampshire Constabulary said that no allegation of criminal offences was made by the victim, and in their words where that is not forthcoming the police are limited in the action that can be taken. Even if the parents consent to a medical examination to obtain DNA evidence, if the child refuses to allow police surgeons to examine her there is nothing they can do.
Hampshire Constabulary also provided Mr Turner with a series of similar cases. In autumn 2000, police officers strongly suspected that a 14 year-old girl was having a sexual relationship with a 32 year-old man but the girl was unwilling to be interviewed. She was
1100
eventually taken into care by social services. Once away from the influence of that man she indicated a willingness to co-operate with the police. However, before she could be interviewed, the man traced her and sent her letters that persuaded her not to say anything. The man was eventually prosecuted for child abduction, to which he pleaded guilty. He admitted that there was a relationship but refused to admit that it was sexual.
In another case, officers investigated cases of unlawful sexual intercourse involving a registered sex offender and several young girls under 16. The girls in that case refused to co-operate with the police and social services, considering themselves, again, to be in love with the offender so an application to obtain a sex offender's order against him failed and the man was prosecuted for abduction. In each case the prosecution was for abduction, not a sexual offence. The reality of what he did was therefore not recognised in the proceedings or the sentence.
More and more legal duties are being placed on parents these days. They are told, for example, that they will be gaoled for not sending their children to school, but there is no corresponding increase in parents' legal powers or, indeed, in the support they can expect from the police and social services when their children become unruly despite their best efforts.
On 16th May this year the Daily Mail reported a case in the area from which I come. It was the case of 15 year-old Vicky Osborne who left home and moved in with 17 year-old Sam Hayes, a lesbian who has served three months for beating up a woman in a row over drugs money. The two freely admit that they sleep together yet the police say that they cannot act because Vicky has made no complaint to them. Astonishingly, when the parents turned to social services for help they were told that there were no grounds to warrant Vicky's forcible removal from Sam's care. Milton Keynes social services stated:
"There is no evidence to suggest that Vicky is at risk",
albeit that taking that attitude they were condoning illegal behaviour. The age of consent under our law is 16. The older party to this sexual relationship is committing a sexual offence against Vicky, yet social services saw nothing wrong with that situation.
Where a sexual relationship with a minor is being condoned by the local social services, it makes a mockery of the law and cocks a snook at the girl's parents who are trying to do the best for their daughter. In that type of situation, can parents take any comfort from these clauses in the Bill? Are the offences in Clauses 9 to 13 any easier to prosecute than the current offences of unlawful sexual intercourse with a minor and sexual assault? Are any of the later provisions of the Bill, such as the sexual offences prevention orders or the risk of sexual harm orders, likely to be of help in such situations?
I was being opportunist because these issues relate very much to this part of the Bill. Where my noble friend is arguing for consistency I am arguing for effective prosecution and support for parents who are trying to do the best by their children.
6.45 p.m.
Lord Falconer of Thoroton: My Lords, the amendment moved by the noble Baroness, Lady Noakes, would provide a higher penalty in relation to certain offences and would require the case to be dealt with only at the Crown Court for certain of the child sex offences when the victim is aged under 13.
Amendments Nos. 49 and 50 would introduce a penalty of life rather than 14 years for the offence of causing a child to engage in sexual activity where the activity involves penetration of or by a child aged under 13. We are obviously agreed on the need to ensure that sufficiently heavy penalties are available when sexual offences are committed against children of such an age.
However, as the noble Baroness pointed out—indeed, it is the foundation of her case—Clause 8 is already available for the Crown Prosecution Service to charge in these circumstances and carries precisely the penalties proposed in Amendments Nos. 49 and 50. We think it is important for the CPS to charge the Clause 8 offence rather than the Clause 10 offence where the victim is under 13, so that not only are the higher penalties available, but the defendant, if found guilty, will have on his criminal record the offence of causing a child under 13 to engage in sexual activity.
As regards the provisions which the noble Baroness seeks to amend, it is possible for there to be victims under 13, as is explicitly acknowledged in the clause, but those would be cases where we think that a mistake had been made about the age which became apparent only during the course of the proceedings. We think that in those circumstances, where one is dealing with cases on the margins, the 14-year penalty is sufficient.
Amendments Nos. 54 and 55 propose that cases of engaging in sexual activity in the presence of a child and causing a child to watch sexual activity should be dealt with on indictment only with a maximum penalty of 10 years when the offence involves a child under 13. We equally have no doubt that the offences in question merit the intervention of the criminal law. As I said, in a number of these cases one has to recognise that they involve a range of sexual activity which a person can be forced to watch or caused to watch, ranging from penetration—which plainly would merit the intervention of the Crown Court—right through to what might be, by comparison with penetration, quite minor sexual activity. We think that in those cases, as in any other, the option of summary trial should be retained to allow flexibility in recognition of the range of behaviour involved in the types of offences to which we refer. We do not believe it is right that that option should be taken away from the Crown Prosecution Service.
The noble Baroness, Lady Blatch, described her intervention as somewhat opportunist. With the greatest respect, I have to say that this has absolutely nothing to do with any of the amendments we are discussing. However, we want to make these offences effective and we believe that we have made them more effective in many respects than the existing law in providing proper protection for children. However,
1102
there will need to be some evidence in every case, although not necessarily the evidence of the victim. There will be causes where evidence can be brought from sources other than the victim—for example, in relation to what was said or recorded by others. We believe that the Bill's provisions are effective and strike the right balance between the need for proper evidence and the need for the proper protection of children.
Baroness Noakes: My Lords, the Minister has not answered my points. As to Clause 10, he said that Clause 8 would normally be used but if there were some kind of mistake, 14 years was all right. Where the child was under 13, there should never be the possibility of a lesser penalty than the one in Clause 8.
I invite the Minister to examine the relationship between Clauses 12 and 13 and Clauses 35 and 36, which deal with mentally disordered persons who lack the capacity to refuse. In the case of under-13s, we are effectively dealing with the same situation because the issue of consent is wholly irrelevant. A range of behaviours can cause a charge to be brought under Clauses 35 and 36 in relation to mentally disordered persons, with a set penalty. With children, there is the option of a lesser penalty. I do not understand that provision in respect of under-13s.
I hope that the Minister will think again. I will not press the amendment but will return to the issue on Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 50 not moved.]
Clause 11 [Inciting a child to engage in sexual activity]:
[Amendments Nos. 51 and 52 not moved.]
Lord Falconer of Thorotonmoved Amendment No. 53:
Leave out Clause 11.
On Question, amendment agreed to.
Clause 12 [Engaging in sexual activity in the presence of a child]:
[Amendment No. 54 not moved.]
Clause 13 [Causing a child to watch a sexual act]:
[Amendment No. 55 not moved.]
Clause 14 [Child sex offences committed by children or young persons]:
Baroness Walmsleymoved Amendment No. 56:
Leave out Clause 14.
The noble Baroness said: My Lords, the result of this amendment would be that under-18s could not commit the relatively minor offences set out in Clauses 9 to 13—the sexual touching of a child; causing, inciting or engaging in sex in the presence of a child; or causing a child age 13 to 15 to watch sexual activity.
The amendment focuses on the Bill's most ridiculous aspect. Where the activity is consensual, the normal behaviour of probably half the adolescent population is being criminalised. The penalties in Clause 14(2) are neither necessary, justified nor

1103
proportionate. One of the problems with Clauses 14 and 9 is that they take no account of consent. Whether or not there is consent, their provisions are not the best way of dealing with sexual activity between young people.
During the passage of the Bill through your Lordships' House, I have pressed for children to be treated differently, for two reasons. One is the matter of culpability for their actions. Children's moral values are not yet fully formed. They experiment. That is a normal part of growing up. Children are very much influenced by adults and what they see around them. Their attitudes and behaviour are almost always strongly influenced by the opinions of adults and the way that adults behave towards them.
Children who commit offences such as sexual touching without the consent of their child victim are damaged children themselves. Many have suffered sexual abuse. A large majority have suffered physical and emotional violence and neglect.
The second reason is that children respond even better to treatment and counselling than adults, partly because their attitudes are not yet fixed. A large amount of research has shown how well children respond to counselling, which is why it is so important to provide it. Counselling can transform the lives of young offenders and. most important, protect other children who might otherwise be abused by them in the future. It is all about child protection.
I draw your Lordships' attention to the Long Title:
"A Bill … to make new provision about sexual offences, their prevention and the protection of children from harm from other sexual acts, and for connected purposes".
It seems strange that all my attempts to put into the Bill measures to ensure that children who commit sexual offences are entitled to treatment rather than penalties—albeit lower than those for adults—have failed. I have been told that such measures are beyond the scope of the Bill. They are not. The Bill is about effective prevention and the protection of children and their potential victims.
We all know the truth of the old saying that one cannot fit a square peg into a round hole. If one can, either the peg or the hole is the wrong shape. The Government, in drafting the Bill so narrowly, have crafted the wrong-shaped hole, into which I and others are vainly trying to squeeze something that is absolutely vital—the proper treatment of young sex offenders.
The Government claim that they always act on the advice of experts. In matters of scientific importance such as CJD, foot and mouth disease, MMR vaccination and GM crops, the Government make a big thing about doing so. During the passage of the Bill, the noble and learned Lord the Minister has listened to experts such as the noble Lords, Lord Rix and Lord Adebowale, speak about people with physical and mental disabilities. Why will the Minister not listen to the experts on children? The noble Baronesses, Lady Howarth and Lady Gould of Potternewton, the noble Earl, Lord Listowel, and many others have given us the benefit of their years of
1104
experience in advising young people—yet the Government are still not listening. Instead, they are trying to make a Bill for adults fit children by sticking in a few clauses with lower penalties.
Clause 14 is faulty because it will have unintended consequences for teenagers indulging in relatively harmless experimentation. Nor does it provide the most effective method of ensuring
"prevention and the protection of children from harm".
I beg to move.
Baroness Noakes: My Lords, I have considerable sympathy with Amendment No. 56. Throughout our consideration of the Bill, I have been concerned about the way that sexual activity has been criminalised. In this instance the issue is teenage sex but elsewhere the Bill addresses sex between persons who are mentally disordered. It continues to trouble me that we must rest on prosecutorial discretion in determining which sexual activities are to be treated as criminal.
Some of your Lordships will view the amendment as undermining the age of consent but it is already undermined—day in, day out—by wholly consensual sexual intercourse involving teenagers. We cannot turn the clock back to a golden age, if one ever existed, in which teenagers saved themselves to their 16th birthday. The world has moved on and we may well reflect that in our laws.
We should remember also that while child offences include full sexual intercourse, they extend to a lot of other activities such as kissing, heavy petting and looking at dirty magazines. I wonder if there are any children under 16 who do not engage in one or more of those activities. The problem is how to reflect the realities of teenage life in our laws. We struggled to do so in Committee and are still struggling.
I am clear that we do not want to create a blanket exception for all sexual activity involving under-18s because some young people are very dangerous sexually. They can and do abuse other children and the law should be fully capable of dealing with them. I fully accept the comment by the noble Baroness, Lady Walmsley, that other interventions are likely to be the most important when dealing with such children.
The amendment does not affect the crimes under Clauses 1 to 8. Therefore sexual activity with under 13 year-olds will remain a crime, as will non-consensual activity with 13 to 15 year-olds. I am conscious that that may well involve a 13 to 15 year-old giving evidence. That has drawbacks. However, as always with the Bill, it is a question of balance. On the one side, there is the possibility of emotional trauma for a 13 to 15 year-old having to give evidence; and, on the other, that a wholly consensual and normal activity involving teenagers will be dragged within the law, possibly at the insistence of over-zealous parents. On balance, I find myself in favour of the amendment.
However, I have a problem with it. The amendment would remove the possibility of prosecution under Clause 12 or 13 where under 13 year-olds were involved. Clause 12 covers engaging in sexual activity in the presence of a child; Clause 13 covers causing a

1105
child to watch a sexual act. I do not think that that is right. For that reason, I am unable today to support the amendment but I certainly support the principles underlying the amendment.
7 p.m.
Baroness Howarth of Breckland: My Lords, I support the intent underlying the amendment. On the previous occasion when we discussed the issue, the Minister kindly wrote to the noble Lord, Lord Campbell, regarding a question that I raised about the treatment of young people. I cannot quote from the letter because I do not have it in front of me; the Minister will put me right. The general gist of the letter was that research at present does not indicate what we can do in order to provide treatment and, therefore, a working party was being set up to consider the implications.
I took a copy of the letter to the steering group of the Stop It Now campaign which I chair. The group includes Barnardo's, Childline, the NSPCC and the Faithfull Foundation—to name but a few. They all commented on the wide range of work. Indeed, Barnardo's already has eight projects working with young people who abuse. The NSPCC has projects. The Faithfull Foundation has led the way in some of this thinking.
It is important to recognise that treatment is the way forward for those young people, while not criminalising normal sexual developmental behaviour. I how again to the lawyers' understanding of how to include the social care aspect in the legal framework. I hope that we shall consider the issue again. I shall submit a great deal of information to the working party. I support the amendment.
The Earl of Listowel: My Lords, I, too, support the intention of the amendment. I welcome the Minister's remarks in Committee regarding those young children who commit serious offences who may be covered by Clause 14 or possibly earlier clauses. I appreciate his wholehearted agreement that we should identify and intervene at an early stage with children at risk of becoming sexual abusers; and his acknowledgement that in the past such children have not received the focus and attention they should have done. The noble and learned Lord has kindly written to me and to others, alerting us to the interdepartmental working group. I believe that it is due to report in the autumn. Will the Minister keep us informed of the progress of the working group? Perhaps he will let us know should there be any change in the group's timetable.
Baroness Blatch: My Lords, I think that I am again on my own in fighting this issue. I object to any provision which erodes what I consider to be the very low age of consent. We continually erode it through some of the amendments put forward.
I was pleased to hear my noble friend Lady Noakes give qualified support for the amendment: she did not wish to see a blanket exemption. Removing Clause 14 represents a blanket exemption. All noble Lords have
1106
talked about what they consider to be innocent, normal sexual activity between healthy teenagers. However, in the real world we know that there is aggressive and abusive sexual behaviour by teenage boys in particular against very young girls. It is possible for 13 year-olds or even younger girls to be terrorised by such aggressive, abusive sexual behaviour. By leaving out Clause 14, those teenage boys would not commit offences. There needs to be protection of those children.
I find it almost impossible to conceive of the police prosecuting the kinds of examples cited. We need a provision in the Bill which enables the police to prosecute and then to put in place the treatment, counselling and behavioural programmes that those young people require. As the noble Baroness, Lady Walmsley, said, many of those young people have been abused themselves. They have all kinds of personality defects. That issue needs also to be addressed. But to remove Clause 14 from the Bill would be detrimental. I hope that the noble and learned Lord will not accept the amendment.
The Lord Bishop of Chester: My Lords, I hope that the noble Baroness, Lady Blatch, will be pleased to know that she is not alone on this matter. I share the desire to avoid criminalising young people unless it is necessary. The legal framework in our country affects the moral climate. The two are not separate. To remove Clause 14 gives the wrong signal. I speak as someone with teenage children. My daughter is 17. She brings her friends to my house, we mix freely, and I learn something of the culture of young people. It is a bit of a jungle, with threats, stresses and strains. The law has a part to play in providing safeguards and anchors in particular when dealing with boys aged 15, 16 and 17.
As drafted, Clause 14 is somewhat stark. Clearly one wants counselling, support, advice and education to be pre-eminent. There is a place for the law. Clause 14 has got it about right. At present, I resist the amendment.
Lord Falconer of Thoroton: My Lords, it is a difficult area but we resist the amendment. It is important to identify its effect: ostensibly, that consensual sexual activity between persons aged between 13 and 17 inclusive would never be unlawful. In effect, it restricts the age of consent only to situations where a person under 16 engages in sexual activity with a person who is 18 or over. The way in which the criminal law deals with under-age consensual sexual activity is a matter we debated at some length in Committee. We have considered very carefully our position in the light of all the concerns raised. However, we remain firmly of the opinion that the age of consent should apply across the board, whether a child is having sex with another child or an adult.
I know that it is widely held that a sexual relationship is far more likely to be abusive if the age gap between the parties is significant—for example, between a 15 year-old child and a 40 year-old adult. But the truth is that adults do not have a monopoly on child abuse. We cannot assume that sexual

1107
relationships between young people will be fully consensual just because they are of a similar age. We know that children are often abused by other children. Although we earnestly hope that steps would be taken to intervene as early and as quickly as possible to try to help the child who is abusing, the law must be able to protect such children in the appropriate case.
The amendment would leave in place the nonconsensual cases and the under-13 cases, save in the respect identified by the noble Baroness, Lady Noakes, but would provide no protection where it is said, possibly by the victim, that there was consent. In that case, the child sex activity charge would not apply to those cases where the defendant is under 18 years of age.
We believe that the law must make provision for children to face charges relating, ostensibly, to consensual activity where there is evidence to suggest that it is exploitative or coercive, as there may not be enough evidence to support a charge for a nonconsensual offence. As was said in Committee, many children are vulnerable to peer pressure and can be persuaded to engage in sexual activity when they would prefer not to do so. In such circumstances, sexual activity cannot be said to be non-consensual, but it can be exploitative. In such cases, we want to leave open the possibility of the CPS bringing charges under one of the child sex offences where prosecution is in the public interest.
The testimony of many children is that they welcome the protection that is offered by the age of consent, because it enables them to withstand peer pressure to engage in sexual activity before they are ready to do so. I am not sure that we would be right to remove that protection. I simply do not accept the proposition that we should leave children without any legal grounds to help them resist coercive sex. Legalising sexual activity between minors would send the message that sexual activity below the age of consent is acceptable and normal. In my opinion, that would encourage more children to engage in sexual activity before they are emotionally and physically ready to cope with the consequences.
Our view is that we have a duty to protect children from engaging in sexual activity at too early an age. Existing legislation, which contains offences of unlawful sexual intercourse and indecent assault, already makes it clear that it is unlawful to engage in any sexual activity with a person below the age of 16. We are content that our new legislation should make a clear statement that this continues to be the case.
I have already made it clear—I do so again—that we do not want or expect under-age sexual activity between young people to be prosecuted unless there is clear evidence of exploitation and prosecution is in the public interest. We suspect that it would be unwise to remove all of that protection, as proposed by the amendment, and that it would also be a matter of getting the balance wrong. Despite the law that I described, there is no evidence at present to show that that happens. As we are not making any substantive change in that respect, we do not believe that it will happen in the future.
1108
I recognise that this is a difficult issue, but we are clearly of the view that the amendment is unacceptable. I am not talking about the technicalities involved; I am talking about the principle. To say that the child sex activity offences should not apply to a person under the age of 18 is wrong in principle. I respectfully ask the noble Baroness to withdraw her amendment.
Baroness Walmsley: My Lords, I am grateful to the Minister for his response, and to those noble Lords who expressed support for the sentiments behind the amendment. It is possible that the wording of the amendment is not quite right, but I respectfully suggest that that also applies to Clause 14. Perhaps I need to draft a new Clause 14 and table it for consideration on Third Reading. I shall certainly consider that option. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
7.15 p.m.
Baroness Walmsleymoved Amendment No. 57:
After Clause 14, insert the following new clause—
"SENTENCE REVIEW
Where a young person under the age of 18 has been convicted of an offence under this Part, the Court or Youth Offending Panel shall review the sentence when the young person reaches the age of 18."
The noble Baroness said: My Lords, this amendment relates to reviewing the case of a young sex offender when he reaches the age of 18. When I tabled a similar amendment in Committee, the noble and learned Lord responded that young people's cases are regularly reviewed in any event, so why should we bother to review such cases again when such youngsters reach the age of 18? In response, I should point out that at the age of 18 young people move into the adult penal system, which is a very significant change in their circumstances. That is why I believe it to he essential for such cases to be reviewed.
There is a great difference between a young offenders' institution and an adult prison. It is quite appropriate, therefore, even if a review took place only a month or so prior to the young person's 18th birthday, for such cases to be reviewed. We are talking about a significant point in the lives of young sex offenders when they move into the adult justice system. I beg to move.
Lord Falconer of Thoroton: My Lords, this amendment would introduce a new provision that would oblige the court or a youth offending panel to review the sentence of all young persons convicted of sex offences once they reach the age of 18, regardless of what sentence was passed. This point was raised in Committee. As I said then, the sentence passed by the court will already have taken account of the severity of the offence and the age or the child at the time that the offence was committed.

1109
For sentences passed for sex offences committed by young persons to be automatically reviewed when the child reaches the age of 18 would be a completely novel departure from the approach adopted throughout the rest of the criminal justice system. For example, a sentence passed on a young offender at the age of 17 would need to be reviewed very quickly thereafter. If a very long sentence was passed on a younger child, it would almost invariably be because of the seriousness of the offence, which, as a matter of punishment, required a long sentence.
Therefore, although we fully understand the motivation behind the amendment, we do not believe it to be sensible or necessary and we do not believe that it sufficiently takes into account the fact that the court will already have considered the child's age and the seriousness of the offence when passing sentence. I implore the noble Baroness to consider withdrawing her amendment.
The Earl of Listowel: My Lords, I apologise for speaking out of turn. I did not rise quickly enough to enable me to speak in the proper order. I shall quite understand if noble Lords object to my speaking at this point. However, having re-read the record of the Committee stage in the Official Report, I must emphasise my concern about those children aged 13 or 14 who receive a long sentence of imprisonment. Tremendous progress has been made on what can be done to treat these children. The scene here is changing very quickly. As the Minister will know, for adults there has been a lot of progress and this is now beginning to happen for children.
I emphasise that for these young children with long sentences there are almost invariably welfare issues to do with the circumstances that created the initial problem in them. They undergo an important transition at the age of 18. Perhaps the Minister could bear these factors in mind when considering the guidance that is to apply to the Bill, so as to ensure that a thorough mechanism for review is available for the cases of those children who receive long sentences at an early age. This would ensure that the practice here is right. I thank noble Lords for giving me this opportunity to speak.
Baroness Walmsley: My Lords, I am most grateful to the Minister for his reply. I also thank the noble Earl, Lord Listowel, for his comments. He is quite right: rapid progress is being made in the treatments and programmes available to assist young people in such situations. Indeed, because of the flexibility of the programmes, the children often make very rapid progress towards recovery out of the situations in which they find themselves. Therefore, it is very important to review the sentence when these youngsters reach the age of 18. However, for the moment, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 15 [Arranging or facilitating commission of a child sex offence]:
Baroness Blatchmoved Amendment No. 58:
Page 6, line 36, at end insert—
"( ) he is not and has never been subject to the notification requirements of Part 2 of this Act or to any order made under Part 2 of this Act,
( ) he has never been subject to Part 1 of the Sex Offenders Act 1997 (c. 51) and does not satisfy any of the conditions in section 83(1)(a) to (d) of this Act, and
( ) he is not and has never been subject to any order made under a provision within section 83(8) of this Act, and"
The noble Baroness said: My Lords, Clauses 15 and 75 were amended in Committee to create a defence against child sex offences for those who claimed to be carrying out sex education or similar activities. I opposed the amendments. I believe that the defence is unnecessary. I am not aware of a single case under the existing law of a respectable sex education professional being prosecuted for a child sex offence simply for carrying out legitimate sex education. I do not believe that any such cases would arise under the new legislation.
None the less, the Government, supported by my noble friends and others, were determined that there should be a specific defence from the Clause 15 offence of facilitating a child sex offence and a further defence from aiding and abetting child sex offences in Clause 75.
The Bill now provides that no offence is committed where the person acts to protect a child from sexually transmitted infection or physical harm, or to prevent pregnancy (Clause 15 (3) and Clause 75(1)).
I have given serious consideration to all that was said in Committee, and I remain concerned that this defence will be abused. When the matter was debated in Committee on 1st April (Hansard, col. 1235), I argued that it was a paedophile's charter. I maintain that the law of unintended consequences means that the amendment, which is not necessary to protect sex education professionals, will instead benefit paedophiles who worm their way into positions of trust and authority over children precisely in order to take sexual advantage of them.
In the next group we shall discuss amendments which would widen the scope of that defence. I hope by my amendments to narrow the defence.
I wrote to the noble and learned Lord the Minister last week mentioning some cases where a child sex abuser claimed that he was simply carrying out sex education, when in fact he had ulterior motives.
First there was the case of Michael Gregory, a trainee church minister who was convicted of indecently assaulting two girls. In one case he gave a 13-year-old girl a graphic demonstration of how to use a condom. The man was responsible for giving a course of sex education lessons to a youth group at the church.
Then there is the case of Terence King. He was a vicar who apparently showed an 11-year-old boy pictures of naked men during sex education classes and

1111
then sexually assaulted him. The victim, now 24, said that a number of children in the church were abused in this way. The vicar would require the children to go one at a time into his room for sex education sessions lasting up to half an hour.
There was also the case of Robin Peverett, the headmaster of a leading prep school who indecently assaulted at least eight pupils in the 1970s. He conducted sex education lessons at the school. He had access to the girls' changing rooms and showers, and obtained details of the girls' physical development, ostensibly out of professional interest.
Finally, there is the case of Anthony Gray. He arranged via the Internet to meet up with a 14-year-old boy. His pretext was to discuss the boy's confusion over his sexuality. He took the boy to a hotel, where he sexually assault him. He later claimed that they spent the night discussing the boy's problems.
Clearly, those are cases in which the paedophiles carried out actual sexual acts on the children concerned, and it was for those acts that they were subsequently convicted. My purpose in drawing attention to those cases is to ask what would have happened if the individual had stopped short of actual sexual contact and had been content to obtain his sexual gratification from the sex education lessons. Could he have defended his actions up to that point by claiming merely to have been involved in sex education?
None of those cases involved a man with previous convictions for child sex offences. This brings me on to the substance of my amendments. What is most astonishing about the sex educator's defence that the Government have written in to Clauses 15 and 75 is that there is nothing to prevent a convicted paedophile or other sex offender from using that defence. Is it really the Government's intention that this defence should be available to such people?
My amendments—Amendments Nos. 58, 168 and 171—stipulate that no person who is subject to the sex offender notification requirements of Part 2 can rely on that defence. This stipulation also applies to those subject to registration under the existing sex offenders register. This stipulation is permanent. Once a person has been subject to the notification requirements he can never rely on the defence, even if the notification requirements cease to apply.
I would accept it if the Minister said that the drafting could be improved—any drafting of my amendments can always be improved—and that he will take the matter away and think about it.
I cannot conceive of any reason why a convicted sex offender should ever be allowed to get away with facilitating or aiding and abetting a child sex offence by claiming that he was merely involved in sex education. I beg to move.
Baroness Noakes: My Lords, I support the principles behind my noble friend's amendment. If there is any possibility that paedophiles could use the
1112
welcome provisions in Clauses 15 and 75 to become involved inappropriately with children, everyone in the House would want to prevent that.
My noble friend has found an ingenious way to ensure that sex offenders cannot claim the protection of Clauses 15 and 75, and I congratulate her on that.
However, I have two problems with the amendments. The first relates to the lack of time limits. The time that the ban exists does not expire with the notification period, which it seems to me would be a more proportionate amendment. Secondly, the amendments cover all sex offenders and therefore cover offences involving adults only as well as those involving children.
If those aspects can be resolved, it seems to me that the Government would want to consider whether the matter can be shaped into a more workable form.
Lord Falconer of Thoroton: My Lords, the purpose of Amendments Nos. 58, 168 and 171 is to ensure that the exemption that we have introduced to protect those acting to protect the physical safety of a child, or to protect him or her from pregnancy or sexually transmitted infection, shall not apply if the accused is or has been a registered sex offender or the subject of an order designed to prevent sexual harm.
The noble Baroness, Lady Noakes, referred to various aspects of the clause that make it probably too wide and untargeted. I do not wish to spend time on the detail, but rather to deal with the principle, which, as I understand it, as advanced by the noble Baroness, Lady Blatch, is that a convicted sex offender—I shall ignore how one precisely defines that term—should never be able to rely on Clause 75 as a defence to any of the relevant offences.
I fully understand the noble Baroness's concerns, and completely agree that the clause should not become a means of people putting forward bogus defences. But I do not believe that addressing the issue as the noble Baroness suggests, by an amendment of this sort, is the appropriate way.
I believe that the provisions in the Criminal Justice Bill, which will reach this House in the next two to three weeks, would be the better way to address this question. They deal with cases where the fact that a defendant has a conviction for a sex offence is relevant to the facts of the charge in question. The existing law means that it is only in very exceptional circumstances that evidence of such previous convictions is admissible in trials.
If someone previously convicted of sex offences against a child were charged with a new sexual offence involving a child, it would not generally be possible now to refer to the previous convictions in the trial for the new allegation. However, proposals in the Criminal Justice Bill would make such evidence available to the court in a much wider range of circumstances. The court, therefore, when considering whether the exception was made out—and the exception exists for the purposes of court proceedings—or whether the defendant had in fact

1113
been causing or encouraging a sexual offence, would be able to consider that matter, where relevant, taking into account those previous convictions.
I think that it is better for the court to assess whether in a particular case the evidence relating to the previous conviction is relevant, and, where it is fair, for it to be admitted, rather than providing a blanket prohibition on a whole class of offenders from relying on the exemption, even where there might be clear evidence that the defendant was acting for the protection of the child.
I am very sympathetic to what is sought to be achieved, but I think that there is a better way to deal with it.
I have dealt with the principle. For the reasons advanced by the noble Baroness, Lady Noakes, I do not think the detail is quite right, but I do not rely on the detail; I rely on the principle.
7.30 p.m.
Baroness Blatch: My Lords, the noble and learned Lord has not answered my question. In all the cases I have cited, what would have been the position if those involved had stopped short of committing actual sexual offences and relied upon the sexual education exemption in the Bill? There is a lacuna in the Bill which, sooner or later, will be used by people who have malintentions against young people.
Lord Falconer of Thoroton: My Lords, as I understand the hypothesis put by the noble Baroness, the putative offender conducts sex education lessons—he does not commit any other offence but simply teaches sex education—and obtains some kind of sexual gratification from that. If that is all, and there is no element of grooming involved, is that an offence under the Bill? The answer is that it is not.
Clause 13 relates to causing a child to watch a sexual act. If the noble Baroness is referring to potentially causing another person to watch a third person engaging in a sexual activity, plainly she is right. But, as I understood the noble Baroness's point, looked at from the outside it would be ostensibly a straightforward biology lesson.
Baroness Blatch: My Lords, the noble and learned Lord and my noble friend are missing the point. It is possible that the activity undertaken by these persons could be offensive and their defence for what they were doing could be that they were helping a young person to deal with confusion about his or her sexuality or helping a young person who had difficulties in his or her sex life. The defence has a wide interpretation which could be used by persons who are up to no good. Such people would be allowed to adopt the defence, which could be accepted. If the people in the cases I have cited had done what they were charged with but simply stopped short of the full offence, their behaviour would have been offensive but their defence would be allowed under the Bill as presently drafted.
1114
The noble and learned Lord said that there are other ways of dealing with this issue and that he was sympathetic to what I was trying to achieve, but he did not impress me too much with his answer. We are dealing with a sexual offences Bill and this is a sexual offences issue. What I am referring to can be dealt with in the Bill. The remedy is not to give a blanket defence for people who have a malintention rather than a genuine educational intention.
I am bothered that the noble and learned Lord is palming off this issue by saying that another Bill is coming along and that that is the way to deal with it. It should be dealt with in this Bill. If the noble and learned Lord is not able to improve on my wording I shall go away, pick up the points made by my noble friend and the noble and learned Lord and try to find a way of ensuring that young people are protected from people who have malintentions against them using the defence set out in the Bill. I go back to what I have said previously—I make no apologies for it—that this Bill could in practice be a paedophile's charter. That is something that I do not want to sign up to. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Evans of Temple Guiting: My Lords, I beg to move that consideration on Report be now adjourned. In moving the Motion I suggest that the Report stage begin again not before 8.35 p.m.
Moved accordingly, and, on Question, Motion agreed to.

