Sitting of 6 July 2004

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

  UNIVERSITY OF MANCHESTER BILL [Lords]
  Order for Third Reading read.
  Queen's Consent, on behalf of the Crown, signified.
  Read the Third time and passed.

  MEDWAY COUNCIL BILL
  Read the Third time and passed
Oral Answers to Questions
  HEALTH
  The Secretary of State was asked—
  HEALTH

    Consultants (Early Retirement)
    Alistair Burt: What recent representations he has received concerning early retirement from the NHS by senior consultants. [182181]
    The Minister of State, Department of Health (Mr. John Hutton): My right hon. Friend the Secretary of State has not received any recent representations on that issue.
    Alistair Burt: Why does the Minister think that the Health Service Journal reported in the past two weeks that trusts were being offered money to massage the figures on the number of consultants still in place at the end of March 2004? Does he think that it was connected with an internal policy document from the Department of Health, that warned of the short-term nature of some measures designed to maximise the consultant count in March, such as delayed retirement? Does he appreciate the damage done to the health service through the constant manipulation of all sorts of figures, which means that no one can trust anything that the Government say any more on the health service?
    Mr. Hutton: No, I do not accept any of the hon. Gentleman's points. It is a good thing, not a bad thing, to bring forward consultant appointments. It is a good thing, not a bad thing, to delay consultant retirements from the NHS, for one simple reason: it allows more
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    patients to be treated more quickly in his constituency and in the constituencies of all his right hon. and hon. Friends.
    There is one other thing that I should say to the hon. Gentleman: we will guarantee waiting times for NHS patients and his party would not.
    Dr. Richard Taylor: Difficulties with continuity of care appear to me to be one of the most difficult factors with which consultants must cope. What plans has the Minister to address those concerns?
    Mr. Hutton: I agree with the hon. Gentleman, who speaks with some experience on these matters, that continuity of care for patients is an important issue. Equally, it is an important issue for NHS consultants and doctors. The best way to tackle those problems and others is to continue to expand the number of consultants and doctors working in the NHS, and that is precisely what we will do.

    Norfolk and Norwich Hospital
    Norman Lamb: If he will make a statement on the impact of the cost of the private finance initiative contract for the Norfolk and Norwich hospital on the health service in Norfolk. [182182]
    The Parliamentary Under-Secretary of State for Health (Dr. Stephen Ladyman): The Norfolk and Norwich university hospital private finance initiative scheme was the fourth major PFI scheme to reach financial close and sign contracts. The Norfolk and Norwich university hospital is a high-quality hospital and was recently named among the top 40 hospitals in the United Kingdom by an international company involved in measuring health care performance.
    Norman Lamb: May I draw the Minister's attention to the fact that there appears to be a black hole of well over £20 million in the Norfolk health economy and that many people in the health service in Norfolk blame the extra cost of the PFI contract, compared with traditional means of financing public sector projects? Is not he concerned that Norfolk is paying the price for being a pioneer of this form of financing and that other services, such as cancer and learning disability services, are being put at risk? Will he do anything to help Norfolk, given that it was a pioneer of this PFI form of financing?
    Dr. Ladyman: I am surprised that the hon. Gentleman is not celebrating the fact that he now has one of the best hospitals in Europe serving his constituency. When a new hospital is built, that is bound to put pressure on the local health economy. That pressure does not come about as a result of it being a PFI scheme; in fact, the PFI scheme is cheaper, if we also take into account the cost of risk, than a traditional building scheme would be.
    Mr. Henry Bellingham: Certainly, people in Norfolk do not begrudge this excellent hospital, but is the Minister aware that one of the big disappointments in relation to the project has

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    been the lack of public transport access from the A47? Has he been briefed on that point, and will he do anything about it?
    Dr. Ladyman: The hon. Gentleman knows perfectly well that those issues must be addressed by the local health economy. This is a 1,000-bed hospital that has been built as a result of this Government's PFI initiative, and it provides services for the whole Norfolk health economy. I would have thought that he would have joined in the celebrations of that and made sure that people were addressing those issues, which are best addressed locally.
    Mr. Paul Burstow: Given that PFI projects such as those in Norfolk and elsewhere often result in fewer beds in the new hospitals, and given the Government's commitment to introducing payments by results—which is about rewarding increased activity—how will the recommendation of the Health Protection Agency that bed occupancy rates should be reduced in order to reduce infection rates be implemented? Surely the two are incompatible. There is potential for more infections in our hospitals as a consequence of the Government's policies.
    Dr. Ladyman: The hon. Gentleman should recognise that 45 hospitals have been completed and are being occupied as a result of the PFI. This is a major hospital rebuilding programme. Each hospital has been rebuilt following a thorough review of local health needs by local people to ensure that the right number of beds is there for those people. I should have thought that the hon. Gentleman would join in the celebrations of a magnificent hospital delivering magnificent services to the people of Norfolk.

    Kidney Dialysis
    Mr. Peter Pike: What facilities are available for renal patients on dialysis for treatment while they are away from home on business or on holiday. [182183]
    The Minister of State, Department of Health (Ms Rosie Winterton): A £60 million capital investment programme to expand renal services began four years ago. There are now at least 700 extra dialysis stations and 28 more dialysis units, which will make it easier for renal patients to take holidays and travel on business.
    Mr. Pike: I know that tremendous advances have been made in Preston and Burnley in the north-west, but does my hon. Friend accept that the scheme needs to be improved so that people can arrange to go away in the knowledge that they can get a dialysis slot wherever they go? They should not have to be confined to taking holidays in this country. In this day and age, should we not be doing something to enable people to have dialysis abroad?
    Ms Winterton: There are a number of arrangements that enable people to travel abroad—mainly within the European Union, but we have reciprocal arrangements with other countries such as Australia. We made it clear in the national service framework for renal services,
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    published in January, that it is important for patients to be able to dialyse away from home, whether they are on holiday or on business. A group of renal commissioners, chaired by Robert Dunn of the National Kidney Federation, is considering how we can support the implementation of the framework and guidance.

    Chronic Diseases
    Dr. Phyllis Starkey: What plans he has to improve services for patients with chronic diseases. [182184]
    The Secretary of State for Health (Dr. John Reid): The NHS improvement plan sets out the Government's plans for providing personalised support for the millions of people with long-term or chronic conditions. All that will of course be free: there will be no charges for anyone.
    Dr. Starkey: I welcome the increased emphasis on managing patients with chronic diseases, but a significant number suffer from more than one chronic disease. One of my constituents who has Crohn's disease was recently in hospital for an unrelated operation and there was clearly a lack of communication between the different specialties involved in her care. What is being done to encourage clinicians to co-operate more across clinical specialties in the management of patients with chronic diseases?
    Dr. Reid: That is an important and pertinent question. The plans that we outlined last week will ensure that, over the next four years, we provide more support for patients, especially those who suffer from a number of conditions and therefore have the most complex health and social care needs.
    The focus will be on improving care in three main ways: by supporting all patients so that they can care for themselves and manage their conditions better whenever possible, by ensuring that all patients have access to the care that they need, and—this is particularly relevant to my hon. Friend's question—by providing personalised, co-ordinated care for the most vulnerable patients with the most complex conditions.
    Angela Watkinson: The Secretary of State will be aware of the importance of respite care for those who care for family members with long-term conditions, but is he aware that no such care is available to many parents of children on the autistic spectrum because of the very specific needs of those children? What plans has he made to ensure that it becomes available?
    Dr. Reid: The hon. Lady makes yet another important point. It is true that, in addition to the extra resources that we are putting in and the extra people to provide chronic care in the localities, I announced that an additional 3,000 community matrons—specialised nurses—would be provided to help out. We try wherever possible to provide for respite care. She has drawn attention to a particular illness with particular problems in respect of respite care for the carers. I promise to look at that and perhaps to write to her on it.
    Mr. Andrew Lansley: The Secretary of State just said that he is planning to provide additional community matrons. He might like to explain why, after seven years of a Government who have failed to deliver community nursing care, there are 800 fewer district nurses than there were seven years ago; why there are 15 per cent. fewer episodes of care from district nurses than there were seven years ago; and why there are 20 per cent. fewer episodes of care from health visitors than there were seven years ago.
    The Government have only just discovered the needs of those with long-term diseases. Even now, the Government's approach is not to design services around the needs and choices of patients but to put in place some community nursing without necessarily understanding how that meshes together with the role of general practitioners. Perhaps the Secretary of State would like to explain where community nursing has gone over the past seven years.
    Dr. Reid: I confess that I would like to have turned to this as a first priority seven years ago. Had we inherited something other than an impoverished and undernourished NHS in which there had been under-investment—[HON. MEMBERS: "Oh!"] The hon. Gentleman asked me what we did for seven years before we got the 3,000 community matrons. It is a fair question.
    Mr. Simon Burns: Answer it then.
    Dr. Reid: I will answer it, if the hon. Gentleman will be courteous enough to contain his excitement. We have been providing 67,500 more nurses, 18,000 of them, incidentally, in primary care, exactly the sector to which the hon. Member for South Cambridgeshire (Mr. Lansley) referred. We have more than 19,400 new doctors. Sixty-eight major new hospitals have been built, are under way or have been improved, and 2,200 GP premises have been improved. In the past three years alone, we have provided 1,600 more general and acute beds than we inherited. We have 265 one-stop services. We have slashed the waiting lists and improved the health care of millions. On top of that, we are providing yet more facilities, including 3,000 community matrons. I wish that we could have done more but we followed a Government who could not have done less for the health service.

    NHS Dentists
    Mrs. Annette L. Brooke: If he will make a statement on progress in implementing the new contract for NHS dentists. [182185]
    The Minister of State, Department of Health (Ms Rosie Winterton): Since the Health and Social Care (Community Health and Standards) Act 2003 received Royal Assent in November, my officials have had several meetings with the British Dental Association about the new contract. Further meetings are scheduled in the next two months. We will shortly be making a further statement on the implementation of the new contract.
    Mrs. Brooke: What guarantee does the Minister think she may be able to give that the new proposals will improve access to NHS dentists? That is an enormous concern for my constituents. Given the latest research from the British Dental Association, which found that nearly 60 per cent. of high street dentists are likely either to reduce their commitment or quit the NHS, I seek reassurances from her today.
    Ms Winterton: Our evidence that the new contract will work is based on five years of work in pilot sites around the country. We already have about 1,500 dentists coming over to the new system of personal dental services. The hon. Lady will be aware that we worked up the proposals for the new contract with the British Dental Association because it told us that it did not like the current way of working—the treadmill effect. We are changing the system so that all the money that is currently held centrally will go to local level and primary care trusts can plan properly, in conjunction with local dentists, the NHS dentistry that is required in their area.
    Mr. John Denham: I thank my hon. Friend for agreeing to visit Southampton on Thursday to discuss dentistry, and may I encourage her to do two things when she does? First, will she do everything that she can to reassure NHS dentists about the nature of the new contract, because the misconceptions about it are one reason why some are considering reducing their commitment? Secondly, I urge her to press the primary care trust to monitor dentists' intentions much more closely, so that it can intervene quickly if there are any signs of dentists planning to leave the NHS for erroneous reasons and fears in particular.
    Ms Winterton: My right hon. Friend is right: there are some misconceptions about the new contract. On PCTs ensuring that they are aware of what is happening locally, we have dental leads in every PCT and in the strategic health authorities. Earlier this year, we announced £59 million to improve access, and dental personnel working at PCT and strategic health authority level have access to that money. They can work with local dentists, so that if dentists indicate that they want to leave the NHS, money can be accessed and ways of improving services considered so that they remain NHS dentists.
    Dr. Andrew Murrison: These are not just misconceptions. The dental profession seems to be united in its opposition to the new dental contract. Why does the Minister think that that is so? Could it be that, with nine months to go until the start of the contract, we have yet to be given the details of it? Could it also be because nine out of 10 dentists believe that PCTs are not up to the job of managing that contract, as the National Audit Office also seems to think?
    Ms Winterton: One problem is that dentists were completely united against the contract introduced by the previous Administration and we have had to pick up the pieces resulting from that. On dentists' attitude to the new approach, 1,500 dentists are moving over to the new system and they say that they like the new way of

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    working. The chairman of the British Dental Association said that there are many happy practitioners working under the new system—a fact that we should be celebrating. We have put together the dental work force review and worked with the BDA on the new contract—the new way of working—which, as we have demonstrated, is working after five years of piloting. I had hoped that the hon. Gentleman would support the action that we are taking, particularly given that we are putting right the problems created by his Administration.

    Breast Cancer Screening
    Mr. Bill Tynan: How many women have benefited from the extension of the breast cancer screening programme to those aged between 65 and 70 years. [182186]
    The Parliamentary Under-Secretary of State for Health (Miss Melanie Johnson): Over 250,000 more women have been invited for breast screening in England since the extension to women aged 65 to 70 began in April 2001.
    Mr. Tynan: My hon. Friend will know that statistics show that currently, a third of all women aged over 70 suffer from breast cancer. Although I congratulate the Government on extending the programme to those aged 70, will she consider a further extension to take into account giving an automatic recall to those aged over 70?
    Miss Johnson: We have looked at the evidence on screening for the over-70s and the Advisory Committee on Breast Cancer Screening is currently reviewing it. However, there is little evidence to suggest that screening would be effective for that age group; indeed, I understand that no major country offers routine screening for the over-70s. It is possible, however, for women aged over 70 to continue to be screened, and such screening is already freely available. Women who have participated in the programme will be informed of that right at the age of 70.
    Gregory Barker: The expansion in screening is to be greatly welcomed and it is to the Government's credit, but for women suffering from breast cancer it is by no means the whole picture, particularly if follow-up care is not available. In my part of the world, we are extremely worried about the situation at the Maidstone and Tunbridge Wells NHS Trust, the chief executive of which wrote to all Members of Parliament in our area. He said that waiting times for breast cancer patients needing radiotherapy is now an urgent issue, and that
    "waiting times have started to increase for all patients who require radiotherapy treatment, the longest waits now being for those with … breast cancer".
    This is not a new problem; we experienced it two years ago, and the numbers started to come down. Will the Minister undertake to get in touch with the trust to see what can be done to help tackle this very important problem?
    Miss Johnson: As the hon. Gentleman said, we have improved outcomes enormously through the screening programme. About a third of cancers are being detected in this way and we have detected 1,500 extra cancers through the programme in the last couple of years. I welcome his congratulations on the work of staff across the country, including, no doubt, his constituency. To a degree, we are the victims of our own success: as a lot more women are identified, a lot more women need treatment. There is a maximum waiting time for front-line treatment and, in terms of follow-up treatment, we have doubled the number of radiography training places and increased the number of clinical oncologists by a quarter since 1997. We recognise that there is still more to do to address the issues raised by the hon. Gentleman, which is why we have asked the national cancer director to undertake a stocktake on the issue.
    Dr. Jenny Tonge: "Celebrate" seems to be the in word this morning and I do celebrate, if modestly, the huge improvement in detection and treatment of breast cancer in this country; that should be recognised. However, the causes of heart disease are now well known and much has been done to prevent heart disease. What resources are we putting in to the causes of breast cancer so that we can prevent this terrible disease and not just treat it when it occurs?
    Miss Johnson: I welcome the hon. Lady's congratulations on and support for the achievements so far. A number of research programmes are going on, but we already know that some things will reduce people's risk of getting cancer—including breast cancer—such as eating five pieces of fruit or vegetables a day. The hon. Lady screws up her face, but such things clearly improve outcomes across the board in relation to several cancers and coronary heart disease. There are a number of things that people can do already such as undertaking more physical activity, and we will come to those as part of the White Paper in the autumn. I am happy to undertake to write to the hon. Lady on the details of the research programmes.
    Mr. John Baron: We welcome any extension of the breast cancer screening programme, but the fact remains that three quarters of all breast cancer cases are still diagnosed through the GP referral system, with which there are a number of problems. For example, whereas the Government's two-week target for women urgently referred by their GP to see a specialist is being met, Breakthrough Breast Cancer, among others, has pointed out that something like 10,000 women each year are routinely referred by their GP and subsequently misdiagnosed with breast cancer. Those women have to wait, on average, six to eight weeks—and, in some cases, up to 17 weeks—to find out whether they have breast cancer. The Government's two-week target is not helping the large number of women who are, in effect, misdiagnosed because they have been routinely referred and who must wait much longer to see a specialist at a time when they may be suffering much anxiety and stress. That also puts GPs in a difficult position, as around half of them have expressed the view that they find it difficult to distinguish between urgent and routine referrals, upon which so much depends. What is the Minister going to do to correct this lottery in breast cancer care?
    Mr. Speaker: Order. Before the Minister replies, I want to explain that when I call Front Benchers, it means that Back Benchers will not be called, because I have given Front Benchers that privilege. I therefore expect shorter questions—indeed, I demand them.
    Miss Johnson: Obviously, women are hugely better off than they were under Conservative Governments. Presently, 98 per cent. or more of women with urgent referrals are being seen within two weeks. The hon. Member for Billericay (Mr. Baron) dismisses that out of hand, but those are people categorised by their doctors as the most important cases. They are now receiving speedy treatment, which could never have been guaranteed—and, indeed, people did not receive it—in the past, when only a comparatively small percentage were getting hospital referrals within two weeks.
    As to the hon. Gentleman's point about non-urgent referrals, we are interested in improving the referral accuracy of GPs. Work is being done on the guidance given to GPs about whom they should and should not refer urgently. Overall, the effect of the Government's policies and investment is hugely positive for women with breast cancer. The outcomes demonstrate that, with more than a 10 per cent. overall cut in cancers reflecting similar cuts in breast cancer mortality across the piece.

    Scanners
    Dr. Brian Iddon: How many additional scanners have been provided in the NHS in the last year; and how many of these are in the north-west. [182187]
    The Secretary of State for Health (Dr. John Reid): Forty-five scanners—29 CT and 16 MRI scanners— were delivered to the NHS through centrally funded programmes in 2003–04. Of those, six were delivered to NHS trusts in the north-west. In addition, we announced last week that NHS MRI scanning capacity will be increased by a further 15 per cent. as a result of procuring 12 state-of-the-art mobile units from the private sector. Three of those will be based in the north-west.
    Dr. Iddon: I welcome that news. The New Opportunities Fund has provided the Royal Bolton hospital with a new —700,000 scanner, which will detect cancers. Unfortunately, it is being used only for six half-day sessions a week because the hospital cannot provide suitably trained staff who can interpret the images from the scanner. What account is my right hon. Friend taking of the budgets necessary to staff the new scanners? Can he please comment on the provision of adequately trained staff?
    Dr. Reid: In terms of the budgets, even our most churlish critic would accept that an increase in the Bolton Hospitals NHS Trust budget from about £108 million to £130 million between 1999 and this year is a significant increase in revenue funding. As to the scanners themselves, my hon. Friend will be aware that one MRI scanner was delivered last year and I believe that two CT scanners are scheduled to be delivered in the next couple of years. In terms of staff, yes, it is
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    difficult. We are expanding NHS staff and 84 per cent. of them are involved in direct patient care, despite the constant refrain from Conservative Members that everyone in the NHS is a useless unproductive bureaucrat. It is difficult to get radiologists, but I can tell my hon. Friend that there are more radiology staff than ever before. Since 1997, the number of clinical radiologists has increased by 26 per cent. and the number of diagnostic radiographers by 13 per cent. We will boost those figures further by an additional £3 million investment.
    Mr. Nigel Evans: The Secretary of State for Health has mentioned mobile scanners. Will he ensure that they will be made available to rural areas around the north-west of England, including Clitheroe in Ribble Valley, whose needs are as great as in any other place? Will he also ensure that trained staff will be made available to local residents so that they secure the level of service that they are paying for?
    Dr. Reid: We are certainly trying to do that. The point of having mobile scanners is not just to add to capacity, although the announcement last week by the Minister of State, Department of Health, my right hon. Friend the Member for Barrow and Furness (Mr. Hutton) spoke of adding some 500,000 to 600,000 scans to our capacity over the next few years, which is an enormous increase. The fact that they are mobile means that they can be taken to the places where the needs are greatest and also to rural areas. There will be two mobile units in London, two in north-east Yorkshire and Humber, three in the north-west and west midlands, two in the east midlands and the east and three in the south. That, to adopt the word of the morning, is cause to celebrate, not least in Leicester where two MRI scanners have already been delivered and Birmingham where three MRI scanners and nine CT scanners have been delivered.

    General Practitioners
    Tony Lloyd: What initiatives are in place to encourage the retention of general practitioners in inner-city areas. [182188]
    The Minister of State, Department of Health (Mr. John Hutton): The Government are committed to increasing the number of GPs working in under-doctored areas, which include many inner-city practices. A range of measures have been put in place to achieve that, including the allocation of extra training places and payments of up to £12,000 for GPs beginning their careers in those areas.
    Tony Lloyd: Obviously, my right hon. Friend's answer is very helpful, but may I draw his attention to the specific problem of population change in the inner cities? There has been a very rapid decline in some areas, and in others—such as the centre of my city of Manchester—the increase has been extremely rapid. A decline in population places a significant strain on GPs in financial terms, while a rise poses difficulties in terms of patient numbers. I hope that my right hon. Friend looks very seriously at the problem. The rapid population growth in the centre of Manchester is a major issue. We need more GP services to serve the new

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    population. The problem is not unique to Manchester but is apparent in other cities, such as Birmingham and Leicester, where the Government's many achievements are already celebrated. However, people are listening to the debate on this matter.
    Mr. Hutton: I very strongly agree with my hon. Friend. Central Manchester's population is booming because of the significant success of local regeneration schemes. I agree too that there is a need to ensure that primary care trust funding allocations keep abreast of population changes. I accept his criticism that that may not always have happened in the past. That is why we are looking very carefully at the problem that he highlights as part of the next wave of allocations to PCTs, and I am sure that he will agree that it is a priority.
    Mr. Jonathan Sayeed: The Minister will know that GP retirements are concentrated in inner-city practices run by a single doctor—and especially in practices where the retired doctor was Asian. The Government have promised some 2,000 more GPs, but have not specified that they will all work full-time. The British Medical Association says that we need an extra 10,000 GPs. How do the Government intend to square that circle?
    Mr. Hutton: I hope that the hon. Gentleman at least will welcome the fact that 2,000 more GPs are working in the NHS—but perhaps he was coming to that. There has been a significant increase in the number of whole-time equivalents as well. We need to continue the investment and to support PCTs in using a variety of mechanisms to expand the GP work force. The hon. Gentleman's strictures today would have had more credibility if he and his party had any plans to increase the size of the primary care work force. Sadly, they do not.
    Mr. Bill O'Brien: On the question of retaining GPs in inner-city areas, will my right hon. Friend take into consideration the problems that arise in urban areas? When two GPs left a practice in my constituency, the withdrawal of the satellite service caused much inconvenience for people. Is there any incentive to encourage doctors to work in urban areas? The PCT has done all it can to fill the vacancies, but more assistance is needed.
    Mr. Hutton: Again, I agree with my hon. Friend that there remain parts of primary care in England that experience difficulties in recruiting more GPs, and he referred to problems in his area. In my earlier answer, I set out some of the incentives that we have put in place, but I can tell the House that we are looking at ways to increase them further. I hope to make an announcement on that very shortly.
    Miss Anne McIntosh: If he will make a statement on the implementation of the new general practitioner contract. [182190]
    The Minister of State, Department of Health (Mr. John Hutton): The new primary care contract was approved overwhelmingly by a ballot of general
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    practitioners, and is being implemented successfully. All but five practices working under general medical services arrangements have signed the contract. Payments under the new contract have all been made on time.
    Miss McIntosh: People can see a doctor within 48 hours only if they declare themselves to be an emergency, and in parts of the country it is impossible to see a doctor out of hours in the evenings or at weekends. Will the Minister apologise for that? Does he accept that the new GP contract is an abject failure, and that his Government have let this country down?
    Mr. Hutton: No. In the light of recent exchanges in the House, I hope that the hon. Lady will understand why I will not take at face value any of the so-called facts that she has just brought to our attention. They are not the case. She might be better off having a word with the motley crew on the Opposition Front Bench about the new GP contract, because I understand that the hon. Member for South Cambridgeshire (Mr. Lansley) has said that he supports it.
    Mr. Bob Blizzard: Lowestoft is not a city like Manchester, Birmingham or Leicester, but it contains some of the deprivation associated with those cities. In assessing the new GP contract, will my right hon. Friend take into account the difficulties of recruiting and retaining GPs in the poorer parts of Lowestoft, which do not benefit from the incentives that are offered elsewhere? Will my right hon. Friend look at that situation?
    Mr. Hutton: Yes, I certainly will look at the point that my hon. Friend raises. The incentives for new GPs who are starting their careers are all targeted at under-doctored areas, and that will include the constituency that my hon. Friend so ably represents. The key is to continue the investment in primary care, which is set to increase by 33 per cent. over the next couple of years and to ensure that we seek to improve the health of the poorest communities in Britain at a faster rate than any other community. That is what this Labour Government are committed to doing.
    Mr. Simon Burns: Does the Minister really think it is successful that last weekend in Norfolk half the GPs who provided the out-of-hours service had to be flown in from Germany? Is the Minister doing anything to prevent the inevitable chaos at weekends for the out-of-hours service as GPs cease to have surgeries on Saturday mornings, and the pressures on the service in the evenings during the week as patients cannot get appointments?
    Mr. Hutton: I know that the hon. Gentleman has a vested interest in spreading doom and gloom about the national health service. In relation to the points that he raises, some 40 PCTs have now successfully negotiated opt-out arrangements in relation to the new contract with their local practices. The general view is that those opt-out arrangements are working effectively. The hon. Gentleman raised the issue of Norfolk and I understand that it is looking at finding some doctors from Germany to support the work of GPs.

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    It was important to make the changes to the contract, because the doctors themselves asked us to do it and agreed to the changes in the ballot. The new contract will help us in the wider sense of recruiting more GPs to work in primary care. However, we should nail one misunderstanding. The contract does not suggest that out-of-hours services will end: it will remain the case that people will have access to a GP out of hours. That is the legal responsibility of PCTs and it cannot be avoided. My understanding is that the Conservative party supports the changes to the contractual arrangements for the employment of GPs, but they come here and imply that they think that we should not make those changes. What a bunch of hypocrites they are. [HON. MEMBERS: "Oh!"]
    Mr. Speaker: Order. The right hon. Gentleman will withdraw that remark.
    Mr. Hutton: Of course, Mr. Speaker—
    Mr. Speaker: Order. He should say nothing else; just withdraw the remark.
    Mr. Hutton: I am happy to withdraw that remark.
    Ms Gisela Stuart: GP services in Birmingham have improved tremendously and the contracts are working. It is a fact that 98 per cent. of people in Birmingham can see a GP within 48 hours. However, GPs do not operate in isolation. We must continue to drive down the waiting lists for referrals to see a consultant. Will my right hon. Friend remind the people of Birmingham—especially those in Hodge Hill, who will be voting soon—which party represents their interests, is driving the NHS forward and will continue those improvements, not jeopardise them?
    Mr. Hutton: I am very happy to do that. People face a clear choice between a party that is committed to investment and giving patients guarantees about when they will be treated and by whom, and the Opposition, who would do none of those things.

    Single Sex Wards
    Dame Marion Roe: What progress has been made with making wards in child and adolescent mental health services units single-sex. [182191]
    The Parliamentary Under-Secretary of State for Health (Dr. Stephen Ladyman): The data are not collected centrally, but the Royal College of Psychiatrists' quality network for in-patient child and adolescent mental health services conducts annual reviews of services. Of the units reviewed in 2002—03, 89 per cent. fully or partly met its standards for single-sex privacy, and for units reviewed so far in 2003–04, that has increased to 98 per cent.
    Dame Marion Roe: I am grateful to the Minister for that reply, but can he tell the House what action is being taken to stop young and adolescent mental health
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    patients being placed in adult mental health wards, and what measures the Government propose to take to ease the crisis in resources for such patients?
    Dr. Ladyman: I congratulate the hon. Lady on her recently bestowed honour.
    The hon. Lady is right; there is a real problem when it becomes necessary to place adolescents in adult wards and we are working very hard to avoid it, not only by giving guidance to the services but also by making major investments in those services. I bring to her attention the fact that later this year we shall be publishing the national service framework for children, which will include further extensive guidance on the subject.
    Tim Loughton: If we are "motley", I dread to think what unparliamentary language would be required accurately to describe the shower on the Treasury Bench—
    Mr. Speaker: Order. I dealt with the remark that was made. I want temperate language at all times.
    Tim Loughton: Why did a recent British Medical Journal survey of psychiatrists and paediatricians reveal that nearly two thirds of under-18-year-olds with mental health problems were admitted to inappropriate wards, many to adult wards? They were the lucky ones, given that the mean number of adolescent in-patient beds is only 7.1 beds per 100,000 of the population, leading to the conclusion that there is an absolute lack of capacity in child and adolescent in-patient psychiatrist units. Given all the Government's bluster about eradicating mixed-sex wards for adults with physical illness—unsuccessfully—why have they done nothing to end mixed-sex wards for adolescents with mental illness, potentially the most vulnerable of all?
    Dr. Ladyman: I would not have thought child and adolescent mental services an obvious subject for levity, but perhaps my sense of humour is not quite as refined as the hon. Gentleman's.
    We are making a major investment in child and adolescent mental health services, including an investment in new wards and in providing single rooms and separate-sex facilities. We are making the investment that will improve a service with which we are not happy. The hon. Gentleman is pledged to taking that investment out.

    Patient Capacity
    Mrs. Janet Dean: What plans he has to increase patient capacity within the NHS. [182192]
    The Secretary of State for Health (Dr. John Reid): The NHS is expanding capacity as never before, with 19,400 more doctors and 67,000 more nurses since 1997, and the largest hospital building programme in its history. That will allow us to offer faster, more responsive services and more patient choice, all free with no charges for anyone for operations or treatment.
    Mrs. Dean: I thank my right hon. Friend for that answer and—to use the word of the morning—celebrate the fact that there has been a 35 per cent. increase in overall staffing at Queen's hospital in Burton, and a 68 per cent. increase in the number of doctors there. A new GP surgery at Winshill in my constituency is serving a local population that has not had one for between 20 and 30 years. May I also tell my right hon. Friend—
    Mr. Simon Burns: Question!
    Mr. Speaker: Order. I chair the proceedings in the House.
    Mrs. Dean: There are concerns about the number of GPs, especially in the inner wards of Burton, and about the shortage of dentists in east Staffordshire. Will my right hon. Friend give the primary care trust guidance on how to address those issues?
    Dr. Reid: We always stand ready to give whatever assistance and guidance we can, although as we drive forward reforms in the national health service and increase capacity we are trying simultaneously to pass down to local level as much of the power for decision making as possible. My hon. Friend has given a balanced picture of where we are. We have made huge and significant progress on capacity over the past seven years, although we still have a long way to go, as she pointed out. However, the choice before people is plain: what we offer, in increased capacity, extended choice, more personal care, all delivered free at the point of need; or the alternative, which is to reduce NHS capacity, to scrap all targets so that there will be unlimited waiting lists, to introduce charges and give preferential treatment to the better-off, and to return to the jungle of the free market where health policy benefits only the financially fittest in this country.
    Mr. Mark Francois: May I ask the Secretary of State about capacity as regards dental patients in the NHS? In large parts of my constituency, it is now practically impossible to register with an NHS dentist. People must go to a practice well outside the constituency to do so. In Hockley, in my constituency, there is a particular problem. The residents association has come up with some innovative proposals to address it, but those in the local health economy appear to be pooh-poohing them at present. Will the Secretary of State allow me to write to him specifically about that very difficult situation to find out whether he can do something to address the black hole in NHS dentistry in my constituency?
    Dr. Reid: Of course I look forward to receiving any representation on that from any Member on either side of the House. I have not hidden—nor has the Minister of State, Department of Health, my hon. Friend the Member for Doncaster, Central (Ms Winterton)—from the huge challenges that we face with dentistry. Again, let us try to get a balanced picture. There are more dentists in this country than ever before. There has been a 15 per cent. increase in the number of dentists in this country. There are more dentists in training than ever before, but there are problems that relate to the
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    contract. I make no party political point, but that is not merely a problem under this Government. There is a problem with getting in extra dentists in the short term, as well as with training them for the long term. I will address all those points in the coming week, because this issue should not separate us on party political grounds, but I certainly look forward to receiving any ideas and representations. One idea that I will not accept is to reduce the capacity that we are putting into the NHS— an idea that could only make the situation worse.
    Mr. Gordon Prentice: We need more home-grown doctors because, very often, doctors will stay in the area where they were trained. May I ask my right hon. Friend whether there is any plan to establish a new medical school in the north-west, based on the university of Central Lancashire?
    Dr. Reid: It is not always that I can start with the words, "I agree entirely with my hon. Friend," but I can today. That is why we have got 60 per cent. more home-grown doctors, and more medical students and a higher number of applications to medical colleges than ever before. We have opened four more medical colleges as well.
    All that is a massive advance, but it is short of where we would want to be in an ideal world. However, I hope that people will recognise that, if we want to build on the advances of the past few years, we need increased capacity and more personal control for patients, and all that must be delivered free at the point of need. We should be celebrating this morning the fact that, as shown in a BBC poll, 70 to 80 per cent. of the people of this country agree with us on that and are entirely opposed to any plan to charge people for health care.

    Enbrel
    Rev. Martin Smyth: When he expects Enbrel to be available for general prescription throughout the NHS. [182193]
    The Minister of State, Department of Health (Ms Rosie Winterton): Enbrel is already available on NHS prescription.
    Rev. Martin Smyth: It may be in England, but I understand that it is not yet available in Northern Ireland, where patients are crying out for it. Will the Minister have a chat with her colleagues in the Northern Ireland Office to find out whether Enbrel may become free on prescription not in three years' time, but to meet patients' needs at the moment?
    Ms Winterton: As I said, Enbrel is available on prescription. The hon. Gentleman may be referring to the National Institute for Clinical Excellence guidelines, which are implemented in England and Wales, but the implementation of NICE guidelines is, in fact, a devolved decision. However, I can assure him that officials in the Northern Ireland Office are considering more formal ways of working with the relevant national standard-setting bodies, including NICE, which will address the problem that he raises.

    Waiting Times (Hendon)
    Mr. Andrew Dismore: What steps he plans to take to reduce hospital waiting times for residents in Hendon. [182194]
    The Minister of State, Department of Health (Mr. John Hutton): Maximum waiting times for hospital treatment in my hon. Friend's constituency have halved since 1997. On 24 June, the Government set out our plans to reduce further waiting times for treatment, which will bring further benefits to my hon. Friend's constituents.
    Mr. Dismore: May I celebrate my right hon. Friend's answer and the fact that he, rather than the Conservative party, is running the health service in London? There is still some spare capacity at Edgware hospital. Will he work with Barnet and Chase Farm trust and others to find out whether that extra capacity can be brought into use by some of the consultants there, who seem a little reluctant to travel the short distance involved?
    Mr. Hutton: I will certainly look into the matter my hon. Friend has raised.

    Patient Choice
    Andrew George: What assessment he has made of the potential for patient choice in remote rural areas.[182195]
    The Parliamentary Under-Secretary of State for Health (Dr. Stephen Ladyman): Increasing patient choice offers all patients, including those in rural areas, the opportunity to have more control over their health care. Choice should also lead to better quality services as health care providers respond to the choices that patients make.
    Andrew George: I am grateful for that reply, but does the Minister accept that the reality in rural areas is a choice between whether people have a hospital or not, and a consideration of whether there are enough acute and primary care beds and front-line staff, and sufficient diagnostic capacity in the NHS in such areas, rather than a synthetic argument about the choice to join some elective queue or other somewhere else?
    Dr. Ladyman: So in the hon. Gentleman's opinion, Cornish mothers do not want to choose between midwife-led units and obstetrician-led units for their births, and the 3,000 people from the health economy in his area who have already chosen under existing plans to travel to shorten their waiting time for coronary heart disease operations do not want that choice. It is absolutely true that part of what we must do is to drive up capacity and ensure that that is available everywhere. However, one of the great drivers for that—it is also a driver for increasing quality—is giving people choice, and that is just as relevant, and perhaps even more relevant, in rural areas as it is anywhere else.
    Mr. Desmond Swayne: May I join a modest celebration and congratulate Ministers on the way in which they have expanded the choice available to my rural constituents by making use of the availability and capacity of the private sector? Does the Minister, in accepting the success of that scheme, believe that it is time to expand it further to alleviate the suffering of people who have had to dip into their savings to afford life-changing, or life-saving, treatments?
    Dr. Ladyman: The hon. Gentleman's party's policy is to force people to pay from their own pockets if they want choice, while our policy is to give people choice without their having to spend extra money. He would unleash inefficiency on the health service by allowing people to buy from the private sector one at a time. When we choose to use the private sector, we negotiate and buy in bulk, and get cost effectiveness as a result.

    Life Expectancy
    Sir Teddy Taylor: What estimate he has made of the impact on health service spending of the increase in life expectancy. [182197]
    The Minister of State, Department of Health (Mr. John Hutton): The Wanless review reported that the impact of ageing on future health expenditure is likely to be small compared with other cost drivers.
    Sir Teddy Taylor: Does the Minister agree that bed blocking by elderly patients remains a major difficulty in the health service that causes many problems for the medical services? Does he agree that the problem should be faced up to seriously because it will obviously get worse if we have more elderly patients? Does he think that the matter should be examined independently and carefully to determine whether we can find a real solution to bed blocking?
    Mr. Hutton: I do agree that we need to examine such issues carefully. I am glad to be able to tell the hon. Gentleman and the House that bed blocking in the national health service has reduced hugely, largely as a result of the new legislation and extra investment that we have put in place, both of which he and his hon. Friends opposed in the House.

    Children's Hospices
    Jeff Ennis: If he will increase the amount of NHS funding being channelled towards children's hospices. [182198]
    The Parliamentary Under-Secretary of State for Health (Dr. Stephen Ladyman): Children's hospice services are funded from a number of sources, including services commissioned by national health service primary care trusts on the basis of their assessment of children's needs and their priorities. There are no limits to the amount of funding that may be provided—that is for local decision.
    Jeff Ennis: I am sure that the Minister is aware of my early-day motion 667, entitled "Review of NHS Funding for Children's Hospices", which highlights a differential that exists whereby children's hospices receive only 5 per cent. of their funding through the NHS while adult's hospices receive up to 38 per cent. of their funding in such a way. There is genuine concern throughout South Yorkshire about the disparity, so will the Minister meet me to discuss the matter in greater detail?
    Dr. Ladyman: I would be happy to meet my hon. Friend, but I must stress again that services for children's hospices need to be based on the needs of individual children, not on the basis of a blanket figure that he or I might think appropriate.

    Nutrition (Young People)
    Bob Russell: If he will make a statement on the nutritional content of meals for young people. [182199]
    The Parliamentary Under-Secretary of State for Health (Miss Melanie Johnson): The latest national diet and nutrition survey of young people aged 14 to 18 in
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    2000 showed that they consumed too much saturated fat, sugar and salt and too few fruit and vegetables.
    Bob Russell: I thank the Minister for her answer as far as it went, but will she have discussions with her colleagues in the Department for Education and Skills, as successive attacks on the school meal service by this Government and the previous one have seriously affected the health and well-being of children? Will she also ask her colleagues in the national health service why they are promoting unhealthy products through the NHS "Popzone", as it is not acceptable for the NHS to promote such products?
    Miss Johnson: I am happy for the hon. Gentleman to send me anything about which he is discontented so that I can have a further look at it, but we are in regular discussions with the DFES about initiatives to encourage and enable children and their families to make healthier food choices, including national healthy school standards, the food in schools programme, the school fruit and vegetable scheme, the healthy living blueprint and healthy start. A range of initiatives is therefore under way to improve children's health as well as the food that they eat during and outside the school day.

Roads Policy
12.31 pm
The Secretary of State for Transport (Mr. Alistair Darling): With permission, Mr. Speaker, I should like to make a short statement on new measures to encourage better use of our roads and on the M6 between Birmingham and Manchester.
Decades of under-investment and a growing economy have put our roads under severe pressure. Two steps are necessary if we are to reduce congestion, especially at peak times. First, we need to make better use of our existing roads and, secondly, we must provide additional capacity on key strategic routes. I have two proposals to tackle congestion and provide more reliable journey times, including a scheme to make better use of the existing capacity on the road network by encouraging people to share vehicles at peak times.
Car pool lanes have been used to great effect, both in America and Australia, and if it works in other parts of the world there is no reason in principle why it should not work here. Car pool lanes could play an important role in reducing congestion on key commuter routes. I have therefore asked the Highways Agency to carry out a feasibility study of four sites on the motorway network for trialling high occupancy vehicle or car pool lanes, which could be created by widening the road to create an additional lane or in some cases by using the hard shoulder as a running lane. They would be reserved for the use of vehicles carrying two or more people, and would offer faster, more reliable journey times.
The Highways Agency will consider a 6-mile stretch of the M62 between junctions 25 and 27 from Brighouse to Leeds; a 7-mile stretch of the M3 between junctions 3 and 2 from Bagshot to Thorpe; a 20-mile stretch of the M1 between junctions 13 and 7 from south Milton Keynes to St. Albans; and a 7-mile stretch of the M61 between junctions 6 to 3 north-west of Manchester. In general, the Government favour the provision of extra capacity for car pool lanes, but in the case of the M61 it may be possible to use one of the existing lanes, so I have asked the Highways Agency to consider that. An assessment of each site will be carried out over the coming months that will consider operational suitability as well as safety and environmental implications. The proposal extends the measures that we are already putting in place to make better use of our existing roads, including piloting hard-shoulder running on the M42 and, since April this year, introducing traffic officers on motorways to help clear up incidents and get traffic flowing as quickly as possible.
I come to the need for additional capacity on one of the most heavily used road arteries in the country—the M6. We need more capacity on road and rail, which is why, for example, we are investing over £7 billion in the west coast main line. When the first stage of work is complete in September it will cut half an hour from Manchester to London train times. We also need more road capacity, however, on that key route. The House will be aware that the new M6 toll motorway opened in December last year. Today, the Highways Agency has published an analysis of the first three months of traffic on the M6 toll and the existing M6. Copies of that report have been placed in the Library.
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The report shows that the M6 toll regularly carries about one fifth of all traffic flowing through the west midlands conurbation every day, with vehicles saving up to half an hour on a journey that can take more than an hour during peak times on the existing M6. Drivers who choose not to pay the toll are benefiting from reduced congestion. Since the M6 toll opened, traffic on the existing non-tolled M6 has decreased by 10 per cent. Friday afternoons have seen a significant improvement in journey times, and there have also been improvements on roads as far afield as Stoke-on-Trent. All this has been widely welcomed by businesses, in particular across the west midlands, and by the AA and RAC.
The M6 links two of the country's most important economic centres, Birmingham and Manchester. It is one of the busiest roads in the country, and drivers regularly suffer heavy congestion. That is why on 10 December 2002 I told the House that I would support the widening of a number of key strategic roads, including widening the M6 between junction 11A near Cannock and junction 19 near Knutsford to four lanes in each direction.
Given the success of the M6 toll in alleviating congestion, it is now right to consider extending the tolled motorway and building a new expressway to run parallel with the M6 between Birmingham and Manchester, as an alternative to widening the existing road. This 51-mile stretch of the M6 between junctions 11A and 19 is being considered as a tolled expressway because of its importance to business and its link to the M6 toll, and because a significant percentage of its traffic travels 20 miles or more.
There are a number of advantages to an expressway. First, it would provide motorists and businesses with a choice of using the existing M6 or paying for a faster, more reliable journey on the new road. An expressway could be designed to suit long-distance journeys with fewer junctions, and could also improve conditions on the original road, freeing up space there. Secondly, an expressway would provide double the extra capacity at a lower cost than widening the existing road by one lane. Thirdly, construction of an expressway would not cause disruption to road-users while it was being built. In comparison, widening the existing M6, which obviously would need to be done in a phased way, would cause disruption for five to six years.
We have also to consider carefully the wider social and environmental impacts, including the effect on landscape, biodiversity and heritage, as well as air quality and climate change. We will need to assess what impact an expressway would have on traffic levels generally and the scope for high quality measures to combat any adverse effects. Sometimes new roads can have a positive impact on the environment. A new route, with good environmental mitigation plus environmental improvements to the existing M6, might overall be better in environmental terms than simply widening the existing M6. That will need to be looked at carefully.
I am therefore publishing today a consultation on a proposal for an expressway to run parallel with the M6 between Birmingham and Manchester, as an alternative to widening the existing road, so that all these issues can be looked at thoroughly. Our approach is to tackle congestion through a range of measures, both road and rail. The proposals that I am announcing today are

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intended to give motorists more choice and allow far more reliable journeys. I commend this statement to the House.
Mr. Tim Yeo: I am grateful to the Secretary of State for an advance copy of the statement, the context for which is an increase in the burden of taxes paid by motorists from £31 billion a year in 1997 to £44 billion a year now, a smaller proportion of which is spent on roads in Britain than in most other countries.
Despite such a huge burden of tax, congestion on our road network has got so bad that not only do millions of drivers face frustration and delay every day, but the congestion crisis is damaging Britain's economic prospects by weakening our competitive position compared with that of other countries. Our motorway network is poorer than that of all our main international competitors. If only it were expanding as fast as the staff of the Highways Agency, which is set to increase by three quarters, motorists could look forward to a better future.
For years to come, Britain will suffer the consequences of Labour's war on the motorist declared by the Deputy Prime Minister in 1997, and the consequences of the Government's refusal to acknowledge what we, the CBI, the British Chambers of Commerce, the Freight Transport Association, the AA, the RAC Foundation and many others have all agreed is needed—an increase in our motorway capacity. Nevertheless, not for the first time the hype that preceded the statement enormously exceeds its substance.
The statement is another attempt to con the media and the public into believing that decisions have been taken. It does not contain a commitment to build new roads, widen the M6 or introduce car pool lanes—all it contains is a commitment to start more consultations. The Secretary of State's reputation for indecision is the only thing enhanced by today's statement. The question that is on everyone's lips remains the same: when will car pool lanes be introduced, and when will the four new lanes on the M6 actually be built?
I shall deal with the issues in the order in which the Secretary of State mentioned them. We have already expressed our support for the principle of car pool lanes, which can contribute to reducing congestion, although they will never be the complete answer. Car pool lanes should be introduced only where capacity is increased, and existing road capacity should not be closed to motorists who have paid for it many times over—for example, some motorists cannot find other travellers with whom to share vehicles because of their patterns of shift work. I also hope that the Secretary of State will publish his assessment of the safety implications of using hard shoulders on motorways as soon as possible.
Turning to the possible new lanes on the M6, a proposal that Conservative Members strongly support in principle, I remind the Secretary of State that the contract for the existing midlands expressway was signed under the previous Government in 1992, more than a decade before vehicles travelled on the route. Given that today's statement concerns starting a
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consultation process, will the Secretary of State confirm that it is extremely unlikely that any vehicle will travel on any new lanes on the M6 before 2020?
Given that the environmental impact of the new lanes will be felt all the way along the route, does the Secretary of State's statement mean that access to the new lanes will not be available at all the same points as access to the existing M6, in which case the communities affected by the environmental impact will not have the chance to share the benefits? What implications does today's statement carry for other improvements to the motorway network, which are desperately needed on motorways such as the M1 and M62? Have those proposals been postponed indefinitely?
The statement is an admission that the Government's 10-year plan has completely failed, and that the targets for road building and cutting congestion will not be met. Will the Secretary of State admit that failure and say whether he will publish new and more realistic estimates of how bad congestion will get on Britain's roads? Are we to deduce from the timing of today's statement, less than one week before the announcement of the comprehensive spending review, that the Secretary of State hoped to persuade the Chancellor of the Exchequer to allow him to pay for the M6 improvements from his departmental budget, and that he failed in that endeavour?
Since motorists may now be asked to finance road improvements, will the Government cut the tax burden currently borne by motorists? Although it is right to finance some new roads through private sector investment and acceptable to ask motorists to contribute to costs through tolls, the extra costs should be directly related to new capacity, and should not be accompanied by further increases to the tax burden—the threatened 2p duty increase in the autumn is wholly unjustified at a time of high and volatile oil prices.
I welcome the Government's partial and belated adoption of more Conservative transport policies, although it is sad that it has taken them so long to realise what is needed and to start alleviating the substantial damage that they—in particular, the Deputy Prime Minister—have done to our transport system and our economy. It is a very long time since an incoming Government inherited such a strong economy as that inherited by this Government. One of the Government's first actions was to axe the Conservative road building programme. For the first time since the invention of tarmac, not a single foot of new road was built in 2001, and it has taken more than seven years for them to begin to acknowledge the scale of the problem.
Today's statement is a press release masquerading as a policy. Even after the announcement, Britain's motorists will continue to rue Labour's seven wasted years, during which congestion has increased, delays have lengthened, business costs have risen and pollution has worsened. When the needs of the nation demanded decisions and action, characteristically, all the Secretary of State could produce was more dither and delay, which we will pay for in years to come.
Mr. Darling: The hon. Gentleman is sounding more and more like a Liberal Democrat by giving the impression that he is both for and against the proposals. The hon. Member for Caithness, Sutherland and Easter

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Ross (John Thurso) must be wondering what he should say to distinguish his position from that of the Conservative party.
In relation to the M6, we have, as the hon. Gentleman acknowledged, already announced that in principle we support its widening: it is not as though we suddenly decided that its capacity was insufficient—[Interruption.] I will come on to the Tory position in a moment. That is why I agreed to its widening two years ago. In answer to the hon. Gentleman's specific question, today's announcement does not at all affect the position in relation to the M1, the M25 or any other road schemes that have been announced. They are in the process of being developed and taken forward.
On spending on roads, I think that there is common ground. The problem that we have on our road and rail networks is that successive Governments, both Labour and Conservative, did not spend as much money as they should have. The hon. Gentleman talks about the roads programme that we inherited, but he must remember, because he was a Minister at the time, that the Conservatives' road programme had virtually dried up by 1997 because of the mess that they had got the economy into. In contrast, we are due over the 10-year period to spend some £59 billion on roads. The Conservatives' present policy is to cut £600 million from the transport budget, and unless that changes nothing that he says will have any credibility whatever.
I am glad that the hon. Gentleman supports car pool lanes in principle. I, too, believe that where possible they should be built on new capacity. All the experience from other parts of the world shows that motorists accept that where new capacity is provided, priority should be given to motorists carrying passengers. Earlier this year, I visited the United States, where some 3 million people use car pool lanes; there is an entire network in the north-east and over in California. As they work there, there is no reason why they cannot work here. The best approach is to provide new capacity, but, as I said, in the case of one particular road north-west of Manchester existing carriageway could be involved if we decide that that is right.
The hon. Gentleman mentioned consultation. If we are to build an expressway of any sort, it is inconceivable that consultation will not take place. That is obvious, if for no other reason than that such projects take up time in the planning process.
The hon. Gentleman is right to recognise that the Government are determined to ensure that we improve capacity on our transport system, both road and rail. I believe that these measures represent a significant step forward and that in time people will recognise the advances that are being made in such provision.
John Thurso: I thank the Secretary of State for his courtesy in sending me a copy of the statement. I congratulate him on his new tactic of damning Conservative Front Benchers with faint praise; if they wish to behave like Liberal Democrats, that is entirely up to them.
On car pool lanes, I welcome the principle of encouraging shared use of cars. Some 61 per cent. of car journeys are made by single occupancy cars, and figures show that a 10 per cent. increase in occupancy would result in a 9 per cent. reduction in traffic. I, too, have
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seen the schemes that operate in America, although I did so courtesy of a visit with the Select Committee on Culture, Media and Sport. In light of the American experience, how does the Secretary of State expect that the policy will be enforced? As he will know, enforcement has caused considerable problems in America, in Australia and in the pilot scheme in Leeds. Has he given any thought to permitting single occupants to use such lanes on payment of an additional fee, as happens in the United States?
The Secretary of State mentioned that the current proposal is to use car pool lanes only where it is possible to build additional capacity. What studies, if any, have been carried out to see whether car sharing might work on some of the less congested roads where extra capacity would not necessarily be required? Will he tell us what the Government will do to deliver any other measures to support car sharing? Will he also tell us how the Government intend to finance the new M6 toll road? Will it be undertaken on a private finance initiative, as was the existing toll road, or will it be funded by Government finance? What assessment has been made of the financial implications of the current scheme?
What environmental assessment has been made of the existing scheme? Have emissions increased or decreased? It is important to know, when considering the overall policy, whether schemes such as these play a positive or negative role in that regard. Given that the Secretary of State has previously recorded his opposition to such schemes, are the Government considering any others? Last year, in The Scotsman, the Secretary of State was quoted as saying:
"We can't build our way out of congestion … The idea that you can build lane after lane after lane is just bonkers."
So, while this scheme may be welcome, is it not now the time to consider a proper national road-user charging scheme, rather than some form of piecemeal privatisation of the motorway network?
Mr. Darling: The hon. Gentleman asked about enforcement in regard to car pool lanes. The use of such lanes is enforced in the United States—and, I think, in Australia—by the police. I have travelled quite extensively in some of these car pool lanes, and it is remarkable how many people do not abuse the system. It seems to work, and I would envisage the police enforcing those rules. In relation to car sharing elsewhere, yes, of course that would be possible. It is always possible for the local authorities that control local roads to consider these options if they want to do so. That is not a matter for the Government.
The hon. Gentleman asked a number of questions about the M6 toll road. In relation to the environmental assessment, research is being carried out at the moment, but it obviously takes time. The M6 toll road opened only in December. In regard to the new road, the Government hope that it will be privately financed, as the existing toll road is.
On the hon. Gentleman's last point, yes, it is the case that we cannot build our way out of all the problems that we face. That is perfectly true, and I have said so time and again ever since I became Secretary of State. Three things are necessary. The first is to provide additional limited capacity where a problem exists, and

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the M6 is a classic example of that. It was anticipated that that road would carry about 75,000 cars a day, but it now regularly carries 150,000 a day. The capacity there needs to be increased. Secondly, we need to make better use of the infrastructure that we have, and car pool lanes would be among a number of measures introduced to achieve that. Thirdly, as the hon. Gentleman says, we need to plan ahead. Over the next 20 to 30 years, new technology will be available. That is why I commissioned a study last year to examine the technical feasibility of a national road pricing scheme. However, I have to tell the hon. Gentleman that, on any view, that is 10 to 15 years away.
Mr. Andrew Miller: I am conscious of the number of colleagues from Staffordshire around me here. I strongly support my right hon. Friend's comments about the need for the M6 expressway. The existing toll road has undoubtedly proved a great success. Will he ensure, however, that businesses in the north-west, particularly manufacturing companies in constituencies such as mine, are consulted as part of the process, so that it is not just a geographical consultation in the immediate surrounding areas?
Mr. Darling: I shall be brief, so as to allow as many other hon. Members as possible to speak. Yes, I can give my hon. Friend that assurance. This will be a national consultation; it will not be confined to the route of the M6.
Sir Patrick Cormack: In deploring the fact that the first part of this statement was leaked yesterday and the rest this morning, may I ask the Secretary of State whether he would please bear it in mind that my constituents, and those of many of my neighbours, have been devastated and blighted by the building of successive motorways over the past 30 years, including the M6, the M54, the toll road, the threatened link road from the toll road, and now this? What will the Secretary of State do to reassure those people? Can we have a detailed timetable and, above all, an assurance that the compensation claims of people suffering from such blight will be considered very quickly?
Mr. Darling: When specific proposals are made, such claims are looked at fairly quickly, but I appreciate the point that the hon. Gentleman makes. Indeed, he came to see me a few months ago to discuss some of his concerns, and he was very frank about his position. There are always two sides to these arguments, and he recognises that additional road capacity is required. I appreciate, however, that people living alongside the route might be affected. Two years ago, I said that I thought that the road needed to be extended. That would involve five to six years of construction work, when it started. This is an alternative. In the light of what we now know about the M6 toll road, it would be daft not to ask ourselves whether this would not be a better way of providing the additional capacity up that corridor.
On the hon. Gentleman's first point, it is unfortunate that the more people we have to involve in making a decision, the greater the risk becomes that somebody
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will talk. I can assure the hon. Gentleman that, when these things were broadcast on the radio this morning, I would have liked to have been there to argue my corner, rather than having to wait five hours to put my case, but that is life. Yes, of course the Government sometimes tell people what is going on and sometimes they do not; I appreciate the hon. Gentleman's point.
Tony Lloyd: I welcome my right hon. Friend's statement on the new capacity for the M6. There is no doubt that the present situation is unacceptable, in regard to both congestion and the environment. One of the problems involved in road building programmes is that the process of construction can often be as damaging, in congestion terms, as the existing problem, if the project is not handled well. That means that we must put a premium on speed in this process, and also on the project being extremely well managed. People want to know that this scheme will relieve congestion and not simply cause problems in the medium term. Will my right hon. Friend also give me a guarantee that this programme is sufficiently robust, so that, if it took some time to complete, the kind of cuts that a future Conservative Government might bring in would not put it in jeopardy?
Mr. Darling: My hon. Friend is right. A future Conservative Government who had pledged to cut spending would have to cut the roads programme along with just about everything else. He is also right to say that the construction can cause a lot of disruption. One of the attractions of building an expressway of the kind that I have proposed is that it can be built parallel to the existing road. It would not therefore cause five or six years' worth of additional congestion on the M6. I am sure that my hon. Friend would not look forward to the prospect of driving up and down the M6 for five or six years while it was being widened. Another general point is that the maintenance of roads—we are doing a lot at the moment—can be disruptive. I understand people's frustration in that regard, but—as with the railways, where there has been a lot of disruption on the west coast main line—once the work has been satisfactorily completed, journey time reliability will improve. That is something that we should all aspire to.
Mr. John Redwood: I welcome the Secretary of State's statement and his commitment to more capacity. One easy thing that he could do would be to put a statutory instrument before the House to allow cars carrying more than one person to use the bus lane on the M4, a much under-used lane that is already demarked for special purposes. Such a proposal would make his statement even more popular.
Mr. Darling: I have considered that, because it seemed an obvious thing to do. However, the advice that I received was that, if we did that, that road would no longer have the capacity that it needs, because the bus lane is not an extra lane, as the right hon. Gentleman knows. It was taken from the existing third lane. There would therefore be a risk of adding to the congestion. I have looked at that proposal, however, and I would be happy to discuss it with the right hon. Gentleman or anyone else. I have also asked my officials to continue to look at it, because it was a very obvious candidate to me.

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I am told, however, that if we did it, there would be a serious risk of the road becoming completely gummed up. Obviously, we need to work through those issues.
Ms Joan Walley: I was very pleased to hear my right hon. Friend say that he accepted that we could not build our way out of congestion. I also welcome his proposals on car sharing. On the M6 proposals, I am disappointed that we are not really considering the full opportunities offered by the multi-modal studies that were carried out. On the timing of the proposals, will he give me an assurance that there will be full consultation with Advantage West Midlands on both sustainable development and economic regeneration? We already have consultants going ahead with surveys on transport, and we need to know now how this longer time scale will affect all that.
Mr. Darling: This consultation will run until the end of September, and there will be ample time for all interested parties to put their views. The multi-modal studies suggested that there is an economic case for widening the existing M6 to five lanes. Two years ago, I agreed to widen it to four lanes. The point that I made a few moments ago bears repetition: we are talking about either widening the road to four lanes or, as an alternative, having an expressway. There are arguments for and against, but I believe that the arguments for an expressway are pretty persuasive.
We are spending £7.5 billion on the west coast main line precisely because we want to ensure that there are good public transport alternatives. The M6 was designed to carry 75,000 cars a day; it is now carrying perhaps 150,000 at peak periods. That is unsustainable: it is not good for the environment, for business or for anybody, and that is why I want to sort it out.
Dr. John Pugh: What studies have been conducted into the effect of the expressway parallel to the M6 on rail patronage, given that £7 billion has gone into the west coast main line?
Mr. Darling: The hon. Gentleman will be aware that the number of people using our railways is increasing, with more than 1 billion passengers being carried by the railways last year. Indeed, when the first phase of the west coast main line is completed in September, it will become a more attractive proposition. I cannot agree with what is implicit in his comments, which is that the way to get more people to use trains is to make it increasingly difficult to go up and down the M6—[Interruption.] The Liberal Democrats always give the distinct impression that that is what they are saying. We need to invest in road and rail capacity to give people a proper choice.
Mr. Colin Challen: If I understood correctly my right hon. Friend's answer to the right hon. Member for Wokingham (Mr. Redwood), he suggested that, were car sharing allowed on the M4 bus lane, it would lead to more congestion. Will extra capacity for such lanes elsewhere in the country be reserved for public transport, so that we can avoid the possibility that he mentioned in relation to the M4?
Mr. Darling: I do not want to over-complicate the proposal before it is too old. I propose additional capacity for cars containing two or more people: adding more and more people before the hour is out will lead to disaster. However, as my hon. Friend knows, there are many examples of bus lanes and other measures that give priority to public transport. This proposal is specifically about car pool lanes, however, and is very much modelled on what happens in parts of the United States. As I said, it works there, and I do not see why, in principle, it cannot work here.
Mrs. Angela Browning: What are the safety implications of turning existing hard shoulders into running lanes?
Mr. Darling: The hon. Lady is right that there are safety implications, which is why we are considering them carefully. She may recall that, a couple of years ago, I announced that we were going to consider the use of the hard shoulder on the M42 at peak times, to try to relieve congestion. Obviously, a lot of new technology is required to make sure that traffic speeds reduce and cars can run safely. Again, that works in continental Europe—for example, in Holland—and it is one way of making better use of existing capacity. The alternative is to build more lanes on the M42, which would have an environmental effect.
My strategy is clear: let us have additional capacity where it is required, but let us get the most out of the assets that we already have. I think that I heard the current Conservative spokesman say such a thing on a Sunday television programme a few weeks ago—[Interruption.] Perhaps I was listening to the wrong programme; it was someone who looked like the hon. Gentleman and who claimed to be the Conservative transport spokesman, but they are changing so fast now that we can never be sure. The hon. Lady's point in relation to safety is important, and we shall certainly consider it.
Tony Wright: The M6 toll road is a considerable achievement. There was quite a stir last year, however, when a director of one of the companies involved said that the terms of the contract, with the absence of Government regulation, meant that it was the best opportunity for monopoly pricing anywhere in the world. He was quoted in The Daily Telegraph as saying,"We won't see anything like this ever again." Will my right hon. Friend assure us that, in contract terms, we will not see anything like this ever again?
Mr. Darling: If I recall rightly, the gentleman in question was taken out and shot—metaphorically, at least. I was never sure whether he was shot because he said the wrong thing, or whether he was being remarkably candid about what his company thought. One of the features of the midland express contract, which was signed in 1992, is that the company has the absolute right to charge whatever it wants—within some constraints, but it has fairly free rein. Obviously, we need to examine that, because there is an issue of public policy. Hauliers are deeply unhappy about the £11 charge that they face at the moment.
Mr. Patrick McLoughlin: The Secretary of State said that the benefits of the toll road had been spread as far as Stoke-on-Trent. I ask him to consider whether that might be partly due to the completion of the A50 link road. When will that concrete road be resurfaced with a better, less noisy surface? Will the scheme that the Secretary of State has announced fall under schemes of national importance as far as the Transport and Works Act 1992 is concerned?
Mr. Darling: I need to consider the latter point—it is certainly a pretty major scheme. In relation to concreting, I had better write to the hon. Gentleman and see what point the programme has reached. I am glad, however, that he recognises that the improvements to roads are beginning to bear fruit. He might want to reflect on the fact that if that programme were to be cut drastically, it would have an adverse effect.
Paul Farrelly: The Secretary of State will be aware that my constituency is in the enviable position of stretching exactly between junctions 15 and 16 of the M6. There has already been much uncertainty about the impact of M6 widening, especially how we would fit just one lane on each side on the stretches between Seabridge, Keele, Audley and Betley in my constituency, and between Butterton and Madeley in the Stone constituency. He will be aware that there will be immense concern about how a four or six-lane expressway will run parallel with the M6. Will he therefore say a little more about how the national consultation will work, and what undertakings he can give to me and my constituents in the borough of Newcastle-under-Lyme that their voices will be heard and not drowned out?
Mr. Darling: Of course all voices will be heard. As I said earlier, the in-principle consultation will allow my hon. Friend and all his constituents ample opportunity to say what they think. In relation to the planning process, when a route is proposed, whether it is a widening or a new scheme, it is also subject to consultation, which is why I was at a loss to understand the criticism that was made earlier. People have every right to be consulted. I hope that we can avoid the situation that we had with the existing M6 toll: the contract was signed in 1992 and given the go-ahead in the mid-1980s, but I am told that it was first discussed when Harold Wilson was Prime Minister. That gives the House some idea of how long it takes to build anything in this country.
Bob Russell: Will the Secretary of State confirm that hard shoulders have been provided on motorways because highway engineers, road safety experts and the emergency services believe that they are a vital road safety measure that enable broken-down vehicles to avoid fast-moving traffic. In his calculations, how many crashes, injuries and deaths is he prepared to accept?
Mr. Darling: Not for the first time, the hon. Gentleman goes a little bit over the top. In relation to the M42, we are going to see whether hard shoulder running at peak times works, and considerable discussion, not just with highway operators but with the police, fire and
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ambulance services and others, has taken place. This has worked successfully in the Netherlands, for example, which has very heavy road usage, and it is worth considering. He is right that safety is important, and we take it very seriously.
Mr. David Kidney: In the 1990s, the Conservative Government published and then withdrew proposals to widen the M6 motorway by what was called the parallel widening method. Is it intended that the expressway would fill the route of those proposed parallel works?
Does my right hon. Friend accept that Stafford contains the greatest concentration of houses and environmentally sensitive sites on the entire route? Does the plan give Stafford a wide berth? If not, has he dusted off the part of the multi-modal study that suggested a brand-new road rather than a monster motorway through Staffordshire?
Mr. Darling: My hon. Friend is right to raise environmental concerns, and concerns for those whom he represents. The consultation is about whether, in principle, we should build a tolled expressway rather than widen the road. No specific route is included in the consultation; when we reach that stage we shall have to consult people, because they will want to know exactly where the road would be built, but that is the second stage rather than the first.
Mr. George Osborne: The Secretary of State said that the M6 linked Birmingham to Manchester, but in fact, as he knows, it bypasses Manchester and pushes Manchester-bound traffic on to the wholly unsuitable A556 at junction 19. When he looked at the proposal for a new toll road, did he consider extending it to junction 20 so that the traffic could go on to the M56? That would be much more sensible. If we were given that in return for the concreting of thousands of acres of my constituency, we would not just be shifting the traffic jam to the end of the toll road.
Mr. Darling: My recollection is that the hon. Gentleman and I have already discussed the A556. He will recall that when we last discussed it on the Floor of the House I said that I was greatly troubled by the proposal to build a motorway along it. We are now considering whether there are better ways of directing the traffic. Once we have reached a conclusion, it will influence where the expressway will end.
The hon. Gentleman is right: major environmental sensitivities are involved along the A556. As I have said in the House before, I am concerned about that, which is why I have asked the Highways Agency to consider alternatives.
Mr. Bob Blizzard: I know it is on the other side of the country, but I used the north Birmingham toll road earlier in the year and thought it excellent. I look forward to another 50 miles of it stretching north to Manchester.
When considering wider roads policy, will my right hon. Friend take account of parts of the country such as mine, which have no decent roads at all? Will he give

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thought to that, in the interests of equity and inclusion—not just in the context of trunk roads, because there are none in my constituency—when he evaluates proposals for major capital schemes in local transport plans?
Bob Russell: Involving Lowestoft.
Mr. Darling: I am well aware of my hon. Friend's concerns about transport not just to Lowestoft but in East Anglia. Again, there are sensitive issues, such as the need to ensure that people can get about on the roads and the fact that it happens to be a very nice part of the country. My colleagues and I consider such issues every time proposals such as this come before us.
Michael Fabricant: The existing M6 toll road is regarded as a great success and very useful to my constituency, which is now close to a motorway; it certainly was not before. The Secretary of State will know, however, that it is not used very much by heavy trucks or commercial vehicles, which seems to be a deliberate policy. Does he not understand the frustration felt by many of us—particularly me—about the fact that heavy trucks from the continent, which pay no British taxes, can fill up with diesel in France and travel all the way up to Scotland and back without refuelling in the United Kingdom? If they, too, refuse to use the new M6 toll road, once again foreign trucks will be using British roads and paying nothing. Can the Secretary of State envisage any possibility that overseas transporters will put their share into the British road system?
Mr. Darling: Yes, I can. That is why the Government are introducing a lorry road user charging scheme, with the widespread support of the haulage industry, whereby lorries will be charged on the basis of the distance they travel rather than money being raised from the purchase of petrol or diesel. We want all lorry drivers who use our roads to pay their fair share. The scheme is well advanced, and it will make a big difference. It also has much wider implications for the future of our cars, but that is for another day.

Buses (Concessionary Fares)
1.14 pm
Mr. Michael Foster: I beg to move,
That leave be given to bring in a Bill to make provision about concessionary fares on buses for elderly persons.
I believe that the Bill tackles several issues that are important not just to my constituents but to more than 7 million other people throughout England. Concessionary bus fares have been a contentious issue across the country for some time because of the patchwork of different schemes that has developed over the years.
The Transport Act 2000 amended the legislation covering concessionary fares in England and Wales from 1 June 2001 outside London and from 1 April in inner London. Local authorities must now provide elderly and disabled people with at least half-fare concessions on local bus travel. Since April 2003, men have been eligible for travel concessions from the age of 60. Local authorities also have discretion to offer further concessions on buses and other public transport services if they wish, under the Transport Act 1985. Concessionary fare schemes for local public transport are the responsibility of local government and are funded and administered by it. That is the nub of the problem.
As a result, the nature and extent of concessions have varied from region to region—in Worcestershire, even from parish to parish. It is that inconsistent patchwork approach that rightly causes resentment among pensioners. The Bill's purpose is to create a uniform approach, ending the postcode lottery for free bus travel.
Pensioners in Scotland, Wales and Northern Ireland already enjoy free bus travel, as do those in London, Merseyside and the west midlands conurbation. The Government estimate that that covers some 20 per cent. of pensioners. There are other isolated areas with free bus travel for pensioners, such as Redditch in Worcestershire, but they are all too few.
The national concessionary scheme was needed in the late 1990s and was welcomed, but it does not go far enough. Back in 1998, 10 local authorities in England had no concessionary fare schemes. One was Malvern Hills in Worcestershire. The Government have started to make progress, but more is now needed. It cannot be right for a pensioner in one part of the United Kingdom to have a free bus pass and free bus travel while others still have to pay. Let me give a personal example. Both my grandmothers are still alive, and both are 90. One lives in Birmingham and has had free bus travel for 30 years; the other lives in south Staffordshire and has not. The best way of avoiding a postcode lottery is to introduce a scheme providing universal entitlement to free bus travel for pensioners.
There is no doubt about the benefit to pensioners of free bus travel, apart from the obvious economic gains. The aims of reducing the sense of isolation, supporting independence in old age and giving some of the most socially excluded people a chance to travel should be uppermost in our decision making. There are also wider public benefits, including reduced traffic congestion as fewer car journeys are made, and consequent reductions in pollution.

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It has been said that free bus travel is of no use in some of the more rural and sparsely populated parts of England, as there are no buses on which to travel. With universally free bus travel, demand would obviously increase. Bus operators would respond by providing services that could be used not just by pensioners but by other members of the public. The lack of public transport is still one of the major concerns of young and old alike in rural areas.
Under current legislation, making the concession universal would force local authorities to grant the concession. I accept that in areas with two-tier local government that would create more challenges, with districts having a smaller tax resource base to fund the subsidies. One solution is to get rid of the two tiers of local government in England as soon as possible, giving unitary authorities a bigger tax base on which to fund the concession. That would also allow greater purchasing power in dealings with bus operators. Rather than six Worcestershire districts dealing with one bus operator, there would be a united voice that would almost certainly generate a better deal for the taxpayer, making free bus travel more affordable to the authority.
Such a move would also get rid of another lottery that blights the travel concession scheme—namely, who benefits, as it is up to local councils to co-operate with each other for mutually advantageous concessions. For example, someone living in Malvern in the Malvern Hills district can get a half-fare return to Worcester, crossing local council boundaries to go to Worcester's historic cathedral, but someone living in Worcester gets a half-fare only as far as the city boundary and has to pay full fare to Malvern to take in the water or walk on the hills.
The other anomaly is that a pensioner who lived in Worcestershire up until retirement would not have contributed to free bus travel for pensioners, but, upon retirement, if they moved to Birmingham or Dudley, they would immediately benefit from it, and, importantly, vice versa. Indeed, changes in local
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government boundaries, not unusual in themselves, can lead to changes in entitlement to free bus travel. Universal free bus travel would avoid those problems.
I know that some in local government believe that the subsidy to pay for pensioner bus fare concessions is not the most effective use of scarce resources. Indeed, the Commission for Integrated Transport shares that view. However, I reject the idea that developing quality partnerships with bus companies and new park and ride sites alone will increase use of public transport by some of the neediest in our society. What use is a park and ride site for a pensioner in Worcester who does not own or drive a car?
It is no use subsidising bus companies to operate extra services that have no customers. Therein lies nothing but false delivery—more buses but not more bus users. I support quality partnerships as a concept and park and ride at the appropriate site, but not at the expense of what should be a real passport to freedom for pensioners—free bus travel.
If I were to look at free bus travel purely as a benefit to pensioners, I would compare it with other benefits that the Government give such as the winter fuel allowance. A pensioner in the north of Scotland has considerably more justification for receiving the winter fuel allowance than one living in Cornwall. Climatic differences account for different needs, but we universalise the benefit because it is fair to do so. How can we accept universal winter fuel allowances, yet allow a postcode lottery for free bus travel? We should not do so. My Bill would put an end to that unfair treatment of pensioners in Worcester and other areas alike.
Question put and agreed to.
Bill ordered to be brought in by Mr. Michael Foster, Peter Bradley, Mr. Alan Campbell, Mrs. Janet Dean, Mr. Parmjit Dhanda, Mr. David Drew and Mr. James Plaskitt.

BUSES (CONCESSIONARY FARES)
Mr. Michael Foster accordingly presented a Bill to make provision about concessionary fares on buses for elderly person: And the same was read the First time; and ordered to be read a Second time on Friday 15 October, and to be printed [Bill 133].

Business of the House
Motion made, and Question proposed,
That, notwithstanding the practice of the House as to the intervals between stages of Bills brought in upon Ways and Means Resolutions, more than one stage of the Finance Bill may be taken at any sitting of the House.—[Dawn Primarolo.]
1.24 pm
Mr. Eric Forth: Here we have a piece of business that, I am very happy to see from the Order Paper, can take us through until 7 o'clock this evening. Given the importance of the matter, we may want to take up most of that time, although sadly—not untypically but sadly—the Minister has not seen fit to share with us her view of why the motion is necessary. When we have a motion such as this, which the Order Paper rightly allows us until 7 o'clock to debate, rather too frequently the Minister does not even do the House the courtesy of explaining why it is before us. That puts us at something of a disadvantage. We may have to spend some time speculating as to why the motion is on the Order Paper, because the Minister has not seen fit to tell us. At some stage—who knows?—Ministers may learn that, if they were to do us the simple courtesy of explaining what such motions meant and what their intentions were, the subsequent debate could be correspondingly briefer, but sadly, since the Minister has not sought to catch your eye, Mr. Deputy Speaker, we will have to spend a bit of time speculating as to what it is all about.
I was able to do a modest bit of research on the motion, with, as usual, the help of the Table Office. It was pointed out that the matter is referred to in page 855 of the brand spanking new 23rd edition of "Erskine May", which I strongly recommend to the House. Page 855 refers to
"Intervals between stages of taxation legislation."
May I quote briefly from that part of "Erskine May", which sets the context for the debate that will follow and that can run until 7 o'clock? It states that
"it is a rule of the House that not more than one stage of a bill brought in on a Ways and Means resolution (ie a taxation bill) should be taken on the same day."
That is on the face of it an explanation of why we have the motion before us. "Erskine May" goes on to say, in its ever helpful way:
"This is the last remaining expression in the House's practice of what was once a general principle—that the House's agreement to expenditure or to the imposition of taxation should be conditional upon a number of distinct opportunities for discussion."
In a nutshell, there has been a sad decline in both the ability and, one has to say, the willingness of the House to take these matters as seriously as it should. Ways and Means resolutions have a long history and they usually indicate, or should indicate, that some serious matters are being dealt with. We only have to glance at the Order Paper to see that, following this business, we have three Ways and Means motions—items four, five and six, to which I shall refer in more detail in a moment.
I assume—the Minister may give us some guidance on this, if she bothers at any stage in the debate to reveal her thinking—that, if we were not to pass the business of the House motion, either none or only one of the following Ways and Means motions could be taken today. I assume that the Government have speculatively, in their
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usual pushy and presumptive way, put three Ways and Means motions on today's Order Paper, truncated as the debates on them are to 45 minutes—I will refer to that in a moment, too—and that that is contingent on our approving item three.
One is left to speculate. Were we not to pass the business of the House motion—I ask the House seriously to consider not approving it—could only the first Ways and Means motion be taken today? Would one of the three be taken? Could the Minister pick and choose and suggest which one should be taken before we get on to the Finance Bill itself, about which I will also say a word in a moment? That is the first point at issue.
I have been guided by "Erskine May" as to the context of the motion. It indicates that, historically, the House of Commons has always wished to be able to dwell on these financial matters at proper length and in proper detail, which is entirely appropriate because, as we know, historically, one of the main roles of the House has been to represent the taxpayer vis-à-vis the Government of the day and to give proper and serious consideration to matters arising from both taxation and expenditure, which is the whole point of Ways and Means.
Of course, we have before us three Ways and Means motions, although speculatively so, because until we determine the business motion under discussion, we will not know which of those motions we will discuss, or whether we will be able do so. The first is headed, "Rent factoring of leases of plant or machinery", and states:
"That provision may be made in the Finance Bill for the purposes of income tax and corporation tax in relation to arrangements for the transfer of a person's right to receive rentals under a lease of plant or machinery."
That strikes me as a matter of some substance and importance, which the House might want to dwell on. Sadly, however, we are constrained to a mere 45 minutes in which to debate it in its totality. That fact alone ought to concern the House considerably.
It appears that the Government want us then to move on rapidly, and to consider motion 5, on "Manufactured dividends and interest". It states:
"That provision may be made in the Finance Bill in relation to payments, and deemed payments, by companies of … manufactured dividends … manufactured interest, or … manufactured overseas dividends".
I assume that my hon. Friends on the Front Bench are champing at the bit to get stuck into these very important matters, and they doubtless have a lot to say about them. But sadly, the House—never mind my hon. Friends—will be allowed only 45 minutes in which to debate them, before it will then perforce be asked by the Government to move on to yet another Ways and Means motion, which is headed, "Gifts etc. of shares, securities or real property to charities". It states:
"That provision may be made in the Finance Bill amending section 587B of the Income and Corporation Taxes Act 1988."
I do not want to attempt at this stage to go into the detail of these Ways and Means motions, and you would not want me to do so, Mr. Deputy Speaker. Such a discussion awaits a later point in the day—perhaps after 7 o'clock this evening. Bearing it in mind that this debate, quite properly, can take us through until 7 o'clock, my hon. Friends might be able to go off and have lunch, afternoon tea and perhaps an early supper

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before they even have a chance to debate the three motions—or perhaps only one of them, should we fail to agree to the motion before us.
I wanted to mention that point to give the House some idea of the way in which we are being asked to consider these important Ways and Means motions. We are being given only 45 minutes to discuss each of them, which is a sad reflection on the extent to which the Government now say to the House of Commons, "Never mind your historic role in protecting the taxpayer, and in overseeing expenditure through Ways and Means resolutions; we are giving you only 45 minutes in which to debate each of these very important financial matters." That is to say nothing of what follows.
We should remember the context as indicated in "Erskine May", which states
"that the House's agreement to expenditure or to the imposition of taxation should be conditional upon a number of distinct opportunities for discussion."
That statement is made a nonsense of when we come to the Finance Bill proper, following these Ways and Means motions. On glancing at today's selection list, I see that there are no fewer than 21 groups of amendments and new clauses, of which 14 contain Government amendments and new clauses. They cover matters as vital as anti-avoidance, gifts to charities, overseas pension schemes, stamp duty land tax, disabled persons, individual savings accounts and personal equity plans, and fuel duty, to mention but a few.
The House is faced with the potential for debating a very wide variety of matters, contingent on the motion that we are considering. So we have to ask ourselves whether we are content with the motion before us, which contains the phrase,
"notwithstanding the practice of the House as to the intervals between stages of Bills brought in upon Ways and Means Resolutions".
In the good old days, the House was able properly to pause between considering such very important matters, to take time for reflection and perhaps for consultation with legitimate outside interests, and to give an opportunity for amendments to be considered. Now, of course, the Government—who are contemptuous, as ever, sadly, of the role of the House of Commons in these matters—want simply to steamroller us through all these motions in very quick succession if, and only if, we agree to the business motion.
It surely would have helped us in considering this motion if the Minister had done us the courtesy of first explaining why we have to compress these matters in the way suggested in the motion. Given that our business here is conducted in the full gaze of the public, I doubt whether I am giving away a great secret by pointing out that a mere glance at the Order Papers of the past few weeks reveals that we are not exactly being hard pressed in terms of the business before us; indeed, the same is true of Order Papers for the weeks to come. The Government's legislative programme seems almost to have dried up, and we have a succession of Adjournment debates. Very welcome such debates may be, but that does not suggest to me that there is enormous pressure on the House's time or on legislative time—quite the opposite.
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It was surely incumbent on Ministers at the very least to explain to us why, under the terms of the motion before us, they want to compress the business in this way. There is surely ample time and opportunity, given the totality of the Order Papers for this and succeeding weeks, to consider these matters in the traditional way—
Mr. Deputy Speaker (Sir Alan Haselhurst): Order. The right hon. Gentleman may be anticipating my intervention. I hate to suggest this, but it is just possible that he is misinterpreting the motion. It deals with the difference in stages of the Bill, so what he has been saying about the Ways and Means motions is not relevant to the motion before us. The only point that the motion deals with is the question of the separation between Third Reading and the consideration stage.
Mr. Forth: I am most grateful to you, Mr. Deputy Speaker. You have, in your inimitable way, performed the task that I had hoped the Minister would perform. I initiated this debate—which can of course run until 7 o'clock, as you well know—for the sole reason that the Minister had not done us the courtesy of offering any explanation as to the point of, or reason for, the motion. I was therefore left to speculate, as I explained at the beginning of my speech, and you have rightly pointed out that I am speculating now. But I hope that you will understand that I was forced to do so, simply because the Minister had not done us the courtesy of saying even a few words, as you yourself have done so elegantly, to explain the point of the motion.
If you are telling me, Mr. Deputy Speaker, that the motion has no relevance to the Ways and Means motions, I of course accept that. I should point out, however, that I am not sure whether you were in the Chair when I quoted from page 855 of the 23rd edition of "Erskine May", which you have doubtless already committed to memory. I shall re-read it into the record, because doing so will help you and the Clerks who keep an eye on us, and it will explain why I was speculating as I did. It states that
"it is a rule of the House that not more than one stage of a bill brought in on a Ways and Means resolution (ie a taxation bill) should be taken on the same day."
That is what led me—erroneously, as it turns out—to refer to the Ways and Means motions on the Order Paper. Indeed, that was the very point on which I sought guidance in "Erskine May", to which I was guided by no less than the Clerks in the Table Office. I am not suggesting for a minute that that guidance is in any way at odds with your guidance to me, Mr. Deputy Speaker, but you can see how I might have misinterpreted such guidance, in the absence of any help from the Minister. However, you have been very helpful in that regard.
We are then left to speculate further as to why this motion had to be included on the Order Paper. If it has no bearing on, or relevance to, the Ways and Means motions and relates only to the Finance Bill itself—and given that we have several days in which to deal with the Bill, on consideration of which, happily, no time limit has been imposed—one is left even more in the dark as to why we need this business motion at all. Given the leisurely nature of the way in which we can tackle these matters, and given the 21 groups of amendments—no fewer than 14 of which contain Government amendments and new clauses—I should

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have thought that there was ample opportunity for debate on today's business before Third Reading, which will not come until a subsequent day. Therefore, I am still in the dark.
If this little episode illustrates nothing else, I hope that it illustrates again to Ministers that if they had the respect for the House that I still hope they will develop one of these days, however belatedly, they would find it easier to come to the House and give a brief explanation of a motion, which then might not have to be debated. It might be that the Minister's eloquence is sufficient to persuade us that a motion is straightforward and reasonable and that we need not concern ourselves with it. Ministers have not done that, so innocent souls such as myself are obliged to seek to catch your eye, Mr. Deputy Speaker, to speculate, as I have done today. I still think that that is a healthy expression of the interests of the House in the matter. Would that the House, frankly, were full of people who share my concerns, but that is not the fashion of the moment, I regret to say; perhaps it will come back one day.
I hope that, given the questions I have raised, notwithstanding your helpful advice, Mr. Deputy Speaker, the Minister might see fit, even as a courtesy—maybe to me; certainly to the House—to get to her feet and give us an explanation of the motion. That would be my simple request and I hope that I will be satisfied by what she says.
1.42 pm
The Paymaster General (Dawn Primarolo): I am surprised, to put it mildly, by the comments of the right hon. Member for Bromley and Chislehurst (Mr. Forth). I understand that he entered the House in 1983; I did so in 1987. I do not recall a Minister ever speaking at the Dispatch Box on a motion to allow Committee, Report and Third Reading to take place over two days, as agreed through the usual channels. This is a procedural motion that has always gone through in this fashion. I was advised that, procedurally, this is what I should do. The motion allows us to spend today and tomorrow on Committee and Report, completing Third Reading tomorrow. If that offends the right hon. Gentleman I apologise, but his memory is clearly shorter than mine.
Question put and agreed to.

FINANCE BILL [WAYS AND MEANS]
Rent factoring of leases of plant and machinery
1.44 pm
The Paymaster General (Dawn Primarolo): I beg to move,
That provision may be made in the Finance Bill for the purposes of income tax and corporation tax in relation to arrangements for the transfer of a person's right to receive rentals under a lease of plant or machinery.
The resolution paves the way for a new anti-avoidance provision relating to a newly devised arrangement for the sale of rental streams from leased plant or machinery. The new avoidance schemes have
710
emerged since the Budget, hence the need for the resolution, and depend on selling taxable lease-rental streams for sums on which tax will not be payable.
The new provision, which will have effect where arrangements to sell the right to the income stream are entered into on or after 2 July, will ensure that the sums received from the sale of such rental streams are brought into account when computing income for tax purposes.
Question put and agreed to.

FINANCE BILL [WAYS AND MEANS]
Manufactured dividends and interest
1.45 pm
The Paymaster General (Dawn Primarolo): I beg to move,
That provision may be made in the Finance Bill in relation to payments, and deemed payments, by companies of—

(a) manufactured dividends,

(b) manufactured interest, or

(c) manufactured overseas dividends,

within the meaning of Schedule 23A to the Income and Corporation Taxes Act 1988.
The resolution covers provisions in the Finance Bill that prevent companies from avoiding corporation tax by entering into a range of artificial arrangements that involve manufactured payments.
The arrangements vary in detail, but usually involve claiming tax relief for a manufactured payment while arranging for any counterbalancing income or gains to escape taxation in some way. The clause works by introducing an unallowable purpose rule for manufactured payments. The rule denies tax relief for the manufactured payment to the extent that payment is attributable to the unallowable purpose.
Where tax avoidance is the main, or one of the main, motives behind a company entering into these arrangements, it will be denied a tax deduction, thereby defeating the avoidance. The measure will apply to manufactured payments made on or after 2 July 2004, subject to transitional provisions for payments made under arrangements already in place.
Question put and agreed to.

FINANCE BILL [WAYS AND MEANS]
Gifts etc. of shares, securities or real property to charities
1.47 pm
The Economic Secretary to the Treasury (John Healey): I beg to move,
That provision may be made in the Finance Bill amending section 587B of the Income and Corporation Taxes Act 1988.
The resolution paves the way for an amendment to section 587B of the Income and Corporation Taxes Act 1988 to restrict the value of income tax relief available in relation to a gift of shares or securities to charity to the net amount by which the charity benefits, rather than the market value. We will debate this as new clause 11.

711
The amendment has become necessary because we have recently uncovered evidence of a scheme using a complex arrangement of trusts and options to manipulate the value of gilts donated to charities. The scheme aims to achieve tax relief for the individual making a donation at negligible cost and negligible benefit to the charity, and it has the potential of returning virtually the whole value of the gift to the control of the individual. There is potentially no limit on the amount of tax relief at stake. This is an unacceptable abuse of legislation designed to provide additional giving to charity.
Question put and agreed to.

Orders of the Day

  Finance Bill
  [1ST ALLOTTED DAY]
  As amended in the Committee and in the Standing Committee, considered.
  1.48 pm
  The Paymaster General (Dawn Primarolo): I beg to move,
  That the Finance Bill, as amended, be considered in the following order, namely, new Clauses, amendments relating to Clauses 1 to 4, Schedule 1, Clauses 5 to 19, Schedule 2, Clauses 20 to 28, Schedule 3, Clause 29, Schedule 4, Clause 30, Schedule 5, Clauses 31 to 41, Schedule 6, Clauses 42 to 47, Schedule 7, Clause 48, Schedule 8, Clause 49, Schedule 9, Clauses 50 to 52, Schedule 10, Clauses 53 to 64, Schedule 11, Clauses 65 to 76, Schedule 12, Clauses 77 and 78, Schedule 13, Clauses 79 and 80, Schedule 14, Clauses 81 to 84, Schedule 15, Clause 85, Schedule 16, Clauses 86 to 92, Schedule 17, Clause 93, Schedule 18, Clause 94, Schedule 19, Clause 95, Schedule 20, Clauses 96 to 116, Schedule 21, Clause 117, Schedule 22, Clauses 118 to 134, Schedule 23, Clause 135, Schedule 24, Clauses 136 to 141, Schedule 25, Clause 142, Schedule 26, Clause 143, Schedule 27, Clauses 144 to 162 and 164, Schedule 28, Clauses 163 and 165, Schedule 29, Clauses 166 to 175, Schedule 30, Clauses 176 to 200, Schedule 31, Clauses 201 to 212, Schedule 32, Clauses 213 to 275, Schedule 33, Clauses 276 and 277, Schedule 34, Clauses 278 and 279, Schedule 35, Clause 280, Schedule 36, Clauses 281 to 290, Schedule 37, Clauses 291 and 292, Schedule 38, Clauses 293 to 296, Schedule 39, Clauses 297 to 317, new Schedules, amendments relating to Clause 318, Schedule 40 and Clauses 319 and 320.
  The motion allows us to progress through the Bill in the normal way, starting at clause 1. I hope that that is clear to the right hon. Member for Bromley and Chislehurst (Mr. Forth).
  Question put and agreed to.

  Finance Bill
    New Clause 9

      RENT FACTORING OF LEASES OF PLANT OR MACHINERY
      '(1) After section 785 of the Taxes Act 1988 insert—
      "785A Rent factoring of leases of plant or machinery

      (1) This section applies in any case where the following conditions are satisfied—

      (a) a person (call him "P") is entitled to receive rentals under a lease of plant or machinery,

      (a) the rentals, so far as receivable by him, fall to be brought into account as income for the purpose of calculating his tax liability,

      (c) P enters into arrangements for the transfer of his right to receive some or all of the rentals to another person,

      (d) apart from this section, some or all of the amount or value of the consideration for the transfer ("the relevant portion of the consideration") would fall to be brought into account neither—

      (i) as income, nor

      (ii) as a capital allowances disposal receipt,
      for the purpose of calculating P's tax liability.

      (2) In any such case, the relevant portion of the consideration—

      (a) shall be treated for tax purposes as income of P,

      (b) shall be taxable as rentals receivable by P under the lease (apart from any transfer of his right to receive some or all of the rentals), and

      (c) shall be brought into account in a period of account to the extent that it is receivable in that period of account.

      713

      (3) Any reference to the transfer from P to another person of a right to receive rentals includes a reference to any arrangement under which rental ceases to form part of the receipts taken into account as income for the purposes of calculating P's tax liability.

      (4) Where P is a partnership, any reference in this section to calculating P's tax liability includes a reference to calculating the tax liability of the partners, notwithstanding that the partnership has legal personality.

      (5) A partnership has legal personality for the purposes of subsection (4) above if it is regarded as a legal person, or as a body corporate, under the law of the country or territory under which it is formed.

      (6)In this section—

      "capital allowances disposal receipt" means a disposal receipt within the meaning of Part 2 of the Capital Allowances Act 2001 (see section 60 of that Act);
      "lease" includes an underlease, sublease, tenancy or licence and an agreement for any of those things;
      "tax liability" means liability to income tax or corporation tax.".
      (2) The amendment made by this section has effect where arrangements for the transfer from one person to another of a right to receive rentals are entered into on or after 2nd July 2004.'.—[Dawn Primarolo.]
      Brought up, and read the First time.
      Dawn Primarolo: I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker (Sir Alan Haselhurst): With this it will be convenient to discuss Government new clause 10—Manufactured payments under arrangements having an unallowable purpose.
      Dawn Primarolo: As I explained briefly with regard to the ways and means motions, the new clauses introduce anti-avoidance measures to prevent a loss of tax through arrangements involving leasing and manufactured payments.
      New clause 9 prevents the new avoidance using arrangements that are being marketed in an attempt to get around the impact of clause 134 of the Bill, which was introduced to prevent tax avoidance through sale and finance lease-back and lease and finance lease-back generating double benefits. Aggressive new schemes are now being marketed, which aim to achieve a similar result by generating a tax-free sum from the sale of rental income streams from the leasing of plant and machinery. The measure will ensure that the proceeds from the sale of such income streams are taxable as rental income, making the new arrangements ineffective.
      New clause 10 will prevent companies from avoiding corporation tax by entering into a range of artificial arrangements involving manufactured payments. The arrangements vary in detail, but usually involve claiming tax relief for a manufactured payment while arranging for any counterbalancing income or gains to escape taxation in some way. The new clause works by introducing an unallowable purpose rule for manufactured payments. The rule denies tax relief for the manufactured payment to the extent that the payment is attributable to the unallowable purpose. To the extent that tax avoidance is a main motive, or one of the main motives, behind a company entering into those
      714
      arrangements, it will be denied a tax deduction for the manufactured payment, thereby defeating the avoidance.
      As was noted in 1996, when the original loan relationships unallowable purpose rule was introduced, companies entering into the arrangement with the primary aim of avoiding tax will inevitably be aware of the fact. The transactions against which the rule is aimed are not the sort that companies stumble into inadvertently. Provided that companies enter into arrangements involving manufactured payments for genuine commercial reasons, they should have nothing to fear from this unallowable purpose rule. That will be confirmed in guidance issued by the Inland Revenue today. If, however, companies go in for artificial tax-driven arrangements, they may and should find themselves caught.
      As I said when the new measures were introduced, we will not allow the efforts of the tax-avoidance industry to undermine the will of Parliament or allow a small minority of businesses and individuals to get round the tax system at the expense of the vast majority who pay their fair share. We are determined to stamp out this type of tax avoidance and create a level playing field for all. The new clauses will assist in achieving that objective, and I commend them to the House.
      Mr. Howard Flight: On the face of it, these two anti-avoidance clauses are perfectly reasonable and, indeed, a fair cop. I would, however, make the point that we have had 180 and more new clauses and amendments tabled for Report, which has left quite insufficient time for the various professionals to pore over them in detail to ensure that there are no unintended effects. I note that the Paymaster General mentioned that the guidance notes would only be published today, so there is clearly no chance to review those guidance notes ahead of reviewing the two new clauses. It also struck me that the measures being blocked by new clause 9 are, to some extent, a reaction to what have been seen as retrospective changes in the tax position relating to sales and lease-backs.
      As to the territory of new clause 10, the key issue is how the unallowable purpose rules will work. The Paymaster General is quite right to say that people will know when they are doing things essentially to avoid taxation. There are many circumstances—the use of swaps, forward sells and various other financial instruments—where sound commercial purpose may go hand in hand with paying less rather than more tax. The unallowable purpose rule is yet to be tested either here or in loan relationship legislation.
      We have not spotted anything in the two measures that would have unintended effects. There are many other avoidance measures in the Bill where unintended effects have not been adequately dealt with, but these new clauses appear to be perfectly practical measures. It is good to see the Revenue spotting these measures, which it might have done more diligently in other respects. If it had, we would not have needed the somewhat over-heavy reporting of anti-avoidance tax planning, which we will deal with later in the Bill.
      Mr. David Laws: We support the two new clauses. The only question for the Paymaster

      715
      General—I hope I did not miss the point in her earlier comments—is how the Treasury identified these abuses, particularly when she indicated in respect of new clause 9 that the abuses seem to have arisen very recently, even since the Finance Bill was first drafted. Will she say a little more about that?
      Mr. Quentin Davies: I start by endorsing the hon. Gentleman's last suggestion. It would be helpful if, when the Government bring forward last-minute measures to deal with tax-avoidance schemes, they could describe in more concrete detail what the schemes actually consist of.
      I have no problem in principle with new clause 9. I must say, however, that I am surprised. I have learned to my surprise this afternoon that, at the present time and until we change the position by passing the new clause, revenues that a company generates by selling its entitlement to lease rentals are not taken into account for the purpose of computing tax liabilities. In other words, those revenues do not feature in the computation of taxable profits. That seems very surprising. Usually, if a company discounts or factors its receivables, the amount of money that it receives from those receivables is a revenue and if the costs of generating those revenues mean less profit, the profit is taxable in the normal way. I am surprised that this particular anomaly should have arisen in the first place. It would all be less surprising if the Paymaster General were a little more explicit in telling the House about the type of scheme that she or her officials have identified and targeted.
      I believe that we should not allow new clause 10 to slip by without any comment. Once again, we see the introduction of a general anti-avoidance rule—no, perhaps not a general anti-avoidance rule because that would be general, but an anti-avoidance rule. It is becoming an ever more frequent feature of our taxes legislation. There are similar examples in the current Finance Bill where the Government have had recourse to a specific anti-avoidance rule. In this instance, the anti-avoidance rule is in new clause 10(5).
      At some point, we need the Government to make a clear statement of their views on anti-avoidance rules. Otherwise, we will find that, through adopting the anti-avoidance rule approach in a large number of individual cases, we have introduced a general anti-avoidance rule by the back door. At the end of the day, we will have an anomalous tax system in which anti-avoidance rules apply to certain activities, but not others. It will be unclear to the public and to Parliament—it is certainly unclear to me—on what principles it has been decided that certain types of transactions, trades, professions or businesses encounter anti-avoidance rules, but not others. It is a major philosophical point, and it must be dealt with—if not now, at some other stage—by the Government. There is an increasing lack of clarity on the matter, as the Government have recourse to more and more of these rules in specific cases.
      The second issue raised by the anti-avoidance rule approach is the classic one of unfairness. Great unfairness can arise in individual cases precisely because of the subjectivity of a tax inspector saying that someone acted not for commercial but for anti-avoidance purposes. The taxpayer might respond by denying that.
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      It may be clear and a fair cop in some cases, but not in others. A tax inspector may decide to apply the rule in good faith, but perhaps the taxpayer resists with equal good faith on the basis of the facts. Those matters will have to be resolved by jurisprudence, by the commissioners or the courts. Will the Paymaster General say what guidance is being given to tax inspectors on the application of the rule? That is an extremely important matter. Information about the guidance should be in the public domain, as there is no point in cluttering up the commissioners or the courts with disputes that could be avoided. I am sure that, like everyone else, the Paymaster General would not want unfairness to arise as a result of the application of the rules.
      2 pm
      The third point is another classic problem raised by anti-avoidance rules. What provision has been made for pre-transaction rulings? If a company feels that it might fall foul of the anti-avoidance rule, equity demands that it have the opportunity to clear a transaction with the Revenue in advance. That company might want to adopt a certain course of action, with a perfectly honest commercial purpose in mind. It would not want to be hit, retrospectively, with an anti-avoidance rule. It would be neither satisfactory nor fair for the Revenue to say subsequently that the company should have done X rather than Y, and then clobber it accordingly. That is not a transparent tax system.
      When the Government introduce anti-avoidance rules, they should make it clear that a pre-transaction ruling facility will be available. I hope that the Paymaster General, when she replies to the debate, will confirm that that will be the case. Such a facility must be available to taxpayers in a reasonable time, so that businesses that might fall foul of the rule can clear the position, in anticipation, with the Revenue.
      Dawn Primarolo: I shall begin by dealing with the series of questions posed by the hon. Member for Grantham and Stamford (Mr. Davies), who wanted to know whether these proposals amounted to the introduction of a general anti-avoidance rule. I assure him that they do not. The rule is targeted at a narrow area of tax in which abuse, unfortunately, is rife. I shall then move to the question, raised by the hon. Member for Yeovil (Mr. Laws), of when and how the Revenue became aware of two specific schemes.
      Mr. Davies: I hope that the Paymaster General does not proceed on a false premise. I said in my remarks that this is not a general anti-avoidance rule, as such a rule would apply, by definition, to all transactions. However, with this new clause—and the same thing happens elsewhere in the Bill—the Government seem to want have recourse to individual anti-avoidance rules. As a result, a series of anti-avoidance rules is being built up in the tax system in a pretty haphazard fashion.
      There seems to be no rhyme, reason or principle to determine which transactions qualify under the rule. I said that that raises philosophical problems and policy issues, and that practical difficulties would arise. I would be grateful for a statement about the Government's

      717
      attitude to a general anti-avoidance rule before we get halfway there by the back door as a result of a build-up of specific anti-avoidance rules.
      Dawn Primarolo: I remind the hon. Gentleman that the Government consulted in 1998 or 1999 about whether a general anti-avoidance rule should be introduced, with the pre-clearance mechanism that he rightly says would be necessary. The consultation was generated by the frustration—also experienced by the previous Government—that ever more complex avoidance schemes give rise to ever more complex legislation to counter them. The clauses under discussion are examples of our approach.
      Extensive consultation was held on whether a general anti-avoidance rule was needed or whether what is called a "mini-GAR" would be sufficient. Another question was whether the Government should deal with avoidance by measures that were specifically targeted, as the previous Conservative Government did.
      The result of the consultation showed that businesses did not want the general anti-avoidance rule, although respondents were divided on the matter. Businesses did not want a mini-GAR either. At that time, the Government were dealing with an anti-avoidance method in respect of value-added tax. We decided not to go with a general anti-avoidance rule in that case, but we said that we would keep the matter under review.
      The hon. Member for Grantham and Stamford will be aware that the Bill contains clauses on the disclosure of information. The Government are still valiantly trying to achieve a principled position in the matter, and I hope that the hon. Gentleman will agree with our approach. He was right to say that this is a grey area. Our aim is to target avoidance, without affecting reasonable commercial transactions. A general anti-avoidance rule can be a very blunt instrument.
      New clause 10 deals with manufactured dividends, a point raised by the hon. Member for Yeovil. Officials made it clear to me in May that such dividends were a possibility. I regret that I cannot be more specific about the date. I agree that we need an arrangement to deal with the matter, and that we need to allow enough time for proper consideration.
      On further investigation, it became clear that a great deal of revenue was at stake. A number of schemes, in various stages of development, were identified. They are very complex, and I am sure that the hon. Member for Yeovil will excuse me if I do not read them into the record. However, I should be happy to send him two examples of the main form that those schemes take.
      As always, my officials and I looked to achieve consistency across the tax system. Our approach was to establish how the previous Government had responded to the problems that they encountered. That Government introduced the unallowable purpose rule—even though they said in 1996 that no such rule would be brought in—and it has worked. It is part of the system now, and it deals with specific problems that arise in connection with manufactured dividends. Although I cannot predict what tax planners will do in the future, the unallowable purpose rule also seeks to preserve transactions that are not undertaken for the purposes of tax avoidance.
      718
      In Standing Committee, the Government's view was made clear that the disclosure methods contained in the Bill would put the Inland Revenue in a better position to be aware of schemes as they are being developed, rather than only when they have been used. The Inland Revenue guidance in respect of the unallowable purpose provision is well used and understood. It is used by tax inspectors, and it is also published for the benefit of companies and their advisers.
      I turn to new clause 9. Clause 134 seeks to prevent avoidance, and the need for the clause was generally accepted in Committee. Subsequently, schemes have been designed to negate clause 134. That is the bind we are in: the Government consult and publish a Bill, and while it is making progress through the various stages, other people are planning how to negate it. Therefore, clause 134 would not protect the revenue that it was designed to protect. New clause 9 would ensure that the scheme designed to negate clause 134—which has not even been used yet, because clause 134 has not come into force—would not be effective.
      I feel the same frustration as other Members at the need for Treasury Ministers to act in that way, but such is the problem of the creativity of a small number of accountants, tax planners, legal professionals and companies. If they are not held in check, they are capable of ensuring that the Treasury loses vast amounts of revenue. That is why we needed the ways and means resolutions earlier and that is why I was unable to introduce the new clauses in Committee as I should have preferred. A responsible Minister must protect the Treasury and all honest taxpayers, and that is what new clauses 9 and 10 seek to do.
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.

    New Clause 10

      MANUFACTURED PAYMENTS UNDER ARRANGEMENTS HAVING AN UNALLOWABLE PURPOSE
      '(1) In Schedule 23A to the Taxes Act 1988 (manufactured dividends and interest) after paragraph 7 (irregular manufactured payments) insert—
      "Manufactured payments under arrangements having an unallowable purpose
      7A (1) This paragraph applies in any case where—

      (a) a manufactured payment falls to be made by a company in an accounting period in pursuance of any arrangements (see sub-paragraphs (9) and (10) for definitions), and

      (b) the arrangements have an unallowable purpose at any time (see sub-paragraphs (3) to (5)).

      But this is subject to sub-paragraph (8) below (cases where tax relief is denied apart from this paragraph).
      (2) The company is not entitled, by virtue of anything in this Schedule or any provision of regulations under it, or otherwise, to any relevant tax relief (see sub-paragraph (10)), to the extent that the relief is in respect of, or referable to, the whole or any part of so much of the manufactured payment as, on a just and reasonable apportionment, is attributable to the unallowable purpose.
      (3) Arrangements have an unallowable purpose at any time if at that time the purposes for which the company is a party to—

      (a) the arrangements,

      (b) any related transaction (see sub-paragraphs (6) and (7)), or

      (c) any transaction in pursuance of the arrangements,
      include a purpose ("the unallowable purpose") which is not among the business or other commercial purposes of the company.

      (4) The business and other commercial purposes of a company do not include the purposes of any part of its activities in respect of which it is not within the charge to corporation tax.
      (5) Where one of the purposes for which a company is at any time a party to—

      (a) any arrangements,

      (b) any related transaction in the case of any arrangements, or

      (c) any transaction in pursuance of any arrangements,

      is a tax avoidance purpose, that purpose shall be taken to be a business or other commercial purpose of the company only where it is not the main purpose, or one of the main purposes, for which the company is party to the arrangements or transaction at that time.
      (6)One or more transactions are to be regarded as related transactions, in the case of any arrangements, if it would be reasonable to assume, from either or both of—

      (a) the likely effect of the transactions, and

      (b) the circumstances in which the transactions are entered into or effected,

      that none of the transactions would have been entered into or effected independently of the arrangements.
      (7) Transactions are not prevented from being related transactions, in the case of any arrangements, just because the transactions—

      (a) are not between the same parties, or

      (b) are not between the parties to the arrangements.

      (8) This paragraph does not apply if, as a result of any of the following provisions—

      (a) section 75(4)(b) (expenses of management of companies with in vestment business: unallowable purposes),

      (b) section 76(4)(d) (expenses of insurance companies: unallowable purposes),

      (c) paragraph 13 of Schedule 9 to the Finance Act 1996 (loan relationships with unallowable purposes),

      the company in question is not entitled to a relevant tax relief in respect of, or referable to, the whole or any part of the manufactured payment.
      The references to sections 75 and 76 are references to those provisions as they have effect in relation to accounting periods beginning on or after 1st April 2004.
      (9) Any reference in this paragraph to a manufactured payment falling to be made by a company includes a reference to a manufactured payment which is deemed by or under any provision of the Tax Acts to be made by a company (and references to a transaction, or to a company being party to a transaction, are to be construed accordingly).
      (10) In this paragraph—
      "arrangements" includes schemes, arrangements and understandings of any kind, whether or not legally enforceable, and shall be taken to include any related transactions;
      "manufactured payment" means any of the following—

      (a) any manufactured dividend;

      (b) any manufactured interest;

      (c) any manufactured overseas dividend;

      "related transaction" shall be construed in accordance with sub-paragraphs (6) and (7) above;
      "relevant tax relief" means any of the following—

      (a) any deduction in computing profits or gains for the purposes of corporation tax;

      (b) any deduction against total profits;

      the bringing into account of any debit for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships);

      (c) the surrender of an amount by way of group relief;

      "tax advantage" has the same meaning as in Chapter 1 of Part 17 (tax avoidance);
      "tax avoidance purpose" means any purpose that consists in securing a tax advantage (whether for the company in question or any other person);
      and sub-paragraphs (3) to (7) above have effect for the purposes of this paragraph.".
      (2) In section 95 of the Taxes Act 1988 (taxation of dealers in respect of distributions etc) before subsection (2) insert—
      "(1C) The application of subsection (1) above in relation to a payment made by a dealer is subject to paragraph 7A of Schedule 23A (manufactured payments under arrangements having an unallowable purpose).".
      This amendment has effect on and after the commencement date.
      (3) The amendment made by subsection (1) has effect—

      (a) in the case of new arrangements, in relation to manufactured payments made, or deemed by or under any provision of the Tax Acts to be made, on or after the commencement date, and

      (b) in the case of old arrangements, in relation to manufactured payments made, or deemed by or under any provision of the Tax Acts to be made, on or after the day on which this Act is passed.

      (4) But where—

      (a) as a result of old arrangements, any income arose or accrued, or any gain accrued, to a company before the commencement date,

      (b) the income or gain is or was within the charge to corporation tax, and

      (c) a manufactured payment in pursuance of the arrangements is made, or deemed by or under any provision of the Tax Acts to be made, by the company on or after the day on which this Act is passed,

      the amendment made by subsection (1) does not have effect in relation to so much of the manufactured payment as (on such just and reasonable apportionments as may be necessary) represents the income or gain.
      (5) For the purposes of subsection (4)—

      (a) "income" includes any income deemed by or under any provision of the Tax Acts to arise or accrue,

      (b) "gain" includes any gain deemed by or under any provision of the Tax Acts to accrue.

      (6) In this section—
      "the commencement date" means 2nd July 2004;
      "new arrangements" means any arrangements other than old arrangements;
      "old arrangements" means arrangements which were, or some part of which was, entered into or acted upon before the commencement date.
      (7) For the purposes of subsection (6), the cases where arrangements were, or some part of any arrangements was, acted upon before the commencement date are those cases where a transaction in pursuance of the arrangements, or of any part of the arrangements, has taken place before that date.'.—[Dawn Primarolo.]
      Brought up, read the First and Second time, and added to the Bill.

    New Clause 11

      GIFTS OF SHARES, SECURITIES AND REAL PROPERTY TO CHARITIES ETC
      '(1) Section 587B of the Taxes Act 1988 (gifts of shares, securities and real property to charities etc) is amended as follows.
      (2) For subsection (4) (the relevant amount) substitute—
      "(4) Subject to subsections (5) to (7) below, the relevant amount is an amount equal to—

      (a) where the disposal is a gift, the value of the net benefit to the charity at, or immediately after, the time when the disposal is made (whichever time gives the lower value);

      (b) where the disposal is at an undervalue, the amount by which—

      (i) the value described in paragraph (a) above, exceeds

      (ii) the amount or value of the consideration for the disposal,

      or, if there is no such excess, nil.
      (3) After subsection (8) insert—
      "(8A) The value of the net benefit to the charity is—

      (a) the market value of the qualifying investment, unless subsection (8B) below applies;

      (b) where that subsection applies, that market value reduced by the aggregate amount of the related liabilities of the charity (see subsections (8E) to (8G)).

      (8B) This subsection applies in any case where—

      (a) the charity is, or becomes, subject to an obligation to any person (whether or not the person making the disposal or a person connected with him), and

      (b) one or more of the conditions in subsection (8C) below is satisfied.

      (8C) For the purposes of subsection (8B) above—

      (a) condition 1 is that, taking into account all the circumstances (including, in particular, the difference in the value of the net benefit to the charity if subsection (8B) applies and if it does not) it is reasonable to suppose that the disposal of the qualifying investment to the charity would not have been made in the absence of the obligation;

      (b) condition 2 is that the obligation (whether in whole or in part) relates to, is framed by reference to, or is conditional on the charity receiving, the qualifying investment or a related investment (see subsection (8D)).

      (8D) In subsection (8C) "related investment" means any of the following—

      (a) any asset of the same class or description as the qualifying investment (irrespective of size, quantity or amount);

      (b) any asset derived from, or representing, the qualifying investment whether in whole or in part and whether directly or indirectly;

      (c) any asset from which the qualifying investment is derived, or which the qualifying investment represents, whether in whole or in part and whether directly or indirectly.

      (8E) For the purposes of this section, the liabilities which are related liabilities in the case of any qualifying investment are the liabilities of the charity under each of the obligations that fall within subsection (8B) above (as read with subsection (8C) above) in relation to that investment.
      (8F) Where an obligation is contingent and the contingency occurs, the amount to be brought into account for the purposes of this section at any time in respect of the liability, so far as contingent, under the obligation is the amount or value of the liability actually incurred in consequence of the occurrence of the contingency.
      (8G) Where an obligation is contingent and the contingency does not occur, the amount to be brought into account for the purposes of this section at any time in respect of the liability, so far as contingent, is nil.".
      (4) In subsection (9) (definitions) insert each of the following definitions at the appropriate place—
      " "obligation" includes a reference to each of the following—

      (a) any scheme, arrangement or understanding of any kind, whether or not legally enforceable;

      (b) a series of obligations (whether or not between the same parties);";

      " "related liabilities" shall be construed in accordance with subsection (8E) above;";
      " "value of the net benefit to the charity" shall be construed in accordance with subsection (8A) above;".
      (5) After subsection (10) (market value) insert—
      "(10A) Section 839 (connected persons) applies for the purposes of this section.".
      (6) The amendments made by this section have effect in relation to any disposal to a charity on or after 2nd July 2004, except where the disposal is in performance of a contract entered into before that date and not varied on or after that date.'.—[John Healey.]
      Brought up, and read the First time.
      The Economic Secretary to the Treasury (John Healey): I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker: With this it will be convenient to discuss the following:New clause 1—Gift aid and non-taxpayers—

      (1) 'Section 25 of the Finance Act 1990 (donations to charity by individuals) shall be amended in accordance with subsection (2) below.

      (2) In subsection (8)—

      (a) after "year of assessment" there shall be inserted "by more than £520"; and

      (b) at the end there shall be added "over £520".

      (3) This section shall be deemed to have effect for the year 2003–04 and subsequent years of assessment.'.

      John Healey: New clause 11 amends legislation providing income tax relief to a donor making a gift, or disposal at under value, of shares or securities to charity. The legislation, introduced in the Finance Act 2002, which was welcomed at the time on both sides of the House, enables a donor to offset the market value of a gift of shares or securities to charity against their income for tax purposes. The market value is the value of the gift in the hands of the donor at the point of disposal to the charity. In the first two years that the relief has been available, £370 million has been donated to charity.
      However, we have uncovered evidence of complex avoidance schemes that severely reduce the benefit of the gift in the hands of the charity, while leaving the market

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      value of the gift for tax purposes unchanged. The schemes operate where an individual makes a "donation" to a charity and, as a result of an obligation on the charity, the value of that donation to the charity is less than the market value of the assets donated. In that context, an obligation on the charity commonly means that the charity will undertake to sell the shares or gilts back to a third party. The effect of such schemes, which use complex arrangements of trusts and options, is to give the donor tax relief that can far outweigh the benefit to the charity and has the scope to return the whole value of the gift to the control of the donor. The charity receiving such a gift is left with very little benefit and, because the gift or an amount of nearly equivalent value returns to the control of the donor, the gift costs the donor much less than the amount of tax relief they claim.
      2.15 pm
      The purpose of the new clause is to counter abuse not by charities, but by individuals seeking to take advantage of the generous income tax relief available to charity donors. The new clause ensures that the amount of income tax relief claimed by the donor cannot exceed the value of the net benefit to the charity. It will not affect genuine donors or charities. But when an obligation is placed on the charity—no matter by whom—that results in the value of the gift in the hands of the charity being less than the value of the gift in the hands of the donor, the income tax relief that can be claimed by the donor is restricted to the lower amount. That provision will operate either when the obligation can be linked to the assets given, or when it is probable that the gift would not have been made without the existence of the obligation
      The Government are committed to increasing donations to charity and the gifts of shares and securities legislation is an important part of that commitment. But schemes that seek to abuse charitable reliefs are unacceptable. We have shown with this new clause that when we identify such abuse, we will act quickly to prevent that abuse from continuing.
      Mr. Flightrose—
      John Healey: I hope that the hon. Member for Arundel and South Downs (Mr. Flight) will welcome the clause as he did the last as a reasonable and fair cop.
      Mr. Flight: As I recall, the income tax relief received when one gifts something to a charity is set against one's income for income tax purposes, so it is 40 per cent. for top-rate taxpayers. As I understand the Economic Secretary's description, it would still be worth practising the scheme because the gift to the charity might be two and a half times the effective benefit.
      John Healey: We believe that the new clause will prevent such abuse. Our concern is that the amounts that can be donated—and therefore the tax relief that can be claimed—are virtually limitless. We are, however, keen to ensure that we do not introduce a
      724
      measure that discourages genuine acts of philanthropy or removes the incentive to the donor to give in the first place.
      Mr. Laws: In the spirit of the questions I put earlier to the Paymaster General, can the Economic Secretary tell us how long the abuse has been going on and how much it might have cost?
      John Healey: As I said earlier, we uncovered evidence of the scheme relatively recently. It is not yet widespread, but it has the potential to become so. As my right hon. Friend the Paymaster General said, a responsible Government have the duty to act as soon as evidence of such schemes is uncovered, to prevent the loss of potentially very large sums. We have uncovered evidence of a potential donation of close to £100 million. If a single donation of such size were to be channelled through the sort of scheme that I have described, the extent of the abuse would be obvious, as would the potential exposure of the public purse.
      The new clause has the support of the Charity Finance Directors Group and the Charities Tax Reform Group. Indeed, the latter says:
      "We welcome this measure which defends the tax breaks designed to encourage giving to charities. Any abuse of charitable reliefs by donors rebounds on the whole charity sector by tarnishing its reputation; we support all initiatives that protect the integrity of the sector."
      I hope that the new clause will receive support from both sides of the House.
      I turn briefly to new clause 1. Opposition Members will recall that we debated this proposal in the Finance Bill Standing Committee in 2002, when I cautioned the hon. Member for Arundel and South Downs that the consequence of such a measure would be to change the nature of gift aid. To understand our objections to new clause 1 we must return briefly to the operating principles of gift aid.
      Gift aid donations are treated as having been made after the deduction of income tax at the basic rate. As charities are exempt from tax on that income, they are entitled to reclaim from the Inland Revenue an amount equal to the basic rate of tax on the donation. If the donor has not paid sufficient income or capital gains tax to cover the amount reclaimed, they are liable to be assessed for the shortfall.
      If the new clause were accepted, it would allow donors to make donations using gift aid on which the amount of income tax treated as deducted from the gift can exceed the amount of income tax or capital gains tax paid by the donor in that year. It would allow an excess of up to £520 before further amounts became recoverable.
      At present, where the tax reclaimed by the charity receiving a gift aid donation does not exceed the amount of income tax and capital gains tax paid by the donor, the repayment is treated as negative taxation. If the tax reclaimed by the charity exceeds the amount paid by the donor, we deal with the situation by making an assessment on the donor, as I said earlier. If, as the new clause proposes, we did not have that option, amounts repaid to charity could exceed tax paid by donors and the whole gift aid scheme would be reclassified as public expenditure. Since our debate in 2002, we have checked

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      that point with the Office for National Statistics, which confirmed that such an extension would indeed represent public expenditure.
      As gift aid acts as an incentive to encourage taxpayers to give to charity, it enables the donor, in effect, to direct some or all of the income and capital gains tax they have paid to causes that they support. New clause 1 would breach the central principle of gift aid if the scheme allowed non-taxpayers to direct where the taxes of others are used. On that basis, I hope that Opposition Members will not press the new clause to a vote.
      Mr. Richard Bacon: I shall comment briefly on new clause 11. On the face of it, the new clause causes us no great difficulty, although it was tabled rather late and we would have liked longer to consider it. I was at the Vote Office not two hours ago, yet I was unable to obtain any guidance notes on the new clause.
      New clause 11 appears to be a targeted anti-avoidance measure designed to prevent donors from obtaining income tax relief in excess of the benefits received by the charity from the donation of shares or securities. Normally, one would expect the market value of a gift to reflect the value of the gift in the hands of the charity. There is potential for serious abuse; for example, by using offshore trusts and options to manipulate the value of gilts or other securities donated to charities so that the value of the gift in the hands of the charity could bear no, or little, relation to the market value of the underlying asset. Such manipulation could be used to write off entirely an individual's tax liability while conferring only limited benefits, if any, on the charity.
      As genuine gifts of shares and other securities will continue to receive tax relief under new clause 11, we have no objection to it in principle. It appears to be a measure that will protect the Revenue while ensuring that charities continue to benefit from genuine gifts of shares and other securities. We shall, however, be keeping an eye out for unintended consequences.
      The purpose of our new clause 1 is to probe the Government's thinking in the important field of gift aid relief, and the Economic Secretary gave us a hint of his thinking in his remarks earlier. The new clause would ensure that people on incomes too low to tax, who are often the most generous of givers, are able to benefit from the gift aid scheme, and it would remove the charge they unwittingly incur when they mistakenly sign a gift aid form.
      The gift aid relief scheme is a great boon for charities, and it may also be convenient for those who donate to charities, if they pay tax; but for those of the poor who give generously to charity, the gift aid scheme can be a costly and significant trap. Gift aid relief can be claimed only by those who have paid enough tax in the year to cover the amount of tax on the gift, so, for example, if a person gives a gross amount of £100 in a year to a charity using the gift aid scheme, he or she will pay the charity a net sum of £78 and the charity will reclaim from the Inland Revenue basic-rate tax of £22; but the donor must have paid at least £22 tax in the year for that to work. A donor who has not paid enough tax to cover the gift, and still uses the gift aid scheme, remains legally liable to the Inland Revenue for that amount of tax. If the donor were a non-taxpayer, the Revenue would be
      726
      entitled to pursue them—and sometimes does—for the £22, notwithstanding the fact that the donor was not liable to pay tax for any other reason.
      Non-taxpaying donors might use the gift aid scheme for all sorts of reasons. They might not appreciate the technicalities, and the charity concerned might fail to warn them. Their incomes might decline unexpectedly—for example, if they lose their job, or if interest rates fall, taking them out of tax—and they may forget that they still have a gift aid declaration in place.
      The low incomes tax reform group—the LITRG—which is part of the Chartered Institute of Taxation, has been campaigning since the introduction of the gift aid scheme to enable non-taxpayers to participate in it. Those on low incomes are often among the most generous givers in proportion to their means and, as the LITRG points out, it is not clear why low-income donors should not be encouraged to give to charity in the same way as wealthier donors.
      Indeed, the group had originally thought that that was the Government's intention. When the Chancellor of the Exchequer announced the introduction of "Getting Britain Giving", he said that for every pound a citizen gave, the Government would contribute a further 28p. It is worth noting that the Chancellor said "citizen" not "taxpayer". In the event, however, as the measures have unfolded, we see that higher-rate taxpayers can get relief on their giving—indeed, if they give shares to a charity the relief can approach 80 per cent. in certain circumstances—whereas a charity can get no relief on a gift from a non-taxpayer. That seems a curious inversion of the idea of a progressive tax system. The exclusion of some citizens from the gift aid scheme can hardly be said to contribute to the building of an inclusive or a civic society.
      When the matter was last debated, in the Finance Bill Standing Committee to which the Economic Secretary alluded, the hon. Gentleman gave two welcome assurances. First, he said that in practice, where the Inland Revenue finds that a non-taxpayer's donation has been included in a gift aid claim from a charity, it invites the charity to make good the shortfall rather than pursuing the individual taxpayer. No doubt most charities would respond positively to such an invitation.
      Secondly, the hon. Gentleman undertook to keep the matter under constant review. New clause 1 would enable non-taxpaying donors to use the gift aid scheme when donating, but it would set a limit. It provides that they will not have a legal liability to pay the Revenue any tax reclaimed by the charity, provided that tax on any gifts they make under the scheme during a tax year does not exceed £520, or £10 a week. That restriction is intended primarily to meet the possible objection that fraud might be encouraged if non-taxpayers were able to donate to charity under gift aid without limit. New clause 1 would take effect from the last tax year— 2003–04—since tax returns for that year are largely still to be made.
      2.30 pm
      In the debate to which I referred a moment ago, the Economic Secretary objected—he reiterated his objection this afternoon—because the tax reclaimed by a charity in respect of a gift by a non-taxpaying donor

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      would be effectively public expenditure, not a tax relief. That raises the question of whether the gift aid scheme could be classified in two ways for public accounting purposes: as tax relief to the extent that it is used by taxpayers and as public expenditure to the extent that it might be opened up to non-taxpayers.
      On 9 June 2003, Lord Freeman wrote on behalf of LITRG to the Financial Secretary to ask whether the ONS could consider that question at one of its review meetings, and on 19 June last year, the Economic Secretary replied to that letter, saying that he had arranged for the ONS to give definitive advice. He referred to that advice in his opening remarks, and I ask him to consider publishing it, as I am not aware of seeing it in the public domain.
      It is hard to understand why a split classification should present a problem, given the proliferation of the various tax credit schemes that we have seen under the Government. Those schemes raise very much the same issues as those we are discussing and their total cost is divided between tax relief, on one hand, and public expenditure, on the other, in so far as the credits reduce tax liabilities or lead to payments to claimants.
      In summary, we urge the Government to think again about extending the gift aid scheme to non-taxpayers, to give those on low incomes the opportunity to give to charity as they would wish, to prevent them from falling into what for them could be a costly and unlooked-for trap, particularly where they are ill-advised by the bodies to which they donate, and to simplify generally the administration of the scheme for charities.
      John Healey: May I welcome the hon. Member for South Norfolk (Mr. Bacon) to the Dispatch Box? He offers distinguished service to the House on the Public Accounts Committee. I understand that he is making only a temporary appearance at the Dispatch Box, but I fear that his permanent presence cannot be far off, and I look forward to that.
      The hon. Gentleman asks first about guidance. He said that he had looked for guidance published by the Inland Revenue alongside new clause 11. He will appreciate that it is important that the House considers the clause first, but the Inland Revenue will publish guidance to support the new clause. That guidance will give charities some certainty in respect of how the new clause will operate and where they stand. Let me repeat very clearly that this measure is carefully constructed not to discourage genuine philanthropy. It is designed to counter abuse not by charities, but by those individuals who seek to take advantage of what is a generous income tax relief scheme for charitable donors.
      The hon. Gentleman made a number of other points. He took up the cause and case of the non-taxpayer, particularly the non-taxpayer or low taxpayer who may not fully appreciate the principles and operation of the gift aid scheme. I am sure that he will know, as do many hon. Members because many of them are strong supporters and give in this way, that any person who makes a donation under gift aid must complete a declaration to confirm that he or she has paid sufficient tax to cover the amount that the charity will reclaim. The requirement that charities must obtain such a
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      declaration from the donor reduces the risk that the donor will accidentally use gift aid when it is not appropriate.
      Where it is established, however, that a donor has not paid enough tax to cover the value of the gift aid, the Inland Revenue can, as I said, assess the donor to recover that overpayment. However, as the hon. Gentleman said, I gave an undertaking during the proceedings on the Finance Bill in 2002 that, in many cases, the Inland Revenue will explain the situation first to the charity, which will then decide voluntarily to repay the amount of the tax reclaimed.
      The hon. Gentleman spoke about citizenship and asked why non-taxpayers should be barred from donating to charity. Non-taxpayers can give to charity in other ways, but it is not appropriate for them to do so under gift aid. He will be aware that, even for those who pay a small amount of tax, gift aid can apply to any amount no matter how small, so long as some tax is paid, gift aid is a scheme of which the charity can take advantage.
      Finally, the hon. Gentleman urged the Government to think again and referred back to the debates on the Finance Bill in 2002, where I gave an undertaking that, as with all taxes, the Government would keep gift aid under review. We will do so. We are always open to fresh argument and to the case for further reform, particularly with such issues, where we believe that any further measure may boost the amount that people can give to charity, thus encouraging charitable giving more widely. However, as I tried to explain in my opening remarks, the basic objection to new clause 1 is that it contravenes the principles that lie at the heart of the operation of gift aid and that, at present, we simply do not think that that problem has been overcome by the case made by its proponents.
      Mr. Flight: May I ask the Economic Secretary how new clause 11 will work? He said that the income tax rebate cannot exceed the net value of the benefit to the charity. I am not sure whether or not the net value includes the tax rebate. However, if it does not include the tax rebate, for example, someone could give £100 and take back £80. The charity would get £20. The individual would get back £18 on his £100, so he would be out of pocket by only £2. In effect, that could be used to make all giving to charities tax deductible. If the net value includes the tax rebate to the charity, someone could give £100 and take back £100. The charity could still have £22, and the individual has benefited by £18. I just want to understand whether the new clause will be an effective deterrent to the abuse that the hon. Gentleman describes.
      Mr. Deputy Speaker: Order. We are in danger of getting ourselves into disorder. I was assuming that the hon. Gentleman's remarks were by way of a long intervention, to which the Minister may reply in concluding his speech, but if he does not wish to respond that is in order.
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.