Horses
7.34 p.m.
Viscount Astorrose to ask Her Majesty's Government what progress they are making in bringing forward passports for horses.
The noble Viscount said: My Lords, the Government intend to introduce horse passports at the end of this year. However, I believe that there are two important issues that Ministers must address before doing so. First, is it really necessary to require all horses, ponies and donkeys to have a passport in order to meet European Decision 2000/68/EC? Secondly, if the Government are determined to pursue the introduction of passports for all horses, whether or not they end up in the human food chain, are the current proposals the most sensible option? The answer to both questions would seem to be no.
The European decision aims to prevent horses that have been given drugs which might be harmful to humans from entering the food chain at the end of their lives. Under the Government's proposals, all horses, ponies and donkeys will have to have a passport from the age of six months onwards and owners must carry it with them whenever they travel. When they acquire the passport the owners must state whether or not the horse can enter the human food chain. Restricted drugs will then be entered into the passports of animals that may be used for human consumption.

1115
It would be perfectly possible to prevent horses that have been given restricted drugs from entering the human food chain without introducing a universal horse passport scheme. The Government could simply stipulate that only horses with a passport could be presented at slaughterhouses for human consumption. As most British horses do not enter the human food chain, this would save thousands of owners across the country having to apply for passports and the industry as a whole many millions of pounds.
The Government have estimated in their own Regulatory Impact Assessment that such a scheme would cost around £140,000 to £300,000 per year. This compares with the £17.6 million start-up cost and the £2 million annual running cost of introducing universal horse passports.
In the Government's Final Regulatory Impact Assessment published on 27th March this year, the Government rejected this simple suggestion on the basis that,
"This option has a high risk of legal challenge from the EC for not implementing the measure fully".
They went on to argue that a universal passport scheme was the only option that,
"fully implements the Commission Decision".
Can the Minister point to the section of the European Commission's decision which states that all horses across the EU must have passports by December 2003? Can he tell the House what measures other European countries are taking to implement the decision? Have any other member states decided to opt for passports only in cases where the horse will enter the food chain?
The Government claim in their Final Regulatory Impact Assessment that the draft statutory instrument published earlier this year does not include,
"any gold plating or add any requirements that are additional to those contained in the Commission Decision".
However, this is clearly not true given that the Government could meet the requirements of the decision—that horses which have been given certain medicines should not enter the food chain—without introducing a bureaucratic, universal horse passport scheme.
The Government, to be fair, did consult. It consulted the British Horse Industry Confederation, the BHIC. Unfortunately neither the BHIC nor, indeed, the British Equestrian Federation appear to have consulted their own industry as thoroughly as they might have. Many sections of the British horse industry, which will not benefit financially from administering the scheme, are opposed to the introduction of universal horse passports.
The Association of British Riding Schools, which has 65,000 members, believes that,
"The introduction of horse passports will put British breeders at a disadvantage competing against European breeders in countries with simpler control systems. It is unenforceable. It will increase costs and create welfare problems. The consultation process was seriously flawed. Only a narrow and unrepresentative sample of the horse industry was consulted".
1116
The Pony Club, which has 33,000 members, has stated that,
"We are concerned at the financial burden placed on our members by yet another cost. Many of them operate on a very tight budget. We share the industry's anxiety about the risk of old horses and ponies being dumped rather than pay the passport price".
The Donkey Society—we must remember that donkeys are included in these proposals—is also not in favour.
The Government have claimed that universal horse passports,
"may well result in additional benefits to horse welfare and breeding".
Having read the comments made by many of the horse and pony societies in this country, these assertions are not immediately obvious. The concerns of the industry seem to be the opposite: that the introduction of a passport scheme could be detrimental to the welfare and breeding of horses.
The National Equine Welfare Council has explained:
"In the UK, the percentage ending up in the human food chain is tiny. Many will also, especially with smaller ponies of low end value, just abandon the ponies rather than face the passport cost or a possible fine".
I am particularly worried that vets may be deterred from giving drugs to horses in an emergency if the owner does not have the animal's passport on them at the time. This could lead to unnecessary suffering.
In terms of breeding, I see no advantage in such a scheme. Racehorses need passports but that is just to race, so to protect the punters. This country has bred world-class showjumpers and event horses and maintained rare breeds for centuries without the need for a universal horse passport scheme.
Turning to my second point, if the Government are determined to pursue the introduction of passports for all horses—I would urge them to think again—are the current proposals set out in the draft statutory instrument the most sensible option? I fear not. The statutory instrument seems to apply only to England. Can the Minister confirm that we are not going to have separate regimes with separate rules in Scotland and Wales, which would only further increase costs and also add to confusion?
Perhaps, at this stage, I should declare my interest as an owner of three horses at home in Oxfordshire and a very charming Highland pony called Tommy who lives in Scotland. As far as I can see, I shall have to have different passports for different horses in different regimes.
The draft order also states that all existing passports, because they do not conform to the Government's requirements as they do not contain a Section IX statement about whether or not the horse can go into the food chain, will need to be recalled. In reality, the only people who actually need return a passport for a Section IX form to be inserted are those who may allow their horse to enter the human food chain. The simple safeguard would be that anyone presenting a horse for slaughter for human

1117
consumption without a completed Section IX in the animal's passport could be rejected. If a vet was asked to administer restricted drugs to a horse without a Section IX, he or she could simply stamp it across the front page of the passport.
It is envisaged that all horses, ponies and donkeys will need a passport once they reach six months old. That may cause practical difficulties for breeders of racehorses with a number of foals to register. Existing practice on most studs is to apply for passports in batches after the last foal of the season has arrived. This problem could be dealt with by requiring owners to acquire passports by the end of the year in which the animal was born.
Finally, there is the issue of owners declaring that their animals cannot go into the human food chain. As drafted, this is irrevocable. Once an owner has declared that a horse cannot be used for human consumption, this can never be changed. As most owners do not like the idea of their horse or pony being eaten, they will undoubtedly sign this declaration. This could, in time, result in the complete halt of horses being sent to specialist equine abattoirs.
How will owners deal with the disposal of carcasses at the end of a horse's life? The concern must be that the more irresponsible owners may turn them loose towards the end of their lives or export them to other EU countries without the same passport requirements. The live export of animals over vast distances causes enormous distress, yet it is something that this scheme will probably encourage.
The risks could be reduced and the future of specialist equine slaughterhouses secured if owners did not have to sign the Section IX form until nearer the end of a horse's life. Six months would then have to elapse between the signing of the declaration and its disposal, during which any medications administered would have to be recorded.
The Government's consultation on the draft order ends in June. I believe that there are serious disadvantages to the Government's proposals for the introduction of universal passports. The cost to the horse industry in this country will be enormous—more than £20 million probably. The implications for animal welfare are serious.
It is a bizarre world in which passports are required for beef cattle, but without a record of drugs. Indeed, current laws allow pigs, sheep and chickens to go passport free. Yet the Government are stipulating that all horses must have passports recording their veterinary history. A universal passport scheme is unnecessary.
It would be interesting to hear from the Minister which of these animals are the most widely consumed across the EU—I think we can be fairly sure that it will not be the horse. Perhaps the noble Lord could also tell the House what restrictions will be imposed on horses being imported from outside the EU for slaughter and consumption.
1118
In terms of health issues I would suggest that there are many more serious than this. There is a simple solution to this problem—only horses entering the food chain should require passports. The Government have rejected this. I urge the Minister to think again.
7.44 p.m.
Baroness Mallalieu: My Lords, I have to declare an even larger interest than the noble Viscount, Lord Astor, because I have 13 of the things at home and I know that five of them have not got passports. Almost all of them are old horses; they will all be put down at home; none of them will go for human consumption. But if I want to register my new foals this year with Weatherbys, the non-thoroughbred register, I have to pay a vet who comes and does DNA sampling, micro-chipping and identification certification for which I pay him a minimum of £50. I then have to pay a fee for the passport of £50.25. If I do not get the application in before 30th September, that will rise to £138.50 per horse. This is an expensive business.
I would support strongly the principle of a universal registration system for equines in this country and I would support it fully if I could be confident that it was likely to have real benefits for horse welfare and to encourage responsible horse ownership. But I have real concerns and I wonder—given that I have to take this at a gallop because of the three minutes—whether the Minister would try to allay some of my worries.
First, I wonder why, instead of allowing a free-for-all, in effect, in the provision of passports, DEFRA has not set up one comprehensive register which could he consulted with ease, which it could administer, or someone on its behalf, for a reasonable fee. Instead, the delegation of the issue of passports to a whole range of quite separate bodies, all of which seem to have different requirements, seems a recipe for a failure to get to grips with the registration system.
Like the noble Viscount, Lord Astor, I am particularly concerned about vets and their position. Can we be reassured that there will be no question of a vet not being able to prescribe required medicines to horses which have no passport. Unless that is the case, there is a real danger that owners will not call out a vet because they are afraid that they are going to be asked for a passport they do not have. In some cases, vets may be reluctant to prescribe medicine which they consider to be necessary for fear of their own position.
I should like to know also what steps DEFRA is proposing to take to inform horse owners both about their obligations and about their options because I am not at all clear as to where I can go to obtain, as it were, the appropriate passport for my old retainers at home and where I can do it relatively cheaply. Perhaps I may also echo what the noble Viscount, Lord Astor, said about animals being abandoned. It is already going on in the New Forest, in the Quantocks and on Exmoor. In some parts of Northern Ireland it is a serious problem. It is not just horses abandoned because owners have lost interest or will not pay necessary veterinary expenses, but we see in fields large numbers of horses which are sorely neglected because owners

1119
have lost interest. One sees them in fields of ragwort while driving along any motorway in this country. I cannot see the owners of those horses rushing out before the end of the year to obtain documentation for their horses.
Finally, what plans do the department have for enforcement of these provisions? What will it cost? What provisions, if any, are being made for what I very much fear will be a much larger number of abandoned animals?
7.48 p.m.
Lord Soulsby of Swaffham Prior: My Lords, my noble friend Lord Astor has raised the contentious issue of horse passports. The concept of horse passports was mooted in 2000 when DEFRA undertook consultation on the issue and received widespread support. As a spin-off to this legislation that all equids are to have a passport, DEFRA intends to collect data on every horse—its breed, its age, its unique equine life number and location—to create a national equine database. One would not necessarily argue with that.
On the other hand, the argument is that this will improve breeding, sport and welfare of horses. However, the registration of breeding and sport horses is already catered for by the various breed and competition society passports. These could be easily amended to incorporate medicines under Option II of the consultation document. On a positive note, one area in which passports will be of importance is in the monitoring of infectious diseases, such as African horse sickness and West Nile fever, that threaten our shores.
It is important to remember that this legislation is not primarily for the purposes of breeding, sport or welfare but for food safety of the eaters of horse meat in the European Union. As has been stated, animals must he declared—for life—that they are not destined for human food. We must respect the concerns of the consumer but whether such draconian regulations are the way forward is doubtful.
Several concerns arise. First, there will be 58 authorities able to issue passports. These will be based on a silhouette which is noteworthy for its unreliability. By far the most effective and secure method is the microchip and this can readily lead to the establishment of a central register.
Mention has been made of the veterinary surgeon who may be in a quandary. He knows that he cannot use Annex IV drugs for food animals but what about horses where passports are missing, animals that have been involved in accidents, strays or where the passport does not conform to the animal?
Foals must have a passport when they reach six months of age. But what about a foal-at-foot when a mare leaves a stud to go for service? Will the young foal a few weeks old need a passport, and how accurate can a silhouette be for later life?
Of the options offered, Option II is to my mind the most realistic. It has the benefit of being simple, practical and workable. I commend it to the Minister.
7.51 p.m.
Viscount Ullswater: My Lords, I am grateful to my noble friend Lord Astor for putting down the Unstarred Question for debate this evening. I think that I should declare an interest in this matter at the outset in that I am a member of the Jockey Club.
The European Commission decision requires all equines to have a passport as a means of safeguarding the food chain. Although it is difficult to assess the number of horses and ponies going for slaughter for food, it would appear that some 10,000 animals are disposed of in this way each year.
The thoroughbred horse industry is very used to passports. Weatherbys have been issuing passports for 40 years, and it is their key document of identification. As the noble Baroness, Lady Mallalieu, said, with a DNA parentage check on foals, microchips for all foals from 1999 onwards and the identification silhouette check undertaken by a qualified vet, the thoroughbred industry has understood the need for passports for many years. So the horse passport is not new.
Passports are to be issued by organisations approved under the EU legislation. At present there are about 59 such organisations. Is the Minister confident that all these organisations are going to apply the same criteria to the issue of passports? It is one thing issuing a unique lifetime number to an animal, but if one is not able to identify the animal properly, the passport is rendered worthless.
Like my noble friend Lord Soulsby, I ask the Minister to think again about microchips, as they represent the most practical and cost-effective means of uniquely identifying horses. Stolen, lost or straying animals will not be accompanied by their passports and are therefore difficult to trace back to the owner. Neglected or abandoned horses can also be more easily traced back to the last keeper.
The design of the passport is also important. Passports that have already been issued should not need to be recalled to be updated to comply with the new requirements. It must be possible to have Section 9, for instance, issued by way of an adhesive page to be attached to an existing passport so that the passport can remain with the animal. Think of the disruption to racing if all passports have to be recalled in December this year for the addition of new pages.
As we have heard, there are serious concerns about welfare too. Will the cost of issuing a passport drive the owners of some low value ponies and donkeys simply to abandon their animals and turn them loose? In August 2002 Dartford Council reported that it had picked up 100 abandoned horses in the space of a year in the area near the Dartford Tunnel. We get back to microchips again.
Will the need to sign a declaration in Section 9 at an early stage of an animal's life remove the best way of disposing of the animal when its useful life is done? A knackerman will charge for taking an animal away for rendering. There is a substantial cost for incineration.

1121
The Government seem determined to bring hunting to an end and with it will go the collection of fallen and elderly stock by the hunt kennels.
Will the Government consider an amendment to Article 10 so that a stamp of "not fit for human consumption" could be added if Annex IV drugs are applied?
In our search for the protection of human beings from unwanted substances entering the food chain, we must not abandon all our thoughts of humanity to the patient animals that serve us and give us endless days of pleasure.
7.55 p.m.
Lord Burnham: My Lords, I consulted my daughter who is very expert on this particular subject. My question was greeted with an hysterical scream. The hysterical scream represents the degree of knowledge about the details of the regulations.
A number of points need to be made, of which I shall mention just one—the question of VAT. I believe that the Government have left undecided the question of VAT. Is VAT payable on passports? The implications of that are enormous. Defra has shrugged its shoulders and told the horse societies that they must talk individually to Customs and Excise. Customs and Excise is to make the decision.
At present VAT has not been included by the societies and passports are being issued VAT-free. If there is a change and it is decided that it has to be included, bureaucratic chaos is inevitable. The various societies are one thing. They are mostly relatively well organised and have prescribed communication systems. But outside that there are 400,000 to 500,000 owners who will be affected and largely do not at present realise or recognise that they must do something about the matter. "Passport" is a bad word. The majority of small owners are saying—if they know anything at all—that their horses never go abroad and do not require a passport. These questions are asked in the revised Defra consultation document. Replies are required by 30th June, with parliamentary approval to be given in November and the regulations to come into force by 1st January.
Other noble Lords, if they are considering the subject, will have realised the various problems which arise which must be answered—a number of them have already been mentioned—and which will undoubtedly delay the implementation of the regulations. Towering above all is the question of whether owners intend their horses on death to enter the food chain. They must make a decision to the vet which is recorded and which is irrevocable. If the answer is no, there is no problem, but if the answer is not no, almost everything on a long list of drugs and embrocations, internal and external, including flea powders and wormers, will be banned. As I say, the decision is irrevocable; an owner cannot change his mind. The decision remains if the horse changes hands. A new owner is bound by the same conditions.
7.58 p.m.
Baroness Masham of Ilton: My Lords, I thank the noble Viscount, Lord Astor, for this very timely debate. Short though it is, it involves many people, thousands of equines and millions of pounds. I declare an interest as a breeder of registered highland ponies and the owner of a small rural riding centre which was badly hit, being in an area surrounded by foot and mouth disease. The centre provides an outlet for people on holiday and for those who want to enjoy the countryside by seeing it on horseback.
I am a life member of the Highland Pony Society, a member of the National Pony Society, Ponies (UK), the British Horse Society and the Shire Horse Society. I am not speaking on behalf of those societies this evening but from a personal point of view.
The main options seem to be either passports for all horses or passports for only those slaughtered for human consumption. Ponies running free on Dartmoor, Exmoor and in the New Forest will not be required to have passports until they leave those areas. Why could that not be the same for all equines? Many people have old ponies around 28 or 30 years old who have served their owners and are in retirement. What advice do the Government give about those old family friends? I do not think that enough thought has been given to the matter.
Horse societies may be in favour of passports, as it is a way of increasing their finances. Keeping ponies is expensive, especially vets' bills, which are often excessive. The passports will increase that. Small rural riding centres that have to pay business rates find it hard to make ends meet, and passports will increase the stress. The passports will guarantee more paperwork and bureaucracy. The countryside is being strangled with red tape.
I am in favour of passports for equines going abroad, but not for those who stay at home. It would be fairer if equines in Britain were reclassified as an agricultural animal, as in other parts of Europe. Appleby Horse Fair takes place around now. How will all the gypsy horses have passports and be policed when rural villages have lost their policemen?
A £5,000 fine or six months in prison for having a horse, pony, donkey or zebra without a passport seems totally disproportionate compared to someone without a driving licence who kills an innocent person and gets only a suspended sentence. How will the unfair situation be explained to children when their parents forget to get a passport for their pony?
8.2 p.m.
Lord Willoughby de Broke: My Lords, I am grateful to my noble friend Lord Astor for expressing so clearly the concerns and reservations about the legislation. I have some sympathy with DEFRA, and with the Minister, to the extent that his department is now relegated to the status of a branch office of the Directorate-General of Agriculture in Brussels. It seems that he has no option but to implement the directive with which we are dealing.

1123
To what extent did the Government resist this typically heavy-handed and costly EU directive? What was the position taken by DEFRA officials and our permanent representatives in Brussels when the measure was in its early stages? Did they fight it in the committee rooms? Did they fight it in the bars and on the beaches? Did they fight it in the fleshpots of Brussels, or was our "strong voice in Europe" reduced to the usual impotent squeak of protest before the ritual cave-in? Did our representatives support the directive and, if so, why? After all, they are charged with looking after our interests and not those of our horse-eating partners in the European Union.
When the measure was considered by the EU standing committee on zootechnics in 1999, it was passed by 64 votes to 23. Which way did our representatives vote then? It is important to know. The Minister will not be able to give me an answer this evening, but I would be grateful if he wrote to me with that detail.
If the aim of the regulation is to protect our Belgian and French friends from getting tummy ache after enjoying their pony burgers, surely a simple solution would be, on the lines of that suggested by my noble friend Lord Astor, a regulation stating that no equine shall be exported or allowed to enter the food chain unless accompanied by a passport containing a duly completed section on medical treatment. If the aim is to identify horses, I add my name to those of my noble friends who have suggested that microchip technology would be far more effective and much more cost effective. If microchip identification is unacceptable at the moment or too advanced for the EU bureaucracy, why not use our strong voice in Europe, our seat at the table, to change its mind?
I hope that the Minister will tell us that he has listened to what everyone has said, and will do what he can—as branch manager—to reduce the cost, red tape and bureaucracy of this extra burden on the rural community.
8.5 p.m.
The Earl of Onslow: My Lords, I must declare an interest, in that I seem to be keeping half the vets in Surrey in Mercedes with my veterinary bills, and the farriers grow rich and wax prosperous on my shoeing bill. I drive four palomino ponies, named Belisarius, Mundus, Justinian and Theodora. As noble Lords know, those are the great characters of early 6th-century Constantinople.
Have we gone stark, staring, raving mad? Why do we eat horses in Europe? It can all be blamed on Napoleon. When he invaded Russia and the French army's ration system broke down, it then slaughtered its horses and ate them. Consequently they could not ride home, and consequently the whole thing went pear shaped and they managed to acquire a taste for horseflesh.
1124
I was looking vaguely through an anthology of poetry, and the following thoughts came to my mind:
"Their's not to make reply,
Their's not to reason why,
Their's but to do or die:
Into the valley of Death
Rode the six hundred".
"Sorry, sergeant-major, I don't have a horse passport. Need I go?" Or:
"A horse! a horse! my kingdom for a horse".
"Sorry, sir, it hasn't got a passport." Or:
"I sprang to the stirrup, and Joris, and he;
I galloped, Dirck galloped, we galloped all three;
'Good speed!' cried the watch, as the gate-bolts undrew;
'Speed!' echoed the wall to us galloping through".
Then the watchman has to say, "Very sorry, could you and Dirck and Joris please stop, because we haven't checked your passports".
Has DEFRA gone stark, staring, raving mad in saying that we have to have the regulations? We have existed for a thousand years without horse passports. Just because the French muck up the invasion of Russia and take a liking to eating horseflesh, we suddenly have to have horse passports, let alone the fact that we cannot bury livestock, and that every sheep has to have an ear tag. DEFRA is the department for making absolutely certain that it is weighed down with regulation, red tape and incompetence. I thought that the old Ministry of Agriculture was bad, but DEFRA! I think that I may have said enough.
I remind your Lordships that a "passport" means, "Please make it easier to pass towards the Porte, or the centre of government of the Ottoman empire". It was originally something to make things easier. But this is DEFRA using a passport to make the ownership of Shetland ponies more difficult.
8.8 p.m.
Lord Mancroft: My Lords, there seem to be two separate, although related, strands to the question brought to our attention by the noble Viscount, Lord Astor. They are not quite the same strands to which my noble friend Lord Onslow referred.
The first is whether the Government's plan to introduce passports for all of Britain's 900,000 horses is a proportional solution to the problem of drug-free horsemeat entering the food chain. My research shows that all those horses that need passports for international travel, whether to compete or for breeding purposes, already have them. The current system works more than adequately as I have not come across evidence of major problems.
The vast majority of horses do not need passports for the simple reason that they do not travel abroad. Very few horses from this country are intended or likely to enter the food chain, so the most obvious solution to the problem is to ensure that any horses that are sent abroad for meat must have a passport. No passport, no travel, no meat problem. I should imagine that that is a relatively straightforward solution to a relatively simple problem. I cannot think for the life of

1125
me why the 90 per cent of horses in the UK that do not travel abroad, and which consequently will not enter the food chain, should be obliged to subject their owners to pointless bureaucratic processes at some expense but for no discernible benefit.
The second question concerns whether the European Commission's decision means that the Government are obliged to introduce passports for all horses in order to comply. I understand that the Government are obliged to ensure that horses containing certain drugs do not enter the food chain, and to prevent that from happening, no horse should travel without a passport listing the drugs that have been administered to it over a period before travel.
The wording of the decision does not compel the introduction of a universal passport scheme, although that may be the best solution for those countries that have a vibrant horsemeat market, which the United Kingdom does not. The manner in which that decision is implemented will be different in each country. I am sure that the Minister will tell the House how carefully the Government have consulted. I am sure that that is right, but while those horse organisations that will benefit financially from universal passports are in favour, the organisations that will not benefit are clearly not in favour.
My research, which was as extensive as it could be in the time available, leads me to conclude that those who need passports are happy with the current system, and that those who know virtually nothing of the Government's proposals and do not want to know. I am in their camp.
I also understand that the Government believe that a universal passport scheme could lead to a national horse database, which in turn will raise the standard of horse breeding and improve welfare. That is an interesting idea, but it is not relevant and it is probably wrong. The UK already has one of the best breeding industries at many levels in the world. Of course there is room for improvement, but I cannot see how a database will make a difference. Your Lordships might like to remember how often the House has been told of the benefits to be accrued from the Home Office's database of firearms' ownership, which four or five years later, has still to be set up.
If your Lordships cast your minds back to dog licences, one of the reasons why they were abolished was that responsible owners licensed their dogs and irresponsible owners did not. The same applies to car tax discs. I see no real benefits in compelling all owners to have passports for their horses. Even if there were benefits, they are peripheral to tonight's debate.
I shall finish where I started. Does every horse in Britain really need a passport to ensure that no horse containing proscribed drugs enters the European horsemeat market? Are the Government really obliged to set up a universal passport system at an estimated cost of £20 million to meet their obligations to the Commission in respect of decision 2000/68? The short answers I suspect are no and no.
8.12 p.m.
Viscount Falkland: My Lords, I hope that the House will accept that in speaking from these Benches I am in no way anti-European when I ask how likely it is that we would be discussing passports for horses, ponies and donkeys if we were not members of the European Union. I suggest that the issue has little relevance to our horse culture.
I cast my mind back to discussions that we had on dangerous dogs some years ago. The noble Lord, Lord Soulsby of Swawffham Prior, will remember those discussions as an issue about which some of us felt quite strongly. The Government's arguments had some justification, which reflects the remarks made by the noble Baroness, Lady Mallalieu. One of the strongest arguments was that the owners whose dogs needed to be registered were the least likely to register their dogs. The same goes for horses or ponies that should be registered because their owners are likely to mistreat them, lose or get rid of them on purpose. Such owners are the least likely to put information on a passport or some identity form.
This proposal was originally introduced by the European Commission as a means to simplify trade—that was probably unnecessary as well. Some time later, we came across the question of the food chain, which really does not apply to us. As other noble Lords have said, it applies to Belgium and France in particular.
The Government would have done better had they turned their attention to the shocking and indescribable conditions of horses exported from here for slaughter to those countries that eat horses, stamped on that and got it properly under control before acceding to this measure. Policing is an especially difficult problem, as was mentioned. One visualises all kinds of shifty little men with briefcases and notebooks going around riding stables, presumably to check the papers, but probably for other reasons as well.
The Government have not thought this through. They say, "If Europe does it, we have to do it". I personally wish that Europe had said that all dogs should be registered, because the reasons for registering dogs are much more cogent and persuasive than those made for horses and ponies. I wish that the Government would take a little more time. If we were dealing with the matter outside the context of the European Union, there would be more consultation and consideration of the detail and of proper information before it arrived at your Lordships' House.
8.15 p.m.
Baroness Byford: My Lords, I thank my noble friend Lord Astor for giving us the opportunity to refer to the order tonight. He fully explained his reservations about the introduction of the order, which I cannot repeat in the limited time at my disposal.
I have three specific questions. First, is the order necessary in a country where horsemeat is not eaten? Secondly, should the scheme enhance breeding

1127
programmes, as has been proposed? Is that really its purpose? If so, let us have that made clear. Thirdly, will the requirements be applied to countries outside the United Kingdom? What happens to animals that are imported into countries for human consumption?
In a country where horsemeat is not eaten in the same way as it is on the Continent, why should owners in England—I stress England—be burdened with rules designed to cover but so very few? Why indeed? As other noble Lords have said, horses or ponies sold for export for human consumption could be required to have a passport before they are exported. That point has been clearly made by all noble Lords who have spoken.
Has that suggestion been made to the Government? Have they raised it with the European Commission? If so, what was the outcome of those discussions? Did the Government vote in favour of the horse passport scheme, or was theirs the only voice expressing concern? Or is this yet one more statutory instrument that must be implemented whether it has the support of England or not? As I said, will countries outside the EU be required to meet such restrictions, or is this yet again bureaucracy and cost placed on European citizens?
We have heard noble Lords on all sides of the House express concern—in fact, no one has spoken in favour of the scheme. That should concentrate the Government's mind on questioning the consultation that they have undertaken. The order is costly. It is estimated to cost £20 million—obviously, with ongoing costs after that. There is concern about animal welfare and the likelihood that animals will be dumped.
I also have practical concerns, because the order refers only to England. What happens to cross-border movement of animals kept in Scotland or Wales when they are shooed from one side where they do not need a passport to the other where they do?
The whole question of the universal passport scheme has been raised again in the debate; it has been considered unnecessary, costly, unenforceable and runs the risk of increasing animal welfare concerns, about which all noble Lords are anxious. The order is not required by other countries outside England.
In a country where the majority of horses are kept—we have heard the figure of 900,000, of which only 10,000 reach the overseas market—is this really the way to deal with a statutory instrument? Interestingly enough, if it had not been for my noble friend, we should not have had this opportunity to debate the instrument at all.
There are many questions that the Government need to answer; I hope that the Minister will. He should be able to do so. My noble friend Lord Willoughby de Broke said that he is happy to be written to. Finally, in the age of microchips, cannot we use them to help with this issue?
8.19 p.m.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whitty): My Lords, I appreciate the initiation of
1128
this debate introduced by the noble Viscount, Lord Astor, and the contributions of noble Lords.
A number of misconceptions have been running round the House in the course of this debate. The noble Baroness correctly said that no noble Lord who has spoken appears to be wholly in favour of the proposition. It is perhaps incumbent on me to explain some of the background. The Commission proposed it at the initial stage. There was concern about the availability of certain medicines that are frequently used to treat horses but which have not been authorised for food-producing animals. Under EU law, horses count as animals that could get into the food chain. The Commission decided that in order to protect the human food chain, all horses needed to be accompanied by an identity document. The directive is based on that proposition. It is also true that by requiring all equines to have passports, the UK can continue to use those medicines that are frequently used for horses that are in no sense destined for the human food chain and at the same time help those consumers in other EU countries who do eat meat.
The Earl of Onslow: My Lords, I genuinely seek information. In the eating of horse flesh in the past 20 years, how many instances have there been of damage being caused to human health because something was wrong with the drugs that were administered to horses? Are we chasing a chimera?
Lord Whitty: No, my Lords, because the judgment is made not on the basis of the number of cases that may or may not have been recorded but on an assessment of the effect of the medicines, as is done with human medicine. If such medicines have been deemed to be dangerous to humans, it is incumbent on the authorities—including, in this case, the Commission—to make proposals to minimise the danger.
Noble Lords are right that were the EU not to have made this proposal and if it was not concerned about the eating of horses, we should probably not be debating this matter tonight. However, it is also true that at every stage in the consideration of this matter, the majority of those organisations dealing with horses in this country have been in favour of the proposal for passports and of the proposal that they should cover all equines in this country. That applied when we were first considering the directive and in relation to the consultation in 2000 and, so far as we can tell—in terms of responses so far received—it applies in relation to the current consultation, which will end at the end of this month.
In the 2000 consultation, for example, the following organisations indicated their support for passports for all horses: the British Horse Industry Confederation, the British Horse Society, the British Equestrian Federation, the Thoroughbred Breeders Association, the British Equine Veterinary Association, the British Hanoverian Horse Society, and so on. There were organisations that opposed the approach. However,

1129
those organisations, which have some experience in this area, strongly supported the approach and represented the vast majority of those who replied.
Baroness Byford: My Lords, I accept the organisations that the Minister stated. There are many ordinary horses and ponies out there and most people have ordinary horses and ponies. I wonder what response the Minister had from what I call the more scrubby end of the trade rather than the élite end, if I can put it that way.
Lord Whitty: My Lords, I am not sure which I should designate as being the scrubbier end of the trade. There are responses from other bodies and individuals to the latest consultation. We must assess that at the end of June. As some noble Lords said, there were some contrary views during the 2000 consultation. My point is that the vast majority were in favour.
There have also been allegations that we were goldplating and taking action before other countries. Germany, Sweden and Luxembourg have already fully implemented the legislation. The Netherlands, Spain and Denmark are planning to do so before the end of 2004, as, indeed, is Belgium: the issue of the ride from Ghent to Aix will be covered in its provisions. The noble Earl referred to Napoleon. I do not have the full details about France, but we understand that the French have also implemented the proposals. In Ireland, the facility to issue horse passports for all equines is already in place. It is not true that other countries are not implementing.
Nor are we gold plating. By transposing the legislation, we are not introducing anything over and above the EU proposals. Failure to implement the proposals could lead to legal challenge.
Viscount Astor: My Lords, can the Minister explain why in the Government's own regulatory impact assessment, option 2 was just passports for horses for human consumption? It is the Government's own option and not one that has been invented on this side of the House.
Lord Whitty: My Lords, it is one of the options put forward in order to meet the criteria of the directive, but it was not one that was favoured by the industry. Therefore we have a double responsibility: first, not to gold plate legislation and secondly, to take into account the views of the industry in our drafting of the legislation. A number of questions were raised on our proposals, many of which are covered in the consultation. I am sure that remarks in this House, including the points raised by the noble Viscount, Lord Ullswater, on the administration of the passport system, can be taken into account in developing our response to that consultation. Not all issues are closed.
I was asked a number of questions by my noble friend Lady Mallalieu, including why we did not have a national scheme rather than relying on individual organisations to produce the passports. The answer is
1130
that passports are already being issued by a significant number of societies under the Horse Passports Order 1997. It is not necessary to re-invent the wheel and therefore we have devolved a responsibility to those organisations and by and large that has been accepted within the industry.
My noble friend Lady Mallalieu also asked how widespread our publicity on this is going to be. Once we have completed the consultation and decided in the light of that consultation how the scheme will work, we will need to engage in a widespread publicity campaign once the legislation is finalised. The societies involved in this scheme will also be engaged in that publicity. There is currently information on the Defra website and in a number of society communications. The full publicity will be needed before the point of implementation.
The noble Lord, Lord Soulsby and my noble friend Lady Mallalieu asked what happens under the scheme if a vet comes across a horse that does not have a passport. The easiest way to deal with such a case would be for the vet not to administer the medicines. However, we are discussing with the veterinary organisations the best and most practical way of dealing with this situation. Annex 4 of the council regulations says that the medicines must never be given to food-producing animals and therefore should not be used unless it is clear the animal will not enter the food chain.
It is necessary to have some understanding with the veterinary organisations as to how they would deal with a horse that did not have that disclaimer. It is not impossible to see that there will be options available to vets in those circumstances rather than simply refusing to use the medicines.
The noble Lord, Lord Burnham, asked about VAT. It is for Customs and Excise to say whether VAT would need to apply to these passports, but there is a complexity in that many of the organisations helping administer the scheme are charities. Therefore, we have yet to finalise the position in relation to VAT.
I think some of the costs referred to by my noble friend Lady Mallalieu and others relate to costs for particular societies. In consultation with the industry, we estimate that the average cost for the additional burden on the horse owner from this scheme would be £20 to £30 for each passport, which would be valid for the lifetime of the horse. There may be a particular problem with elderly horses but compared with the cost of keeping the horse for a lifetime, it is hardly a huge expenditure. Indeed, some societies—for instance, the British Horse Society and the British Driving Society—are offering a lower cost. This is therefore not a huge expense on the horse-owning public.
The burden of negative comments on the scheme needs to be set against some of the positive benefits that the industry and others see it. They include the fact that passports will enable medicines that are not authorised for food-producing animals to continue to be administered to all horses not intended for human consumption. As noble Lords have rightly said, that is

1131
the vast majority of British horses. Horse owners will have more information on the horses that they purchase, or are considering purchasing, because a requirement of the new legislation is that the passport must accompany a horse being sold. One can therefore check on ownership details such as age and so forth. There may he breeding benefits, because passports may discourage the indiscriminate purchasing of low-value and poorly kept animals, thereby having a positive effect on horse welfare.
The noble Lord, Lord Soulsby, and others referred to the proposed national equine database, which would be possible only if all horses required an identity document. If we go along that road, which is not part of the legislation, the Government will know far more than previously about the number of horses kept in the UK and the important and growing role that the horse industry plays in our rural economy. The British Equestrian Federation proposals for a central horse database would achieve its objectives through the information based on that supplied by the passport-issuing organisations. There is therefore a positive benefit from a public/private partnership in this area.
Noble Lords referred to feral horses, for example. Specific arrangements are being made in relation to Dartmoor, Exmoor and the New Forest and we are looking at other areas where that might also apply.
This has been an interesting if somewhat negative debate in terms of the contributions. I see my time is up, but if I need to answer other points I will do so in writing. In the meantime, I thank the noble Viscount for initiating the debate and all noble Lords for participating in it.
Baroness Farrington of Ribbleton: My Lords, I beg to move that the House do now adjourn during pleasure until 8.35 p.m.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 8.32 to 8.35 p.m.]