    New Clause 12

      OVERSEAS PENSION SCHEMES: MIGRANT MEMBER RELIEF
      'Schedule (Overseas pension schemes: migrant member relief) contains provision about migrant member relief in respect of contributions under overseas pension schemes.'.—[Ruth Kelly.]
      Brought up, and read the First time.
      The Financial Secretary to the Treasury (Ruth Kelly): I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker: With this it will be convenient to discuss the following: Government new clause 13—Non-UK schemes: application of certain charges.
      Government new clause 14—Appeal against decision to exclude recognised overseas pension scheme.
      Government amendments Nos. 111. 114 to 116, 118, 126 to 131, 133 to 137 and 149.
      Government new schedule 1—Overseas pension schemes: migrant member relief.
      Government new schedule 2—Non-UK schemes: application of certain charges.
      Ruth Kelly: The new simplified regime for taxing pensions will provide a more flexible regime that is much less heavily regulated than the existing eight regimes. That should prove attractive to individual pension savers and reduce costs and increase flexibility for the industry. Our aim is to make saving within the new simplified regime as simple, fair and attractive as possible for all pension savers. However, there will be some groups—individuals who come to the UK from overseas—for whom it makes sense not to move into the UK's tax-favoured regime. For example, individuals may prefer to continue to contribute to their home state pension schemes, or might even be obliged to continue to be members of such schemes.
      Under the current regimes, there is provision for individuals to get UK relief for contributions made to their home state schemes. Those provisions are important in maintaining the UK's competitiveness as an attractive place to come to work. Briefly, individuals may currently claim relief for contributions to overseas schemes that correspond to UK schemes either under a double taxation agreement, or the existing corresponding relief rules.
      It is, of course, important to maintain the UK's competitiveness as an attractive place to work and do business. We will therefore be keeping these two routes to relief in the new regime. However, we will simplify and rationalise the conditions for getting relief under the new corresponding relief, which is to be known as migrant member relief in the future. The rights to relief under a double taxation agreement will, of course, remain as they are under the terms of existing agreements. The new rules will ensure that the relief under both routes will have an appropriate fit with the new regime. Government new clauses 12 and 13, which introduce new schedules 1 and 2, and amendments Nos. 111 and 115, provide for these two routes to relief and set out how certain tax charges will apply to overseas schemes.
      730
      New clause 12 and new schedule 1, which it introduces, make provision for individuals and their employers to claim tax relief on contributions to certain overseas schemes. The migrant member relief that they introduce will be available to relevant individuals and their employers. The new rules are more generous than the existing ones for corresponding relief and match the new rules for relief in respect of contributions made to registered pension schemes. We are extending the qualifying criteria, both in terms of the individuals who can qualify for relief, and what constitutes a qualifying overseas pension scheme.
      Internationally mobile overseas individuals who come to the UK to work for a period of time and continue to be members of an overseas pension scheme will be able to claim migrant member relief on pension contributions up to the level of their UK chargeable earnings. Employers will be able to claim tax relief on contributions paid in respect of these employees, and employees will not be taxed on the benefit of an employer's provision of retirement benefits in an overseas scheme. Individuals will be entitled to claim migrant member relief against earnings chargeable to tax in the UK, providing that they come to the UK as a member of a qualifying overseas pension scheme and that they joined that scheme when they were not resident in the UK.
      Additional conditions are that such persons must have been UK residents when they paid the contributions on which relief was claimed, and that they were eligible for tax relief on the contributions in the country in which they were resident immediately before coming to the UK. Finally, individuals must notify scheme managers that they intend to claim migrant member relief. That is important because obligations are placed on scheme managers of qualifying overseas schemes to notify the Inland Revenue that a scheme is such a qualifying scheme. The scheme manager must also notify the Inland Revenue if that stops being an overseas pension scheme, and provide it with information about benefit crystallisation events relating to the individual.
      New clause 13 and new schedule 2, which it introduces, will ensure that certain tax charges will apply in respect of overseas schemes when UK tax relief has been given on amounts in the fund. That will occur when there has been migrant member relief or relief under the terms of a double taxation agreement, or where a transfer has been made from a UK registered scheme to an overseas pension scheme. It is right that if UK tax relief has been given on funds in an overseas scheme, either directly or because funds have been transferred from a UK registered scheme, the same tax charges that apply to relief for UK registered pension schemes should also apply. That meets our objective of maintaining the UK's competitiveness as an attractive place to work and do business while preserving the integrity of the new regime.
      There are three types of charges that might apply to an overseas scheme. First, member payment charges will apply to payments that would give rise to a UK tax charge if they were made from a registered scheme in the UK, such as an unauthorised payments charge, a special lump sum death benefits charge or a charge in respect of trivial commutation. Those charges will apply if individuals are resident in the UK in the year in which the payment is made, or resident in the UK during any

      731
      of the immediately preceding five years. They will apply only to the extent that the payments are made out of funds that have benefited from UK tax relief. We have provided against double taxation by allowing credit against UK tax for foreign taxes paid in respect of those payments.
      Secondly, the annual allowance provisions will apply to an overseas scheme as if it were a registered scheme to the extent to which the annual increase in individuals' pension rights under the scheme had benefited from UK tax relief. Thirdly, lifetime allowance provisions will apply to funds in an overseas scheme that benefit from UK tax relief on or after 6 April 2006. Additionally, individuals may elect for a benefit crystallisation event to occur when tax relief is no longer claimed, thus allowing individuals who leave the UK permanently to be sure that all UK taxation issues in respect of their overseas schemes are completed.
      2.45 pm
      Amendments Nos. 114, 116, 118, 126 to 131 and 133 to 137 are merely consequential amendments to the new clauses and schedules. To provide continuity, transitional provisions introduced by amendment No. 149 will ensure that individuals who claim corresponding relief on 5 April 2006 may continue to claim that relief even if either individuals or the scheme would not qualify for relief if applying for the first time under the new rules. However, the scheme manager must comply with benefit crystallisation information requirements in respect of contributions paid after 5 April 2006.
      The new rules are flexible and transparent, and will ensure that the UK remains a competitive place for internationally mobile companies and their employees to do their business and work. They will maintain the integrity of the new regime by creating a level playing field between UK and overseas pension schemes, so I commend the new clauses, new schedules and amendments to the House.
      Mr. George Osborne: The Financial Secretary said that the measures were simple, fair and attractive, but anyone who has tried to plough through new schedule 2 over the past couple of days would not agree that they were simple. It was not especially fair that the provisions were it introduced at the last moment because that meant that the industry did not have the chance to comment on them at all. As for whether they are attractive or not, we will have to take the Financial Secretary's word that they are more generous than the current arrangements.
      My colleagues have already made the point that it is unsatisfactory for new clauses and amendments to be introduced on Report, but it is especially unsatisfactory when they relate to the aspect of the Bill that deals with reform of pension taxation. As the Financial Secretary well knows, that matter has been subject to lengthy consultation over a couple of years, which I praised in Committee as a good example of the way in which to consult because the Government listened and changed their proposals on various occasions in the light of what the industry said. Unfortunately, she has blotted her
      732
      copybook right at the end of the process by introducing a substantial change to the situation regarding overseas pension schemes without any consultation. The provisions were tabled on Friday and we are discussing them a couple of days after the weekend, so the industry has thus had no chance to have its say. The situation is especially unsatisfactory because we discussed the matter in Committee only a couple of weeks ago. Will the Financial Secretary tell us why the proposals have suddenly appeared on the doorstep so late in the day?
      Will the Financial Secretary tell us something about the missing details? For example, amendment No. 111 is important because it defines an overseas pensions scheme as
      "a pension scheme … which … is established in a country … outside the United Kingdom"—
      one might have guessed that about an overseas pension scheme—
      "and … satisfies any requirements prescribed for the purposes of this subsection by regulations made by the Board of Inland Revenue."
      Are those regulations available so that we can look at and discuss them? Will the Financial Secretary tell us the requirements that will be imposed on those schemes, apart from the fact that they must be overseas pensions schemes?
      Turning to the substance of the Government's proposal and the new concept of migrant member relief, the Financial Secretary implied when discussing new clause 12 and new schedule 1 that the measures were designed for non-UK citizens who came to work in this country. Does she anticipate that they will be used by UK citizens who go to overseas countries in which they enter into pension schemes before coming back to the United Kingdom? She seemed to be talking only in terms of non-UK nationals.
      I accept what the Minister is trying to achieve in new clause 13. The schedule that it would introduce is complex, but explanatory notes have not been produced. When I was dealing with the Pensions Bill many new clauses were introduced on Report—indeed, parts of the Bill were virtually rewritten—but the Department for Work and Pensions produced explanatory notes to clarify what they were doing. There are no explanatory notes, however, for the Finance Bill or, if there are, I have not seen them.
      Government new schedule 2, as the Financial Secretary made clear, is an attempt to ensure that a member of an overseas scheme eligible for UK tax relief cannot evade the rules on, for example, the annual allowance, short service refunds and trivial commutations, and is charged as if the scheme were a UK one. I accept what the Financial Secretary said about protecting the country's tax base, the Exchequer's interests and so on, but what would happen if the Inland Revenue's rules conflicted with the rules of the host country? That is unlikely to be the case with the annual allowance—presumably one would just look at the lower annual allowance in the other country—but the rules on trivial commutation or short service refunds may be substantially different elsewhere. There may be a requirement, for example, to provide a trivial commutation, which in the UK would push the member above the 1 per cent. limit on trivial commutation. How would conflicts between the rules or laws in this country and those in the host country be resolved?

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      What reporting requirements will be placed on overseas schemes? Government amendment No. 115 deals with that, but the Government are proposing to introduce a much lighter-touch regime for all pension schemes that will focus on registration rather than approval. There is concern that that is too light a touch for the UK, but there will be an even lighter-touch regime for overseas schemes. Is the Inland Revenue in a position to police the regime? Will it poke its nose into overseas schemes to make sure that they are providing accurate returns? How on earth will it know whether someone has received a trivial commutation or a short service refund? One hopes that operators of the scheme are honest about the requirement and that members are honest about their refunds, but there is no mechanism for the Inland Revenue to police the proposals. It may rely on the Exchequers of overseas Governments or on pensions regulators in other countries, but is the Financial Secretary satisfied that those safeguards will be adequate and that the Treasury will be on top of the situation?
      The Financial Secretary and the Treasury are anxious to prevent the possibility of the new pensions taxation regime from being used as a tax avoidance mechanism. The annual allowance, she explained in Committee, was introduced for precisely that reason, as there was scope for people to come here, set up a scheme, put a lot of money in and then depart. I assume that she is satisfied with the measures that she has introduced to tackle that problem but, as we have not had an opportunity to question her about them, is she content that they will not be open to abuse? How do the proposals relate, if at all, to the EU pensions directive, or, to give it its proper name and get the snappy EU jargon on the record, the directive on the activities of institutions for occupational retirement provision?
      The Opposition welcome attempts to create more of a single market in the financial services industry, and believe that the UK financial services industry is well placed to do extremely well and sell its products to other European countries. There are, however, great concerns about the directive. For example, it could cost UK schemes up to £300 billion—that is an extraordinary figure, but I have checked it, and the industry assures me that it is correct. Christine Farnish, the chief executive of the National Association of Pension Funds says that the directive
      "is very dangerous and very costly to UK schemes, and because the rules cannot be scheme-specific, will no doubt lead to endless battles in the courts. It is ridiculous; it is not in the real world."
      The directive attempts to allow people to build up a pension as they move between member states. Many new clauses added to the Pensions Bill on Report were meant to ensure that we complied with the directive. Do the present proposals belong to the same category, and can the Financial Secretary clarify whether they are an attempt to make sure that we comply with the directive? As I said, on a first glance—the Government tabled them only on Friday—the amendments do not appear to be unreasonable. We do not want people to come and work here and build up pension provision—we want people in this country to be able to go and work abroad and build up their pension provision. We are not against the principle behind the proposals, but I should be grateful if the Financial Secretary would provide us with
      734
      assurances about their practicality and the reporting requirements on overseas schemes and their policing. How will she deal with conflict, if it arises, between the rules in this country and the rules of host countries? Will she explain to the House why the proposals have been made at the last moment, and why we still do not have many important regulatory details?
      Mr. Quentin Davies: I shall start with negative strictures and concerns before making some positive points.
      It is unsatisfactory that the Government should introduce legislation at the last minute without consultation. There are only two acceptable excuses for introducing substantive new clauses on Report. First, the Government might have to respond to events that they could not have anticipated. The Paymaster General made that excuse—it sounded reasonable, given the background that she described—when she introduced Government new clauses 9 and 10, and the House accepted it. The second reason is if the Government for once take account of debate, discussion and consideration in Committee and have a genuine rethink in the light of Parliament's reaction to their original proposals. That is how Parliament should work, and how it did work for hundreds of years before 1997. I hope that it will work that way again as soon as possible.
      Unfortunately, however, neither of those excuses is available to the Financial Secretary, but if she proves me wrong I shall be pleasantly surprised. It is unsatisfactory, as my hon. Friend the Member for Tatton (Mr. Osborne) said, that explanatory notes are not available—at least, they were not half an hour before our proceedings began this afternoon, when I went to the Vote Office in the hope of finding them. Of all the epithets that the hon. Lady could reasonably use of her new clauses—I shall use some nice ones in a moment—"simple" is not one of them, as they consist of seven or eight pages of complex measures, including equations and so on. Explanatory notes would have helped our debate, and Parliament has been treated with something less than courtesy. Indeed, insufficient consideration has been given to the importance of our role. I hope that we receive an apology, and that in future the Treasury will try to do a bit better on both those fronts.
      I have a more technical concern that is linked to the points made by my hon. Friend the Member for Tatton about the annual limit and the way in which it will be monitored or enforced. What is the position of people who are in danger of exceeding their lifetime limit because they are highly paid and have substantial pension provisions? Would it not be sensible for them to go abroad to join a qualifying foreign scheme, and then return here? A multinational company will have work forces and pension schemes in different countries—certainly in the European Union and north America—so in principle it should not be too difficult for someone who is transferred to another country to join another scheme. The person could presumably return to the United Kingdom and accumulate any amount up to another lifetime limit and enjoy the benefit in retirement.

      735
      3 pm
      How will the lifetime limit be monitored? Perhaps the answer is that a separate lifetime limit will be applied to contributions to overseas schemes while people are in this country. I am sure the Financial Secretary has thought about that. She did not deal with it in her introductory remarks, but perhaps she will do so.
      Let me make some more positive comments, as I said I would. Despite my earlier remarks, it would be churlish not to praise the Government for having tried to move in the right direction. It is economically important that there should be no undue obstacles to people coming to work in the UK. In theory, the more highly paid they are, the greater the value they will add to our economy while they are here. It is important for high-tech industries, the City and so on that they should come to the UK to work. We all know that pensions can be a major obstacle to labour mobility. The Government are to be praised for trying to remove some of the obstacles.
      The Financial Secretary, to give her her due, clearly set out the purpose of the new schedule. I thoroughly agree with that, but perhaps we could look at the other side. It is true that the British economy will benefit from the removal of obstacles, and individuals coming from abroad and supposedly returning abroad before they take their retirement pension will also benefit. There seems, therefore, to be a basis for reciprocity and for negotiation with countries especially those in the EU, with which there is a reasonable exchange of labour, particularly highly paid professional labour. We should try to negotiate some reciprocal benefits for UK residents or citizens who go to other countries, especially in the EU, and wish to continue to contribute to a UK scheme on the basis that their contributions will be tax deductible, to allow them to enjoy the mirror-image benefits of those being introduced under the new schedule.
      The Financial Secretary did not say anything about that dimension, but I should be interested to know whether an attempt has been made to generate some reciprocity and whether—this point was rightly made by my hon. Friend the Member for Tatton—the measure contributes to the emergence of a European pensions directive, which would be highly desirable. It is a major obstacle to labour mobility within the EU—a cause to which we all strongly subscribe—that differential pension regimes exist. In some countries, contributions are tax deductible, but in others they are not. In some countries, there are limits to tax deductibility, whereas in other countries there are not. In some countries, pensions in payment are relieved of tax, but in other countries, such as the UK, they are not. The situation is immensely confusing.
      No doubt there are many opportunities for clever arbitrage—building up one's pension in a country where tax deductibility is high, and taking the pension in a country where the tax regime for pensions in payment is the most favourable—but there are also ample opportunities for getting it wrong in both directions. People who are in danger of doing that will not move, so our labour resources are not used as efficiently as they could be if the obstacles were removed.
      It is important to achieve a European directive on pensions. It has been under consideration for an enormously long time. I do not remember when the idea
      736
      was first mooted, and it is a major failure of the EU's efforts to build up an effective single market that a pensions directive still has not been agreed. I do not want to attribute blame—I would not know how to do so. I have not studied the matter sufficiently in respect of the Council of Ministers, the Commission and so on, but I am happy to allocate blame in general and say that the present position is not good enough and that progress ought to be made.
      My question to the Financial Secretary, which is germane to the new clause, is to what extent the new clause has been considered in that context, as a basis for negotiating bilateral reciprocal arrangements with relevant other countries, and as a contribution to solving the enormous difficulties in finally getting agreement and launching the European pensions directive. If the hon. Lady has made a contribution to that, she will have done a very good day's work indeed for the economy.
      Ruth Kelly: There has been an extremely interesting exchange covering all sorts of issues. I can only apologise to the House for the fact that the new clauses were introduced at such a late stage. Clearly, it would have been desirable to introduce them in Committee. The new rules for migrant member relief are based on proposals that were set out in the December 2003 consultation paper, so they should not come as a complete surprise to hon. Members.
      It was clear that the main rules for the new simplified regime were of most concern to employers, scheme providers and scheme members in the UK, but the migrant member rules are important to admittedly smaller numbers of people, and we wanted to introduce them during the current year, albeit at a late stage, to make sure that the people affected by the rules would have certainty in the run-up to the introduction of the measures in 2006.
      I believe that the explanatory notes are available on the Treasury and Inland Revenue websites, and they were placed in the Library in the standard way. I have not checked personally, but I am assured that that happened. I apologise if there was any difficulty in getting access to them.
      The draft regulations will be published over the summer and, as with the other pensions regulations, interested parties will be able to comment on them at that stage. Again, it is unfortunate that it was not possible to finalise the draft regulations in time for the debate, but the industry and others affected by the proposals will have ample opportunity to contribute to their formulation in due course. I am happy to summarise what the regulations made under the two new overseas schedules will do.
      There will be four aspects to the overseas pensions regulations. First, the regulations will set out the detail of the conditions that must be met for an overseas scheme to be a scheme in respect of which an individual may claim migrant member relief, or a scheme to which funds from a UK-registered scheme may be transferred. Secondly, the regulations will set out the information reporting requirements that an overseas scheme must comply with in order for its members to be eligible for migrant member relief, or in order to receive funds transferred from a UK-registered scheme.

      737
      Thirdly, the regulations will set out the way in which the tax rules for registered schemes will be modified for application to overseas schemes. Finally, the regulations will provide detailed rules for identifying which part of the funds in an overseas scheme has benefited from UK tax relief. That is important for identifying, for example, which part of an overseas fund an authorised payments charge may apply to. Some of the questions raised by the hon. Member for Tatton (Mr. Osborne) touched on issues that will be covered in the draft regulations.
      Mr. George Osborne: Will there be a restriction on the countries in which an overseas scheme could be registered?
      Ruth Kelly: As I understand it, the regulations will cover all overseas schemes. To get it absolutely right for the record, I will write to the hon. Gentleman specifying the countries to which they apply.
      On the hon. Gentleman's point about whether the provisions could be used by UK nationals, there would be no bar to UK nationals claiming migrant member relief, provided they met the relevant conditions in the way set out in the Bill—for example, that they were not resident in the UK and were a member of an overseas scheme and eligible for tax relief in their country of residence immediately before coming to the UK. UK nationals can benefit in exactly the same way as with other schemes.
      The hon. Members for Tatton and for Grantham and Stamford (Mr. Davies) were interested in how we could enforce the tax charge in overseas schemes. I understand that that is an area of particular concern, and I have considered it in some detail. There are two ways in which that might be done, depending on how individuals benefit from migrant relief.
      First, a UK-registered scheme might be transferred into an overseas scheme, which is by far the simplest case. In that case, a migrant worker comes to the UK, benefits from UK tax relief, transfers money from a UK-registered scheme into a scheme in a different country and, after benefiting from that tax relief, returns home. A UK-registered scheme will be able to transfer a member's fund to an overseas scheme under the new regime. The overseas scheme must be regulated as a pension fund in its country of establishment and undertake to comply with information reporting requirements regarding payments made to the member.
      Such a transfer would, in itself, count as a benefit crystallisation event, which is a concept that we debated at length in Committee. Any funds transferred in excess of the lifetime allowance will be subject to the lifetime allowance charge at the time of transfer. The UK scheme will, of course, know whether the funds exceed the member's available lifetime allowance, and, along with the member, it will be jointly liable for any lifetime allowance charge. The situation on transfers is straightforward: any excess relief granted over and above the lifetime allowance will be recouped at the point of transfer, so there is no need to worry about collecting a lifetime charge decades after the individual has left the UK.
      738
      Secondly, the situation is more complex when funds in an overseas scheme receive migrant member relief, because there is no transfer between schemes at which a benefit-crystallisation event occurs. Again, such an overseas scheme must be regulated as a pension scheme in its country of establishment and undertake to tell the Revenue about any benefit crystallisation event involving the member. The individual will tell the scheme that they are claiming migrant member relief, so the scheme will know the cases in which it must tell the Revenue about benefit crystallisation events. Any contributions that enjoy migrant member relief, including employer contributions, will count towards the individual's annual allowance. The individual will then need to claim migrant member relief and self-assess any contributions in excess of the annual allowance.
      The lifetime allowance will also apply to amounts within the member's fund that enjoyed migrant member relief. Those amounts, which are calculated by reference to total pension inputs, are tested against the lifetime allowance on the same benefit-crystallisation events that apply to UK-registered; schemes. The individual, however, will be solely liable for any lifetime allowance charge due.
      Mr. Osbornerose—
      Ruth Kelly: I intend to elaborate further on how the scheme will operate. If the hon. Gentleman waits for a few moments, I may answer his point.
      If an individual comes to the UK, contributes fairly large amounts each year to a UK pension scheme underneath the annual allowance limit and returns to their country of origin, they cease to benefit from UK tax relief, and a benefit crystallisation event will occur some years down the line at the point of retirement. In that case, no annual allowance charge will be imposed, but, depending on the lifetime allowance at the point at which that individual retires, a lifetime allowance charge may be due. The overseas scheme should tell the Revenue about such a benefit crystallisation event, and if it fails to do so it will cease to qualify for migrant member relief. The Revenue will know that a benefit crystallisation event occurred and the total in the fund, so it will be able to risk-assess the situation and concentrate its efforts on larger cases.
      The scheme, the Revenue and the individual will have various records of the pension contributions made to the scheme, and the Revenue will be able to call on further information from the member and the scheme. That provision will deal with the problem in normal situations, and I emphasise that it will cover only those who accumulate large sums above the lifetime allowance.
      Where a member is resident in a treaty partner country, EU directives such as the mutual assistance directive, the exchange of information provisions or the double taxation agreements will apply, but in the vast majority of cases individuals claiming migrant member relief will get nowhere near the lifetime allowance. The annual allowance limit is designed to slow the rate at which the individual accumulates UK tax-relieved funds. Migrant workers tend to come to the UK for short periods, so it will take them a long time to accumulate a fund in excess of the lifetime allowance.
      3.15 pm
      Mr. Quentin Davies: I recognise that this point will apply only in a minority of cases, but the Financial Secretary's second approach to monitoring potential breaches of the lifetime limit is premised on the overseas pension scheme arranging its accounts so that it knows not only what proportion of the total fund is due to an individual, but what proportion of that personal element in the fund derives from contributions made during that individual's employment in this country. In the case of a defined contribution British pension scheme, it is not possible to allocate a percentage of the fund to an individual. The only way in which the Financial Secretary can achieve her purpose is to wait until the pension is in payment, and then apply her multiple of 20. Unfortunately, she will not know how much of the total pension in payment derives from contributions made during employment in this country, and how much of it derives from or relates to provisions made in respect of that individual's employment overseas.
      Ruth Kelly: Not only the scheme but the individual may hold useful information to deal with that point. The Inland Revenue also holds records, which it obtains in various different ways in the UK, and it can base its risk assessment on them.
      Mr. Davies: The Financial Secretary is unduly optimistic, because the Inland Revenue will have access only to contribution records for the period of residence in this country, and it will not know information such as the capital gain and the interest gain accumulated over the 20 or 30 years before the pension is paid. It will not be able accurately to asses the capital gain and interest that accumulates on contributions made throughout the rest of the individual's career, when they are not resident in this country.
      Ruth Kelly: The hon. Gentleman is right, which is why in the case of overseas schemes we will calculate the total pension input contributions, rather than the total size of the pot, when testing the lifetime allowance charge. That is the practical response to some of the issues that he raised.
      The hon. Gentleman is also interested in EU fundamental freedoms, which dictate that migrant member relief must give relief on the same terms and to the same extent as relief is given for contributions to UK schemes, and he understands why that is the case. We must apply the lifetime allowance at the same time at which it would apply to a registered scheme.
      Mr. George Osborne: Before the Financial Secretary turns to the European aspects of the matter, there are a couple of other practicalities. What happens if an overseas scheme transfers to another overseas scheme that transfers to another overseas scheme? Is it possible that the Inland Revenue would lose track of such a pension fund? I know that the Financial Secretary will write to me on the countries in which schemes may be set up, but if a scheme were set up in the Cayman islands and a person became resident there for a couple of weeks, could the Inland Revenue lose track of the
      740
      situation? In which currency will the calculation be made—presumably the answer is sterling—and when will the exchange rate be calculated?
      Ruth Kelly: The rules for collecting debts that leave the country with a foreign national will apply in the usual way. The mutual assistance and recovery of debt directive applies in EU countries, and the information provisions apply in respect of other territories—the hon. Gentleman mentioned the Cayman islands in particular.
      The lifetime allowance charge is not a perfect science, and difficult cases involving practical difficulties in recovering debts will occur—difficult cases may occur whenever individuals leave the UK with debts that remain payable. However, the vast majority of people who come to work in the UK—for example, an American national working in the City of London—are here for a relatively short period, and will not be able to accumulate sufficient sums to make them liable for the lifetime allowance charge. For the vast majority of individuals, there is no problem whatsoever; and there are ways of recovering the charges due for a very small number of individuals with extremely large pension pots. However, for the reasons of fundamental freedoms that the hon. Member for Grantham and Stamford espoused, but also to be fair and to retain the competitiveness of the City of London and to maintain Britain's attractiveness as a place to work and do business, we think that this is a reasonable provision.
      Mr. Quentin Davies: Before the hon. Lady draws her remarks to a close, will she address the issue of the European pensions directive?
      Ruth Kelly: I am not yet drawing to a conclusion, as I still have some points to deal with.
      The hon. Member for Tatton asked what would happen if the foreign scheme rules did not match UK rules. I assure him that the regulations will amend the UK rules so that they apply to overseas schemes in a way that broadly corresponds to UK rules. That avoids problems relating to slight differences in rules. Generous UK relief is given on these contributions, and it is right that those who benefit by them should comply with UK rules. The requirements that overseas schemes will have to fulfil are set out in clause 140, which we discussed at length in Committee. The draft regulations that will be published in the summer will be revised to make a small distinction between schemes to which migrant member relief will apply and schemes to which transfers may be made; apart from that, they will be as published in clause 140.
      I have already touched on some of the reporting requirements with which an overseas scheme will have to comply in order for its members to be eligible to claim migrant member relief or to receive transfers from UK-registered schemes. For example, a report will be required when an overseas scheme makes an unauthorised payment to an individual who has had migrant member relief.
      The UK has a system of double taxation agreements, many of which provide reciprocity for pension contributions. We want to encourage that, because it

      741
      provides a valuable means of assistance to people who work in different countries and encourages labour mobility.
      The EU directive that was mentioned during the debate deals with how pensions schemes are regulated, but not with their tax treatment. We are firmly of the opinion in the UK that it is up to each country to determine how their pension funds are treated for tax purposes, because that is fundamental to national sovereignty. I am sure that Conservative Members would concur with that.
      Following that extensive explanation, I hope that Conservative Members will agree that this is a valuable provision that will continue to make Britain and the United Kingdom a very attractive place in which to work. I apologise for the fact that the new clauses have been introduced late in the day, but rather than defer them to the next Finance Bill I thought it wise to give the small number of people who will benefit from the provisions the additional certainty of an extra year; and of course they will have time to comment on the draft regulations as and when they are published.
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.

    New Clause 13

      NON-UK SCHEMES: APPLICATION OF CERTAIN CHARGES
      'Schedule (Non-UK schemes: application of certain charges) contains provision applying certain charges under this Part in relation to non-UK schemes.'.—[Ruth Kelly.]
      Brought up, read the First and Second time, and added to the Bill.

    New Clause 14

      APPEAL AGAINST DECISION TO EXCLUDE RECOGNISED OVERSEAS PENSION SCHEME
      'This section applies where a recognised overseas pension scheme is excluded from being a qualifying recognised overseas pension scheme by a decision of the Inland Revenue under section 166(5).
      The scheme manager may appeal against the decision.
      The appeal is to the General Commissioners, except that the scheme manager may elect (in accordance with section 46(1) of TMA 1970) to bring the appeal before the Special Commissioners instead of the General Commissioners.
      Paragraphs 1, 2, 8 and 9 of Schedule 3 to TMA 1970 (rules for assigning proceedings to General Commissioners) have effect to identify the General Commissioners before whom an appeal under this section is to be brought, but subject to modifications specified in an order made by the Board of Inland Revenue.
      An appeal under this section against a decision must be brought within the period of 30 days beginning with the day on which the notification of the decision was given.
      The Commissioners before whom an appeal under this section is brought must consider whether the recognised overseas pension scheme ought to have been excluded from being a qualifying recognised overseas pension scheme.
      If they decide that the recognised overseas pension scheme ought to have been excluded from being a qualifying recognised overseas pension scheme, they must dismiss the appeal.
      If they decide that the recognised overseas pension scheme ought not to have been excluded from being a qualifying recognised overseas pension scheme, the recognised overseas pension scheme is to be treated as having remained a qualifying recognised overseas pension scheme (but subject to any further appeal or any determination on, or in consequence of, a case stated).'.—[Ruth Kelly.]
      Brought up, read the First and Second time, and added to the Bill.

    New Clause 15

      LEASES
      '(1) Part 4 of the Finance Act 2003 (c. 14) (stamp duty land tax) is amended as follows.
      (2) In subsection (3) of section 43 (land transactions), in paragraph (d) (inserted by paragraph 2(b) of Schedule 37 to this Act), after "where" insert "(i)" and at the end insert ", or
      (ii) paragraph 15A of Schedule 17A (reduction of rent or term) applies.".
      (3) In section 48 (chargeable interests), at the end of subsection (7) (inserted by paragraph 4(2) of that Schedule) insert "and to paragraph 15A of Schedule 17A (reduction of rent or term of lease)".
      (4) In section 53 (deemed market value where transaction involves connected company), for subsection (1) substitute—
      "(1) This section applies where the purchaser is a company and—

      (a) the vendor is connected with the purchaser, or

      (b) some or all of the consideration for the transaction consists of the issue or transfer of shares in a company with which the vendor is connected.

      (1A) The chargeable consideration for the transaction shall be taken to be not less than—

      (a) the market value of the subject-matter of the transaction as at the effective date of the transaction, and

      (b) if the acquisition is the grant of a lease at a rent, that rent. ".

      (5) In section 79 (registration of land transactions etc), in subsection (2) (transactions to which section does not apply) (as amended by paragraph 7 of Schedule 37 to this Act)—

      (a) in paragraph (a) for the words from "by virtue of" to the end substitute "by virtue of—

      (iii) section 45 (contract and conveyance: effect of transfer of rights), or

      (iv) paragraph 12B of Schedule 17A (assignment of agreement for lease),";

      (b) at the end insert—

      "(c) under paragraph 12A(2) or 19(3) of Schedule 17A (agreement for lease), or

      (d) under paragraph 13 (increase of rent) or 15A (reduction of rent or term) of that Schedule.".

      (6) After that subsection insert—
      "(2A) Subsection (1), so far as relating to the entry of a notice under section 34 of the Land Registration Act 2002 or section 38 of the Land Registration Act (Northern Ireland) 1970 (notice in respect of interest affecting registered land), does not apply where the land transaction in question is the variation of a lease.".
      (7) In subsection (3) of that section, after "The certificate" insert "referred to in subsection (1)".
      (8) In Schedule 4 (chargeable consideration), in paragraph 10 (carrying out of works), in sub-paragraph (2A) (inserted by paragraph 9(2) of Schedule 37 to this Act), for the words from the beginning to "completion)," substitute—
      "Where by virtue of—

      (a) subsection (8) of section 44 (contract and conveyance),

      (b) paragraph 12A of Schedule 17A (agreement for lease), or

      (c) paragraph 19(3) to (6) of Schedule 17A (missives of let etc in Scotland),

      there are two notifiable transactions (the first being the contract or agreement and the second being the transaction effected on completion or, as the case may be, the grant or execution of the lease),".
      (9) Subsections (2) to (4) and (8) apply in relation to any transaction of which the effective date is on or after the day on which this Act is passed.
      (10) Subsections (5) to (7) apply in relation to any transaction or deemed transaction of which the effective date is on or after 17th March 2004.
      (11) In this section "effective date" has the same meaning as in Part 4 of the Finance Act 2003 '.—[Ruth Kelly.]
      Brought up, and read the First time.
      Ruth Kelly: I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker: With this it will be convenient to discuss the following: Government new clause 16—Chargeable consideration.
      Government amendments Nos. 160 to 165.
      Amendment No. 12, in page 562, line 25 [Schedule 37], at end insert—
      'Application of paragraph 14
      15A (1) Paragraph 14 does not apply to a lease if the following two conditions are met.
      (2) The first condition is that—

      (a) no chargeable consideration other than rent has been given by the Purchaser in respect of the grant of the lease; and

      (b) no arrangements are in place at the time of the grant of the lease for any chargeable consideration other than rent to be given by the Purchaser in respect of the grant of the lease.

      (3) The second condition is that the rent payable under the lease as granted was a market rent at the time of grant disregarding any provisions in the lease that operate to increase the rent payable after the fifth year of the term of the lease to an amount that exceeds the market rent at the review date.
      (4) The market rent of a lease at any time is the rent that the lease might reasonably be expected to fetch at that time in the open market.
      (5) The review date is a date from which the rent determined as a result of a rent review is payable:'.
      Government amendments Nos. 150 to 159.
      Government amendments Nos. 166 to 221.
      Ruth Kelly: New clause; 15 is the first in a series of Government amendments to the legislation governing stamp duty land tax. Some of the amendments arise from the need to counter known avoidance
      744
      opportunities, but most are in response to representations made to us since the publication of the Bill.
      Mr. Mark Prisk: Do I take it that the Financial Secretary is suggesting that these avoidance schemes were known prior to the publication of the Bill? If that is the case, why were they not included in the original text?
      Ruth Kelly: As the hon. Gentleman is well aware, it takes some time to draft legislation. These avoidance opportunities have only recently been made known to us. As I say, most of the amendments are in direct response to representations made to us. Most are relieving measures that I hope the hon. Gentleman will welcome.
      I shall deal first with the new clauses, then with the Government amendments in the order of the relevant provisions in the Bill. Finally, I shall deal with Opposition amendment No. 12. As full explanatory notes have been published, I propose to discuss only the more significant provisions.
      New clause 15 deals with a number of matters concerning leases. The only change of substance is subsection (4), which concerns leases where the tenant is a company connected with the landlord. Section 53 of the Finance Act 2003 provides that the consideration for such transactions is deemed to be market value rather than the consideration actually given. However, many leases will have only a negligible market value, but there will still be a rent payable. Subsection (4) ensures that the rent is taken into account. That is similar to other "market value" provisions such as those governing exchanges.
      New clause 16 concerns the termination of chargeable consideration in two sorts of transaction: first, the transfer of property subject to existing debt; and secondly, the variation of the testamentary disposition, which is not wholly exempt from charge. The more substantive issue concerns transfers subject to a debt.
      Our intention in the 2003 Act was that transfers subject to a debt should be treated in the same way under stamp duty land tax as they were under stamp duty. However, inquiries from customers have suggested that the current provisions could benefit from clarification. No change of practice is intended. The examples in the explanatory notes show how the charge will work—the same way in which it worked under stamp duty.
      I turn to the Government amendments, of which I shall mention only the most significant. Amendments Nos. 155 to 159 concern relief for charities and amend clause 294. They make it possible for charities to claim partial relief from stamp duty land tax. That issue was raised in Committee of the whole House by the hon. Member for Yeovil (Mr. Laws), and I undertook to consider it. If a charity makes an acquisition but does not intend to hold the entirety of the acquisition for qualifying charitable purposes, the charity will now be eligible for partial relief provided that it intends to hold the majority of the acquisition for qualifying charitable purposes. In such cases, a clawback of a relevant portion

      745
      of the relief will occur when the charity disposes of that part of the acquisition. This will ensure that the relief granted is in proportion to the share of the acquisition held by the charity in furtherance of its charitable aims.
      3.30 pm
      I turn now to some of the amendments to schedule 37 of the Bill. Amendment No. 161, introduced in response to representations, extends the circumstances in which overlap relief is available when one lease comes to an end and a new one is granted. Amendments Nos. 162 and 163 extend the circumstances in which the assignment of a lease is treated as the grant of a new lease to the case where the original grant was to a nominee or bare trustee for the lessor. Amendment No. 165 provides for a charge to stamp duty land tax when the lease is varied so as to reduce the rent or the term.
      I turn now to the amendments to the partnership provisions in schedule 39. These amendments fulfil commitments that I made in the Committee of the whole House, in which we had an extensive debate on this point. Eighteen of them are required to restrict the charge to land in the United Kingdom. They change the phrase "interest in land", or something similar, to "chargeable interest", or something similar. This is in response to the concerns raised by the hon. Member for Hertford and Stortford (Mr. Prisk) in Committee, and I hope that he will be satisfied with our conclusions.
      Amendments Nos. 175 to 182 inclusive amend the charge on transfer of land into a partnership by a partner, an incoming partner, or someone connected with such a person. Our intention is to deal with those situations in which joint owners outside a partnership transfer land into a partnership in which they, or persons connected with them, are partners. An example is when a husband and wife start up a business in partnership, and the business is run from their jointly owned property. The calculation now identifies the smallest proportion of the land transferred that remains owned by a person who both owns the land outside the partnership and is a partner. For example, when parents gift land to a partnership in which the partners are their children, there would be no charge as the children would be connected to their parents. Their ownership outside the partnership would therefore be treated as 100 per cent. There might be occasions on which land is transferred by way of sale rather than by gift. In such cases, any payment will be charged. The charge on the payment is restricted to reflect the proportion of the land that is exempt from the market value charge.
      Amendments Nos. 192 to 201 inclusive make a similar restriction to the market value charge on the transfer of land out of a partnership to a partner, former partner, or someone connected with such a person. They also introduce a proportional charge on any payment made to the partnership. As part of this process, amendment No. 200 introduces a further restriction on the charge when land is transferred between partnerships that have at least one partnership in common, or the partnerships are connected through connected persons. There would normally be two charges as one partnership is transferring land to a partner or connected person, and the other partnership is having land transferred to it by a partner or connected person. The amendments restrict those two charges to the single highest charge. However,
      746
      partnerships of bodies corporate cannot benefit from this treatment unless the connection between the transferor and the transferee is less than 75 per cent. Our intention is that when the connection is 75 per cent. or more, the transferee should claim group relief, as with other transfers between companies in the same group.
      Amendment No. 219 provides that partners in a partnership are not to be treated as connected persons solely because of their being partners. Without this amendment, each partner in a partnership would be treated as owning 100 per cent. of the land in the partnership, and the charge on transferring land into and from a partnership would not be effective.
      Amendments Nos. 185 to 188 align the requirements of a lease to be treated as a market rent lease more closely with commercial leases, in response to representations made after the publication of the Finance Bill. Market rent leases do not count as partnership property for the purpose of determining market value of land interests. Leases for less than five years only have to be granted at an initial market rent. Longer leases have to have rent reviews to market rent at least once every five years. In either case, there must be no chargeable considerate on other than rent.
      Amendments Nos. 202 and 203 address concerns that disadvantaged area relief might not apply to transfers of an interest in a partnership. They also ensure that groups and charities reliefs are available for these transactions. Amendments Nos. 201 and 215 introduce changes to the charge to stamp duty on transfer of an interest in a partnership, in response to concerns expressed by the hon. Member for Hertford and Stortford in Committee. These amendments have the effect of restricting the stamp duty to that which would be payable on the net value of any shares and securities held by the partnership when an interest in a partnership is transferred. Again, this accords with the principles of transparency.
      Opposition amendment No. 12 returns to the subject of abnormal rent increases, which we discussed in Committee. At that stage, the hon. Member for Hertford and Stortford sought to remove the provisions in their entirety. In contrast, this amendment would limit their application, but it would do so in a way that would in practice prevent them from ever applying. Although we discussed the need for paragraphs 14 and 15 of schedule 37 at length in Committee, I shall briefly remind the House why the provisions on abnormal rent increases are needed. They are part of the scheme for charging stamp duty land tax on leases with variable rents. The general rule is that changes in rent after the end of year five are ignored. However, an abnormal rent increase—that is, one exceeding an annualised increase of RPI plus 5 per cent.—is treated as the grant of a new lease in consideration of the increased rent.
      The rule for leases is intended to minimise the need for additional returns, and means that, in almost all cases, no returns will have to be made after the end of the five-year period. It will also make it difficult for tax avoiders to reduce their liability to tax by arranging for large increases in rent in the future by setting an artificially low rent in the first five years. The amendment would render those provisions ineffective. The result would be that, as long as the parties could arrange for the initial rent to be a market rent, there would be no liability to

      747
      pay any more stamp duty land tax, regardless of the level of future rent increases. I suggest to the hon. Gentleman that it is easy enough for parties to arrange for a very low rent to be a market rent, by including, for example, onerous covenants in the lease. Subsequently, the lease could be varied for no consideration, so as to remove those covenants. Therefore, the market rent would rise.
      In addition, the amendment would impose a heavy compliance burden on taxpayers, who, to bring themselves within its scope, would need to demonstrate at the outset that the rent was a market rent. That might involve paying for valuation advice, and paying advisers to negotiate with the Revenue. By contrast, the current provisions ensure that the initial compliance burden is minimal. Only when, if ever, the rent increases after the end of year five do the provisions need to be considered. The Government believe that the rules in paragraph 14, which provide for further returns only if rent increases are more than 5 per cent. per year plus RPI, will exclude ordinary business rents without the need for the proposed paragraph. As I said in Committee, the provision will not impose any charge until December 2008. Between now and then, I assure the hon. Gentleman that we will keep the provision under review, to make sure that it meets its purpose.
      Mr. Prisk: I shall no doubt come back to the broader points, but can the Financial Secretary explain, given the rigidity of a rule of RPI plus 5 per cent. or an increase of 5 per cent., what will happen in an area that is seeking to regenerate, where local market rent is at a certain level, and two or three years later, after successful regeneration, it is a much better area and the increase has been 15 or 20 per cent? Will additional tax have to be paid for that benefit?
      Ruth Kelly: As I am sure the hon. Gentleman knows, we have debated that point in a Committee of the whole House. I argued to him that that situation was most unlikely to occur. I assure him, however, that we will keep the proposal under review before it is introduced in 2008, to make sure that it is appropriate at the time.
      The proposals that we have put forward carry a minimal compliance burden. They are designed to try to make sure that as few leases as possible are covered. I commend the new clauses and amendments to the House.
      Mr. Prisk: I thank the Financial Secretary for her opening remarks. First, I want to refer to amendment No. 12, before considering the Government's new clauses and 71 amendments to this part of the Bill.
      The purpose of amendment No. 12 is to reduce the compliance costs for businesses of stamp duty land tax. It would do so by disapplying paragraph 14 of schedule 37 when a lease has been granted at a market rent from the outset. As such, many people feel that amendment No. 12 directly fulfils the Government's original aims for stamp duty land tax: to modernise stamp duty, without unduly creating a bureaucratic burden on business.
      I wish that I could say the same about the Government's attempts to legislate for this tax. After a botched consultation, the legislation has proved ill
      748
      considered and ill prepared, and there is a raft of areas in which it has significantly increased the regulatory burden for business. Where there was once a one-page tax form we now have 12 pages, plus more than 40 pages of explanatory notes—and that is even before the Bill becomes law.
      The provisions concerning abnormal rents exemplify the problem. Believing that tenants and landlords are, as we speak, actively colluding to create tenancies with below-market initial rents, the Government have brought forward a ridiculous six-step, three-formula test. Tenants would be required to carry out this test at every rent review after five years. Of course, the premise that most landlords will give up a full rent now in the hope of higher rents at some point in the near or distant future is completely false. I fully accept that some peculiar and unusual agreements may arise, but given that in the vast majority of cases such an arrangement would clearly be against the interests of the landlord, they will be extremely rare.
      The Financial Secretary has argued in the past, and again this afternoon, that having undertaken the six-step test few businesses are likely to find themselves liable. That may well be true, but they will still have to undertake the test to find out, which means that the burden of compliance affects most businesses. The purpose of amendment No. 12 is to relieve most businesses of the bureaucratic burden by disapplying the test when the lease is granted at a market rent. I am grateful to the British Property Federation for helping to identify the change.
      As the Financial Secretary suggested. if I had my way it would be lovely to see the back of this nonsense. Sadly, however, we are not in that position, so we must try to amend the Bill in the current climate.
      The amendment draws partly on paragraph 13 of schedule 39, which excludes leases granted at a market rent from being partnership properties for the purpose of this tax. To that extent, it is based on a principle initiated by the Government. It may not have been drafted perfectly, but I hope the Financial Secretary will acknowledge that it is a positive proposal, and will monitor it and act accordingly. She nods; I will hold her to that.
      New clauses 15 and 16 change the provisions for agreements to lease, for granting and varying leases, and for the exemption of certain forms of chargeable consideration. The Financial Secretary tells us that the new clauses matter, and they may well matter; but why did they not matter in April, when the Bill was published, in December, when the regulations were debated, or at the time of last year's Finance Bill, when the Government first promoted this tax—or even during the consultation before the Bill, which the Government abruptly curtailed? Why are there suddenly 73 amendments and new clauses relating to a tax that is less than a year old? Last year the Chief Secretary waxed lyrical in his usual style, telling us that the tax would work perfectly well. Yet here we are, less than 12 months later, rewriting the rules before the ink has dried.
      I also want to comment on the way in which the changes have been presented. Here I strike a note of disappointment as much as anything else. Why did the Government table all 73 amendments and new clauses on Friday afternoon, when the House was not sitting?

      749
      What possible opportunity did that give Members, or those whom they represent, to consider the effects of the changes? I draw no comfort from this, but I think that the way in which the legislation has been presented suggests either incompetence or a wanton disregard for the House. I hope that the Minister will be able to explain. I hope that she will also he able to explain what led to the change of heart on the carrying out of works. Who will benefit from the change in new clause 15, and who will not?
      What independent evidence can the Financial Secretary offer us to show that the granting of leases constitutes a significant tax avoidance scheme, as is alleged? What change in tax yield does she expect? Can she tell us whether it will rise or fall?
      What assessment of the compliance costs has the Inland Revenue undertaken? This is, after all, the fourth version of the tax in 12 months. Can tenants expect renewed guidance, and if so, in what form and when?
      New subsection (1A) in new clause 15(4) refers to market value. I assume that that is open market value. If so, can the Financial Secretary tell us on what basis the valuation is undertaken? Does new subsection (1A)(b) widen the scope of the term "chargeable consideration", or does it merely confirm its existing application?
      3.45 pm
      On a wider point, does not the Minister recognise that the ability of landlords and tenants to vary leases to reflect changing commercial and trading circumstances is a vital part of a dynamic and successful economy? Does she not therefore accept that heavy-handed tax rules could hamper an open, flexible rental market in commercial property and thus create a drag on our competitiveness? To that end, I hope that she will be able to tell us what discussions she has had with ministerial colleagues in the Department of Trade and Industry and in the Office of the Deputy Prime Minister on Government policy to improve flexibility in leases. That is an established Government policy. Can she tell us when she has met them and what discussions she has had with them?
      On subsection (3) of new clause 16, can the Minister describe the circumstances in which the change of rules applies? How will the changes in the rules concerning property with secured debt affect mortgaged property—residential or commercial? Can she clarify whether the new clause allows for properties with a second, or further charge? I appreciate that she may not be able to provide us with an immediate answer. I am sure that hon. Members on both sides of the House would, if it is appropriate for the Minister, be willing to receive a written answer.
      I am also concerned about subsection (7) of new clause 16, which states:
      "The other amendments made by this section are deemed always to have had effect."
      Is that not a retrospective measure? If so, why is it being introduced in this way to this Bill?
      I turn to some of the 71 amendments. I welcome the amendment to clause 294, which will allow charities, as the Minister suggested, to claim partial relief from stamp duty land tax on certain acquisitions. The Minister will know that we on the Conservative Benches
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      retain concerns about the scope of the definition "qualifying charitable purposes" but, in the absence of a rethink on that particular point, it is only fair to say that the measure is helpful and I welcome it.
      I also welcome several of the changes to schedule 37. I understand that they reflect some of the points that were raised not simply by those outside the House but by many members of the Standing Committee last year. It would have been nice to have resolved them last year but, again, I recognise that the Government are now acting to correct their past errors—it would be remiss of me not to recognise that. However, the Government are treating a variation as an acquisition of a chargeable interest. How, in law, does the Minister distinguish between a rent review and a variation of rent?
      In amendment No. 161, there is a reference to
      "the same or substantially the same premises".
      Can the Minister clearly tell us what "substantially the same" means? There is uncertainty there.
      The reference in other amendments to market value concerns me. The Minister and I have discussed market rents and discounted cash-flow valuation. Is this a discounted cash-flow valuation, or is it what someone will pay? It is an important distinction.
      The Minister needs to realise that there may well be times when people will pay more than the market value because of other circumstances related to their business, or perhaps for a personal reason. That cannot be reflected in a DCF valuation, yet it is what the market is willing to pay. In those circumstances, if someone pays more than the DCF valuation of "market value", what happens to the difference in tax terms? How is it treated?
      The changes to schedule 39 are quite extensive and they seek to legislate for almost every eventuality concerning partnerships. It would be remiss of me not to recognise that some matters that were discussed in the Standing Committee and raised by me and others have been responded to. I welcome that. However, I think that, given that we are given five-step and three-step formulae in addition to the existing six-step test on abnormal rents, there is still confusion and crudity in the legislation. Indeed, if a partnership of five or more people were to try to transfer an office to a similar partnership under this legislation, more than 25 pages of primary tax law would be involved on that narrow point alone. Given the Financial Secretary's original aim of a simpler and more modern tax, how on earth can she possibly justify this provision?
      Although some of these amendments do indeed deserve our support, the truth is that their number and late introduction is a very accurate example of how poorly this Government sometimes behave towards this House. Where we get promises of simplicity, we end up with bureaucracy; where we are offered fairness, we end up with iniquity; and where we are promised certainty, we simply have ceaseless change. By way of contrast, our amendment has the potential to help thousands of businesses. I fully accept that it is not perfect, but it does merit serious consideration. For those reasons, I ask the Financial Secretary to reconsider her earlier remarks. Or will she now reject this amendment and, as I suspect she will, come back to the House in a year's time—be it on Report, in Committee or even at the beginning of next year's Finance Bill—and introduce something very

      751
      similar in the end? I hope not. Rather, I hope that she will for once think beyond her briefing and listen, and thereby show that debates in this House can just occasionally be reflected in the actions of this Government.
      Ruth Kelly: We have had yet another full contribution to the debate from the hon. Member for Hertford and Stortford (Mr. Prisk), who takes a personal interest in these issues, given his previous experience in the field. Yet again, his contribution has ranged from questioning the concepts behind particular clauses to questioning the detailed drafting of individual amendments. However, he will agree that I covered some of the issues raised in my opening statement, and I shall now attempt to deal with the more general points. If specific drafting issues and matters of legal terminology remain unanswered, I promise that I shall write to him and fill him in on some of the detail.
      I want to begin by welcoming the hon. Gentleman's welcome for some of the measures that we have implemented, such as granting greater relief to charities. That measure was called for by the hon. Member for Yeovil (Mr. Laws) and we have been able to respond, so he, too, will welcome it. I should also apologise to the House for the fact that it was not possible to make these amendments earlier. This is an entirely new tax, as the hon. Member for Hertford and Stortford knows, and it is impossible to know how such a tax will work in every particular before introducing it. Issues will always arise as the operational impact of a new tax becomes clear, and representations will always be made to the Government as it comes into effect. I should tell the House that some of those representations were made extremely late in the day—after the Finance Bill had been published and considered in Committee—so it was not possible to introduce these amendments sooner.
      The hon. Member for Hertford and Stortford will accept that 18 of the 73 amendments are needed purely to restrict the charge to land in the UK—an issue that we discussed in Committee. Parliamentary counsel suggested that this was the appropriate way to bring that provision into operation.
      Mr. Prisk: The Financial Secretary is right to say that those 18 amendments were necessary, but I come back to the fundamental point over which we argued last year, and which I still regard as an important principle of tax legislation. It was clear last year, and it is clear from the Bill and the 71 amendments and two new clauses that, in keeping with the considered view of all outside tax and property experts, this was a Bill in a hurry. As a result, more mistakes were made than were necessary, and the compliance costs were greater. Does the Financial Secretary not accept that, as we and a long list of outside organisations, including the Chartered Institute of Taxation, have argued—they are more expert on these matters than I am—it would have been far better to get things right the first time, rather than adopting this "make do and mend" approach? That is our central concern, and I hope the Financial Secretary will respond to it positively.
      Ruth Kelly: The hon. Gentleman will know that, in an ideal world, we would get legislation absolutely correct first time. I am afraid that that is impossible when we bring in a completely new tax.
      Most of the amendments that we are discussing today are deregulatory in impact and have come about because of a greater understanding of operational impacts; for example, how stamp duty operates in Scotland compared with England and so forth. Issues have been raised with the Inland Revenue and the Treasury; some of them very late in the day, and after the usual consultation period had finished in some cases.
      In order to achieve the objectives and published aims of stamp duty land tax, it has been necessary on occasion to table a substantial number of amendments. Of course we endeavour to avoid late amendments wherever possible and, as I said, most of the amendments we are discussing today are deregulatory in impact.
      The hon. Gentleman asked about the effect on yield. There is not a substantial effect on yield, either upwards or downwards, from the measures that we are discussing today, very many of which are highly technical. However, some—such as the hon. Gentleman's new clause—have a more significant impact in terms of how the market operates in practice.
      Amendment No. 12 is the main point of interest to the hon. Gentleman, who suggests that somehow lower rents now as an artificial means of avoiding lease duty will not be used widely because the landlord does not have the incentive. However, the professional press has recognised that a low rent payable for the first five years of a lease is a method to be considered for reducing stamp duty land tax. I cannot accept that an abnormal rent provision is unnecessary. However, I will look at his proposal in a positive spirit. We are always keen to reduce compliance burdens. In fact, I argued earlier that his proposal would increase the compliance burden compared with what we have put forward. We had an extensive debate on the compliance burden in the Committee of the whole House.
      Mr. Prisk: I am unclear as to why an additional independent valuation would be required, given that in any negotiation between a landlord and tenant there would be an independent valuation for the two parties to agree. I do not accept the Minister's point there, and she may wish to challenge her officials on that.
      If someone takes on a new premises on a lease at market rent—agreed jointly between the two parties—that should remove them from the need to go through the hoop of the infamous six-step test. That is the essence of what we are trying to do here. I am not entirely confident that the exact wording of the amendment is perfect, but I hope the Minister will look at it. I ask her one thing: does she have evidence for the scope of the proposal? If not, may I ask her to commission a study before implementing the proposal any further? One danger is that I am speculating and she is speculating, but the tax is being introduced on the basis of no evidence. Will she agree to commission a study, which might answer some of the questions I am raising in the amendment?
      Ruth Kelly: The hon. Gentleman is well aware that the proposals will not come into effect until 2008 at the earliest. We will keep the matter under review and we are constantly trying to improve legislation. He may not like us tabling new amendments, but where we see opportunities for improvement, we will do so. Given the attention on the issue, we will see if this is the most appropriate way to act. I do not accept the principle of his amendment, which is that where there is agreement between the landlord and the lessee, somehow the rent should not be tested after a five-year period. It is easy to avoid payment of duty in such cases. It is not a difficult process, and it is, of course, in the interest of both parties to come to a mutual arrangement under which less duty is payable. We have to be wise to that. If I remember correctly, the original five-year review was a concession to make the process much easier and to minimise the compliance burden in respect of variable leases.
      4 pm
      The hon. Gentleman reverts to the argument about the six-step test, which he has made on previous occasions. I can tell him that a calculator for leases is already available on the Inland Revenue website. A calculator for rent increases after 2008 is not yet available, but I can assure the hon. Gentleman that it will be introduced closer to the time. It might confuse people to have it available at the moment. There is no easy way round the issue, but our provisions strike us as representing a sensible balance between minimising the compliance burden and capturing the avoidance.
      Mr. Prisk: I am grateful to the Financial Secretary for her positive words, but I should like to edge her one step further, if I can be that persuasive. If nothing is going to happen until 2008, it strikes me that we have a real opportunity to assess the scope of the avoidance. That is, after all, something that Treasury Ministers do in a raft of other areas and there is a logical argument for doing so. I have not yet seen evidence that it has happened in this particular respect. Given that avoidance issues have been presented to us as being easy to deal with and something about which the Government are concerned, may I ask the Financial Secretary whether she would be willing to consider such a study? Let us see the evidence, which would happily allow us to improve the legislation. Will she agree to an independent study to assess the scope of the avoidance in order to ensure that the legislation hits the people at whom she is aiming?
      Ruth Kelly: I fail to understand how it would be possible to commission an independent scoping study to establish how much potential avoidance could take place if a loophole were to exist in the future. It has not, as far as I am aware, been tried in any other area of tax law, because it is impossible independently to assess how many people would take advantage of a loophole in the legislation. I believe that we have produced a reasonably balanced compromise, reducing compliance burdens while allowing maximum flexibility. I have already given the hon. Gentleman an assurance that we will keep this under review until it is introduced in 2008. We will reflect on other proposals as and when they emerge in a
      754
      constant attempt to improve the legislation. No doubt the hon. Gentleman will make his own representations to me before 2008 and I look forward to hearing them.
      On a more minor point, the hon. Gentleman asked similar questions about Government amendment No. 161. It deals with the circumstances in which one lease comes to an end and a new one is granted. Substantially the same broad interpretation will apply to ensure that rent is not taken into account twice, so there is a relieving intention behind the amendment. As to other technical points, if the hon. Gentleman will allow me, I will respond to him in writing.
      Mr. Prisk: I am grateful to the Financial Secretary, but I hope that she can clarify one further point now. I asked about new clause 16(7), which states:
      "The other amendments made by this section are deemed always to have had effect."
      That sounds retrospective to me, so will the Financial Secretary confirm whether it is?
      Ruth Kelly: I can confirm that it is compatible with the Human Rights Act 1998 because it is a relieving measure. It has retrospective application, but, as it is a relieving measure, I do not think that anyone could possibly object to it. It is fully compatible with human rights legislation.
      Mr. Prisk: Given that it is retrospective, I want to register a small protest about legislation being introduced in this way. We all know that retrospective legislation often has unintended consequences. Will the Financial Secretary set out for us in writing—we have no explanatory notes—exactly how it will work and whom it will affect? I am concerned to ensure that people do not get caught out. In that process, we could minimise the number of people ending up not paying the tax that the Government feel is due.
      Ruth Kelly: I would be happy to set out for the hon. Gentleman exactly how it would apply in practice. I am sure that the provision will be widely welcomed in the industry. On that basis, I commend the Government new clauses to the House and I hope that the hon. Gentleman will not press his amendment.
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.