Sexual Offences Bill [H.L.]
Consideration of amendments on Report resumed.
Clause 15 [Arranging or facilitating commission of a child sex offence]:
Baroness Walmsleymoved Amendment No. 59:
Page 6, line 43, leave out "for the purpose" and insert "to promote the child's welfare, with particular regard for the need—"
The noble Baroness said: My Lords, in moving Amendment No. 59, I shall speak also to Amendment No. 61 in the group. We were grateful to the Minister at an earlier stage of the Bill for tabling the amendment which included subsection (3), making it clear that those who act to protect children from sexually transmitted infections, to protect their physical safety and to protect them from unwanted pregnancy would not be committing an offence under the clause. However, there are still concerns, which is why I have submitted the amendments.
1132
Earlier this evening the noble Baroness, Lady Blatch, suggested that it was almost unbelievable that somebody giving bona fide sex advice to a young person could possibly be caught under the clause. However, it is a fact that many of those who give that advice are the very people who are concerned about the unamended clause. They are people who work for reputable organisations such as the Brooke Advisory Centre, the Family Planning Association, Childline and many people who are commonly called agony aunts who write in some of the teenage magazines.
I feel that some of those teenage magazines sometimes go too far, but it has to be said that they are part of the culture of young people who do look to them for advice. On the whole the people who give that advice are reputable and well-intentioned. If they are concerned that the Bill as drafted is ambiguous and could make them feel that they were in danger of falling foul of the law if they carried on doing their good things, then I believe that that deserves our full attention.
The main thing missing from the Bill is reference to the emotional well-being of young people, because, particularly for them, emotions and sexual activity are tied up together. It is very difficult to separate them. I know that if the noble Baroness, Lady Howarth, was able to be with us this evening—and she is very sorry that she cannot be—she would be able to give us the perspective of the advisers on Childline who are concerned that often they are called upon to talk to young people about issues to do with sexual activity. Those young people are not just concerned about their own sexual activity. Sometimes they are distressed and worried about having perhaps witnessed their parents having sexual activity and they do not understand what is going on. They need reassurance and advice.
It is for that reason that I have tabled Amendments Nos. 59 and 61. Other amendments in this group would achieve similar aims. One way or another it is important that on the face of the Bill there is reference to the emotional well being of people as well as tangible things such as their sexual health and avoidance of unwanted pregnancies.
I hope that the Minister will carefully consider the amendment and look favourably upon it. There is much concern among professionals and well-intentioned and trained non-professionals, who do much good work. I have always felt that those who say that young people can get too much sex education are mistaken. It does not cause them to indulge in more sex than they otherwise would. It just means that they are well-informed about the consequences of sexual activity. We should do all we can to ensure that those who give good sex advice to young people are not in danger of falling foul of the law. I beg to move.
Baroness Noakes: My Lords, I shall speak to Amendments Nos. 60, 62, 169 and 170 tabled in my name. In our debate in Committee, the noble Baroness, Lady Walmsley explained the loose ends which existed. We were delighted that the Minister tabled the amendments which resulted in subsections (2) and (3) of Clauses 15 and 75. I have tabled slightly

1133
different amendments from the two tabled by the noble Baroness, but I do not think there is anything of substance between us. Amendment No. 62 represents wording suggested by the Periodical Publishers Association, which has a particular concern in relation to the work of agony aunts in magazines aimed at under-16s. We are trying to ensure that the exception provided by these two subsections covers not just the physical side of sex but also the emotional and psychological side.
I know that the Minister is keen to try to understand the kind of examples which could arise that would lead to the need for that. Perhaps I may put to him the case of a 15 year-old child confused about either a sexual relationship or his or her sexuality. He is in a relationship with another child under 16, which involves sexual activity. The child knows about condoms and all the kind of things about which one would advise a child in order to avoid sexually transmitted disease, pregnancy and so forth, but is confused as to how he feels about sexual activity and wants to discuss feelings of guilt, stress and perhaps even an obsession he has developed. He seeks advice from a trusted adult, Childline or one of the magazines which specialise in advice. He wants to know whether he should have sex, what will be the consequences for how he feels and what normal reactions are possible for him.
The person he consults can say, "No sex, you are under 16" and then no question of aiding and abetting or any of the other matters would arise. But that is not the real world so it is quite possible that the person giving advice would reassure the child that perhaps his strong desire for sex is not unusual. The adviser is not likely positively to counsel having sexual relations but it is likely that the advice will be given on the basis that it is not wrong for the child. Thus reassured, the child could go on to have sexual intercourse with the other child.
I do not believe that people in that situation should be caught by the Bill. We have already discussed the issue of whether it should be unlawful for teenagers to have consensual sex. Those of us who are concerned that the law should reflect the reality of consensual teenage sex have a similar concern in relation to advice given to teenagers involved in consensual sexual activity. If we do not deal with the doubts that exist—for example, in relation to publishers—advice columns could be closed down. The noble Baroness, Lady Walmsley, said that some advice goes further than she thinks advisable but such columns appear to meet a need. If they are closed down because of risk-averse lawyers, less information might be available to teenagers—which could lead to more problems down the line for society. I hope that the Minister will reconsider.
8.45 p.m.
Baroness Gould of Potternewton: My Lords, it may be that the wording of the amendments is not entirely correct but I hope that my noble and learned friend
1134
will feel able to support the principle behind the amendments, then perhaps we can return with something better.
It is almost impossible for anyone counselling children on engaging or not engaging in under-age sex to ignore the emotional problems that the child is likely to raise. I understand that Childline has received 800 calls this year from children seeking relationship advice and its counsellors must be reassured that the clause will protect them. If my noble and learned friend can say that is the case, the organisations to which the noble Baronesses, Lady Walmsley and Lady Noakes, referred can be clear that they are protected by the clause as it stands. It will be difficult for organisations to continue giving advice if they feel that there is any ambiguity in the Bill.
Baroness Blatch: My Lords, it will come as no surprise to anyone that I oppose the amendment. I have already expressed my grave reservations about the education defence. The potential for abusing that defence can only be made worse by the amendment, which extends its scope even further.
We are talking about some of the most manipulative people and worst confidence tricksters in the world. Here we are giving them a defence on a plate. Allowing a person to claim, as Amendment No. 61 does, that he was facilitating a child sex offence to protect a child's emotional well-being could open up all kinds of arguments. What, for example, is "emotional wellbeing"? It is certainly something much broader than the physical protection of a child. It is a very vague notion and will allow individuals to introduce young people to all sorts of material and to give them all kinds of appalling advice—safe in the knowledge that they can rely on the proposed defence.
If Amendments Nos. 62 and 170 are accepted, a person could with impunity supply a child with sexual literature that does not even pretend to be about so-called safer sex, help or pregnancy but deals merely with the emotional and physical aspects of sexual relations. Would the provision include pornography or advice about sexual technique? It seems wide to me and probably could.
The amendments go far beyond the legitimate concerns of a health professional or teacher and even further into the realm of activities that a person might undertake to groom a child for abuse. I hope that my noble friend and the noble Baroness, Lady Walmsley, will reflect not on the needs of health professionals or teachers—who have nothing to fear from the Bill—but on those manipulative individuals who will welcome a tailor-made defence to their abusive behaviour.
Lord Falconer of Thoroton: My Lords, I appreciate the very genuine concerns which have motivated the noble Baroness. I am sympathetic to them. It is obvious that help is of incredible importance with regard to many problems of an emotional kind. The noble Baroness, Lady Blatch, identifies the problem in relation to the amendment. Without it being pointed out, everyone can understand that those people who wish to encourage children to engage in sex for their

1135
own ends can say various things which will help them in relation to it. Therefore, the balance to be struck in this area is incredibly difficult.
Any statutory exceptions to protections offered to children by the criminal offences must be framed in such a way that they cannot be persistently manipulated by an abuser to avoid prosecution for abuse. That is why the exceptions have been worded in the way that they have, focusing on the specific protections being offered to the child—against sexually transmittable diseases, pregnancy or physical harm—that will exclude the provider's behaviour from the scope of the offence.
I am moved by the level of concern expressed by the noble Baronesses, Lady Walmsley, Lady Noakes and Lady Gould of Potternewton. There is no doubt that they are trying to deal with an actual problem. I have therefore spent a lot of time considering whether there is a way in which we could address those concerns without opening a loophole that an abuser could seek to exploit or causing grave concerns that we are weakening the protection that we offer to children. It is a difficult issue. I have looked at the amendments, keen to see what could be done to meet those concerns.
Amendment No. 59, moved by the noble Baroness, Lady Walmsley, would amend Clause 15(3) so that rather than acting "for the purpose" of protecting the child, the defendant is required to have acted "to promote the child's welfare, with particular regard for the need" of protecting the child.
I do not feel that the term "to promote the child's welfare" adds anything here, as there can be no doubt that the actions in subsection (3)(a) to (c)—protecting the child from pregnancy or infection, or protecting his physical safety—would promote the child's welfare. My concern about the term "with particular regard for" is that this is a lower test than "for the purpose of", which would only fuel the argument that the exceptions clause is weakening child protection. I think that the current wording is better and provides better protection for children and I wish to retain it.
Amendment No. 60, in the name of the noble Baroness, Lady Noakes, would extend the provision at Clause 15(3)(b) to cover both the physical and the emotional safety of the child. Her Amendment No. 169 would do the same in Clause 75(1)(b).
I am very concerned that the term "emotional safety" is too vague. It would create a potential loophole that abusers could exploit, claiming that they were, for example, seeking to protect a child from emotional bullying by his peers when in fact they might be trying to acclimatise a child to sexual matters in order to prepare the way for unlawful sexual activity. It would be a very difficult clause to police. There are differing views in the sector as to the right way to go.
Amendment No. 61, in the name of the noble Baroness, Lady Walmsley, would extend Clause 15(3)(b) to cover "the physical safety and emotional well-being" of the child. It is similar to the approach taken by the noble Baroness, Lady Noakes. I do not think that there is much to choose between "emotional well-being" and "emotional safety", as the noble
1136
Baroness said. I fear that both could potentially weaken the protection offered to children. What is the position if someone with the bona fide interests of the child were to say, "I understand your problems. You would feel a lot better if you did commit certain sexual acts"? The person giving that advice may be motivated by his or her belief, but such advice may not really be what reasonable people would regard as in the best interests of the child.
Amendment No. 62 would add a new subsection (3)(d) to Clause 15 that would exempt those who provide,
"bona tide advice and information about the emotional and physical aspects of sexual relations".
Amendment No. 170 proposes the same change for Clause 75 by creating a new subsection (1)(d). The words "bona fide" are open to wide interpretation—honest belief that it is okay, no matter how mad. Those words may be suitable for guidance notes, where they are already used. I know that the term was used in the case of Gillick, but I do not believe those words to be sufficiently precise for us to include in statute.
I do not believe that the phrase,
"advice and information about the emotional and physical aspects of sexual relations",
has anything to recommend it as regards being different in its ultimate effect from the more straightforward terms, such as, "emotional safety" or "emotional well-being''. We are going round and round in a sort of linguistic circle. I genuinely wish to help noble Lords with their concerns, but we are trying to strike a very difficult balance. Therefore, any provisions that we include in legislation to protect those who act to protect children must not undermine the protection that it offers to children.
This is a difficult area, hut, having thought about it a great deal, I am moderately satisfied that we have broadly got the balance right. If the amendments proposed by the noble Baronesses, Lady Walmsley and Lady Noakes, were placed in the Bill, I believe that we would end up with this becoming a major focus of criminal proceedings—not because such provision would form the basis of criminal charges but because it would become "the issue" upon which defendants would rely. We would regret that outcome.
Baroness Walmsley: My Lords, I am grateful to the Minister for his reply. I appreciate the support expressed by the noble Baronesses, Lady Noakes and Lady Gould of Potternewton. I accept the noble and learned Lord's suggestion as regards Amendment No. 59 that his wording is stronger than mine. I give in on that one; I think that the Minister is right.
However, the position on Amendments Nos. 60, 61, and 62 is somewhat different. A jury can sort out the difference between a defence and a successful defence—one that will get a paedophile off the hook. Far be it from me to want to write a paedophile's charter, but there is very little difference between our proposal to insert something about the emotional wellbeing of the child and subsection (3)(a), (b), or (c).

1137
Someone could try to defend himself from a charge of "inappropriate activity" by suggesting that he wanted to protect the child from sexually-transmitted infection by talking to the child regarding how he or she could have sex wearing a condom. In exactly the same way, a paedophile who was up to no good could also try to use that defence. Yet the noble and learned Lord seems to be perfectly happy with paragraphs (a), (b), and (c).
Sometimes such children are merely asking for advice on emotions and feelings, but where sexual activity is involved physical and emotional considerations can become mixed up. Therefore, the people who give such advice need the protection that could be provided by placing something on the face of the Bill that makes it clear that they are not doing anything wrong. I do not believe that our proposal would open up any more of a loophole for a potential paedophile than is the case with paragraphs (a), (b), or (c).
I do not intend to press Amendment No. 59 at this stage, but I may return to Amendment No. 61 on Third Reading. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 60 to 62 not moved.]
Clause 17 [Meeting a child following sexual grooming etc.]:
Lord Astor of Hevermoved Amendment No. 63:
Page 7, line 30, leave out paragraphs (c) and (d) and insert ", and (c) subsection (1B) applies."
The noble Lord said: My Lords, in moving this amendment I shall speak also to Amendment No. 64. This is an amended version of the amendments that we moved in Committee on the inclusion of those with a mental disorder or learning disability into the grooming offence under Clause 17.
In Committee I was grateful that the principle behind our amendments was welcomed. People with mental disorders or learning disabilities are often very trusting and easily exploited. Consequently, they are a target for sexual offenders. We should like them to be covered by Clause 17 in the same way as children are.
The noble and learned Lord the Minister and the noble Baroness, Lady Walmsley, pointed out—rightly—that there was a fundamental flaw in our original version. We have listened to those comments and altered the drafting of our original amendments. We want to provide safeguards and special protection, not to restrict the freedoms of those who can consent. The protection that Clause 17 offers to children should be extended to cover not all those with a mental disorder or learning disability, but only those whose capacity to consent is inhibited by their condition.
I hope that the noble Baroness, Lady Walmsley, and the noble and learned Lord the Minister will feel happy to support our amendments, which are designed to cover this very important and fundamental issue. As the clause is currently drafted, there is a dangerous loophole. We need to make sure that this is remedied.
9 p.m.
Baroness Blatch: My Lords, I support my noble friend.
Once again I am glad to see the offence of grooming in the Bill. It is an important addition to the armoury of police and the courts in tackling child sex abuse. Its strength is that we do not have to wait for the sexual abuse to have taken place before the police can act. A single incident of sex abuse can be devastating to a child. It must be better to act pre-emptively to prevent the abuse.
I regret that my own amendment at Committee stage did not meet with more sympathy. I remain concerned that requiring proof of two previous communications will allow paedophiles who do all their grooming in a single, lengthy communication to get away with it.
None the less, it is a good offence, and it is added to considerably by Amendments Nos. 63 and 64 in the names of my noble friends. If a person has a mental disorder which means that they lack the capacity to consent, they are just as vulnerable to grooming as any child. They may, indeed, be even more trusting—in fact, in most cases they probably would be—and even more willing to be befriended by a stranger. They may have less of an idea about what is appropriate behaviour with a stranger.
The noble and learned Lord the Minister said when we debated the amendment in Committee that he would consider it. I hope that our hopes have not been raised only to be dashed tonight, and that the noble and learned Lord will look kindly on the amendment.
Baroness Walmsley: My Lords, I beg to shock the House. I agree with the noble Baroness, Lady Blatch, and the noble Lord, Lord Astor of Hever. I think that the amendment is very close to, if not exactly at, the point that I said in Committee we wanted to reach. It is vital that we get right in the Bill the rights and protection of people with mental disorders, and I believe that the amendment helps to achieve that. Therefore, we on these Benches support it.
Lord Falconer of Thoroton: My Lords, the amendments, unlike those tabled at the Committee stage, are restricted to those who lack the capacity to consent. In extending the offence of meeting a child following sexual grooming to those with a mental disorder who lack the capacity to consent, we would be transposing an offence specifically designed to deal with real cases—cases that have actually occurred—of abuse against children to a completely different situation involving adults. We are not aware of evidence of the need for this offence to protect those who lack the capacity to consent, whereas, as noble Lords will know, plenty of evidence exists with respect to children. If there is evidence, please bring it forward. It is not a criticism of the noble Lord, Lord Astor, either on this occasion or previously, to say that there is a great danger in making offences extend to areas where there is no evidence of a real problem.

1139
Just as Clause 17 is a response to a specific threat that we know to exist towards children, so Clauses 32 to 49 represent the equivalent response to a specific risk to those with a mental disorder or learning disability, based on evidence presented to the Sexual Offences Review.
The scrutiny of legislation should be restricted to evidence rather than to the consideration of thoughts and good ideas that occur in the course of the scrutiny process without first having had the opportunity to discover whether there is a real problem. As the noble Lord, Lord Astor, would he the first to point out, there is a big issue about striking the balance between, on the one hand, appropriate freedoms for those with mental disabilities—even those without the capacity to consent—and, on the other, children where there is a specific problem.
The clauses covering offences against people with a mental disorder or learning disability, of inducements and so on and the care worker offences are all a response to evidence. The abuse of those with a mental disorder who lack the capacity to consent is far more likely to be perpetrated by someone who has built up a face-to-face relationship of trust with the victim rather than by someone who contacts the victim on the Internet. Setting the Boundaries identified the case for a separate offence,
"to recognise the special and often limited nature of the threats or deception needed to obtain sex with mentally impaired people".
That is why we have put in the Bill the group of offences concerning the use of inducements, threats or deception to take account of the various ways that mentally impaired people can be pressurised into having sex.
We have taken the appropriate measures, based on evidence, to provide justice for those with a mental disorder or learning disability who are subjected to sexual abuse or sexual coercion of whatever kind. I do not believe that Clause 17, which is designed for a quite distinct purpose and based upon specific cases advanced by those with experience in this matter, should be extended in the way proposed. Having thought about the matter very carefully, I do not believe that there is a basis for the amendment.
Lord Astor of Hever: My Lords, I thank my noble friend Lady Blatch for her support. She is absolutely right that those with mental disorders and learning difficulties are equally as vulnerable as children. I also thank the noble Baroness, Lady Walmsley, for her support.
I am sorry that the noble and learned Lord has not accepted the amendment. After all, the Minister said in Committee that the Government would consider it, focusing particularly on those without the capacity to consent. The noble and learned Lord said that I did not mention any evidence in my speech, which I kept deliberately short in an optimistic mood that the amendment would he accepted. However, I shall consider the matter further and read carefully what the Minister said. In the mean time I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 64 not moved.]
Lord Falconer of Thorotonmoved Amendment No. 65:
Page 7, line 38, leave out "75" and insert "81"
The noble and learned Lord said: My Lords, the amendments in this group are of a minor and technical nature. Amendment No. 65 is necessary for the proper operation of the Bill in Northern Ireland. Amendments Nos. 108, 122 and 127 replace "a" with "another" in Clauses 33, 38 and 43 for the sake of consistency with other clauses.
In Committee I tabled an amendment in relation to the definition of a community home for the purposes of the abuse of trust offence. Amendment No. 141 makes a similar change for the purposes of the care worker offences. I beg to move.
On Question, amendment agreed to.
Baroness Noakesmoved Amendment No. 66:
Page 8, line 5, leave out paragraph (a).
The noble Baroness said: My Lords, Amendment No. 66 seeks to make the offence of meeting a child following sexual grooming an offence which could be tried only on indictment.
We welcome the new offence created by Clause 17 and the Government's decision in Committee to raise the maximum sentence to seven years. The issue raised by the amendment is whether it should be possible for the offence to be tried summarily, thus involving a sentence of only six months or a fine.
When we debated this issue in Committee the noble and learned Lord said that the summary option was to deal with, for example, a 19 year-old talking to a child of 15 years and 11 months. I do not believe that using ages gets to the heart of the issue. A vulnerable 15 year-old is entitled to as much protection as a 12 year-old. As the Minister knows, it is always difficult to know where to draw lines, but having chosen the lines—18 years for the defendant and 16 for the victim—we should stop at that and not choose examples around the margins to justify an approach to penalties.
The offence is a serious one. It is designed to catch sexual predators—both on and offline—who entice their intended victims into situations where sexual offences could be committed. The offence does not entail a sexual activity but it is the nearest thing. If a child is involved in sexual activity under Clauses 9 to 11, there is only a possibility of an indictment. These are serious offences and there is no option of a lesser offence. It is my contention that this approach should be carried over into Clause 17. Making the offence indictable only would encourage the police and the CPS to see this as the very serious offence that it is intended to be and not one which should encompass marginal cases.

1141
If the Minister is not in favour of removing the possibility of summary conviction from the whole offence, what is his attitude towards children under 13? Should they not be protected by a stronger offence with no soft option of a summary trial? I beg to move.
Lord Falconer of Thoroton: My Lords, I know that the noble Baroness is pursuing in this amendment a more general concern that she raised earlier in debate to ensure that certain sex offences could be dealt with only at the Crown Court. Amendment No. 66 would remove the provision that the offence at Clause 17 can be tried summarily as well as in the Crown Court. I believe that it is important in the grooming offences that we retain the possibility of summary trial.
In this offence, the offending behaviour that we are targeting is at a preparatory stage before a substantive physical sexual offence against a child has been committed. The essence of this offence is an adult meeting or travelling to meet a child, following two meetings or communications with them, intending to engage them in sexual activety at either that meeting or a subsequent one.
The adult charged with the offence may never have met the child concerned. He may have simply communicated with the child online or via a telephone text message. He may not have said or done anything overtly sexual towards the child. It may be the first time that he has been charged with anything remotely like a sexual offence. It might be a 19 year-old and a 15 year-old. Evidence may be obtained relating to the defendant talking to other people which indicates that the sexual offence considered would not be at the more serious end of sexual offences. As in all those cases, it is incredibly important to keep this in perspective and to recognise that the landscape is from the not so serious to the extremely serious offence.
Therefore, for example, the paedophile seeking to groom children for offences should plainly be tried in the Crown Court. But is every 19 year-old who sends a text message to someone suggesting that they meet with a view to perhaps going to the cinema and committing what technically constitutes a sexual offence always to be tried in the Crown Court? I am not so sure and I believe that the right course to take is to look at each case on its merits. I think we can trust the CPS to do that. It is not right to limit where charges for this offence can be heard. I understand the motive behind it, but it is the wrong approach. For those reasons, I shall be resisting the amendment.
Baroness Noakes: My Lords, I thank the Minister for that reply. I believe that the difference between us is that he sees this offence as covering a wide range of activity for—example, a 19 year-old texting a 15 year-old about a sexual liaison. I have never considered the offence created by Clause 17 as remotely covering those types of activities, which are not serious sexual predator activity. To use the examples cited earlier, this is about men going out with condoms and ropes in their pockets to entrap young, vulnerable children,
1142
having enticed them to a meeting. It is not about text messages between teenagers slightly above and slightly below the age limits.
I am particularly concerned about under-13 year-olds and sending the right messages. I may return to this issue later. In the mean time, I shall read carefully what the noble and learned Lord said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
9.15 p.m.
Clause 18 [Abuse of position of trust: sexual activity with a child]:
Lord Thomas of Gresfordmoved Amendment No. 67:
Page 8, line 16, leave out from "the" to end of line 20 and insert "other person is over 13, it is a defence for the defendant to show that he did not know, and had no reasonable cause to believe, that that other person was under 18."
The noble Lord said: My Lords, we move from child sex offences to a series of groups of offences between Clauses 18 and 49—four groups in all—which deal with particular relationships: the position of a person who is abusing trust; the familial relationship; offences against persons with a mental disorder or learning disability; and care workers.
One of the curiosities of the Bill is that those four groups are not all dealt with in the same way. In respect of people in a position of trust, familial relationships and care workers, the policy of the Government is to transfer to a defendant in the particular circumstances outlined in the Bill the persuasive burden of establishing his innocence. I shall not weary those brave few noble Lords who remain with a repetition of what I said earlier.
Interestingly, in the group which appears in the middle of all these—that is to say, the group that concerns people with a mental disorder or learning disability—the persuasive burden is not transferred. If one looks at Clause 32(1)(d), one observes that it is still for the prosecution to prove that the defendant knows or could reasonably be expected to know that the complainant has a mental disorder or learning disability and that because of it that person is likely to be unable to refuse. So the approach of the Government to the four groups is not consistent.
The formulation in relation to the three groups where the burden transfers to the defendant to prove his innocence—I am using shorthand here—passes the persuasive burden to the defendant to prove—I refer to Clause 18(2)—that he believed that the other person was 18 or over, and then transfers the persuasive burden back to the prosecution to satisfy the jury that the belief was unreasonable.
I have already wearied your Lordships in Committee about the difficult mechanisms that are involved in such a transfer. If one had to sum up to a jury, it would in my view be extraordinarily difficult to instruct a jury that in relation to a number of the matters that are set out in this offence it has to be satisfied when it comes to passing the burden to the

1143
defendant to prove his defence that it is on a balance of probabilities. When the persuasive burden shifts back to the prosecution it has to be sure, having been satisfied on a balance of probabilities that the defendant believed the other person was 18, that the belief was unreasonable.
Those with little experience of the criminal courts may think that this is a simple matter and that juries are capable of being so directed. I reflect upon the words of the noble and learned Lord, Lord Lloyd, earlier today when he talked about the experience of those who drafted the Bill. I think that they are very enthusiastic and very bright, but I am not sure that they are very experienced. I would say the same about the Minister when it comes to criminal matters. It seems to me that the difficulties that would arise in directing a jury have not been properly assessed.
I consider, as I said in relation to the earlier provisions that we discussed, that the passing of the persuasive burden to the defendant in the case we are discussing is likely to offend Article 6(2) of the European Convention on Human Rights. If I were defending a person in that situation, I would certainly make that application. I can distinguish the situation, however, from the charges of rape or more serious sexual offences that we discussed earlier, because the sentences in those cases are very much greater.
I do so also because it is possible to say that, because of the relationship with a care worker, the familial relationship, or that with the person in a position of trust, it is right to impose an almost strict liability and say, "You will not have sex with anyone under the age of 18, anyone with a mental disability who is in your care, or any member of your family under the age of 18. That is the offence". Only then is the defence raised, which might satisfy the fair trial provisions of Article 6(2). There is a distinction to be drawn because, unlike the offences that we discussed earlier, which apply right across the board, we are concerned with imposing an almost strict liability on people in a specific tight relationship.
Having said that—if I were to concede that, and I do so only for the purposes of argument—it is still wrong in principle to adopt the formulation that the Government have adopted, which brings the burden back to the prosecution to prove that a belief was unreasonable. If someone is to take the convention on and say, "We are going to define the offence tightly, but there is a defence of reasonable belie", it seems to me that they should go the whole way and say, "The defence is that you have to prove that you have a reasonable belief", rather than falling back on the prosecution to satisfy the jury that it is sure that the belief is unreasonable.
Those who drafted the Bill have fallen between two stools. They have not been confident enough to say, "We are going to breach the presumption of innocence in these instances, and we are going to say that it is for the defendant to prove something—his reasonable belief—entirely". Instead, they have come to a halfway house where they divide the responsibility between the prosecution and the defence—between the defence and
1144
prosecution, I should probably say—and hope that that satisfies any challenge that may subsequently be made to it in the courts under Article 6(2).
I am against the provision in principle, because it could offend against Article 6(2). I am against it from a practical point of view, in that the way it is framed is unworkable. Noble Lords have heard today from judges of a greater standing than me who have criticised the unworkability of parts of the Bill. Across the board, in the three groups where the attempt is made, the provisions are unworkable. I would much prefer to see a formulation that follows that—curiously, it is in the middle of everything, between Clauses 32 and 41— which relates to those who have a mental disorder or learning disability. I beg to move.
Lord Falconer of Thoroton: My Lords, we have a range of amendments that all follow the same pattern. The first amendment of the noble Lord, Lord Thomas of Gresford, places the burden on the defence. The defendant must show that he did not know, which is knowledge, and had no reasonable cause to believe, which is reasonableness, that the other person was under 18. The whole burden of knowledge, age and reasonable belief in age is being placed on the defendant.
The noble Lord presumably regards that as legal within the European Convention on Human Rights, so the issue for him is not legality, but simplicity. We take the view that, because all these cases are based on existing relationships, if a defendant asserts that he did not know the age, that there was a mental disorder or that there was a family relationship, he should produce evidence to show that. As those matters are within the knowledge of the defendant, it is appropriate to place a burden on him.
We are advised that the burden of reasonableness, which is a more objective question, cannot appropriately be put on the defendant in that respect. That is why it remains with the prosecution.
Does that cause a problem for the jury? The noble Lord, Lord Thomas of Gresford, nods enthusiastically. Those are the very same juries that we both want to trust. Is it difficult to say, "Members of the jury, the defendant says that he didn't know that the person he was caring for suffered from a mental disorder. It is for the defendant to satisfy you of that on the balance of probabilities. If he does satisfy you, the prosecution must satisfy you that that belief, even if he had it, was unreasonable so that you are sure"?
Is that too complicated? Not in my view. I was struck by our earlier debate. The noble and learned judges who contributed greatly to the debate did not at any stage respond to what the noble and learned Lord, Lord Cooke, said about how the reasonableness provision had worked in practice. It did so, according to the noble and learned Lord, Lord Cooke, in a precisely different way from that in which the noble and learned Lords, Lord Lloyd and Lord Ackner, said it would.

1145
Yes, we must listen to what the judges say, but we must be prepared to form our own sensible views as to what will and will not work in practice.
Lord Thomas of Gresford: My Lords, the noble and learned Lord has clearly forgotten that I said that my drafting was based on the New Zealand principles. It is set out the same way in New Zealand; it is for the prosecution to prove that the belief held by the defendant is unreasonable.
I have followed the New Zealand provisions in drafting the amendments that I tabled in Committee and when considering how to simplify them on Report. I was greatly heartened by the noble and learned Lord, Lord Cooke, who gave such a bill of good health to the New Zealand provisions. That is where I want to be. I think that they are right. The Government's proposal is an unfortunate development of New Zealand practice and legislation.
I have to ask the noble and learned Lord, Lord Falconer, to consider carefully the position. It is no use passing legislation that will be struck down by the courts. We may succeed in getting an amendment through here, which may be reversed in the House of Commons, but if the courts say that it is not good enough, we shall have failed in our duty. I am suggesting a clear view of how Article 6(2)affects such legislation. So I ask the Minister to reconsider the matter; to take advice if necessary, if I may respectfully suggest that, from the Attorney-General or his department on the reverse onus provisions—both the original ones that we discussed earlier and the current ones. It is right that the Minister should say that in the amendments I am concerned about the mechanism and the practicalities. That is true, but I am even more concerned about the principle of reverse onuses of proof.
Perhaps I may in her absence again refer to the contribution, much appreciated around the House, of the noble Baroness, Lady Kennedy of The Shaws, today. She expressed her total opposition to reverse burdens of proof. They are not the way in which the criminal law of this country has developed. They are not the way to protect or to balance the interests of prosecution and defence. I am sure that if they get to court those provisions will fail. I shall return to it, but for the moment I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 68 not moved.]
9.30 p.m.
Clause 19 [Abuse of position of trust: causing a child to engage in sexual activity]:
Lord Falconer of Thorotonmoved Amendment No. 69:
Page 8, line 35, after "causes" insert "or incites"
On Question, amendment agreed to.
[Amendments Nos. 70 and 71 not moved.]
Clause 20 [Abuse of position of trust: inciting a child to engage in sexual activity]:
[Amendments Nos. 72 and 73 not moved.]
Lord Falconer of Thorotonmoved Amendment No. 74:
Leave out Clause 20.
On Question, amendment agreed to.
Clause 21 [Abuse opposition of trust: sexual activity in the presence of a child]:
[Amendments Nos. 75 and 76 not moved.]
Clause 22 [Abuse of position of trust: causing a child to watch a sexual act]:
[Amendments Nos. 77 and 78 not moved.]
Clause 24 [Positions of trust]:
Baroness Blatchmoved Amendment No. 79:
Page 11, line 32, leave out "full-time"
The noble Baroness said: My Lords, I rise in a state of excited anticipation that the Minister will break the habit of a lifetime and accept my amendments. In Committee, the noble and learned Lord was at least sympathetic to the amendments. He said that he would table some at this stage and would share their wording with me before today. That has not happened, so my hopes were dashed last night, but I understand that I have reason to anticipate that my amendments may be accepted, so without saying any more, I await good news. I beg to move.
Lord Falconer of Thoroton: My Lords, in Committee I went much further than I have in any other unguarded moment and undertook to table government amendments on Report to include part-time students in the offence. I regret that, as the result of an oversight, I failed to do so. However, the amendments tabled by the noble Baroness, Lady Blatch—Amendments Nos. 79, 80, 91 and 92—achieve the effect that I said we were prepared to accept. Her amendments deal with the issues raised by previous amendments. I again thank her for raising the issue; I apologise for not tabling amendments as I undertook; but we agree to the amendments and may now pass them.
Baroness Blatch: My Lords, I am hugely grateful. I thank the noble and learned Lord most warmly.
On Question, amendment agreed to.
Baroness Blatchmoved Amendment No. 80:
Page 11, line 34, leave out "full-time"
On Question, amendment agreed to.
Baroness Blatchmoved Amendment No. 81:
After Clause 24, insert the following new clause—
"POSITIONS OF TRUST: YOUTH AND COMMUNITY WORKERS
Within six months of the coming into force of section 24, the Secretary of State shall, by order under section 24(1)(b), specify conditions relating to youth and community workers who work with persons under 18."
The noble Baroness said: My Lords, I suspect that I shall not be as lucky this time, but here goes.
On Second Reading, the noble and learned Lord said that the Bill aimed to:
"give children the greatest possible protection under the law from sexual abuse".—[Official Report, 13/2/03; col. 772.]
For that purpose, the Bill recognises that those under the age of 18 are in fact children. The abuse of trust offence has been created to protect those under 18 from adults who seek to take sexual advantage of them using their position of trust. It recognises that children are vulnerable to people who exercise influence over them and that some adults abuse positions of trust to gain sexual gratification from those in their charge.
Clause 24 protects children in young offenders' institutions, residential homes, hospitals and care homes, those who are in education and those who are looked after by mentors appointed under the Learning and Skills Act 2000, personal advisers under the Children Act 1989 or youth offending teams. However, it does not protect those looked after by officers appointed to represent their interest under the Children Act nor does it protect those appointed as supervisors under that same Act. Those issues are addressed by my Amendments Nos. 83 and 84, which simply require the Secretary of State to use his order-making powers under Section 24(1)(b) to extend the abuse of trust offence specifically to cover those two categories. The noble and learned Lord the Minister indicated in Committee on 1st April at col. 1295 of Hansard that he would give further consideration to those posts. Given the strong similarities with mentors and personal advisers, which are already covered by the Bill, I cannot see any logical reason for refusing to add those two categories.
The Minister also indicated that he would consider sports coaches—that issue was raised by the noble Lord, Lord Faulkner of Worcester, who is in his place. Amendment No. 86—I hope that I will be forgiven for the presumption that I tabled it on Report—simply places an obligation on the Secretary of State to lay down the circumstances in which such persons would be covered by the abuse of trust offence.
I have also returned to the issue of youth and community workers and voluntary youth groups in Amendments Nos. 81 and 82. I chose the phrase, "youth and community workers" in Amendment No. 81 not only because it is in common usage but because the phrase is already used in statute. Amendment No. 82 addresses the wider category of voluntary youth group workers. The noble and learned Lord said last time that the Government are guided by three criteria when deciding which areas to
1148
cover with the offence: the vulnerability of the young person, the location and/or lack of access to other adults and the special influence of the adult. The noble and learned Lord used the phrase "in loco parentis" to describe the sort of relationship that he had in mind. Anyone who has allowed their child to go away on a youth group trip knows that youth group leaders fulfil all three of those tests. They often work with highly vulnerably young people; they may take them far away from their homes and the influence of other adults on camping trips and the like; and they are most certainly in the position of in loco parentis. They have real influence; indeed, some youth group leaders are positively idolised by those in their care.
When I called for youth groups to be included in the abuse of trust offence, which is contained in the Sexual Offences (Amendment) Act 2000, the then Home Secretary and the noble and learned Lord the Lord Privy Seal, who was then Attorney-General, indicated sympathy. During the Committee stage of this Bill, even the noble Lord, Lord Thomas of Gresford, indicated that he was sympathetic to extending the offence in that way. He did so in Hansard on 1st April at col. 1293. I hope that I will be able to add the Minister to my list of supporters.
This morning, as it happened, I received a letter from the noble and learned Lord the Minister on a point relating to Scottish jurisdiction, which gives an important illustration of the limitations of the abuse of trust as drafted. In the previous debate, I posited a situation in which a child from England goes away on summer camp as part of the Duke of Edinburgh award scheme and has sex with one of the camp organisers who lives in Scotland. The Minister referred to that scenario in his letter and said that the necessary relationship of trust would not exist and that no offence would be committed. I find it extraordinary that such an obvious example should be left out from the scope of the offence. Parents who send their children away on such camps would be horrified to think that their child was not protected from the offence in that situation. I wonder whether the Minister will give further consideration to extending the offence to cover that situation also.
In Amendment No. 85 I return to the issue of childminders. The noble and learned Lord indicated last time that he thought that childminders did not have sufficient influence over 16 and 17 year-olds to merit being brought within the scope of the offence. However, that ignores the fact that many parents leave the childminder in charge of all the children in the house, not just the younger ones. It ignores the fact that the childminder and the older child may spend hours alone together after the younger children have gone to bed. It also ignores the enormous trust that parents place in those they invite into their home to look after their children. It ignores the many opportunities for abuse while the parents are away from home.
My Amendment No. 87 addresses ancillary and caretaking staff who work in the institutions listed in Clause 24(2) to (5). It is not just those who work directly with the children who have a position of trust.

1149
All staff, particularly those who live on the premises, such as caretakers, have plenty of opportunity to get to know the children who live or study there. That gives them opportunity to take advantage of them.
I mentioned on Second Reading the example of Eric Drummond, a school caretaker who was found guilty in October 2001 of repeatedly sexually abusing children. I also mentioned the case of Holly Wells and Jessica Chapman, where the relationship with the caretaker might prove to have been significant.
It is quite wrong not to recognise that caretakers can and do find themselves in a one-to-one relationship with a child. Often it is the most vulnerable children who are left behind at school—those children who are not collected by their parents. The caretaker can then strike up a friendship and become particularly friendly with the child, with all the scope of empty classrooms and an empty school to get up to no good.
I strongly believe that all these areas ought to be covered and I hope that on reflection the noble and learned Lord will accept that these amendments are very worthy of consideration. I beg to move.
Lord Faulkner of Worcester: My Lords, I shall comment on Amendment 86, to which the noble Baroness, Lady Blatch referred. She was kind enough to refer to the contribution I made in Committee, when I moved an amendment that would have included sports coaches within the provision of the positions of trust elements of the Bill.
In that debate, my noble and learned friend was kind enough to say that I had,
"hit the spot in respect of a large number of the criteria, particularly as he described a picture in certain circumstances of the vulnerable adult being isolated because of the control that a sports coach has." [Official Report, 1/4/03; col. 1295].
I look forward to what my noble and learned friend Lord Falconer says about this aspect. I know that he will have reflected on it. I have had further submissions from the NSPCC and others about the provision of sports coaches. It is a very substantial subject. There are 57 recognised and funded English national sports governing bodies and over 25,000 coaches hold qualifications recognised by those bodies.
The NSPCC and Sports Coach UK are conducting an audit to determine how many of these coaches work with young people. My suspicion is that it is a substantial number. I hope that this Bill can be used in some way to protect the vulnerable young people who are in the care of these sports coaches at a time when they are away from home and the sports coaches are, as the noble Baroness says, acting in loco parentis. These are young people who need assistance and I hope my noble and learned friend will indicate that he is willing either to accept this clause or to propose something similar to it.
Lord Thomas of Gresford: My Lords, reeling as I am from the epithet that even I—even I—supported the noble Baroness, I should like to point out to her that
1150
in my Amendment No. 178, which deals with the more serious offences, I included as one of the circumstances to be taken into account, whether,
"the defendant exercised authority over the complainant in the fields of education, employment, sport or service".
I was concerned with almost all the areas to which the noble Baroness has referred. I do not necessarily support the listing of everybody in this way, because when you make out a list you always leave somebody out. Nevertheless, I hope she will accept that I have very much in mind the spirit in which these amendments are moved.
9.45 p.m.
Lord Hylton: My Lords, I have been associated with at least two residential youth centres and I am still a governor and trustee of an adult centre which sometimes takes in groups of young people. With that background, I support the intention and general direction of this group of amendments.
It is most important that positions of trust should not be abused. Nevertheless, if all or part of the group of amendments should meet with the approval of the Government and come to be enacted, I want to express the strong hope that the conditions laid down will not be so complicated and onerous as to deter the recruitment of suitable volunteers—for example, lay advocates of people held in residential institutions.
Baroness Noakes: My Lords, my noble friend Lady Blatch has raised some important issues about the scope of the abuse of trust offences. If there is a case for the protection of 16 and 17 year-olds, which I understand is what we are talking about under these offences, it is illogical to ignore circumstances where a position of trust can be set out. A teacher in a school will be covered, but not someone who teaches people in other settings; for example, in a sports setting or for the Duke of Edinburgh's Award. I cannot see the logic in that and I therefore believe that my noble friend's amendments are along the right lines. However, I fully accept that a boundary must be drawn or we will end up with all offences involving 16 or 17 year-olds being brought within the net.
I am not sure that all my noble friend's amendments are correct, but, equally, I do not believe that the Government have drawn the line in the right place. I hope that the Minister will be able to make further moves on the issue.
Lord Falconer of Thoroton: My Lords, although I cannot accept Amendments Nos. 82 and 84 because of the way in which they are drafted, I will be tabling amendments in time for Third Reading to bring within the scope of the abuse of trust offences those appointed as children's guardians under Section 41 of the Children Act; those appointed to supervise children under Section 35 of that Act in conjunction with Parts 1 and 2 of Schedule 3 (those references relate to supervision orders); and those appointed under Section 36 in conjunction with Part 3 of Schedule 3, which relate to education supervision orders. I will explain the justification for that when I move the

1151
amendments at Third Reading, but I am satisfied that such persons meet the criteria for inclusion within the scope of the abuse of trust offences.
I shall deal with Amendments Nos. 81, 82, 85, 86 and 87, tabled by the noble Baroness, Lady Blatch. In deciding whether to accept them, we have had to consider how well the proposed categories fit within the guiding criteria for the abuse of trust offences and whether it is appropriate to criminalise consensual and what would otherwise be lawful sexual relationships in such circumstances. As the noble Baroness, Lady Noakes, pointed out, we are dealing with 16 and 17 year-olds.
The noble Baroness, Lady Noakes, asked: if we are criminalising some relationships, why not criminalise all?—but immediately indicated what a mad view that was. There needs to be some line and criteria and principles. As the noble Baroness, Lady Blatch, reminded the House, we said in Committee that the young person is particularly vulnerable—for example, in residential care or on probation in the community. The second principle is location and/or lack of access to other adults, and the absence of countervailing influences makes the young person particularly vulnerable. The third principle is the special influence of the adult: that is, that the adult acts in loco parentis.
Those seem sensible criteria to apply. However, in applying them to the proposals, I do not believe that youth and community workers, voluntary group workers or child minders fall within them. Although youth and community workers are employed by local authorities, their role is to run centres or projects which children attend voluntarily. They do not act in loco parentis and they do not have a position of power or influence in children's lives. We believe that they fall on the other side of the line. The same can be said of voluntary youth workers who do not have a statutory role. They run or help out at youth clubs or are involved in other community activities with children who participate out of choice and whose lives and futures cannot be adversely affected by the disfavour of a voluntary helper.
Child minders generally do not look after young people aged 16 and 17, and even if they are in the house at the same time as a young person in order to look after younger siblings the position of trust simply does not exist between the child minder and the 16 or 17 year-old.
As far as concerns ancillary or caretaking staff in institutions and homes, such people will already be caught within the scope of the offences if they look after the child as defined—that is, they are regularly involved in caring for, training, supervising or being in sole charge of the child. If they do not look after the child in the way that I have defined, then the basis for their inclusion is not justified because they do not have the necessary involvement or influence in the child's life. Nor is the child cut off from other adults because of their existence. Again, I do not think that they should fall within the category.
Finally, I turn to sports coaches. The matter is an important issue, and there was a very powerful speech by my noble friend Lord Faulkner of Worcester, which
1152
is important to consider carefully. I have spoken in detail to other government departments concerned. The Government's plan for sport published by the Department for Culture Media and Sport and the Department for Education and Science in March 2001 identified weaknesses in sports coaching and set up a coaching task force to examine corrective actions. The task force reported in July 2002 and made several recommendations to reform the recruitment, education, employment and deployment of coaches. Key among those was the establishment of a national coaching certificate.
DCMS has now made a firm commitment to introduce that national coaching certificate. The final outcome will be to transform the current, largely voluntary, workforce into a recognised coaching profession. The certificate is to be set against national standards and developed at five levels. A core curriculum will be devised for the qualifications awarded by national governing bodies of the sports across the UK. Two possibilities remain to be decided—whether adoption will be necessary for national governing bodies to be eligible to receive public funds and whether coaches would need the certificate in order to obtain a licence to practise.
DCMS believes that the latter is right in principle but final decisions will be taken in due course. The review was not primarily driven by concerns about child sexual abuse within sporting relationships, but that is one of a number of concerns that the national coaching certificate will aim to address. Once the measures are introduced, any coach who uses his position to manipulate a young athlete in his charge into a sexual relationship may lose his licence and his livelihood.
We believe that relying on those future measures will be the more appropriate way to deal with any problems that are identified and currently, subject to a point that I shall make, we are not minded to bring sports coaches within the scope of the offences. I have also considered the argument that sports coaches often act in loco parentis, especially where a talented young person is undergoing intensive training. Our problem lies in distinguishing that situation from the person who coaches the local football team on a Saturday morning. We do not think that there is any satisfactory way of drawing the line so that we do not, for example, criminalise the actions of the 18 year-old college student who falls in love with, and has a consensual sexual relationship with, one of the members of the local netball team, just because he helps to coach them one evening a week in his school holidays.
It is also the case, at a time when we are trying to encourage more people into the sports coaching profession, that we do not want to discourage them through fear of false allegations and prosecution for relationships that are consensual and not in any way abusive. I think that the right way forward is for us to reassess the position once the national coaching certificate has been introduced.

1153
Should it transpire that that does not solve any problems which might exist, I should be happy to review the position and to consider using the order-making power attached to these offences in order to bring sports coaches within the scope. There is one problem in that approach, about which I am particularly conscious of the strength of feeling in the House. The certificate will not be introduced until 2007. What will happen in the mean time?
We believe that the right approach is to consult now to take a view on whether the approach that we suggest is the right one, and if not, whether earlier measures need to be considered. Having considered carefully, we believe that there is a way forward in relation to sports coaches which does not involve amending the Bill at this stage, but it is on the basis of the steps that I have proposed.
For those reasons I am unable to accept the amendments. However, as I made clear at the outset of my remarks on Amendments Nos. 83 and 84, I shall table amendments on Third Reading to deal with the points raised.
Baroness Blatch: My Lords, I thank the Minister for the amendments which are to be accepted. I look forward to seeing the particular wording at the next stage of the Bill. I ask the Minister to think again about the first of the three criteria—vulnerability.
It is true that in one sense of the word some children—that is, the kind described by the Minister—are indeed vulnerable. However, I would regard a child of mine going away on a summer camp with youth and community workers supervising them as being vulnerable even if they were entirely adjusted with no problems and from a sound home. It seems to me that vulnerability needs to be considered in a slightly wider sense than simply children from children's homes or children who are neglected at home and do not have the security of a loving and nurturing home life.
As I have said, youth and community workers take children away from home. They are acting in loco parentis. Surely, every parent in the land has a right to expect that that position of trust will be honoured and that if it is breached, it is a real breach of trust and something which the parents would expect not to happen. It seems extraordinary that such people are not brought into the scope of the Bill. As my noble friend Lady Noakes said earlier, some of those people are the very people who come within the scope of the Bill; that is, teachers who then do voluntary youth work and go away with children to summer camps or on expeditions. I have been fortunate in that my children have all gone away on expeditions and have always come home safely. I am grateful for that. However, we should all at least remember that parents expect their children to be safe when they go away.
1154
As regards the points raised by the Minister on childminders, I still believe there is a case there. If two parents go away leaving someone with the care of their children or if working parents leave someone with the care of their young children where there are older children in the house, they do not expect that trust to be breached by childminder having a sexual relationship with a 16 or 17 year-old. I believe that if that were to happen, there would be a serious breach of trust.
I do not want to pre-empt the reaction which the noble Lord, Lord Faulkner of Worcester, may have about sports coaches. Like me, he will want to read what the Minister said. The noble and learned Lord had a great deal to say about sports coaches. I partly welcome some of the comments made by the Minister: in particular that the Secretary of State would consider using the order-making powers. However, the sting in the tail is that it would be a very long time before the Home Secretary would be in a position to be able to make a judgment on whether that order-making power should be used.
Sports coaches are in a very special position. More and more under the policy of inclusion—I applaud the Government for this—talented young people are given sports coaching, some of it one-to-one. On the other hand, I accept the Minister's point about the difficulty of recruiting. The noble Lord, Lord Hylton, referred to not introducing changes in such a way that would deter good people.
The Minister referred to the system of certification and national standards for sports coaches that is to be introduced by the DCMS. When that raft of changes is in place, we shall not need to bring the issue within the scope of the Bill because if coaches breach their trust they could lose their licence.
Teachers are certified to practise teaching and are subject to national standards and endless codes of practice—yet they fall within the scope of the Bill and its abuse of trust clauses. The Minister said enough about sports coaches and I would like to read his response.
Even the noble Lord, Lord Thomas of Gresford, supported me at the previous stage. I say that with great deference to him. I admire the noble Lord and all that he does in the House, so I am overwhelmed by his support. When even the noble Lord, Lord Thomas, supports me I feel that I must be on to something. I thank the noble Lord for his support today, even though it was qualified. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments 82 to 87 not moved.]
Lord McIntosh of Haringey: My Lords, I beg to move that consideration on Report be now adjourned.
Moved accordingly, and, on Question, Motion agreed to.
House adjourned at two minutes after ten o'clock.

Official Report of the GrandCommittee on the

  Local Government Bill
  (First Sitting)
  The Committee met at half past three of the clock.
  [The Deputy Chairman of Committees (Lord Murton of Lindisfarne) in the Chair.]
  The Deputy Chairman of Committees (Lord Murton of Lindisfarne): Before I put the Question that the Title be postponed, it may be helpful to remind your Lordships of the procedure for today's Committee stage. Except in one important respect, our proceedings will be exactly as in a normal Committee of the Whole House. We shall go through the Bill clause by clause; noble Lords will speak standing; all noble Lords are free to attend and participate; and the proceedings will be recorded in Hansard. The one difference is that the House has agreed that there shall be no Divisions in the Grand Committee. Any issue on which agreement cannot be reached should be considered again at the Report stage when, if necessary, a Division may be called. Unless, therefore, an amendment is likely to be agreed to, it should be withdrawn.
  I should explain what will happen if there is a Division in the Chamber while we are sitting. The Committee will adjourn as soon as the Division Bells are rung and will resume after 10 minutes.
  Title postponed.
  Clause 1 [Power to borrow]:
  Baroness Hamwee moved Amendment No. 1:
  Page l, line 9, leave out paragraph (b) and insert—
  "( ) subject to the provisions of this Act."
  The noble Baroness said: In moving Amendment No. 1, I shall speak also to Amendments Nos. 53 and 67. I should say at the outset that, generally, we welcome Part 1 of the Bill, which deals with the prudential borrowing regime, which is not, as the Official Report in another place described it at one point, the "prudential boring regime". I enjoyed that typo almost as much as one that I saw in a letter from CIPFA, which referred to an item "in elation to" the prudential indicator. Before we started, the Minister suggested that we should enthuse about the Bill, but I am not sure that I would go as far as elation. None the less, we support Part 1, and our amendments are generally directed at extending the new freedoms for local authorities, not at opposing them.
  Amendment No. 1 is a probing amendment. Paragraph (b) of Clause 1 provides that a local authority may borrow money,
  "for the purposes of the prudent management of its financial affairs".
  Those words must mean something, and it seems to me that it is unnecessary to spell out that the borrowing is for the management of a local authority's financial affairs. Anything else would be ultra vires. What is meant by the term "prudent"? In particular, what is meant by the term that is not dealt with by the detailed provisions of Part 1? If the word is a signpost to Clauses 2 to 4—Clause 2(2) suggests that that might be the case—why does not the Bill say so?
  When I started to read the Bill, I wondered about the protection of lenders. I came rapidly to Clause 6, which provides that lenders are not bound to inquire whether an authority has the power to borrow money. No doubt, that is to avoid cases similar to those in the 1980s that were so damaging for everyone involved. The clause protects lenders, but does it protect the borrowing authority, if its management is not prudent? I am not sure. If it does not, that could lead to all sorts of tangles. Is it about the council tax payer inspecting accounts and being able to say, as the opposition on a local authority might say, that the borrowing is not for prudent management? With my amendment, I seek to understand what the term imports. I have suggested alternative wording, allowing an authority to borrow money,
  "subject to the provisions of this Act".
  Partly, I hoped to pre-empt a suggestion from the Minister that I am being destructive.
  The later amendments in the group are similar and relate to the provisions for investment in Clause 12—to which Amendment No. 53 refers—and Schedule 1, which relates to parishes. It is precisely the same point. I beg to move.
  Baroness Hanham: In general, I welcome and support what the noble Baroness, Lady Hamwee, said. The Explanatory Notes become one's bible on such matters after a while, and I was interested to note that the power under Clause 1 is described as going further than the existing wide-ranging power and clarifies the fact that,
  "there is power to borrow for normal treasury management purposes".
  That covers paragraph (a) neatly, but, like the noble Baroness, Lady Hamwee, I remain, in a sense, mystified by paragraph (b). Does "prudent management" include borrowing to deal with debt that is already there? It is probably debatable that one would want to swap one for the other, when it is clear that any additional borrowing done under these provisions will be a direct cost to the council tax payer because there will be no government subsidy or support.
  In the light of what the noble Baroness said, I support her probing remarks to see what we can get from the Minister.
  Lord Dixon-Smith: I did not intervene at Second Reading, although I have some experience of finance

  GC57
  in local government. It was a long time ago, and it is possible that I am hopelessly out of date. The Minister will forgive me if I am.
  I too am fascinated by the wording of the paragraph:
  "the prudent management of its financial affairs".
  I know that the Bill is, in theory, about capital expenditure, but the prudent management of an authority's financial affairs describes a wider area than, I suspect, the Bill is directed at. Even in the management of an authority's capital affairs, it is not unusual for revenue expenditure to be applied directly to capital. Therefore, one can turn the question round and ask whether, in certain circumstances, it might not be legitimate to apply borrowed moneys to revenue affairs. That is the real sting in the tail.
  In national finances, there is nothing unusual about the power to borrow money to defray revenue expenditure. I do not know whether the power should go that far, and I am sure that the intention is that it should not. However, the wording of the clause implies that that might be a reasonable thing to do. The clause refers to the prudent management of the authority's financial affairs. That is different from the prudent management of the authority's capital financial affairs.
  I am a little concerned about the matter. I support the thrust of the Bill. I am all for giving authorities the maximum financial independence and freedom. The only way that my son learnt financial discipline was by being given complete freedom. He soon learnt to be discreet about what he did with his money. I am all for letting authorities get themselves deeply into the mire, if they are unwise enough to do so. It is the only way in which they will learn. I am all for it. However, I have a sneaking feeling that what I am describing and thinking about goes wider than the Government intended with the Bill, which deals here with capital finance and accounts. The phrase in the clause implies something far wider.
  The Minister of State, Office of the Deputy Prime Minister (Lord Rooker): I promised myself that I would enthuse so much about the Bill that I would stick ruthlessly to the groups of amendments. Considering the debates that are about to come up, it is clear that one could be repetitious, so I shall also stick to the notes that have been provided for me. I hope that I will be able to answer the questions from noble Lords and noble Baronesses.
  Amendment No. 1 relates to Clause 1, which deals with the power for local authorities to borrow. Paragraph (a) simply preserves the existing wide-ranging power for an authority to borrow for any purpose relevant to its statutory functions. Paragraph (b) is new, and the amendment would replace it.
  Under the current legislation, introduced in 1990, there have been technical doubts about the lawfulness of borrowing to repay existing debt. The aim of paragraph (b) is mainly to deal with that concern. The refinancing of debt is a widespread practice and has
  GC58
  full government approval. A large part of the money lent by the Public Works Loan Board to local authorities is for that purpose. It gives local authorities flexibility over the timing of loan repayments and often makes it possible to negotiate more favourable interest rates. Something similar is done by many members of the public with mortgages on their homes. They often find that they can replace an existing mortgage loan with a new one on more favourable terms.
  The present law does not, however, confer an explicit power on local authorities to borrow for such a purpose, although it is generally assumed that an implicit power exists. To clarify the matter, paragraph (b) of Clause 1 gives authorities power to borrow for the prudent management of their financial affairs. That will empower them to borrow to repay existing debts, provided that they are satisfied that it is prudent to do so.
  The removal of the existing words in Clause 1(b) would allow the uncertainty about refinancing to remain. That is why the provision is there in the first place. The words offered as a replacement are superfluous. There is no need to say that authorities will have power to borrow subject to the provisions of the Act, as that is already the overall effect of Part 1.
  Amendment No. 67 relates to the similarly worded borrowing power for parish councils in paragraph 2(1) of Schedule 1. The amendment proposes the same change as Amendment No. 1, and the objections to it are identical.
  Amendment No. 53 make an analogous change to Clause 12, by replacing the words in paragraph (b). The clause concerns local authority investment powers. It remedies a deficiency in the present legislation, which does not give authorities an explicit power to invest. Since 1990, authorities have had no choice but to assume that there is an implicit investment power. Understandably, they have often called for clarification. Clause 12 therefore confers such a power. It is in very broad terms, and the wording deliberately mirrors that of the equally wide borrowing power in Clause 1.
  The basic power in Clause 12(a) is to invest for any purpose relevant to the authority's functions. However, investment activity cannot easily be linked to a specific function. It is unusual for an authority to have an investment account earmarked for an identifiable kind of expenditure. In Clause 12(b), power is conferred on an authority to invest for the purposes of the prudent management of its financial affairs. That allows authorities to invest simply because they have temporarily surplus cash and must keep it safe until it is needed for spending.
  The proposed amendment to Clause 12(b) would allow the uncertainty about investment to remain. The words offered as a replacement for those in the Bill would not address the long-standing concerns and would add little, if anything, to what is already covered in Clause 12(a).