    New Clause 16

      CHARGEABLE CONSIDERATION
      '(1) In Schedule 3 to the Finance Act 2003 (c. 14) (transactions exempt from charge), in paragraph 4 (variation of testamentary dispositions etc) after sub-paragraph (2) insert—
      "(2A) Where the condition in sub-paragraph (2)(b) is not met, the chargeable consideration for the transaction is determined in accordance with paragraph 8A(2) of Schedule 4.".
      (2) Schedule 4 to that Act (stamp duty land tax: chargeable consideration) is amended as follows.
      (3) In paragraph 8 (debt as consideration), after sub-paragraph (1) insert—
      "(1A) Where—

      (a) debt is secured on the subject-matter of a land transaction immediately before and immediately after the transaction, and

      755

      (b) the rights or liabilities in relation to that debt of any party to the transaction are changed as a result of or in connection with the transaction,

      then for the purposes of this paragraph there is an assumption of that debt by the purchaser, and that assumption of debt constitutes chargeable consideration for the transaction.
      (1B) Where in a case in which sub-paragraph (1)(b) applies—

      (a) the debt assumed is or includes debt secured on the property forming the subject-matter of the transaction, and

      (b) immediately before the transaction there were two or more persons each holding an undivided share of that property, or there are two or more such persons immediately afterwards,

      the amount of secured debt assumed shall be determined as if the amount of that debt owed by each of those persons at a given time were the proportion of it corresponding to his undivided share of the property at that time.
      (1C) For the purposes of sub-paragraph (1B), in England and Wales and Northern Ireland each joint tenant of property is treated as holding an equal undivided share of it.".
      (4) In sub-paragraph (2) of that paragraph, for "sub-paragraph (1)" substitute "this paragraph".
      (5) After paragraph 8 insert—
      "Cases where conditions for exemption not fully met
      8A (1) Where a land transaction would be exempt from charge under paragraph 3A of Schedule 3 (assents and appropriations by personal representatives) but for sub-paragraph (2) of that paragraph (cases where person acquiring property gives consideration for it), the chargeable consideration for the transaction does not include the amount of any secured debt assumed.
      "Secured debt" has the same meaning as in that paragraph.
      (2) Where a land transaction would be exempt from charge under paragraph 4 of Schedule 3 (variation of testamentary dispositions etc) but for a failure to meet the condition in sub-paragraph (2)(b) of that paragraph (no consideration other than variation of another disposition), the chargeable consideration for the transaction does not include the making of any such variation as is mentioned in that sub-paragraph.".
      (6) The amendments made by subsections (3) and (4) apply in relation to any transaction of which the effective date (within the meaning of Part 4 of the Finance Act 2003) is on or after the day on which this act is passed.
      (7) The other amendments made by this section are deemed always to have had effect.'.—[Ruth Kelly.]
      Brought up, read the First and Second time, and added to the Bill.

    New Clause 2

      ACCESS FOR DISABLED PERSONS
      '(1) The following shall be inserted after section 29 of the Capital Allowances Act 2001—
      "29A Access for disabled persons
      This section applies to expenditure if a person carrying on a qualifying activity has incurred it in pursuance of a duty under section 21 of the Disability Discrimination Act 1995."
      (2) This section shall have effect in relation to expenditure incurred in relation to chargeable periods ending on or after 1st October 2004.'.—[Mr. Bacon.]
      Brought up, and read the First time.
      Mr. Bacon: I beg to move, That the clause be read a Second time.
      Madam Deputy Speaker (Sylvia Heal): With this it will be convenient to discuss the following:
      New clause 3—Expenses of disabled employees—
      '(1) The Income Tax (Earnings and Pensions) Act 2003 is amended as follows.
      (2) After section 203 (cash equivalent of benefit treated as earnings), insert—
      "203A Employment costs resulting from disability
      There shall be exempted from section 203 any benefit which satisfies each of the following conditions—

      (a) the benefit is provided to a disabled employee;

      (b) the main purpose of providing the benefit is to enable the employee to perform the duties of his employment;

      (c) the benefit consists in the provision of any equipment, service, or facilities;

      (d) the benefit is made available to the employer's employees generally on similar terms."

      (3) After section 336 (deductions for expenses, the general rule), insert—
      "336A Expenses of disabled employees
      Where an employee has a disability, a deduction from earnings is allowed for any amount incurred by him if its main purpose is to enable him to perform the duties of his employment."
      (4) This section shall apply for the year 2004–05 and subsequent years of assessment and shall be deemed to apply for the year 2003–04.'.
      New clause 4—Definition of disability—
      'In section 832 of the Taxes Act 1988, subsection (1), there shall be inserted at the appropriate place:
      "disability" and "disabled person" shall, where the context so admits, have the meanings given to them by section 1 of the Disability Discrimination Act 1995, and cognate expressions shall be construed accordingly…"'
      New clause 8—Expenditure incurred in improving accessibility for disabled persons—

      '(1) The Capital Allowances Act 2001 is amended as follows.

      (2) In section 23(2) after "section 29 (fire safety)", insert—"29A (disabled access)".

      (3) After section 29 insert—

      "29A Disabled access

      (1) This section applies to expenditure if a person carrying on a qualifying activity has incurred it in making adjustments within subsection (2) below to premises which he uses for the purposes of the qualifying activity.

      (2) The adjustments referred to in subsection (1) above are those specified in subsection (3) below which are or will be required to comply with section 21 of the Disability Discrimination Act 1995.

      (3) The specified adjustments are—

      (a) installation of ramps to facilitate either access to the premises or use of the premises by disabled persons, and

      (b) alterations to the premises to provide accessible toilets for disabled persons…"'

      Mr. Bacon: I thank the Economic Secretary for his earlier kind words. What he said was very generous, although I have absolutely no idea whether he is correct.
      These new clauses address a number of issues in the tax system faced by disabled people. They are essentially probing clauses designed to elucidate the Government's thinking in this important area.

      757
      New clause 2 would grant capital allowances on expenditure incurred by businesses in complying with their obligations under the Disability Discrimination Act 1995 to ease access to premises for disabled people. There is no doubt that the level of awareness of the needs of disabled people in the worlds of architecture and building design has grown significantly in recent years. For new building projects, it is often the case that careful thought and planning has been undertaken at the earliest stages in order properly to meet the needs of disabled people. None the less, it is also true that complying with the 1995 Act can impose significant costs on businesses, particularly in relation to older premises.
      New clause 2 amends the Capital Allowances Act 2001, and applies to expenditure by a person carrying on a qualifying activity who has incurred it in pursuance of a duty under section 21 of the Disability Discrimination Act 1995.
      New clause 3 recognises the extra costs disabled people incur in going to work. It would ensure that the tax system does not discriminate against disabled workers vis-à-vis their non-disabled colleagues.
      The test for a deduction of an expense incurred when carrying out one's employment has remained virtually unchanged since its introduction in 1853. The general rule is that a deduction from earnings is allowed for an amount if the employee is obliged to incur and pay it as holder of the employment, and the amount is incurred wholly, exclusively and necessarily in the performance of the duties of the employment. As a judge said 50 years ago, those words are
      "stringent and exacting: compliance with each and every one of them is obligatory if the benefit of the rule is to be claimed successfully".
      One of the main purposes of the Disability Discrimination Act 1995 is to ensure that disabled people are not discriminated against in their employment. Long before that legislation was enacted, there were—and still are—a range of exemptions from tax relating to disabled people's earnings from employment, focusing on matters such as home-to-work travel, adaptation of motor vehicles for business use, early retirement on ill-health grounds, and so forth.
      As a rule, people with disabilities need to spend more than those without in performing the same tasks. Where additional expense is incurred solely by reason of their disability, one would expect a tax-neutral effect. Whether such additional expense has to come out of their own pockets, or be paid or reimbursed by a sympathetic employer, the logical result should be that people with disabilities should either receive an expenses deduction for tax purposes, or should not be assessed on any employer subsidy as a benefit in kind.
      Therefore, new clause 3 would do two things. First, subsection (2) would exempt from tax any benefit in kind provided by an employer that consisted of equipment, services or facilities, the purpose of which was to enable the disabled employee to work. Its wording is loosely based on an existing set of regulations, the Income Tax (Benefits in Kind) (Exemption for Employment Costs Resulting from Disability) Regulations 2002/1596, which attempt to do much the same thing but which unfortunately are restricted to benefits that are provided under statutory
      758
      arrangements such as the access to work scheme. Secondly, subsection (3) would relax the restrictive rule governing tax deduction for employees' expenses where disabled employees spend their own money in order to be able to work.
      New clause 4 would bring the definitions of "disabled person" and "disability" in the tax legislation up to date by aligning them with the broad definition in the Disability Discrimination Act 1995. Many of the definitions of disability that are attached to tax reliefs, allowances and other forms of favourable treatment contained in the tax legislation are restrictive and outdated. The new clause seeks to introduce the more up-to-date and inclusive definition of "disability" into the tax legislation, bringing it into line with the modern thinking on disability in the Disability Discrimination Act 1995.
      Section 1 of that Act defines a "disabled person" as one with
      "a physical or mental impairment which has a substantial and long-term adverse effect on his ability to carry out normal day-to-day activities".
      There is statutory guidance to enable courts and tribunals to assess whether a person meets the requirements of the definition. The draft Disability Discrimination Bill, introduced at the end of last year as a Government initiative for the European year of disabled people, will in due course widen the definition still further. By contrast, where disability issues are dealt with in the tax legislation, disabled persons and disability are defined in such a way as to restrict the scope of the relief or the exemption being conferred, or are not defined at all, so as to leave scope for official discretion. In the former case, not all the people who could usefully benefit from the tax relief or the exemption in question are able to do so, because of the restrictiveness of the definition. In the latter case, access to the benefit or the exemption can become a lottery, depending on the attitude of the official charged with applying the legislation, particularly—as is often the case—when there is little or no departmental guidance.
      Both restrictive definitions and the absence of definitions are anachronistic and unnecessary in an era when we have the benefit of statutory definitions that recognise modern thinking on disability. Some definitions have survived intact for hundreds of years, such as the definition of "incapacitated person" in the Taxes Management Act 1970, which includes
      "any infant, person of unsound mind, lunatic, idiot, or insane person".
      With respect, I think the Treasury can probably do a little better than that.
      The Low Incomes Tax Reform Group, in its report on the issue, which was called "Disability in tax and related benefits: the case for a modern and coherent approach" and published in December 2003, recommends the adoption of the Disability Discrimination Act 1995 definition of "disability" and "disabled person" throughout the tax legislation.
      New clause 4 would enable the benefit of the tax reliefs and exemptions to be extended to all disabled people, and would provide guidance for officials charged with using their discretion to determine who is disabled and who should benefit from particular forms of tax-favoured treatment. It is unfair that some

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      disabled people should benefit and not others, simply because the statutory definitions are out of date, ineffective, or absent.
      In conclusion, the new clauses would recognise the special costs that can face both employers and employees in ensuring that disabled people can play a full part in the workplace and would also update the definitions of "disabled person" and "disability" for the purposes of tax legislation in a way that is almost certainly overdue.
      4.15 pm
      Mr. Laws: I want to speak to new clause 8, which is, I must confess, somewhat similar to the new clause 13 that we debated in the Standing Committee. On that occasion, the Financial Secretary responded on behalf of the Treasury and I indicated that some of her points were fair and reasonable. On reflection, however, I may have been too generous in acknowledging some of the hon. Lady's points so I want to take this additional opportunity and respond to them in relation to new clause 8.
      I remind Members who were not present during our previous debate on the issue that the new clause was drafted by the CBI and the Disability Rights Commission and enjoys the support of both bodies. It relates to the duties imposed by the Disability Discrimination Act 1995, which will begin on 1 October 2004, whereby providers of services to the public will need to take reasonable steps to facilitate disabled persons wishing to make use of those services.
      New clause 8 proposes that expenditure on ramps and accessible toilets for use by disabled persons be classified for tax purposes as expenditure on plant and machinery qualifying for relief as capital allowances. That would follow the established precedent of capital allowances being given for fire safety expenditure, as is currently the case.
      In Committee on 24 June, the Financial Secretary put several counter-arguments to the new clause that we were debating, to indicate that the Treasury was not willing to support that proposal. I shall briefly run through her arguments. Her first argument was that the new obligations relating to disability access will apply to all service providers whether in the public, private or voluntary sectors, so it could be seen as unfair to give special financial support only to private sector businesses. That argument is partly countered by the fact that there is an existing precedent in relation to fire safety expenditure: it is possible to use capital allowances even though fire safety expenditure obviously relates to entities that are not merely business entities, which would have to fund such provision differently.
      The DRC sent me a note raising several issues relating to what it described as the "spurious"—I hope it will not mind my quoting that word—arguments put by the Financial Secretary to counter our proposals. The DRC said:
      "while we'd like to see more/better funding support across the board we would point out that there are sources of funding available to the public sector/voluntary sector to support physical alterations to premises which businesses cannot access".
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      The commission helpfully sets out a series of areas where specific grants are made available—often through the Government—to help with disabled access. Many
      Members will already know about the large capital investment programme in new school buildings through the schools access initiative, designed to make school buildings disabled-accessible at very large cost. Those grants have been directly provided by the Government.
      In addition, local authorities often provide small grants for community groups and other local groups, to make their facilities disabled-accessible. Central Government provide grants to local authorities to facilitate physical access to polling stations, and other grants are available for both private and public bodies through the national lottery distribution fund, millennium funds and the Heritage Lottery Fund, which can be fruitful avenues for voluntary organisations and other groups.
      In other words, quite a number of alternative mechanisms are already available for the bodies that the Financial Secretary felt might be disadvantaged by the proposal. New clause 8 would provide a relief for businesses that do not benefit from that other Government support.
      The second point that the Financial Secretary made in arguing against such a new clause was that
      "it is clear that many of the adjustments needed to meet the requirements of the Disability Discrimination Act, including some of the most expensive adjustments, already qualify for tax relief as either a revenue expense, of through capital allowances."—[Official Report, Standing Committee A, 24 June 2004; c. 773.]
      Although that is a fair point, it is of limited relevance to new clause 8, because even the Financial Secretary was not trying to maintain that the existing reliefs relate to ramps and toilets in particular. Those are major items, which many organisations will need to purchase to make their premises disabled-accessible. Indeed, many Members of Parliament may discover that they need to make precisely those types of adjustment in the organisation of their own constituency offices. Many businesses will certainly want to make those adjustments.
      At the time, I thought that the third reason that the Financial Secretary gave for not pursuing these proposals was a hopeful sign, but on further investigation, I am not sure whether it is quite so promising as the nod and wink that she gave me reason to believe that she was giving. The third reason that she gave was that
      "we are considering the possibility of introducing such an allowance"
      to cover structural alterations
      "for most commercial buildings in the wider context of our ongoing"
      review of the
      "corporate tax regime."—[official Report, Standing Committee A, 24 June 2004; c. 773.]
      The Disability Rights Commission's response to that point is that
      "the timing of any such changes"
      to the corporate tax regime
      "will be past the symbolically important point when the new duties come into force."

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      That is obviously in a few months' time. It points out:
      "The incentive is needed now to maximise compliance by the Government's 2004 deadline … Moreover, it is likely that any such general allowance for expenditure on buildings would be at a rate similar to Industrial Buildings Allowance—currently 4 per cent. per annum."
      That would be too small to make any difference to small and medium-sized enterprises, which are likely not to have made the necessary adjustments to disabled access already. It is likely that larger entities have already allocated expenditure for those purposes. They may even have completed that expenditure.
      The final point that the Financial Secretary made on the issue was that the Department for Work and Pensions had discovered that cost was not a factor for many entities in making provision for disabled access. That may well be the case for the larger entities that have already undertaken a lot of those works and made the relevant expenditure, but it is not likely to be the case for many SMEs. The Financial Secretary indicated in Committee that it might be unfair to introduce a new tax allowance, which other entities could not have taken advantage of earlier, to facilitate conversion for disabled accessibility, but we must appreciate the fact that such an allowance could largely benefit the smaller businesses that are struggling to pay the cost of making their premises disabled-accessible. In other words, the allowance might turn out to be well targeted as a consequence of its late introduction, as it would probably affect particularly those businesses that are struggling to make such provision and that will find it most difficult financially to make those conversions.
      On reflection, I might have been a little generous by accepting some of the points that the Financial Secretary raised on 24 June. However, I understand that the Economic Secretary will respond to today's debate, so there is hope for us. Perhaps he will accept that his colleague's arguments were not entirely convincing and respond positively to some of the arguments that have been put forward by the Disability Rights Commission and the CBI—a powerful alliance of two bodies with special interest and expertise in the matter. In the light of comments on the Financial Secretary's arguments, I hope that the Economic Secretary will indicate that the Government will undertake a more constructive and positive approach.
      John Healey: I am not sure whether I will disappoint the hon. Member for Yeovil (Mr. Laws) or not—he will have to wait and see—but as he would expect, I am entirely as one with my hon. Friend the Financial Secretary. We take seriously the arguments and evidence put to us by the Disability Rights Commission. I hope that I can give him an indication of the consideration that we are giving to the cases that it and others put to us.
      The four Opposition new clauses relate to disability issues across the tax system. Labour's manifesto included a pledge to establish comprehensive and enforceable civil rights for disabled people, so I welcome the opportunity to reaffirm our strong commitment to those rights. I can also confirm that the Low Incomes Tax Reform Group, to which the hon. Member for South Norfolk (Mr. Bacon) referred, the Disability Rights Commission and the CBI are in detailed, continuing discussions with our officials on the range of
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      issues covered by the new clauses and the points raised by the hon. Members for Yeovil and for South Norfolk. I place on record our appreciation for the thoughtful contributions that those organisations are making to help us to assess the case for future policy changes.
      Given our strong commitment to the rights of disabled people and our support for them, we have no quarrel with the motivation behind the new clauses. However, we are not yet convinced that the specific changes to the tax system that they suggest would represent the best way of improving the rights of, and support for, disabled people.
      New clauses 2 and 8 would provide capital allowances for the costs that businesses might incur when making their premises reasonably accessible to disabled people. As the hon. Member for South Norfolk made clear, the requirement on service providers to make their premises reasonably accessible derives from the Disability Discrimination Act 1995, which was passed by the previous Government. At the time, that Act was an important step forward for disabled people's rights, and we have been able to build on it. The requirement comes into effect in October this year.
      New clauses 2 and 8 are similar in purpose to the new clauses 5 and 13 that were debated in Committee and subsequently withdrawn. However, new clause 2, which was moved by the hon. Member for South Norfolk, has a wider scope than those new clauses because its provisions are not limited to specific items of expenditure such as access ramps or accessible toilets. Our reasons for resisting it at this stage are compounded by our worry that such broad provisions could be manipulated and carry a high Exchequer cost. Additionally, as the provisions are broadly drawn, they could impose a significant compliance burden on taxpayers and the Inland Revenue, which would administer the scheme.
      Like the previous Government, we have consistently encouraged all businesses to make adjustments as early as possible, rather than waiting for the provisions in the 1995 Act to come into force in October 2004. Common sense would suggest that many would think it unfair to introduce allowances at such a late stage. That would be especially unfair to businesses that had already acted promptly in the interests of disabled people by promoting the access that they may need. Research commissioned jointly by the Disability Rights Commission and the Department for Work and Pensions in 2002 showed that 40 per cent. of providers had made adjustments. Only 15 per cent. of respondents said that they had plans to make further adjustments to comply with the Disability Discrimination Act 1995. The research found that the cost of making adjustments to comply with the Act tended to influence the manner and timing of the adjustments rather than whether they were made at all. We have therefore concluded, as my hon. Friend the Financial Secretary has made clear, that the changes to the capital allowances system proposed both today and on an earlier occasion would not confer a significant benefit.
      4.30 pm
      The research confirmed that many adjustments needed to meet the requirements of the Act, including some of the most expensive, already qualify for tax

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      relief, either as a revenue expense or through existing capital allowances. The cost of structural alterations to most commercial buildings is not covered by the capital allowances regime, but we are considering the introduction of allowances for commercial buildings in the wider context of our ongoing project to reform corporation tax.
      Mr. Laws: Will the Economic Secretary give way?
      John Healey: May I just make an observation about the points made by the hon. Gentleman? If he still wants to intervene, I shall give way. He is sharp in wanting to intervene, but perhaps he will be patient while I explain that the fire safety example that he gave does not give the lie to my general argument.
      Mr. Laws: The Economic Secretary suggested that there might be a change to the corporation tax regime that would provide relief for some of the expenditure that we have discussed. Surely, however, that would take effect too far into the future?
      John Healey: I cannot give the hon. Gentleman a time scale for the completion of the work or the decisions that will flow from it, but it is unlikely that we will have conclusions from the review or legislation in place by the October start date of the provisions of the Disability Discrimination Act.
      The new obligations under the Disability Discrimination Act will, as my hon. Friend the Financial Secretary has argued before, apply to all service providers, whether public, voluntary or private, so giving special financial support only to private businesses could be seen by other sectors as unfair. As I have just said, the example of fire safety cited by the hon. Member for Yeovil does not give the lie to the general argument. The list of grants, many of them modest—he used the phrase "quite a number"—available to some organisations does not undermine the argument against providing special treatment for the private sector in preference to other organisations that must meet the requirements of the Act.
      New clause 3 proposes further tax relief for disabled people for employment benefits and expenses. Under existing law, wherever equipment, facilities or services are used wholly, exclusively and necessarily in carrying out the duties of employment, there is no benefits charge where the employer provides the items in question. Where employees themselves pay the cost, there is a full deduction against earnings, so problems do not arise in those cases, as the hon. Member for South Norfolk acknowledged. Where equipment, services or facilities such as specially adapted wheelchairs or hearing aids are provided for disabled people for work purposes, but for which there is some private use at home, there is a general exemption. Beyond that, in June 2002 we introduced regulations—the hon. Gentleman referred to them—which ensure tax exemption for any benefits provided to disabled employees under any statutory arrangements, provided that the main purpose of the benefit is to enable the employee to perform the duties of an employment.
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      The hon. Gentleman made a parallel point when he said that the benefits exemption was too narrow because it was confined to provision under statutory arrangements. In our experience that is unlikely to be significant. As regards cases where benefits are not provided by employers under statutory arrangements, I should be glad to see any specific examples that he may have.
      Furthermore, as the hon. Gentleman mentioned, an employer can provide transport for disabled employees, and pay for or reimburse their transport costs to enable them to commute to and from work, without any tax charge. Where additional costs are a necessary part of a disabled employee's employment, he or she can already claim a deduction for those costs.
      To go beyond that would make it difficult to target the relief effectively and to devise an affordable scheme. The expenses rule proposed in the new clause could entail considerable costs and is likely not to be properly targeted at helping disabled employees with the additional employment expenses that they incur as a result of their disabilities. In summary, the existing provisions together provide a comprehensive benefits exemption and expenses relief, along the lines of the provisions set out in the new clause.
      Finally, new clause 4 proposes the use of the Disability Discrimination Act 1995 definition of disability across the tax Acts. At this stage I am not convinced that that is necessary or desirable. The insertion suggested into section 832 of the Income and Corporation Taxes Act 1988 would not override the existing definitions in use. It would apply only to the few provisions in which disability is not defined. I shall return to that in a moment.
      The hon. Member for South Norfolk mentioned the work of the Low Incomes Tax Reform Group and the report that it produced. That report gave examples of areas where there is a lack of explicit definition of disability, but many of the areas cited as examples, such as council tax or power of attorney, lie outside the Taxes Act and therefore would not be affected by the new clause.
      I am uneasy about the new clause. The DDA definition is not settled or certain at present. It allows exclusions, and as the hon. Gentleman acknowledged, the draft disability discrimination Bill proposes further changes to that definition. The main area of the Taxes Acts where the word "disability" is not currently defined is in relation to the taxation of certain payments from insurance policies. In some cases it is possible that a policyholder might receive less favourable treatment if the DDA definition were used.
      I hope that Opposition Members will accept that these are matters that we are discussing in detail with groups that are interested in representing disabled people or representing employers of disabled employees. I hope that hon. Members will feel that the debate has been a useful contribution to that process and that they will not press the new clauses to a vote.
      Mr. Bacon: I thank the Economic Secretary for that useful and detailed reply. I agree that the debate has been constructive, and I hope he will feel that our having raised these matters has enabled him to set out the Government's policy more fully. I join him in paying

      765
      tribute to the Low Incomes Tax Reform Group and to the Disability Rights Commission and the CBI for the important work that they are doing. I indicated that the new clauses were probing measures, and I hope that they have served their purpose. On that basis, I beg to ask leave to withdraw the motion.
      Motion and clause, by leave, withdrawn.

    New Clause 5

      AMENDMENT OF INDIVIDUAL SAVINGS ACCOUNT REGULATIONS 1998 (SI/1998/1870)
      '(1) The Individual Savings Account Regulations 1998 (SI/1998/1870) shall be amended as follows.
      (2) In paragraph (2) of Regulation 4—

      (a) the words "£7,000 for the years 1999–00 to 2005–06 and £5,000 for subsequent years," shall be replaced by "£7,001"; and

      (b) the words "£3,000 in the years 1999–00 to 2005–06 and £1,000 in subsequent years" shall be replaced by "£3,001".

      (3) In paragraph (2A) of Regulation 4, the words "£3,000 in the years 2001–02 to 2005–06, and £1,000 in subsequent years" shall be replaced by "£3,001".
      (4) In paragraph (2B) of Regulation 4, the words "£3,000 in the years 2001–02 to 2005–06, and £1,000 in subsequent years" shall be replaced by "£3,001".
      (5) In paragraph (3)(a) of Regulation 4, the words "£3,000 for the years 1999–00 to 2005–06, and £1,000 for subsequent years" shall be replaced by "£3,001".
      (6) In paragraph (2) of Regulation 7, after sub-paragraph (a) insert—
      "(aa) shares, not being shares in an investment trust, issued by a company wherever incorporated and traded on the market known as OFEX;".
      (7) In paragraph (5) of Regulation 7, after sub-paragraph (c) insert—
      "(d) that the securities are traded on the market known as OFEX.".'.—[Mr. Prisk.]
      Brought up, and read the First time.
      Mr. Prisk: I beg to move, That the clause be read a Second time.
      Madam Deputy Speaker: With this it will be convenient to discuss new clause 6—Tax credits for ISAs and PEPs—
      'Section 76(1)(a) of the Finance Act 1998 (c. 36) shall cease to have effect.'.
      Mr. Prisk: I begin by declaring that I have two individual savings accounts—sadly, I do not have any more than that—and that a member of my family works for the Financial Services Authority.
      New clause 5 seeks to highlight the Government's plans further to diminish the benefits of ISAs by reducing the tax-free limits for savers and to include investments through the Ofex market, which is a key source of funds for many of the UK's smallest ventures, in the ISA wrapper. As such, it is a probing measure that seeks to help savers and stem the loss of confidence in ISAs.
      The Government accept that Ofex securities should be included within the ISA tax-free wrapper, but they have unfortunately decided to defer that change for
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      nearly two years until April 2006. Ofex is a highly effective source of finance for our smallest enterprises. Indeed, it is specifically focused on the £500,000 to £5 million to £10 million range, and it is generally accepted as offering an excellent means by which to bridge the equity gap. It is therefore peculiar that, given the Government's stated commitment to closing that gap, the Treasury should wait for two years before acting.
      The second problem with that delay is that alternative investment market securities are already eligible, so there is a danger that a distortion could occur in the market and, indeed, in savers' investment decisions. Given that AIM securities tend to favour larger companies, the smallest enterprises might continue to lack funds, which the Government say that they want to encourage to be brought forward. Given the inclusion of AIM securities, why not include Ofex? Our smallest enterprises deserve the same chance of capital investment, so why wait?
      The other aspect of new clause 5 is the retention of the established tax-free limits for savers in ISAs. Saving is sadly in danger of becoming a lost habit in this country—the ratio for savings has halved since 1998, and net retail investment in funds last year was among the worst in the past decade. The Government's decision to reduce the tax-free limits from £7,000 to £5,000 on maxi ISAs and from £3,000 to £1,000 on cash ISAs will only make things worse.
      A recent survey by Invesco Perpetual shows that 35 per cent. of current equity investors will reconsider their investment, and 17 per cent., which is nearly one in five investors, may choose not to invest at all. Mr. Mike Webb, head of distribution for Invesco Perpetual, said:
      "Our research proves that people are angry and confused by the Government's planned changes. The Government needs to be clear on what it wants to convey to investors. It talks openly about people needing to provide for their future, yet it plans to take away the very thing—tax incentives—that encourages people to save in the first place."
      Mr. Webb is right.
      If saving is to be encouraged, the Government are sending out the wrong signals by cutting those limits. The result could be that the savings ratio falls still further, leaving future generations increasingly vulnerable to events. We now need a period of stability for savers prior to any review in 2006; in other words, the limits should remain as they are. After all, what credible alternatives are the Government offering? Can the Minister tell us, for example, why savers should commit themselves over the next two years to a savings product that the Government are running down? In the absence of a credible Government alternative, does not the Minister recognise that a two-year hiatus will only further erode people's willingness to save?
      4.45 pm
      The Government have committed themselves to a review in 2006, but what does that mean in practice? Will a review begin in 2006, or will the Government present their final decision in that year? If it is the latter, does not that further extend the delay? I hope that the Minister will be able clearly to set out, both for savers and for the financial services industry, exactly what the commitment means and when we can expect decisions and statements.

      767
      New clause 6 would reverse the Government's abolition of the 10 per cent. tax credit received by savers on their dividend payments. That would help current savers and future generations alike. In particular, it would ensure that all taxpayers, rich or poor, enjoyed the same incentives to save. I stress that this is a probing new clause.
      The tax credit originates from the advance corporation tax regime that the Chancellor abolished in 1997. Hon. Members will recall that the result of that decision was to slash £5 billion a year from the value of people's pensions and investments. That was, frankly, an act of daylight robbery that will cost millions of people thousands of pounds. What is worse, many of those people remain, even today, unaware of just how much the Chancellor has short-changed them. It was, and still is, the worst and most insidious of this Government's stealth taxes.
      When the Chancellor raided our savings and pensions in 1997, he also cut the dividend tax credit to 10 per cent. and the dividend income tax rate to 32.5 per cent. for higher rate taxpayers. Then, in the Finance Act 1998, he sought the abolition of the tax credit altogether, with effect from April this year. The net result, ironically, discriminates in favour of higher rate taxpayers over everyone else. The combined effect of the changes to the dividend tax credit and income tax rates strips away any tax incentive for basic rate taxpayers to invest in an equity-based ISA. Cash and bonds are still worth it, but not shares. Do not the Government believe that everyone who is trying to save should enjoy similar tax incentives? Why discriminate by precluding basic rate taxpayers from something that the richest in the land can enjoy? I hope that the Minister will be able to show us where in Labour's manifesto it says that Labour will provide a tax break for the few, not the many.
      Last year, when my party tabled a similar new clause, the Minister argued that the markets, not the Government's actions, were encouraging people to invest in anything but shares. Since then, the stock markets have improved, yet there is still a residual problem. The recent survey conducted by Invesco Perpetual found that 47 per cent. of equity ISA investors will be less likely to invest in those ISAs because of this abolition—nearly half of investors are turning away from equity ISAs. Indeed, 13 per cent. said that it will put them off saving altogether. As the PEP and ISA Managers Association and the Investment Management Association said in their recent paper of earlier this year,
      "ISAs are a successful and simple savings product and should be at the centre of the Government's strategy to encourage long-term savings. This is not the time to be undermining them."
      The Government like to claim that any tax benefits are small, with the average tax credit being around £25. In fact, the actual benefits will vary widely. The whole point of saving is that every pound counts, especially over the long term, and every time the incentives diminish, the savings habit declines. Is that the Government's intention, or an unintended consequence of their proposals? I hope that the Minister will be able to tell us.
      768
      Indeed, in total tax terms, the benefit of this abolition will be far from small for one organisation. The Treasury has failed to highlight the small fact that the Inland Revenue expects to save £200 million every year. That is £200 million that will be lost to savers. Another result of the abolition of this tax credit will be to skew savers towards cash and bonds, distorting the market and therefore distorting prices. Equally, some investors might be pushed towards cash-based and bond-based ISA products when an equity-based product might be far more suitable for their needs. The Government are rightly quick to condemn advice that encourages savers to choose inappropriate products, yet here we have a policy that could well have exactly that effect. Never mind mis-selling, this is mis-taxing, and I wonder who will police the Treasury. This is another example of the Government's meddling with the tax system distorting people's decisions and investments, to their own and the markets' detriment.
      The Conservative party believes that the halving of the savings ratio represents a dangerous trend, which the Government have at best neglected and at times encouraged. Savers have been short-changed by Labour, not least by the abolition of advance corporation tax. We believe that savers need certainty and encouragement, and we want to hear why the Government are intent on further eroding the incentives to savers in the absence of any credible alternative. The new clauses seek to encourage savers and to help small enterprises. I hope that the Government will be wise enough to think again on this, and I look forward to the Minister's reply.
      Ruth Kelly: The hon. Member for Hertford and Stortford (Mr. Prisk) has outlined the reasons behind his new clauses. The effect of his proposals would be to change the current secondary legislation, the regulations that govern investment in ISAs, through the Finance Bill and to reintroduce the 10 per cent. payable tax credit into the ISA.
      The effects of new clause 5 would be twofold. First, it aims to extend the maximum investment limits for an ISA from £7,000 to £7,001 indefinitely. It would also increase the maximum amount that could be invested in cash savings within an ISA to £3,001. The purpose of that would be to retain the current annual investment limits for an ISA. The ISA regulations currently provide for these to be reduced in April 2006. The second effect would be to allow ISA investors to invest directly in stocks and shares traded on Ofex. Although Ofex is regulated for certain purposes—such as market abuse and insider dealing law—it is not a recognised stock exchange for the purposes of the Inland Revenue. Investors are therefore currently excluded from directly holding shares in companies traded on it within their ISA.
      New clause 6 aims to reintroduce the 10 per cent. payable tax credit into the PEP and ISA regime. This credit was, until April this year, paid on top of UK dividends received on investments held in a PEP or ISA. I should like to cover each of these proposals separately, as each raises quite different issues. I shall deal first with the ISA investment limits. ISAs are the Government's primary vehicle for tax-free savings outside pensions. They have helped to make saving easier for ordinary investors. We do not believe that amending the ISA

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      limits in the way the hon. Gentleman suggests would be appropriate at this stage, for the reasons that I shall set out.
      When the ISA limits were first announced in the Budget in 1998, we made it clear that ISAs had two key objectives. The first was to develop and extend the savings habit. The second was to ensure that tax relief on savings was more fairly distributed. The aim was to rebalance the tax benefits provided through the PEP and TESSA, and to focus more on encouraging non-savers to start saving and those who saved little to save more. To achieve that, the maximum limits for investment were set at £5,000, with a maximum of £1,000 in cash savings, but for the first year those limits were increased to £7,000 and £3,000 respectively, to encourage take-up and to smooth the transition to the ISA. Those higher limits were subsequently retained until 6 April 2006, which is more or less two years from now. I put it to the hon. Gentleman that those limits are extremely generous: they have allowed savers to build up very substantial sums in savings, free of tax, as the amounts that they subscribe to the ISA accumulate year on year. Therefore, we need to keep the limits under review, to ensure that the ISA is still achieving its objectives.
      The ISA has already started to change savings habits. Fifteen million individuals have invested in an ISA account, saving around £130 billion—one in three of the adult population are saving in an ISA, which is a far greater number than ever saved in a PEP or TESSA. The ISA has also been extremely successful in attracting individuals from groups who were previously underrepresented in the PEP and TESSA. Around one in five ISA savers, for example, are from lower-income groups, compared with one in seven who had either a TESSA or PEP. Similarly, the number of people under the age of 25 with an ISA is more than double the number who had either a TESSA or PEP.
      We are not complacent, however. Of course, we continue to keep all savings incentives under review, which is one reason why we are piloting the savings gateway scheme, which aims to provide more effective savings incentives to those on low incomes, who benefit less from the tax incentives provided through an ISA. It is also why, for example, we have developed the child trust fund, to provide children with the financial education that they need to understand their savings options, and to ensure that in the future, all children have some form of financial asset available to them at the age of 18—
      Mr. Prisk: Will the Financial Secretary give way?
      Ruth Kelly: Before I give way to the hon. Gentleman, I urge him to consider that there are two years to run before the ISA limits are due to change. We announced the higher level as a transitionary measure to ensure the success of the ISA and to encourage people to save. We will, of course, continue to review the ISA limits. We have made no announcements on that, subject, of course, to the 10-year guarantee provided by the Chancellor that savers should benefit from tax relief on up to £5,000 in savings each year until at least 2009.
      Mr. Prisk: Why would a saver wish to invest in a product to which the Government seem to have no commitment over the next two years? Does not the
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      Financial Secretary understand that if an individual is trying to save for the next five, 10 or 15 years, the knowledge that that is a product in which the Government seem to have little confidence, because they are diminishing its effect, leaves open the question: why would one bother? Of course, that would further lower the savings ratio.
      Ruth Kelly: The hon. Gentleman has a perverse view of the effects of the Chancellor's announcements. In fact, going back to the introduction of the ISAs, the higher limit was introduced purely as a first-year measure to encourage take-up in the initial year. The next positive announcement made by the Chancellor was to extend that until April 2006. We have not yet commented on what we will do after that, although, of course, we keep the limits under review. As the ISA regulations stand, however, they are due to end in April 2006.
      Mr. Prisk: Will the Financial Secretary give way?
      Ruth Kelly: I give way to the hon. Gentleman, but I have not yet finished covering his first point.
      Mr. Prisk: I am keen to try to draw out the full detail. What I am concerned about is the transition period. Given that in the past few years, under this Government, the savings ratio has fallen, does this not simply compound the existing problem? I could understand it if the savings ratio were booming—there might be an argument at that point. Given that it is falling, however, how can she do it?
      Ruth Kelly: The hon. Gentleman may have noticed that I had some debate with the right hon. Member for West Dorset (Mr. Letwin) last night about the relevance of the savings ratio as an indication of long-term savings in this country. I would argue that it was artificially high for periods during the late 1980s, as inflation was high: people were retrenching their finances, and saving as a precautionary measure in those circumstances. If we consider the Bank of England analysis of the savings ratio adjusted for inflation, we have a significantly higher savings ratio now than we have had historically. Of course, we are not complacent, and millions of people are under-saving for their retirement. That is why we have introduced our informed choice strategy, alongside a new suite of Sandler stakeholder products. We could have a long debate about savings now, but perhaps you will agree, Madam Deputy Speaker, that we should focus on the amendments and new clauses under consideration today.
      Of course, we have a commitment to the ISA. We have made it absolutely clear that there is a 10-year guarantee on ISAs. Savers can benefit from tax relief on up to £5,000 in savings, each year, until 2009. We are committed, on an annual basis, to reviewing the tax reliefs, to make sure that the product remains attractive and meets the underlying objectives, which I set out at the beginning of my comments: to provide an attractive savings environment while ensuring that tax relief is more fairly distributed among all taxpayers. While we are considering the position with respect to ISAs, we are also encouraging savings in a number of other ways that I have already described, including the savings gateway

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      and the child trust fund. We shall continue to test our measures against the objectives that they are designed to meet.
      5 pm
      The hon. Gentleman is correct in his claim that ISA investors cannot hold stocks or shares traded on Ofex, but he is not correct about AIM. It is not a registered exchange, and therefore does not meet the criteria either. ISA investors who choose to invest directly in stocks or shares are limited to those listed on a recognised stock exchange. There are good reasons for that. The ISA is by its nature aimed at the less sophisticated investor. These are individuals who historically would not have considered investing in stocks or shares. It is only right that we initially encourage people to invest in products that are regulated in a way that gives investors an appropriate level of protection. That is what the UK listing rules aim to achieve. Similar aims apply to recognised stock exchanges worldwide. Other markets that are not recognised stock exchanges are not always subject to such requirements. For individuals who wish to invest directly in stocks and shares, we believe that it is still right to restrict investments to stocks and shares quoted on a recognised stock exchange.
      Mr. Flight: If the Financial Secretary believes in what she has just said, why is she arguing in a different context that no such investment restrictions should be placed on the same individuals' stakeholder pensions?
      Ruth Kelly: That is probably what caused the confusion in the mind of the hon. Member for Hertford and Stortford, because we are liberalising the pensions regime. We had a long discussion in Committee about why that was appropriate. I do not intend to repeat all the arguments that we had then about why ISAs aimed at retail investors should be treated differently. The hon. Gentleman has had sufficient opportunity to rehearse those arguments.
      It would not be desirable to add Ofex to the ISA without considering the wider implications and ensuring that fair treatment is given to all markets. Let me give a couple of examples. First, in the light of EU requirements, we could not add an unrecognised market in the UK without extending the same treatment to other unrecognised UK markets, and potentially to all similar markets in the EU including those in the new member states. Indeed, there might be pressure for the extension to be made worldwide. We are talking about a fundamentally different proposition in respect of ISAs. Secondly, unlisted companies traded on markets that are not recognised stock exchanges also potentially benefit from a different range of tax incentive schemes to encourage wider investment. It is surely only right for us to consider whether they should continue to benefit from those schemes before giving investors in those companies access to tax benefits available only for investments listed on recognised stock exchanges.
      Again, we shall continue to keep the savings incentives provided through the tax system under review, especially in the light of wider developments in
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      the savings and investments arena; but on balance we think it inappropriate to make the changes proposed here without proper consideration of all the wider factors.
      The 10 per cent. payable tax credit was removed for ISA purposes in April 2004. It was abolished more generally in 1999 as part of our wider corporation tax reforms. I understand that there is a heated debate in this place about the merits of those reforms, but as the hon. Gentleman knows, they were aimed at removing a major distortion in the tax system which encouraged companies to pay out their profits as dividends rather than retaining them for reinvestment in the business. The intention was to create a more profitable UK business sector over the longer term through productive investment, and more wealth for the UK economy and investors as a whole.
      When the retention of the tax credit for the ISA and PEP regimes was announced in March 1998, the Chancellor made it clear that it was only a transitional measure—for a period of five years, up to 5 April 2004— to give investors time to adjust their portfolios. Outside the PEP and ISA, only a non-taxpayer would have benefited from the payable tax credit; but non-taxpayers investing in shares outside an ISA or PEP have not had the benefit of the tax credit since 1999.
      The payable tax credit was paid to all ISA investors, whether they were higher rate, basic rate, starting rate or non-taxpayers, at a cost to the Exchequer of around £250 million a year. The withdrawal of payable tax credits for ISAs and PEPs simply means that an additional payment is no longer being made—an additional payment that mainly benefited higher rate taxpayers and people with a lot of capital to invest.
      The change does not affect all ISA savers. Of the 15 million people who have saved through ISAs since 1999, only 6 million could be affected by the change, and that is if the ISA stocks and shares investment that they hold provides income through dividend payments. In addition, we think that around 1.6 million PEP investors may be affected.
      I accept that there has been a lot of concern about the impact on basic rate and lower rate taxpayers and non-taxpayers but, as we made clear in the debate last year, the average payable tax credit received each year per person was worth only £25, a fact to which the hon. Gentleman referred. In reality, the vast majority of ISA investors saw far less than that. Over half of the investors benefited by less than £10 a year, and two thirds benefited by less than £20 a year.
      Only 3 per cent. of basic rate taxpayers investing in shares within an ISA will have their tax benefits reduced by more than £100. Those are investors who have taken advantage of the ISA investment limits to build up high levels of tax-free saving and who have already benefited from the additional generosity of the payable tax credit over the past five years. All investors, however, including those holding shares through ISAs and PEPs, should benefit from the improved long-term company performance resulting from the 1999 corporation tax reforms.
      I do not think that the new clauses are appropriate, necessary or desirable. I ask hon. Members to reject them.
      Mr. Andrew Mitchell: I draw the House's attention to my interests, which appear in the Register of Members' Interests.
      I support the new clause so ably introduced by my hon. Friend the Member for Hertford and Stortford (Mr. Prisk). As he rightly said, it is clearly a probing measure. It is designed not to increase the limits on the financial instruments by £1 but to test the Government's view on these important matters.
      I was struck by the fact that the Financial Secretary quoted Government comments in 1998 and spoke of the importance that the Government said should be attached to—I think I quote her exactly—getting the savings habit. She said that the Government wanted to send some signals about saving in the measures that they introduced in that year. All I can say is that I believe that the Government, in the whole area of savings, which are important to all of us in our individual lives, have shown extraordinary complacency in the way in which they have allowed their policies on savings to develop.
      The Government certainly mouth the mantra of saving. We have had lots of new policies, new initiatives and an unbelievable number of consultations but, when the savings ratio is at an all-time low, it is clear that the Government pay little attention, if any, to the serious risks for all of us in the lack of savings in our economy—risks that do not pertain hugely to the highest earners in the land but very much pertain to those in middle Britain, the many ordinary people whose savings are now so low and whose security in old age will be at great risk as a result.
      The Government's attitude to savings is epitomised by their response to the new clauses. How have we got ourselves into this dreadful position with savings? The Chancellor of the Exchequer is, rightly, desperate to maintain the strong economy, but it is underpinned by consumption, a housing boom, enormous debt, which the shadow Chancellor set out in the House last night, and a massive Government job-creation scheme. As a result, the Chancellor has no serious intention of encouraging people to save, because to do so would undermine the nature of the economy as it is today. He wants to encourage people to save like he wants a hole in the head. That is extremely dangerous for our future, which is why I want to detain the House very briefly on the new clauses. They relate to one of the most important aspects of the Bill, which is why I am so pleased that my hon. Friends decided to move them.
      I remind the House of the savings climate in 1997, when the Government came to power. We had expanding tax-exempt special savings accounts and personal equity plans, which this Government re-branded as individual savings accounts. The intellectual climate was such that the Secretary of State with responsibility for such matters introduced "pension plus", which was designed to encourage a massive boost in savings throughout the country. I remind the Financial Secretary that in those days Britain had more savings through funded pensions than the whole of the rest of the European Union. Many more people owned TESSAs and PEPs than are saving in their equivalent today.
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      Savings have become ever more necessary for old age. People no longer retire at the age of 65 to a pair of slippers and entry into the ante-room of the afterlife. People now live and work for much longer than their parents and grandparents ever did. Of course, the old age of many who are retiring now is underpinned by defined benefit schemes—company pensions—that were built up in the good times. That is not the case today, as we all know so well.
      The problem that we all face with our savings is immense. Although the Government are not wholly responsible for the scale of the problem, the £5 billion per annum raid on pension funds certainly has not helped, as my hon. Friend the Member for Hertford and Stortford said. It has wiped billions of pounds off the value of pension funds, and in the case of many companies it has been coupled with the demise of the defined benefit scheme, which benefited many people in their retirement. The stakeholder pension was a flop, and the pension credit scheme is stark raving bonkers. Under the terms of that scheme, some 80 per cent. of people will be dealt with through a means-tested approach. It has fundamentally undermined the savings—
      Madam Deputy Speaker: Order. I hope that the hon. Gentleman will relate his remarks to the new clause under discussion.
      Mr. Mitchell: I certainly will, Madam Deputy Speaker, but I just wanted to place the new clause in the context of the dire complacency that the Government have shown in all areas of saving.
      When the Government came to power, TESSAs were a very important savings instrument. Through PEPs, one could save £12,000 per annum but, as the Financial Secretary said, this Government have reduced the savings level to £7,000 per annum. Now, it is being reduced to £5,000 per annum. What sort of signal does that send? As the Financial Secretary will doubtless appreciate, over recent years and in a falling stock market environment, the nature of ISAs has saved the Government tax, because capital gains losses have not been reclaimable from the Inland Revenue.
      I remind the Financial Secretary of what the polls and industry have themselves said about the measures that she proposes to introduce. Research conducted by YouGov reveals that once the tax credit on dividends paid out by shares held in an equity ISA is withdrawn, almost half of all equity ISA investors will be less likely to invest in them. One in eight ISA investors say that they will probably not invest any more. Tony Vine-Lott, director general of the PEP and ISA Managers Association, said:
      "ISAs have proved the most popular savings vehicle this Government has introduced, and now form a key part of day-today retirement savings for millions of people. To ensure the continued success of the ISA scheme, we urge the Chancellor to drop his plans to abolish the ISA dividend tax credit and the reduction in ISA subscription limits."
      Furthermore, the Skipton building society said that 80 per cent. of savers questioned think it wrong to cut the tax-free savings limits for cash mini-ISAs from April 2006. Some 45 per cent. said that that would put people off saving. Meanwhile, the Government want to

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      promote stakeholder products and the child trust fund. TESSA customers said that the tax-free element of that account had been a big draw.
      5.15 pm
      Figures based on data retrieved from the Inland Revenue website covering the financial years from 1999—2000 to 2002—03 show that subscriptions to maxi-ISAs have declined by 40 per cent. Moreover, the average subscription has declined from £4,620 to £3,890—a fall of almost 16 per cent. Average subscriptions in mini-ISAs of stocks and shares—often used by the lower-income families about whom the Chancellor is so concerned—have fallen from £1,240 in 1999 to £1,070 in 2002.
      Those figures should greatly distress the Government, given that, during the financial year 2000–01, 52 per cent. of mini-ISAs in stocks and shares were subscribed to by individuals with an income of £10,000 or less.
      I urge the Financial Secretary to repent of this great mistake in the signals that she sends to people about the importance of saving. I urge her to say clearly what she hinted at, in a slightly backhanded way, in response to my hon. Friend the Member for Hertford and Stortford, and to make it clear that the Government have every intention of regularly increasing the level—rather than reducing it from £7,000—to send the clear signal that we need to increase the amount that we save throughout society.
      If the Financial Secretary does not do that, when the Government's epitaph is finally written, the fact that they were asleep when this country faced a massive savings crisis will be towards the top of their charge sheet. She must think again and send a clear signal that far from reducing the levels of saving one can make through this device, she will increase them significantly.
      Mr. Prisk: We have had a useful debate and my hon. Friend the Member for Sutton Coldfield (Mr. Mitchell) has demonstrated his expertise on the subject.
      The Minister's response, sadly, offered no hope to the ordinary saver. I note her remarks on Ofex and I hope that she will reflect on the points that have been raised. Many hon. Members will be disappointed by the Government's failure to realise that the halving of the savings ratio is storing up real problems for the future.
      On tax limits, the measure may well have been temporary when it was introduced, but any self-respecting Government would have responded more effectively to the situation before them and not to their own bank balance. As for the abolition of tax credits, is it not peculiar, Madam Deputy Speaker, that a Labour Minister should proudly promote a policy that discriminates against basic rate taxpayers, and does so—not as I meekly suggested—for a £200 million benefit to the Treasury, but for £250 million? I hope that ordinary basic rate savers will know where their money has gone.
      I said earlier that these were probing new clauses and I hope that where the Government and the Opposition stand has now been put on the record, so I beg to ask leave to withdraw the motion.
      Motion and clause, by leave, withdrawn.

    New Clause 7

      APPLICATION OF SECTIONS 298 TO 301
      'Sections 298 to 301 above shall apply to situations where a promoter sells or markets a scheme; and in this section, "Scheme" means a notifiable proposal or notifiable arrangements.'.—[Mr. Flight.]
      Brought up, and read the First time.
      Mr. Flight: I beg to move, That the clause be read a Second time.
      Madam Deputy Speaker: With this it will be convenient to discuss the following amendments:
      No. 39, in page 255, line 22 [Clause 300], leave out 'the prescribed period' and insert 'thirty days'.
      No. 40, in page 255, line 31, leave out 'the prescribed period' and insert 'thirty days'.
      No. 42, in page 259, line 12 [Clause 309], at end insert—
      '(2A) Regulations made by the Treasury or the Board under this Part may provide for a threshold below which arrangements shall not be notifiable arrangements under section 298(1).'.
      Government amendment No. 222.
      Mr. Flight: There has been a great deal of discussion in the media and important lawyers have written to the Treasury and the Inland Revenue about the new regime for the reporting of tax avoidance schemes. The Paymaster General has responded to a significant number of the issues raised and Conservative Members are pleased that she has done so in the interests of the British economy.
      There remains, however, a central unresolved issue, which we call the dividing line. There is pretty much unanimous agreement that a regime requiring the disclosure of tax avoidance schemes that are being marketed is a sensible measure both as a deterrent and in order to make the Inland Revenue more actively aware of what is going on. Without a dividing line, though, and as a result of the drafting of the provisions, it is unfortunately probable that in order to protect themselves, large numbers of company accountants will feel obliged to report normal tax planning circumstances. The money that the Government are budgeting for the task and the numbers of extra staff employed at the Revenue will be wholly inadequate to cope with the level of reporting. Indeed, the Revenue will be snowed under and yet another burden will have been placed on British business.
      The Government generally and the Paymaster General in Committee specifically referred to schemes, and the understanding of the population at large is that the target of the new disclosure regime is widely marketed tax avoidance schemes. However, the current drafting is such that the schemes will operate much more widely than should be intended, and uncertainty and additional compliance burdens will be created.
      New clause 7 is designed to clarify and confirm the focus of the new rules on the marketing of avoidance schemes—hence the crucial dividing line between reportable schemes and non-reportable everyday bespoke tax advice. In Committee debates, I said that I hoped that the arrangements were intended to apply to

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      promoters of schemes and not, for example, to tax advice in the normal course of business or to takeover activities, which always require tax advice.
      The direct tax disclosure proposals as they stand have been changed marginally as a result of the Government's amendments, and the regulations to implement the rules framework will be amended further in the light of the Paymaster General's recent press release. However, what remain are legislation and a set of rules that still have an uncertain reach—and uncertainty is not what a tax system should be based on. Accountants want to comply with the rules but, as currently drafted, the rules are bound to lead to excessive disclosure, which would be counterproductive for the Inland Revenue as well as for commerce.
      The new clause is thus designed to ensure greater certainty in the application of the rules to everyday client-adviser situations and to bespoke advice coming from continuing and continuous business arrangements. As I have already explained, when it comes to takeovers, it is inevitable that commercial arrangements will change rapidly and frequently as the deal is worked on. A tax input is necessary and a tax can be either a cost or a benefit of the deal, which is factored into the price. The advice will be normal everyday tax planning advice designed to ensure that those involved understand the tax consequences of what they have in mind and that they take advantage of the basic rights of taxpayers to minimise their tax liabilities within the law. It is crucial to get rid of uncertainty; otherwise, advisers, their clients and the Inland Revenue will waste a lot of time over disclosures that surely are not required. That will help no one, least of all the Revenue.
      It is notable that the House of Lords Select Committee on Economic Affairs made exactly those points about the Government's proposals. It stated that it was
      "not convinced that the legislation as it stands has been sufficiently thought through or exposed for serious consultation with those who will have to deal with its consequences … We have seen the good results which such consultation has produced in the case of the Government's measures to simplify the taxation of pensions. We would like to have seen something along the same lines for some at least of the revenue protection measures."
      In its conclusions, the Committee stated that
      "there is a need to avoid the risk of over-reporting to ensure that taxpayers and their advisers do not report ordinary tax planning arrangements … We have sympathy with the view expressed to us that the primary legislation and the regulations ought to be worded sufficiently tightly to put matters beyond doubt and that the function of departmental guidance is to elucidate rather than to make"
      secondary market rules.
      I hope that the Paymaster General will tell the House that it is her intent that the winnowing process of the regulations and, ultimately, the Revenue guidance will mean that marketed tax avoidance schemes are reported. However, tax law should not be run by Revenue fiat: it is wrong in principle that a law, as drafted, should not be clear.
      The five-day time limit has been debated previously. It is obvious that there is no problem in reporting within five days avoidance schemes that are being marketed, and it is equally obvious that it is entirely impractical for the general run of tax advice to be reported in the same period. Moreover, the latter is a continuing process.
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      In addition, will the Paymaster General give an assurance that the voluntary sector will be excluded from the scope of the regulations? A growing number of charities and similar organisations offer advice on tax or tax credits to people on low incomes, on a pro-bono basis. The advice given by such bodies is not generally of the sort that would constitute avoidance schemes, but it is a way to help people to make the best of their opportunities. It often consists of simple advice to help a couple to structure their tax position to their best advantage.
      The draft regulations focus on avoidance schemes rather than ordinary tax planning, and the draft guidance notes give some comfort. However, the difference at issue is the same as that between the business and marketing of tax avoidance schemes and the general giving of taxation advice in the normal run of tax planning.
      We must have a clear dividing line in these matters. It is one of the major outstanding issues for the legal and accounting professions, and for much of business. If we do not get a clear dividing line, there will be huge problems for the Inland Revenue, and business will be faced with quite unnecessary compliance burdens.
      I hope that the Paymaster General will be able to assure us that she has eventually made up her mind about the dividing line. If she has not, we will press the amendment on this major issue to a vote.
      Mr. Laws: I want to speak to amendments Nos. 39, 40 and 42. To some extent, I echo the comments of the hon. Member for Arundel and South Downs (Mr. Flight). One advantage for us in our review of this year's Finance Bill is that we have been able to study the report from the House of Lords Select Committee on Economic Affairs, to which the hon. Gentleman referred. It goes into some detail on some prominent aspects of the Bill, especially those that have been controversial with businesses and tax practitioners. Having served on the Treasury Committee, I am not convinced that it has been able in the past to give enough attention to specific tax measures, as opposed to the macro-economic impact of Budgets. Therefore, it has not been able to inform the debates that we have in this place, especially by taking evidence from outside bodies. For that reason, I welcome the fact that the House of Lords Committee has again prepared a report on the Finance Bill and I hope that we shall be able to learn from some of its assessments, often made by people with much expertise in the area who have considered the issues in a non-party political and non-partisan way.
      5.30 pm
      The House of Lords Committee's report echoes to a large extent the support in this place and outside for the broad thrust of the Government's proposals on tax avoidance, especially the early notification of tax avoidance schemes and, in particular, those that are widely marketed. In paragraph 19 on page 15, the Committee states:
      "We wholeheartedly support the objectives of this draft legislation when applied to contrived schemes of artificial avoidance, and we have focused on matters that might assist in its practical application."

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      The Committee goes on to distinguish—as have our debates today—the artificial contrived schemes, which are marketed to large numbers of counterparties, from the bespoke schemes, of which there are many more.
      Dawn Primarolo: Will the hon. Gentleman explain to the House the difference between a bespoke scheme that saves one taxpayer £300 million that they should have paid, and a marketed scheme that is sold to hundreds of thousands and also costs the Exchequer £300 million? Both involve a tax loss through avoidance, and that is what we should deal with.
      Mr. Laws: I agree with the Paymaster General about the potential tax loss. However, we need to distinguish between the two types of tax planning activity—schemes that are widely marketed, about which the Inland Revenue can be contacted and the schemes registered, and the more detailed tax advice that most tax accountants would not even consider constituted a scheme. Such tax advice may also be provided by a number of different entities within one group at the same time, and the practical steps that would have to be taken to report that information to the Inland Revenue could cause problems.
      Dawn Primarolo: I must press the hon. Gentleman on the issue, because he did not answer my question. If bespoke advice to one taxpayer saves them £300 million through avoidance that they should not have saved, why should not that bespoke scheme be notified to the Revenue?
      Mr. Laws: In terms of the practical application and the compliance cost, there is a material difference between artificial schemes that can be reported and cover tax advice given to many entities at the same time, and tax advice that is given to individual companies when dealing with their day-to-day affairs and which even the Paymaster General might agree did not constitute a "scheme".
      Dawn Primarolo: In that case, does the hon. Gentleman accept that those highly paid, highly qualified and intelligent tax advisers and accountants know full well that the advice they give will be used to avoid tax when it should not be avoided? Therefore, they would know the difference between a bespoke tax avoidance scheme and a bespoke tax planning scheme that would be within the rules.
      Mr. Laws: I do not want to disappoint the Paymaster General, but I genuinely do not believe that it is quite that simple. Like most tax practitioners, I think there is a spectrum—from actively marketed contrived schemes to advice given by tax practitioners in the ordinary course of events.
      Our amendments address two practical issues that are dealt with in the House of Lords report. The first is whether there should be a requirement for a different reporting period for individual pieces of tax advice—perhaps the Paymaster General would prefer me to call them that rather than bespoke schemes, which carries the sense that they are indeed schemes—in contrast to
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      that for the artificial and marketed schemes. The second issue is whether there should be a de minimis limit in order to reduce compliance costs.
      Despite the Paymaster General's comments in Committee and in this debate, she has failed to convince not only many professional bodies and individual accountancy firms, which may worry her rather less, but a cross-party House of Lords Committee that has given the issue careful deliberation, no doubt bearing in mind the points that she has made. As the hon. Member for Arundel and South Downs noted earlier, the Committee's conclusion was that although it accepted the proposition that five days was long enough for "prepackaged schemes", it had sympathy for the view that there were likely to be more complex commercial relationships where
      "five days is too short a period in which to determine whether or not a report is due".
      The Committee noted that, given its focus on ease of administration in keeping down the compliance costs of both sides:
      "We recommend that consideration be given to adopting a 30day time limit in respect of notifications under clauses 292 (1) and (3) of the Finance Bill".
      The Committee also referred to the evidence given by John Whiting of PricewaterhouseCoopers. He commented:
      "It is noticeable that the Inland Revenue, whilst requiring disclosure in five days"—
      in relation to this type of tax advice—
      "is then allowed 30 days to simply register the item and return with a number for the scheme."
      The practical implications of such deadlines for that type of tax advice were set out in a letter from Grant Thornton, the tax accountants, which I am sure that the Paymaster General has seen and which describes from Grant Thornton's perspective some of the practicalities in reporting that information and how it intends to handle the process, highlighting some of the steps it will need to take. Grant Thornton's evidence makes it clear that the marketed schemes are not an issue; the material for such schemes should be at hand and there should be no difficulty in notification. The letter states:
      "Grant Thornton intends to make notifications"—
      of the individual advice—
      "on a centralised basis. This should be of benefit to the Inland Revenue as it should avoid duplication and our submissions should be consistent in nature. However, with offices in 34 locations, the gathering, filtering, collation and summarisation of information within the five-day timescale will be virtually impossible to achieve. If we make each office responsible for its own notifications, then the Inland Revenue's Avoidance Intelligence Unit could potentially be swamped with duplicated notifications. A timescale of 30 days would be more realistic and would be in line with many other time limits for providing information".
      When we consider how such information is likely to be reported and filtered in practice, we can see that a five-day deadline would be a rapid turnaround. If the Government insist on keeping to that deadline, they may receive information in much greater quantities, much less effectively filtered and from a number of different locations.

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      I understand the Paymaster General's concern about extending the notification period, thus providing an opportunity for tax avoidance. I hope that she will appreciate that that concern must be balanced by an understanding of the practicalities that many tax accountants will face in the circumstances and that, therefore, she will at least reflect on the deliberations of the House of Lords Committee even if she considers that tax practitioners have a commercial interest in amending the legislation in this way.
      The second issue that I want to touch on is whether a de minimis threshold should be established. The House of Lords Committee discussed that issue and put it to the Inland Revenue officials who gave evidence to it. At paragraph 41, it says:
      "The Revenue had practical objections to both the suggested measures for a de minimis rule"
      in respect of the possible tax avoidance or the fees that would be charged. It says that the Inland Revenue
      "anticipated that promoters 'might argue that they would not know with any certainty how much tax was at stake when their scheme was used by a particular taxpayer.' A fees-based test was ruled out because 'it would not be straightforward to isolate fees for a particular tax scheme from fees for general tax advice'."
      I do not want to go into too much detail, as it is already outlined in the House of Lords Economic Affairs Committee report, but that Committee has also had the benefit, which we have not, of taking evidence from the United States Internal Revenue Service and hearing about its experience of early declaration and notification and using a de minimis rule. The House of Lords Committee points out that three of the five filters used for notification in the US include a de minimis element. At paragraph 48, on the basis of its deliberations about how such matters work in the United States of America, it rejects the idea that a de minimis limit would be unworkable. Indeed, it says:
      "We accept the argument that setting a de minimis threshold could serve significantly to reduce compliance costs and, in the light of the US IRS evidence to us, we therefore recommend that further consideration be given to adopting a de minimis limit for the reporting of individual schemes."
      Both those matters are not straightforward for the Treasury and concerns have been raised about whether tax avoidance could occur while individual tax measures are being reported, but I hope that the Paymaster General will accept that countervailing concerns have been expressed about the burdens that could be imposed and about requiring a short reporting period for detailed tax advice while the Inland Revenue appears to allow itself much longer to respond to its counterparties. If the Paymaster General is unable to respond constructively to the House of Lords Committee's proposals, I hope that she will at least indicate that she will keep the matter closely under review in the year ahead and that, if it turns out that adopting those proposals has benefits, she will be willing to keep an open mind and introduce changes at a later stage.
      Dawn Primarolo: Perhaps I should start with the point about artificial versus bespoke schemes made by the hon. Members for Yeovil (Mr. Laws) and for Arundel and South Downs (Mr. Flight). The purpose of the disclosure clauses is to address the precise issues highlighted by the hon. Member for Yeovil—the artificial and contrived arrangements that can occur in
      782
      marketed schemes and bespoke arrangements. Neither the Government nor any hon. Member have advanced an argument to say that normal tax planning should fall within the disclosure rules; on the contrary, the Government argue that normal tax planning should not fall within the bespoke rules. Frankly, I would say to the hon. Member for Yeovil that if organisations such as Grant Thornton cannot tell the difference between an artificial and contrived arrangement and normal tax planning, I would be amazed. Indeed, I might thus seriously question the quality of advice that it gives to people who pay a lot of money for that service.
      5.45 pm
      Mr. Laws: Does the Paymaster General accept that not only Grant Thornton but all tax practitioners have expressed considerable concern about what they will be required to report and what they will not? Although it might be easy to distinguish between each end of the spectrum, it is more difficult to decide whether tax advice that falls in the middle of the spectrum constitutes something that the Government intend to be reported.
      Dawn Primarolo: With respect to the hon. Gentleman—and I shall address that issue later—he did not advance that scenario when he cited Grant Thornton. If he was quoting correctly, it sounded as though the company would send the Inland Revenue just about all the tax advice produced by every office in the country. I refer him back to the excellent speech made on Second Reading by the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb), although I shall not repeat it. That was the best speech that I have heard about corporate responsibility, and it demonstrated clearly the fact that professionals should know full well the precise activities that they undertake.
      I want to address further issues regarding new clause 7 and amendments Nos. 39, 40 and 42, but I make it absolutely clear again that we are talking about artificial and contrived schemes, such as gilt strips and those that we addressed when we considered new clauses 9 and 10 today. We want to get information so that we can deal with such schemes in the way in which all hon. Members have implored Ministers to do.
      Mr. Quentin Davies: As the Paymaster General says, everything turns on the words "artificial" and "contrived", because they determine whether something is notifiable. Does she agree that those terms are ambiguous because they involve an element of judgment—they are not mathematically precise? An adviser will need to know, ex ante, whether a scheme is artificial and contrived because it is no use waiting for a court to determine that. By that time, an adviser might have made a mistake and thus have been penalised. Will the Paymaster General give the House definitions of "artificial" and "contrived" to make their meanings unambiguously clear? If we use words that require an element of judgment, there will be, by definition, a large area of persistent doubt, and thus unfairness and perversity may arise.
      Dawn Primarolo: That was a long intervention. As the hon. Gentleman knows, the clauses and the filters in the regulations seek to make the position clear. We are

      783
      talking about the operation of the provisions in only two areas of taxation—employment and financial products. He should cast his mind back to discussions on new clause 9, when we learned that tax planners have already designed a scheme to get round clause 134, even though the Bill has yet to receive Royal Assent. We were fortunate to receive the details of the scheme so that the House could close it off. If I explain how the relevant provisions will work in practice, the hon. Gentleman may not be satisfied but he will have a clearer understanding of them. By their very nature, artificial and contrived schemes introduce uncertainty into the system. I fail to understand how anybody could look at, for instance, the gilt strip arrangements and not conclude that they are contrived. I am trying to deal with those grey areas.
      Mr. Flight: Is there not a clear moral distinction to be made? The individuals to whom the right hon. Lady referred know when they are dealing in artificially contrived schemes, as opposed to tax planning to minimise tax liabilities. Legally, it is difficult to distinguish between the two, although the regulations may go some way towards doing so. The Bill, however, does not.
      Dawn Primarolo: I am not even going to attempt to go down the road of moral definitions.
      There has been a universal welcome for the Bill's attempt to provide disclosure mechanisms in the light of the experience of the US and other countries. Tax avoidance is not limited to marketed schemes or even schemes that are sold without marketing, which is why the Government's approach is to target arrangements where the risk of avoidance is greatest. New clause 7 would give rise to significant practical problems, as I shall explain to the House, and does not address or improve the position that hon. Gentlemen are trying to tackle. I accept that it attempts to differentiate between an off-the-shelf scheme and bespoke advice, but applying the disclosure rules only where a promoter sells or markets a scheme could create the very uncertainty and arbitrary boundaries that they seek to remove. That problem arises from the very nature of contrived and artificial schemes.
      There is a genuine difficulty, I acknowledge, in drawing a clear line between advice on marketed schemes, such as the gilt strip scheme that the Government have dealt with in the Bill, and planning advice—advice on a major commercial transaction such as an acquisition or merger, however, is clearly bespoke advice—and hon. Gentlemen are seeking to address that grey area. It is not clear on which side of the dividing line between bespoke advice and advice on marketed or off-the-shelf schemes particular advice will fall. Trying to target the disclosure rules in that way would make it even harder for the majority of compliant advisers to apply them and, at the same time, would unfortunately—I know that this is not the hon. Gentlemen's intention—provide scope for less scrupulous advisers to find ways of side-stepping them. That would create a significant defect in the disclosure rules. That is why the Government's approach is to target the types of schemes and arrangements in which we believe that avoidance is most prevalent.
      784
      It is not clear how the new clause is intended to affect the disclosure of schemes devised in-house, and there are many such schemes. The result of the new clause could be the introduction of different rules for the disclosure of schemes that are marketed and sold by a promoter, and in-house schemes where no promoter is involved. Were the Government to adopt that approach, they would rightly be open to accusations of discrimination against firms that rely on in-house tax advice.
      Notwithstanding some of the comments that have been made, the Inland Revenue has had extensive consultation with the profession and the industry on the draft regulations and has set out details of what would be caught by the disclosure rules. During the consultation, concern was expressed that the financial products regulations might be too wide. I recognise that the new clause attempts to deal with those concerns by narrowing the scope of the rules for marketed and off-the-shelf schemes.
      I appreciate that the hon. Gentleman also wants to ensure that the disclosure rules do not apply to the normal tax planning advice on commercial transactions that is provided by the vast majority of tax advisers. He wants to distinguish between that sort of bespoke advice and aggressive schemes that depend on exploiting loopholes. I can assure him that the Government do not want to impinge on straightforward tax planning. That is not what we are attempting to do. However, our concern remains—I made the point in Committee as well—that some bespoke advice also depends on the aggressive exploitation of loopholes.
      We therefore believe that the response that the Government propose is more effective and will preserve the new disclosure obligations. The Inland Revenue is working hard with tax advisers to ensure that the rules catch only aggressive schemes. We will refine the text of the regulations to ensure that the financial products test is clear and easier to apply in practice. The regulations will contain new filters, which we discussed in Committee. They will ensure that financial products that gain a tax advantage by exploiting loopholes are dealt with.
      Government amendment No. 222 corrects a drafting error. It removes from clause 299 some extraneous words referring to a trade, profession or business that involves the provision to other persons of services relating to taxation.
      Amendments Nos. 39 and 40 seek to remove from the Board of Inland Revenue the power to prescribe in regulations the time within which promoters are required to make a disclosure, and set out in primary legislation that that should be 30 days. I make a simple point to the hon. Member for Yeovil: when the promoters make the scheme available for use, they know whether or not it should be declared. Five days after the scheme is made available is therefore reasonable. Thirty days simply allows more time.
      The broad framework for a disclosure regime is set out in primary legislation and specifies who needs to make a disclosure and what they need to disclose. The regulations published in May require promoters to supply those details within five days. If they know on day 1, day 2, day 3, day 4, day 5, day 29 and day 30, I do not see why they cannot make the information available by day 5 and why that should wait until day 30. I am not

      785
      convinced that the promoters cannot supply the information within five days. They clearly have all the information that they need, because they make the schemes available.
      6 pm
      Mr. Laws: Can the Paymaster General confirm that, like the House of Lords Economic Affairs Committee report, our proposal distinguishes between artificial marketed schemes, where we agree that the five-day limit is right, and more complex tax advice, where a potential problem exists and a 30-day limit might, as the House of Lords Committee suggested, be more sensible?
      Dawn Primarolo: Amendments Nos. 39 and 40 do not provide for that distinction, because they remove the five-day period. The operation of the disclosure rules means that the Government's arrangements are straightforward, and there is no reason why they should not work.
      Amendment No. 42 gives the Treasury a new statutory power to impose a de minimis limit. It is difficult to see what it seeks to achieve, because it does not set the de minimis threshold, but merely enables the Treasury and the Inland Revenue to introduce such a limit. We resist the introduction of a de minimis limit for direct tax disclosure rules because it would not work in practice. For example, where such a limit applied to tax saved or to the turnover of a business, a promoter of a scheme might not be in a position to know those facts when they sold the scheme to the client, and would not know whether the de minimis limit applied and whether they should make a declaration. The disclosure rules in the Bill provide for the notification of the Government and the Inland Revenue when promoters and those giving advice believe that schemes fall within the definition of "artificial and contrived", which is vital if we are to defend tax revenues in order to invest in our public services.
      Mr. Quentin Davies: The Paymaster General said that my intervention, which she was kind enough to take, was too long, so I rise to take her up on one or two points. This afternoon's debate has become quite amusing, because she used an argument that she herself dismissed earlier in the debate to reject new clause 7. She says that one cannot make a viable distinction between a marketed scheme and a non-marketed scheme, because one cannot define what is marketed, so, in her words, "a grey area" exists between marketed and non-marketed schemes. Conservative Members have put that argument to her on the definition of "artificial and contrived", and a considerable grey area clearly exists.
      The Paymaster General says that everyone knows what is "artificial and contrived", but I shall give her an example and take an intervention, if she wants to make one. What about transferring capital allowances from profit-earning firms to non-profit-earning firms through finance leases? That mechanism is classic, but surely it is "artificial and contrived." It must be contrived—presumably some clever tax accountant or lawyer thought it up 20 years ago when finance leases started—and it became a classic method of financing. It enabled companies whose profitability was not sufficient to do so to get full benefit from capital allowances by investing in
      786
      plant and equipment, which is a socially and economically desirable objective that both Conservative and Labour Governments have sought to secure.
      The Paymaster General has not intervened yet, but does she regard that example as "artificial and contrived"? The practice certainly did not flow directly from the original purpose of the capital allowances, which were effectively used by firms that were not making the corresponding profits, so one could describe that as both artificial and contrived. The right hon. Lady clearly does not know the answer.
      Earlier this afternoon, the Government moved new clauses 9 and 10, which we did not oppose and which are designed to prevent from coming into effect artificial and contrived tax avoidance schemes that, we were told, have been marketed over the past few weeks. But she did not rely on her "artificial and contrived" definition to try to dispose of those particular schemes: she used the different mechanism of an anti-avoidance rule. Why does she not stick with that? Why does she not simply say that schemes will be disregarded by the Revenue if their main purpose is to avoid tax, as under new clause 10? That is a much more objective definition than "artificial and contrived".
      The right hon. Lady cannot pray in aid new clause 10 because she adopted an entirely different approach to solving the problem of that set of schemes. She certainly cannot reject the argument that it is undesirable to have areas of doubt and uncertainty—grey areas—in tax legislation when they are put to her in one context, then five minutes later reject an Opposition amendment on precisely the same ground. There is a certain amount of irony, to put it kindly, in the position that the Government have taken up this afternoon.
      Dawn Primarolo: The only irony is that the hon. Gentleman has not read the proceedings of the Standing Committee, during which I specifically gave the answer with regard to leasing and the disclosure rule.
      Mr. Davies: The right hon. Lady did not then, or on any other occasion, define "artificial and contrived". I cited the lease as an example where doubt would exist ex ante as to whether it was artificial and contrived. She may well be able subsequently to say that she chooses not to regard it as artificial and contrived, yet it could have been considered to be so.
      I am afraid that the right hon. Lady has not answered the question at all. We need a definition ex ante; otherwise, the only way in which we will get a definition is ex post, after a great deal of complicated and expensive litigation before the commissioners or the courts. What is more, as my hon. Friend the Member for Arundel and South Downs (Mr. Flight) said, it is inevitable that tax advisers will play safe. The e-mails and pieces of paper that travel between tax advisers and Revenue offices will increase greatly as everybody tries to cover themselves in knowledge of the penalties that will apply if it is subsequently, and retrospectively, deemed that a certain piece of tax advice was involved in an artificial or contrived arrangement.

      787
      The right hon. Lady may live to regret this. I am afraid that by not giving us any guidance on what is artificial contrivance, and accepting a grey area in these matters that she rejects elsewhere, she has laid the basis for the problem that I fear will ensue.
      Mr. Flight: All hon. Members will understand what the Paymaster General is trying to achieve and why. Our concerns, as echoed by my hon. Friend the Member for Grantham and Stamford (Mr. Davies), centre on why the arrangements as they stand can achieve it without leaving too great a grey territory in the middle. We have a lot to learn from the US experience in this area, and I trust that the right hon. Lady will continue to monitor that.
      Morally, everyone knows when they are crossing the line between acceptable tax planning and artificial contrivance, but legally defining that is extremely difficult. For good reason, the Minister does not want a definition of artificial and contrived schemes in law. Only a few years ago, inspectors of taxes were telling people that trust arrangements were not caught by the gifts with reservation rules and were perfectly okay and acceptable, whereas now they are seen as artificial contrivances. Judgments as to where the line is drawn change over time.
      We believe that the most important place to start in this regard must be with practical measures that will have some effect. That is why it is important to draw the line in relation to any form of promotion and selling; that is where we shall stop most of the problems, because that is where most of the abuse has taken place. We understand the Minister's point that a clever company could come up with its own fancy internal scheme. We do not deny that that could be a problem, and we understand why the Government are trying to catch that kind of problem. However, our concern is that the price of doing that will be a degree of mayhem in terms of how the financial industry and accountants operate, and in terms of what the Revenue gets landed with.
      I am afraid that, although the Minister has convinced us of the worthiness of her intentions, she has not convinced us that she has addressed the problem of the grey territory in the middle. If that is not addressed, the arrangements will be damaging to the economy. For that reason of principle, we would like to register our point by pressing the matter to a vote.
      Question put, That the clause be read a Second time:—
      The House divided: Ayes 128, Noes 268.

      Division No. 215]

      [6:11 pm

      AYES

      Allan, Richard

      Bercow, John

      Arbuthnot, rh James

      Beresford, Sir Paul

      Atkinson, David (Bour'mth E)

      Bottomley, Peter (Worthing W)

      Atkinson, Peter (Hexham)

      Bottomley, rh Virginia (SW Surrey)

      Bacon, Richard

      Baker, Norman

      Brady, Graham

      Baldry, Tony

      Brake, Tom (Carshalton)

      Barrett, John

      Brooke, Mrs Annette L.

      Beggs, Roy (E Antrim)

      Browning, Mrs Angela

      Beith, rh A. J.

      Bruce, Malcolm

      Bellingham, Henry

      Burnside, David

      788

      Burt, Alistair

      Liddell-Grainger, Ian

      Cable, Dr. Vincent

      Lidington, David

      Campbell, rh Sir Menzies (NE Fife)

      Lilley, rh Peter

      Loughton, Tim

      Carmichael, Alistair

      McIntosh, Miss Anne

      Cash, William

      McLoughlin, Patrick

      Chapman, Sir Sydney (Chipping Barnet)

      Maples, John

      Mates, Michael

      Chidgey, David

      Maude, rh Francis

      Clappison, James

      Mawhinney, rh Sir Brian

      Collins, Tim

      Mitchell, Andrew (Sutton Coldfield)

      Cotter, Brian

      Davies, Quentin (Grantham & Stamford)

      Norman, Archie

      Öpik, Lembit

      Davis, rh David (Haltemprice & Howden)

      Osborne, George (Talton)

      Ottaway, Richard

      Djanogly, Jonathan

      Page, Richard

      Dorrell, rh Stephen

      Prisk, Mark (Hertford)

      Doughty, Sue

      Pugh, Dr. John

      Duncan, Alan (Rutland)

      Redwood, rh John

      Duncan, Peter (Galloway)

      Reid, Alan (Argyll & Bute)

      Duncan Smith, rh lain

      Robertson, Hugh (Faversham & M-Kent)

      Evans, Nigel

      Fabricant, Michael

      Robertson, Laurence (Tewk'b'ry)

      Fallon, Michael

      Roe, Dame Marion

      Flight Howard

      Russell, Bob (Colchester)

      Forth, rh Eric

      Sanders, Adrian

      Foster, Don (Bath)

      Sayeed, Jonathan

      Fox, Dr. Liam

      Shepherd, Richard

      George, Andrew (St. Ives)

      Smith, Sir Robert (W Ab'd'ns & Kincardine)

      Gidley, Sandra

      Spicer, Sir Michael

      Gillan Mrs Cheryl

      Spink, Bob (Castle Point)

      Grayling Chris

      Spring, Richard

      Green, Damian (Ashford)

      Steen, Anthony

      Greenway, John

      Stunell, Andrew

      Grieve, Dominic

      Swayne, Desmond

      Gummer, rh John

      Syms, Robert

      Harvey, Nick

      Taylor, Ian (Esher)

      Heald, Oliver

      Taylor, Matthew (Truro)

      Heathcoat-Amory, rh David

      Taylor, Sir Teddy

      Hendry, Charles

      Teather, Sarah

      Hermon, Lady

      Tonge, Dr. Jenny

      Hogg, rh Douglas

      Turner, Andrew (Isle of Wight)

      Holmes, Paul

      Tyler, Paul (N Cornwall)

      Horam, John (Orpington)

      Tyrie, Andrew

      Howard, rh Michael

      Walter, Robert

      Jackson, Robert (Wantage)

      Waterson, Nigel

      Keetch, Paul

      Watkinson, Angela

      Kennedy, rh Charles (Ross Skye & Inverness)

      Whittingdale, John

      Wiggin, Bill

      Key, Robert (Salisbury)

      Wilkinson, John

      Kirkbride, Miss Julie

      Willetts, David

      Knight, rh Greg (E Yorkshire)

      Williams, Roger (Brecon)

      Lait, Mrs Jacqui

      Wilshire, David

      Lansley, Andrew

      Young, rh Sir George

      Laws, David (Yeovil)

      Leigh, Edward

      Tellers for the Ayes:

      Letwin, rh Oliver

      Mr. Mark Francois and

      Lewis, Dr. Julian (New Forest E)

      Mr. Hugo Swire

      NOES

      Adams, Irene (Paisley N)

      Bennett, Andrew

      Ainger, Nick

      Benton, Joe (Bootle)

      Ainsworth, Bob (Cov'try NE)

      Berry, Roger

      Anderson, rh Donald (Swansea E)

      Betts, Clive

      Anderson, Janet (Rossendale & Darwen)

      Blizzard, Bob

      Borrow, David

      Armstrong, rh Ms Hilary

      Bradley, rh Keith (Withington)

      Atherton, Ms Candy

      Bradley, Peter (The Wrekin)

      Austin, John

      Bradshaw, Ben

      Bailey, Adrian

      Brennan, Kevin

      Banks, Tony

      Brown, rh Nicholas (Newcastle E Wallsend)

      Barnes, Harry

      Battle, John

      Browne, Desmond

      Begg, Miss Anne

      Bryant, Chris

      789

      Burgon, Colin

      Havard, Dai (Merthyr Tydfil & Rhymney)

      Byers, rh Stephen

      Cairns, David

      Healey, John

      Campbell, Mrs Anne (C'bridge)

      Henderson, Doug (Newcastle N)

      Campbell, Ronnie (Blyth V)

      Hendrick, Mark

      Cawsey, Ian (Brigg)

      Heppell, John

      Challen, Colin

      Heyes, David

      Chapman, Ben (Wirral S)

      Hinchliffe, David

      Chaytor, David

      Hodge, Margaret

      Clapham, Michael

      Hoey, Kate (Vauxhall)

      Clark, Mrs Helen (Peterborough)

      Hope, Phil (Corby)

      Clark, Dr. Lynda (Edinburgh Pentlands)

      Hopkins, Kelvin

      Howarth, rh Alan (Newport E)

      Clark, Paul (Gillingham)

      Howarth, George (Knowsley N & Sefton E)

      Clarke, rh Tom (Coatbridge & Chryston)

      Howells, Dr. Kim

      Clarke, Tony (Northampton S)

      Hoyle, Lindsay

      Clelland, David

      Hughes, Beverley (Stretford & Urmston)

      Clwyd, Ann (Cynon V)

      Coaker, Vernon

      Hughes, Kevin (Doncaster N)

      Coffey, Ms Ann

      Humble, Mrs Joan

      Cohen, Harry

      Hurst, Alan (Braintree)

      Corbyn, Jeremy

      Hutton, rh John

      Corston, Jean

      Iddon, Dr. Brian

      Cranston, Ross

      Illsley, Eric

      Cryer, Ann (Keighley)

      Irranca-Davies, Huw

      Cummings, John

      Jackson, Helen (Hillsborough)

      Cunningham, Jim (Coventry S)

      Jamieson, David

      Cunningham, Tony (Workington)

      Johnson, Miss Melanie (Welwyn Hatfield)

      Davey, Valerie (Bristol W)

      Davies, rh Denzil (Llanelli)

      Jones, Helen (Warrington N)

      Davies, Geraint (Croydon C)

      Jones, Jon Owen (Cardiff C)

      Dawson, Hilton

      Jones, Kevan (N Durham)

      Dean, Mrs Janet

      Jones, Lynne (Selly Oak)

      Denham, rh John

      Jones, Martyn (Clwyd S)

      Dhanda, Parmjit

      Jowell, rh Tessa

      Dismore, Andrew

      Keeble, Ms Sally

      Dobbin, Jim (Heywood)

      Kelly, Ruth (Bolton W)

      Dobson, rh Frank

      Kennedy, Jane (Wavertree)

      Doran, Frank

      Khabra, Piara S.

      Dowd, Jim (Lewisham W)

      Kidney, David

      Drew, David (Stroud)

      Kilfoyle, Peter

      Dunwoody, Mrs Gwyneth

      King, Andy (Rugby)

      Eagle, Maria (L'pool Garston)

      King, Ms Oona (Bethnal Green & Bow)

      Edwards, Huw

      Efford, Clive

      Knight, Jim (S Dorset)

      Ellman, Mrs Louise

      Ladyman, Dr. Stephen

      Ennis, Jeff (Barnsley E)

      Lawrence, Mrs Jackie

      Etherington, Bill

      Leslie, Christopher

      Ewing, Annabelle

      Levitt, Tom (High Peak)

      Farrelly, Paul

      Lewis, Terry (Worsley)

      Field, rh Frank (Birkenhead)

      Liddell, rh Mrs Helen

      Fisher, Mark

      Linton, Martin

      Fitzpatrick, Jim

      Lloyd, Tony (Manchester C)

      Fitzsimons, Mrs Lorna

      Llwyd, Elfyn

      Flint Caroline

      Love, Andrew

      Flynn, Paul (Newport W)

      Lucas, Ian (Wrexham)

      Follett, Barbara

      Luke, lain (Dundee E)

      Foster, rh Derek

      Lyons, John (Strathkelvin)

      Foster, Michael Jabez (Hastings & Rye)

      McCafferty, Chris

      McDonnell, John

      Foulkes, rh George

      McFall, rh John

      Francis, Dr. Hywel

      McGuire, Mrs Anne

      Gerrard, Neil

      McIsaac, Shona

      Gibson, Dr. Ian

      McKechin, Ann

      Godsiff, Roger

      McKenna, Rosemary

      Goggins, Paul

      McNamara, Kevin

      Griffiths, Jane (Reading E)

      McNulty, Tony

      Griffiths, Nigel (Edinburgh S)

      MacShane, Denis

      Griffiths, Win (Bridgend)

      Mandelson, rh Peter

      Grogan, John

      Marris, Rob (Wolverh'ton SW)

      Hall, Mike (Weaver Vale)

      Marsden, Gordon (Blackpool S)

      Hall, Patrick (Bedford)

      Martlew, Eric

      Hamilton, David (Midlothian)

      Meacher, rh Michael

      Hanson, David

      Meale, Alan (Mansfield)

      Harman, rh Ms Harriet

      Michael, rh Alun

      790

      Milburn, rh Alan

      Smith, rh Chris (Islington S & Finsbury)

      Miller, Andrew

      Mitchell, Austin (Gt Grimsby)

      Smith, Geraldine (Morecambe & Lunesdale)

      Moffatt, Laura

      Mole, Chris

      Smith, Jacqui (Redditch)

      Morgan, Julie

      Smith, Llew (Blaenau Gwent)

      Mountford, Kali

      Soley, Clive

      Munn, Ms Meg

      Southworth, Helen

      Murphy, Denis (Wansbeck)

      Starkey, Dr. Phyllis

      Norris, Dan (Wansdyke)

      Stevenson, George

      O'Brien, Bill (Normanton)

      Stewart, David (Inverness E & Lochaber)

      O'Brien, Mike (N Warks)

      O'Hara, Edward

      Stinchcombe, Paul

      Olner, Bill

      Stoate, Dr. Howard

      O'Neill, Martin

      Strang, rh Dr. Gavin

      Osborne, Sandra (Ayr)

      Stringer, Graham

      Owen, Albert

      Stuart, Ms Gisela

      Pearson, Ian

      Taylor, rh Ann (Dewsbury)

      Taylor, Dari (Stockton S)

      Perham, Linda

      Thomas, Gareth (Clwyd W)

      Picking, Anne

      Thomas, Simon (Ceredigion)

      Pickthall, Colin

      Timms, Stephen

      Pike, Peter (Burnley)

      Todd, Mark (S Derbyshire)

      Plaskitt, James

      Touhig, Don (Islwyn)

      Pollard, Kerry

      Trickett, Jon

      Pond, Chris (Gravesham)

      Truswell, Paul

      Pope, Greg (Hyndburn)

      Turner, Dennis (Wolverh'ton SE)

      Pound, Stephen

      Turner, Dr. Desmond (Brighton Kemptown)

      Prentice, Ms Bridget (Lewisham E)

      Turner, Neil (Wigan)

      Prentice, Gordon (Pendle)

      Twigg, Derek (Halton)

      Price, Adam (E Carmarthen & Dinefwr)

      Tynan, Bill (Hamilton S)

      Walley, Ms Joan

      Primarolo, rh Dawn

      Ward, Claire

      Prosser, Gwyn

      Wareing, Robert N.

      Purchase, Ken

      Watts, David

      Purnell, James

      Weir, Michael

      Quin, rh Joyce

      White, Brian

      Quinn, Lawrie

      Whitehead, Dr. Alan

      Rapson, Syd (Portsmouth N)

      Wicks, Malcolm

      Reed, Andy (Loughborough)

      Williams, rh Alan (Swansea W)

      Williams, Betty (Conwy)

      Robertson, John (Glasgow Anniesland)

      Wills, Michael

      Wilson, Brian

      Roy, Frank (Motherwell)

      Winnick, David

      Ruane, Chris

      Winterton, Ms Rosie (Doncaster C)

      Russell, Ms Christine (City of Chester)

      Wishart, Pete

      Salmond, Alex

      Worthington, Tony

      Savidge, Malcolm

      Wright, Anthony D. (Gt Yarmouth)

      Sawford, Phil

      Sedgemore, Brian

      Wright, David (Telford)

      Sheerman, Barry

      Wright, Tony (Cannock)

      Sheridan, Jim

      Shipley, Ms Debra

      Tellers for the Noes:

      Short, rh Clare

      Charlotte Atkins and Joan Ryan

      Skinner, Dennis

      Question accordingly negatived.

    Clause 4

      DUTY STAMPS FOR SPIRITS ETC
      Mr. Laws: I beg to move amendment No. 35, in page 3, line 11, leave out clause 4.
      Mr. Deputy Speaker (Sir Michael Lord): With this it will be convenient to discuss the following amendments: No. 41, in page 265, line 2, leave out schedule 1.
      Government amendments Nos. 50 to 70.
      Mr. Laws: The previous time we debated this issue in detail was on 27 April on the Floor of the House. The debate lasted some four hours, which was more than

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      50 per cent. of the deliberations. I hope that the debate today will be somewhat shorter, although, with the number of hon. Members from Scottish constituencies here, that is not guaranteed.
      It was appropriate that we had a detailed debate about the issue, because it has caused much concern in the spirits industry in the United Kingdom, across all parties. I do not intend to go over all the ground that we covered on 27 April because that has already been written into the record, but it is worth reminding the House of the conclusion of the all-party Select Committee on Scottish Affairs, which reported prior to the debate in April. It concluded:
      "Until definitive figures are available"
      on the extent of fraud in the spirits industry,
      "no estimate, whether from Customs or from the industry, can be accepted as accurate. For any Government to introduce important measures which could have major implications for industry and employment, based on what could be inaccurate figures, might be considered precipitate to the point of being reckless."
      Since that debate, there have been two developments that are relevant to our discussions. The first is that the Lords Select Committee on Economic Affairs has had an opportunity to debate the issue in detail and to take evidence from the industry and others about the potential implications of the measures that the Government intend to take. Secondly, amendments have been tabled by the Government. Perhaps you, Mr. Deputy Speaker, will allow me to turn to the Government amendments first because, to the extent that they address this particular issue and concern, they will limit the rest of the debate, particularly the debate about the different estimates of the extent of the fraud in the sector and the cost that will fall on the spirits industry and particularly smaller producers as a consequence of the measures that the Government envisage.
      We have already had some feedback from one of the major industries that will be affected by the measure and by the amendments that the Government have tabled in the past few days. In an e-mail on 5 July to my hon. Friend the Member for Argyll and Bute (Mr. Reid), who has been particularly active in lobbying on the issue alongside many other Scottish MPs from all political parties, the Scotch Whisky Association set out its view about the Government amendments. It says that in the first instance, contrary to some weekend newspaper reports, largely in the Scottish media, the amendments do not mean that the Chancellor is abandoning strip stamps either in principle or in terms of the conclusion that the Government have so far reached. It goes on to say that the amendments are positive in that they allow the industry and the Government to continue discussions about whether an alternative route to a piece of paper over the top of the bottle can be found and that this "might"—it underlines "might"—in the type B variant include a tax stamp appearing within the back label of a bottle, for example, or even under the type A proposal, the ability to attach a self-adhesive label somewhere on the bottle. The SWA goes on to say that such a solution would incur expenditure on the redesign of labels, but that that would be minor compared with companies having to buy strip stamp application
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      machines, which was the Government's previous proposal. The SWA's assessment is that the amendments offer an important opportunity for ongoing discussions to take place against legislation that gives the chance of flexibility in design of the final tax stamp scheme. However, it points out that it has received no concrete assurance that the original preference will not in fact be the one that we end up with. It says that we need to satisfy Customs and Excise over the security aspects of the alternative and ensure that there is sufficiently broad support across the industry.
      6.30 pm
      However, this is certainly a step in the right direction, and I welcome the fact that the Economic Secretary and his colleagues have had detailed discussions with the industry on reducing compliance costs, and on the principle of the scheme. My colleagues and I certainly will not oppose the Government amendments tabled today. If they are accepted, the compliance burden on the industry will potentially be significantly less than it would otherwise be.
      That said, we have tabled a couple of amendments that would delete clause 4 and the associated schedule. We continue to table such amendments, and currently intend to vote on them, because we are still unconvinced that the Government have proven the case for introducing proposals of any kind.
      Alongside the Government's proposals, which are a small step in the right direction, there has been another major development since we debated this issue in April: the assessment by the Lords Select Committee on Economic Affairs of various key aspects of the Finance Bill. It is a cross-party Committee, and in reporting on this matter it has come up with some clear—and very critical—conclusions. One of my colleagues on that Committee told me the other day that he considered this the most deficient aspect of the Finance Bill, and that the Committee was perhaps more concerned about the estimate of fraud than about any of the other salient elements of the Bill that they looked at in detail.
      Mr. John Lyons: The hon. Gentleman should consider the fact that the argument has moved on somewhat, as his earlier comments about the SWA e-mail underlined. The Scottish Affairs Committee, among others, was deeply concerned that because the stamp is designed to go over the top of the bottle, the costs for distilleries such as Bushmills would be rather high. So we were happy that the SWA endorsed a flexible approach, and that the Government were able to discuss with it an alternative to placing the stamp over the top of the bottle.
      Mr. Laws: I am grateful to the hon. Gentleman for that intervention, which highlights where the debate is now. It is clear that the measures proposed in the Government amendments are a clear step forward. They have the potential to reduce the compliance burden associated with the measures that the Government are seeking to implement, but they still leave the SWA, the spirits industry and ourselves with an underlying worry about whether the Government have justified introducing this additional burden at all.

      793
      I remind the hon. Member for Strathkelvin and Bearsden (Mr. Lyons) of the Scottish Affairs Committee's conclusion, and underline the quotation that I referred to earlier:
      "Until the definitive figures are available, no estimate, whether from Customs or from industry, can be accepted."
      The hon. Gentleman will recollect that the Committee continued:
      "Introducing changes of any kind would be considered precipitate to the point of being reckless, without actually understanding the extent of the fraud and getting some greater agreement over the figures."
      The Lords Select Committee on Economic Affairs discussed the fact that Customs and Excise and the industry have given various estimates of the extent of fraud, and it discussed the National Audit Office assessment of those estimates. It refers to the fact that the potential variation in the estimate of fraud is between £10 million at the bottom end and £1,060 million at the top end, a huge amount. I do not know whether the hon. Gentleman has had a chance to see the report from the House of Lords Economic Affairs Committee, but it would be useful for him to do so.
      Malcolm Bruce: Does my hon. Friend agree that we have to put this into context? I have 12 distilleries in my constituency, and the spirits industry makes a huge contribution to the economy and is our major export. Yet the Government seem to be obsessed with a fraud they cannot prove and a mechanism that would affect the industry's competitiveness. We are the leading marketeer of branded spirits in the world. Is it really necessary for the Government to impose this kind of extra cost on the industry unless they can justify it in terms of fraud? The figures quoted by my hon. Friend show that the parameters are ridiculous.
      Mr. Laws: My hon. Friend is right. Although the Scotch Whisky Association and the spirits industry may prefer the Government amendments to the original proposals, that does not mean that they support even the amended proposals on the basis of the available evidence. The House of Lords Economic Affairs Committee concluded:
      "While we accept that estimates of the scale of fraud are always uncertain, we are concerned by the extent of the differences in the estimates between those of the industry and those of the Government. Clearly the question whether the compliance costs of duty stamps represent a reasonable burden depends in part on the extent of the fraud. In this context we are particularly disturbed at the size of the statistical range in the Government's own figures, and have some sympathy for the view urged on us by the industry that uncertainty over the measure of the fraud means that a necessary pre-condition for the introduction of so burdensome a measure has not been met."
      The Committee added that there was an urgent need for additional work to establish whether the cost estimates of the Exchequer were reliable, adding that it would be dangerous to introduce the additional potential costs without a clear understanding of the extent of fraud and, therefore, the extent of the benefit.
      The House of Lords Economic Affairs Committee raised a number of important points that we discussed on 27 April; important issues but, compared with the overall issue of the amount of fraud, second-order
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      issues. One is the question of the counterfeiting of tax stamps, about which representatives from Customs and Excise gave evidence to the House of Lords Committee. After considerable debate and consideration, the Committee concluded:
      "We note the confident note struck by HMCE in respect of the risks of counterfeiting and that this reflected the reassuring tone of the Economic Secretary's response to the Scottish Affairs Committee, who, however, felt such a response to be verging on the complacent. Counterfeiting of stamps could in the event add to the overall burden of costs of the measure, and in this instance too, it is difficult to evaluate against the background of uncertainty over the measure of spirits diversion fraud."
      In other words, the House of Lords Committee was not persuaded by the case that the Government were making on counterfeiting.
      There are other points on which we would like clarification from the Economic Secretary. In particular, we need an update on the discussions taking place with the industry and the extent of progress in agreeing steps to reduce the compliance burden. The Economic Secretary said that he hoped that smaller producers—who might be particularly hard hit by the measure—would introduce some targeted measures to reduce the costs.
      There has been some discussion about the cost of the stamps being borne entirely by the Government rather than falling upon the industry. I understand that there is scope within the Bill for debate about whether that will happen. I hope that the Economic Secretary will make it clear today that all of the cost of the stamps will be borne by the Government.
      I hope that I have not been too ungenerous to the Economic Secretary, who has made some progress since we debated the issue about a month ago. He is bringing forward measures that address some of the concerns of the industry and therefore we will not oppose the amendments that he has tabled today. However, the big issue that remains, as identified by the House of Lords Economic Affairs Committee and in the Scottish Affairs Committee report, is what is a reasonable estimate of fraud in this sector. Is there not a real risk of introducing measures, in either their amended or original form, which will impose costs on the industry that are much more significant than the benefits that we could potentially secure?
      John Healey: I rise to explain the Government amendments in the group, but I welcome their approval by the hon. Member for Yeovil (Mr. Laws) and I hope to give him the progress report that he seeks. He said that he did not want to go over the ground covered by the Committee of the whole House on 27 April, but his amendments are drafted in such a way that other hon. Members may want to take advantage of them and go over those arguments, even though the debate was in a sense settled a couple of months ago.
      I hope that hon. Members will recall that, as the hon. Gentleman said, that debate lasted for nearly four hours. It was a debate in which 22 Members took part, with me playing my part by taking 49 minutes for my opening speech. Much to the displeasure of my colleagues in the Whips Office, I took 23 interventions, and a further 20 minutes responding to the points raised in the debate.
      Mr. Alex Salmond: In remembering that debate, as I do, does the Economic Secretary recall how many of the 22 speeches made from both sides of the House were enthusiastically in favour of the Government's proposals?
      John Healey: Even my own speech was not enthusiastically in favour of the Government's proposals. I made it very clear that it was a step that we did not wish to take, but that, having exhausted more than two years of work with the industry, we had come to the conclusion that there was simply no other way of trying to tackle the levels of fraud in the spirits sector. After the Committee of the whole House, the industry accepted that tax stamps were part of the Bill. It said afterwards that it would work with the Government to introduce the duty stamps—and it has. The Scotch Whisky Association said that the important thing was that the industry should be involved in detailed discussions with Customs and Excise and the Treasury to ensure that a workable regime was introduced. As my hon. Friend the Member for Strathkelvin and Bearsden (Mr. Lyons) has just said, the argument has moved on.
      In case hon. Members are not aware of it, let me explain that, soon after the Committee of the whole House debate a couple of months ago, the trade formally proposed to Customs the solution of back labels. The case was prepared well and some of the security features that we were keen to see incorporated in any tax stamp were examined. The Government amendments before us this evening are the result of the detailed and constructive work that has taken place during 16 separate meetings between the Government and the industry since the Committee of the whole House.
      During that debate on clause 4 and schedule 1, I emphasised the commitment made in the Budget that, while we would press ahead with the duty stamps regime, we would aim to ensure that the duty stamps were implemented in such a way that additional costs and complexity to the industry were minimised. I also welcomed in that debate the report of the Scottish Affairs Committee, chaired by my hon. Friend the Member for Paisley, North (Mrs. Adams), and I committed the Government to give due consideration to the Scottish Affairs Committee's advice that
      "it would be far less disruptive to the industry for a tax stamp to be incorporated into the front or the back label of a bottle."
      Malcolm Bruce: The Economic Secretary is explaining the justification for the Government amendments, but does he not acknowledge that the industry is trying to secure the least bad solution? The industry would prefer not to have any sort of requirement that would add costs, so the Economic Secretary is being rather disingenuous in suggesting that this is the industry's preferred solution. It is the least bad one, given that the Government want to press ahead.
      John Healey: The hon. Gentleman needs to be a little patient. The industry has not let the Government forget that it would rather not have tax stamps. I make no bones about that but, since this matter was last discussed in the Committee of the whole House, the argument has changed. The industry has fulfilled its undertaking to work with us, and we have done much
      796
      detailed and constructive work on the logistics of implementing the tax stamps regime. The introduction of the scheme is still 20 months away, and I look forward to the continuation of the consultation and the detailed discussion that we have had so far.
      Mrs. Irene Adams: The industry was well aware of the problems with whisky fraud. In two years, it took no steps to produce suggestions about how to tackle that fraud.
      6.45 pm
      John Healey: My hon. Friend is right. She is Chair of the Scottish Affairs Committee, which pointed out the industry's lack of action in its report. The media did not give that element of the report much attention, but it was a central part of the Committee's analysis. It remains an important consideration.
      In the earlier debate, I warned that the back label approach might not deliver the degree of simplicity that we hoped for without compromising the regime's effectiveness in tackling fraud, or suffering some of the other flaws of conventional strip stamps. Over the past three months, however, representatives of Customs and the industry have met regularly to look at the details of implementing a duty stamp regime.
      As happened before the Budget, we have conducted consultations through the joint alcohol and tobacco consultative group. That industry forum is made up of representatives from producers, importers, retailers, travel retailers and warehouse keepers. Customs officials have worked with the JATCG's spirits group, and with two specially constituted specialist sub-groups looking at the detailed technical design of the tax stamp system, and at payments and compliance costs issues.
      Work has also continued, again in discussion with the industry through the JATCG, on the package of regulatory measures announced in last year's pre-Budget report. The measures complement the duty stamp system in clamping down on the opportunities for spirits fraud, and in helping to prevent the possible displacement of the fraud, from the spirits sector to other parts of the drinks industry.
      I pay tribute to the industry's approach to the work. It has never let us forget that it does not like tax stamps, but it has continued to emphasise its support for clamping down on fraud. Also, it has carried out its undertaking to work with us constructively to find a workable and effective duty stamps regime.
      The progress that has been made over the past three months means that I have been able to table these Government amendments, which will do two things. First, they will build into the legislation the flexibility that will allow us to adopt a system for incorporating duty stamps into the labels on the back of bottles of spirits, if that can be made to work. Secondly, and consequently, they will provide flexibility to enable arrangements for payment of duty stamps to reflect that decision on the duty stamps.
      I make it clear to the hon. Member for Yeovil that that does not affect the Government's commitment to bear the costs of printing and distributing tax stamps. If we decide to take the back label route, I do not think that the Government can be expected to pay for more than the duty stamp element

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      of the back labels, as those labels serve much broader purposes for the industry, including product branding. However, I emphasise that the Government have not yet made a firm decision to go ahead with the back label system. Indeed, we are not yet in a position to make such a decision. There would be obvious concerns about the integrity and security of a duty stamps regime that permitted the full range of printers who currently supply labels to the UK spirits industry—and to those producers who supply to the UK market—to have access to the facilities that produced the tax stamps. However, it is at present uncertain whether any restrictions on the supply of labels would be compatible with EU law or World Trade Organisation rules. That is the issue that we need to examine further.
      Mr. Salmond: Given the unwillingness of the industry to accept strip stamps, given the uncertainty about the estimates that attempt to quantify the fraud, and given the new uncertainty that the Economic Secretary has spoken of—whether the proposal can be mitigated by the back label scheme—does he agree that we should not legislate on the issue? Everything he says suggests that the matter should still be at the discussion and formulation stage, not being considered during the Report stage of the Finance Bill.
      John Healey: It is just three months since the Budget confirmation that we wanted to press ahead with tax stamps and 20 months until their implementation, and now is the time that we must put the legislative framework in place. That framework needs to allow sufficient flexibility for us to make decisions that we are not yet in a position to make.
      I do not believe that the SWA would press us for early decisions on the matter. If it had done so before, the early decision would have been to proceed with strip stamps, not back label stamps. We should consider the legislation now and build in the flexibility that we may need in the future.
      John Robertson: I congratulate my hon. Friend on what he has said, but will he assure me and the whisky industry that his proposals are not just words to appease politicians and companies to stave off the fateful day, but a proper attempt to try to save the industry money and solve the problem of fraud? We want to see deeds, not words.
      John Healey: I do not believe that my hon. Friend could have picked up any doubt on the part of the industry about the seriousness with which Customs staff, Treasury officials and I have entered into detailed discussions on several occasions since the Budget and the debate in Committee on the Floor of the House. Together with the trade, we have been able to establish the potential benefits of a back label system.
      Mr. Laws: I appreciate that the Economic Secretary does not believe that the proposals are yet ready to be approved, but can he tell us how long it will be before he decides whether the amendments that he has tabled
      798
      today can be implemented or that he will need to revert to the original proposals? How many months will it be before we know?
      John Healey: We are not in a position at this stage to make a decision. I hope that within two to three months we will be able to reach a firmer decision.
      Mr. Prisk: The amendments mention label type A and label type B as the two options available. Are those options mutually exclusive or would they run side by side?
      John Healey: We have not made those decisions yet. The purpose of the amendments is to give us the flexibility to make those decisions in due course, when we are in a position to do so.
      My hon. Friends have been supportive of our efforts to find a workable solution for the introduction of the tax stamp regime and I am sure that they would be interested to hear about the conclusions that we have been able to reach about the potential benefits of back labels. I know that Labour Members who have played a big part in discussion of the issue on the Scottish Affairs Committee will certainly want to hear those conclusions.
      Let me make three things clear. First, we have been able to establish that, as the vast majority of spirits products already carry back labels, both the initial and the ongoing compliance costs of the option would be significantly less for the industry than strip stamps. In particular, the requirement for new machinery for the industry to apply stamps would be substantially reduced.
      Secondly, as duty stamps would in the vast majority of cases be incorporated in labels that already bore the product's brand name, a back label system could help to reduce the incentive for the counterfeiting and theft of duty stamps. Obviously, a potential fraudster would need to match a stolen or counterfeited stamp to something that could pass for the matching product. Thirdly, Customs is satisfied that a back label stamp could incorporate the full range of security and anti-counterfeiting measures that are vital for the prevention of stamp duty fraud.
      Mr. Michael Weir: The Minister has rather skimmed over the discussions held with the industry about other aspects of fraud in the supply chain. When the Scottish Affairs Committee looked at that matter, it found that a key element was that fraud did not arise at the distillery but further down in the supply chain. Whether the Minister opts for a back label or an over-bottle strip stamp, he needs to explain how either would necessarily deal with that problem. Can he be more specific about that?
      John Healey: To give the hon. Gentleman credit, he attended most of the debate on 27 April when we covered that issued comprehensively. As I have already made clear, alongside our detailed discussions with the industry about the potential for the use of back labels instead of strip stamps, we have been discussing compliance costs and how to reduce them, and looking into other regulations and measures that will help to deal with the sort of problems that he is concerned about.

      799
      Our amendments are intended to create scope for the design of the stamp to be determined once we have made the fullest possible assessment of the relative merits of a strip stamp and a back label scheme and, most important, when we have clarified the legal position. I commend the amendments to the House.
      Mr. Prisk: The United Kingdom whisky and spirits industry is important for exports and for jobs. Scotch whisky exports alone are worth more than £2 billion a year, and many jobs in the industry are located in communities where there are few other employment opportunities.
      Throughout the passage of the Bill, the Government have told us that they want to impose tax stamps on spirits because they believe it is the only way to prevent fraud in the UK spirits market. The Opposition do not doubt that there is fraud. What is at question, however, is the scale of the fraud and whether strip stamps will deal with it without unduly harming the industry.
      That is why, throughout the Bill's proceedings, we have urged the Government not to press ahead with the scheme. It is an impractical policy, based on questionable statistics, and it has been rejected by many of our competitors, which is why we support the amendment moved by the hon. Member for Yeovil (Mr. Laws).
      The Government's briefing to Members of 18 March shows that, depending on the assumptions made, the fraud the scheme seeks to curtail could be as little as £10 million or as much as £1,080 million. In short, no one really knows the scale of the problem.
      We fully accept that there is a problem and that action is required. However, the very uncertainty about the nature of the problem means that it is even more important that the Government work closely with the industry. To that end, I note the 21 amendments that the Government have tabled. I also thank the Economic Secretary for his letter to my right hon. Friend the shadow Chancellor of 2 July, which indicates acceptance of many of the points that we raised in earlier exchanges, both on Second Reading and in Committee.
      The decision to respond positively to the suggestion that a duty stamp might be incorporated in existing product labels is to be welcomed. It could remove the danger, which we described, of small businesses having to buy expensive equipment simply to comply with Government regulations.
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      I have discussed the decision with the Scotch Whisky Association, which, among others, speaks positively about it—although, frankly, like us, the association would prefer the whole scheme to be replaced with something more practical. However, the Government are not committed to such an amendment. For the benefit of hon. Members, I shall quote the Economic Secretary's letter to the shadow Chancellor, in which he states:
      "You should note that this does not mean that the Government will implement the industry proposal for a label mark. There are still a number of concerns over the label mark proposals, to which we need to give further detailed consideration with the industry and with Government lawyers."
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      He then sets out some of those practical problems, including the danger that such a scheme could be open to scrutiny, as it might create barriers to trade. Indeed, that is a significant problem. I hope that he will give those matters due care, and his record suggests that he will. The industry has made it clear to me and many other hon. Members right from the beginning that, if handled badly, the scheme could make UK production in the whisky market less competitive. Of course, it has also stressed that there are important legal hurdles in a single market.
      When the Chancellor announced the scheme, he expressed a wish to hear alternatives. Despite what has been said earlier, the spirits industry has, in fact, suggested 17 alternative anti-fraud packages since then. In particular, the industry has based its approach on what, to be fair, in most other cases, the Government usually applaud—a risk-based strategy. By focusing on the higher risk movements, there would be a better chance of securing lost revenue, without unfairly burdening legitimate traders.
      I hope that in his reply the Minister will be able to set out what progress is being made. He has mentioned some of it, but I hope that he can elaborate further. In addition, of course, as we learned during the earlier consideration of the Bill, the Minister has already made a series of valuable concessions. The combined cost of the capital fund, the printing support and a two-year tax freeze is approximately £123 million. Given that the Government expect to claw back only about £160 million in lost revenue, the net gain seems remarkably small. Will the Minister say whether those figures have changed?
      The scheme remains, in our view, unduly onerous and based on uncertain evidence. We would rather that the Government listened to the industry before taking any further step. Despite the concessions that the Minister has made, to which he has referred, it remains our view that, on this scheme, in principle and in practice, it is time for the Government to think again.
      Annabelle Ewing: I, too, rise to support amendments Nos. 35 and 41, tabled by the hon. Member for Yeovil (Mr. Laws). As we have heard, those amendments would delete clause 4, thereby scrapping the Government's proposed tax stamp scheme. Like many hon. Members—certainly those who represent constituencies in Scotland—I have a direct whisky interest in my constituency: the headquarters of the Edrington Group is based in Perth. I can also lay claim to the oldest, albeit the smallest, distillery in Scotland—the Glenturret distillery, just outside Crieff, which is also in my constituency.
      We have heard much about the importance of the Scotch whisky industry to the Scottish economy and that some 40,000 jobs are dependent on the industry throughout the length and breadth of Scotland. Indeed, it is one of Scotland's premier industries, so it is absolutely incredible that, notwithstanding all the uncertainties about the scheme, the UK Government still propose to go ahead with a damaging tax stamp scheme that has won no support outside the Treasury in London. I should have thought that the Government's role is to support our key industries, not actively to adopt measures that will damage them.

      801
      As the debate has unfolded over the past months, we have heard pronouncement after pronouncement against the adoption of the scheme in principle at this time. All the key players have made those pronouncements, including the industry, the unions, the Scottish Parliament and the Select Committee on Scottish Affairs. Even Scotland's estimable First Minister expressed his disappointment that the UK Government would proceed.
      When I said a moment ago that the Treasury had no allies, I was perhaps not being 100 per cent. accurate because it has one ally—the Scottish Socialist party. It was the only party in the Scottish Parliament that failed to support a cross-party motion that called on the UK Government to reverse the damaging scheme. The fact that the Government have to rely on the support of the Trots says a lot about the unsoundness of their proposal.
      Why is there such united opposition in Scotland? The introduction of the tax stamp scheme is seen as damaging to the industry because the case on which it is based involves figures that have been criticised as unreliable. We have heard today about the House of Lords Economic Affairs Committee report and previously about the comments of the National Audit Office—the Economic Secretary is smiling about that for some reason. There has been no proper rigorous analysis of the likely effectiveness of the proposals. Indeed, the Economic Secretary admitted on Second Reading that the Government intended to go ahead with the tax stamp scheme despite the fact that no proper assessment had been made of the risk of counterfeiting. At the same time, however, the UK Government were quick to reject out of hand the industry's entirely reasonable alternative proposals.
      It is correct to say that Government amendments Nos. 50 to 70 offer the possibility of mitigating the significant cost of the scheme to the industry, but I would say no more than that, not least due to the lack of detail and the absence of any assurance from the Economic Secretary tonight about the back-label option. The fundamental point remains that the UK Government have not made an unarguable case for legislating for tax stamps in principle at this time. It is clear that tax stamps will cost the industry; the question is, "How much?"
      Amendment Nos. 35 and 41 represent one last opportunity to scrap the daft and damaging proposals, which is why my Scottish National party colleagues and I will support them. I urge Scottish Labour Members to consider doing the same because in a democratic society, surely the vote should follow the voice. For once, I would have thought it would be important for them to put the interests of their constituents and country ahead of those of the London Chancellor.
      Mr. Alan Reid: It is quite clear that the case for tax stamps on bottles of spirits has not been made. Having said that, I am pleased that the Economic Secretary has held discussions with the spirits industry and tabled amendments that allow for the alternative option of incorporating the stamps on labels. I suggested in Committee that that option would not be as bad as the strip stamp proposal, so I am pleased that the amendments have been tabled.
      802
      Although the alternative proposal of incorporating stamps on labels would be less costly for the industry, I am still firmly of the view that the case for tax stamps has not been made for other reasons. For example, the industry will still face the problems and cost involved in keeping the tax stamps secure, and it might yet be faced with the cost of buying the stamps up front.
      In response to the Scottish Affairs Committee report, the Government said that they were
      "seeking to implement tax stamps without requiring upfront payment for stamps".
      That sounded good, but they went on to say:
      "Realising this ambition is not straightforward".
      That wording is worrying. The Government want to pass the Bill without giving us any assurances that they will come up with a scheme for the deferred payment of duty. In fact, they may not be able to come up with a scheme for deferred payment of duty, which is extremely worryingly and reinforces the argument that it is premature to pass legislation today to introduce a tax stamp scheme.
      Despite all the spin in the press over the weekend, and even though they have undertaken to consider the label stamp alternative, the Government have not abandoned the idea of putting strip stamps on top of bottles. Even if the Chancellor's amendments are made, clause 4 would still allow him to put strip stamps on top of bottles and compel the industry to buy the stamps up front. The Government have not given a satisfactory answer on the threat of forgery. The experience of other countries shows that if tax stamps are introduced, high-quality forgeries will quickly appear. An experienced customs officer could doubtless spot the forgeries, but a tax stamp scheme is meant to ensure that retailers and customers can tell at a glance whether duty has been paid on a bottle. Given that high-quality forgeries are likely to appear, they will probably be good enough to fool retailers and customers, so the scheme would fail.
      There is a wide range of estimates on the extent of duty fraud, and that is no basis on which to introduce tax stamps. The Government should establish a methodology to provide an accurate estimate for the levels of fraud. Once they have done so, they should examine the many alternative anti-fraud measures proposed by the industry. I shall vote for amendment No. 35, because the case for tax stamps has not been made. I am pleased that the Government amendments leave the door open so that they can adopt the industry's suggestion of label stamps. I shall not oppose them because they would make the position less bad, but even with those improvements the case for tax stamps has not been made. The Government have not dealt adequately with security costs, the fact that the industry might have to pay for tax stamps up front and the risk of forged stamps, so I appeal to the House to vote to ditch clause 4.
      Sir Robert Smith: I welcome the fact that my hon. Friend the Member for Yeovil (Mr. Laws) has tabled amendments Nos. 35 and 41, as they allow us, even at this late stage, to say no to the Government proposal.
      The Government have not made the case for imposing such a burden on the industry, but they have tabled amendments to improve a bad situation. My hon.

      803
      Friend reminded the Economic Secretary of his wish to address the concerns of smaller producers and small businesses that produce specialist spirits in small production runs. The Government have not yet shown how they plan to address concerns about the burden on that sector, and there is a limited chance that it will be involved in duty fraud or importing and substitution fraud. Those businesses produce spirits that may, or may not, be aimed at the export market, so they will not know at the time of production whether they want to put labels on the bottles. There will therefore be added problems in the production process.
      I hope that in their discussions with the industry the Government will propose ways of tackling the concerns of one or two-person businesses with small production runs of specialist spirits. Fraud is not a major concern for them, and they do not show up in the statistics on the problem. If the House supports the amendments tabled by my hon. Friend it can show that the Government have not yet made the case for their proposals.
      Mr. Laws: It was useful to have an update from the Economic Secretary on the discussions he has been holding with the Scotch Whisky Association and the wider industry about the Government's proposals. We welcome the Government amendments moved today, which are certainly an improvement on the proposals that the Government put to us when we debated the issue in April. However, two facts remain that make us inclined still to press our amendment to a Division.
      First, there is still no guarantee that the Government will not go ahead with the same proposals that were put to us before and rejected by all the bodies that considered them, including the all-party Scottish Affairs Committee. There is no guarantee that those measures will not go through. Secondly and most decisively, I come back to the conclusion of the Scottish Affairs Committee, which stated in its report just a couple of months ago that, without accurate figures on the extent of fraud, it could be considered precipitate to the point of reckless to continue. We still have no reliable information on which to base an assessment of the balance of costs and benefits. For that reason we intend to press our amendment No. 35 to a Division.
      Question put, That the amendment be made:—
      The House divided: Ayes 147, Noes 252.

      Division No. 216]

      [7:15 pm

      AYES

      Allan, Richard

      Bottomley, Peter (Worthing W)

      Amess, David

      Bottomley, rh Virginia (SW Surrey)

      Arbuthnot, rh James

      Atkinson, David (Bour'mth E)

      Brady, Graham

      Atkinson, Peter (Hexham)

      Brazier, Julian

      Bacon, Richard

      Brooke, Mrs Annette L.

      Baker, Norman

      Browning, Mrs Angela

      Baldry, Tony

      Bruce, Malcolm

      Barker, Gregory

      Burnside, David

      Baron, John (Billericay)

      Burt, Alistair

      Beggs, Roy (E Antrim)

      Cable, Dr. Vincent

      Beith, rh A. J.

      Campbell, rh Sir Menzies (NE Fife)

      Bellingham, Henry

      Bercow, John

      Cash, William

      Beresford, Sir Paul

      Chapman, Sir Sydney (Chipping Barnet)

      Blunt, Crispin

      804

      Chidgey, David

      McIntosh, Miss Anne

      Chope, Christopher

      Mackay, rh Andrew

      Clappison, James

      McLoughlin, Patrick

      Conway, Derek

      Mates, Michael

      Cormack, Sir Patrick

      Maude, rh Francis

      Cotter, Brian

      Mawhinney, rh Sir Brian

      Curry, rh David

      Mercer, Patrick

      Davies, Quentin (Grantham & Stamford)

      Mitchell, Andrew (Sutton Coldfield)

      Djanogly, Jonathan

      Moss, Malcolm

      Dorrell, rh Stephen

      Murrison, Dr. Andrew

      Doughty, Sue

      Norman, Archie

      Duncan, Peter (Galloway)

      Oaten, Mark (Winchester)

      Duncan Smith, rh lain

      O'Brien, Stephen (Eddisbury)

      Evans, Nigel

      Öpik, Lembit

      Ewing, Annabelle

      Osborne, George (Tatton)

      Fabricant, Michael

      Ottaway, Richard

      Fallon, Michael

      Page, Richard

      Flight, Howard

      Paice, James

      Flook, Adrian

      Price, Adam (E Carmarthen & Dinefwr)

      Forth, rh Eric

      Foster, Don (Bath)

      Prisk, Mark (Hertford)

      Francois, Mark

      Pugh, Dr. John

      Garnier, Edward

      Robertson, Hugh (Faversham & M-Kent)

      George, Andrew (St. Ives)

      Gidley, Sandra

      Robertson, Laurence (Tewk'b'ry)

      Goodman, Paul

      Roe, Dame Marion

      Gray, James (N Wilts)

      Rosindell, Andrew

      Grayling, Chris

      Russell, Bob (Colchester)

      Green, Damian (Ashford)

      Salmond, Alex

      Greenway, John

      Sanders, Adrian

      Grieve, Dominic

      Sayeed, Jonathan

      Gummer, rh John

      Shepherd, Richard

      Harvey, Nick

      Spicer, Sir Michael

      Heald, Oliver

      Spink, Bob (Castle Point)

      Heathcoat-Amory, rh David

      Spring, Richard

      Hendry, Charles

      Stanley, rh Sir John

      Hermon, Lady

      Steen, Anthony

      Hogg, rh Douglas

      Streeter, Gary

      Horam, John (Orpington)

      Swayne, Desmond

      Howard, rh Michael

      Swire, Hugo (E Devon)

      Syms, Robert

      Howarth, Gerald (Aldershot)

      Taylor, Matthew (Truro)

      Jackson, Robert (Wantage)

      Taylor, Sir Teddy

      Jenkin, Bernard

      Teather, Sarah

      Johnson, Boris (Henley)

      Thomas, Simon (Ceredigion)

      Keetch, Paul

      Tonge, Dr. Jenny

      Kennedy, rh Charles (Ross Skye & Inverness)

      Turner, Andrew (Isle of Wight)

      Tyler, Paul (N Cornwall)

      Key, Robert (Salisbury)

      Tyrie, Andrew

      Kirkbride, Miss Julie

      Waterson, Nigel

      Knight, rh Greg (E Yorkshire)

      Weir, Michael

      Lait, Mrs Jacqui

      Whittingdale, John

      Lansley, Andrew

      Wiggin, Bill

      Laws, David (Yeovil)

      Wilkinson, John

      Leigh, Edward

      Willetts, David

      Letwin, rh Oliver

      Williams, Hywel (Caernarfon)

      Lewis, Dr. Julian (New Forest E)

      Williams, Roger (Brecon)

      Liddell-Grainger, Ian

      Wishart, Pete

      Lidington, David

      Young, rh Sir George

      Lilley, rh Peter

      Llwyd, Elfyn

      Tellers for the Ayes:

      Loughton, Tim

      Mr. Alan Reid and Sir Robert Smith

      Luff, Peter (M-Worcs)

      NOES

      Adams, Irene (Paisley N)

      Baird, Vera

      Ainger, Nick

      Banks, Tony

      Ainsworth, Bob (Cov'try NE)

      Barnes, Harry

      Allen, Graham

      Battle, John

      Anderson, rh Donald (Swansea E)

      Beard, Nigel

      Anderson, Janet (Rossendale & Darwen)

      Begg, Miss Anne

      Bell, Sir Stuart

      Atherton, Ms Candy

      Bennett, Andrew

      Austin, John

      Benton, Joe (Bootle)

      Bailey, Adrian

      Berry, Roger

      805

      Betts, Clive

      Griffiths, Win (Bridgend)

      Blears, Ms Hazel

      Grogan, John

      Blizzard, Bob

      Hall, Mike (Weaver Vale)

      Borrow, David

      Hall, Patrick (Bedford)

      Bradley, rh Keith (Withington)

      Hanson, David

      Bradley, Peter (The Wrekin)

      Harris, Tom (Glasgow Cathcart)

      Bradshaw, Ben

      Havard, Dai (Merthyr Tydfil & Rhymney)

      Brennan, Kevin

      Browne, Desmond

      Healey, John

      Bryant, Chris

      Henderson, Doug (Newcastle N)

      Burgon, Colin

      Hendrick, Mark

      Byers, rh Stephen

      Heppell, John

      Cairns, David

      Heyes, David

      Campbell, Mrs Anne (C'bridge)

      Hinchliffe, David

      Campbell, Ronnie (Blyth V)

      Hodge, Margaret

      Cawsey, Ian (Brigg)

      Hope, Phil (Corby)

      Challen, Colin

      Hopkins, Kelvin

      Chapman, Ben (Wirral S)

      Howarth, rh Alan (Newport E)

      Chaytor, David

      Howarth, George (Knowsley N & Sefton E)

      Clapham, Michael

      Clark, Mrs Helen (Peterborough)

      Howells, Dr. Kim

      Clark, Dr. Lynda (Edinburgh Pentlands)

      Hoyle, Lindsay

      Hughes, Kevin (Doncaster N)

      Clarke, rh Tom (Coatbridge & Chryston)

      Humble, Mrs Joan

      Hurst, Alan (Braintree)

      Clarke, Tony (Northampton S)

      Iddon, Dr. Brian

      Clelland, David

      Illsley, Eric

      Clwyd, Ann (Cynon V)

      Ingram, rh Adam

      Coaker, Vernon

      Irranca-Davies, Huw

      Coffey, Ms Ann

      Jamieson, David

      Cohen, Harry

      Johnson, Miss Melanie (Welwyn Hatfield)

      Corbyn, Jeremy

      Corston, Jean

      Jones, Helen (Warrington N)

      Cranston, Ross

      Jones, Jon Owen (Cardiff C)

      Cryer, Ann (Keighley)

      Jones, Lynne (Selly Oak)

      Cummings, John

      Jones, Martyn (Clwyd S)

      Cunningham, Jim (Coventry S)

      Keeble, Ms Sally

      Cunningham, Tony (Workington)

      Kelly, Ruth (Bolton W)

      Curtis-Thomas, Mrs Claire

      Kennedy, Jane (Wavertree)

      Davey, Valerie (Bristol W)

      Khabra, Piara S.