  GC59
  I have stuck to the purpose of this set of amendments, without going into the other areas that we will come to. I hope that, with those reassurances, the noble Baroness will withdraw the amendment. The noble Lord, Lord Dixon-Smith seemed to imply that he would like local authorities to get into the mire, as that would teach them a lesson. When that happens, it is the citizens who pay the cost. We do not want local authorities to get into the mire; we want them to be as active and independent as possible, within the big picture. We cannot encourage them to get into the mire, for it is the council tax payer who suffers at the end of the day.
  I hope that there will be a set of powers in the Bill that will give greater powers to local government. There is a consensus across all parties in the House, in another place and in local government generally that the powers are a good replacement for the existing setup. People will obviously want to broaden and deepen them here and there but, by and large, it is a good package for local government. It is designed to keep them out of the mire, not get them in it.
  3.45 p.m.
  Lord Dixon-Smith: I hope the noble Baroness, Lady Hamwee, will forgive me if I say that although I accept the Bill's intentions, I have found that if we want people to behave responsibly, we have to treat them as if they are responsible, not as if they need limits and have to be tied down.
  The point that the Minister has not answered is perhaps more significant, regarding whether the prudent management of an authority's financial affairs permits the borrowing of money for revenue use. That was the point at which I was aiming my remarks. I would be delighted to hear that that was so, but I suspect, because of the Bill's title, that it is not.
  Lord Rooker: It may not be, but I can assure the noble Lord that what local authorities do with their money in terms of revenue and capital will form a considerable part of some of our later debates. We can go into that in some depth at the appropriate time.
  Lord Dixon-Smith: I hear what has been said but I wonder if, when all that is over, the noble Lord might be prepared to concede that he might need to think a little more carefully about that particular phrase at this particular stage of this particular Bill.
  Baroness Hamwee: I agree with the noble Lord, Lord Dixon-Smith, on his comments about local authorities but I might not apply the analogy of teaching his son a lesson. I do not want to take up the Committee's time in investigating the affairs of the Dixon-Smith family.
  I confess to remaining a little troubled by this. Perhaps we can pursue it after the Committee stage. The Minister says that the present law does not confer an explicit power with regard to both borrowing and investment but that it is accepted that there is an implicit power. It would be wise to consider whether any wording might be inserted to make it clear that the
  GC60
  power is not new. Might the legislation otherwise not open up the possibility of challenges regarding previous accounts which have not been closed for local authorities? I have already mentioned the difficulties that can be caused, sometimes rightly, by a council tax payer inspecting accounts and raising matters with the district auditor. If this is not a new power, it would be comforting to say so.
  The Minister also said that an authority could borrow provided that it regards the borrowing as prudent. That is not quite verbatim, but I think it was his thrust. I agree that the local authority should judge whether its borrowing or its investment is prudent, but the clause suggests an objective rather than a subjective test, which could contain the seeds of later difficulties.
  I appreciate that I am being particularly technical, and that is a pity because one would rather start a Bill on a political note. We will be political later, no doubt. Having made those remarks, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 1 agreed to.
  Clause 2 [Control of borrowing]:
  Baroness Hanhammoved Amendment No. 2:
  Page 1, line 16, leave out "direction" and insert "order"
  The noble Baroness said: In speaking to Amendment No. 2, I am also speaking to Amendments Nos. 23 and 69. They all more or less follow the same line. As the noble Baroness, Lady Hamwee, said, we welcome the possibility of greater freedom and flexibility. I am bound to say, having read the Bill clause by clause, that I am not quite sure where that freedom and flexibility will come from. However, we may manage to unpick it as we go.
  Amendment No. 2 would replace the Secretary of State's ability to specify an individual local authority's borrowing limit by direction with a requirement to do that by order, thereby making any borrowing limit decided by the Secretary of State subject to parliamentary scrutiny.
  We believe that it is reasonable to expect this sort of examination. After all, the additional powers this provision brings the Secretary of State go against the general principle of giving more freedom to local councils. We understand that if the Government were expecting to specify a number of individual limits, the process could become cumbersome and impractical. But since this is a reserve power only—it is suggested that it is used in exceptional circumstances, if something has gone wrong at a local authority—we believe that such an exception is so important that the Secretary of State should spell out his reasons justifying limiting a council's borrowing, and he must do that before Parliament.
  Amendment No. 23 continues this theme. It is to find out what is meant in page 3, line 4, by "direction". It is mentioned a lot in the Bill, and it would he helpful, at this early stage, if the Minister could identify what is meant by "direction". Or are we misreading this? Is

  GC61
  it intended that a direction would be laid before Parliament like regulations, or is it just a diktat to the local council in question?
  Amendment No. 69 is, we believe, of fundamental importance. Chapter 1 deals with capital finance, making provision for borrowing credit arrangements, the use of capital receipts, investments and accounting practices to be followed by local authorities. It introduces a considerable number of changes to the current system, several of which involve directions from the Secretary of State.
  If the Secretary of State is able to direct a local authority in these matters, it would appear to be a considerable usurpation of local authority power, bearing in mind that the Bill is meant to be about freedom and flexibility. We believe that local authorities know better than central Government how to manage their own financial arrangements. We are therefore not comfortable with these new powers and believe that it would be preferable for all directions made under this chapter, and in others that we shall come to later, to be in the form of regulation and therefore subject to parliamentary scrutiny. I beg to move.
  Baroness Hamwee: We share the noble Baroness's concern. It is sad, so early in the Bill, that what is given with one hand is subject to being taken away with the other. Clarity about how that taking away might happen would at least leave us knowing what the procedure would be and give us a little more certainty.
  Lord Rooker: I will do my best to answer. I am reminded of the comments of the noble Baroness, Lady Hamwee, on the last group of amendments, that she wanted to be political. I know it is unfair, but could she announce when she is being political, so that we know? We always have trouble with the Liberal Democrats in this respect.
  Baroness Hamwee: For my own self-respect, I have to say that I am always political.
  Lord Rooker: We have already had one major announcement of a change of policy from the noble Baroness, Lady Hanham, about letting local authorities do anything they want and keeping the big hand of Government off them. That is certainly a major change from what I experienced in 18 years of opposition in another place. Anyway, I digress and am falling foul of my cardinal rule—I will stick to replying to the amendments.
  Amendment No. 2 relates to Clause 2(2). It is not a question of giving powers with one hand and taking them away with the other, and I hope to be able to explain that. This is a power under which the Secretary of State could allow an individual authority to breach its national borrowing limit. The national limit would be intended to apply to all authorities, but-we could occasionally need to offer emergency assistance to an individual authority. We can do something like this
  GC62
  under the present system by issuing a supplementary credit approval to an individual authority, thereby allowing it to undertake extra borrowing.
  Only in the most exceptional circumstances would it be right to allow an individual authority to breach its national limit. The criteria would be similar to those we apply at present before issuing supplementary credit approvals. We would need to be satisfied, for example, that the authority's difficulties were such as to threaten the delivery of essential services. And any extra borrowing capacity we allowed would still have to be within the authority's own local prudential limit, since the Bill gives us no power to allow a breach of that limit set under Clause 3(1).
  Clause 2(2) would allow us to exercise this power by issuing a direction—in other words, by sending a letter to the authority, which is what we do when we issue a supplementary credit approval under the present rules. That would allow us to respond quickly to a case of real need. We could also easily attach any necessary conditions to the direction and tailor these to the precise circumstances of the case. However, the amendment would require us to lay an order before Parliament instead. That procedure would be much less flexible and could involve quite unacceptable delays. It is not an appropriate means of dealing, in a sensitive way, with a particular authority's emergency needs.
  Amendment No. 23 would retain Clause 4(2), under which a local borrowing limit could be set, but require the power to be exercised by regulations rather than by direction. The use of directions is a simple administrative procedure which allows a quick and sensitive response to local circumstances. Making regulations, which would normally take many weeks, is less flexible.
  In response to concerns expressed by local government, we have made it clear on the face of the Bill that this power may be used only to stop an authority borrowing more than it can afford. But if the power needed to be exercised against an authority deliberately flouting the prudential code, rapid action could be important. The amendment would therefore lead to delay in a situation where action might need to carried out in days.
  The power in Clause 4(2) was among those considered by the Delegated Powers and Regulatory Reform Committee. In its 16th Report, of 2nd April, the Committee reported on this Bill and did not recommend any change in relation to this provision.
  Amendment No. 69 covers some of the same ground. It relates to Clause 20, which deals with all the powers in Part 1 of the Bill to issue directions. The amendment would prevent the use of that flexible procedure and require regulations to be made instead.
  There are three powers of direction in Part 1. The first is the power in Clause 2(2) to waive the national borrowing limit, which I have just discussed in relation to Amendment No. 2. Secondly, under Clause 4(2), the Secretary of State could impose a local borrowing limit on an authority by direction. Finally, under Clause

  GC63
  16(2)(b), a direction could be used to allow items of an authority's revenue expenditure to be treated as capital expenditure.
  These powers are essential to the Bill. As I have explained, they enable action to be taken quickly and sensitively in particular cases. However, the amendment would, in effect, remove that option and require regulations to be made instead. As I said, that could lead to quite unacceptable delays and reduce the flexibility for the Government and local authorities.
  Several precedents have been set for the use of directions in the present capital finance system introduced in 1990 by the previous administration. I hope that, with these assurances which I hope are those sought by the noble Baroness, she will withdraw her amendment.
  4 p.m.
  Baroness Hanham: I thank the Minister for that explanation. While none of us seeks to be political at this early stage in our proceedings, I too have been a leader of a council and I know what government interference, of whichever complexion, can do. From that neutral point, perhaps I may take the opportunity to declare my interest as a current member of a local authority. Perhaps that will cover it for the duration of the Committee stage and I shall not need to bore everyone by repeating it.
  If I am correct in my interpretation, the Minister has explained that this would be used only in an emergency and that direction would have to be introduced because of that emergency situation. I further understand that it would be introduced because a local authority had either overextended itself or was in danger of doing so. The Minister is nodding his head to say that that is correct.
  I shall read with care the Minister's comments on the amendment, and for the moment I shall withdraw it. While I do not promise not to return to the matter, I believe that his remarks have given us the necessary clarification.
  Amendment, by leave, withdrawn.
  Baroness Hanhammoved Amendment No. 3:
  Page 2, line 1, leave out ", without the consent of the Treasury,"
  The noble Baroness said: The purpose of this amendment is to probe the circumstances under which the Treasury would give consent for a local authority to borrow other than in sterling, whether that consent would be general or would apply to a particular authority, and how it would be exercised. The Explanatory Notes, which serve as my bible here, make it clear that the Treasury could give approval for borrowing in currencies other than sterling, but I want to probe into exactly what that would mean.
  Under what circumstances would the Government think it prudent and right for local authorities to borrow in other currencies? Can the Minister envisage a reason for doing so, and could he cite some examples of where other currencies might be used? Do the Government envisage allowing an adventurous authority to borrow, as an experiment, Japanese yen to
  GC64
  take advantage of lower interest rates or would the power be exercised only as part of a general authority to borrow?
  Can the Minister give examples of past borrowing in other currencies and how successful that was? What was it in the past that led Ministers possibly to include this power, by the exception that the Treasury might approve it? In the light of what we have been discussing, I hesitate to ask whether there would be parliamentary control over the general lifting of a ban on borrowing in any currency? Does the Chancellor envisage allowing it simply by direction, or would the permission be granted only by regulation? Would such an order be subject to parliamentary scrutiny?
  Can the Minister give an explicit assurance that this power is not intended and would not be used under any circumstances to enable a general power to borrow in euros, as part of a back-door policy—
  Noble Lords: Oh!
  Baroness Hanham: I knew that noble Lords were waiting and poised for me to refer to the euro. I did not want to disappoint Members of the Committee. So the "euro" word has slipped in. We want to know whether the power could be used as a back-door transfer to the wider use of the euro in the economy. Such a major decision could be taken only in the context of general legislation on currency change. However, it is clear from what is proposed that it is expected that at some point borrowing could take place in other currencies. Without being too humorous about it, the euro area would be a logical choice and therefore I should like the Minister to explain further what this proposal would empower the Government to enable local authorities to do. I beg to move.
  Lord Dixon-Smith: I support this voyage of exploration. Investing in international currencies is quite a dodgy business, but of course investing in a currency is different from borrowing for revenue purposes. It would not be unreasonable to suppose that, if the power to constrain borrowing abroad was not in place at the Treasury, local authorities could at present borrow more cheaply if they were permitted to borrow in Europe, which might produce an interesting side-effect.
  An even more interesting side-effect is that, at present, sterling is relatively weak against the euro. If sterling were to appreciate over the duration of the debt, not only would an authority benefit from the lower interest rate, it would be able to repay a considerably lower sum when the debt finally fell due. So I do think that it is worth exploring this. However, I should like the Minister to go into the details of investment in foreign currencies.
  Every local authority has a large pension fund. It is not unknown for them to spread their investments across equities, gilts, property and foreign currencies. I had some painful experience of that with certain investment advisers and I would be wary of it.

  GC65
  However, the question I want the Minister to answer is whether this proposal would affect that position. I seek a reassurance that it will not do so.
  Lord Rooker: I can answer the final question put to me by the noble Lord, Lord Dixon-Smith, without advice. The answer is that no, it would not, because the Bill refers to local authorities borrowing "otherwise than in sterling". I see no connection between that and pension funds.
  It is my first time in the Moses Room, but I know that when the noble Lords, Lord Stoddart of Swindon and Lord Pearson of Rannoch, find out that we are debating the euro, there is going to be trouble. I can reassure noble Lords on this point because, first, this clause simply carries forward a provision already in place under the present legislation. The Treasury's power of consent has never been used, and therefore no examples can be given. However, I can say in response to the noble Baroness that if the UK ever adopted the euro, primary legislation would be needed to deal with statutory references. It would be a monumental piece of legislation.
  Borrowing in a foreign currency involves exchange rate risks as adverse movements in rates could result in a local authority owing more than it had borrowed. We would be reluctant to allow an authority to expose itself to such a risk. However, as local authorities increase their dealings with contractors and partners outside the UK, it is conceivable that in certain special circumstances an authority might make a case for such consent. Given that, it is worth preserving the flexibility. However, I stress that it would be most exceptional.
  The Treasury has never used this power so there are no examples to cite. I know of no applications in the pipeline. With that reply, I hope that the amendment can be withdrawn.
  Baroness Hanham: I thank the Minister for that reply. I wish to say only that quite often adverse risks are associated with investing in this currency, let alone investing in currencies elsewhere. Unless they are cautious, which I am sure they would be, local authorities could trip over their own feet even with sterling, let alone with currencies elsewhere. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 2 agreed to.
  Clause 3 [Duty to determine affordable borrowing limit]:
  Baroness Hanhammoved Amendment No. 4:
  Page 2. line 6. leave out "keep under"
  The noble Baroness said: In moving Amendment No. 4, I shall speak also to Amendments Nos. 5, 6 and 7 because they all address the same matter. The purpose of these two sets of amendments, the first of which applies to local authorities and the second to the Mayor of London and his functional bodies, is to explore what the Government mean by "keeping under review" the level of affordable borrowing. Will
  GC66
  the Minister spell out what kind of regime he envisages a local authority should follow and how much he expects it to do to show to the department that it had complied with this function?s
  All prudent authorities already review their finances and borrowing on an ongoing basis. In most local authorities that is underpinned by quarterly monitoring. Certainly every authority should undertake such a review at least annually, which is sought in Amendments Nos. 5 and 7. It is important, first, to get to the root of what is the expectation of "keeping under review" and then to ensure that such a review has some teeth.
  This also applies to the Mayor of London and the second group of amendments would have the same effect on what is suggested that he should do and how to keep it under review. I beg to move.
  Baroness Hamwee: I wish to put a short question. While I accept that the amendments tabled by the noble Baroness may be probing, are not authorities required to conduct an annual review as part of the annual budget-setting process? That must be the case, whether or not one states it.
  Lord Bassam of Brighton: Clause 3 is central to the prudential borrowing system. Local authorities are to be free to borrow whatever is prudent, in other words, whatever they can realistically afford. Clause 3(1) therefore requires authorities to determine and keep under review how much money they can afford to borrow. Clause 3(2) makes a similar provision in relation to the Greater London Authority and its functional bodies. I am sure that the noble Baroness is well apprised of that.
  Amendments Nos. 4 and 5 to Clause 3(1) would specify that the authority must determine and review its own borrowing limit at least annually. We agree that it is important that these processes are undertaken at least once a year, but there is no need to say that in the Bill. Clause 3(5) provides a power to make regulations about the procedures for setting and reviewing the borrowing limit, and Clause 3(6)(a)(i) makes it clear that such regulations may cover the timing of those decisions. So if we thought it necessary to include this timing issue in legislation, we could deal with it by way of regulation.
  However, the alternative option is to cover all such procedural details in a code of practice, and that is the course we favour. Clause 3(7) provides that regulations may specify codes of practice to which local authorities are to have regard when setting their affordable borrowing limits. We have made it clear from the outset that we intend to specify the prudential code that is being specially prepared by CIPFA, the Chartered Institute of Public Finance and Accountancy.
  The latest draft of the CIPFA prudential code has been placed in the Library of the House together with a draft of the regulations that refer to it. The code makes it perfectly clear that the borrowing limit is to be determined each year as part of the annual budgeting process and then to be kept under continuous review.

  GC67
  Dealing with such matters as timing in the code will allow greater flexibility and, in our view, much less legalistic framework and language. However, authorities will still be subject to a clear statutory duty to have regard to that code.
  In the case of the Greater London Authority and its functional bodies, Clause 3(2) provides that the affordable borrowing limit is to be set and kept under review by the Mayor of London. Amendments Nos. 6 and 7 would oblige the Mayor to undertake those procedures at least annually. However, the CIPFA prudential code already embodies such a requirement and the Mayor, like local authorities, will be under a statutory duty to have regard to that code. If the noble Baroness, Lady Hamwee, is in the GLA, her political edge will ensure that it is kept much more up to speed and regularly reviewed.
  4.15 p.m.
  Baroness Hanham: My only comment last time was, "Don't count on it". The noble Baroness, Lady Hamwee, keeps a very tight notch on things. However, I am not sure that she always wins, although she might like to.
  The amendment would have been less necessary if we had seen the draft regulations and the code of practice. I am mindful of the fact that they were sent to me while I was on holiday, so they were a bit late for catching up with as the amendment had already been drafted. I am prepared to accept the explanation. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendments Nos. 5 to 7 not moved.]
  Baroness Hanhammoved Amendment No. 8:
  Page 2, line 14, at end insert "of which at least two-thirds of the members must approve his determination as to the maximum borrowing level affordable in each financial year"
  The noble Baroness said: Amendments Nos. 8 and 10 aim give the Greater London Assembly and its functional bodies a lock on the exercise of the Mayor's powers to set his own borrowing limits. Part 1 of the Bill gives the Mayor of London power to set limits for borrowing only after consulting the London Assembly and the functional bodies. There is no provision that requires him to heed the Assembly's views or any power for it to make him do so.
  The amendments give the Greater London Assembly and the Members of the functional bodies power to veto a high limit of borrowing being determined by the Mayor. I ask: what, in the Mayor's career so far, gives the Government the idea that he alone should have the power and the common sense to set appropriate borrowing limits? The GLA precept has already risen by 29.6 per cent this year and by other sums in previous years. Most boroughs would probably say that they would be very nervous about the borrowing being able to be increased without the Assembly having a role in it.
  GC68
  Amendment No. 10 proposes that at least two thirds of the Members of the Assembly must approve the Mayor's,
  "determination as to the maximum borrowing level affordable in each financial year".
  The Mayor already needs a two thirds' approval by the Assembly for his GLA budget proposal. There is no doubt that any increase in borrowing would have an impact on the revenue implications of the Mayor's budget. By definition, that would then have an impact on the London boroughs. Therefore, we think that this is a sensible lock to put on the Mayor. The London Assembly could well take on this requirement to not only consider the matter, but to vote in favour of it by a considerable majority. I think that the boroughs would regard the tension that would put on the Mayor as welcome. I beg to move.
  Baroness Hamwee: I decided that this would be the point at which to declare an interest as a Member of the London Assembly, but that has already been done for me by the noble Lord, Lord Bassam. I should say that I am currently also chair of the Assembly and chair of the Budget Committee. Could I first—
  Lord Bassam of Brighton: Leave it with the Government.
  Baroness Hamwee: Unfortunately, the Greater London Authority Act did not give as extensive powers to the Assembly or indeed to the Budget Committee as I might have liked.
  Perhaps I may plead with the noble Baroness, Lady Hanham. Mr Livingstone will not always be the Mayor; please do not encourage him by talking as if he might be. I am sure that the noble Baroness takes the same view even if our conclusions as to the outcome might be different.
  As to Amendment No. 8, the Mayor's annual budget can indeed by blocked by two thirds of the Membership of the Assembly, but only if there is agreement by two thirds on an alternative revenue budget. I do not say that I support that, but that is how it is. I am not sure how the amendment of the noble Baroness fits in with it.
  Of course the issue of how much the GLA "can afford to borrow" will be considered as part of that process because that is a part of the revenue budget. As regards capital, as distinct from the implications of the borrowing, the Assembly is consulted on the capital budget. After three years, I have learned that consultation can be all well and good but you say what you have to say and maybe that is an end of it; it does not necessarily affect the outcome.
  On Amendment No. 10, I am concerned about muddying the role of the functional bodies. The budget of the GLA, including that of the four functional bodies, is the Mayor's budget. It is not the budget of the different functional bodies. I would have liked to have seen some of the functional bodies taking a bigger part in the consideration of the budget put forward by the current Mayor over the past three years—in particular, Transport for London. However,

  GC69
  I am not sure that that is consistent with the role of the functional bodies. It is tempting to use the Bill to go down the road of suggesting substantial amendments to the established regime. I shall try not to do that and simply confine myself to those remarks. Although, as I say, I should like some of the functional bodies to take a more energetic role in regard to their own budgets than they have done up to now.
  Lord Dixon-Smith: I was very interested to hear what the noble Baroness, Lady Hamwee, had to say. Of course when the GLA was set up we debated together against the Government about the arrangements that were finally set up.
  I have a great deal of sympathy with what both noble Baronesses have said. It is a dangerous thing to do to stand between two ladies. However, we need to remember that the Mayor is in a unique position. Whether or not we agree that it is the appropriate position is neither here nor there. The Mayor will not always be Mr Livingstone. I am grateful for that reminder. I draw Members' attention to Clause 3(8). It states:
  "A local authority's function under subsection (1) shall be discharged only by the authority".
  That implies that such authority must be taken by the council and the Members quite openly and that it can never be delegated. We need to remember in respect of the Mayor of London that he is the authority. I can imagine his having some fairly ferocious debates with himself from time to time, but I do not see how he possibly manages to divide, and even if he does, he will always win the Division.
  Lord Bassam of Brighton: The digression into London GLA politics is interesting, but we ought to try to focus on the mechanics of this because they are not just there for the GLA, they are there for all local authorities.
  The regime we seek to establish is to enable local authorities to be able to borrow whatever is prudent; in other words, what they can afford. Clause 3(1) requires the authorities to determine and keep under review how much money they can afford to borrow. Clause 3(2) makes a similar provision for the GLA and its functional bodies.
  Amendment No. 8 relates to Clause 3(3), which requires the Mayor to consult the London Assembly before setting the prudential borrowing limit for the Greater London Authority or one of its functional bodies. It would require the limit to be approved by at least two thirds of the Assembly Members. We understand that.
  It might be helpful if I set out and explain the policy behind the arrangements in Clause 3 relating to the GLA bodies. In the case of all other authorities, the intention is that the setting of the borrowing limit should always be undertaken by the full council, rather than being delegated to officers. That is an important safeguard, which is implemented by Clause 3(8).
  GC70
  In the case of the Greater London Authority and its functional bodies, we again believe that the setting of the borrowing limit should not be delegated to officers. However, for the GLA group of authorities, the term "full council" has no application. To achieve the equivalent result, the Bill provides special arrangements to reflect the current responsibilities for budget setting and, as noble Lords have given good voice to, the central role—the key importance—of the Mayor of London.
  The affordable borrowing limit is to be set by the Mayor, both for the GLA itself and for each of the four functional bodies—Transport for London; the Metropolitan Police Authority; the London Fire and Emergency Planning Authority; and the London Development Agency. Before doing so, the Mayor must consult the London Assembly. Also, in the case of the limit for a functional body, the Mayor must consult that body itself. So that point is established. Clause 3(9) makes it clear that the Mayor's normal wide powers of delegation are curtailed in this context.
  The amendments to Clause 3(3) seek to elaborate on those requirements. The reference to the two thirds majority is no doubt meant to reflect the veto arrangements which the Assembly already has over the GLA budget. But, in practice, the prudential borrowing limits will have to be considered as part of the annual budgetary process and the Assembly's normal scrutiny and intervention powers will of course apply in those circumstances. The statutory consultation with the Assembly is sufficient to ensure long-term precept issues are fully exposed to democratic debate; and the Assembly has adequate teeth, through its ability to override the Mayor on the annual precept, subject to the two thirds majority.
  Furthermore, as it stands, Amendment No. 8 presents a potentially serious problem. If the Assembly were unable to reach a two thirds majority on the Mayor's proposals, the GLA and the functional bodies would have no borrowing limit set and so would not be able to borrow at all. That would be unacceptable. Being answerable to the electorate for the GLA's budget and precept through the ballot box is in our view a very important part of this process.
  Amendment No. 10 relates to Clause 3(4), which requires the Mayor of London, when setting the borrowing limit for the GLA functional bodies, to consult those bodies. It would require two thirds of the board members of each body to approve the borrowing limit. The amendment seems to be based on the assumption that responsibility for considering the precept is a matter for the functional bodies themselves. In fact, it is for the democratically elected Mayor and the Assembly to consider the impact on the precept on London taxpayers and to justify their decisions directly to the electorate. The arrangements proposed in the Bill are sufficient to ensure that the effects of the borrowing limit are properly considered in the normal budgetary process.
  The boards of the functional bodies, which are not elected, do not have a formal role in setting the precept and should not be expected to concern themselves with

  GC71
  precept and taxation issues. The amendment would give them such a role and for that reason we believe it to be inappropriate.
  I hope, with that understanding explanation, that the noble Baroness will feel confident to withdraw her amendment.
  4.30 p.m.
  Baroness Hanham: I suppose that if I had greater confidence in the Greater London Assembly I might not be making these proposals. We have to understand that borrowing by the Greater London Assembly is going to be a major issue; it impacts not only on the authority itself but more specifically on the London boroughs. Moreover, any borrowing that it undertakes is not likely to be of a minimalist nature but is likely to be fairly substantial. It therefore seems fundamental that proposals for borrowing of whatever extent should be part of a policy initiative. Such proposals should not simply drop out of the sky, but they could do so. In the middle of a financial year the Mayor might suddenly decide that he had yet another wonderful wheeze that he wished to implement and would require borrowing. He may therefore wish to borrow outside the agreements already reached in the annual budget.
  The mayoral authority is at a quite different level from every other local authority. As we were reminded throughout our consideration of the Regional Assemblies Bill, the GLA is not a local authority. It must therefore be right that members of the functional bodies should have a significant role in policy and in considering the reasons for which money is sought. They should be able to decide whether to approve that policy. Equally it must be right that the Greater London Assembly has a view on the purposes for which borrowing is sought and that it should agree that borrowing.
  I hear what is being said—that the budget itself must be agreed by two thirds of the Assembly. However, I foresee cases in which the Mayor may wish in the middle of a financial year to borrow for some scheme or other which was not dealt with at the annual review. In such circumstances it is essential that a proper majority is in favour of the proposal. Not only should a majority of the democratically elected members of the specific authority approve the proposal, the proposal should also be approved in the functional bodies by more than a simple majority of those interested in the particular policy. It should be approved by many more people than simply the Mayor himself.
  Therefore, although I heard what has been said and I listened carefully to the beseeching voice of the noble Baroness, Lady Hamwee, for now I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Baroness Hanhammoved Amendment No. 9:
  Page 2, line 14, at end insert—
  "( ) In deciding under subsection (3) whether a determination by the Mayor represents an affordable level of borrowing, the London Assembly must have regard to the likely effect of borrowing to that level on the precept levied by the Greater London Authority on each of the London Boroughs."
  The noble Baroness said: This group of amendments also deals with the Mayor of London. The amendments seek to ensure that in deciding whether the Mayor is setting sensible and affordable borrowing limits for the Greater London Authority and the functional bodies, the members of the Assembly and the functional bodies must take into account the likely effect of the proposed borrowing limits on the level of the precepts to he levied on London boroughs. Current experience shows that the boroughs are the cats that are kicked whenever the Mayor decides to go for higher expenditure on a policy and wants a bit more money.
  The boroughs need a fair deal from the Mayor, but they currently do not believe that that is happening. The precept has increased every year by about one third. It is increasing remorselessly and despite all the efforts of the Assembly members to bring it under control. I think it fair to say that they are not always successful in bringing the extra figures down to what the boroughs believe to be a reasonable level. Therefore, apart from requiring a two-thirds majority in relation to borrowing, the amendments would require that consideration be given to the impact of the borrowing on the levy and precept on local authorities. That would at the very least prevent anything happening without the knowledge of the Assembly. It would also impose a test of transparency and a duty of care. In our view that is a sensible safeguard. I beg to move.
  Baroness Hamwee: Perhaps I may first take up a comment made by the noble Baroness in speaking to the previous group about a mayor deciding in the middle of the year that he or she would like to borrow money for a new project. I think that the issue is wider than that, and to that extent I share her concern. I assure her that the monitoring that the London Assembly has undertaken in the current term is not simply a once-a-year exercise after which we forget about it. It is important publicly to conduct regular monitoring and to question both the Mayor and the functional bodies about their spending. Last year, for example, it was revealed that Transport for London is heading, in about five or six years, towards a hole in its budget of about £600 million. Therefore, mid-year borrowing to deal with anticipated problems could indeed be an issue.
  However, having said that, I should say that borrowing is almost the least of it for Transport for London and the other transport authorities. Judgments about fare levels are the most important issue. Only about 2 per cent of Transport for London's current income of about £2.3 billion is raised by the precept, and that percentage will decrease when