      Davies, rh Denzil (Llanelli)

      Kidney, David

      Davies, Geraint (Croydon C)

      Kilfoyle, Peter

      Dawson, Hilton

      King, Andy (Rugby)

      Dean, Mrs Janet

      King, Ms Oona (Bethnal Green & Bow)

      Denham, rh John

      Dhanda, Parmjit

      Knight, Jim (S Dorset)

      Dismore, Andrew

      Ladyman, Dr. Stephen

      Dobbin, Jim (Heywood)

      Lammy, David

      Dobson, rh Frank

      Lawrence, Mrs Jackie

      Doran, Frank

      Lepper, David

      Dowd, Jim (Lewisham W)

      Leslie, Christopher

      Drew, David (Stroud)

      Levitt, Tom (High Peak)

      Dunwoody, Mrs Gwyneth

      Lewis, Ivan (Bury S)

      Eagle, Maria (L'pool Garston)

      Lewis, Terry (Worsley)

      Edwards, Huw

      Liddell, rh Mrs Helen

      Efford, Clive

      Linton, Martin

      Ellman, Mrs Louise

      Lloyd, Tony (Manchester C)

      Ennis, Jeff (Barnsley E)

      Love, Andrew

      Etherington, Bill

      Lucas, Ian (Wrexham)

      Farrelly, Paul

      Luke, lain (Dundee E)

      Field, rh Frank (Birkenhead)

      Lyons, John (Strathkelvin)

      Fisher, Mark

      McCafferty, Chris

      Fitzpatrick, Jim

      McFall, rh John

      Fitzsimons, Mrs Lorna

      McIsaac, Shona

      Flint, Caroline

      McKechin, Ann

      Flynn, Paul (Newport W)

      McKenna, Rosemary

      Follett, Barbara

      McNamara, Kevin

      Foster, rh Derek

      McNulty, Tony

      Foster, Michael Jabez (Hastings & Rye)

      McWalter, Tony

      Mahon, Mrs Alice

      Foulkes, rh George

      Mandelson, rh Peter

      Francis, Dr. Hywel

      Marris, Rob (Wolverh'ton SW)

      Gerrard, Neil

      Marsden, Gordon (Blackpool S)

      Gibson, Dr. Ian

      Marshall-Andrews, Robert

      Goggins, Paul

      Martlew, Eric

      Griffiths, Jane (Reading E)

      Meale, Alan (Mansfield)

      806

      Milburn, rh Alan

      Smith, Geraldine (Morecambe & Lunesdale)

      Miliband, David

      Miller, Andrew

      Smith, Jacqui (Redditch)

      Moffatt, Laura

      Smith, Llew (Blaenau Gwent)

      Mole, Chris

      Soley, Clive

      Morgan, Julie

      Southworth, Helen

      Mountford, Kali

      Starkey, Dr. Phyllis

      Munn, Ms Meg

      Stevenson, George

      Norris, Dan (Wansdyke)

      Stewart, David (Inverness E & Lochaber)

      O'Brien, Bill (Normanton)

      O'Hara, Edward

      Stinchcombe, Paul

      Olner, Bill

      Stoate, Dr. Howard

      O'Neill, Martin

      Strang, rh Dr. Gavin

      Osborne, Sandra (Ayr)

      Stringer, Graham

      Owen, Albert

      Stuart, Ms Gisela

      Pearson, Ian

      Taylor, Dari (Stockton S)

      Perham, Linda

      Thomas, Gareth (Clwyd W)

      Picking, Anne

      Timms, Stephen

      Pickthall, Colin

      Todd, Mark (S Derbyshire)

      Pike, Peter (Burnley)

      Touhig, Don (Islwyn) Jon

      Plaskitt, James

      Trickett, Jon

      Pollard, Kerry

      Truswell, Paul

      Pond, Chris (Gravesham)

      Turner, Dennis (Wolverh'ton SE)

      Pope, Greg (Hyndburn)

      Turner, Dr. Desmond (Brighton Kemptown)

      Pound, Stephen

      Prentice, Ms Bridget (Lewisham E)

      Turner, Neil (Wigan)

      Twigg, Derek (Halton)

      Tynan, Bill (Hamilton S)

      Prentice, Gordon (Pendle)

      Vaz, Keith (Leicester E)

      Primarolo, rh Dawn

      Walley, Ms Joan

      Prosser, Gwyn

      Ward, Claire

      Purchase, Ken

      Wareing, Robert N.

      Purnell, James

      Watts, David

      Quin, rh Joyce

      White, Brian

      Quinn, Lawrie

      Whitehead, Dr. Alan

      Rapson, Syd (Portsmouth N)

      Wicks, Malcolm

      Reed, Andy (Loughborough)

      Williams, rh Alan (Swansea W)

      Robertson, John (Glasgow Anniesland)

      Williams, Betty (Conwy)

      Wills, Michael

      Roy, Frank (Motherwell)

      Winnick, David

      Ruane, Chris

      Winterton, Ms Rosie (Doncaster C)

      Russell, Ms Christine (City of Chester)

      Worthington, Tony

      Ryan, Joan (Enfield N)

      Wright, Anthony D. (Gt Yarmouth)

      Savidge, Malcolm

      Sawford, Phil

      Wright, David (Telford)

      Sedgemore, Brian

      Wright, Tony (Cannock)

      Sheridan, Jim

      Skinner, Dennis

      Tellers for the Noes:

      Smith, rh Chris (Islington S & Finsbury)

      Margaret Moran and Charlotte Atkins

      Question accordingly negatived.

  Schedule 1

    NEW SCHEDULE 2A TO THE ALCOHOLIC LIQUOR DUTIES ACT 1979
    Amendments made: No. 50, in page 265, line 11, after 'circumstances', insert
    ',and with a duty stamp of such a type,'.
    No. 51, in page 265, line 23, leave out lines 23 to 26 and insert—
    '() it carries a duty stamp of a type mentioned in sub-paragraph (5)(a) below which has been affixed to the container in a way that complies with the requirements of regulations under this Schedule, or
    () it carries a label which has been so affixed to the container and the label incorporates a duty stamp of a type mentioned in sub-paragraph (5)(b) below.'.
    No. 52, in page 265, line 27, leave out from 'means' to end of line 34 and insert 'any of the following—

    (a) a document (a "type A stamp") issued by or on behalf of the Commissioners which—

    (i) is designed to be affixed to a retail container of alcoholic liquor, and

    (ii)indicates that the appropriate duty, or an amount representing some or all of the appropriate duty, has been (or is to be) paid;

    (b) a part of a label for a retail container of alcoholic liquor (a "type B stamp") which—

    (i) is incorporated in the label under the authority of the Commissioners, and

    (ii) indicates that the appropriate duty, or an amount representing some or all of the appropriate duty, has been (or is to be) paid.'.

    No. 53, in page 266, line 2, leave out 'document' and insert
    'stamp, or the label incorporating the stamp,'.
    No. 54, in page 266, line 18, leave out lines 18 to 23 and insert—
    '3 (1) The Commissioners may by regulations make provision as to the terms and conditions on which a person may obtain—

    (a) a type A stamp,

    (b) authority to incorporate in a label a type B stamp,

    (c) authority to obtain a label incorporating a type B stamp,

    (d) authority to affix such a label to a retail container of alcoholic liquor.

    (1A) Regulations under sub-paragraph (1) above may in particular make provision for or in connection with—

    (a) requiring a person in prescribed cases or circumstances to pay, or agree to pay, the prescribed amount to the Commissioners or to a person authorised by the Commissioners for this purpose;

    (b) requiring a person in prescribed cases or circumstances to provide to the Commissioners such security as they may require in respect of payment of the appropriate duty.'.

    No. 55, in page 266, line 24, leave out '(1)(a)' and insert '(1A)(a)'.
    No. 56, in page 266, line 27, at beginning insert
    'in the case of a type A stamp,'.
    No. 57, in page 266, line 27, at end insert—
    '() Regulations under sub-paragraph (1) above may also in particular make provision for or in connection with requiring or enabling the Commissioners to bear, in prescribed circumstances, in the case of a type B stamp, all or part of so much of the cost of producing the label as is attributable to the incorporation in it of the stamp.'.
    No. 58, in page 266, line 34, after 'stamp' insert
    ',or the label incorporating the stamp,'.
    No. 59, in page 266, line 41, leave out line 41 and insert—
    '() the times at which a retail container must bear a duty stamp;
    () the type of duty stamp (see paragraph 1(5)) with which a retail container is to be stamped in any particular case or circumstances;'.
    No. 60, in page 266, line 42, at end insert
    '(including the production of a label incorporating a type B stamp)'.
    No. 61, in page 266, line 44, leave out 'duty' and insert 'type A'.
    No. 62, in page 267, line 1, leave out lines 1 and 2 and insert—
    '() the procedure for obtaining—

    (i) a type A stamp,

    (ii) authority to incorporate in a label a type B stamp,

    (iii) authority to obtain a label incorporating a type B stamp,

    (iv) authority to affix such a label to a retail container of alcoholic liquor,

    (including provision setting periods of notice);'.
    No. 63, in page 267, line 3, leave out 'duty stamp' and insert
    'type A stamp, or a label incorporating a type B stamp,'.
    No. 64, in page 267, line 4, leave out from 'for,' to end of line 6 and insert
    'in prescribed circumstances and subject to such conditions as may be prescribed, all or part of a payment made under or by virtue of this Schedule to the Commissioners or to a person authorised by the Commissioners;'.
    No. 65, in page 267, line 12, leave out from 'preventing' to end of line 14 and insert
    'a type A stamp, or a label incorporating a type B stamp, from being used by a person other than—

    (a) in the case of a type A stamp, the person to or for whom the stamp was issued or a person authorised by that person to affix the stamp to a retail container of alcoholic liquor,

    (b) in the case of a type B stamp, the person to or for whom authority to obtain the label incorporating the stamp, or to affix that label to a retail container of alcoholic liquor, was given by the Commissioners.'.

    No. 66, in page 268, line 34, leave out lines 34 to 38 and insert—
    '() This paragraph applies where a person—

    (a) alters a type A stamp, otherwise than in accordance with regulations under this Schedule, after it has been issued, or

    (b) so alters a type B stamp after the label in which it is incorporated has been produced.

    () His conduct attracts a penalty under section 9 of the Finance Act 1994 (civil penalties).
    () The stamp, or the label in which it is incorporated, is liable to forfeiture.'.
    No. 67, in page 268, line 41, leave out from 'stamped' to end of line 6 on page 269 and insert
    'any of the items mentioned in sub-paragraphs (1A) to (1D) below.
    (1A) The first is—

    (a) a type A stamp, or

    (b) a label incorporating a type B stamp,

    if the stamp is not a correct stamp for that container in accordance with regulations made under this Schedule.
    (1B) The second is—

    (a) a type A stamp that has been altered, otherwise than in accordance with regulations under this Schedule, after it has been issued, or

    (b) a label incorporating a type B stamp if the stamp has been so altered after the label has been produced.

    (1C) The third is an item that purports to be, but is not,—

    (a) a type A stamp, or

    (b) a label incorporating a type B stamp.

    (1D) The fourth is any label or other item affixed in such a way as to cover up all or part of—

    (a) a type A stamp affixed to the container, or

    (b) a type B stamp incorporated in a label affixed to the container,

    except where the label or other item is so affixed in accordance with regulations under this Schedule.'.
    No. 68, in page 269, line 16, at end insert
    '(including, in the case of a container, its contents)'.
    No. 69, in page 269, line 21, leave out lines 21 to 26 and insert—
    '() The following items are liable to forfeiture.
    () The first is an item that purports to be, but is not,—

    (a) a type A stamp, or

    (b) a label incorporating a type B stamp.

    () The second is—

    (a) a type A stamp that has been altered, otherwise than in accordance with regulations under this Schedule, after it has been issued, or

    (b) a label incorporating a type B stamp if the stamp has been so altered after the label has been produced.

    () The third is—

    (a) a type A stamp, or

    (b) a label incorporating a type B stamp, that is in a person's possession unlawfully.'.

    No. 70, in page 269, line 36, at end insert—
    ' "type A stamp" has the meaning given by paragraph 1(5)(a) above;
    "type B stamp" has the meaning given by paragraph 1(5)(b) above.'.—[Dawn Primarolo.]
    Motion made, and Question proposed, That further consideration be now adjourned.—[Mr. Ainger.]
    7.28 pm
    Mr. Salmond: I should like to speak against that motion, if I may. It is 7.28 pm and we are debating the Finance Bill, which is a very important measure—arguably the most important of the parliamentary calendar. Several key issues were due to be debated today. The next groups of amendments deal with fuel duty, income tax, corporation tax, taxation in relation to historic houses, which I did not intend to speak on myself, although I am sure that it is a vital matter, pension scheme benefits and contributions and, finally, relief for petroleum exploration activities, on which I had prepared a few short remarks. I hope to have the opportunity to share that information with the House later this evening. My point is simple, and I was not intending to—[Interruption.]
    Mr. Deputy Speaker (Sir Michael Lord): Order. Hon. Members must come to order and listen to the hon. Gentleman who is addressing the House.
    Mr. Salmond: I was not intending to give the House the full extent of the remarks that I was going to make later this evening, but I am quite happy to do so if Members are enthusiastic enough to listen to them.
    My point is a serious one. I do not think it right, when these matters in the Finance Bill have been set down for debate today, that the Government should announce their desire to pull stumps at 7.30 in the evening. I have
    810
    no doubt that that has been done in co-operation with the official Opposition. As we know, however, on so many issues ranging from Iraq across the social and economic agenda, the official Opposition offer no opposition whatever. Everyone is aware of that, but some of us would like to go on debating the matters before us. I should like to hear from the Government, and from Treasury Ministers in particular, that provision will be made for us to discuss all these vital matters tomorrow or another day, and that the House will not be deprived of the opportunity to hear my remarks on petroleum exploration—[Interruption.] The Tories may giggle at that, but with so many jobs in Scotland—
    Dawn Primarolo: Will the hon. Gentleman give way?
    Mr. Salmond: Of course I will.
    Dawn Primarolo: I am sure that if the hon. Gentleman had had time in his busy day to look at the Order Paper, he would have seen that we have six and a half hours tomorrow to discuss the remaining business. That will be ample time and he will be able to make his contribution then.
    Mr. Salmond: I always feel a great friendship towards the right hon. Lady because, a few years ago in a Budget debate, she was one of the few Members who supported an intervention about the poll tax and a few other things in the middle of Lord Lawson's Budget. She had the strength and integrity at that time—and I dare say that she has carried them through into her Government position—to see a point of justice when it was made. She says that we have six hours tomorrow, but I note that we have already spent a considerable amount of time on our debate today, and we have reached only the seventh or eighth group of amendments.
    I have not detained the House up until now. My colleagues have not detained the House either; they have restricted their remarks to the vital Scottish interest of tax labelling on whisky. I want some indication that, if we continue to make progress at this rate, time will be allowed for us to get to the vital matters that I and others want to debate. We had the choice to stay here beyond 7.30 this evening and to take the appropriate time for our debate, and I think that hon. Members should be prepared to stay later. That is what our constituents would expect of us. The Minister's saying that there are six hours tomorrow does not guarantee that proper time will be available to debate these vital issues. I would be happy to give way to her again, if she can give me an assurance on that. I really would like a wee bit more than to be told that there are six hours tomorrow, when we have already spent that amount of time on our debate today and made very little progress.
    Dawn Primarolo: I am trying to assist the hon. Gentleman. The estimate was that the remaining business would take approximately six and a half hours tomorrow. I can assure him that there will be enough time tomorrow to complete the outstanding business on the Finance Bill. He will have every opportunity to contribute to each of the debates tomorrow. There is plenty of time. I am giving him the assurance that he seeks.
    Mr. Salmond: I shall ignore the "Watch with Mother" voice in which that was presented to me, and take the assurance from the Minister, along with the nods from the Whips further along the Treasury Bench, which are even more reassuring. I shall hold the Government to that guarantee, and I look forward to seeing the Ministers in the debate tomorrow.
    Question put and agreed to.
    Bill to be further considered tomorrow.

  DELEGATED LEGISLATION
  Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),
  DELEGATED LEGISLATION

    SUPREME COURT OF ENGLAND AND WALES
    That the draft Courts Act 2003 (Consequential Amendments) Order 2004, which was laid before this House on 10th June, be approved.—[Mr. Ainger.]
    Question agreed to.
    Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

    COUNTRYSIDE
    That the draft Chilterns Area of Outstanding Natural Beauty (Establishment of Conservation Board) Order 2004, which was laid before this House on 16th June, be approved.
    That the draft Cotswolds Area of Outstanding Natural Beauty (Establishment of Conservation Board) Order 2004, which was laid before this House on 16th June, be approved.—[Mr. Ainger.]
    Question agreed to.

  National Neighbourhood Watch Association
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Ainger.]
  7.35 pm
  Matthew Taylor: I am grateful for the opportunity to raise an extremely important issue, which has been raised in the other place and by other Members of Parliament, not least by a number of Labour Back Benchers, who have been expressing concern with an early-day motion and representations to Ministers. No doubt they, like me, have been contacted by local neighbourhood watch members and co-ordinators who are aware of the concerns that have been raised at national level.
  First, it is worth saying that there is pretty much universal support in the House for local neighbourhood watch schemes. They have been extremely effective, they are essentially voluntary, they exist in many parts of the community, across the country, and their success is perhaps best illustrated by the fact that many insurance companies will offer discounts on insurance for people who live in areas where neighbourhood watch schemes are active. Whereas many of the Government initiatives for which we argue in terms of tackling crime cost money—whether that is more police on the beat, or some other campaign—neighbourhood watch comes at very little cost to Government or local police authorities, it is done by volunteers and it works. There is not much else that can be described in those terms. It is invaluable.
  The national body is a registered charity and was formed in 1995 by volunteers, for a number of reasons. Partly, it was in response to quite a controversial speech by the then Home Secretary, the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) and leader of the Conservative party, who proposed changes to neighbourhood watch, which implied getting out and being active on the streets. The volunteers were concerned that that implied a kind of vigilantism, which they did not want. One of the reasons for the formation of the organisation was therefore to give a voice to concerns at national level and to make representations to Government on an independent basis. It does more than simply provide a voice for the local organisations and volunteers; it also provides support, training, legal advice and conferences.
  The reason that I have sought this Adjournment debate is that there now seems to be a serious question mark as to whether that national association will be able to continue in existence at all. It has been reliant for some years on a national sponsorship deal, which it sought to renew with a new organisation, and thought that it had succeeded in doing so, but at the last moment it was effectively blocked by a Home Office decision. It sought Government support as an alternative on a temporary basis, but that has been blocked because the Government claim that an audit cast doubt on the organisation's financial viability—the organisation has no argument on the financial issue, which is why it supports the Government sponsorship, so there is a degree of tautology in the Home Office's argument. In

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  addition, the audit highlights a shortage of money, not poor bookkeeping, which is the impression that has been given.
  James Purnell: I support completely what the hon. Gentleman said about the great work of the neighbourhood watch in all our areas, including in my area of Stalybridge and Hyde. I am slightly unsure about whether he is saying that there should be ongoing financial support from the Government. My understanding of the position of the association is that it wanted to have private money as its long-term base of funding, so that it can remain independent.
  Matthew Taylor: The organisation wants to maintain its independence, for the reasons that I mentioned at the outset. That is partly why it was formed in the first place. The point is that because the sponsorship deal is caught up in a wrangle with the Home Office, temporary funding is needed to see the organisation through. That is why the argument that it is not financially viable is a bit of a tautology. The Home Office accepts that it would be viable if the sponsorship were there; the Home Office has caused problems with the finalising of the sponsorship deal; the organisation has therefore asked for temporary funding; the Home Office appears to be saying that it will not provide the funding on the ground that the organisation has not enough money to run itself. That is clearly a circular argument.
  I want to start with the issue of the private funding, because it needs to be explained. The original sponsorship arrangement was with Norwich Union. It was in place from 1994 until 2003. I do not think there is any dispute about the fact that it worked well. There were no Home Office objections, and it involved the exclusive commercial use of the neighbourhood watch logo. That was, of course, key to the process in which Norwich Union was involved: it wanted to be seen to back an organisation, have the use of the logo and support the local neighbourhood watch. No doubt it considered that commercially advantageous as well. The arrangement was ended by Norwich Union when its ownership changed and it had new priorities, not because of any dispute with the association or any disagreement about the important role of neighbourhood watch.
  Over the past 18 months, the association has been working to secure new sponsorship. A major high street bank has agreed to sponsorship, essentially on the same terms as Norwich Union. As a result, by 2008 £1 million per annum would be flowing to local neighbourhood watch groups. The agreement was due to be signed on 19 March, but the Home Office and Treasury solicitors wrote to the association's trustees on 17 March—just two days beforehand—threatening possible legal action over the logo.
  That brings me to the issue of the logo. As far as I can see, there is no history of any original dispute with the association. After all, the logo has been used in this way for many years, with, it appears, complete Home Office agreement. In 2002, however, another insurer, Direct Line, began using it without permission.
  Following a challenge, the association and the Home Office were asked by Direct Line's insurers to provide evidence of copyright. They failed to do so. There were
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  no documents and no artwork to be provided by the Home Office to show that it had the copyright. The Treasury solicitors were apparently saying that most records since 1985 had been destroyed. In the meantime, it emerged not only that Direct Line was going down this route, but that the home watch logo—which is used instead of the neighbourhood watch logo in some areas—had been registered by two companies, with no authorisation or agreement whatever.
  The advice to the National Neighbourhood Watch Association from its lawyers was that it had no option but to protect the neighbourhood watch trade mark itself, as the Home Office could not establish Crown copyright. Private commercial companies were rapidly starting to use it, and it was clearly at risk of being lost altogether and abused by other private organisations. For the Home Office to suggest that the association had some ulterior motive in deciding to register copyright at this point is ludicrous. Why would it want to abuse its own logo, given that it consists effectively of local organisations that have come together at national level? Nor was it seeking to do anything that it had not done before with Home Office agreement. The Norwich Union agreement had been in place for many years; the association simply sought to replicate it.
  The Minister wrote to me saying,
  "by this action, the National Neighbourhood Watch Association sought to change the entire basis on which Neighbourhood Watch has always operated".
  I cannot see how that can be true, given that for so many years it operated on exactly that basis. The registration process was carried out through all the usual channels, with advertisements in the appropriate journals, and the association's lawyers took it through the process. Nor was the process clandestine. The issue of copyright was discussed with Home Office officials following proceedings against Direct Line. In January 2003, the Home Office suggested that ownership be transferred to the National Neighbourhood Watch Association—and that is in writing.
  The Home Office knew about that process for months, so why wait until just two days before the signing of a commercial sponsorship arrangement? There were never any objections about Norwich Union's usage. Exclusivity is clearly essential if the national association is to secure commercial sponsorship. It sought Crown copyright action to stop Direct Line abusing the logo and other organisations registering it. It would have been happy if the Home Office could have stopped other organisations abusing it. That is what it wanted, but that did not happen.
  The central point is to ask whether the Minister—I appreciate that these are difficult issues—will agree to step back and reconsider the issue. As I understand it, there is no issue for the National Neighbourhood Watch Association about who has the copyright. The issue is that, whether the copyright is in the hands of the national association or the Government, the aim is to stop private companies abusing it, as Direct Line sought to do and as others have done in registering the home watch title.
  That brings us to the issue of public funding. Following the breakdown of the commercial sponsorship proposal at the last minute, the

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  Government allocated grants through to the end of 2003 and early 2004 to help to resolve the inevitable financial shortfall, but further support is being withheld due to what the Government describe as an audit report. The Minister wrote to me, saying that
  "government accounting rules preclude giving public funds to organisations which are financially unsound."
  The way in which the matter has been reported would give the impression that there was something wrong with the financial management of the national association. The Mail on Sunday, for example, quotes a Home Office source as saying:
  "NNWA's books are not in good shape".
  The Home Office view is that they are "financially unsound" but it was not an official audit. It was a funding review, which concluded that, without the commercial sponsorship, the national association is short of funds. However, that is why it is applying to the Government for funding. It would not be asking them for that if it were not short of funds. I cannot see what the dispute is.
  Until I hear from the Minister, all I can take is the national association's view. It says that at no point did the auditors find fault with its accounting controls or processes. Indeed, it has a good financial performance record. It has been audited by KPMG year after year in accordance with charity law. Not only has KPMG approved the books but it has not issued a management letter for the past three years, which is more than can be said of many companies, so the financial management is, in any normal sense, clearly sound. Indeed, if there is an issue about people getting the figures wrong, it is to do with the Government's own financial review, since its authors did not consult the national association management during the review, or share their findings prior to publication so that matters could be clarified or resolved if there were concerns.
  The proof of the pudding—no audit company would allow that to happen because it would check with the organisation—is that on 17 May a Home Office official wrote to the national association admitting that
  "owing to a misunderstanding I am not confident that the profit and loss account at Appendix 4 of the report is entirely accurate".
  Therefore, if there is any mismanagement here, it seems to be with the Government, not the national association.
  Clearly, the authors of the audit recognise that the association would be self-supporting if a contract with a commercial sponsor were secured, which brings us back to the question of why that is effectively being blocked.
  We know from debates in the House of Lords that the Government have now said that they would step in if the NNWA folds. The Lords Home Office Minister said that
  "if the national organisation … has to fold, of course, we will put measures in place to ensure that there is a national support network."—[Official Report, House of Lords, 27 May 2004; Vol. 661, c. 1434.]
  But the whole point of the network is not just that it runs conferences and provides training and support, but that it is an independent voice for the local volunteers. Frankly, in effect the NNWA appears to be being nationalised through the back door and taken over by the Government. That is highly inappropriate for an organisation that is entirely dependent on volunteers.
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  Last weekend, The Observer reported the Minister for Crime Reduction, Policing and Community Safety as saying that the Government want to "beef up" neighbourhood watch schemes to become "Neighbourhood Action schemes". What does the Minister mean by "Neighbourhood Action schemes"? That sounds rather like the proposals introduced by a former Conservative Home Secretary, who talked in 1995 about "Getting them out on the streets, rather than just looking through their windows". In fact, that was the very issue that led to the formation of the NNWA, which argued that it did not think that an appropriate use of the volunteer network.
  The Minister will agree with me about the importance of Neighbourhood Watch at a local level. I hope that she agrees that the ideal solution is to maintain a national umbrella organisation that reflects and responds to local community groups, and which is able to continue to provide support and training, and an independent voice and conferencing, for such people. That is important not least because it is much the most likely way of continuing to get people to take part in the NNWA.
  In the light of that, and given that Ministers have never had a problem with exclusive use of the logo being the basis of the organisation's funding and sponsorship, it is a little hard to understand why it should be such a great problem now. If they do not want the NNWA to hold the copyright, it should be simple to resolve the problem through Crown copyright processes. In the light of my discussions with the NNWA, I do not believe that it has any problem with that idea. However, the NNWA and local neighbourhood watch associations—and, indeed, the Government—cannot live with people such as Direct Line simply using the logo ad hoc, with Government solicitors apparently unable to prove that there was Crown copyright. In the light of that understanding, I hope that the Minister will reconsider and see whether there is a way to resolve these issues.
  A number of criticisms have been made of the NNWA that are misplaced, and I shall give one more example of why I am concerned about the funding review—the so-called audit. The review argues that the NNWA secured premises in Buckingham gate that were more expensive than elsewhere, but we should remember that that was part of the Norwich Union sponsorship deal, which was self-funding. In fact, that brought in a profit of £50,000 per annum, rather than resulting in a net cost; indeed, that is admitted elsewhere in the funding review document.
  Secondly, the review looked at eight comparators, including moving elsewhere—it was to either Stockport or Stockton, I cannot remember which—where rents were as low as £16.50 per sq ft. But because of existing staff costs and the sponsorship deal, that would have proved more expensive than the offices that the NNWA had secured. The costs were the lowest of the eight comparators examined—a fact that would have been known, had the authors of the funding review taken the trouble to discuss matters with the NNWA before publication.
  I know that the Minister did not herself conduct the review and that she is reliant on information from her officials, but there are real issues that need to be resolved. The NNWA has been pressing for a meeting for some time, and she has now agreed to meet its representatives. I hope that, in the light of what I have

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  said, she will meet them with a very open mind, and that we can solve these problems in a manner that deals with the concerns of various Members, including her own Back Benchers.
  7.54 pm
  The Minister for Crime Reduction, Policing and Community Safety (Ms Hazel Blears): This debate is very important. Probably every single Member will know of neighbourhood watch and many will be members of home watch schemes in their constituencies. It is an amazing organisation—there are 155,000 local schemes covering 6 million people in this country—and the largest volunteer organisation that we have. I want to put on record at the outset the Home Office's huge regard for the work that neighbourhood watch does, not just in monitoring crime but in playing an increasingly active part in making communities safer. Much of that work is done selflessly by volunteers up and down the country.
  The Home Secretary has made it clear in his Edith Kahn and Scarman lectures that we regard neighbourhood watch as a key component of the civil renewal programme on which we are seeking to embark, which aims to build capacity in local communities to be able to tackle some of the issues. The work of neighbourhood watch is beyond question.
  The question today is about the status of the National Neighbourhood Watch Association, its relationship with the Home Office, its funding, its use of the logos and its relationship with local and regional parts of the neighbourhood watch movement. I want to address each of those matters in turn.
  It is important to bear in mind that the NNWA was set up only nine years ago and did not exist when neighbourhood watch came into being some 20 years ago. It is a relatively new organisation that had the general aim of furthering the objectives of neighbourhood watch, but was not set up either to take over the running of neighbourhood watch, nor to control, supervise or in any way regulate the way in which local neighbourhood watch schemes operated at local level. It was not the sort of national organisation to which local organisations would be subservient, setting rules, regulations and supervising operations. It is a different organisation.
  Mr. Paul Tyler: I have listened with care to what the Minister has said about the network, and we all endorse what she says about the importance of those involved feeling that they are volunteers. Does she accept that the national association was set up democratically by the network and was not imposed from above? Does she also accept that there is an important point here regarding perception? The perception of the volunteers is that there is a control-freak tendency in the Home Office that wants to take over the network. If that were to happen, the volunteers would simply leave in their droves.
  Ms Blears: There are two issues, here. The first is whether the national association was set up democratically. There are lots of interpretations of the word "democratic". It is my understanding that local associations are not required to affiliate to the national
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  association. They do not elect people in the normal way; we do not see every single member of the home watch organisations having one vote in electing the trustees. We are not talking about that kind of subscription organisation in those terms. Some local organisations are affiliated; some are not. We have had letters and e-mails from local volunteers who have never heard of the national association, so I do not entirely accept the hon. Gentleman's contention that this is a vibrant, democratic organisation, owned by its members.
  I want to put a stop here and now to the second issue that the hon. Gentleman raised. There is absolutely no intention within the Home Office to take over neighbourhood watch. It is a vibrant volunteer organisation, and we want to support, facilitate, enable and empower it to develop in the way that many local organisations want.
  I recently met some active co-ordinators from neighbourhood watch who said that they thought the organisation was in need of some updating and development. It is not active in many of the inner-city, high-crime areas in the country and many neighbourhood watch volunteers would acknowledge that the coverage needs to be developed into areas that could benefit from such volunteer activity. Perhaps there are not enough young people involved in some of our neighbourhood watch activities. If we want to ensure that neighbourhood watch addresses something like antisocial behaviour—a big concern now—as well as crime, we need to see how we can develop the organisation. But there is absolutely no intention for us to dominate it from the centre; we want to facilitate it locally.
  James Purnell: I think that many will welcome the Minister's point that the Home Office has no interest in controlling the organisation. I was delighted to hear that my hon. Friend will shortly have a meeting, but in advance of it, can she tell us how big a stumbling block the copyright of the logo is? I encourage her to use her good offices, as she has already, to find a way through that particular problem.
  Ms Blears: I want to deal with the issue of the copyright logo and to refute the suggestion that the Home Office's last-minute intervention into copyright matters was designed to frustrate the success of the sponsorship deal. That was absolutely not the case. Indeed, my understanding is that the Home Office intervened as soon as it became aware of attempts by the national association to seek copyright of the logos. Had it been brought to our attention earlier, we would have been in a position to intervene earlier.
  The logo is an important matter. The Central Office of Information designed it in 1994 on behalf of the Home Office. It is therefore Crown copyright. We received complaints from local neighbourhood watches and from one police force that the National Neighbourhood Watch Association had, in early 2003, registered the logo as its own trade mark. That was done without consulting the Home Office, the police or neighbourhood watch more generally. That is why we are attempting to take steps to resolve that situation with the national association to restore ownership and control of the neighbourhood watch trade marks to the Home Office, because we want to ensure that local and

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  regional associations can continue to use it. If exclusive use of the trade mark is given to any sort of commercial organisation, the local associations could be debarred from using it themselves, which would be an absolute tragedy, because the local associations need access to the well recognised trade mark.
  Matthew Taylor: I appreciate that the Minister is reliant on her brief, but I have to ask her why, if there is a clear Crown copyright, it was not possible to establish it in the court case with Direct Line, which took to using it on the grounds that it was not copyrighted? Also, why did the Home Office make a written suggestion in January 2003 to transfer the ownership to the NNWA as a means of resolving the problem?
  Ms Blears: I have not had sight of the letter to which the hon. Gentleman refers, but I will happily consider it and respond to it in due course. Neither am I aware of the particular negotiations in the court case, but I will happily respond when I can. I can tell the hon. Gentleman that the original deal with Norwich Union was not an exclusive deal. It retained the right for local and regional associations to use the copyright. What we are talking about here is the possibility of an exclusive deal, which would be damaging to the interests of the local organisations, and it is not where we want to go.
  On the funding position, the Home Office audit was mentioned. I have to say to the hon. Gentleman that the audit did express concern about the high central costs of the accommodation and the high salary costs that the national organisation continued to fund. The concern about the accounts was that the revenue forecasts for 2003–04 and 2004–05 were based on unfounded assumptions about continued Home Office funding of
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  £618,000. If a revenue forecast contains assumptions about funding that have not been agreed, any organisation would clearly be concerned about the financial basis of future viability.
  Despite the assertion of he NNWA that it wanted to remain independent and have private sponsorship, the Home Secretary agreed to £350,000 of central Home Office support in order to tide the national organisation over its difficult period when the Norwich Union sponsorship was withdrawn. There was a commitment from the centre, despite the protestations about the organisation's independence. I entirely respect that, but the Home Secretary decided that the Government could not keep providing more public funding when the audit showed that the organisation was unwilling to take control of its high central management costs in respect of salaries and accommodation and that it was building into its budget a reliance on continued Home Office funding rather than on the private sector funding that it was seeking to obtain.
  I understand that the current proposals for an agreement with Lloyd TSB involve a third party with a joint venture company called Hot Listed Ltd. I am not sure why the organisation is involved with that joint venture because it appears that the company is not making any financial investment towards the sponsorship deal with Lloyds TSB. That matter would also have to be considered in establishing whether it was an appropriate way forward for the association.
  As the hon. Member for Truro and St. Austell said, I confirmed in an oral reply that I would be happy to meet the—
  The motion having been made after Seven o'clock, and the debate having continued for half an hour, MADAM DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned at five minutes past Eight o'clock.

Preamble
[MR. EDWARD O'HARA in the Chair]

Cyprus
Motion made, and Question proposed, That the sitting be now adjourned.—[Derek Twigg.]
9.30 am
Mr. Andrew Dismore: Perhaps I may say kalimera, Mr. Deputy Speaker. For those who do not know, that is Greek for good morning. I declare an interest by drawing attention to my entry on visits to Cyprus in the Register of Members' Interests. I am also Labour vice-chair of the Friends of Cyprus organisation, which works with both communities. I am pleased to see you in the Chair, Mr. Deputy Speaker. Given your long interest in these matters, I know that you would have liked to participate in the debate.
The debate is timely, given the failure of the referendum on the Annan 5 plan, Cyprus's accession to the European Union and this week's discussions on EU support for Turkish Cypriots. Perhaps most important is the fact that this is, almost to the day, the 30th anniversary of the Turkish invasion of Cyprus, which is the root cause of the problems. The immediate context of the debate is the fallout from the referendums. The Turkish Cypriots have been portrayed as the good guys to be rewarded for voting the right way; the Greek Cypriots are seen as the bad guys to be punished for voting the wrong way. That is shown by an article published by Lord Hannay. The title gives the game away: "Greek Cypriots Must Pay the Price of Folly".
The reality is that, in the diplomatic dance leading to Annan 5—which involved pressures from the international community and ill-informed press coverage buying too much anti-Greek Cypriot spin—the basic facts were forgotten. Thirty years ago, hundreds of thousands of Greek Cypriots were driven from their homes by an illegal invasion and cannot return, and the Turkish Cypriots have lived under military occupation, which has denied both Turkish and Greek Cypriots human rights for all that time. There are real stories of human tragedy and loss, and the appalling verbal assaults from people who should know better have left Greek Cypriots bitter and angry—with some justification, in my view.
Let me give an example. During the London mayoral elections, Ken Livingstone came to my constituency to visit Burnt Oak. Coincidentally, the first person we came across was an old Greek Cypriot lady, who said that she was no longer voting Labour, although she had done so all her life, because of the Annan plan. Obviously, I tried to chat her up in my best Greek and persuade her otherwise, and I hope that I made some progress, but there is no doubt that many people in the Greek Cypriot community feel disillusioned with our Government. That view is mistaken, because we have achieved a great deal, not least in securing Cyprus's entry to the EU without preconditions—a position that was not adopted
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by the previous Government. In addition, although we have not yet secured a result on reunification and a settlement, there has been progress towards that.
I do not want to dwell on the failure of the Annan plan, but it is important to take stock of where we are and make suggestions for the way forward. First, however, we need to consider some of the realities and myths surrounding that failure. The first myth is that it is all down to the perfidious Greeks breaking promises and a lack of leadership, especially by President Tassos Papadopoulos. I think that that is incorrect, as is perhaps shown by the fact that Mr. Anastasiades, the leader of DISY, the largest party in Cyprus, campaigned for a yes vote. His supporters simply did not follow him. The exit polls also reject the thesis that the failure was all down to lack of leadership.
The second myth is that Greek Cypriots are not prepared to compromise. That ignores the fact that, over 30 years, they have made major concessions already. The proposal of the bi-zonal, bi-communal federation as a strategic solution is an example. That was banked and forgotten about by Mr. Denktash, in his usual style, and by the international community. The nature of the proposed constitution—described as the Swiss or Belgian model—with power sharing is a further concession. I know from all my discussions and dealings with Greek Cypriots that they were prepared to accept painful concessions, especially on a personal level in relation to private property rights and some of the rights of settlers who had been there for some time.
Myth No. 3 is that Greek Cypriots do not want a settlement because they are sitting pretty in relation to the EU accession. I remind hon. Members that the EU accession process was without preconditions. The decision of the accession negotiations was that the Greek Cypriots should not be punished twice: once for losing to the Turks in the occupation of 30 years ago and again by not being allowed to join the EU because their country is under occupation; 1 May became an artificial deadline—in fact, it became part of the problem, not part of the solution. It was seen by many as imposing a precondition by the back door. However, my experience and knowledge of the community, both here and in Cyprus, is that it definitely wants a settlement, but not at any price, as all the polls show. Greek Cypriots, as well as Turkish Cypriots, want a settlement that is workable and fair. Solution and reunification remain the goal of both communities.
The fourth myth is that the Greek Cypriots want to keep the Turkish Cypriots isolated, but again that is not true. They certainly do not want recognition of the so-called Turkish republic of northern Cyprus, which was acknowledged by the European Court of Human Rights as a subordinate organisation of Turkey in the Loizidou case, but they have taken economic and trade measures to ease the position. The Greek Cypriots responded positively to the opening of the green line by Turkish Cypriots, and people cross backwards and forwards visiting their old homes, even under occupation, and making new friends on both sides of the line. The visits by Greek Cypriots to the north have been well respected and reflected by Turkish Cypriot hospitality, even by people occupying their family homes.

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The republic of Cyprus has agreed that Turkish Cypriots should receive €259 million of European money to improve administration and infrastructure. It certainly wants trade links to improve.
The fifth myth is that the Turkish army is prepared to keep out and to allow proper and free negotiations, but the analysis that I have seen suggests otherwise. The best example is a monograph by Gregory Copley, president of the International Strategic Studies Association and editor-in-chief of the Defence and Foreign Affairs publishing group. He said in summary:
"It was clear that Turkish concerns, beginning in 2002, over the direction of the US-led Coalition war in Iraq, and fears for the impact of the outcome of that war on Turkish security, played the most significant and continuing role in the TGB's"—
the general staff's—
"insistence that the United Nations' Annan Plan for the resolution of the Cyprus problem be deliberately made to fail. As a result, the Turkish Government of Prime Minister Recep Tayyip Erdogan was clearly instructed by the TGB to continue to escalate Turkish demands on the Annan Plan until it was no longer a meaningful document which the Greek Cypriots could accept."
That is his basic thesis. The paper is well argued and well researched, and I commend it to hon. Members. The argument is that Turkish strategic concerns require, as the general staff see it, an indefinite military presence in Cyprus because of developments in the region.
The general staff pressed Mr. Erdogan to escalate Turkish demands on the Annan plan as unacceptable to the republic of Cyprus. There is mounting evidence of that effect, including the United Kingdom working document that recently fell into the hands of The Cyprus Weekly and was widely reported in the Cypriot press here.
The reality is that both Greek Cypriots and Turkish Cypriots want a settlement free of Turkish military interference. That is best exemplified by Harts Sophoclides, the well-respected president of the Greek Cypriot Brotherhood, who said that the two communities voted for the same thing: to get rid of the Turkish military influence over their lives. For the Turkish Cypriots that meant a yes vote and for the Greek Cypriots it meant a no vote. The fundamental objections of the Greek Cypriots were about security and the continued presence of the Turkish army for ever under Annan 5.
The international community bears a lot of responsibility also for the failure of the Annan plan. It got used to focusing on Turkey and the Turkish Cypriots, and in particular Mr. Denktash, as the obstacles to progress. It finally found a negotiating partner in Mr. Erdogan and Mr. Talat, who were prepared to engage, at least to an extent, but took its eye off the ball because the settlement also needed to be acceptable to the Greek Cypriot community. It accepted Cyprus without preconditions for the European Union, but 1 May, nevertheless, became an artificial deadline. When it was clear that the referendum campaign was not going well in the south, although Mr. Christofias of AKEL, the president of the House of Representatives,
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asked for more time so that the arguments could be developed, that was not granted. A progressive party such as AKEL could see what was happening, but the international community could not. The United Nations Secretary-General, Mr. Annan, has now acknowledged that more time might have been appropriate.
The pressure from the United States, the United Kingdom and the European Union was also seen on the island as counter-productive, and that is illustrated in an article by Shlomo Avineri, professor of political science at the Hebrew university in Jerusalem who said that to the
"Greek Cypriots in the South … it appeared that the UN and the European Union were bent on legitimising at least some of the consequences of the Turkish invasion of 1974, because the EU wanted to take the Cyprus issue off the table in order to facilitate negotiations on Turkey's accession to the EU."
There is a real lack of understanding of the Greek Cypriots' position, which is exemplified by Lord Hannay's article, to whose title I have already referred. I do not want to engage in personal attacks, but some of his language is vitriolic towards the Greek Cypriot leadership, so some mild criticism is appropriate. His article is one-sided and lacks appreciation. It is no wonder that the Greek Cypriots have been concerned for years about his involvement. He refers to
"every stop being pulled out in an appeal to the emotions"
of the Greek Cypriots, but entirely ignores the activities of Mr. Denktash senior, who had lost the Turkish Cypriots, effectively campaigning in the north for a no vote in the south, by, for example, inviting Mr. Ecevit, the architect of the 1974 invasion, to visit at a crucial time. There were also the activities of the Grey Wolves.
Looking at the content of the plan, there clearly were some improvements for the Greek Cypriots in Annan 5 compared with earlier versions. Notably, the 30-month period of joint transitional government envisaged by Annan 3 was reduced to two months; the UN was to be involved for a brief period before each tranche of territory was handed back; and there were better financial provisions, replacing earlier provisions that would have bankrupted Cyprus from the first day on which the plan came into force. Of course, there were phased reductions of Turkish troop numbers; the return of just over half of Greek Cypriot refugees to their former homes under Greek Cypriot administration; Turkish de-occupation of some territory, with its return to the future Greek Cypriot constituent state; and a form of federal government loosely linking the two parts of the island. However, there was no guarantee that Turkey would implement the advantages. The Greek Cypriot public feared for their security, and feared that the plan would be unworkable and that Turkey would continually intervene, possibly even militarily. They feared that the collapse of the plan's envisaged arrangements would inevitably be followed by total uncertainty over the future, leaving two entities—the former constituent states—to struggle for international recognition.
Looking at the security fears, whereas the third version of the plan provided that all Turkish troops would leave Cyprus in 21 years or when Turkey joined the EU, whichever came first, the final version stipulated that Turkish troops, ultimately reduced to the levels of the 1960 treaty of guarantee, would remain for ever. The

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presence of the settlers is also important. I think that everyone on the Greek Cypriot side accepted that there were human rights issues involved and that long-standing settlers should be allowed to stay in some way, but under Annan 5 all illegal Turkish settlers—between 115,000 and 120,000 people, 13 per cent. of the total Cyprus population—would be able to stay. Provisions permitting a permanent flow of Turkish nationals were inserted into the plan, and the settlers would control the Turkish Cypriot constituent state, becoming a majority of its voters.
There would be limitations on the political rights of Greek Cypriots who chose to resettle in the Turkish Cypriot constituent state, who would not have the right to participate in federal elections. The return of refugees was significantly limited under Annan 5 compared with previous versions. Under Annan 5, wherever in Cyprus Greek Cypriots chose to live, those living in the Turkish Cypriot constituent state would be restricted to 18 per cent. of the population, compared with 21 per cent. in Annan 3, for a transitional period of 19 years or until Turkey joined the EU. Even after that, permanent restrictions were envisaged. That change disturbed the balance in the core bargain proposed in earlier versions of the plan between the number of returning Greek Cypriots and the size of the Greek Cypriot constituent state. No additional territory would be placed under Greek Cypriot administration to reflect the reduction in the number of returning refugees.
The provisions on property And compensation, already complex and burdensome in earlier versions, became even more problematic in Annan 5. At Turkey's insistence, only up to one third of the property of individual Greek Cypriots was to be reinstated, the right to keep long-term ownership by entering into 20-year leases was removed, and Greek Cypriot taxpayers were required to guarantee the compensation to Greek Cypriots for property that they had lost. That effectively made the losers pay twice.
Most important, there were no safeguards on the implementation of the plan. Whereas the economic and financial benefits and rights of participation in the government of all of Cyprus would immediately accrue to the Turkish Cypriots when the plan came into force, Turkey's obligations to implement the plan would be phased in over an 18-year period. It contained no safeguards to ensure that Turkey would honour her obligations to remove the troops and de-occupy the island within the terms of Annan 5—still leaving troops—or would allow individual Greek Cypriots to reclaim their property or return, under the strict quotas that I have mentioned, to live in the Turkish Cypriot constituent state.
The exit poll of Greek Cypriots conducted after the referendum by the Mega TV channel illustrates their concerns: 75 per cent. gave security as their reason for voting no. Only 7 per cent. said they voted no to support the President's position, which gives the lie to the argument that it was all down to Mr. Papadopoulos not working hard enough. Five per cent. of Greek Cypriots cited economic cost as their reason, and only 13 per cent. said that they preferred to live separately—in other words they would reject any solution.
Where do we go from here? The important thing is to build on the positives. The Erdogan Government in Turkey are prepared to discuss Cyprus. and engage with
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further Turkish integration into the European Union community. The sidelining of Mr. Denktash is a positive step, which is due to the election of Mr. Talat as the so-called Prime Minister of the TRNC last December. However, he is now head of a minority Government, and there is a risk of further elections. I disagree with the Republic of Cyprus Government that it was wrong of our Government to invite Mr. Talat to Britain. He was invited as leader of the community of Turkish Cypriots, not as the so-called Prime Minister, and it is important that we are seen to support people who represent progressive forces that are working towards a settlement. It is instrumental to note that political pressures in northern Cyprus do not come from those who wish to reject a settlement, but from those who wish to move more quickly, such as defectors from Mr. Talat's own coalition and Mr. Akinci and Mr. Izzet Izcan, both of whom are pushing him to stand up harder to Turkey and the military. Whether there will be future elections depends on a vote in the Assembly of the Turkish Cypriots in two or three weeks' time.
However, the real question is the extent to which the Turkish Cypriots have room to manoeuvre. The fact remains that the Turkish "deep state" is still in operation and has a heavy influence in Turkish Cypriot politics, particularly from the army. The response to the Greek Cypriot proposal for 10 new green line crossing points was instrumental in that respect, but the so-called Government of the north has suggested only two additional crossing points. I note that one of the 10 proposed is at the Paphos gate, and that may well be rejected because it is suggested that the Turkish army have a military base there.
Another positive sign is the way that the green line opened. In my view, there is now no going back to the division of the past or the isolation of the two communities. The good relations at a personal level, which I have already mentioned, show that that is the case. The fact that Turkish Cypriots are increasingly taking up Republic of Cyprus citizenship is also a good indication of progress. A Turkish Cypriot whom we have worked with in Friends of Cyprus got his Cypriot birth certificate recently and is about to get his republic passport. He says that for the first time in 30 years he feels like a real person with an identity. It is welcome that Republic of Cyprus citizenship is being given to children from marriages between Turkish Cypriots and Turkish—that is, settler—families.
We have to acknowledge the democratic voice of the Greek Cypriots. It is not for castigation; it is unjust and counter-productive to blame them for what happened, and for exercising their democratic freedom. We have to understand why they rejected the Annan 5 plan, and note that their fears and aspirations were not addressed. We have to recognise that the proposed Swiss-Belgian constitutional model, which they accepted, would have been rejected by nearly every previous Government of the republic. The achievements of rapprochement between the elected leadership of both sides, and on a personal level, are important.
The plan has significant financial burdens. The International Monetary Fund produced a report for the donors conference, which I am not sure has been published. Perhaps it would be helpful to do so to inform the debate. However, the question of a lack of respect for human rights still remains, which is

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illustrated by the suggestion that the European Court of Human Rights should throw out individual cases en bloc if there was a settlement under Annan 5.
We must acknowledge the progress that has been made by both communities. The technical committees did sterling work in laying down the foundations of the detail of the settlement, and those involved were rightly congratulated by the United Nations Secretary-General. The civil society contacts go from strength to strength: all bread-and-butter issues needed to make a future settlement work.
The European Union has a positive role to play in education, for example, helping both sides come to terms with the difficult parts of their past. On security, the EU can provide reassurance to Turkey—while respecting its general staff's concerns—that security can be achieved without having to occupy another member state of the European Union. It can also provide reassurance over their fears about the rapprochement between our Government and Iran, the consequences, concerning the Kurds in particular, of the war in Iraq and Turkey's overall concern about instability in the middle east.
Part of that reassurance must involve giving Turkey a date for accession to the European Union. We must maintain engagement because that is our only hope of any progress, and the Republic of Cyprus supports that position. Equally. however, we must maintain that the Turkish general staff keep out of politics and out of civil society. The recent imprisonment and fining of journalists and newspapers was a retrograde step, and I raised the issue in a parliamentary question with my hon. Friend the Minister for Europe. I know that he feels strongly about it, given his personal background.
We should help the Turkish Cypriots, but we should not act precipitately or in a way that is likely to make things worse. We should work with, not against the Republic of Cyprus Government, who are supportive of efforts to help the Turkish Cypriots. It is not just a question of the recognition of the TRNC, which is one fear of course; there are practical implications, too.
The conclusions of the 26 April General Affairs and External Relations Council meeting provided for the end of the isolation of the Turkish Cypriots by facilitating the reunification of Cyprus through the encouragement of the Turkish Cypriot community's economic development, an emphasis on the economic integration of the island and the improvement of contact between the two communities and the European Union. The only two specific measures referred to were the use of the €259 million grant and the adoption of the green line regulation. During the consultation leading to its adoption, it was always understood that the movement to the EU of goods of Turkish Cypriot origin would have taken place through points under the control of the Republic of Cyprus. It was an explicitly shared assumption between the authorities of the Republic of Cyprus and the European Commission during the drafting of the resolution.
The conduct of direct trade from the northern part of the island is not a measure that serves reunification, the economic development of the Turkish Cypriot
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community or the economic integration of the island; on the contrary, such a measure would help to solidify and deepen the divisions. The same goes for direct flights.
We should allow adequate time to see whether the green line regulation can work. Time and again, we have seen proposals from the Government of Cyprus to try to make it work, and it would give them the opportunity to demonstrate their readiness to work with the Turkish Cypriots to facilitate trade from Cyprus with EU countries through the green line and legal ports of entry. It would build the necessary confidence that would contribute to reunification. I float the possibility of opening the port of Famagusta with Varosha as the jointly controlled port between the two communities. It could build confidence and help both communities.
Mr. Andrew George: Will the hon. Gentleman give way?
Mr. Dismore: I am about to conclude my remarks.
We must also consider the position of Turkey vis-à-vis the Republic of Cyprus. Turkey still does not recognise Cyprus as a state, let alone as a member state of the European Union, yet Turkey wants to join the European Union. There are real contradictions there. The customs union extends to the 10 accession states, but so far not by Turkey to Cyprus.
Under the Annan plan, the exclusion of the Montreux treaty effectively meant that Cyprus ships would not be allowed to use the Bosphorus. The reservation on the Cyprus/Egypt economic zone treaty could prevent mineral exploitation, and the Annan 5 removal of any provision for a continental shelf for Cyprus could deepen the problems between Turkey and Greece and export them to the European Union. Working with Turkey and the communities through the European Union, there is a lot that we can do to make progress.
On Sunday night, we saw Greece's magnificent victory, winning the European championships 1–0. Cyprus feels that it has lost the European Union 23–2. The Cypriots feel as let down and cheated by the reaction of the international community as England supporters do by the decision of the Swiss referee—a decision and reaction made too far from the action and with a blind lack of understanding of what was happening on the ground.
However, like England's footballers, all those who care for Cyprus—Greek and Turkish Cypriots alike and their many friends throughout Europe and the rest of the world—must take stock and accept what happened. We must look to the future and devise a way to win the prize of a just and fair settlement that reunites the island and provides a home for all Cypriots to live together in harmony.
9.55 am
Sir Sydney Chapman: Mr. Deputy Speaker, like you, the hon. Member for Hendon (Mr. Dismore) speaks Greek fluently. I well recall addressing a public meeting in this very Room some time ago. The person speaking before me was the hon. Gentleman, who spoke in fluent Greek. I was then called on to comment on what the hon. Gentleman had said. I had not understood a word of it, but I made a judgment that turned out to be correct. I looked at the body

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language of those in the audience and it was clear that they were full of approbation for what the hon. Gentleman told them.
I wish to make a brief contribution and I can do so because I agree almost entirely with everything that the hon. Gentleman said. I pick him up on one point, which is minor but, I think, important. I may have misunderstood him. I pay tribute to the present British Government for facilitating the accession of Cyprus to the European Union in every way possible, but that long path was triggered by the previous Conservative Government. I am sure that the hon. Gentleman and the Minister will acknowledge that.
This is an issue that transcends petty party politics. When I read the Annan 5 proposals, I was greatly surprised. Of course those proposals demand give and take on both sides but I agree with the hon. Gentleman, who said that the Greek Cypriots had already given much to get the Turkish Cypriots and their representatives to the negotiating table.
This is subjective, but I think that there were two reasons why the Greek Cypriots felt that they had to vote no in the referendum. Incidentally, while two thirds of Turkish Cypriots voted yes in the referendum and three quarters of Greek Cypriots voted no, it is worth putting on the record that two thirds of all Cypriots voted no. I think that those two sticking points were Greek Cypriot doubt as to whether the Turkish Cypriots could hold to what they were agreeing to and the vexed question of the continued presence of Turkish troops in Cyprus.
On the first point, I say simply this: when one considers the politics and the problems of Cyprus since the illegal invasion of that island—now almost 30 years past—the Turkish Cypriot leadership performed a Damascene conversion at almost the 59th minute of the 11th hour. It is understandable that the Greek Cypriots said, "Well, they were saying almost the opposite until very recently. Can we be satisfied that they will keep their word?" I am sure that the Turkish Cypriots will keep their word but I think that the doubt of the Greek Cypriots was perfectly understandable. After all, Mr. Denktash and Mr. Talat were, to use the modern jargon, not singing from the same hymn sheet.
The question of the Turkish troops greatly surprised me. I accept that the number would be reduced in time but, having read Annan 5, my understanding is that there would always be a permanent brigade of about 600 or so on the island. I question why that is necessary and why it had to be included in the plan because there are already United Nations personnel on the island—put aside the two sovereign British bases that contain a number of British armed personnel. If there is a yes to a referendum, or successful negotiations, and the island is reunited, all of it will be an integral part of the European Union. I have grave doubts about setting up a European security and defence policy and the impact that it would have on NATO, but if ever there were a case for an ESDP presence on the island, that would be it. I hope that when negotiations begin again, Turkish Cypriots will consider that point and be reassured by the safeguards that at least the EU, if not the British Government, would be able to give.
I share the hon. Gentleman's view that a reason for the no vote in the referendum was that the question was put to the Cypriot people far too hastily. As he said,
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there was obviously an attempt to beat the 1 May deadline for the main part of Cyprus—the legal part—joining the EU.
The illegal occupation of Cyprus took place four years after I was first elected to this House. I have announced that I am not standing at the next elections.
The Minister for Europe (Mr. Denis MacShane): Shame.
Sir Sydney Chapman: The Minister may be able to help me, as I would like to know the date of the next election. He might like to take this opportunity to confirm that it will be held on Thursday 5 May next year. It is still my dearest hope that the beautiful, wonderful island of Cyprus will be reunited before I depart the Westminster stage.
10.2 am
Mr. Andrew Love (Edmonton) (Lab/Co-op): I add my congratulations to my hon. Friend the Member for Hendon (Mr. Dismore), not only on securing the debate but on giving an honest and accurate summing up of the current situation. Like the hon. Member for Chipping Barnet (Sir Sydney Chapman), I agreed with everything that he said, particularly his congratulations to Greece's national football team on its excellent victory on Sunday night. Many of my constituents and, I suspect, those of the other two Members who have contributed to the debate, shared in that victory. I refer to my entry in the register in respect of my membership of Friends of Cyprus and my frequent visits to Cyprus at the invitation of various organisations.
This is a timely debate, as it comes almost immediately after the referendums' results. Sadly, a considerable number of people predicted this aftermath, given what happened during the period leading to the referendums. We failed to see the likely reaction—or perhaps overreaction—to the results of the referendums. I believe that most informed opinion, certainly on the Greek Cypriot side, predicted for a considerable period prior to the referendums, on the basis of the negotiations and the likely outcome of the negotiations in Switzerland, that it was very unlikely that the Greek Cypriot community could be persuaded to support that outcome.
I was saddened not only by the fact that after such a long time and such intense negotiations we were unable to find a resolution that met with the approval of both communities, but by the hard criticisms—indeed, some would say the condemnation—with which the outcome of the referendum in the Greek Cypriot community has been met. I also refer to the article by Sir David Hannay, a noted expert on such matters, and some of the injudicious language that he used in it.
I make that suggestion because if we consider the history, we will find that in the 30 years that have elapsed since 1974 it has been the Cyprus Government and Greek Cypriot community that have kept Cyprus on the international agenda. They have insisted that all the international institutions—from the United Nations through the European Union to various other bodies—address the continuing division of the island and find a solution. To condemn the Cyprus Government when they were trying their hardest to find a solution is a criticism too far.

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During those 30 years, the Cyprus Government have made significant concessions to reach an agreement. I can look back to the high-level agreements of 1977 and 1979, in which the Cyprus Government accepted the bi-communal and bi-zonal nature of a future Cyprus. That was a major concession at the time. The UN Ghali plan in the mid-1980s also saw similar concessions to try to reach agreement, and the various versions of the Annan plan, from 1 to 5, show how the Cyprus Government were asked to make further concessions.
When we look back at the referendums and at what went right and wrong, we must recognise that for the past 30 years, it had been an unwritten assumption that Mr. Denktash and the Turkish Cypriot community were the major obstacles to finding a solution while the Greek Cypriot community and the Cyprus Government were the major proponents of finding a solution. It seems somewhat at odds with the reality to find ourselves now criticising the Cyprus Government and lauding the Turkish Cypriot community.
Part of the reason why the negotiation process and referendums were ultimately unsuccessful is the psychology of how we reached the point at which they took place. I do not believe that the problem lies within the Annan plan. In the early part of the negotiations in New York, there seemed to be bipartisan agreement to move on to the second stage of the process. The statements made by both the Turkish and Greek Cypriot communities and their leaderships show that the outlines of the Annan plan were supported by both communities.
It all seemed to go wrong in the final stage of negotiations in Switzerland. We can examine the various additional requests and demands—or whatever we call them—made by the Turkish Government in those negotiations to find where the agreements began to unravel. That unravelling can be put down not to one cause but to the psychology of concession followed by concession and the idea that the Greek Cypriot community had reached the stage of a concession too far. It was the psychological impact of Switzerland on the Greek Cypriot community that led ultimately to the failure of the referendums.
How do we move forward from here? We have done enough navel gazing since the referendum results, and we need now to look forward rather than continue to look back and recriminate with each other. We must first all recognise that the dust must settle on this stage of the negotiating process. The referendums have been held, the results have been announced and we must now let the situation settle. We can do that, first, by ensuring that all the abuse and criticism ends. It is not helpful to the process and certainly not helpful in getting the Turkish Cypriot and Greek Cypriot communities to start to build a consensus that will ultimately lead to a solution. Secondly, we must respect the democratic result. I have been pleased that representatives of the Government, the Opposition and the international community are now coming round to recognising that the referendums were democratically held and that the results must be respected.
Thirdly, we must all recognise the significant progress in the Turkish Cypriot community and, most important, in Turkey, towards finding a solution. For the first time
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in the past 30 years, the Turkish Government have been positively engaged in finding a solution, and we must build on that. Similarly, the Turkish Cypriot community has elected its representatives to those negotiations. Its sidelining of Mr. Denktash is a recognition that the Turkish Cypriot community is ready to find a solution. That is borne out by all the studies that have been carried out in the community; they were very much in favour of the referendums. We must maintain that momentum, and that is one of the critical, salient issues that we must now consider. Once the dust has settled. we must move on to a positive agenda.
The accession of Cyprus to the European Union is a positive step. I pay tribute to the British Government's actions since 1997, when it became official Government policy to sponsor and support Cyprus's accession to the EU. Nobody at the time thought that an island that continued to be divided could become a member state. We have seen that through, with the full support of other EU members, and the sceptical and somewhat less than 100 per cent. support of others. We kept to the task, and the international community must recognise that Britain and Greece played significant roles in ensuring that Cyprus acceded to the EU. That provides a major opportunity, and the EU now has a major role in carrying the issue forward.
There is continuing pressure on the EU: in its membership, there is now an island that remains divided, which cannot be acceptable in the medium to long term for the EU, It was instrumental in moving the process this far along the road, and it is incumbent on it to continue with that process. It must keep Turkey involved. We are leading up to the decision in December, and I am pleased that the Government have been positive about entering accession negotiations with Turkey. That will maintain their interest not only in Europe but in finding a solution to Cyprus. We must do everything possible to ensure that that happens.
We must also assist the economic development of the island. Over the past 30 years, the economy of the northern part of the island has undoubtedly suffered significantly from its exclusion from the international community and world markets. Living standards in the north are significantly below the EU average and those of the Greek Cypriot community. We have to assist that process, not just because it is the right thing to do, but because it will be a signal to the Turkish Cypriot community that positive benefits will arise from membership of the EU, and that membership can be guaranteed if we can find a solution to the division of the island.
Although we have to accept that the dust will settle on what has gone before, we must also accept that time will be of the essence. To use an engineering metaphor, centrifugal forces are at work in the current situation, and if nothing happens in the medium term, we will move further away from, rather than closer to, a solution. We cannot allow that to happen.
I suggest that it is a priority for the EU and for Britain, as a leading member of the EU and a country with a strong and long-term historical relationship with Cyprus and the eastern Mediterranean region, to try to find the elusive consensus that will be the way forward. I hope that my hon. Friend the Minister will respond to

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that point in his summing up of the debate. Such consensus cannot be achieved by those involved not talking to each other. It must therefore be recognised that the first and most important thing is for dialogue to start, with the involvement of both communities, the Government of Cyprus through the EU and the United Nations. I accept that the UN is less than enamoured of the process as it was concluded with the referendums, but it would be a negation of its obligation as the primary international body to walk away from the current situation.
We need to get down to the hard act of establishing the dialogue and the framework on which we can make progress. That framework remains the Annan plan, with all the compromises that have gone into it, and with all the concerns about the outline that have been raised subsequent to the referendums. However, it was accepted at New York, and we must recognise that it is the only acceptable starting point on which to base a consensus.
I hope that dialogue can be established—not immediately, but in the short term—and that we can get the communities to focus on and build on the areas of agreement rather than disagreement. I also hope that we can introduce the sorts of confidence-building measures outlined by my hon. Friend the Member for Hendon, which have been well-established for a long time but not implemented. I believe that, with the support of the EU and the UN, there is the good will in the Turkish Cypriot community, the Greek Cypriot community and in the Cyprus Government to move the current negative situation in a positive direction. I therefore hope that in a future debate we will be able to start talking about the terms on which a final settlement will be agreed.
10.19 am
Mr. David Chidgey: I congratulate the hon. Member for Hendon (Mr. Dismore) on securing this debate on a topic that is important in terms of Britain's relationships within and outside the EU. I also congratulate the hon. Members for Chipping Barnet (Sir Sydney Chapman) and for Edmonton (Mr. Love) on their mature, thoughtful and constructive contributions to the debate.
The UK has a special relationship with both communities on the island of Cyprus, and it is therefore right that we in Parliament take a close interest in its affairs and in the efforts made to try to resolve the differences between the two communities.
I shall refer to the work of the Foreign Affairs Committee, of which I am a member. Only two years ago, as part of the inquiry into relations with Turkey, we had to examine the situation in Cyprus and visited the island. It is perhaps worth recalling our report's concluding remarks, published in April 2002, which state on page 27 that
"after so many frustrating years there is at last a possibility that a settlement can be reached between the Greek and Turkish Cypriot communities, bolstered by a certain urgency on both sides. A settlement is very much in the best interests of all concerned, and the obstacles that remain seem, from the outside at least, eminently surmountable."
It was suggested to us in our inquiries that the perception by Turkish Cypriots that Greek Cypriots had no need to compromise because they would benefit from the unilateral accession to the European Union anyway was misplaced.
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Similarly, it was suggested that fears among Greek Cypriots that Mr. Denktash would not act without permission from Turkey were also misplaced. Progress on Cyprus at that time was seen as essential to overcoming objections to Turkish accession to the EU. It was thought that if Cyprus joined the EU as a divided island it would be a serious setback to Turkey's hopes of accession. In his evidence to the Committee, Mr. David Barchard told us that
"if southern Cyprus, the Republic of Cyprus, is admitted into the European Union in 2003/2004 before negotiations are opened with Turkey, it will certainly use a vote of veto for the foreseeable future to prevent Turkish negotiations being opened."
Recent events, particularly the outcome of the Greek Cypriot and Turkish Cypriot referendums on the Kofi Annan plan, have done little to lighten that somewhat gloomy perspective.
I shall comment on the work done by the Robert Schumann centre at the European Institute, and on the possible outcomes beyond the results of the referendums. We must remember that the Greek Cypriots rejected the Kofi Annan plan, 75 per cent. being against it, but the question is why. Perhaps it is because the Greek Cypriots' perception is that the plan would legitimise the consequences of the Turkish invasion. They are concerned that only about half of the 200,000 former Greek Cypriot refugees will be able to return to their former homes. They are worried, as we all are, that Turkish forces would remain in the north, perhaps until accession to the EU or beyond. Many see that as an infringement of Cypriot sovereignty. Greek Cypriots are not free to move or settle in the north, which conflicts with the EU principles of freedom of movement. It was feared that Turkish Cypriots would not deliver on the commitments that they would have accepted under the Kofi Annan plan.
There is also the issue of higher living standards and, possibly, unconditional accession for the Republic of Cyprus, lessening the need to compromise with the Turkish Cypriots. There is a perception that a better plan might be available, especially if the Greek Cypriots could use EU membership to negotiate over Turkish accession. In that regard, there is a longstanding belief in the moral and legal superiority of the Greek Cypriot cause. However, Turkish Cypriots voted in favour of the plan against the advice of their political leader; such is the way of politics. It contrasts with the previous negotiations, in which Turkish Cypriots were traditionally seen as the obstacle to a settlement, especially when Mr. Denktash was in control.
Changes in Turkish Cypriot attitudes have been attributed primarily to the deteriorating economic situation in the north of Cyprus. That is creating the desire for EU-generated prosperity and for help to stop migration from the island, which is a serious problem for the Turkish Cypriots, who fear that migration from the island will eventually lead to the disappearance of their community. It is estimated that there are more Turkish Cypriots in London than there are in Cyprus because of migration—caused, stoked and fuelled by economic failure.
The present situation has led to an increasing reliance on Turkey, which has created fears that the Turkish Cypriots' independence in the island of Cyprus is also being compromised. Overall, the Turkish Cypriots felt that the Annan plan would provide a satisfactory

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solution. There is also a need to acknowledge in this view of Cyprus's future the important changes that have taken place in Turkish attitudes, which began in the run-up to the referendums. There is no doubt that the policy shift, which was due to the change in Government and an acceptance that the continued division was no longer acceptable, was an important milestone in the process.
The stick, which is that Cypriot accession to the EU without a solution to the division is likely to be seen as an obstacle to Turkish EU membership, is balanced by the carrot, which is that Turkish EU membership became more likely with a change in its position towards Cyprus. The irony is that although Greece was committed to the yes vote for the Annan plan as part of its commitment to improving relations with Turkey, it became increasingly more hands-off in the run-up to the Greek Cypriot referendum and, consequently, had less influence over the outcome of that vote.
It is clear that the Greek Cypriot rejection of the Annan plan for reunification meant that Turkish Cypriots were excluded from accession to the EU. However, we should place on record and acknowledge the fact that the EU has sought to reward the Turkish Cypriot community in a number of ways. In particular, I am sure that the Minister will want to comment on the fact that the EU has agreed a number of greenline measures, which I believe the United Kingdom Government played a major part in securing. Those measures allow Turkish Cypriot goods to be exported into the EU in order to end the north of the island's economic isolation, which fulfils a promise that was part of the recognition of its support for the Annan plan.
We have started discussions in the EU about introducing direct flights to the north of the island. I believe—I am sure that the Minister will confirm this—that EU Foreign Ministers have recommended that the £172 million that was intended for the reconstruction of the north, which was dependent on the Annan plan, be disbursed in any event, which is of course good news. However, I understand that the EU's efforts to end the isolation of northern Cyprus have run into fierce resistance from the Greek Cypriots, as reported in the Financial Times on 2 July this year. Will the Minister give us the latest position of the Greek Cypriot Government on the situation of the Turkish Cypriots in the negotiations that he and others are having?
The Minister will recall the issues that have been raised about access and travel across the green line from the north of Cyprus. He will remember responding to a letter that I sent him on 16 June about a complaint that I received from Mrs. Gill Allis, one of my constituents, who was arrested last year when she crossed the green line from the north of the island. The Minister pointed out in his response that the Greek Cypriots, or the Government of the Republic of Cyprus, have continued to consider it illegal for EU nationals to enter the southern part of the island from the north and have reserved their right to penalise EU and British nationals by fining them should they so do.
I am sure that the Minister can assure us that he is continuing to negotiate with his counterparts in the Republic of Cyprus to remove that offensive restriction on EU nationals. The Minister will remember that the Greek Cypriots made a ruling in May that Turkish
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Cypriots would have to cross the green line to register a vote in the European elections. As a result, Turkish Cypriots have in effect been barred from taking part in the elections. He will remember also that six seats were up for election to the European Parliament, two of which were to be reserved for Turkish Cypriots. That has not happened. It is reasonable to ask the Minister what has been the outcome in the European Parliament of what is in effect gerrymandering of the MEP seats in Cyprus. What are his views on that?
I am coming to the end of my remarks and I would like to consider the reactions that there have been since the referendum results. The Foreign Secretary recognised that we will respect the choice that the Greek Cypriots made, but we hope that they will continue to reflect on whether it is the best choice. The Minister has said that the Annan plan remains the best way forward for a united Cyprus in the EU, so will he tell us specifically what the Government are doing to re-engage the two sides, recognising our special relationship with and responsibilities to the island of Cyprus?
Similarly, the Secretary-General of the United Nations, Kofi Annan, has made the point that we must respect the outcomes of the two referendums, but he rightly says that an historic and unique chance to resolve Cyprus's problem has been missed. He applauds the Turkish Cypriots for approving the plan, notwithstanding the significant sacrifices that it would have entailed for many of them, and he regrets that they will not enjoy the benefits of EU membership. What discussions are the Government holding with the Secretary-General in their attempts to persuade the Greek Cypriots to re-engage with the unification process?
The Liberal Democrats recognise that the Turkish Cypriots should be praised for their commitment to peace and for the way that they have campaigned for the issue. We fully support UN and international efforts to resolve the differences between the two communities, especially the Annan plan, which we see as the best such resolution. There is no doubt that it is in the interests of both communities that the whole island should achieve membership of the EU. Will the Minister tell us how the United Kingdom can take the measures forward?
10.32 am
Mr. Richard Spring: I warmly congratulate the hon. Member for Hendon (Mr. Dismore) on an extremely comprehensive speech. It was well put together, detailed and it added to our knowledge of the situation in Cyprus. I also congratulate the hon. Member for Edmonton (Mr. Love) on his speech, which reflected considerable knowledge of the subject. It is greatly appreciated that both of them contribute to these debates.
It goes without saying that my hon. Friend the Member for Chipping Barnet (Sir Sydney Chapman) has had experience and expertise of the situation in Cyprus for many years. He made a measured and sensible contribution and will be greatly missed when he leaves the House. We have various ways of recognising people for their service in this country and he has justifiably received a knighthood. I would like to think that if we were living in Japan, he could be appropriately described as a national living treasure.

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Earlier this year we celebrated the accession to the European Union of Cyprus and nine other countries. In the case of Cyprus—a valued Commonwealth member—the accession was particularly warmly felt in this country. However, amid the celebrations of enlargement there was a note of sadness. As other hon. Members have said, it is a shame that it proved impossible for Cyprus to enter the European Union on 1 May as a united island.
The Annan plan, drawn up after tortuous and painstaking negotiations by the UN Secretary-General and his team, offered a way to move matters forward. In essence, it advocated a loose federated structure for a united island. The plan was put to the people of Cyprus on 24 April and we know the result. In "The Case Against the Annan Plan", a publication by two academics, Dr. Kyriakides of the university of Hertfordshire tellingly points out that the
"final version of the Annan Plan did not see the light of day until the day before the referendum."
Despite the fact that much of the plan was in the public domain, that was not satisfactory.
While we all hope that a settlement to the division of the island can be found sooner rather than later, the many attempts to date, including the latest one, serve as testimony to the complexity of the dispute and the strongly held views and concerns of both communities. However, what comes through from this morning's debate is that the door must be left open; everyone has said that we must move forward positively from this point. Now is a time to reflect on the issues and the situation and not to proceed with too much haste.
The areas of contention and concerns, particularly among the Greek Cypriot community, need to be thrashed out and addressed before a long-term solution can be found. The Greek Cypriot community voted in a certain way for reasons of which we are aware, but their concerns need to be addressed. The roots of the problem are to be found in the history of the island. It has special links with Britain and we have a particular responsibility, as a guarantor power and with our military bases on the island, to assist the people of the island to resolve the dispute. It is also evident in the vibrant and thriving Cypriot communities, both Greek and Turkish, which enrich our national life and our towns and cities with their culture and enterprise. They are cultures that can co-exist successfully here and provide our country with the added links of kinship to the island of Cyprus.
Only 14 years after independence in 1960, Turkish troops invaded Cyprus in 1974 and occupied the northern part of the island, their stated reason being the protection of the Turkish minority. It is worth recalling that the 1983 declaration of independence by Turkish north Cyprus went unrecognised by the international community and the dispute has given rise to many UN resolutions condemning the island's division. Talks between the island's divided communities have occurred on and off since 1980, but the fundamental sticking points remain.
The problems relate to the Turkish settlers from mainland Turkey, who now occupy land and property in northern Cyprus; to the right of return to their former lands claimed by Greek Cypriots who fled in 1974; and, for obvious historic reasons, and most important for
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Greek Cypriots, to the permanent presence of Turkish troops in northern Cyprus. That is an emotional and practical issue, which must be resolved if a solution to the situation is to be found.
There is, however, hope. Although the Annan plan may not have proved acceptable to some on the island, it came closer than before to offering a solution. What is clear is that the final solution of the dispute can come about only from the two communities on the island themselves, although—without hindering a process of reconciliation—other countries can and must play important roles. I have already touched on our own special link with Cyprus and its people. Can the Minister set out the steps that the Government are taking to help to restart the peace process and to work with the two communities to evolve a further plan that will lead to a resolution?
Turkey has been mentioned several times this morning and, of course, it is another key player. It deserves due credit for the progress that it has made, what it has done to try to resolve the matter, and the changes that it has made in its stance. The prospect of EU membership, which I very much support, for Turkey, has undoubtedly served as an important spur to change and to its attitudes to the Administration in north Cyprus.
The poor economic circumstances faced by the Turkish Cypriot community, and their poor communications links, undoubtedly foster resentment, both on the island and in Ankara. Many countries have ended their economic embargoes of northern Cyprus since the Turkish community declared its support for the Annan plan. The EU has pledged to release some £170 million to northern Cyprus to end its economic isolation and to allow development to take place to raise living standards, improve the economy and foster a continued desire to work towards a long-term solution, rather than seeing such assistance as any sort of incentive to postpone a settlement. That is an important point. Undoubtedly and understandably, the cost of upgrading the north is also a concern for the Republic of Cyprus, which is prosperous and successful. There is an echo in the minds of many Cypriots of the economic circumstances that arose after the Berlin wall came down. Can the Minister elaborate on the Government's policy on the Turkish Cypriot community in northern Cyprus, and set out what steps the UK is taking to aid northern Cyprus's economic prospects and growth?
I should like to raise one further question here today—that of missing people from both sides of the green line; Greek and Turkish Cypriots alike. The problem has been with us for 30 years, which causes understandably huge anguish to the families and friends of the missing. Although I appreciate the reasons for tackling the issue on a parallel but separate track, what progress has been made, to the Minister's knowledge, since the most recent talks began in 2002? I recall that, when we last debated the subject in November 2002, I had found a statement on the Foreign and Commonwealth Office website to the effect that our high commission in Nicosia was working with both communities on the matter. Is that still the case? What steps are the Government taking to help end the pain of those families who want to know what happened to their loved ones?

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A solution to the long-running dispute is in everybody's interests, most obviously in the interests of the two communities in Cyprus. Such a solution should focus on the concept of a bi-zonal or bi-communal federation. It must grow from a sense of shared purpose and trust on the island, something that can be aided from outside but must begin and end on the island. We must play our part in restarting talks and in doing anything we can to facilitate their progress.
Having come close on this occasion, none of us can give up. I look forward to a united Cyprus, at ease with itself and its neighbours in the future. That beautiful, friendly island deserves no less, not least the spread of prosperity to all parts of it.
10.41 am
The Minister for Europe (Mr. Denis MacShane): I am grateful to my hon. Friend the Member for Hendon (Mr. Dismore) for raising this important Adjournment debate because it allows me to set out the Government's position on Cyprus. It is a country that is dear to many in the United Kingdom and of great concern to many hon. Members, as we heard in the fine speeches, including that of the hon. Member for Chipping Barnet (Sir Sydney Chapman). It will not, I hope, be his last distinguished contribution to the House before the general election, whenever that may be. It will certainly be before July 2006.
I also thank my hon. Friend the Member for Edmonton (Mr. Love), who is a great champion of the rights and needs of all the people of Cyprus and very popular in his constituency as a result, and the hon. Member for Eastleigh (Mr. Chidgey), who drew attention to the important Foreign Affairs Committee report on Cyprus. Finally, my opposite number, the shadow Minister for Europe, the hon. Member for West Suffolk (Mr. Spring), made some important points and asked questions that I hope I can reply to because, as has been said in the debate, there are not sharp party political divides on the issue.
We are enjoying a wonderful year for both Greece and Turkey, highlighted by the victory of the Greek football team in Lisbon—one of the Greek players was rejected by Sheffield United, but, there we are, Sheffield's loss is Greece's gain—and we all look forward to what we hope will be a positive vote in Turkey's bid to start EU membership negotiations. On those vital issues, there is no party political divide.
I take the opportunity to place on record the Government's—and, I am sure, the House's—thanks to the great work of Her Excellency, the Cyprus high commissioner, Myrna Kleopas, who has served her country and her island with great distinction in London for the past four years. We wish her well. Let it be noted that, under the Annan 5 plan, two of the five major diplomatic posts that the Cypriot Government would have to send representatives to—Ankara, Greece, London, Washington and Brussels, I believe—would be reserved for a Turkish Cypriot diplomat. So, one of these days, her successor may be a Turkish Cypriot.
I debated the Cypriot referendum result in another Adjournment debate on 26 May 2004, when the issue was raised by the hon. Member for Congleton (Ann
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Winterton). I commend the hon. Lady's passionate and vivid speech to all hon. Members. She made a great case about the wrongs done to Turkish Cypriots over the years. To an extent, she reflected the absent voice that was not represented in this morning's debate. When replying to her, I noticed that none of the hon. Members who raised the case from the Greek Cypriot point of view was present in the House. One of the difficulties is that we do not put the partisans of both points of view together in the House to exchange their views.
I will refer to just one quote that the hon. Member for Congleton gave. She quoted Mr. Nicos Sampson on 26 February 1981, a propos the events of summer 1974 when he led a fascistic coup to install an authoritarian Government in Nicosia, as saying:
"Had Turkey not intervened, I would not only have proclaimed Enosis, but I would have annihilated the Turks in Cyprus".— [Official Report, 26 May 2004; Vol. 421, c. 1689.]
I give that quote not to enter into the rights and wrongs of the different positions on the island but to try to convey to the House the deep passions that exist. It has been said, perhaps rightly, perhaps wrongly, that no Turkish Cypriot remembers what happened after 1974 and that no Greek Cypriot recalls what happened before 1974.
In a sense, our task as a Government and as a House is to try to invite all Cypriots and their friends in Greece and Turkey to look to the future, and to build a Cyprus for the 21st century rather than settle the wrongs of the 20th, although there have been deep wrongs, and reference has rightly been made to the 1974 invasion. Churchill put it well when he said that if we want to live in the past, and allow the present to be conditioned by the past, we will build no future. Right across Europe, particularly in the new united Europe, there are many communities and groups that, while looking to lands, properties or power that they once had, now accept that they will not return on similar terms to those that caused great distress when their countries were separated or divided.
I shall try to answer some of the points and questions that have been put. Much reference has been made to the number of Turkish troops on the island, but under Annan 5 the Turkish troops at the end of the process will be reduced to the number that they are entitled to be under the treaty of guarantee: 650. That is hardly more than those of our troops who march out to do the changing of the guard every morning in front of Buckingham palace. That is a solemn treaty, which will not be superseded by any settlement. Pacta sunt servanda—treaties must be obeyed. Under all possible Annan proposals, unless we have a complete rewrite of the international treaty of guarantee, those troops will be able to be there. In flying time, Turkey is only four minutes from the island of Cyprus, and the need to meet its perceived security concerns for Turkish Cypriots can be sustained in my view without anything like the present number of troops. However, we should not make that a key issue.
I believe that the Turkish Government and Mr. Erdogan have made that clear to the Turkish general staff, because part of the terms for any Turkish accession to the EU will have to be that the military is 100 per cent. under the control of the civilian

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authorities. As I said, the Government hope that membership talks can begin once a date has been agreed later this year.
Sir Sydney Chapman: In fairness, the Minister makes an extremely good point about the brigade strength that will eventually be left. However, what concerns many people is the time span for reducing the 40,000 or so Turkish soldiers now present to—at a rather distant date—the brigade that he has mentioned.
Mr. MacShane: I have to deal with European Union politics in which five years is a nanosecond and 10 years merely a slip of the tongue. The idea that the island should have just the 650 troops at the point at which Turkey would join the European Union—in some 10, 15 or more years—should not be a breaking point. I accept that Turkey could have offered to have fewer troops on the island as part of the negotiations, but I am not convinced that change on that single issue would have moved the Greek Cypriot leadership to offer to their people a decisive and clear lead in urging a yes vote.
I was asked about the resumption of talks. I deliberately chose not to visit Cyprus as Minister for Europe with responsibility in the Foreign Office for the island during the Annan discussions. Contrary to what my hon. Friend the Member for Edmonton said, I believe that Lord Hannay and the distinguished team of facilitators from the Foreign Office have worked tirelessly to achieve a settlement. They are friends of Cyprus, and it is wrong to criticise them. I have also heard from other hon. Members unworthy ad hominem remarks about British diplomats.
I am happy to inform the Chamber that I intend shortly to visit the island, and I will seek to ascertain what the Government can do to move the situation forward. However, the United Nations has said that it will not resume talks until both sides demonstrate the necessary political will, and so far the Government of Cyprus and the Greek Cypriot community have not approached the UN to seek resumption of the talks. Alas, the last word is still the no of the referendum in the south.
The British high commission in the island is active in conjunction with the British Council in building civil society on both sides of the island, and we seek to bring them together at every opportunity. The Foreign Secretary and I have had positive discussions with Mr. Talat, and we stressed to him that the way forward is not to set up new demands but to work constructively.
I am grateful to the hon. Member for West Suffolk for mentioning the tragedy of the disappeared people dating from the 1970s. Let me assure him that I am ready to place technical help at the disposal of the communities on both sides of the green line, particularly in connection with non-governmental organisations that work on DNA identification. We have seen forensic pathologists at work in Guatemala and the western Balkans—the right hon. Member for Kensington and Chelsea (Mr. Portillo) has considerable knowledge of that—and it is increasingly possible to identify through DNA testing the remains of buried people and who is responsible for their killing.
It is vital that the concept of habeas corpus—that nobody can be detained without the knowledge of their nearest and dearest—also applies to the dead. Their
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relatives should be allowed the dignity of knowing when they were killed, under what terms and who lies in the many graves. If the expertise that our non-governmental organisations have built up in DNA testing can be of service in the island, I will be happy to help with that.
The hon. Member for West Suffolk referred to the fact that the final version of the Annan plan was published only just before the vote, but that version had been tweaked only slightly. To draw a rough comparison, we now have the final version of the EU constitutional treaty, but a linguis juris version will be published in November just before the treaty is signed. Everyone in Cyprus knew where they were and had done so for many years—the version was Annan 5. Hon. Members may feel that just around the corner there may be a perfect Annan 6, 7 or 8 that satisfies both the Greek and Turkish Cypriot communities. I have to disabuse them of that view.
The current situation leaves the Turkish Cypriots disfranchised. Hon. Members asked me about the representation in the European Parliament. I assure them that when a solution is reached, under Annan 5, two of those MEP seats will be reserved for Turkish Cypriots. It is not fair that all five—I believe it will soon be six—seats for Cyprus are occupied exclusively by one community on the island.
I was also asked about entry from the north. It is true that the sovereign Government of the Republic of Cyprus—let us be clear that it is the sovereign Government recognised by the UN and by Britain—have said that they must have some regard for people who cross into the territory under their control from territory that they regard as occupied.
Mr. Chidgey: I accept the point that the Minister makes about the right of a sovereign nation to protect its borders, but I specifically refer to EU nationals—citizens of the EU and the UK, who carry passports to that effect—who should be treated with the normal courtesies given to residents and citizens travelling throughout the EU. Cyprus is an EU country.
Mr. MacShane: I made that point in the House. The Government of Cyprus have made it clear that they will not seek to delay or hinder the passage of EU nationals. If they were to do so, that would not be a problem for Britain alone, but would affect all 24 member states.
On 26 April, in response to the referendum, the General Affairs and External Relations Council stated:
"The Turkish Cypriot community have expressed their clear desire for a future within the European Union. The Council is determined to put an end to the isolation of the Turkish Cypriot community and to facilitate the reunification of Cyprus by encouraging the economic development of the Turkish Cypriot community."
The council recommended that the €259 million already earmarked for the northern part of Cyprus in the event of a settlement should now be used for that purpose. The council invited the Commission to put forward comprehensive proposals to that end, with particular emphasis on the economic integration of the island and on improving contact between the two communities and with the EU. The Commission's proposals are expected today and will go to the college—the collective Commission—tomorrow, so we will soon know what

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those recommendations are. The British Government's view is that we must now seek to facilitate economic, trade, travel and tourist links with northern Cyprus.
I was asked whether the Government of Cyprus might interfere with Turkey's ambition to join the EU. We have received solemn assurances from the Cyprus Government—I, personally, have received such assurances from the Foreign Minister, Mr. Iacovou—that Cyprus will not place any obstacle in the way of Turkey being given a start date for negotiations on EU membership. I accept those assurances, and hope that hon. Members will be reassured on that point.
Our approach to Cyprus continues to be governed by two principles: we want the reunification of the island as a bi-zonal, bi-communal federation. Having lived and worked for some years in Switzerland, I can think of worse fates for Cyprus than to become as rich and successful as the Swiss confederation. With that in mind, we will maintain our policy of not recognising the north of Cyprus as a separate, independent state, but we will maintain good contact with the leaders of its community.
I have no solution to hand. Such a solution will require leadership from both communities. There is no Annan 6—no magic solution from Her Majesty's Government or from Brussels. It is up to all the people of Cyprus to say yes to the unity of their island. The best way forward will be to return to the negotiating table and to vote for Annan 5 or Annan 5.5.

Assyrian Christian Minority (Iraq)
11 am
Mr. Stephen Pound: It is a pleasure and an honour to appear before you, Mr. Deputy Speaker, and also a delight, as you are one of the few hon. Members who speak fluent demotic and classical Greek and, for all I know, Akkadian Aramaic, too. If I occasionally lapse into Aramaic, it is not as a result of watching Mel Gibson films, but a tribute to your learning, Sir.
One purpose of he debate is to place on the record some facts about the Assyrian community as it is now and will be in the future, and about its extraordinary past. It is not just as old as civilisation, it has measured civilisation. The Assyrian community may be known from the unfortunate Biblical reference to the Assyrian coming down like a wolf on the fold, but as we are in the year 6754 in the Assyrian calendar, it gives us some idea of its longevity.
Who knows when the Assyrian civilisation began, but 2400 BC was the beginning of the first golden age of Assyria, which lasted until 612 BC, followed by a dark age from 612 BC to 33 AD, a second golden age from 33 AD to 1300, a second dark age from 1300 to 1918, and then the diaspora from 1918, which is why I have raised the matter today.
People in this country know little of Assyrian culture, language and history, although we may recognise the names Sargon II. Sennacherib, Esarhaddon and Ashurbanipal, but are we aware that the Assyrian empire at its peak stretched from the Caspian to Cyprus, from Anatolia to Egypt? It was a vast civilisation, not just the cradle of the modern world and modern civilisation, but the exemplar of how a state and an empire could be run, with learning, culture and an indigenous language that survived the vicissitudes to which I have referred.
The early Assyrian civilisation gave us, today, in this country, an enormous number of gifts: its people invented locks, keys and the measurement of time—the sexagesimal system was an Assyrian invention. They were responsible for the first postal system, the first paved roads, the first use of iron, the magnifying glass, the first libraries and, more prosaically, but equally usefully, the first plumbing and flush toilets. They invented the first electric battery, the first guitars, the first aqueducts and the first arches, although they are perhaps best known for two of their most famous inventions, both of which have made a great difference to my life: the wheel and lager. Those are the extraordinary achievements of a group of people from a country that is recognised in the epic of Gilgamesh; it is the site of Noah's flood, and its civilisation is inextricably linked with our own.
For the purposes of this debate I want briefly to mention the defining moment in Assyrian history: 33 AD, when the apostle Thomas, with Thaddeus and Bartholomew, converted the Assyrian nation to Christianity; the Assyrian Church of the East is the first and oldest Christian Church. Many hundreds of years later, when Marco Polo arrived in China, he found Assyrian Christian missionaries, which had followed the silk road. The entire Assyrian nation converted to Christianity in 33 AD, held true to its tenets and beliefs, and suffered grievously for it.

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At the height of the golden age from 33 AD to 1300, Assyrians founded the world's first university, with departments of theology, philosophy and medicine. The school of Nisibis became the model on which early Italian universities were founded.
Rather than go through Assyria's entire history, tempting thought that may be, I shall rush forward to 1918—the age of the diaspora. From 1300 to 1918, the Assyrian Christian community in Iraq, and those in Lebanon, Turkey, Syria and surrounding areas were viciously persecuted. Genocide was a regular feature. The Islamic conquerors of that part of the world imposed a tax, and many families had no alternative but to convert to Islam out of sheer financial necessity, regardless of their own theological beliefs.
The Assyrian diaspora has spread throughout the world. Switzerland was mentioned earlier; it has 10,000 Assyrians. There are 80,000 in Brazil, 100,000 in Lebanon, 50,000 in Iran, 23,000 in Canada, 20,000 in Holland, 2,000 in Mexico and 8,000 in Greece, which was the subject of the previous debate. Particularly dear to my heart and to the business of the House is the 8,000-strong Assyrian Christian community living in this country, many of whom I am privileged to welcome to my own community in west London. It is a long way from Nineveh to north-west London, but the Assyrian culture and the belief in the language have been constant throughout.
Earlier this year, I celebrated the Assyrian new year at the Assyrian centre in South Ealing road with one of the Minister's colleagues, who was extremely well received—he is always welcome, should he wish to return. We were delighted to see evidence of the strength of this community in our part of the world—a community that has thrived and given us a great deal.
One reason why the community is so well integrated in the UK is the long tradition of service for the British, predominantly in what we call modern Iraq. I am delighted that with us in Parliament today is Awiya Khamo, the son of Rab Emma Nimrud Khamo—Rab Emma is a title roughly translatable as flight lieutenant—who served in the Royal Air Force Levies in Habbaniyah. I could happily speak for hours on the history of the Levies' contribution and the Assyrians' participation, but I doubt whether people could happily listen for hours. I will say only that during the last war, 40,000 Assyrians fought in the Levies, and the Assyrian Parachute Regiment fought hand to hand with German forces in Crete, Greece, Albania and Italy.
I am delighted that my hon. Friend the Member for Ealing, Southall (Mr. Khabra), my constituency neighbour, in whose constituency the Assyrian centre is located, is here to support the debate. We speak as one on this matter. Although the centre is in his constituency, I do not begrudge him that; I welcome it.
Today, we have a desperately unhappy and tragic situation. I am referring specifically to the situation in Iraq, to which the title of this brief debate refers. Article 7 of the constitution of Iraq states that Islam shall be the official religion of the state. One consequence of that and of the large amount of Islamic cultural and social material that is played on radio stations and is in the newspapers has been a marginalisation of the Christian community. In addition—I do not say that this is a result of article 7, because it has lasted for many
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thousands of years—there is a campaign of murder and harassment against Christians in Iraq, which I deeply regret. An exodus on the scale of the 1918 diaspora is taking place. A recent message from a deacon at a church in Iraq states that its people are spending more time filling out the baptismal forms needed to leave the country than on arranging Christian services.
It is a desperately difficult situation, and harassment of Assyrians, principally—but not solely—by Muslims is now so serious that people are talking about whether article 54 of the transitional administrative law could include some sort of protected homeland for the Assyrian Christian minority. I shall mention that again in a moment.
Last month, two Assyrian sisters, Janet and Shatha, who were working for Bechtel, were killed just outside Basra in a drive-by shooting. They were identifiable Assyrian Christians, slaughtered for no discernible reason. Why would two young women be killed on the streets in that way? The family are quite convinced that the murder took place because of their religion. In the new year, several bombs exploded specifically in Christian areas.
The loss of Bashir Toma Elias, who was slaughtered on Christmas eve, just outside Basra, is a matter of grave concern to many people in the Christian community. Bombs exploded outside Christian churches and in the Christian district of Baghdad, and it is felt that some of the militia groups, who have names like "God's Vengeance", have stated that they will not rest until all Christians have left Basra or converted to Islam—that information comes from the well-authenticated and respected Barnabas Fund—and 2,000 Christian families have already fled.
On 7 June, four masked men drove into the Christian Assyrian quarter—Hay Al-Athuryeen—of the Dora district of Baghdad and opened fire on Assyrians on their way to work. Three men and one woman were killed immediately. It was a specifically targeted attack by masked gangsters on the Assyrian Christian community. We have now reached the stage where the Holy Apostolic Catholic Assyrian Church of the East, in the form of the Diocesan Bishop of Europe, Mar Odisho Oraham, has actually written to the Foreign Office, calling attention to the present plight of the Assyrian Christians. With the charity for which he is known, he recognises that the previous dictatorial regime in Iraq has gone, but he asserts that security and stability have not yet been established.
For many Assyrian Christians, the UK is a country for which their fathers and their families have fought. It has welcomed them and seen them grow into a stable, hard-working, law-abiding community, which has made an enormous contribution. My hon. Friend the Member for Ealing, Southall and I can point to many examples of the contribution that it has made locally. The concern is that many of the Assyrian Christian community who have followed a well-trodden path to the United Kingdom will be forcibly repatriated to Iraq without the specific pressures and the condition of the Christian community in Iraq being considered.
Mar Odisho Oraham has urged the Foreign Office, not to give a blanket exemption to all Assyrian Christian asylum seekers from Iraq from any repatriation—that would be unreasonable—but to take into account their

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specific circumstances. I ask for that today. When decisions are made, the long history of genocide against the Assyrian people—the continuing and contemporary slaughter of Assyrians for no other reason than their Christianity—should be taken into consideration. I have spoken this morning to one of the leading members of the community, Andy Darmoo, whose father served for 31 years in the RAF. Speaking for the Assyrian community in the UK, he lists a long, bloody and heartbreaking catalogue of murders, attacks, assaults, land confiscation and denial of human rights currently taking place.
Andy Darmoo said to me this morning that, in addition to the historical linkage between the Assyrian Christian community and the United Kingdom, there has been a long-lasting relationship of mutual respect and support. He referred to the participation of the British forces after the great war and how virtually everyone in the Assyrian centre has some relationship with the British armed forces. He also referred to the positive contribution that they have made to this country.
My hon. Friend the Member for Ealing, Southall can speak for himself, but I hope that he will allow me to say that he and I come from a part of north-west London that has many communities. Many different streams of people come together to make up what we relish and cherish as our multiracial and multicultural community. One cannot say that one community is better, stronger or weaker than another, but of all the dozens, if not scores, of communities among whom I live and work, few have made as great a contribution in such a positive, community-conscious and law-abiding way as the Assyrian Christian community. The fact that half the referees in the Middlesex FA are Assyrians is neither here nor there—I can forgive them for that. That community makes an enormous contribution.
I asked for this debate because I am concerned about the fear in the Iraqi Christian community of the consequences of article 7 of the constitution for the temporary administration in Iraq and of the possibility of forced repatriation, and about the effect that that is having on that community, which, to coin a phrase, has stood shoulder to shoulder with us for many centuries. While we cannot repay such loyalty, we can acknowledge and respect it.
I call on my hon. Friend the Minister, who is well known and widely respected in the Assyrian community, simply to accept the realities of life in Iraq when any decision is made. I am sure that he will do so. If I apologise for placing this matter on the record and for taking parliamentary time to do it, I do so in recognition of the fact that it is important that the voice of our Assyrian brothers and sisters is heard in this place, that some of their history is placed on the record and, more importantly, that their present and future are made safer and more secure by the actions of this House.
11.18 am
The Minister for Trade and Investment (Mr. Mike O'Brien): I thank my hon. Friend the Member for Ealing, North (Mr. Pound) for raising this subject for debate today. I also thank my hon. Friend the Member for Ealing, Southall (Mr. Khabra) for coming along to listen to the debate.
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I begin by assuring my hon. Friends that the Government intend to take into account the circumstances of the Assyrian Christians in Iraq when we make asylum decisions. I shall pass on their concerns to the Home Office and the Foreign Office.
My hon. Friend the Member for Ealing, North is right to say that the roots of the Assyrian Christians in the region perhaps go deeper than those of any other community in the middle east. They are rightly proud of their history and culture. However, like all the people of Iraq, the latest chapter of their history has been one of misery. They have endured decades of oppression under Saddam's regime. Many were forced into exile, as were many others during the great Assyrian diaspora of decades before. I know that many Assyrians live in my hon. Friend's constituency and that he has worked hard during his years as a Member of this House to highlight their cause, and it is right that he should do so.
There are also thousands of internally displaced Assyrians still living in Iraq, driven from their homes during Saddam's "Arabisation" scheme. The forced movement of Kurds, Turkomans and Assyrians is one of the worst legacies of Saddam's regime. An Iraqi Property Claims Commission has been set up to deal with the way in which people were forced out of their homes and to examine whether the disputes over property can be resolved in a legal and controlled fashion. Offices arc now open throughout Iraq, with particular emphasis on the Kirkuk district, which saw the worst cases of forced displacement.
The British Government have worked tirelessly over the past year to secure basic human rights for all of Iraq's minorities—rights that Saddam denied. Iraq now has human rights legislation encapsulated in chapter 2 of the transitional administrative law, agreed by the Iraqi governing council in March. This legislation provides a legal framework for Iraq during the transitional period. It states that all Iraqis are equal before the law and that discrimination on the grounds of ethnicity, religion or gender is illegal. It states that torture in all its forms is prohibited in all circumstances and it guarantees the right of all Iraqis to educate their children in their mother tongue, including Syriac, the language of the Assyrian people.
It is the first time in Iraq's history that such an impressive package of human rights legislation has been passed, and Iraq's different communities have universally welcomed it. I know that the Assyrian community in particular were pleased with article 53 of the law, which guarantees their administrative, cultural and political rights, although of course they would have liked more.
The British Government will continue to keep in touch with the full spectrum of different ethnic, religious and tribal groups that make up Iraq's rich tapestry. Foreign Office officials regularly meet representatives from Iraq's Assyrian community, both in London and in Iraq. We will actively continue with such engagement. We are very aware of the Assyrians' unique place in Iraq's history. Appropriately, they have a representative in the new Iraqi Government, Ms Pascale Isho Warda, who is Minister for Displacement and Migration.
All indications from the new Iraqi Government are that they will continue to further minority rights. That is not surprising—after so many years of suffering the

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Iraqi people crave a Government who will further their collective and individual rights. Many individuals in the interim Government have personal and direct experience of human rights violations under the former regime.
Of course, the drafting of human rights legislation in Iraq is only part of the battle. Respect for human rights must be seen in action, too. We have a moral duty to support the Iraqis in the implementation of the laws that they have passed. As my hon. Friend said, there have been reports of attacks against the Christian community in Iraq, including kidnappings, assassinations and intimidation of practising Christians. It is not just Christians who are affected. Shias in Sunni areas, Sunnis in Shia areas, Kurds and Arabs—men and women—have all been affected by terrorist attacks. A small minority who aspire to provoke and exploit divisions between religions and ethnic communities carry out the attacks.
The British troops currently serving in Iraq are working with the Iraqi security forces to prevent those attacks and create stability in the country. It is only by building up the Iraqi security forces and ensuring that they enforce the human rights laws that their Government have decreed that we can create the conditions in which the most basic human rights—security, stability and democracy—can be implemented.
The handover of authority on 28 June was a milestone that has profound importance for the Iraqi people. It has been welcomed throughout Iraq, regionally, and worldwide. With the support of the United Nations, Iraqis are preparing for the next steps in the political transition—elections to a Transitional National Assembly and Transitional Government by the end of January, followed by the drafting of a permanent constitution, a referendum and then elections on the basis of the new constitution.
We hope that the elections will give Iraq's minority groups an opportunity to be represented at all levels of government in Iraq. Furthermore, it is the elected representatives to the Transitional National Assembly who will draft the permanent constitution in 2005, so all Iraqis, including the Assyrians, will be able to identify with the values and institutions enshrined in that new constitution.
There is a long way still to go. There are obviously difficulties in dealing with terrorism, reducing the level of violence, and ensuring proper respect for human rights. It is also clear that the hatred that is building up among some in Iraq is targeted not only at coalition forces but at various minority groups, including the Assyrians. We must ensure that the security forces are strong enough to deal with the problems, and that respect for human rights is embedded in a new Iraqi
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constitution so that the duly elected Government respect those rights. To some extent the coalition can help, but it is up to the Iraqi people how they vote in elections.
Mr. Piara S. Khabra: Under a constitution, or whatever political system is set up in a country, there is a guarantee of civil liberties and rights to the minorities. However, despite the fact that the law may not allow it, religious fundamentalists in many countries behave as they want to, as has been experienced by Christians in Pakistan. How can the difficult situation in Iraq be resolved if the authorities are unable to control the fanatics, who like to intimidate and persecute minorities in a country that is predominantly made up of one religion?
Mr. O'Brien: My hon. Friend is right: we have seen the growth of fanaticism in a number of countries in and beyond the middle east. There have been attacks based on religious hatred in Pakistan, India and many other countries. The Governments of those countries must deal with that level of fanaticism, the teaching of hatred and the fact that some people seem to think that they have a God-given right to murder others because of their different beliefs.
Iraq presents us with particular problems because of the aftermath of the war and the creation of the new Government. There has been a concerted attack not only by outside extremists—some no doubt influenced by al-Qaeda—but by those involved with Saddam Hussein in the past. Others, for various tribal and domestic reasons, have also become involved in terrorist action and violence. The religious hatreds that my hon. Friend identified have fed into that situation.
Over the coming months, we shall seek to embed the idea of respect for human and individual rights into the operation of the Iraqi Government. I repeat that it will be up to the Iraqis what sort of Government they create. We can help and encourage them, and show that we believe that respect for minority religions is enormously important. We will continue to lobby the Iraqi Government to implement human rights legislation and we will continue to provide troops for the multinational force in line with Prime Minister Allawi's request. We will also continue to lobby the new sovereign Iraqi Government after the implementation of the constitution to ensure that human rights are firmly anchored in their permanent way of dealing with people. We want to see a free, democratic, stable Iraq, at peace with herself and her neighbours, and with respect for all religious minorities, including the Assyrians.
11.30 am
Sitting suspended until Two o'clock.

European Constitution
2 pm
Mr. William Cash: I want to dispose of one myth about the European constitution straight away—that is, its length. I have seen repeated references to the length of the treaty, but, having got the full text, to my considerable astonishment I discovered that, far from being 331 pages, which is in itself excessive, the figure, including protocols, is 676 pages. I have the documents here—I got them from the Library this morning—and the two together come to that extraordinary total. That is an indication of its scale.
The Minister for Europe (Mr. Denis MacShane): This is a friendly debate and I thank the hon. Gentleman for giving way. I have the official Foreign Office draft treaty establishing a constitution for Europe here. It is 248 pages. Can we swap, because we must decide on the number of pages? This is the official Government version; perhaps he is referring to some other treaty.
Mr. Cash: No. I can only refer the Minister to the documents that were given to me this morning by the Library. One is dated 25 June 2004 and the other, which is described as an addendum, contains the other provisions. It may be that the Library is mistaken, in which case we will be required to produce further and better particulars.
I do not have a copy of the document that the Minister referred to, and I would be glad to have one, but there are so many such documents and, in any case, we are told repeatedly that the whole thing is subject to the expression "toilletáge", so we will not have a final text until much later in the year.
The important point is that this is one of the most important documents to have been presented to the people of Europe and, in the European elections only the other day, we discovered exactly how little genuine interest there is in certain countries. That was described as apathy, but I prefer the word "rejection". When people are given an opportunity to take part in a debate on the scale of the one that took place during the European elections, I would expect a much larger turnout if people are properly informed. The problem is that the information that has been made available has simply not excited people's attention.
To start with, I will identify exactly what the provisions before us represent in terms of the text that we had beforehand. I think that that is a convenient starting point. It is a myth that the European constitution has been put to sleep until after the next general election. The reality is that it is already being implemented. That stage was reached even before the Prime Minister signed the final agreement on 18 June.
On 14 June 2004, the European Defence Agency, which is referred to in article III-212 of the constitution, was established. Indeed, preparations for the European Union diplomatic corps—the so-called external action service—should be taking place even as I speak under a declaration annexed to the relevant article of the treaty establishing the constitution and requiring the member states to get going as soon as the text is signed.
Furthermore, despite the assurances of the Prime Minister about an opt-out on asylum and immigration policy, several building blocks for the common
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European asylum system have been put in place, including the Dublin II regulation on responsibility for asylum claims. Furthermore, there is a directive on reception conditions for asylum seekers and a directive on temporary protection in the event of a large influx.
Directives on the definition of a refugee and on common asylum procedures are already well advanced. Indeed, the longer the delay in holding a referendum, the more of the 25 per cent. of the treaty establishing a constitution that the Prime Minister admits is not contained in previous treaties will have been implemented. That will make it even easier for the Government to press their false claim that a no vote is really a vote to leave the European Union—another underhand tactic from an underhand Government.
An honest Government would hold a referendum immediately. The British people could then reject this predatory, jargon-ridden, dirigiste constitution before it took hold. The constitution is a victory not for the Prime Minister or for the new Europe, as he suggests, but for the corporatist, Franco-German placemen who drafted it. It is the wrong prescription for an ailing Europe and it will not serve its interests. It should be torn up and thrown away.
The leader in The Economist of 26 June, "The right verdict", states:
"That lack of subsidiarity, of control, above all of any real sense of constitutional stability are the fundamental flaws of this treaty. The European Union does need a smoother, more efficient decision-making process, both for its own sake and so that it can enlarge itself even more in future … But if voters are to feel comfortable both with that efficiency and that enlargement, they need a constitution"—
I question whether we need a constitution in any event, but that is the view of The Economist, and this is what it prefers—
"that stabilises and controls the process properly."
It goes on:
"It needs to be demanded by voters. That is why the best result in all the ten referendums would be a resounding no vote."
That is the view of a journal that, going back only a few years, was positively advocating the accumulation of treaties, but which has come to the conclusion that the constitution is a disaster area.
The Prime Minister, in accordance with his habit, has defended this monstrosity, which I think he has never believed in, with posturing and windy generalities. What he likes to call myths are most often real dangers that have been averted, and the aversion often owes more to lobbying than to the efforts of his Government. I am not talking about straight bananas, but things such as oil supplies. It should be noted that energy remains a new competence of the Union under the agreed text of the constitution, despite the best efforts of those in the oil business.
The real myths are the claims the Prime Minister makes about the constitution, which he dare not call a constitution because he knows that the British people are opposed to the imposition of a constitution in principle. He says that the constitution makes clear where the EU can and cannot act. What it does in fact is divide up the Union's expanded powers into exclusive, shared and complementary competences. A shared competence is one where the member states retain their powers in so far as the Union has not exercised, or ceases

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exercising, legislative power. This is, therefore, not a matter of equal sharing. There is a list of exclusive Union competences, but no list of competences expressly reserved to member states.
That issue was dealt with by the House of Lords European Union Committee when considering the role of the European Court of Justice, which led to a debate in the House of Lords on 21 May. I intend to refer briefly to a number of matters that arose in that debate because they go to the very heart of the fundamental question facing the people of this country, which is, who in fact is to call the final shots? Is it to be the voters in the general election or the European Court of Justice, adjudicating in areas that one would have assumed in a democracy to be the province and the right of the voters of this country? It is precisely because the European Court of Justice is given such overarching powers over matters of government that I oppose the constitution as a violation of our democracy.
The change in the nature of competences creates myriad grey areas that will be subject to the rulings of the European Court of Justice, which itself is not an impartial tribunal, but an integrating institution of the European Union. We already know about the political influences within the European Court. Almost as soon as the texts had been agreed, one of its most senior judges made it abundantly clear that the treaty would expand their powers at the expense—although he did not say this—of the voters of this country and of the whole of Europe.
One of the fundamental objections that we all should legitimately have to the constitution is the structure that it creates throughout Europe. Far from improving stability, it will generate tension but—with the low growth and high unemployment that are characteristic of the European, or certainly the French and German, landscape—not prosperity of the sort that has been claimed for the new proposals.
This morning, I heard on the "Today" programme an interesting altercation between Derek Simpson of the TUC and the Secretary of State for Trade and Industry. Mr. Simpson complained about unfairness in the European Union because of the state aids that are prevalent in France and Germany, and about the fact that we are now getting a diet of temporary workers and low-quality manufacturing. As far as he—and I take it, therefore, the TUC itself—is concerned, the TUC is inverting the attitudes that prevailed under John Monks, his predecessor, because it recognises that the way in which the European Union is moving is not in the interests of the social Europe to which the Minister referred in a speech a few days ago.
This Europe is not working; it is not successful. As I said a few days ago in an exchange with the Chancellor of the Exchequer in the European Scrutiny Committee, there are features of the British economy outside the present arrangements that have benefited this country. There is no doubt about that. However, the manner in which the economy has been constructed is despite, not because, of the arrangements that the Government have entered into.
The Government's commitments in principle to the single currency and the European constitution are not just theoretical abstractions; they involve essentially practical matters. When one finds that the Labour
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heartlands and the TUC turning against the way this European Union is functioning, one can understand why, when compared with the previous European parliamentary elections, the Labour party lost a 19 per cent. share of its vote in the most recent elections.
When the Secretary of State for Trade and Industry replied to the interviewer on the programme this morning, she described herself as being passionate for manufacturing and said that 3 million to 4 million manufacturing jobs had been created under this Government. Unfortunately, however, the problems relating to the new constitution that are now becoming clear will further diminish the effectiveness of that Government policy, which exists despite, not because of, their policy on the European issue.
Together with other colleagues on the European Scrutiny Committee, I cross-examined the Secretary of State on competition policy on 16 June. It is important to bear it in mind that competition policy is absolutely essential to the potential effectiveness of enterprise and productivity in the United Kingdom and throughout Europe. It may come as a surprise that the Government's original intention, as expressed by the Leader of the House when he was playing a role in the prospective treaty and by others, was to insist that competition activity would be at most a shared, but not an exclusive, competence.
The exchange that took place in the European Scrutiny Committee included this astonishing remark on competition policy by the Secretary of State:
"As far as the IGC is concerned, it did come up though I could not tell you at exactly what date, I am afraid. This, as I have said earlier, was not one of our first order issues. It was one of my Department's many concerns about the original proposals and earlier drafts of the Convention but it was not a first order priority and, certainly once into detailed ministerial meetings, there simply was not time to worry about second order priorities".
That demonstrates the Government's complete lack of comprehension and perspective on something so fundamental as how we as a nation are to be absorbed into the European Union and the inevitable effect on our jobs, our competitiveness, our productivity and our growth if we are locked into an arrangement in the European Union by which it has so much control over how questions of competition are to be defined.
As I and other Committee members from both sides said to the Secretary of State, we were simply not convinced by her arguments on why we ended up with competition policy being in effect an exclusive competence. I also asked her how she would deal with the avowed policy of France and Germany, which has recently been announced, to establish industrial champions. Quite clearly, that will be a highly protective measure, taking us back to the 1970s, which will be counter-productive and generate more problems internationally than one would possibly have imagined only a few years ago when all that talk was abandoned.
Having just been to Birmingham, Hodge Hill, where the by-election is to be held, I note that GEC Alsthom at Washwood Heath in that constituency has been closed. There was a discussion on the "Today" programme this morning about the problem of making trains. The GEC Alsthom experience, which I witnessed when I was the Member of Parliament for Stafford, was part and parcel of the failure to control the industrial champions policies that have had such disastrous effects on British

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manufacturing and employment. The French and Germans, for example, will be pursuing their industrial champions policy in the face of international competition from the world as a whole, as I told the Secretary of State for Trade and Industry. There is a fundamental flaw in that aspect alone of the direction in which the European Union is going. The difficulty facing us is also tied up with the extent to which the treaty provides for economic co-ordination.
I want to return to the question of the European Court of Justice. Lord Scott of Foscote, who is a Law Lord and chairs the European Union Committee, had some important things to say during the debate, and as far as I can see, the Government are not succeeding in or even attempting to repudiate the points that he made. He said:
"There is very little said in the proposed treaty about the role of the"
European Court of Justice. He said that in their response to the Committee's report, the Government said:
"'The court's jurisdiction and role will remain essentially the same as under the European Community Treaty although the scope of the Constitutional Treaty itself will, of course, be different'."
I do not know what you make of that, Mr. Deputy Speaker, but it suggests that they are trying to have it both ways. Lord Scott then said:
"This statement … gives inadequate recognition to the increase in importance of the role of the ECJ".
The Government are extremely anxious to avoid the issue of the role of the European Court because they know that the ultimate question will be the exchange of voters' rights for decisions in relation to matters of fundamental importance in Government and governance of the United Kingdom and standing here in Westminster Hall in the British Parliament observing the history of this place in the fight for democracy and having to take part in a debate on a treaty that fatally undermines the democratic rights of the people who return us to Parliament and have done for generations, if not centuries.
The noble Lord then referred to what he described as
"perhaps the most important issue of all"—
the jurisdiction of the Court. He pointed out that the European Court
"does not at present have jurisdiction in respect of second or third pillar matters. The second pillar is common foreign and security matters; the third pillar is police and judicial co-operation in criminal matters. Under the new constitution"—
as I pointed out in previous debates—
"the three pillars will be collapsed. There will simply be European Union law which, according to Article 10/"—
the number has changed to 10.5—
of the proposed constitution, will have primacy over domestic, national law."—[Official Report, House of Lords, 21 May 2004; Vol. 661, c. 1001-02.]
The issue of primacy is fundamental and in the Prime Minister's statement to the House on his return from the European Council, he attempted to gloss over it. Eurorealists such as myself allege that primacy has substantially and fundamentally changed the nature of
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the relationship between the European Union and the member states. In a nutshell, his response is that that is nonsense. However, he cannot repudiate the point that I put to him during Prime Minister's questions a few weeks ago that the constitution revokes all existing treaties and the laws that go with them.
The bottom line is that there is a fundamental change. The division of competencies, to which Lord Scott of Foscote referred in his report on the treaty, is not a mere drafting exercise. In recognition of that, and because the Government could not continue to hold the ring on the argument, the Prime Minister agreed to a referendum. He did not do so lightly and he has not given a satisfactory explanation of his change of mind. I am convinced that as we got deeper into the question, the position of the Government and of the Minister replying to this debate became both transparently absurd and increasingly impossible to maintain.
Mr. Richard Spring: May I return to the question of the primacy of EU law? The Government's approach is absurd given that the Leader of the House sought to amend exactly that point during the Convention on the Future of Europe. While the Government are saying one thing now, in practice they unsuccessfully tried to reverse the constitutional enshrining of the primacy of EU law.
Mr. Cash: Absolutely. That was precisely why the Prime Minister originally resisted the idea of a constitution and said that it was not desirable or necessary. The Government know exactly the impact it will have and how invasive it will be on the democratic rights of the electorate.
I held a debate in this very Hall a few weeks ago about my Sovereignty of Parliament (European Communities) Bill, in which I have proposed a solution to the problem of primacy. There is ongoing dispute here and in other countries about whether the European Court or the highest domestic court in the land has the last word. However, the passage of a Bill that unambiguously states that enactments that include the words,
"notwithstanding the provisions of the European Communities Act 1972",
are inconsistent with that Act would impose an obligation on our judges to give effect to that. It would strike at the heart of the manner in which the European Court asserts its jurisdiction over our constitution and, as expressed in the relevant articles of the European constitution, takes primacy over our constitution and laws.
This is in fact a new situation, not a repetition of the existing one. Where the constitution refers to the conferral of powers through the member states, that applies only to the act of putting together the proposals for the constitution. Once the constitution has gone through, the European Court will exercise its jurisdiction over our constitutional arrangements unless we have a provision that reaffirms the sovereignty of this Parliament. It is simply not good enough for hon. Members and the Government to assert that it is nonsense that the constitution has an adverse impact on the manner in which we exercise our sovereignty in this place. There will be a substantial difference. In the evidence given to the House of Lords European Union

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Committee, a number of distinguished legal experts made it clear that that would be the case. One went so far as to say that he would prefer the word "supremacy" to be used rather than the word "primacy", for obvious reasons.
The Government will continue to protest their case, but it is a sham. If anyone considers the history of the European Union in the past decades, they will see clearly that the endless list of assertions that have been made, for example in the 1970 White Paper that we would not lose the veto, have all proved completely unsubstantiated. The reason for that is that those who are driving forward the process and have established the idea of a European constitution by agreement between Governments—but not people—have done so with one objective: the political union of Europe.
For all the arguments, dancing on the head of a pin and analysis of individual provisions the totality of the exercise is as clear as daylight. It is intended to create one state and a political union, and the constitution is the culmination of that work. Considering the continued ingenuity of those pursuing that objective, they will undoubtedly find other ways of bringing more effectively into account matters such as national taxation. After all, whether we are dealing with taxation, defence or foreign policy, it is clear from the pattern of established movement towards integration that that is what is intended and that is what will happen.
It is simply a massive deception on the people of Europe and this country to suppose that that is not in the making. In fact, I would go further to say that all the essential ingredients already exist. Although the European Court of Justice does not get an enormous amount of publicity—which is highly regrettable— it already adjudicates on matters of national taxation in relation to corporate tax. The boundaries are being pushed back all the time, and the same applies to defence and foreign policy. Even if the barriers—the so-called red lines laid down by the Prime Minister—were construed as having had a partial success, they will not withstand the overriding tidal wave of determination to take over other functions in the short term.
In a House of Lords debate, Lord Scott listed the areas that were outside ECJ jurisdiction, including
"common foreign and security policy matters … police and law enforcement matters, and matters relating to the maintenance of law and order and the safeguarding of national security — Outside these specifically excluded areas, the ECJ will have jurisdiction."
However, he pointed out:
"Even in the areas from which ECJ jurisdiction is excluded, European law will have primacy — It is an oddity that European law will have primacy over member states' domestic law, even in the areas where the ECJ does not have jurisdiction."—[Official Report, House of Lords, 21 May 2004; Vol. 661, c. 1002.]
That point was not answered in the House of Lords, so I hope that the Minister will answer it now. It is not only an oddity, as Lord Scott said; it is an absurdity. However, the key point is that it should not be within the competence of the European Union in the first place.
Where the treaty refers to the fact that the
"limits of Union competences are governed by the principle of conferral",
it is implied that, somehow or other, that prevents the European Union from acquiring the degree of control that I assert it attains. Once the constitution has been
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ratified, conferral will give way to the consequences and the European Court will ultimately have the last word through its control and ultimate say over competences.
Lord Scott went on to ask which courts would have the final word on such issues as and when they arise. Without going into the detail of that, the bottom line is that he says that the European Court must have the final say, and Lord Slynn, who spoke earlier in the same debate, said that that was absolutely fundamental to the workings of the European Union. Above all else, the bottom line is the insistence that we get over and again that the European Court must have the last say. I argue strongly that that is an undemocratic way to run the European Union and is in itself a reason why it is essential that the constitution be rejected.
Indeed, as the Prime Minister said in his statement on 21 June,
"of course, European law only takes precedence where member states have agreed that Europe should have a competence."—[Official Report, 21 June 2004; Vol. 422, c. 1080.]
However, it is the European Court and not our courts that will decide which competences we have given to Europe as Lord Scott noted. At present, the doctrine of primacy remains an invention of the European Court of Justice and member states can set their own limits on it. However, once it becomes the founding principle of a European constitution, there can be no argument, only obedience. The Prime Minister says that the new treaty provides for qualified majority voting "where we need it". He did not say that we needed more qualified majority voting before. That is because we do not need more of it, and certainly not in the 40 extra areas that the European constitution provides for.
The Prime Minister says that the UK will retain a veto over tax, but as I pointed out, the European Court has been harmonising corporation tax for years, and there is nothing in this constitution that would prevent it from continuing to do so. He has spoken of safeguarding the areas of social security and criminal law procedures, but the so-called emergency brake on new European legislation in all those areas can be overridden by the European Council. He talked about national Parliaments being given the power to send legislation back to Brussels, but all they can do under the protocol is send a reasoned opinion on whether the draft legislation complies with the principle of subsidiarity, which, as we all know, has never worked. When it was first announced back in 1990, I described it as a con trick. It has never worked, and there is no intention that it should.
The Prime Minster seeks to present the so-called explanations added to the charter of fundamental rights as a victory that will neuter the charter, but the Minister's predecessor, the hon. Member for Leicester, East (Keith Vaz), originally told us that the charter would have no more legal force than the Beano, and now it is an integral part of the constitution. Many European lawyers doubt that the much more vaunted so-called explanations will have the effect that the Prime Minister claims for them. Indeed, the president of the European Court of Justice is not willing to say that the charter's provisions will not apply directly to the United Kingdom.