  GC73
  London Underground is handed over. So although the cash figures are not inconsiderable, as a proportion they are very much the least of it.
  My overall response to this group of amendments, particularly Amendment No. 9, is that although we must have regard to the effect on the precept, why should we single out borrowing in that respect? One should have regard to the effect on the precept in terms of the whole budget. I would hate to see the Bill send out the signal that other aspects of spending are less important in that regard. It is of course possible that the Assembly would support borrowing and its effect on revenue for a particular project but not support other spending. So I think that the picture is perhaps more complicated than one might initially think.
  As for Amendment No. 11, we have already referred to the role of the functional bodies. Although they are consulted on their own budgets and within the parameters of guidance issued by the Mayor, the budget is the Mayor's budget.
  Lord Bassam of Brighton: Amendment No. 9 relates to Clause 3(3) which requires the Mayor to consult the London Assembly before setting potential borrowing limits for the GLA or one of its functional bodies. That fact has been made clear in earlier discussions and debates. In our view it is unnecessary to say that the Assembly must have regard to the effect on the precept which will be levied on the London boroughs. As I said earlier, the borrowing limit will inevitably be considered as part of the normal budgetary process. That should ensure that the impact on the precept is properly considered. However, I take the point made by the noble Baroness, Lady Hamwee, that not only borrowing limits should be considered in the context of the precept: all the other budget elements should also have a bearing on it. It should therefore be seen as part of a wider debate and in that wider context. The effect of the precept is of course going to be a key concern for the Mayor and the Assembly, who are answerable to the electorate through the ballot box for the GLA's budget and precept.
  Amendment No. 11 relates to Clause 3(4) which requires the Mayor of London when setting the borrowing limit for the GLA's functional bodies to consult those bodies. Amendment No. 11 would require the bodies' board members to consider the effect of the precept levied on the London boroughs. As I said, it is for the democratically elected Mayor and Assembly to consider the impact of the precept on London taxpayers and to justify fully—or not—their decision to the electorate. I think that we have to put some confidence into the political process. In a sense, the amendment rather underlines that fact. We need to let the political processes run their course.
  As I explained before, the boards of the functional bodies, which are not elected, do not have a formal role in setting the precepts and should not be expected to concern themselves directly with precept and taxation issues. The amendment would give them that role. We think that the democratic process should have the override here and run its course. Clearly that will not
  GC74
  entirely satisfy the noble Baroness. However, the processes are at work and throw up some of the strange idiosyncrasies that inevitably happen in the budget process. I think that we have to trust that process.
  Baroness Hanham: I thank the Minister for his reply. The democratic process is fine every four years when people are sharply brought face to face with those seeking their votes to be elected Mayor of London, but words such as "consult" and "consider" seem terribly feeble in this context. I am trying to separate out the difference between a local authority and the Greater London Authority where the sums borrowed could be inordinately larger than those sought by any individual local authority. As the noble Baroness, Lady Hamwee, indicated, Transport for London certainly has the potential to hoover up vast borrowed sums and resources.
  I fully accept that this issue is examined by the London Assembly and that the budget must be approved by two thirds of the Assembly. However, I still see pockets of potential problems where borrowing might fall outside that annual review and might need to take place in the interim. Despite the assurances that I have been given, I remain concerned about that. At the moment, however, I shall not press the issue. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendments Nos. 10 and 11 not moved.]
  The Deputy Chairman of Committees: I should inform the Committee that if Amendment No. 12 were to be agreed to, I shall not be able to call Amendments Nos. 13 to 17 inclusive owing to pre-emption.
  Baroness Hanhammoved Amendment No. 12:
  Page 2, line 17, leave out subsections (5) to (7) and insert—
  "( ) In carrying out any determination or review under this section, a local authority or functional body shall have regard to any relevant code of practice or guidance issued by the Audit Commission or the Chartered Institute of Public Finance and Accountancy."
  The noble Baroness said: The purpose of this amendment is to try to dismantle the Government's intended cat's cradle of regulation-making powers about local authority borrowing, about which we have briefly spoken, and to replace it with a genuinely prudential regime in which local authorities would be freed of onerous regulation but would be required to take heed of codes of practice issued by CIPFA or the Audit Commission.
  Local authorities are currently being driven mad by excessive regulation on all fronts and there is no guarantee that any of the Bill's provisions will improve the situation. The Bill promises the same nightmare for directors of finance, beginning with the subsections that this amendment seeks to remove.
  We just have to glance at subsection (6) to see the likely scope and scale of the regulation that the Secretary of State is able to impose. I am not at all reassured by the only regulation of which I have a copy—part 1 of the code of practice, the draft regulation which the Minister kindly arranged to be

  GC75
  sent to me during my brief week off. That regulation refers only to the code of practice of CIPFA. That is the only aspect mentioned or given credence under the regulations provided for in subsections (5) and (6). It is the only one I have seen. It may be that the code of practice, which has been laid in the Library and which I will certainly read carefully before Report stage, deals with some of the regulations which it is suggested that the Secretary of State might be able to make under subsections (5) and (6). Equally, however, it may not; if that is so, no draft regulations yet exist regarding the main bulk of Clause 6.
  The CIPFA code of practice could be alternated with one from the Audit Commission. However, if the code of practice is going to be very clear on all those matters, I will not want to press the amendment. I would be glad to hear what the Minister has to say. I beg to move.
  4.45 p.m.
  Lord Rooker: Amendment No. 12 deals with the power in Clause 3 to which the noble Baroness has taken exception, in particular the wording of subsection (6). The amendment deals with the way in which local authorities are to set their affordable borrowing limits. It would remove the Secretary of State's power in subsections (5), (6) and (7) of Clause 3 to make regulations about setting limits. Instead, the clause would explicitly require authorities to have regard to a relevant code issued by the Audit Commission or the Chartered Institute of Public Finance and Accountancy.
  There is a simple answer to the noble Baroness's questions, into which no one need read anything subversive. We have always intended to make regulations requiring authorities when setting their prudential limit under Clause 3 to have regard to the code that CIPFA is producing. Copies of the draft code and draft regulations are in the Library. For the avoidance of doubt, they are in a box marked "Secondary legislation, Local Government Bill". A separate set of secondary legislation relates to this Bill. The clause as now drafted gives us the option of identifying some other code, including one of the Government's own. The clause also allows us to use regulations directly to specify how the borrowing limit is to be set. We must preserve that flexibility. This is the bald point which goes to the heart of the amendment.
  We are very grateful to CIPFA for producing the draft code and we fully recognise that it is an independent body, as is the Audit Commission. Neither of those bodies is compelled to publish a code and we must not take it for granted that they will always wish to do so. If, for any reason, CIPFA ever ceased to issue its code, the clause as drafted would allow the Government to produce their own guidelines, either in the form of a code or regulations, or a combination of the two. Without that power, the system would become completely unworkable.
  The provisions are there to keep the legislative options open, in case practical experience of operating the new system highlights concerns which need to be
  GC76
  tackled through regulations. They provide a fallback just in case it is needed. The other important point is that the Audit Commission and CIPFA are independent organisations; the Government are in no position to order them to produce a code. We are extremely grateful to them for doing so. It is that code to which we shall refer, and the powers in subsections (5), (6) and (7) are simply a back-up for the future.
  Baroness Hanham: I wonder which came first, the chicken or the egg? My understanding is that these clauses were in the Bill long before anyone thought of getting CIPFA to produce a code of practice. If they were, it would have been sensible to put that organisation in.
  I need to read the regulations, and we shall return to the matter on Report. In the meantime, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Baroness Hamweemoved Amendment No. 13:
  Page 2, line 31, after "by" insert "or on behalf of"
  The noble Baroness said: In moving the amendment, I shall speak also to Amendments Nos. 14, 15 and 16.
  Amendment No. 13 to Clause 3 refers again to codes of practice. It suggests that regard should be had to codes issued,
  "by or on behalf of the Secretary of State".
  This amendment and Amendment No. 14 would insert the full stop and leave out the words, "or another".
  The position is that a code issued by "another" should be regarded as one issued on behalf of the Secretary of State. I am happy to see the draft regulation, but it seems to me that the Secretary of State should put his own name to it, as the amendment would achieve.
  Amendment No. 15 returns us to the issue of parliamentary approval of regulations, proposing that the regulations under subsections (1) and (2) are subject to the affirmative resolution. Since I tabled the amendments, I have seen the draft regulation. In a sense, one could say that it puts the code at a further remove from Parliament. The regulation refers to the current code, which can change from time to time, so the Government's proposal does not even offer real scope for challenging the next but one code. At least, that is how I understand the way in which the procedure might work.
  I am not criticising the draft CIPFA code, but we are always considering a situation in which there may be a different Secretary of State and, perhaps, a different group of people running CIPFA and making proposals on its behalf. I hope that they would not go off their respective heads at the same time, but one would want Parliament to be able to stop the worst effects of that, if it were to happen. However, I accept that Parliament might be more likely to lose the plot than would CIPFA.

  GC77
  Amendment No. 16 probes just how much discretion local authorities will have. The draft code sets out its objectives and states, in paragraph 5, that:
  "Prudential indicators that are limits are for the determination of the local authority subject only to any long stop controls under statute exercised by… the relevant Minister. The government…have indicated that these are long stop powers and will be used only in exceptional circumstances".
  The obvious question is: could we have some examples of exceptional circumstances? For instance, are they different from circumstances that could cause reserved capping powers to apply? Why is it necessary to have different long-stop powers exercised through the code? I beg to move.
  Lord Rooker: If I was an impartial, dispassionate observer—which I am not—I would think that the speech I have just heard could be regarded as that of someone wanting to be an interfering busybody in local government. The noble Baroness seems to be saying, "Let the Secretary of State and Parliament do everything", but we do not want that. We do not want to be prescriptive; we are quite happy to work with independent professional people producing professional codes of practice which are well tried and tested. It goes without saying that this is not the first code that CIPFA has produced. The suggestion that we would want to interfere and that the Secretary of State should do everything may be Liberal Democrat policy, but it is not Labour Government policy.
  Amendments Nos. 13 and 14 relate to Clause 3(7). This provides that regulations may specify codes of practice to which authorities are to have regard when setting their affordable borrowing limits. Such codes may be issued by the Secretary of State or by some other body. The amendment would only allow the regulations to specify a code issued by "or on behalf or the Secretary of State. That would require a very different approach from the one currently envisaged. I have made it clear that the code we intend to specify in regulations is the one being specifically prepared by CIPFA, which is an independent body. The latest draft code has been placed in the Library of the House.
  CIPFA has developed the code in collaboration with the Government. I should tell the noble Baroness, Lady Hanham, that the code has been part of our proposals from the very first. The whole point is to rely as much as we can on professional regulation. It is worth trying to set this out because I do not want there to be any misapprehension. We have no secret motive or agenda in subsections (5), (6) and (7). They are there for the very reasons I gave when I replied to Amendment No. 12.
  CIPFA has developed the code in collaboration with the Government, the Audit Commission and representatives of local government. However, despite that close working relationship, the code remains CIPFA's own publication. In no sense has it been produced on behalf of the Government. The great merit of the code lies in its independent status. It will be viewed by local government in the same light as CIPFA's other well-established codes of practice.
  GC78
  There is, however, no risk in relying on an independent code since it acquires no legal status until it is named in regulations. Unless the Government are content with a code, they will not specify it in regulations.
  Amendment No. 15 relates to Clause 3(5), under which regulations may be made about the way in which authorities set their affordable borrowing limits. As drafted, the Clause 3(5) power would rely on the negative resolution procedure. That is consistent with the position under the present capital finance system, which depends heavily on secondary legislation. However, the amendment seeks to make the Clause 3(5) power subject to the affirmative resolution procedure.
  The Select Committee that looks after these matters in Parliament—the Delegated Powers and Regulatory Reform Committee—in its 16th report did not recommend any change to the procedure proposed for the Clause 3(5) power.
  Amendment No. 16 also relates to Clause 3(5). The amendment is concerned with the scope of the regulatory power and seeks to limit it. I am not clear about the precise intention behind the amendment, but I must emphasise that we consider it essential to have a flexible power to regulate the setting of the affordable borrowing limit. The whole system is designed to give authorities much more freedom than they now have, but the freedom must be balanced by safeguards for local taxpayers, which means that we must be able to ensure that the affordable borrowing limit is set professionally and responsibly.
  Our present intention is that the regulations will simply require authorities to have regard to the CIPFA prudential code. However, we need to keep the legislative options open in case practical experience of operating the new system highlights concerns which need to be tackled through regulations. I do not believe that should be described, in the words of the amendment, as seeking to "fetter the discretion" of authorities. That is far from our motives.
  I hope that I have given some reassurance. I may not have completely reassured the noble Baroness, Lady Hamwee, because she wants to go down a far more prescriptive path than the Government. I could not accept that.
  Baroness Hamwee: If I were an impartial observer, I would say that it is the Government who want to interfere, more than do my noble friend Lady Maddock and I. We are saying not that the Secretary of State should do everything, but that there should be greater accountability to Parliament. I am not questioning the current Government's motives; I simply want to make certain that the wording ensures that the motives find their way into action.
  The Minister said that CIPFA was independent and talked about the code being developed in collaboration with the Government. I accept that it was also developed in collaboration with the Audit Commission and local government. I started to write down a question about what would happen if the Government disliked the code, and, as I was doing so,

  GC79
  the Minister said that they would not specify it if that were the case. Draft Regulation 2 does not say that. It states that a local authority and mayor shall have regard to the code. So, it is good in parts, in that the Secretary of State cannot stop it, but it still leaves me a little concerned about where responsibility lies.
  5 p.m.
  Lord Rooker: That is an unfair way of describing it. These are not the regulations and code; they are in draft form. The code has no statutory instrument number; it will have to be approved in due course. If we were not satisfied with the final code, we would not specify it. The regulations and code are in draft form, so the noble Baroness's concluding point is wrong and could be misunderstood by those outside Parliament who follow our proceedings.
  Baroness Hamwee: In that case, I am glad that I raised the point. Draft regulation 2 states:
  "In complying with their duties under Sections 3 (1) and (2) …a local authority and the Mayor shall have regard to any current prudential code for capital finance in local authorities issued by the Chartered Institute of Public Finance and Accountancy".
  I take from the Minister's comments that that part of the draft regulations may not appear in the same form in the final draft. I am not trying to impute motives. Perhaps others do not share my lack of understanding, but I am trying to understand the chain of command. After all, the draft regulations are all that we have to go on at the moment—although I accept that they may not be in their final form.
  I am sorry that I was not clear about Amendment No. 16 in asking what were the exceptional circumstances referred to in the current CIPFA code, which, I accept, is in draft form. The question remains of what long-stop powers the Government might need as part of this regime that could not be covered by applying current long-stop reserve powers for capping of revenue spending.
  I will read what the Minister says. I assure him that, as much as anything, I seek clarity and accountability to Parliament. For the moment, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendments Nos. 14 to 16 not moved.]
  Baroness Hanhammoved Amendment No. 17:
  Page 2, line 36, at end insert—
  "( ) No regulation made under this section shall apply to any local authority that has been assessed as "good" or "excellent" in its most recent comprehensive performance assessment."
  The noble Baroness said: In the past two or three years, local government has gone through the extraordinary process of the comprehensive performance assessment. Each local authority has now been branded with a category of performance. Presumably, at some stage, those categories may change. A few authorities are within the "good" and "excellent" categories, which, as I understand it, means that they are more than competent to manage their own affairs, and that they have also demonstrated an ability to do so.
  GC80
  There are many critics of the system, including authorities who have been assessed as being in the higher categories. Some of the criticism will be maintained if the freedom or flexibility that those authorities expect to gain as a result of achieving the upper echelons of performance are not met. The Bill, which has been lauded as giving freedom and flexibility, needs to ensure that it does just that.
  We have discussed the regulations put forward in Clause 3(5) and (6) and the code of practice. But it would be fair to say that the local authorities view further regulations with some dismay. It would not be unreasonable to suggest that there should he a light touch in regulating borrowing by good or excellent local authorities. The amendment would place those local authorities in the sort of category that they expect, and which has been made out as one of the advantages of being in those upper echelons. It would begin to mark out the fact that good and excellent authorities were deemed to be able to manage in a good and excellent way. I beg to move.
  Baroness Hamwee: I put it on record that, although we believe that external assessment is useful, we do not regard it as the appropriate indicator or permit for the exercise of rights and freedoms. We could not support the amendment.
  Lord Rooker: The noble Baroness, Lady Hanham, said that there would be a light touch. The problem is that there would be no touch, as I will seek to explain. The amendment would prevent such regulations applying to any authority assessed as "good" or "excellent" in its most recent comprehensive performance assessment. As I made clear, we envisage using the regulations to require authorities to have regard to the CIPFA prudential code. So the amendment would mean that good or excellent authorities would have no statutory obligation to consider the CIPFA guidelines.
  The amendment appears to be based on the assumption that a high-performing authority can be trusted to act prudently and thus merits the reward of being exempted from the statutory controls. Compliance with the CIPFA code is a factor that will normally be taken into account in performance assessments once the new system is in operation. Good and excellent authorities will therefore have an established track record of prudent borrowing.
  However, we must face the fact that authorities may change for the worse as well as the better. Much could happen after an authority gains its good rating and before it is assessed again. Without the prudential controls, local taxpayers would be exposed to a considerable risk. A single unwise borrowing transaction could ruin many previous years' exemplary financial management.
  I do not believe that high-performing authorities seek that apparent freedom. I am not aware of any high-performing authority that wishes to opt out. The prudential code merely records borrowing and treasury management practices that any good authority will already be following. It allows

  GC81
  individual authorities considerable discretion about the specific application of the general principles it lays down. Removing the statutory duty to have regard to the code would confer no practical benefit on high performers; it could work to their disadvantage. Good authorities will wish to demonstrate to their electorate that they are borrowing prudently. In the absence of the statutory duty to have regard to the code, the soundness of their borrowing practices will be much less apparent to the public. That loss of transparency would be regrettable.
  Good and excellent authorities would continue in their good and excellent role anyway. They have everything to gain from being part of the system whereby they must have regard to the statutory regulations. If the authorities were cast out on their own, there would be unacceptable risks between the comprehensive performance assessments. In any event, the loss of transparency would probably be more regrettable than some other risks. I hope that, with those assurances, the noble Baroness will not press her amendment and that the explanation is satisfactory.
  Lord Hanningfield: In spite of what the noble Baroness, Lady Hamwee, says, we have the CPA regime whether we like it or not. The Bill legitimises the regime, so we will have to live with it. We therefore have in this country a system of categorisation of authorities. I declare an interest as the leader of a "good" authority that narrowly missed being deemed "excellent".
  I think that the Minister missed the point. Surely, the idea is to give authorities, after they have gone through the hoops, the freedom and flexibility promised by the Government. Obviously, they will abide by the principles. As the Minister said, they would not be good or excellent authorities if they had not abided by the principles. I must have misread many of the purposes of categorisation and this Bill. It was intended to give more freedom and flexibility to the authorities that have gone through the hoops. Amendment No. 17 would give those authorities one of the freedoms or flexible measures of which we would like to see more.
  Although the Minister gave a technical answer, he missed the point as regards what could be seen as adding to the advantages of being "good" and "excellent" authorities. Can he clarify the point? Yearly changes could apply in the context of granting good or excellent local authorities any of the freedoms or flexible measures, such as freedom from inspection. But if authorities changed category, they would lose their freedom and flexibility as provided in the legislation. Will the Minister rethink on the amendment? It would provide one more type of freedom or flexibility that the Government could offer the authorities.
  Lord Rooker: Yes, one more. There is a classic argument: give them a foot, and they will want to take a mile. I am not the Minister for Local Government and the Regions, and I do not read all the papers dealt
  GC82
  with by my colleague Nick Raynsford, but I see some of them. Many areas of form-filling, reporting and accounting have been lifted from good and excellent authorities.
  But this amendment would have no practical effect on the authorities concerned. We are not asking them to do anything more. The code would not place on them an onerous burden, because they adhere to the principles anyway. It would be counterproductive to move local authorities out of the regime, leaving them vulnerable to attack. It would result in a lack of transparency. I cannot see the point that the noble Lord makes. Local authorities won many freedoms because of the assessment. Under this amendment, we would be asking them to depart from best practice, which they adhere to anyway, and which is not a burden in the first place. I genuinely believe that the amendment would have no practical benefit to any good or excellent authorities. They receive a raft of benefits—I am not sure how many—and do not have to carry out lots of tasks that they would otherwise have to do. We have lifted burdens, which is important. The code does not place on them a burden, so there is no burden to lift.
  As I know, the noble Lord strives to lead an excellent authority to do even better. But we are not placing on it any extra burden. The idea that he would say that he does not want to be subject to the code of practice—
  Lord Hanningfield: The point is the philosophy behind the regime. To return to the point made by the noble Baroness, Lady Hamwee, we live by the regime as enshrined in the legislation; therefore, it is very important that all authorities recognise that and strive to become good or excellent. My noble friend and I were asking to have that point recognised in this little part of the Bill. We will return to the point as we deal with other aspects of the Bill. Although good and excellent local authorities have freedoms from inspection, other small burdens could be removed from local government through more freedom and flexibility. We shall return to the matter, even after my noble friend's comments on the point.
  Lord Rooker: My answer to that is to ask, "Where is the burden on the good and excellent authorities in what we propose? Where is the burden that we are being asked to lift?"
  Lord Smith of Leigh: I can speak on the matter as leader of an excellent council.
  It is an apparent freedom. As my noble friend the Minister said, we would always carry on a prudential regime in a "good" or "excellent" authority. We could not exercise a freedom. I am not sure that I agree with my noble friend's view that a raft of freedoms is coming our way, but this one is apparent. I have chaired the meetings of excellent councils, and no one has asked for that freedom. We are asking for a lot, but that is not one of them.
  Baroness Hanham: I thank the Minister for his reply, and I thank other noble Lords who intervened, particularly my noble friend Lord Hanningfield.

  GC83
  The regulations that seem to be apparent in Clause 3 seem to be in addition to the normal regulation to which any local authority would have to adhere. Given what the Minister said, it may be that that is not the situation, but I will consider the matter further. In the mean time, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 3 agreed to.
  5.15 p.m.
  Clause 4 [Imposition of borrowing limits]:
  Baroness Hanhammoved Amendment No. 18:
  Page 3, line 3, after "the" insert "aggregate level of"
  The noble Baroness said: If caps on individual borrowing are to be set for reasons of prudent macroeconomic management, it is the aggregate level of borrowing that is important. It is the total debt that will have an impact on the bigger economic picture. The amendment would make that point explicit, by making sure that local authorities' aggregate borrowing was the target of Clause 4(1). I beg to move.
  Baroness Hamwee: We tabled Amendment No. 19, which is in this group. It skins the cat in a slightly different way by proposing that any regulations under Clause 4(1) should relate to the borrowing of money by all local authorities. We should make it clear that there is no distinction between local authorities, as regards the powers under the clause. We would be content with an assurance from the Minister to that effect and will not move our amendment if he can give such an assurance.
  Lord Bassam of Brighton: The amendments relate to Clause 4, which gives the Secretary of State the power to set borrowing limits for local authorities. Amendment No. 18 would change Clause 4(1), which empowers the Secretary of State to make regulations for national economic reasons setting limits on the borrowing of money by local authorities. If amended, the clause would refer to the setting of limits on the "aggregate" level of borrowing by authorities.
  It may help if I explain first how we see a national limit operating. As Clause 4(1) makes clear, such a limit could be set only for national economic reasons. The need for a limit might, for example, be triggered by a sudden downturn in the international economy. The Government would form a view on the maximum increase in local government borrowing that was sustainable. Even then, a national limit would be formally set only if there were strong evidence that the acceptable level of borrowing was likely to be exceeded without some form of intervention. In that case, for any individual authority, the limit would be likely to take the form of a maximum amount by which their borrowing could be increased over the coming financial year. The limit need not be expressed as an absolute sum but could be a formula, reflecting such factors as previous borrowing, budgets and commitments.
  Whatever formula was used at individual authority level, it would be calculated to produce the right aggregate result nationally. We are satisfied that the
  GC84
  idea of an aggregate level of borrowing is already implicit in the clause. In a sense, we are already taking on board the noble Baroness's point. For us, the amendment would add little and would not provide any further clarification. That might seem a bit rude, but that is the case.
  Amendment No. 19 would also change Clause 4(1). If amended, the clause would refer to the setting of limits on the borrowing of money by all local authorities. That idea is already implicit in the clause and need not be stated. The formula setting the national limit need not produce exactly the same result for every authority. It could be sensitive enough to take some account of different local needs and circumstances. For a few local authorities, perhaps, the impact might be minimal. However, the limit would be imposed through secondary legislation, which, I am sure, would need to apply generally to all authorities. For those reasons, the amendment seems unnecessary.
  I hope that, with those assurances, the noble Baroness will feel able to withdraw the amendment.
  Baroness Hamwee: I am not sure that I fully understood the Minister. In describing how the regulations would work, was he saying that, although the decision would be taken looking at the aggregate, there would be a different application authority by authority? Would it be the same proportion across authorities or the same cash amount? Should I ask the question in a different way?
  Lord Bassam of Brighton: I am trying to avoid the necessity to write.
  It would depend on the circumstances of each local authority. We would have to take into consideration the circumstances that prevailed at the time. That probably does not answer the point that the noble Baroness is probing at, but if she reads again what was said earlier, she will find that it probably does.
  Baroness Hanham: The only word that I heard that sank deeply into my soul was that aggregate was "implicit" in what is proposed. There are other considerations about the borrowing limits, and the fact that the word "aggregate" is implicit will be helpful in the discussions that we will have on the remaining amendments on the clause.
  Having had the assurance that that is what the clause means, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendment No. 19 not moved.]
  Baroness Hanhammoved Amendment No. 20:
  Page 3, line 3, at end insert—
  "( ) No regulation made by the Secretary of State under subsection (1) may reduce the overall borrowing limit set for local authorities in any year in which the Government is planning to increase the level of borrowing by central government departments or their agencies."
  The noble Baroness said: This is the beginning of a small group of amendments that deal with Clause 4 in various ways. It will not have escaped the Committee's

  GC85
  notice that I have had several goes at various different aspects. If, in due course, I moved the amendments on Report and pressed them to a vote, I would be in considerable trouble. I shall not do that, but I shall go through them one by one, as they all raise slightly different points. If one of them is agreed, I shall probably be in trouble with some of the others.
  Amendment No. 20 would ensure that central government could not use the pretext of national economic reasons to squeeze local authority borrowing, while increasing the borrowing of central government departments and agencies. We are looking for a level playing field, if there is a problem over borrowing. The amendment would protect the budget planning of local authorities against possible unfair action to squeeze their borrowing while increasing the Government's borrowing. It is a question of whose priorities will come out on top.
  It is understandable that, in certain circumstances, the Government might wish to reduce the overall level of public sector borrowing, as happens reasonably often. In those circumstances, it would be reasonable to expect local government to play its part. It would not be reasonable to make local authorities alter their budgets and borrowing plans, leading potentially to cuts in school programmes and discretionary services such as social services for which local authorities would take the blame, while central government planned to continue expanding borrowing for short-term reasons of their own.
  The amendment would protect local authorities against the threat of such one-sided interference, which, some authorities feel, does happen. It would also remove the temptation for government to try to do it. If the Government want to make local authorities virtuous in such circumstances, they must be virtuous themselves. I beg to move.
  Lord Bassam of Brighton: Amendment No. 20 relates to Clause 4(1) and would stop the Government imposing a reduction on local government borrowing in any year in which central government borrowing was allowed to increase. That would be the impact.
  In response to the former Select Committee on Transport, Local Government and the Regions, which considered the draft Bill, we have made it clear in the Bill that the reserved power could be exercised only for national economic reasons. Those are the circumstances in which it would be exercised, and they would have to be serious, if they were to justify a national limit. There might, for example, be a sudden and significant downturn in the international economy. Such a situation would demand restraint from the public sector as a whole, not just local government, and it is unlikely that central government borrowing could increase significantly, if local government borrowing were curtailed.
  Central government is the major lender to local government. Much of our borrowing is undertaken purely to fund the loans that we make to local authorities through the Public Works Loan Board. That reflects the fact that local government capital
  GC86
  expenditure represents about 50 per cent of the national total of such expenditure. We would expect local borrowing constraints to feed through to the national level.
  The amendment implies that the constraints should always be exactly the same for central and local government. I am sure that, on reflection, the noble Baroness will see that as being somewhat unrealistic. The Government will have to consider carefully how any borrowing capacity should be distributed, taking account of central and local needs and their different priorities. The amendment would remove that flexibility. The Bill is about providing greater flexibility, but the amendment would remove our flexibility to make a proper decision on that issue in the light of prevailing circumstances.
  I hope that, with that assurance that the power might be used in connection with difficult international and national circumstances, the noble Baroness will feel confident and able to withdraw the amendment.
  Baroness Hanham: I do not feel at all confident about it. What the Minister said has made me feel even more uncomfortable.
  The thrust of the chapter is that local authorities will be able to borrow outside the box and will have greater powers to borrow. They must make decisions about what the borrowing will be required for. It could be a capital programme or any number of things about which they need some confidence before they can go forward with the borrowing. Not all of that borrowing will come from government sources such as the Public Works Loan Board; some will come from outside. Funding that does come from government sources will still need to be secured elsewhere, and it may be only a part of what the local authority is borrowing. It is not unreasonable to suggest that if, for whatever national economic reasons, the Government decided to curtail local government borrowing, they should do so only while curtailing their own borrowing. Thus, there would be a level playing field for any decisions to lower or curtail local government borrowing in some way.
  I hear what the Minister says, but I am not happy with his remarks. However, for the time being, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Baroness Hanhammoved Amendment No. 21:
  Page 3, line 4, leave out subsection (2).
  The noble Baroness said: I shall deal with Amendments Nos. 21 and 24 together. The purpose of Amendment No. 21 is to probe the circumstances in which the Government would use the sweeping power to set limits not only for the borrowing of local authorities, but for individual local authorities. Here we move from advocate down to the individual.
  Controls of local democratic accountability already affect such limits: prudential advice from directors of finance and scrutiny by the district auditor, while the regulations we discussed earlier add a further layer of potential intervention. In general terms we believe that

  GC87
  we should be trying to move away from powers where central government can interfere unequally with different local authorities. Amendment No. 21 seeks to discover the Government's intentions.
  Amendment No. 24 seeks to address the issue that Clause 4 would give the Secretary of State power to impose a barring limit on a local council irrespective of whether the power to set a national limit is taken up. The amendment would leave in the power to impose a borrowing limit, but would require that the Secretary of State can act under Clause 4(2) only where he believes that a local authority has failed to have a proper regard to the codes when determining its borrowing limit under Clause 3(1).
  Given that, in the extraordinary circumstances of a national economic crisis, the Minister already has the power to impose individual borrowing limits under Clause 4(1), I should like the Minister to explain under what other circumstances an authority that complies with the requirements under Clause 3(1) and has proper regard to the codes of practice specified by the Secretary of State should be subjected to a special sentence issued by the Secretary of State. Perhaps I am missing something, but it is not apparent how any such circumstances would arise outside of a time of national economic crisis.
  If the Minister drew a comparison based on the current regime of capital approvals and said that local authorities might find ways of avoiding those approvals, which was why the Secretary of State required these wide-ranging powers, I suggest to him that a regime based on a code of practice which reinforces standard accounting practices is not susceptible to avoidance in the same way as a prescriptive regime of capital approvals might be. The power in its unqualified form is wholly unnecessary and is merely an example of the instinct to keep hold of reserve powers. I beg to move.
  5.30 p.m.
  The Deputy Chairman of Committees (Lord Elton): If this amendment is agreed to, I shall be unable to call Amendments Nos. 23 and 24 by reason of preemption.
  Baroness Hamwee: Given our procedures in Grand Committee, I suspect that the amendment will not be agreed to. I have added my name to Amendment No. 21, and the only reason that the name of my noble friend Lady Maddock is not included is that we thought that another noble Lord might take the fourth place.
  My honourable friend Edward Davey tabled a similar amendment in the Commons, and certainly the Liberal Democrats and the Conservatives agree on this point. Clause 4(2) seems to be inconsistent with Clause 4(1). Subsection (1) refers to "national economic reasons", while subsection (2) allows particular local authorities to be fingered. That does not seem to support the reasons of national economy that the Secretary of State might seek to apply under this subsection.
  GC88
  At col. 85 in the Standing Committee the Minister spoke of,
  "building a good, new relationship with local government, based on responsibility and a shared concern to tackle and turn around the relatively small number of authorities in real difficulty whose failures, sadly, give the whole of local government a bad name".— [Official Report, Commons Standing Committee A, 2111,103; col. 85.]
  Yes, but is this the way to do it? This is not the way to bring struggling local authorities up to scratch.
  Clause 4(2) states that the Secretary of State can give a direction. We have more than touched on what is meant by "direction" in this context and I shall certainly look again at the comments made on that to see how they might apply here. However, I wonder what will be the sanction if a particular local authority does not observe the direction. Perhaps the Minister can explain what would happen in that situation. We have the protection of lenders under Clause 6, so that money would be repaid, but what would be the effect of a direction made under Clause 4(2)?
  Our points are not only technical or practical. There is the whole principle of local democracy and accountability to consider. We have already made it clear, and no doubt will do so again, that we believe that it is for local authorities rather than central government to deal with these matters.
  At this point, I wonder whether I might ask a question with regard to Clause 4(3) rather than asking it during the clause stand part debate. Subsection (3) provides for different limits to be set,
  "in relation to different kinds of borrowing".
  Can the Minister explain what that means, because if "national economic reasons" require restraint, why should different restraints apply to "different kinds of borrowing"? Furthermore, what is meant by that phrase in this context? When I first read it I assumed that it meant borrowing for different purposes, but it might mean long-term or short-term borrowing. We do not yet know what kinds of borrowing would be covered by this.
  Lord Rooker: I shall seek to answer the point about Clause 4(3), which is not the subject of the amendment before the Committee. We need to go through the Bill as best we can, and if we can avoid debating matters on the clause stand part debate, as my noble friend said, we shall give answers as we go along.
  I turn to Amendments Nos. 21 and 24. I realise that even the title of the clause, "Imposition of borrowing limits", must generate apoplexy: "Is that nasty Government coming along again to stop us being reckless?". However, I hope that I will be able to satisfy the concerns of both noble Baronesses. There is no question that this is an important provision, and Amendment No. 21 seeks to remove it completely.
  I do not think there are any differences between us as regards Part 1 of the Bill. It would give local authorities the freedom to borrow without government consent, provided they can afford to service the debt without extra government support. That is a massive extra freedom for local authorities. No one would contradict that. But that freedom must

  GC89
  be balanced by safeguards for local taxpayers, and that is why Clause 4(2) provides a reserve power for the Government to set a borrowing limit for an individual authority overriding any locally set limit.
  In response to concerns expressed by local government about the terms of the draft Bill, we have now made it clear on the face of the Bill that the power can be used only to prevent an individual local authority from borrowing more than it can afford. We would use this power very much as a last resort and only if there was strong evidence of a real risk of imprudent borrowing. It is not a question of the Government moving in at the first sign of an authority doing something with which they disagree. That is not the case. In fact, the Government will not even police the system. As at present, scrutiny will rest in the first instance with the external auditor. But concerns could come to light through the process of the comprehensive performance assessment. We could then consider using the power.
  Without the power, the Government would be unable to stop an authority from borrowing recklessly and thereby imposing a long-term burden of unaffordable debt on its local taxpayers. I do not have loads of examples, but I recall reading about the Western Isles some years ago. What that authority had done caused considerable difficulty for its local taxpayers.
  Amendment No. 24 proposes another approach to Clause 4(2). As drafted, the amendment states that the power to set an individual borrowing limit is to apply only where an authority has not had proper regard to the requirements of Clause 3(2). There may be an error of reference here due to the renumbering of the subsections since the Bill was first published. Clause 3(2) in fact deals with the borrowing limit of the Greater London Authority. The intention might have been to refer to Clause 3(5), which would be consistent with the effect of a similar amendment debated in another place. I shall proceed on that assumption.
  Clause 3(5) provides a power for the Secretary of State to make regulations about the way that authorities should set their affordable borrowing limits. The power may be used to specify a code of practice to which authorities are to have regard. We intend to specify the CIPFA prudential code which will lay down the guidelines on deciding how much borrowing is affordable.
  The effect of the amendment is that an individual borrowing limit could only be imposed on an authority which had disregarded regulations made under Clause 3(5). In practice, therefore, that would mean an authority which had disregarded the prudential code and was borrowing unaffordably. That may seem to be the right result.
  However, the present wording of Clause 4(2) is much more transparent. It makes it absolutely clear that the aim of the power in subsection (2) is to prevent unaffordable borrowing. There is an explicit link with Clause 3(1), which requires authorities to set an affordable borrowing limit. Clause 4(2) comes into
  GC90
  play only if that duty is at risk of being breached. It is desirable to have that policy brought out as clearly as possible on the face of the Bill. The amendment would conceal the policy intention. I hope that those remarks provide a reassurance.
  I turn now to subsection (3) of Clause 4. This could be helpful in taking account of the varying needs of authorities if a national limit was needed. It could allow greater borrowing capacity for specified projects considered to be exceptionally urgent, of which housing is an example. In other words, this covers different kinds of borrowing for specified projects. It would only arise in respect of the imposition of borrowing limits, but obviously we hope that Clause 4 as drafted is not used, that it will not be made operable. It is a provision of last resort. However, I hope that that gives an example of fall-through, but I shall be happy to return to this on Report if my explanation does not satisfy any potential Opposition amendment.
  Baroness Hanham: Again I thank the Minister for his careful explanation. I note his point as regards Clause 4(2). The purpose of the power is to ensure that authorities do not borrow more than they can afford, but given some freedom and flexibility, at some stage they may do just that. I suppose that a restriction is required to prevent that.
  I shall read what the Minister has said and for the moment I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Baroness Hanhammoved Amendment No. 22:
  Page 3, line 4, leave out subsections (2) to (6) and insert—
  "( ) No regulations may be made under this section unless—

  (a) the Secretary of State has consulted such representatives of local government as appear to him to be appropriate.

  (b) he has laid before each House of Parliament a report explaining the reasons why he considers it necessary that the regulations be made, and

  (c) the report has been approved by resolutions of each House of Parliament.

  ( ) Section 122( I ) and (2) do not apply to regulations made under this section."
  The noble Baroness said: This amendment seeks to lay down some conditions that we feel are appropriate for when the Secretary of State may wish to limit the amount of money that a local authority can borrow. This covers points that we have already talked about, but as I explained earlier, discussions on these amendments are taking place around each other.
  The Secretary of State may want to limit the amount of money that a local authority can borrow when he feels that it is necessary to do so for "national economic reasons". The amendment also seeks to remove the provision given in subsection (2) that gives the Secretary of State the power to set individual borrowing limits on local authorities for reasons other than national economic emergencies. We touched on this when discussing the previous amendment.

  GC91
  It is welcome that the Government are concentrating on the economic cycle, the same cycle that the Chancellor told us in his first few years in office was a thing of the past. However, perhaps that is a political snipe that I should leave alone.
  The first part of the amendment requires the Secretary of State to consult local government before taking action. I remind the Minister that this was a key recommendation of the Select Committee. We believe that it would be inconceivable for the Secretary of State to take such drastic action without consulting local government.
  The second part of the amendment provides for the Government to report to Parliament to explain the macro-economic reason that gives rise to the need to limit local authority borrowing.
  Thirdly, we propose that there should be an affirmative resolution of both Houses to approve the order that imposed the new limits on local authorities. The Committee should note that this procedure is used in an extreme macro-economic crisis only, and while we wish that the Secretary of State never has to come before the House to seek such an order, I hope that we have broad support in asking for this type of parliamentary scrutiny.
  I would like to give a topical example of when the Secretary of State may need to reduce borrowing limits. If in the future the Government take us further into the euro-zone, they may find it necessary, in order to satisfy the European Bank, to curb the country's borrowing. Indeed, we understand that some countries, including France and Germany, are already having difficulty with the 3 per cent deficit. In this instance, I feel—and I hope I have broad support—that the Secretary of State should come before the Houses of Parliament and that his decisions should be subject to parliamentary scrutiny. I beg to move.
  5.45 p.m.
  The Deputy Chairman of Committees: I should advise the Committee that if this amendment were to be agreed, I should be unable to call Amendments Nos. 23 to 28 inclusive.
  Baroness Hamwee: We support this amendment. Perhaps I should sit down to enable us to get through it before either the noble Lords, Lord Pearson of Rannoch or Lord Stoddart of Swindon, come into the Room and find us discussing the corrupt octopus of Brussels.
  Lord Bassam of Brighton: Amendment No. 22 would substantially change the operation of Clause 4. The first effect would be on the power to set a national borrowing limit under Clause 4(1). As drafted, the power would be exercised by making regulations under the negative resolution procedure. My understanding is that the Delegated Powers Committee was very happy with that. The amendment would require a report to be laid before and approved by both Houses of Parliament as well as the undertaking of formal consultation with local government before regulations could be made.
  GC92
  Any national limit would he in accordance with policies on public expenditure which had already received parliamentary approval. Economic circumstances serious enough to demand national borrowing constraints would inevitably be the subject of extensive parliamentary debate. But Parliament has never been involved in scrutinising the allocation of the local authority borrowing limits which, every year since 1990, the Government have set by the issue of credit approvals. Under the new system, a national limit would achieve exactly the same result. We see no need for a statutory requirement for parliamentary approval of that process.
  With regard to consulting local authorities, we have already given clear commitments to local government representatives that they would be fully consulted about any possible need to set a national borrowing limit. I am quite happy to put that on the record this afternoon. There are well established agreements between central and local government about consultation, and we take those commitments very seriously. Under the present system, there is no statutory duty to consult prior to the annual issue of credit approvals, which act as borrowing limits, but we regularly discuss these matters and the arrangements that follow from them with local government representatives.
  Amendment No. 22 would, in our view, have other unfortunate effects. Deleting Clause 4(2) would remove the Government's power to set a borrowing limit for an individual authority. But that second reserve power provides a vital safeguard for local taxpayers against unaffordable borrowing by their local council.
  Amendment No. 22 would also eliminate the important flexibility conferred by Clauses 4(4) to 4(6). These provisions would allow local authorities to transfer borrowing headroom between themselves under a national limit, without Government consent. They make no difference to the total effect at the national level and would ensure that borrowing capacity was distributed efficiently and not wasted. These provisions also help to underline the fact that the Clause 4(1) power is directed only towards protecting the national economy.
  In addition, Amendment No. 22 would disapply Clause 122 when regulations on a national limit are made and thus prevent different provisions being made for different cases and different descriptions of classes of authority. Such flexibility could be important in spreading the impact of a national limit fairly among authorities. For those technical and rather hard-nosed reasons, I hope that the noble Baroness will feel happy about withdrawing the amendment.
  Baroness Hanham: I thank the Minister for his reply. This was a probing amendment and the response was interesting. Of course we have the local government consultation process, but what is being suggested here is that this might come about in an unexpected way. If a national economic crisis arose, we would not be working with normal factors. If at some stage

  GC93
  decisions had to be made about the national economy, it would be essential that local government was involved and that consultation took place. That particular aspect still stands.
  On the other aspects, I shall read the Minister's reply. For the moment, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendments Nos. 23 and 24 not moved.]
  Baroness Hanhammoved Amendment No. 25:
  Page 3, line 8, at end insert—
  "( ) No direction or regulation that applies to a particular local authority or local authorities may be made by the Secretary of State unless he has laid before Parliament a statement explaining the reasons that justify selective action in the case of that authority or authorities."
  The noble Baroness said: The purpose of this amendment is to achieve an important element of transparency in the exercise of powers under this section which would allow the Government to make different rules for individual authorities. No one who has studied this year's local government settlement could doubt that there was a great variation between the apportionment of money to individual authorities.
  Against that background, an explicit power to penalise individual authorities, as set out in the clause, should be subjected to the closest scrutiny. The amendment suggests that when a government uses this power, an open and transparent statement must be laid before Parliament by the Minister to explain on what grounds the power is being used. That would give proper protection in the case of a selective power which would enable an intervening Minister's actions to be probed by public and Parliament alike instead of being shrouded in secrecy. It could be a provision that might be applied in other powers to intervene selectively being sought by the Government in this Bill. I beg to move.
  Lord Bassam of Brighton: This amendment seeks to insert a new subsection in Clause 4 relating to the powers in subsections (1) and (2) to impose borrowing limits. Before those powers could be used, the amendment would require a statement to be laid before Parliament explaining the reasons for the limits set on particular authorities under the provisions of Clause 4(1), or for imposing a limit on an individual authority under Clause 4(2).
  Subsections (1) and (2) already make clear the general circumstances in which these powers may be used. However, the amendment would require the Government to give Parliament a specific reason for setting borrowing limits for particular authorities. Parliament has never been involved in scrutinising the allocation of local authority borrowing limits which, as I said earlier, every year since 1990 the Government have set by the issue of credit approvals. Under the new system, setting national or individual borrowings would achieve exactly the same result. We can see no need for a statutory requirement for parliamentary approval of that process. There has not been one in the
  GC94
  past and when the party of the noble Baroness was in government, it certainly did not see the need to have such a process in place.
  If any authority ever felt that the Government, in imposing a borrowing limit, had acted improperly or unjustly, of course it would be fully entitled to seek judicial review. In addition, in the case of the individual limit provided for under Clause 4(2), urgent action could sometimes be needed to prevent imprudent activity. The procedure suggested in the amendment could lead to delays which might have potentially serious consequences for local council taxpayers. I am sure that, given her strong background in local government finance and her desire to see prudence in local practice, the noble Baroness would not want to assist in that process.
  I hope that, with those comments and assurances, the noble Baroness will feel able to withdraw her amendment.
  Baroness Hanham: I enjoyed the digs. They have been the best part of the Bill so far. To say that something has never been done in Parliament before seems a jolly poor excuse for not doing it now. We are moving into a new regime. The expectation is for permissiveness rather than restriction. If, for some reason, that permissiveness is not to be allowed or agreed to, or there is some major reason why there should be a limit on a particular local authority's borrowing power, it seems not unreasonable that that matter should be brought to Parliament for an explanation. It puts it into its proper perspective and makes it a very unusual event. I do not think that the Minister's response to my amendment is seriously satisfactory enough to enable me to say that I shall not pursue the matter in future. Meanwhile, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Baroness Hanhammoved Amendment No. 26:
  Page 3, line 8, at end insert—
  "( ) A limit set under subsection (1) or (2) may not, in respect of any local authority, be set at a level less than the level of that local authority's borrowing on the date that the draft regulation is laid."
  The noble Baroness said: This amendment would require that any enforced borrowing limit for a local authority should never be set below that authority's level of existing debt. I find it hard to believe that it is the purpose of this provision that an authority could be put in breach of its own limit, in itself a statutory offence, on the direction of the Secretary of State. I hope that the Minister will say that he agrees with this amendment or that he undertakes to give the Committee another guarantee that its intended purpose will be built into any regulations issued in the future.
  If the Minister were to accept my argument, authorities that have been prudent and have low levels of borrowing relative to their borrowing limits would

  GC95
  have to take more of the hit to achieve a given macroeconomic effect, because authorities that are close to their borrowing limits cannot, in practice, have their borrowing limits cut. I beg to move.
  Baroness Hamwee: On Amendment No. 26, I would like to understand what would happen in practice if there were what would effectively be a retrospective application?
  Lord Bassam of Brighton: The amendment would insert in Clause 4 the condition that no borrowing limit may be imposed on a local authority below its actual level of borrowing. That is commonly understood. I fully accept that the Government should not be able to impose a retrospective limit on an authority to make its existing debt unlawful. The legislation, as drafted, certainly does not allow that. Any borrowing limits set under the powers in Clause 4 can only serve to restrain the future level of borrowing.
  The safeguard here depends upon Clause 2(1). It provides that an authority may not borrow money if doing so would result in a breach of any borrowing limit it has set for itself or which the Government has imposed upon it. So, if a loan does not breach such a limit when it is actually taken out, nothing can later make it unlawful.
  I hope that that answers the point. I think that the noble Baroness may have slightly misunderstood what was in front of her, but I hope that my explanation clarifies matters.
  Baroness Hanham: I thank the Minister for his explanation, and I am happy to accept it. I beg leave to withdraw the amendment.
  Amendrnent, by leave, withdrawn. 6 p.m.
  Baroness Hamweehad given notice of her intention to move Amendment No. 27.
  Page 3, line 10, leave out "subject to a corresponding limit"
  The noble Baroness said: I tabled Amendment No. 27 to probe whether the national limit applies only to some authorities or to all of them. However, the noble Lord, Lord Bassam, explained not only that point but said that subsection (2) onwards is not a part of subsection (1) and is not reliant on it. It is a whole set of rights on the part of the Secretary of State to impose borrowing limits rather than them all being a part of the national economic reason. Unless the Minister feels there is anything more to be said, I shall not pursue this. I did not say "not moved" to the amendment originally, because it is sometimes a bit confusing to do that when everyone has their notes ready. Apologies for that, but I thank the Minister for his explanation.
  [Amendment No. 27 not moved.]
  Baroness Hamweemoved Amendment No. 28:
  Page 3, line 16, at end insert ", and
  ( ) the rights of the transferor to borrow in the event of failure by the transferee to repay borrowing undertaken on the basis of the transfer."
  GC96
  The noble Baroness said: The draft regulations do not cover Clause 4(4) so far as I can see. This is the opportunity to ask when—and, indeed, if—more draft regulations will be published. It is a serious point. I know that noble Lords frequently complain that we do not have regulations on the real meat of any particular provision, and I am not talking just about this Bill. But. the real issue is for local authorities to know what the detail will be and to have the opportunity to comment, particularly if the new regime is to be effective from April next year—less than a year away. It will not be that long before local authorities are into the start of the budget-making process for next year.
  My amendment was to probe the effects of the transfer of headroom, which is an odd concept in itself. What would happen if a transferee were in default? Is there any problem for the transferor? I hope the answer will be no, but that is what the detail of Amendment No. 28 is designed to ascertain. I beg to move.
  Lord Rooker: This is one of the rare cases where what has happened has not thrown the notes out, as the numbers are consecutive. What throws the notes out is changing the order of everything at about 1 o'clock in the afternoon. That causes a problem. It does not prevent us from giving proper answers but that might happen on one occasion. As this is our first sitting, however, I suppose it is to be expected.
  On Amendment No. 28, there is, I hope, a perfectly satisfactory explanation to the noble Baroness's question, which relates specifically to the transfer of borrowing headroom which, as it says in my notes, "I have just described". I would have done that if I had dealt with the notes on Amendment No. 27. That is part of the problem. The notes were written for the two amendments together, as a package. That is an important point. I shall now try and explain how it works.
  If there were a national limit it would apply to all authorities. However, the local impact could vary. It is possible that under the limit, an authority might be allowed a higher borrowing capacity than it could make use of. In that case, it would be free to transfer the surplus borrowing capacity—that is, the headroom—to any other authority. This would increase the national limit for the latter, allowing it greater freedom to borrow. That is basically the way the system works. Such transfers would be arranged voluntarily between authorities themselves. The Government would not be involved. However, Clause 4(5) would allow the Secretary of State to make regulations about the operation of the system. The power is drafted in sufficiently broad terms to allow regulations to deal with any aspect of the arrangements that we might conceivably wish to cover.
  However, the amendment seeks to specify one additional use of the regulations. It envisages the case in which, following a transfer, the authority receiving the headroom has borrowed on the strength of, and then failed to repay, the debt. The amendment would allow regulations to make provision about the

  GC97
  borrowing rights of the authority which made the transfer. I presume the idea is that it would suffer some penalty.
  The first point to make is that no authority has ever defaulted on a loan. However, in case that ever occurs, Clause 13 provides substantial protection for lenders. Secondly, local authorities borrow for very long periods—25 years is typical—and the most usual arrangement is for the principal of the loan to be repaid only at the end of that period.
  As I have explained, this transfer of borrowing headroom would happen only while a national limit was in place. Such limits would be very exceptional and short-lived affairs—indeed, we hope one is never needed. So, in the unlikely event of default by the recipient of the transfer, it would occur well after the national limit had ended.
  It would be quite unreasonable for there to be any impact on the authority which had made the original transfer of headroom, perhaps many years earlier. Public expenditure policy does not require it, and there would be no obvious mechanism for delivering such a result. I hope that with those assurances I have satisfied the noble Baroness on Amendment No. 28, while using a bit of the explanation relating to Amendment No. 27.
  Baroness Hamwee: I apologise to the Minister for making life more difficult; I thought I was doing the right thing. However, in my defence, my only comment on the draft list was made by e-mail at about midnight, although I do not expect anyone would have been there at that time to deal with it. It was to put two amendments together in the hope of slightly speeding up business, rather than moving them apart.
  I shall read what the Minister has to say. It sounds right, but these are technical areas, and one has to be fully assured. I thank him for his explanation and I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 4 agreed to.
  Baroness Hamweemoved Amendment No. 29:
  After Clause 4, insert the following new clause—
  "BORROWING LIMITS

  (1) The Secretary of State may by regulations set limits in relation to the borrowing of money by a local authority.

  (2) The Secretary of State may only make regulations under subsection (1) if the code for fiscal stability, as provided for in section 155 of the Finance Act 1998 (c. 36) (code for fiscal stability), would otherwise be breached in any way.

  (3) Before the Secretary of State may make regulations under subsection (1), the Treasury must prepare and lay before Parliament a document which shall be subject to approval by a resolution of the House of Commons explaining how the code for fiscal stability would otherwise be breached if limits were not set in relation to the borrowing of money by local authorities.

  (4) It shall be the duty of the Comptroller and Auditor General to examine the Treasury's document published under subsection (3) and report to the House of Commons on his findings."

  The noble Baroness said: The amendment provides for the Secretary of State to make regulation, as based on the code for fiscal stability in Section 155 of the
  GC98
  Finance Act 1998. When I saw that my honourable friends in another place had moved an amendment to this effect, my heart sank because I assumed that I would have to read a tome on Section 155 and the code. However, both are very short and direct.
  Section 155 gives the Treasury the duty of preparing a code for application to the formulation and implementation of fiscal policy and the policy for the management of the national debt of the principles of transparency, stability, responsibility, fairness and efficiency—all admirable principles.
  The code is almost as brief and straightforward as Section 155. For instance, paragraph 65 says:
  "The principle of responsibility means that the Government shall operate fiscal policy in a prudent way, and manage public assets, liabilities and fiscal risks with a view to ensuring that the fiscal position is sustainable over the long term".
  The purpose of the amendment is, in part, to probe whether the five principles underlie Clause 4(1) and how that clause and the Secretary of State's assessment of the national economy relate to the code. The term "national economic reasons" is very broad. Regulations under Clause 4(1) would have to be clear about the borrowing limits set, but not why. I suppose it could be said that the new clause would provide the same sauce for the goose of central government and the gander of local government.
  In another place, one of the Minister's objections was that there should not be a statutory requirement for parliamentary approval before setting a national limit. We touched on that this afternoon, but it seems questionable whether regulations would not even be subject to being prayed against. Another objection was that in any event, the Government would be implementing policies on public expenditure which had already had parliamentary scrutiny as part of the code. It seems to me that there would be no problem in confirming that in the context of the Bill. He also said that it would not be practical to specify in the Bill detailed methods for assessing national economic interests. The code, however, sets the principle—it does not set the detail. Furthermore, he said that one cannot anticipate the circumstances. I assume that that is why the code is about principle, not detail. Indeed, paragraph 11 says:
  "The Government may depart from its fiscal objectives and operating rules temporarily, provided that it specifies:

  a. the reasons for departing from the previous fiscal policy objectives and operating rules;

  b. the approach and period of time that the Government intends to take to return to the previous fiscal objectives and operating rules; and

  c. the fiscal policy objectives and operating rules that shall apply over this period".

  The Minister also said that the new prudential regime might prompt a sudden surge of borrowing. I read that sentence twice, because if this is regarded as both likely and a problem, one wonders why the Government are not, at this point, proposing, for instance, a gradual release of the restriction. I am not suggesting that we would support that—we want the wholesale release—but if that is a real issue, would it

  GC99
  not be logical rather than saying no to the kind of approach that my honourable friends and I have suggested'? I beg to move.
  Lord Rooker: The new clause would require the Secretary of State to follow much more elaborate procedures than are provided for in the Bill. Regulations could be made only to prevent a breach of the code of fiscal stability. Parliament would have to approve a report on the potential breach, and the views of the Treasury and the Comptroller and Auditor General would also be needed.
  As I have pointed out, there would have to be a serious set of circumstances to justify a national limit, such as a sudden significant downturn in the international economy. We do not believe it is practicable to specify on the face of the Bill detailed methods for assessing the national economic interests in those circumstances. The Code for Fiscal Stability lays down very broad financial principles, which would not be particularly helpful in this context.
  Along with Ministers in another place, I am not persuaded of the need for specific parliamentary approval. Any limit would be in accordance with policies on public expenditure that had already received parliamentary approval. Economic circumstances serious enough to demand national borrowing constraints inevitably would be the subject of extensive parliamentary debate.
  Parliament has never been involved in scrutinising the allocation of local authority borrowing limits, which, every year since 1990, the Government have set by the issue of credit approvals. Earlier I reminded my noble friend beside me that, when I arrived in another place in 1974, it was not normal to debate the rates before grant settlement. They were never debated; they simply whizzed through. Although I do not use that as a reason to pray in aid, things evolve over time. Where problems arise, Parliament will debate them in the circumstances that would cause this to come into operation; that is, Clause 4. Furthermore, extensive public debate would take place outside Parliament. Under the new system, a national limit would achieve exactly the same result as that under the system which has been operating since 1990. Therefore I see no need for a statutory requirement for parliamentary approval of the process.
  Also, the appropriate audit authority for local government is the Audit Commission, which we would certainly involve in discussions on any possible national limit. The appropriate independent body would be involved in the discussions to set a national limit, but there is no need for a statutory duty for such consultation.
  I hope that, with those reassurances, the noble Baroness will withdraw the proposed new clause. I understand the motives for tabling it, but one has to say that the circumstances under which such a clause would operate would not be normal.
  6.15 p.m.
  Baroness Hamwee: No, but Clause 4(1) does not say that. While I appreciate that it is difficult to find a point on the spectrum, what I am trying to achieve here is for the legislation to specify how serious a situation might need to be and that it needs to be serious. Clause 4(1) does not address that. Common sense might say that a certain situation would bring Clause 4(l) into effect, but we do not know that. The Minister has found it difficult to cite an example. We must show good faith if we leave the subsection as it is.
  What I propose in the new clause is more elaborate, but it is also more transparent. That point lies at the root of the new clause. For example, Clause 4(1) would allow the Secretary of State to take the relatively easy way of achieving a reduction in borrowing by saving to local government: no more, or much less, rather than addressing the detail in central government. That could be a temptation. Whether or not this is the right way to deal with the point, what circumstances might cause Clause 4(1) to be applied by the Secretary of State is a matter that we shall have to come back to at a later stage. For the moment, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 4 agreed to.
  Clause 5 [Temporary borrowing]:
  Baroness Hanhammoved Amendment No. 30:
  Page 3, line 28, after "relates"insert" and is reasonably expected to be received within that period"
  The noble Baroness said: No doubt the Ministers opposite will be pleased to note that broadly we welcome this clause. Giving local authorities the power to make temporary borrowing arrangements for managing their in-year cash flows is wholly sensible.
  The formula for establishing the limit on such temporary borrowing is based on the amount due to the authority within the period that it has not yet received. As it stands, however, the provision does not take into account the fact that in practice some of the money will not be collected. We fear that it would be imprudent for local authorities to be able to borrow money on the assumption that in the future they will receive 100 per cent of council tax and, not only this. also assume that they can collect all of the housing revenue account arrears and council tax arrears from previous years. It is worth noting that some local authorities receive only around 60 per cent of the moneys owed to them.
  We believe that is a sensible way to approach borrowing for in-year cash-flow management purposes; it must be based on real anticipated receipts, not nominally receivable amounts that in practice everyone understands will not be received in full. I hope that the Minister will accept the amendment or undertake to deal with the issue in another way. I beg to move.
  Lord Bassam of Brighton: Amendment No. 30 seeks to change Clause 5, which allows an authority's borrowing limits to be increased temporarily. Before

  GC101
  addressing the amendment, it may be helpful if I explain how Clause 5 is meant to operate. Money owing to an authority does not always arrive on time. We all understand that. Even the most efficient authority—I am sure that Kensington and Chelsea is one of those—may face arrears of council tax or be paid late by a private sector partner. However, the authority must still pay staff salaries and other major bills on time. To meet those commitments, the authority will have no choice but to borrow until it receives the money it is owed. The loan may be needed only for a few days, but it could push total borrowing above the affordable limit that the authority has already set for itself under Clause 3.
  Authorities must keep their borrowing limit under review. If it is prudent to do so, the limit may be increased at any time by the full council. However, a sudden cash crisis could require action before a full council meeting could be convened. Clause 5 therefore provides for an automatic temporary increase in the borrowing limit. That increase is equal to the amounts due to the authority in the financial year, but not yet received. The amendment would allow the borrowing limit to be increased only by the amount of an outstanding payment which could reasonably be expected to be received in the same financial year that it is due.
  [The Sitting was suspended for a Division in the House from 6.21 p.m. to 6.31 p.m.]
  6.30 p.m.
  Lord Bassam of Brighton: Such a qualification would, however, introduce uncertainty into an assessment and in some cases make it impossible for the authority to borrow to cover a cash shortage. For example, suppose an authority is due to receive a large amount of money on 25th March and is relying upon that to pay staff salaries on 31st March. If the authority learns that the sum will not arrive until 2nd April, that sum will not be expected to be received in the same financial year that it was due. The authority would still need to borrow temporarily to pay its staff. The amendment would prevent the increase in the borrowing limit.
  We must not confer an open-ended power to borrow for revenue purposes, but other components of the statutory and accounting structure for local government will stop that happening. Authorities are required by the Local Government Finance Act 1992 to set a council tax that will balance the council's revenue budget. They are also bound by accounting rules to make proper provision for bad and doubtful debts. When a debt is written off as bad or a provision is set up for doubtful debts, that is a charge on the revenue account. It will result in additional council tax being raised or other expenditure being displaced.
  Authorities must take account of the need to make these changes when they set their council tax. If they underestimate they must make good the shortfall in the following year. One way or another, therefore, uncollectable debts will be covered by new income and the borrowing requirement will be removed.
  GC102
  I am sure those of us who are familiar with local government finance will see that as a practical and sensible way to operate. I hope with those assurances that the noble Baroness will feel able to withdraw her amendment.
  Baroness Hanham: I thank the Minister for that response. We broadly welcome what lies behind the clause. The problem that still hangs around over this is that if you are able to borrow in excess of what you are likely to receive, at some stage additional problems will stack up. I seek to limit the possibility of matters running over. The Minister has already suggested that the issue might go off until another financial year. However, if one cannot collect enough money in one year, there is no guarantee that one will be able to collect enough money in the second year to cover the borrowing from the first year, for which there is a shortfall.
  I am not sure that I accept and am happy with the Minister's reply. I think that pensions should be built in for those who are not going to receive 100 per cent of what they expect to get. That must concern practically all local authorities, all of which will be able to look for temporary borrowing. I appreciate that this is temporary borrowing. For the moment I beg leave to withdraw the amendment, but I might return to it at another stage.
  Amendment, by leave, withdrawn.
  Clause 5 agreed to.
  Clause 6 agreed to.
  Clause 7 ["Credit arrangements"]:
  Baroness Hamweemoved Amendment No. 31:
  Page 4, line 1, at end insert—
  "( ) the transaction is related to a "private finance initiative" or a "public-private partnership""
  The noble Baroness said: Clause 7(1) states that,
  "a local authority shall be taken to have entered into a credit arrangement".
  Amendment No. 31 seeks to extend that arrangement to a,
  "'private finance initiative' or a 'public private partnership"".
  That is not the most technical wording that one might find. Nevertheless, it enables some probing at this stage.
  Amendment No. 32, standing in the name of the noble Lord, Lord Hanningfield, is more detailed about splitting liabilities into those which are on the balance sheet of a local authority and those where the liability is transferred to the private sector.
  Amendment No. 31 simply gives the Minister an opportunity to explain why there is no reference to PFI or PPP. In Committee in another place, the Minister said:
  "The Government's intention is to rely as far as possible on current accounting practice to determine what does and does not count as a credit arrangement".—[Official Report, Commons Standing Committee A. 28/1/03; col. 111.]
  Do those words "as far as possible" mean that we are into further regulations? Certainly, the words "as far as possible" need either retracting or explaining.

  GC103
  Reference was made in another place to the recent Audit Commission report on PFI in schools. Among other things, the report said that,
  "government policy increasingly recognise that it is not possible to deliver strong public services that meet public: expectations using a top-down, 'one-size-fits-all' solution, but that delivery needs to be via local choice and flexibility".
  We agree with that. However, support for projects under the PFI seems inconsistent with the credit arrangements as dealt with in the Bill.
  I am unclear how PFI and PPP would fit into the new regime. Will PFI still receive special treatment? Perhaps the Minister can explain how the regimes fit together. I beg to move.
  Lord Bassam of Brighton: Amendment No. 31 seeks to change Clause 7(1), which deals with the definition of credit arrangements. The amendment is concerned with the treatment of contracts under the private finance initiative. The effect of the amendment is to classify all PFI and public-private partnership contracts as credit arrangements.
  The amendment would be unworkable without defining the terms it uses. However, it is in any event unnecessary and at odds with the strategy of Clause 7. The intention is to rely as far as possible on accounting practice to determine what counts as a credit arrangement.
  For the purposes of the prudential borrowing system, precise definitions are not so important. What is crucial is the long-term revenue implication of any contract being entered into. An authority will have to take account of the revenue impact of a transaction, whether it involves the traditional approach of borrowing to buy an asset or a more innovative approach using some form of public-private partnership. Either kind of commitment will have the effect of reducing the capacity for further affordable borrowing in future.
  If there were ever a national limit in place in accordance with Clause 4(1), the concern would be the impact of any new contract in the national accounts. In the case of PFI, the intention is that a contract will be treated as a credit arrangement only to the extent that it has to be shown on the local authority's balance sheet. Only then is the authority undertaking something akin to borrowing. That in turn depends upon the degree to which risk is transferred to the private sector partner.
  Such an approach gives authorities an incentive to achieve a significant level of risk-transfer when negotiating such contracts. It is consistent with the approach adopted under the present system. Some technical issues relating to PFI need to be clarified, as under the present system, but that can best be done in regulations. There is no need to refer to PFI explicitly in the Bill. I hope, with that assurance, the noble Baronesses will withdraw their amendment.
  Baroness Hamwee: I shall withdraw the amendment today. I accept that the amendment is unworkable without definitions. At the start I offered that acknowledgement. I am not convinced by what the
  GC104
  noble Lord has said that—although I hate the term—a level playing field is being created. Certainly, we should like to give the matter further thought and to hear the Minister's response to the next amendment. This may be a matter to which we shall want to return. For the moment, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Lord Hanningfieldmoved Amendment No. 32:
  Page 4, line 15, at end insert—
  "( ) The Secretary of State shall lay regulations before Parliament within 30 days of the coming into force of this section providing for liabilities under Private Finance Initiative contracts to be apportioned so that, where appropriate, a part of those liabilities are to be treated as a credit arrangement."
  The noble Lord said: We have heard the Minister's response to the previous amendment, but this amendment further explores the whole issue.
  While we welcome measures to free up local authority finance and to manage local priorities in a more flexible way, there seems to be a lack of clarity about how private finance initiatives will fit into these new arrangements, although I listened very carefully to the previous response. In tabling the amendment we seek to query why private finance initiatives are not treated like other credit arrangements and included in the borrowing ceilings calculated under the prudential regime.
  In many cases, private finance initiatives consist of the procurement of some form of capital asset and the procurement of a managed service. Our concern is that despite that fact, the Government have chosen to put PFIs outside the definition of credit arrangements. The definition of a credit arrangement under the new legislation is far less prescriptive than the one that currently holds sway.
  As I understand the situation, a contract under PFI is to be treated as a credit arrangement only to the extent that it will be shown on the local authority's balance sheet, as the Minister has just said. Can he assure us that this is a sufficiently prudent system of financial management? We believe that a more robust mechanism is needed to ensure that PFI contracts continue to be treated as a credit arrangement where appropriate. That can easily be achieved by separating out the component parts of a PFI arrangement. That means that contractual transactions within a PFI arrangement, which are similar to a credit arrangement, would be subjected to the limitations of the prudential borrowing regime. That part of a PFI concerned with the provision of service would naturally remain exempt from the controls.
  As the Bill stands, local authorities will tend to adopt PFIs as a means of reinforcing that headroom within their prudential borrowing limit. For example, a local authority at its borrowing limit could legitimately enter into a PFI arrangement to finance a project that it was otherwise unable to afford. 'That does not necessarily represent the best choice for the local authority, the best way to provide quality services to the public or the most prudent form of financial management. We are concerned that in a Bill that

  GC105
  claims to champion choice for local authorities, certain transactional methods are receiving preferential treatment from the Government. I beg to move.
  6.45 p.m.
  Lord Rooker: I hope that this explanation on Amendment No. 32, along with that given by my noble friend on the previous amendment, will satisfy the Committee that real, practical problems would result from Amendment No. 32. As the noble Lord said, the amendment is concerned with the treatment of contracts under the private finance initiative. It seeks to insert a new subsection requiring regulations to be made bringing part of the liabilities under a PFI contract within the definition of a credit arrangement.
  The amendment seems to be based on the assumption that liabilities under a PFI contract can be easily separated into those relating to the capital asset and those relating to the associated services. But the essence of a PFI contract is that it is a package deal. The authority is paying for the use of an efficiently managed and maintained building. The asset and the services are inextricably linked. The charge cannot be apportioned between those elements.
  Therefore, the whole value of the PFI contract must be taken into account. When calculating the affordable borrowing limit, the authority must consider all long-term revenue commitments including the full value of PFI deals as well as loans. If there is ever a national limit, that will take account not just of borrowing but of other contracts which score on the local authority's balance sheet. If a PFI deal scores in that way, then again its full value must be taken into account, not just some part of it. The required results are achieved by the legislation as already drafted and the amendment is unnecessary. I hope that, with those reassurances, the amendment will be withdrawn.
  I am not so sure that the last couple of sentences which I have just uttered are relevant to the amendment. However, given that the noble Lord is the leader of an exemplary, good council—although not quite excellent—I wonder whether his treasurer or someone else could explain to him whether it would be easy and practicable to separate out the different elements of a PFI contract.
  Lord Hanningfield: I thank the Minister for his answer. We feel that it is possible to separate them. Some projects are very much capital orientated. For example, in Essex we built a road under the PFI scheme that cost £120 million. That is essentially a capital scheme. As the Minister said, some projects such as schools are both capital and revenue projects. However, one could separate the capital element from the revenue element. That is why a very substantial project such as a £120 million road scheme should be taken very much into consideration when considering the prudential borrowing of a local authority.
  Perhaps the Minister could look again at the matter before we reach Report stage. We have to clarify the relationships between some of these enormous PFI
  GC106
  schemes and the other borrowing arrangements of local authorities. Perhaps we could provide more evidence to the Minister before Report stage on exactly how that might work. The Government might like to look again at the whole issue.
  Lord Rooker: I am quite happy to receive any evidence. I realise that I am going to be rapped over the knuckles for the caveat which I gave at the end of my reply. However, when I read:
  "The required results are achieved by the legislation as already drafted and the amendment is unnecessary",
  I thought that the amendment is doing something that we do not agree with anyway. I hope that I have that right. I am sure that I will be told if I am wrong. The amendment seeks to separate out the various bits of the PFI contract. I spent 10 minutes saying that that could not be done, but I then said that it is unnecessary. So unless I am wrong about that, I think that one of my sentences was inoperative.
  Each contract has to be looked at to see whether as a package it would score against the borrowing limits. I do not know—I have no experience in this area—whether it is as plain as a pikestaff that some PFI contracts self-evidently do not score against the limit. However, because of the way in which a package is put together for the bidding process, it is inevitably complex and difficult when a package is then split. However, I shall be happy to receive any evidence that the noble Lord wishes to give me between now and Report.
  Lord Hanningfield: I thank the Minister for that. The noble Baroness, Lady Hamwee, highlighted some of the problems in her amendment. We are not seeking in our amendments to reduce freedom and flexibility, but one should take very large capital schemes into account when considering the borrowing arrangements for local authorities, to ensure that that is properly dealt with in the overall arrangements. I shall not press the matter now but I am sure that we will return to it on Report. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 7 agreed to.
  Clause 8 [Control of credit arrangements]:
  [Amendment No. 33 not moved.]
  Lord Hanningfieldmoved Amendment No. 34:
  Page 4, line 22, leave out paragraph (a).
  The noble Lord said: As we have said several times in the Bill's early stages, we welcome the greater flexibility that the Government are proposing for local authorities under the prudential regime. However, we are still concerned that some of the detail has not been properly thought through. For example, we are not quite clear what is meant by the "cost" of an arrangement. It is also not clear from Clause 3 that there is an absolute requirement on the Government to clarify that issue through regulations. If that is the intention, perhaps the Government could take this

  GC107
  opportunity to explain what they mean by the "cost" of an arrangement, and to tighten up Clause 3 to make that clear. I beg to move.
  Lord Rooker: Again I hope that I can satisfy the noble Lord. Knowing the sort of thing that is in my notes, I hope that I can do that without a full frontal attack on some of the things that local government got up to in the past. Nevertheless, I will begin at the beginning.
  Amendment No. 34 relates to Clause 8 which makes further provision about credit arrangements. That term has already been defined in Clause 7, which has been agreed to. The purpose of Clause 8 is to specify how credit arrangements are to be taken into account under the capital controls. The amendment would delete subsection (2)(a) which provides that entering into credit arrangements is to be treated as undertaking an equivalent amount of borrowing, for the purposes of applying the borrowing limits set out under Clauses 3 and 4. Without this provision, the capital controls would apply when authorities took out loans but not when they undertook other forms of credit. Authorities would have to take account only of straightforward borrowing transactions when considering the limits prescribed under the legislation.
  That would recreate the loopholes of the 1980s which the present system was designed to plug. In the 1980s authorities found that they could evade the borrowing controls that then existed by acquiring capital assets through leasing and other forms of credit. However, the use of such kinds of credit arrangement has exactly the same financial effects as borrowing. At the local level, it creates long-term revenue commitments which may prove unaffordable. At the national level, there is the same increase in public expenditure which would arise if the authority had borrowed money to buy the assets outright. Credit arrangements must therefore be taken into account both for the purposes of the local affordable borrowing limit and any national limit that may ever be imposed.
  The amendment leaves in place subsection (2)(b) which would apply the capital controls to the variation of a credit arrangement, such as extending an existing lease. However, it is even more important to cover the entry into completely new leases and other credit arrangements, because that provides the greatest scope for evasion of the controls. That is why subsection (2)(a) is so vital to the system. In the 1980s many local authority treasurers and others made their name by getting round some of those issues and controls by using the wheezes set up at that time.
  I have just received a note relating to the earlier comments of the noble Lord, Lord Hanningfield. No, it does not. It essentially says, "Please do not leave the room without talking to me, so we can be helpful on the previous amendment".
  Paragraph (a) is necessary. Given the expertise of those in local government and of their advisers, it would not be very clever to create loopholes by leaving it out. That would be the inevitable consequence. We are not saying that people are hell-bent on distorting
  GC108
  the system. However, where there is a possibility for that to happen, where there is a loophole and where it is legal, treasurers will advise their councillors accordingly. They will look at the local circumstances and say, "The Government have not banned it. We will get on and do it". In this case, we do not want to create the loophole.
  Lord Hanningfield: I thank the Minister for that response. I accept much of what he says. One wants to be quite clear what the regime stands for and about the possibilities within it. However, I still think that in order to make the Minister's comments just now completely understandable, the Government could tighten up Clause 3. 1 tabled this probing amendment because we were not clear what was meant by the "cost" of the arrangement. That has now been explained very fully. It would be appropriate for that to be spelled out in the Bill. Perhaps the Minister could re-examine the wording of Clause 3 in order to ensure the clarity of the Government's proposal.
  Lord Rooker: I have also received a note which draws my attention to the draft regulations which we have in front of us. Paragraphs 5 and 6 are perhaps helpful by defining the concept of the cost of credit arrangements as the amount of the liability shown in the authority's accounts. So the draft regulations may be able to answer the query.
  Lord Hanningfield: I thank the Minister for that and beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Lord Hanningfieldmoved Amendment No. 35:
  Page 4, line 30, leave out subsection (4).
  The noble Lord said: It seems that the Secretary of State wishes to impose additional restrictions on the power of any particular authority to enter into credit arrangements. Those restrictions are too far-reaching. Will the Minister explain what form those "additional restrictions" may take and in what circumstances they might be applied? We are concerned that this provision allows the Secretary of State to intervene in a local authority's affairs at will It may not be the intention of this Secretary of State to exercise this power in a highhanded way, but who can say to what ends the powers might be put at some future date? We are unhappy about such general powers appearing on the statute book without a clear explanation of their purpose and the circumstances in which they might be used. I beg to move.
  7 p.m.
  Baroness Hamwee: We support the amendment. I suspect that the Government do not know what circumstances would give rise to imposing additional restrictions. The point of the subsection is to allow us to deal swiftly with any good wheezes that clever local authority treasurers might find. I can put it like that in view of the way in which the Minister replied to the previous amendment.

  GC109
  It is potentially quite a heavy-handed provision. There is a degree of game playing between central and local government in trying to find ways around restrictions. That may sound more sinister than I mean. I refer to the way local authorities seek opportunities to exercise the freedom all of us believe that they should have. There is a bit of a game about this, not unlike individuals and companies seeking to avoid rather than evade tax provisions. It is quite something to be given such a wide power, and we support a restriction on it.
  Lord Bassam of Brighton: The noble Lord, Lord Hanningfield, has been motivated by the "fear factor" in moving this amendment. He is fearful of what the power might be used for at some point in the future.
  Regulation 7 of the draft regulations indicates how we propose to use this power. We want to preserve the prohibition in present legislation on using credit arrangements for anything other than the acquisition of capital assets. Credit, like borrowing, should he used only to meet capital needs and not to pay for services and running costs.
  At present, the restriction appears in primary legislation, but it is more appropriate to deal with it in regulations because then any necessary exemptions can be more flexibly introduced. I am sure that the noble Lord will see the advantages in that. The main exemption, as the draft regulations show, will be in relation to private finance initiative contracts. These are of a hybrid nature, providing both capital assets and services. The regulations will ensure that PFI contracts are not inhibited by this restriction on the use of credit arrangements for services.
  It is also possible that the power in Clause 8(4) might be needed to prohibit kinds of credit transactions which were being used to avoid the controls under Part 1. In the 1980s, much ingenuity was shown by local authorities—my own included, at the better end of the market—in creating devices to get around the capital controls of the day. We need the flexibility to respond in future to any innovative schemes, as they might be described, that might emerge solely as a way round what is a sensible system of control. The power is there to deal with a situation in extremis, when there is a deliberate attempt to flout sensible and prudent regulations.
  Baroness Hamwee: I hear what the Minister says about it being sensible to leave certain provisions to regulations because that allows flexibility for exemptions. However, it would be nice if Clause 8(4) referred to possible exemptions as well as restrictions.
  Lord Hanningfield: I agree with the remarks of noble Baroness, Lady Hamwee. I accept the explanation from the Minister, but the clause takes wide powers for the Secretary of State, and although they may be spelled out in the regulations now, that would not stop even wider powers from being spelled out in future regulations. We are concerned about the wide powers given in the Bill.
  GC110
  I accept the Minister's comments on the regulations. I have not studied them, but I shall do so and we may return to the clause at a later stage. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Baroness Hamweemoved Amendment No. 36:
  Page 4, line 31, at end insert—
  "( ) Before making any regulations under subsection (3) or (4), the Secretary of State shall consult such representatives of local government as he considers appropriate, the Chartered Institute of Public Finance and Accountancy and the Audit Commission for Local Authorities and the National Health Service in England and Wales."
  The noble Baroness said: The amendment applies to subsections (3) and (4) of Clause 8. Subsection (3) relates to regulations about how to calculate the cost of a credit arrangement and subsection (4) to the additional restrictions that we have just been discussing.
  The amendment provides that, before any such regulations are made, the Secretary of State will consult representatives of local government, CIPFA and the Audit Commission. I hope we will be told that that would be the Secretary of State's intention and I hope that we can have it on the record as a commitment. I beg to move.
  Lord Bassam of Brighton: The purpose of the amendment is plain. I am happy to confirm that it is our continuing intention to consult the Local Government Association, CIPFA and the Audit Commission because they are the parties we traditionally consult when dealing with capital finance matters and particular regulations. They have been closely involved in the preparation of the draft regulations, which include regulations relying on the powers in subsections (3) and (4).
  We will continue to consult on the regulations as they are finalised, as we greatly value their contribution. It would be a foolish government which did not consult people with that level of expertise and seek their full co-operation with secondary legislation. We do not believe that there is a need to set out the statutory duty to consult in the legislation, as the system has worked perfectly well for many years, and we have benefited from that. I hope that with that assurance the noble Baroness, Lady Hamwee, will withdraw her amendment.
  Baroness Hamwee: The Minister is happy, and I am happy to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 8 agreed to.
  Clause 9 ["Capital receipt"]:
  Baroness Hanhammoved Amendment No. 37:
  Page 4, line 37, leave out subsection (2).
  The noble Baroness said: In moving the amendment I shall speak also to Amendment No. 38. They relate to the vexed question of the use of capital receipts.

  GC111
  The first matter that we want to probe is what exactly is meant by a "capital asset". The regulations address what is to be treated as a "capital receipt". I am not very clear on that matter, but no doubt the Minister will explain. Under the definition in subsection (2), if a capital asset is something that is acquired only by capital expenditure, what would be the position of assets acquired under leasing arrangements that were financed on the revenue account? For example, we might refer to the payment of a mortgage on the acquisition of a building. What definition of capital expenditure is used in that?
  Does the phrase,
  "at the time of the disposal",
  mean that the definition of capital expenditure could be changed by order so that the Government could catch assets that were not subject to these powers under the rules in force at the time when a local authority decided on an investment?
  Will the Government publish draft regulations for subsection (3)? The answer is probably that they are here—in fact, now I look, I find that the answer is yes. However, I would be grateful if the Minister could give some further explanation of matters to be treated under Part 3 of the regulations. In what circumstances under subsection (3) would the Government decide that a capital receipt would not be a capital receipt? Questions are raised all along by the terminology of the Bill; it may be perfectly straightforward, but it does not look frightfully straightforward to me.
  What is the purpose of subsection (3)(b)? Why would the Government want to say that something not properly classed as a capital receipt was a capital receipt? Again, I seek an explanation of the wording. What particular receipts are the Government thinking of? Are they those in the draft regulations under Part 3, or are there others to be considered? Would they include a legacy or a transfer from a local trust or business? That should be spelled out so that local authorities are clear about what is included in capital receipts that is over and beyond what they might receive from a housing source. I beg to move.
  Baroness Maddock: I shall speak to Amendments Nos. 37 and 38, to which my noble friend Lady Hamwee has attached her name, and support the questions asked by the noble Baroness, Lady Hanham.
  I have had a chance to glance briefly at the draft regulations, which refer mostly to matters relating to housing. We would all be very grateful if the Minister could clarify exactly what is involved. We support the noble Baroness, Lady Hanham, in her amendments, and await the Minister's further explanation.
  Lord Rooker: The clause is an important part of the Bill. Amendment No. 37 relates to the clause, which deals with the definition of the term "capital receipts". The definition is essential and paves the way for the provisions on the use of capital receipts set out in Clauses 10 and 11. The amendment would remove subsection (2), which is a key element in the definition.
  GC112
  Subsection (1) begins by defining a capital receipt as the sum received in respect of the disposal of a capital asset. Subsection (2) says that an asset is a capital asset if its acquisition would count as capital expenditure. That links the whole definition to that of capital expenditure in Clause 16, to which I shall come shortly. A similar approach is taken in the present legislation and has worked well since 1990. Its great advantage is that capital expenditure is a concept derived directly from standard accounting practice. We thereby minimise the need to create special statutory definitions. By deleting subsection (2), the amendment would sever the link between capital receipts and capital expenditure, making the definition unworkable.
  Amendment No. 38 would remove subsection (3), which provides power to vary the definition by regulations. However, that power is essential, as I shall try to explain. Draft Regulations 8 to 11 illustrate how the power would be used. Draft Regulation 8 defines as a capital receipt the repayment to an authority of a loan or grant which it had made to another body for capital expenditure. That is important, because such a grant or loan would normally have been made out of the authority's capital resources. So, when it is repaid, we need to ensure the money goes to replenish those capital resources and can be used only for capital expenditure. The regulation achieves that result. A similar rule exists under present legislation.
  Draft Regulations 9 and 10 also carry forward existing rules. They define as capital receipts, first, the proceeds of selling mortgage portfolios and, secondly, payments by tenants under shared ownership arrangements to increase their stake in their homes. Similar regulations had to be made under the present regime to remove technical doubts that such proceeds were capital receipts. That was necessary to clarify that they were subject to the housing "set-aside" requirement. Under the new system, the regulations will confirm that such sales proceeds are to come within the pooling arrangements in Clause 11.
  Removing subsection (3) would prevent that from being done. It would also deprive authorities of the flexibility offered by draft Regulation 11, which exempts low-value sums from being treated as capital receipts. Again, that rule also applies under the present system. I hope that the Committee will be reassured in this early part of the debate on capital receipts, as that would make our debates on the other amendments more easily understood.
  7.15 p.m.
  Baroness Hanham: I have tried to read the draft regulations as well as sorting out the Minister's response to my question. To some extent, I can see the entanglement between subsections (1) and (2). Subsection (2) states that if something is now a capital asset, it should have been a capital asset when it was bought. I am not sure about the relationship between a capital asset and the capital receipt received for it.

  GC113
  I have a couple of other questions. Is a capital asset only something acquired by capital expenditure when it would be in the position of assets required under leasing arrangements? I do not know whether that point was dealt with. An example is the payment of a mortgage on the acquisition of a building. If the point cannot be dealt with now, I am happy to receive a written reply. I do not think that the Minister responded to my question on the definition of capital expenditure. This matter will be a kernel part of the Bill and the local authorities' responsibilities, so I may need to return to it later.
  Lord Rooker: I am taking advice, as I have referred in my remarks to other clauses, particularly Clause 16, in dealing with this point. When we reach Clause 16, I shall be able to answer the noble Baroness. It is a very inadequate approach, but it is dictated by how the amendments have been grouped. We are dealing with some points more than once, but I must adhere to the list of amendments that I have been given. The definition of capital expenditure will be dealt with when we debate Amendments 61, 62 and 63 to Clause 16. There will also be a clause stand-part debate, if required.
  Baroness Hanham: I thank the Minister. Before we finish, when is a capital receipt not a capital receipt?
  Lord Rooker: When it has not been received, I suppose. Other clauses relate to the use of capital receipts and non-money receipts. I know that there is jollity about subsection (2), but it tries to define in normal language how the system operates in local government at present. We are not inventing the wheel; this is part of a normal process. If at the time of an asset's disposal it had to be bought again through capital expenditure, it is a capital asset. There must be cases—but I cannot think of one—where an asset can become a mixture of revenue and capital or something so that by the time of its disposal its nature has changed slightly. Anything below £10,000 is not treated as a capital receipt. We know that, because it is stated in the regulations, and I have already drawn attention to it. If I have given an inadequate answer, as I feel that I have done, I will be happy to return to the matter. This is one area on which I will have to write to the noble Baroness if there is a problem. I will do so before the next Committee sitting.
  Baroness Hanham: I thank the Minister for that. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendment No. 38 not moved.]
  Baroness Hanhammoved Amendment No. 39:
  Page 5, line 3, after "provision" insert "in relation to a local authority which is not debt-free at the time of the receipt"
  The noble Baroness said: If the Minister is not prepared to delete Clause 3—1 think that he is not—we believe that this alternative should be agreed at the very least. Its purpose would be to make the subsection inapplicable to debt-free councils. We will return to the
  GC144
  matter later, when we discuss the use of capital receipts. When an authority is debt-free, it is excessive and onerous for the Secretary of State to have the ability to regard a receipt as a capital receipt, in view of what he has in mind in Clauses 10 and 11. I beg to move.
  Lord Rooker: Again, we are dealing with an issue that will be split between different groups of amendments. Amendment No. 39 relates to Clause 9, which concerns capital receipts. Subsection (1) first defines a capital receipt as the proceeds of the sale of an asset. Subsection (3) then allows that definition to be varied by regulations. Under subsection (3)(b), regulations could define as a capital receipt a sum that was unrelated to the disposal of any asset. The amendment would prevent regulations under the latter power being applied to debt-free authorities.
  I can best explain how we intend to use the power in Clause 9(3)(b) by reference to Regulation 8 in the draft regulations that we have placed in the Library. That regulation defines as a capital receipt the sum that an authority receives when it obtains the repayment of a loan or grant that it had made to another body for capital expenditure. Such a sum does not arise from the disposal of an asset, but it needs to be treated as a capital receipt. That is because the grant or loan would normally have been funded out of the authority's capital resources—money that may have been raised by the authority itself borrowing. So, when the money comes back to the authority, we need to ensure that it can be used only for capital expenditure and not to meet revenue costs.
  That is achieved by defining the sum as a capital receipt. Draft Regulation 17 ensures that capital receipts may be spent only for capital purposes. A similar rule exists under present legislation. As now, this provision needs to apply to all authorities, whether or not debt-free.
  The amendment may have been prompted by concerns that this power could he used to extend the scope of the pooling arrangements provided for in Clause 11. That is, however, firmly ruled out by the terms of Clause 11(3), which says that pooling can apply only to receipts from the disposal of an interest in housing land. I hope that my explanation will make our debates on pooling arrangements less complicated. With those reassurances, I hope that the noble Baroness will withdraw her amendment.
  Baroness Hanham: I thank the Minister for that. The response begins to touch on the problems that we will have over the pooling of capital receipts, the nature of debt-free authorities and how they are placed in the position of pooling. I agree that the trouble with having to move amendments as we do is that we end up touching on some areas that will be dealt with later. As we will deal with the matter in detail when we reach the provisions on pooling—perhaps not today—we might return to it then. With that in mind, I beg leave to withdraw the amendment. I hope that we do not deal with pooling today.
  Amendment, by leave, withdrawn.
  Baroness Maddockmoved Amendment No. 40:
  Page 5, line 10, at end insert—
  "( ) Regulations made under this section shall be subject to affirmative resolution by both Houses of Parliament."
  The noble Baroness said: In moving Amendment No. 40 I wish also to speak to Amendment No. 41. The amendments relate to parliamentary scrutiny and consultation. Given our opening discussion on capital receipts, it is even more important that we scrutinise and consult properly when the regulations are made. Previously, the Minister has said that they do not want too much scrutiny; however, there have been times when there has not been insufficient scrutiny in the area of housing finance in the past. Indeed, we have had to have last-minute regulations and changes, particularly in relation to housing associations.
  We have perhaps reached the part of the Bill—how capital receipts are dealt with—that gives the least freedom to local authorities. I am sure that in the ensuing amendments, which I understand we will not be discussing tonight, there will be matters to be raised. Having listened to the questions of the noble Baroness, Lady Hanham, and the Minister's reply, I think that it is important that there be proper scrutiny and consultation before any changes are made. Such changes can be crucial to the local authorities and others involved, particularly in the provision of housing. I suspect that the Government will find it easier to convince us that there was proper consultation than they could convince us that there was proper parliamentary scrutiny of changes to the regulations. I beg to move.
  Baroness Hanham: We support the amendment. The draft regulations may change. Before any regulations are put forward, it seems perfectly proper that the House should have the right of seeing them. I support both the scrutiny and consultation aspects. The Government seem to have accepted the need to consult the local government associations, but other authorities have been identified. As usual, I would support consultation with them.
  Lord Bassam of Brighton: Amendment No. 40 relates to Clause 9, which defines capital receipts. The clause includes a power to vary the basic definition by regulations. The Bill as drafted provides for such regulations to be made under the negative resolution procedure.
  When drafting the Bill, it seemed to us right to opt for the negative resolution procedure here, since the similar power under the present capital finance system
  GC116
  relies upon that procedure. Since then, of course, all the regulation-making powers in the Bill have come under the scrutiny of the Delegated Powers and Regulatory Reform Committee. In its 16th Report of 2nd April 2003, covering this Bill, the committee recommended no change in the procedure proposed for the Clause 9 power. In view of that, the amendment is unnecessary. We have a very good track record of following recommendations from that committee. Here, we are sticking exactly to its recommendation, as we think that it is the right way to deal with the issue.
  Amendment No. 41 would require consultation with local government representatives, CIPFA and the Audit Commission. In some ways, it reflects earlier amendments that sought to include in the Bill an obligation to consult prior to making regulations.
  The local government associations, CIPFA and the Audit Commission are the very organisations that we consult as a matter of course on capital finance regulations. They were very closely involved in the drafting of the regulations that are placed in the Library of the House. We will continue to consult those organisations, and we very much value their comments and recommendations. We do not think that there is a need to include the proposed provisions in the Bill. We hope that the assurance that there will be continued consultation on the amendments will satisfy the noble Baroness so that she feels able to withdraw the amendments.
  Baroness Maddock: I thank the Minister for his answer; it does not surprise me. Earlier, the noble Lord, Lord Dahrendorf, said that when the Committee on Delegated Powers and Regulatory Reform does not object to something, it does not necessarily mean that it says "Yes" to it. On the previous amendment, the Minister waxed lyrical about how it gave great support for what was happening. We will return to some of the capital receipts issues in further amendments. I feel sure that, as a result of those discussions, we will wish to return to the matter, perhaps on Report. I accept the Minister's confirmation in good faith that there will he proper consultation. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendment No. 41 not moved.]
  Clause 9 agreed to.
  Lord Rooker: I think that this may be a convenient moment for the Committee to adjourn until Wednesday at 3.30 p.m.
  The Committee adjourned at half past seven o'clock.

  Ballymena to Londonderry Railway Line
  Ballymena to Londonderry Railway Line
  Northern Ireland: Hospital Waiting Times
  Northern Ireland: Hospital Waiting Times
  Waterways Ireland
  Waterways Ireland
  Royal Victoria Hospital, Belfast
  Royal Victoria Hospital, Belfast
  Police Service of Northern Ireland and Garda Síochána
  Police Service of Northern Ireland and Garda Síochána
  Freedom of Information Act 2000
  Freedom of Information Act 2000
  Sentencing Policy
  Sentencing Policy
  UK/China Human Rights Dialogue
  UK/China Human Rights Dialogue
  European Union: Forthcoming Business
  European Union: Forthcoming Business
  Electronic Communications (Market Analysis) Regulations 2003
  Electronic Communications (Market Analysis) Regulations 2003
  Nuclear Industries Security Regulations 2003
  Nuclear Industries Security Regulations 2003
  Energy Crops
  Energy Crops
  Renewables Obligation: Wood Panel Industry
  Renewables Obligation: Wood Panel Industry
  Wheeled Free-range Egg Production Units: Planning Consent
  Wheeled Free-range Egg Production Units: Planning Consent
  Bellwin Grant
  Bellwin Grant
  Iraq: Assets of Saddam Hussein
  Iraq: Assets of Saddam Hussein
  Armed Forces Reservists
  Armed Forces Reservists
  Service Personnel: Matthews Judgment
  Service Personnel: Matthews Judgment
  St Paul's Cathedral
  St Paul's Cathedral
  Olympics 2012
  Olympics 2012
  British Film Industry: Government Funding
  British Film Industry: Government Funding
  State Pensioners
  State Pensioners
  Positive Activities for Young People: Funding
  Positive Activities for Young People: Funding
  A&E Waiting Time Targets
  A&E Waiting Time Targets
  Young Carers
  Young Carers