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The reality is that the Prime Minister's claims about the charter, such as those relating to labour laws, do not look at the threats in the round. A declaration annexed to the treaty drops a hint, saying:
"The guarantees and practices existing in each Member State as regards the responsibility of the social partners"—
the representatives of workers and management respectively—
"will not be affected. This declaration is without prejudice to the provisions of the Constitution conferring competence of the Union, including in social matters."
In other words, the constitution is purely rhetorical, and social policy provisions may ignore it.
The Prime Minister's statement was suspiciously silent on the subject of economic co-ordination. I touched on that in my exchanges with the Chancellor of the Exchequer, and it came up on the "Today" programme this morning. Fundamentally, the question whether we shall continue to benefit from being outside the eurozone will be vitiated by the provisions relating to economic co-ordination. The third paragraph of article I-11 states:
"The Member States shall coordinate their economic and employment policies within arrangements as determined by Part III, which the Union shall have competence to provide."
The first paragraph of article I-14 now states, in respect of economic policy co-ordination, that
"the Council shall adopt measures, in particular broad guidelines for these policies."
Furthermore, a declaration on the discredited stability and growth pact states:
"The Member States will take all necessary measures to raise the growth potential of their economies."
Honestly, what a joke. It goes on:
"Improved economic policy coordination could support this objective."
Weasel words, if ever there were.
The member states should never have entered in to the stability and growth pact in the first place. I was deeply opposed to it at the time, and made it quite clear, in a response that I gave to the then Chancellor of the Exchequer, my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke). He wrote to all Members of Parliament explaining the virtues of the stability and growth pact, and I replied in a letter, explaining why I did not think that it would work. People can judge for themselves.
Since the December intergovernmental conference, there has been a drift back towards greater economic and employment policy co-ordination at EU level, which represents a major reverse for the Chancellor of the Exchequer and the Treasury and is, prospectively, a threat to Britain's economic future. Furthermore, although the constitution may not force Britain to join the euro, it certainly turns the screw.
Under article III-91, non-euro member states, such as the UK, are to lose their voting rights in a number of areas, including recommendations made on the basis of "multilateral surveillance", and
"measures relating to excessive deficits".
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That is a fundamental question. Voting rights are also to be lost in respect of
"decisions establishing common positions on issues of particular relevance to economic and monetary union within international financial institutions and conferences"
That clearly identifies problems that will arise as a result of the EU being given legal personality—another offensive part of the constitution. There will also be
"measures to ensure unified representation within the international financial institutions and conferences".
That is another reflection of the creation of a legal personality.
Eurozone countries will thus be acting as more of an exclusive bloc, even as the economic aspects of economic and monetary union are tightened for all member states, including the UK. Indeed, the greatest myth of all—the people of this country have been fed a diet of myth by the Prime Minister—is that we face disaster unless they vote as the Prime Minister tells them to. I have just come back from the by-election campaign in Hodge Hill, and can assure hon. Members that, as we went round, it became quite apparent that the issue of the European constitution—not just Europe as a whole, but the constitution in particular—was causing a great deal of anxiety to people in that constituency. If this constitution fails, the result will not be a new European war, nor millions of British job losses, nor even the expulsion of Britain from the European Union. Rather, the whole matter would be referred back to the European Council.
The reality is that negotiations would then have to start afresh, not on the basis of making limited amendments to a huge, detailed text drafted in advance, but on the basis of a blue-skies reappraisal, which is what is needed. That is no myth but a genuine prospect, to be welcomed by all those who have the true interests of the British at heart.
That is the key point. We are tampering with the real emotions of the British people, and the constitution is a disgrace for that reason alone. No proper explanation has been given and no proper information is being provided. We see from statements made by the Government in the past few days, for example from Baroness Symons in the House of Lords yesterday, that there is a need for more information to be made available. The bottom line, however, is that the Government will not do that on a fair and reasonable basis.
What are we to do in such a situation? In a nutshell, we will have to repudiate the constitution, and we will have the opportunity to do so in the coming referendum. The European elections also demonstrated a reality, not only in the United Kingdom but across Europe as a whole, in line with the persistent arguments and campaigns that have been going on for the past 30-odd years. The reality is that the arguments have now settled into the minds of the voters not only in this country but across Europe.
A further problem, which we will have to deal with, is that the Conservative party will have to engage in a policy of fundamental renegotiation combined with rejection of the European constitution. If we do that, we will gain the support of the people of this country not only in the referendum but in the forthcoming general election. It would be a monumental mistake for anyone

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to believe that the vote of the United Kingdom Independence party in general, and in specific marginal seats in particular, will evaporate. In certain parts of the country, the Conservative party was overtaken by UKIP in the European elections, and in the East Midlands region, the difference between the Conservative share of the vote and an outright win for UKIP was a mere 4,000 votes.
We must recognise the need for fundamental change, and recognise, on the principle of mutual assured destruction, that the UKIP vote will not achieve its objectives on its own terms precisely because it cannot do so without the Conservative party being in power, while equally, the Conservative party will not be able to get the number of votes needed to achieve power unless it reclaims votes from UKIP. We are locked into a situation from which we shall have to move forward with a more constructive, more convincing argument. Fundamental renegotiation, combined with rejection of the European constitution in principle, is the right way forward.
2.49 pm
Mr. Richard Shepherd: I think it was Cicero who said:
"Those who know nothing of the time before they were born will remain forever a child".
The history of the constitutional development of the European Union has depended on that. The present Government have always employed the technique of asserting that what they are doing is merely an accepted conclusion to a long process, but many of us who in 1975 voted to remain members of what was then considered a common market have watched as that, under successive Governments, has developed into something very different. That is important, and it is similarly important that the Government have at last—contrary to their initial instincts and the Minister's own views—conceded that a referendum is appropriate.
The circumstances in which that decision was made are curious. Just three weeks before the Prime Minister accepted that there should be a referendum, the Whips drummed 237 Members into the Lobby to vote down that very concept. Most of us have watched over 30 years the development of something different from the Common Market. We have had the Single European Act and the treaties of Maastricht, Nice and Amsterdam. Now there is the prospect of the new constitutional treaty, which is very important and contrary to what most of us initially understood.
The results of the recent election demonstrated something. Out there, without understanding the subtle nuances that my hon. Friend the Member for Stone (Mr. Cash) has been enunciating, the people know that this is a constitutional settlement. They have seen British Governments discharge obligations that they never knew had been entered into. They have watched a European Court of Justice, prior to our entry to the Common Market, take upon itself a primacy in law that no country had agreed to within the treaty. That was one of the essential arguments of my hon. Friend concerning the primacy of law in the Community, and it is now to be institutionalised in the constitution.
This is called a constitutional treaty because it is a lock on our own constitutional arrangements. I say "constitutional" because my alarm over the years
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particularly concentrated on the Maastricht treaty, which first revealed to me the wider vision. Where was this European demos? Where was this European polity? The old language had secured for this country a constitutional harmony and peace beyond that of any other western European country, yet we are so casual about it.
Who is the sovereign? That is the oldest question in politics. As Churchill said, in our modern constitution, the people are sovereign. The treaty is designed to remove the sovereignty from the people of this polity—from the demos of this polity—and transfer it absolutely and until the end of time to institutions beyond their reach. That is what it is about, and that is the choice that we shall be arguing about.
I believe that British public opinion is more settled about the constitution. The people profoundly reject it. They no longer trust the politicians of my party or those in government when they assert their understanding of the articles and details of the constitution. They are right to distrust it. Even with the best intentions in the world, I have listened to Ministers of both parties pronounce their understanding of what a policy, position or competence of the UK Government is, only to see it overturned.
Who is the sovereign? In this constitution, the sovereign will be the European Court of Justice. That is alien to our concept of government and our concept of accountability. That the whole of this country can profoundly object to a measure or a policy—profoundly, destabilisingly object to it—means nothing within the terms of the treaty. I give a cheer because the great divide that arises over the constitution will show that this country has not lost a sense of itself, its constitutional heritage or what democratic and accountable government means.
2.55 pm
Sir Menzies Campbell: I disagree with almost everything said by the hon. Member for Stone (Mr. Cash), but I have a grudging admiration for him because he brings to these occasions an admirable political, if not intellectual, consistency.
I claim a certain moral rectitude in these matters because my party was the only one to face the electorate at the previous general election with a proposal for a European constitution as one of its manifesto commitments. I am pleased that a document has emerged. Had I been given the opportunity, however, I would have written parts of it differently. Parts of the proposals are not as ideally expressed or as ideally founded on principles that I regard as important as they might be, and the document is not necessarily as accessible yet as it might be, but it is in an understandable form. It sets forth the competences of the European Union and provides the framework for administering a Union that has grown from the six countries that first formed the European Coal and Steel Community to the 25 that now constitute the EU's membership.
The primacy of European law is part of our constitution by virtue not of anything done in Europe, but of the Act of Accession, which led us to join the EU in 1973. Therefore, it has been a constitutional provision to which our courts have had to defer and which has

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allowed access to the European Court of Justice for people in this country who are dissatisfied with the application of EU law by our domestic courts. The primacy of European law is, in my judgment, part of our constitutional arrangements and therefore does not deserve the description of novelty advanced with such enthusiasm by the hon. Member for Stone.
One fact to which the hon. Gentleman failed to refer, but which I thought would have given him limited comfort, is that whereas the provisions with regard to the withdrawal of any country from the Coal and Steel Community, or the European Economic Community as it became, were to some extent ambiguous, the new document provides for an express right of withdrawal, which some argue never previously existed. Therefore if we reach a point at which a constitutional absurdity, in the hon. Gentleman's terms, arises, we have an obvious remedy and one which, exercised by a country as significant in the EU as the United Kingdom, would undoubtedly have not only legal but enormous political significance.
Mr. Cash: I am sure that the right hon. and learned Gentleman accepts that the withdrawal provisions are hedged with conditions that could make it extremely difficult, if not impossible, for them to operate effectively. Does the Liberal Democrat party in principle rule out there being any circumstances in which it would invite the UK Parliament to legislate unambiguously contrary to any European treaties, laws or European Court rulings?
Sir Menzies Campbell: If one legislated in that form, as the hon. Gentleman suggests and as I think the leader of his party has suggested in respect of the common fisheries policy, it would be the first time in the constitutional history of the UK that the UK Parliament had passed, or even sought to pass, legislation contrary to its international treaty obligations. That would be a major constitutional step and an extraordinary precedent, and one should be extremely reluctant to embark on those unless one is clear in one's own mind as to what the consequences of such a remarkable event would be.
If one enters into treaties—such as the Maastricht treaty, which the House passed when the hon. Gentleman's party was in government, or the Single European Act, which the House also passed when his party was in government, or the Amsterdam treaty, which was passed when this Government took office, or Nice, which was later still—one undertakes certain obligations. So far as I know, never in the history of the United Kingdom have we passed domestic legislation that is inconsistent with treaty obligations.
On the matter of a referendum, during the Maastricht treaty proceedings I voted for a referendum proposed in a new clause that was tabled by a Labour Member who has now returned to his homeland of New Zealand.
Mr. Cash: Bryan Gould.
Sir Menzies Campbell: Yes, Mr. Bryan Gould. As I remember, on that occasion we were not
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overwhelmingly supported in the Lobby by those Conservatives who now argue for a referendum with such vehemence.
However, those people are right to argue for a referendum because the document, if approved, would change the nature of the relationship between the United Kingdom and Brussels. In my judgment—as I have said on the Floor of the House on many occasions—in those circumstances the endorsement of the people of the United Kingdom is necessary, just as, if we were to join the single European currency, a similar endorsement would be required. Indeed, Lord Ashdown of Norton-Sub-Hamdon, then leader of the Liberal Democrats, was the first to say that joining the single currency raised not only economic but political and constitutional issues that require endorsement. So, I have little difficulty with the concept of a referendum.
However, I say to the Government that, if the referendum is to be won, it cannot be put off until after a general election. The case for Europe must be made now. If there is a legitimate criticism of the Government, it is that, far too often. that case has gone by default. Far too often the Prime Minister has repeated the mantra that he wishes Britain to be at the heart of Europe—something with which many of us agree—but his practical implementation of that obligation appears to be the occasional speech made in Warsaw. If the referendum campaign is to be successful, it must begin now.
Be assured that the campaign for a no vote has begun. The speech of the hon. Member for Stone made that clear beyond question. He says that the document seeks to achieve one state. In opposition to that conclusion, one has to point to the fact that the Government succeeded in preserving the so-called red line issues.
One also has to ask whether one can imagine the Government of President Chirac—perhaps notorious for their individuality—being anxious to submerge that individuality in one state. I see little evidence of that. Can one imagine that those countries that lived under Nazism and then communism, which have but recently broken out into the opportunity of democratic institutions, will voluntarily give up their hard-won independence after—for many of them—so many sacrifices to be submerged in one state? I simply do not see it.
The hon. Gentleman is right to point to the fact that not enough people in those countries voted in the European elections, but those who required the mechanism of a referendum to justify their application to the European Union certainly voted in sufficient numbers. I simply say to him that his notion that the constitution is some creeping conspiracy is not recognised outside the United Kingdom. His notion that there can be a renegotiation of the United Kingdom position is not one that I understand to be supported by any other Government among the 25 members of the European Union. Nor—I believe I am right to say—is it an idea that is supported by the European People's party, to which his party is affiliated in the European Parliament. It would be a very solitary road to try to hoe—to put it at is mildest. I do not doubt his determination, but he needs rather better prospects of success before embarking on what would inevitably be constitutional and political turmoil.

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Supposing the negotiation is turned down. What then? Supposing it proceeds but fails because there can be no agreement. What then? What would be the position of the people of the United Kingdom? If Mr. Kilroy-Silk MEP were here, he would say, "Hooray! I have managed in a limited way to wreck the European Union, in so far as it applies to the United Kingdom." However, if negotiation were refused or failed, what would be the position of those such as the hon. Gentleman who say that they wish Britain to remain in the European Union but on a different basis? What then?
Mr. Cash: Will the right hon. and learned Gentleman answer a simple question? He advocates a referendum, as he knows I did on the Maastricht treaty. If the answer was no, where would that leave the Liberal Democrats? What would they do about it?
Sir Menzies Campbell: If the answer is no, that will put us precisely in the position in which the hon. Gentleman wants us to be. It will leave us seeking a renegotiation to which we cannot be confident any other Government will be willing to accede. Therefore, we cannot be confident that renegotiation will be successful. The consequences of a no vote will be extremely serious. He must—I hope—grasp that nettle as much as anyone else.
Mr. Shepherd: I am not certain where that argument lies, inasmuch as that, if the referendum rejected the constitution, under the present arrangements of the European Union the constitution would be dead and we would retain the existing treaty pattern.
Sir Menzies Campbell: The hon. Gentleman is quite right. We would have to find our way through the Maastricht, Nice and Amsterdam treaties, all of which contain provisions to which he objected in his speech. I do not wish to put him in a corner that he would not wish to occupy, but there is a sense in which the logic of his position leads him more towards the position of the United Kingdom Independence party than staying in Europe and finding some form of renegotiation.
Our position is well known. The constitution is an acceptable document, and we want it to be endorsed by the people of the United Kingdom. This is a time when it is essential to our security and prosperity that we are in the European Union, not least so that we may have, together with our partners in Europe, a rather less subordinate relationship with the United States than we appear to have enjoyed in the past two years.
3.9 pm
Mr. Richard Spring: It is always a pleasure to follow the right hon. and learned Member for North-East Fife (Sir Menzies Campbell), who brings a refreshing honesty to such debates. I thank my hon. Friend the Member for Stone (Mr. Cash) for introducing the debate and for putting forward his arguments in a comprehensive and informed way. Also, it is always a particular parliamentary delight to hear from my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd), who is one of the most principled parliamentarians in the House.
We must debate the matter because it has the most profound impact on our country's future and, frankly, it is one that the Prime Minister has been unwilling to
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engage with. When he finally engaged his famous reverse gear and gave the country the referendum a matter of days after the Minister for Europe had been pirouetting in the opposite direction, he said:
"Let the issue be put and let the battle be joined."
It is worth noting that, since then, the Prime Minister has failed to make one speech on Europe. If that represents the strength of the Government's argument and commitment to the whole issue of the EU constitution, I cannot wait for the referendum.
Even if the Government are frightened of talking about the constitution, that does not mean that its implications should not be discussed. We are at a turning point for the European Union. We can either try to become an ever more integrated structure, moving towards a politically integrated state, which is certainly the ambition of many—one size fits all for a Europe of 25 very different countries—or we can be much more flexible.
Everyone agrees that the EU needs to change. There is a deep and spreading alienation of the peoples of Europe from the institutions of the EU. We saw that illustrated by the very poor turnout in the European elections.
The Laeken declaration was right to state that
"the European institutions must be brought closer to its citizens."
The trouble is that the European constitution fails to do that—it does entirely the opposite. It rests on misplaced assumptions that the old European social model is working and that not one material power should be returned to the member states. Indeed, no power has been returned to the member states under this Government.
I want the European Union to succeed, but my party is opposed to the constitution—indeed, any constitution. The Economist has taken the view that
"European voters should reject the new constitutional treaty and demand something better."
The constitution would be bad for Britain and bad for Europe. It is interesting that at one time the Labour Government would have agreed with us.
The story of Britain and the proposed constitution is clear: the fact that this constitution exists at all is a major strategic defeat for this Government. Ever since they gave in on the principle of a European constitution, they have been engaged in an increasingly desperate damage-limitation exercise, as we saw in the Convention on the Future of Europe.
Let us look back at the changing positions that the Government have taken. Five years ago, the then Foreign Secretary told the House, in answer to a question from my hon. Friend the Member for Stone:
"For the record, we are not proposing a constitution of Europe."— [Official Report, 25 May 1999; Vol. 332, c. 184.]
Less than four years ago, the Prime Minister told us that we did not need a European constitution, and then the current Foreign Secretary told us that we should have an EU constitution, and that he wanted it to fit into his back pocket.
Once the Government had given in, they were admirably frank about what the constitution meant. The Leader of the House said:

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"Our task is nothing less than the creation of a new constitutional order for a new united Europe."
However, the Government then became rather nervous and started talking fatuously about a "tidying-up operation".
In summary, first the Labour Government said that there would not be a constitution, then that some people wanted one but that the Government were against it, then that there would be one and that it was a good thing, and finally that there would be one but that we had nothing to worry about in terms of its importance. I do not believe that Europe should have a constitution, because that would lock it into a frozen-in-time mindset born in the 1950s and irrelevant to the needs of Europe today.
The Government have made a fatuous defence of the constitution. The Foreign Secretary has often argued that giving the EU a constitution is nothing to concern ourselves about because golf clubs have them. Such a comparison is demeaning and absurd. Golf clubs do not have Foreign Ministers or make binding laws.
Rather than the Foreign Secretary's fulminations, I find Professor McEldowney's evidence to the Constitution Committee of the House of Lords more convincing:
"While the Constitution may constitute the sum total of the existing Treaties, revised and refined, it is also endowed with a status of a Constitution—even though this status is not well defined or explained. Inevitably the status of a Constitution invites interpretation by the courts and this adds an additional dimension of how judges might interpret the terms of the Constitution. There is plenty of room for interpretation, particularly as there is such unnecessary vagueness."
Therein lies the rub—a point that was tellingly made by my hon. Friend the Member for Stone.
Over time, the constitution will inevitably diminish Britain's independence and increase the EU's powers over our laws, our way of life and how we do business. In particular, it will strengthen the European Court of Justice's power as it weakens that of Parliament. That is the key. The constitution favours the increased jurisprudence of the European Union at the expense of national Parliaments.
The Prime Minister said that the charter of fundamental rights would be a political declaration without any legal force, but it already has legal force and will extend what is known as judge-led law in our national life. The Government's assurances that this will be confined to European law and that the Court will not overturn national laws are more statements of hope than certainty. The president of the European Court of Justice could not give that assurance; the Government's own expert, the widely respected Professor Dashwood, feels unable to give it. More recently, the TUC was confident that it could get round the Government's restrictions in respect of the charter's effects.
The constitution increases the EU's power over energy policy, competition policy, asylum and immigration, and criminal law. New powers for Eurojust and allowing the creation of a European public prosecutor are the embryonic beginnings of a European Union FBI.
The constitution is an astonishing failure of British diplomacy. We heard about the red lines, but they were not met. The Government said that there would be
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unanimity in respect of the criminal justice system and social security, but there is now the so-called emergency brake. I do not understand why the Government feel such a need to defend a document whose form and content they used to oppose. That is not leadership in Europe; it is a dismal failure of a modern European agenda, which we need.
The simple tragedy is that if the Government had stood up like the boy who pointed out that the emperor had no clothes and said that the constitution was a bad project and rejected it, they would have been celebrated in many quarters of the European Union.
As I have discovered in myriad conversations, enthusiasm for the constitution is confined to the political leaders of a few countries. Yes, some countries want deeper integration, but others do not and there is no reason why those who want deeper integration should be hindered from going ahead. We want the EU to be reformed so that all 25 countries can feel comfortable in it. It will be up to the British people to decide what kind of Europe they want.
The battle lines are drawn and clear, but the constitution's proponents do not seem to want to fight. Why is the referendum being delayed for so long? The Dutch have indicated that they will hold their referendum in December during their presidency. Why should not we do so, too? Why are the Government running scared of the debate? The Minister is such a bold believer in more power for the EU, and he even signed a document advocating EU taxes and giving our United Nations seat to the EU. Why is he determined to kick the referendum into the long grass? Why will the British people not be allowed to take a decision very quickly indeed?
When the history books are written, the Government's failure to have a material impact on the constitutional architecture that they signed up to will be their epitaph. For those of us who want the EU to succeed, the tragedy is that this is a recipe for the further alienation of the people of Europe from Brussels, with all that that might mean.
3.18 pm
The Minister for Europe (Mr. Denis MacShane): I know that the hon. Member for West Suffolk (Mr. Spring) would not want unintentionally to mislead the House, so I put it on the record that in the document he referred to, to which I and many others associated with centre-left parties in Europe attached their names, there is no reference to the EU replacing the United Kingdom or France in a single seat at the United Nations.
This has been a good debate, and I am grateful to the hon. Member for Stone (Mr. Cash) for securing it, as it allows me to give the lie to the lies and myths that are so sedulously spread about the constitutional treaty. Let us be quite clear and honest: were it not to exist, we would be having the same debate on the existing constitution. The hon. Gentleman and the hon. Member for Aldridge-Brownhills (Mr. Shepherd) have been utterly consistent over the years, certainly as long as I have been a Member of Parliament, in being opposed to any constitutional arrangements for the European Union that do not conform to their satisfaction.
The hon. Member for Aldridge-Brownhills quoted that great orator Cicero, but the hon. Gentleman is rather more like Cato in the Roman Senate, who, no

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matter what the subject, finished his speech by stating delenda est Carthago, but the hon. Gentleman says eternally delenda est Europa. The plain fact is that Europe is not about to have the salt of a United Kingdom Independence party and an anti-European Conservative party spread about it. Europe has problems, but it is alive and well with 450 million citizens, great cities and a new middle class arising from the prison of Soviet tyranny—all associating themselves voluntarily, freely and independently with our great country in a project that will allots all our nations to grow in freedom.
This country of ours has always sought to operate on the basis of international law. If I may be allowed three more words of Latin, Mr. Deputy Speaker, pacta sunt servanda—we honour our treaties. We honour them in the World Trade Organisation, which exercises a swathe of power over British commerce, and in NATO, which exercises a swathe of power over British defence and foreign policy, and rightly so.
When the Leader of the Opposition makes a solemn pledge to his fisheries and agriculture spokesman that if he is unable to obtain the agreement of 24 other member states to a renegotiation of the common fisheries policy he will pass national law in this House of Commons to exercise national control of it, there is only one consequence: under the Conservative party, pacta sunt non servanda. I do not propose to put that into English. I leave it in the obscurity of a dead language to hide from the British people the full horror, disgrace and shame that the leader of the Conservative party proposes to bring on the British people by solemnly tearing up a treaty obligation.
Mr. Cash: Will the Minister give way?
Mr. MacShane: No, because the hon. Gentleman in his speech—I counted every word—took up what amounts to approximately 13 per cent. of the entire length of the new constitutional treaty. He needs to make only seven more speeches to have read it all into the record.
We on this side of the Chamber, the British people, the Liberal Democrat party and decent Conservatives will defend our membership of the European Union and win the case for Britain to be engaged in Europe. This is a battle like the one fought on the corn laws when some members of the Conservative party did not follow their great leader, Sir Robert Peel, but preferred to remain a protectionist party. At the beginning of the last century, the Conservative party opted for imperial preference and isolationist protectionism. That drove Winston Churchill from among its ranks to become a Liberal MP for 20 years, so horrified was he by the protectionist, anti-internationalist turn of the Conservative party.
Finally, the Chamberlain policy of isolation from Europe in the 1930s is now perfectly replicated by the leader of Conservative party. During the 1930s, Chamberlain had the support of the Daily Mail and today the leader of the Conservative party has the support of the Daily Mail. The Conservative party can dance its isolationist, withdrawal jig with UKIP and Lord Rothermere. This party and this Government will
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defend British interests, which have always been based on being an open, trading nation entering into as many arrangements as possible to defend our interests.
Mr. Spring: What about the 1980s manifestos?
Mr. MacShane: From a sedentary position, the hon. Gentleman refers to the 1983 Labour party manifesto. He is quite right—look what it did to us. I am delighted, because I do not think that he, unlike the withdrawalists and isolationists sitting behind him, believes a word of what he says, but let him keep saying it because I know what the verdict of the British people will be. They may have enjoyed voting UKIP in the European parliamentary election, but it should be placed on the record that we, as the incumbent Government, suffered a voting loss, but they, as the incumbent Opposition, suffered a greater loss in terms of share of the vote than did that incumbent Government. That happened nowhere else in Europe.
The more the Conservative party becomes anti-European and the more it goes down the isolationist, xenophobic road where UKIP wants to take British politics, the better it will be for those decent, patriotic parties that support Britain's international engagement. Let us look at the UKIP manifesto. The second line of the leaflet that came through my door was about opposition to immigration. That is the second UKIP agenda, which, like that of the Front National in France and Vlaams Blok in Belgium, involves not just hatred of Europe, but hatred of the other and hatred of people who they do not want in their country.
Mr. John Gummer rose—
Mr. MacShane: I give way to my right hon. Friend.
Mr. Gummer: Does not the Minister agree that the least patriotic stance is the policy of a party that believes that Britain has so little to offer to the world that it should withdraw from its association with its nearest neighbours—an association so attractive that countries that have hitherto been under the heel of dictatorships want to join it—and that the least patriotic party in Britain is that which calls itself the United Kingdom Independence party?
Mr. MacShane: My right hon. Friend is perfectly right. Frankly, I feel quite ashamed when I look at some of the literature of that party, not because of its views on Europe—there are passionate views about Europe all over the place—but because of the language of xenophobia and hatred of people from other countries who live in our midst, which are shaming and repellent.
In the few minutes remaining, I want to refer to comments about the new constitutional treaty, since I do not believe that the House wants to hear from me. The Irish Taoiseach, Mr. Bertie Ahern, said that the EU
"is not a super state; it's not a federal state. It's about a group of nations, a group of peoples working to a Constitution".
Mr. Jose Luis Zapatero stated in a speech in the Spanish Cortes on 15 June:
"Europe is and will be a Union of States".

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The new president of Germany was quoted in the Frankfurter Allgemeine Zeitung on 12 May:
"I do not believe that current developments are going to give rise to a European Federal state … [I see] a revival of the nation-state principle again."
The president of Poland, Alexander Kwasniewski, said on "Newsnight" in May:
"The Treaty doesn't mean we create a new state of Europe or something like a European federation".
Le Monde, the French newspaper, stated on 26 June:
"Whatever people say, this text remains a British victory".
The Spanish daily, ABC, said on 20 June that
"it isn't a Constitution of a state that already exists … the backbone of Europe is nations with a long and shining tradition".
Mr. Stoiber, leader of the Christian Social Union in Germany, which is the Conservatives' sister party, was quoted in Welt am Sonntag on 20 June:
"The EU will not have the right to set taxes and Europe is not going to be a federal state."
Le Figaro said in April that the constitution
"will seal the victory of the nation-states over the European 'super-state'".
El Mundo, the Spanish paper, stated on 20 June:
"Blair, the big winner of the Summit, achieved everything he wanted. Blair managed to protect all his red lines in the text".
Le Soir from Belgium, the very heart of European federalism—
Mr. Deputy Speaker (Mr. Edward O'Hara): Order. Generally, contributions should consist of more than a compendium of quotations.
Mr. MacShane: I am trying to deal with the compendium of nonsense, distortions and myths that has come from the Conservatives. As I continually make these arguments in this Chamber and on the Floor of the House, but they seem to have so little impact on Opposition Members, I thought that I would pray in aid other distinguished world statesmen. Of course, I bow to your entreaty, Mr. Deputy Speaker, and in the remaining minutes I shall seek to deal with some points that were made.
The European Court ruled in 1964 that Community law has primacy over national law. When we joined the European Community, section 3(2) of the European Communities Act 1972 stated:
"Judicial notice shall be taken of the Treaties … and of any decision of, or expression of opinion by, the European Court".
In other words, we accepted primacy because it is possible to have a set of international rules only if someone is the umpire or referee.
The constitution is good for Britain and good for Europe. I commend it to the House and invite all hon. Members to join me in ensuring that Britain remains a wholehearted member of the European Union so as to serve the interests of our British people and to defeat the reactionary, isolationist, withdrawalist arguments that we have heard this afternoon.

Daniel Morgan
3.30 pm
Mr. Roger Williams: With your permission, Mr. Deputy Speaker, if the right hon. Member for Islington, South and Finsbury (Mr. Smith), who is anxious to participate in this debate, should catch your eye, he does so with my full agreement and that of the Minister.
I am grateful to have obtained this debate on an issue of crucial public interest and concern. The Minster understands that today I will criticise the Home Office, the Metropolitan Police Service, other police authorities and the whole criminal justice system, which has failed my constituent Mrs. Isobel Hulsmann and failed to root out incompetence and corruption. The Minister will also know that the criticism is not directed towards her, because she has only recently taken up her post. Today, however, she has the opportunity to make a name for herself, to right an injustice and to reinforce the Government's reputation for standing up for the victims of crime and for prosecuting offenders.
Daniel Morgan was murdered 17 years ago. He was found with an axe embedded in his face in the car park of a south London pub shortly after his murder. Detective Sergeant Sid Fillery conducted the first four so-called "golden days" of the murder inquiry but was removed from the murder squad when his relationship with Jonathan Rees, Daniel Morgan's partner in Southern Investigations, was revealed. Sid Fillery went on to take up joint ownership of Southern Investigations, and therefore benefited from Daniel Morgan's death.
The circumstances surrounding Daniel Morgan's death in March 1987 are complex and far-reaching, yet my constituent Isobel Hulsmann, the deceased's mother, is left with not only the immeasurable grief of having lost a son in the most brutal of murders but the spectacle of the criminal justice system's having failed again and again to bring those responsible for that murder to answer for their actions.
Why did our criminal justice system fail? The answer is unknown to my constituent, but during the past 17 years she has sought to place her confidence in four separate police investigations, only to find that each one has come to nothing. On the conclusion of the fourth and final investigation last year, the senior officers in charge expressed their strong view that the evidence that they had gathered called out for a prosecution of the primary actors in the murder. Nevertheless, the Crown Prosecution Service declined to bring any such prosecution, forcing the officers to accept that decision, while insisting that they disagreed with it.
In the event, the officers, like the Crown Prosecution Service, have confirmed to my constituent that she has reached the end of the road as far as the criminal justice system is concerned and that she cannot look for any further progress in that direction. They also explained to her their view that the case represented
"the worst mess they had ever seen";
that the real mischief in the case lay in the initial investigation of 1987—88; that the role of ex-Detective Sergeant Sid Fillery in that investigation lay at the heart of the mischief; that a number of other police officers around him had sought to protect him; and that their

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reinvestigation had therefore been an endeavour to build on what they had inherited from previous investigations, understandably focusing on the immediate actors in the murder, within the parameters set by the damage that had already been done. Those officers sought in vain to respond to suspicions about the mischief that had taken place in the initial investigation, particularly with regard to the roles and identities of the police officers who may have had a lot to gain from protecting Sid Fillery.
In other words, my constituent has heard from the Metropolitan Police Service confirmation of her long-held suspicion that the apparent unwillingness or inability of the criminal justice system to deal with the case may have a lot to do with Sid Fillery and other officers, serving or retired, who may have much to gain from protecting him. In that light, I am asking the Minister today to make use of her parliamentary prerogative to institute a full judicial inquiry under section 49 of the Police Act 1996, which is the only way of obtaining fresh and independent scrutiny of the murder and of the circumstances in which successive investigations into it have come to nothing.
The only form of public scrutiny that the murder has received in the past 17 years has been at an inquest in April 1988, which culminated in a verdict of unlawful killing. In the course of evidence at that inquest, allegations were made on oath of involvement by Metropolitan police officers in the murder and in covering up that involvement. It emerged that Jonathan Rees, Daniel Morgan's business partner in their private detective company, Southern Investigations Ltd., had talked about having Daniel killed and arranging for police officers at Catford CID to be involved in the murder and its subsequent cover-up. That was according to the company bookkeeper, Kevin Lennon.
It also emerged that not only was Sid Fillery among those officers but he played a key role in the initial murder inquiry during the so-called first four "golden days" before he was required to withdraw from the murder squad for reasons of personal involvement with the primary suspect, Jonathan Rees. During those four days, Fillery was given the opportunity to manage the first interview under caution with Rees, and to take possession of key incriminating files from the premises of Southern Investigations Ltd., including Daniel's diary, which has never since been found. Kevin Lennon also spoke of Fillery's intentions to retire from the Metropolitan police force on grounds of ill health and take up the vacant seat in Southern Investigations Ltd. left by Daniel's death. That is exactly what happened, and to this day Fillery and Rees remain business partners in what was Daniel's private detective company.
More than 17 years after the murder, my constituent, Mrs. Hulsmann, is confronted with the plain fact that she, like her son, has been failed by the system. Despite her best efforts, those who committed this gruesome act have never been brought to justice and she has had to accept that they may never be brought to justice. She should not be burdened with the responsibility of ascertaining the reasons behind the criminal justice system's failure to bring her son's murderers to book. That is the responsibility of the Government on behalf of us all. That is why she now seeks a full judicial inquiry into the murder and the subsequent police
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investigations. Like many other Members of this House and the other place, I strongly support her case, together with that of Alastair Morgan, the brother of the deceased, who has devoted his life to this campaign.
It seems to me and my constituent that the Government have a particular duty to bring public scrutiny to bear on the case. The refusal with which we have been met is not becoming of a Government who pride themselves in looking after the interests of victims of crime. This is not a case of the Government being unable to help, but of their being unwilling to accept their responsibility, and we are compelled to seek answers for this apparent lack of will. Is it because they have something to hide, or is it because the implications of bringing the matter to a head are so far-reaching that they may make life uncomfortable for many in the Metropolitan police and the Home Office? The Government's attitude towards the murder of Daniel Morgan so far has been one not of openness, collaboration and firm fair action, but of sustained damage limitation.
Public inquiries serve the cause of public accountability. They also serve to eliminate in the public's mind any doubt about the possible involvement of the person or Department that institutes them. Unfortunately, the Home Office does not have an entirely innocent record. The Criminal Justice and Police Act 2001 commanded several structural changes to the constitutional arrangements of our police forces, not least with respect to the independent police authorities to which forces are accountable.
For the record, the Metropolitan Police Service was directly accountable to the Home Office at the time of the murder and of all police investigations into the case except the fourth and final one. Similarly, the Home Office was also responsible for the Police Complaints Authority, which supervised a 1988–89 investigation into the case by Hampshire police, which is said to have looked into and eliminated the possibility of police involvement in the murder or its aftermath. Therefore, it was on the watch of the Home Office that the terms of reference of that Hampshire investigation were changed, secretly and without the knowledge of the family, midway through the inquiry. Having started out
"to investigate allegations that the police were involved in the murder of Daniel Morgan and matters arising there from",
the inquiry was required after the change to proceed
"in the furtherance of prosecuting the suspects Rees, Goodridge (an associate of Rees), Wisden (Goodridge's girlfriend) and anyone else for the murder of Daniel Morgan",
without any reference to police involvement.
The very fact that the terms of reference of a so-called independent inquiry carried out by an outside police force were changed during the course of that inquiry is cause for great concern, and almost of itself warrants a judicial inquiry. However, it is also inconceivable that those changes would have been allowed without the consent of the Home Office at a senior level, to which the all concerned were answerable at the time. It therefore lies particularly ill in the mouth of the Home Office to seek to rely on that very investigation in order to refute the continuing suspicions of police involvement in the murder.
We have called for a public judicial inquiry under section 49 of the Police Act 1996, and we point to the moral and legal obligations of the Government to hold

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such an inquiry. It is not open to the Government to hide behind some obscure case law in their attempt to evade those obligations, as they appear to do in the letter of 10 June from the Minister for Crime Reduction, Policing and Community Safety. It is unbecoming of the Government to suggest that they have no obligations because of a mere accident of timing—the fact that the murder took place before the enactment of the Human Rights Act 1998 and the incorporation of the European convention on human rights into domestic law.
It is significant that support for that dishonourable proposition is sought from the recent judgment in the House of Lords in the case of McKerr, which arose out of the shoot-to-kill policy in Northern Ireland. Apart from any legal considerations, that is clearly a unique political situation. Instead, we invite the Government to look at other decisions of the House of Lords in cases where the political context has been less inhibiting, which serve to establish the obligations of the Government to ensure an effective official inquiry with the benefit of public scrutiny and participation.
As for the purpose of such an inquiry, we can do no better than to point to the words of Lord Bingham of Cornhill in the case of Amin last year:
"The purposes … are clear: to ensure so far as possible that the full facts are brought to light; that culpable and discreditable conduct is exposed and brought to public notice; that suspicion of deliberate wrongdoing (if unjustified) is allayed; that dangerous practices and procedures are rectified; and that those who have lost their relative may at least have the satisfaction of knowing that lessons learned from his death may save the lives of others."
On behalf of my constituent and her family, I am calling for a full public judicial inquiry.
3.42 pm
Mr. Chris Smith: I am very grateful to the hon. Member for Brecon and Radnorshire (Mr. Williams) for enabling me to contribute to this debate. The case is one that I have pursued for well over 10 years on behalf of my constituent, who is Daniel Morgan's brother, Alastair.
The facts of the case are indisputable. Daniel Morgan was murdered more than 17 years ago. It was a particularly hideous and brutal murder, for which no one has yet been convicted. There have been four police inquiries into what happened, into the murder and the issues surrounding it, and those inquiries have yielded no prosecutions. The Morgan family have lived through more than 17 years of anguish, distress and considerable frustration in their attempts to get the case properly investigated, and to secure information and sight of the investigations that have taken place.
I support the call that has been made by the hon. Member for Brecon and Radnorshire. Two things are required, and I ask my hon. Friend the Minister to consider them carefully. First, in the letter from the Minister for Crime Reduction, Policing and Community Safety to myself and others on 10 June, she stated that she would be willing to consider meeting the family, myself, the hon. Member for Brecon and Radnorshire and Lord Livsey—who has also been pursuing the case—once the family had seen the conclusions of the fourth inquiry. The family have now
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seen those conclusions. They are as distressing as the conclusions of the three previous inquiries. The family would welcome the Opportunity to meet the Minister of State, and I hope that the Minister will, on her behalf, agree in principle to such a meeting.
The second thing that is required is a proper judicial inquiry. When the Minister of State wrote to me on 10 June, she explained that judicial inquiries are established only in the most exceptional circumstances. She explained that, where there has been a public disorder or general issues need to be considered, a public inquiry is, on rare occasions, contemplated as a way to resolve that issue.
Partly because of the case's longevity, partly because of the number of failed investigations that have led nowhere, and particularly because there have been serious question marks right from the word go about the possible involvement of police officers in either the murder or the frustration of subsequent investigations—those serious question marks reflect not just on the particularities of the case but on the good name and standing of the Metropolitan Police Service as a whole—I argue that a public inquiry is the right way to try to resolve the issues surrounding the murder once and for all.
Notwithstanding the Minister of State's suggestion in her letter to me and to others that she was not prepared to contemplate holding an inquiry at this stage, I hope that she will listen carefully to the points that have been made by the hon. Member for Brecon and Radnorshire. The central point about the remaining questions that hang in the air over the murder, and that will continue to hang in the air over the murder if it remains unresolved, is that an inquiry is the right way to proceed.
The brutal murder has remained unsolved for far too long. The police investigation route appears to have been thoroughly exhausted. It is important to find new ways of ensuring that the case can be resolved, because simply to wash our hands of it and say that nothing more can be done is not an adequate response.
3.48 pm
The Parliamentary Under-Secretary of State for the Home Department (Caroline Flint): I commend the hon. Member for Brecon and Radnorshire (Mr. Williams) and, in support, my right hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) for bringing the issue to our attention. As they both rightly said, Mr. Morgan's death was particularly horrific and it remains troubling to them, as Members of Parliament, and to the family of Daniel Morgan. To be honest, I cannot imagine the trauma and frustration of not having an answer about who killed Mr. Morgan 17 years ago.
As my right hon. Friend said, my hon. Friend the Minister for Crime Reduction, Policing and Community Safety has written to him and to others about the case. She said in her letter of response to him that if, after receiving the information from the Metropolitan Police Service, people felt it was appropriate to seek a meeting, she was open to that. I will pass that back to her today, and I apologise that she cannot be here to respond to the debate herself.
I think that it will be helpful if I set out the role of the Home Office in cases such as this. The Secretary of State is rightly accountable to Parliament for questions

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relating to the police. However. it is often not appropriate to offer comment or make a judgment on the professional decisions taken by the police, the Crown Prosecution Service or the Police Complaints Authority.
As in the past, the issue of a judicial inquiry has been raised. I want to be clear that the Government's reason for not holding an inquiry is not a legal technicality. There is no legal obligation to hold an inquiry, but that is not the reason for the decision. The primary considerations, as my hon. Friend the Minister for Crime Reduction, Policing and Community Safety said, were whether an inquiry would be proportionate or in the wider public interest. In coming to our decision, we had to consider the investigations that have taken place over the past 17 years and the level of independent scrutiny.
I would like to set out the reasons for not pursuing an inquiry. First, inquiries have been used when there has been serious public disorder or similar circumstances in which wide-ranging and serious disquiet is felt about an event or issue affecting a large proportion of a police force. Successive Home Secretaries have reserved that power for such matters, and at this stage it is not appropriate to go beyond that. I appreciate that Daniel Morgan's family are frustrated, disappointed and angry that no one has been prosecuted for his murder, and that there are lingering concerns about police officer involvement in the killing. Nevertheless, the Government do not consider that that in itself is sufficient to warrant an inquiry.
The second reason for the decision is that, after four investigations and a coroner's inquest, the Government do not consider there to be a realistic prospect of uncovering new evidence. I believe that the efforts of the Metropolitan police to pursue the case to a successful conclusion, despite not having done so, have been extraordinary, and to their credit they have been prepared to look again and again at what happened 17 years ago. As my right hon. and hon. Friends know, following the initial investigation to find the perpetrator of the terrible crime against Daniel Morgan and the coroner's inquest into his killing, the Metropolitan police set up an independent investigation into their handling of the initial investigation. That second investigation was carried out by Hampshire police and supervised by the Police Complaints Authority. Although I recognise that there were concerns about the first Metropolitan police investigation, they have undertaken subsequent investigations in an effort to conclude the case.
A third police investigation was carried out as an intelligence-led, covert investigation for the purpose of gathering evidence about the murder of Daniel Morgan as well as allegations of police corruption. However, no charges were brought against any person for an offence in connection with the murder, although charges were brought against individuals for unrelated matters. That was not the end, however. Nine months later, the Metropolitan police murder review group considered afresh whether all reasonable investigative leads had been exhausted, and considered the possibility of uncovering new evidence because of the existence of new investigative techniques. The review identified a number of overt and covert investigative opportunities that were available, and the fourth investigation was launched.
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At the end of the fourth investigation, the Metropolitan police made recommendations about a number of individuals in respect of offences relating to the murder. However, after reviewing the available evidence, the Crown Prosecution Service decided not to bring any charges against those individuals for the murder of Daniel Morgan. I am afraid that it is not for me to offer a judgment on the decisions taken by the Metropolitan police or the CPS in this case. Because of the four investigations and the coroner's inquest, we remain of the opinion that a further inquiry would be highly unlikely to uncover any further evidence that would lead to a different outcome.
The third reason for the decision is that, although we understand the lingering suspicion of the hon. Member for Brecon and Radnorshire and the family about the involvement of a police officer or police officers in the killing, that cannot of itself warrant an inquiry. There have been two independent scrutinies of the incident, and in coming to our decision we could not ignore the fact that there was nothing to suggest police involvement in the murder. The first instance of scrutiny was the coroner's inquest. When delivering his verdict of unlawful killing, he remarked that there was
"no evidence whatsoever in this inquest to point to any police involvement in this killing".
The second instance followed the Hampshire investigation on behalf of the Metropolitan police into the allegations of police involvement in the killing. The independent Police Complaints Authority supervised that investigation. The PCA said that it was satisfied with how the investigation was conducted and it concluded that there was no evidence of any involvement by a police officer in the murder, or evidence to suggest that a member of the murder investigation team had taken deliberate action to prevent the murder from being properly detected.
I know that the family are not happy with the PCA's conclusion, but the PCA has confirmed to the Home Office that it considered the case rigorously and was satisfied with the conduct of the investigation and the findings. The family believes that the call for an inquiry is strengthened by the views, which have been mentioned today, that were expressed to them by the police officers who led the fourth investigation. I cannot comment on the circumstances in which those views were expressed, but I am aware that the Metropolitan police do not view the account of the conversation in the same way as the family and their solicitors. I am informed that the Metropolitan police accept that the original investigation falls below current investigative standards, but that it was consistent with the standards of the day. However, I am also informed that the Metropolitan police's official view is that its fourth investigation found no evidence to support the assertion that any police officer had been protected, or that any corruption existed.
I understand that the Crown Prosecution Service has offered a meeting, but that it unfortunately had to be postponed. I would encourage the family to take up the opportunity if possible to discuss further the outstanding questions that they have with the CPS, and in particular its refusal to pursue charges and take the matter to court.
Mr. Williams: I thank the Minister for the fullness of her replies, which we shall obviously consider. However,

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would she consider why the terms of reference of the first inquiry were changed? Presumably, that prejudiced the decision as to whether police were involved, as its terms were changed from the consideration of the police's involvement to that of other people who were accused of the murder.
Caroline Flint: My understanding is that the terms of reference of the second investigation were to investigate allegations that police were involved in the murder of Daniel Morgan, and matters arising. That investigation was carried out under the supervision of the Police Complaints Authority. I understood that that was the point of the second investigation, and that the PCA considered the matter and came to conclusions. I cannot comment any more on changes to the terms of reference; those were the terms of reference and that was the basis on which Hampshire police and the PCA carried out their investigation.
In terms of the Home Office's specific responsibility, the Met was accountable to the Home Secretary and Parliament. However, the force's operational decisions, and those of the PCA, are independent of Government, and it is not for Ministers or the Home Office to interfere with them. Parliament has not given such powers to Ministers.
Finally, for what it is worth, I should like to offer my sincere sympathy to Daniel Morgan's family. It is clear that Daniel was tragically murdered, and the family's searches for answers over the years have been, I am sure, traumatic, and continue to be frustrating. I know that my response today may be a disappointment to the family; I am sure that it will be, based on the representations of my two colleagues who are here on their behalf today. Of course, the case is still considered by the Met to be open. There seem to be many instances where Members of Parliament and the family have views that are opposed to those of the Metropolitan police, the Police Complaints Authority and the Crown Prosecution Service.
As I said at the outset, I shall tell my hon. Friend, the Minister for Crime Reduction, Policing and Community Safety that a meeting would be beneficial to the family and colleagues here, and I hope that they will take up the opportunity to meet the Crown Prosecution Service as well. I hope that the recent openness shown by the Metropolitan police and the CPS in seeking to provide an open explanation to the family has helped in some way. If it is felt that that provides the basis for a meeting with the Minister, I shall relay that to her, and I am sure that she will listen sympathetically.

Niger Delta
3.59 pm
Mr. Bill Tynan: I welcome the opportunity to raise the issue of stability in the Niger delta. Throughout Africa, abject poverty, malnutrition, clean drinking water, education and medical care are important issues, which we must address if we are to resolve Africa's problems. Poverty and terror are linked in a complex process, leading from poverty to frustration, a sense of injustice and bitterness, division and conflict. The Niger delta has experienced all those issues. A stable Niger delta is vital to the stability of Nigeria, just as a stable Nigeria is vital to that of west Africa. Nigeria is an important member of the Commonwealth and the New Partnership for Africa's Development, and in past decades Nigerian troops have been in action in Sierra Leone and Liberia as part of African peacekeeping forces. Nigeria is also likely to be an important contributor to the African peacekeeping initiative announced at the G8 Sea Island summit.
The development and democratisation of the country over the past decade must be applauded. The election of President Obasanjo in 1999, followed by his re-election in 2003, should mark the end of military rule in that country. The beginnings of political stability can be sustained only if ordinary Nigerians see real economic benefits, a reduction in corruption and an end to the violence that has struck many areas of the country.
Nigeria is well placed to act as a stabilising power in the region, and the presidential elections in 2007 will be a further test of the trends. Oil accounts for 80 per cent. of Nigeria's revenues and 98 per cent. of its exports. The Niger delta accounts for 40 per cent. of that oil production, and considerable unexploited gas and hydrocarbon reserves exist. The Nigerian Government rely heavily on the oil industry, and all budgets are linked to its viability. If the oil installations were forced to close or reduce production, for whatever reason, that would have devastating consequences for Nigeria's economy and political and social structure, as well as its very existence as a state and west Africa as a whole.
The current instability in the Niger delta must concern us all in the UK, as an humanitarian concern for the people of Nigeria, as a concern for the development of their country and as a concern for the security of world energy supplies. Nigeria is the sixth largest oil producer in the world, and the decision of Chevron to suspend production following attacks on its workers in the delta earlier this year was partly responsible for the recent hike in oil prices.
Of greater concern to us all should be the report that WAC Global Services prepared for Shell, which accounts for half of oil production in the delta. The report was leaked in mid-June. I discussed the report directly with Shell yesterday, and although it rejects many of the conclusions, and even if the report presents a pessimistic worst-case scenario, we must take it seriously. It pointed to a vicious cycle of violence and corruption, caused by the exploitation of oil in the delta and fed by the theft of crude oil. It indicated that such increasing criminalisation in the region could force an end to onshore production in the delta by 2008. Following my discussions yesterday, I can say that Shell rejects that scenario completely. However, we must

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register our concern. As I said earlier, the consequences of an end to production would be catastrophic for the Niger delta, Nigeria, west Africa and possibly the UK.
It is worth detailing where the threats to stability come from. Oil has been beneficial to Nigeria as a whole but responsible for many of the problems in the delta. Many residents of the delta feel excluded, marginalised and disfranchised, and youth militia regularly sabotage oil company installations, kidnap personnel and steal vast amounts of oil. Competition for control of wealth and the lucrative relationships with oil companies is fierce, fuelling often dormant anti or inter-ethnic tensions. Military taskforces sent to quell unrest often serve to increase resentment, and actions that have included destruction of whole villages are frequently condemned by international human rights organisations.
The oil industry generates substantial sums of money. According to Shell representatives, the company employs about 5,500 people directly with a further 20,000 employed by contractors. Comparing that employment level with a delta population of between 10 million and 12 million, we can understand that although there are benefits from oil production, mass unemployment creates enormous problems. It is felt that oil money spent locally has had a negative effect, worsening tensions and highlighting differences in wealth. More alarming are the allegations that a lack of transparency in awarding contracts and the use of cash payments have made corruption worse.
As I have said, a particular problem in the Niger delta is that of "bunkering"—the theft of oil. That ranges from local tapping to much more organised systematic theft of oil in bulk. Some industry analysts estimate that up to 100,000 barrels of oil a day are stolen. That oil is sold for approximately $15 a barrel and generates a large amount of cash. Some allege that it may even undermine the whole Nigerian political system. At a local level, one day's worth of illegal oil bunkering in the Niger delta can buy quality weapons for, and sustain, a group of approximately 1,500 youths for two months.
The exploitation of the oil in the Niger delta has also had serious environmental consequences. The flaring of gas, which accompanies oil extraction, occurs for 24 hours a day. I understand from Shell that the oil companies have recently agreed with the Government that that practice will cease by 2008, but I believe that that is more of a hope and a prayer. Avoidance of the flaring is dependent on the Government and private sector investment.
Official figures also show that an average of 300 incidents occur annually, with oil leaks from pipelines releasing on average 2,300 cu m of oil each year. However, unofficial figures indicate that there are many more oil spills than that, which has severe environmental consequences for the region. It is further estimated that bridge and dam building in the region to support the oil industry could lead to the loss of 40 per cent. of the inhabited land of the delta within 30 years.
It is also sad, but true, that the presence of the oil industry has served to worsen ethnic tensions; it has fuelled competition for control of resources. The ethnic groups found in the delta are not those that hold sway in the rest of Nigeria, and therefore oil has given a new side to feelings of exclusion from the political process.
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The presence of armed youth militias has led to increased violence and instability, and the response of the Nigerian armed forces is regarded as having worsened the situation.
I understand that 13 per cent. of oil revenues are supposed to be redistributed by the Government to local communities. However, at present, the local population sees little benefit from the oil industry. Figures that I have seen show that in the delta only 27 per cent. of households have access to safe drinking water and that there is only one doctor per 130,000 people. Local people strongly believe that they are not sharing in the wealth that is being created from oil production.
I accept that the situation in the Niger delta is complex, with many interlinked problems and no easy solutions. I have spent most of my remarks highlighting the problems, which must be done, but I hope that I have not been too pessimistic. This is one of the first Adjournment debates on the Niger delta, so it is important for us to understand the problems.
I accept that much is being done to bring stability to the region, by the Government, by UK companies and in particular by NGOs such as the International Centre for Reconciliation at Coventry cathedral. As I have said, instability in the Niger delta will have consequences for Africa and for the UK. I hope that our high commission in Nigeria will monitor the situation and examine how best we can assist in resolving some of the problems in the area.
The continuing growth in the UK's overseas aid budget, which is one of this Government's most significant achievements, and the commitments made through the G8 Africa action plan, the New Partnership for Africa's Development and the millennium development goals, give us a real opportunity to have some influence in the delta and to support beneficial work there.
The International Centre for Reconciliation was helpful in briefing me on its work in Nigeria in preparation for this debate. It was quick to contact me once I had secured the debate and provided me with much useful background information.
However, there is much more that can be done. If we are to ensure stability in the delta, the Department for International Development must be involved. I know that it assisted the Nigerian presidency in producing a strategic assessment of the conflict in the delta in October 2002, which made many recommendations, and DFID has recently published its draft country action plan for Nigeria. However, I am slightly disappointed that that does not seem to define a strong role for DFID in the delta. The Foreign Office has sponsored courses for those engaged in civil society projects in the area, which has obviously been helpful and is welcome. As well as the opportunities for direct development aid, the UK should support local development that could bring stability. I hope that the Foreign Office and DFID will look to support more work like that undertaken by the International Centre for Reconciliation. Simply making more money available is not the answer, as Shell agrees. Without tackling the problems caused by the oil industry and breaking down the ethnic tensions, we will not solve the problems in the delta.

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To support further work in the region, I hope that there will be better co-ordination between DFID and the Foreign Office. That could be best achieved by having a member of staff at the high commission in Nigeria with special responsibility for monitoring what is happening in the delta and considering how best we can assist. We should also look to implement the recommendations of the 2002 report, which called for greater controls on the transfer of small arms to Nigeria, and consider how greater export controls and the UN small arms survey might play a role in the area.
We also need to consider how to tackle the profits of bunkering and the oil-related kickbacks. I welcome the agreement at the Sea Island summit on a G8-Nigeria compact on transparency and tackling corruption. However, we need to look at what more we can do to tackle money laundering at the UK end, and ensure that there is transparency and that the sources of large sums of money that enter the UK are disclosed. That is a matter on which the UK banks have been particularly weak. When we consider the ․1.3 billion channelled through 15 UK banks by the late military dictator General Abacha, we can realise the depth of the problem of money laundering. That has had a significant effect on Nigeria. In 2001, the Financial Services Authority identified banks' reporting mechanisms as the weakest point in the system to prevent money laundering, and it worries me that despite the new regulations passed last year, our system remains heavily dependent on banks reporting any suspect transactions. We must try to strengthen that system.
The UK also needs to look at how we regulate the operation of oil companies based in the UK through international codes of conduct that praise those that are performing well and condemn and crack down on those that are performing poorly. We should discuss with the Nigerian Government what support the UK can provide to the Nigerian armed forces to ensure that they will be a force for good in the delta. That must, however, be balanced by pressure to ensure that the military personnel who have engaged in human rights abuses in the area are brought to justice. At minimum, charges should be sought against those responsible for events in Benue state in 2001 and in Odi in Bayelsa state in 1999. There seems little point in training Nigerian troops to serve as peacekeepers when the situation in the delta is so unstable and the troops there at present seem to have such an extremely bad reputation. We should also consider how that support for the armed forces will work alongside our wider support for security sector reform through the G8 Africa action plan.
I have talked mainly about the Government's role, but I shall briefly touch on the role that UK companies can play alongside that. As I have said, I yesterday met representatives from Shell who briefed me on the work that they are doing to limit the consequences of oil exploration. I was encouraged by the range of projects that they are helping with and their real interest in assisting the communities in the delta. I understand that they have built 29 cottage hospitals, which must be a wonderful boost for the people there. That said, all companies that operate in the region could do more.
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I shall highlight three fields in which that is the case. First, companies should introduce tougher environmental standards. Secondly, they should provide greater transparency over payments to local contractors and other local payments made, although Shell has said that it is working on that at present. Thirdly, all companies need to consider the ways in which they can funnel money into the region to assist both traditional aid and development projects, and to support civil society and capacity building projects such as the work of the International Centre for Reconciliation, is absolutely vital. I hope that the Government will find opportunities to encourage and work alongside business in that way.
Overall, much work is being done that can be applauded. However, there is still much more that can be done. I have outlined the problems, but I am optimistic that solutions can be found. I hope that the debate has been constructive and helpful; I hope something has been achieved simply by highlighting the issue. None of us wants the Niger delta to become more unstable; I am sure the Minister will share many of my concerns and respond positively to these proposals.
4.15 pm
The Minister for Trade and Investment (Mr. Mike O'Brien): I congratulate my hon. Friend the Member for Hamilton. South (Mr. Tynan) on raising this important issue. I apologise on behalf of my hon. Friend the Member for Sunderland, South (Mr. Mullin) who is the Foreign Office Minister responsible for Africa. He would have replied to this debate had he not been in Ethiopia.
I begin by explaining why Nigeria matters so much to Britain, and why the British people should care about the issues raised by my hon. Friend the Member for Hamilton, South. Twenty-five per cent. of all African people live in Nigeria; it is estimated that 180 million will live there by 2015, a figure that is projected to rise to 250 million by 2030. If Nigeria does not meet its millennium development goals, Africa cannot meet them.
Nigeria is a functioning democracy, however imperfect, indeed sometimes corrupt, the process. Success for Africa's largest democracy sends a message to the other democracies in the developing world, and failure for Nigeria sands them a bad message. Britain has substantial commercial interests in Nigeria, and is the major holder of Nigerian debt. Nigeria is a force for stability in west Africa, both through its extensive peacekeeping efforts and its economic standing as a magnet for economic activity in the region, and in terms of its own relative political stability.
It is stability that concerns us today, for stability in the Niger delta has an impact on stability across Nigeria, and a direct impact on the wealth and economic development of the country as a whole. The delta is an oil-rich zone on the south coast of Nigeria. It is large—about 70,000 sq km, the size of Scotland—and is home to 20 million people, but they are a complex mix of at least 40 different ethnic groups, speaking 250 dialects, across 3,000 different communities.
The problems of the delta are a microcosm of the many problems that Nigeria faces. It has high levels of poverty—75 per cent. of Nigerians subsist on less than a dollar a day—high unemployment, and a lack of access to

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basic needs; and the 3,000 different communities often mean a rash of ethnic strife. Added to that is the endemic corruption in the area, which is a problem that Nigeria as a whole faces. I take no pleasure in noting that Nigeria came 132nd out of the 133 countries in the 2003 Transparency International corruption perception index.
The Niger delta adds to that cocktail some specific problems of its own. It is without doubt the most unstable region in Nigeria. As my hon. Friend said, the vast oil reserves have led to equally vast oil thefts. There are no accurate statistics, for obvious reasons, but relatively reliable figures suggest that an average of 100,000 barrels a day are stolen, which is an enormous quantity. Again, we guess that that theft makes the thieves and those who support them very rich indeed. We guess that the profit from oil theft is about half a billion—yes, billion—dollars a year. Theft and corruption mean that those involved in ethnic clashes can gain access to more than just sticks and stones.
Mr. Tom Clarke: The Minister will agree that my hon. Friend the Member for Hamilton, South (Mr. Tynan) made an excellent speech. He was able to focus on a point that I trust will be considered by the Commission for Africa, which is that, alongside poverty, malnutrition, HIV/AIDS and other scourges, there is rich mineral wealth. If that were properly shared with the many and not the few, many of those terrible problems that people experience could be removed. I trust, too, that that is very much in the Minister's mind.
Mr. O'Brien: My right hon. Friend is right. Wealth in the midst of poverty is a real problem in that part of Africa. It is one issue that no doubt the Commission for Africa will examine.
We must also examine the fact that such wealth, because of its unequal distribution, sometimes falls into the hands of rich and corrupt people who use poorer people in order to access weapons to get involved in ethnic strife. Small arms are proliferating across the region and they are increasingly sophisticated and available. Unemployed youngsters are easy to hire.
The picture, as my hon. Friend has painted it, is very challenging. It would be easy to conclude that there is no solution, but the delta matters to the UK. It is the engine of the Nigerian economy, producing 75 per cent. of Nigeria's crude oil production, 90 per cent. of its oil export revenue and more than 50 per cent. of its Government's own revenue. It is specifically vital to British commercial interests. As my hon. Friend said, the delta has been described as the jewel in Shell's upstream crown. The Shell Nigeria joint venture produces 1.3 million barrels per day.
There is also the British interest at a purely human level. We have about 1,000 UK nationals resident and working in the Niger delta at any one time, and we have a responsibility to do all we can to ensure their safety. Delta violence makes life even more difficult for them, and we have been involved in several kidnapping cases over the past 18 months—each of which, I am pleased to say, has been brought to a satisfactory conclusion.
It is estimated that Shell's operations cover about half of Nigeria's onshore and offshore oil reserves. Its operations in the Niger delta are widespread and
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complex. Shell has always recognised the need to be involved in community development programmes. My hon. Friend has already praised them. Those programmes have made some difference, though Shell would be the first to accept that to date the programmes have not made enough of a lasting impact on the ground.
Shell is searching for ways in which to promote stability and increase opportunity. For example, it is co-funding projects with the World Bank, Africare, the United Nations Development Programme and the United States Agency for International Development at community level in the delta. I would like to commend, as my hon. Friend has, the work of Coventry cathedral's International Centre for Reconciliation. He was right to identify its work as a model for other work. The centre has undertaken work deserving of great praise in Nembe.
The prime responsibility for the delta, however, lies of course with the Nigerian Government at state and national level. I recognise the efforts of the Nigerian Government's Operation Restore Hope—a joint navy, army and mobile police operation with the aim of cracking down on armed militancy. Nigeria's resources are limited, however, and there have been examples of armed gangs outgunning Nigerian forces. We are also conscious of allegations of human rights abuses by some in the Nigerian forces in the delta in the past. They have a fine balance to strike between establishing effective law and order in the delta and behaving in a way that is appropriate to Africa's biggest democracy. Sometimes that balance is struck well; sometimes, regrettably, it is not.
Could the British Government do more? Our starting point is that there is no quick fix. We need to build consensus with other Governments working closely in the delta—for example the US and the Dutch—and with the broader donor community, the oil majors, and the Nigerian Government themselves, at both state and federal level. Our current efforts concentrate on a number of strands. President Obasanjo's endorsement of a home-grown extractive industry transparency initiative, or EITI, offers an opportunity to increase the transparency and accountability of Government at all levels on the flow and use of oil revenue. The Nigerian Government have made a commitment to include back accounting of the Nigerian National Petroleum Company account. If undertaken effectively, that will be a major step towards tracing the somewhat opaque trail of oil revenue.
We have been working with major oil companies engaged in the delta, as well as NGOs, to try to ensure that measures to protect the security of oil companies do not give rise to human rights abuses. They have adopted a set of voluntary principles on human rights and security, which are now core to the working practices of many of the companies concerned, although more needs to be done to strengthen their effectiveness in the Niger delta.
We are using our position with both the federal and state Governments and the oil majors to press for effective and comprehensive measures to re-establish stability in the region. We are further strengthening our

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consular protection and response to incidents involving British nationals in the delta, such as kidnappings. We have appointed an honorary consul in Warri and maintain our full-time consular office in Port Harcourt. We have overhauled our consular links with the oil majors and the British community and set up a rapid response team under the direction of the deputy high commissioner in Lagos to deal with problems as they arise.
We are considering how we can best help build NGO and civil society capacity to engage on energy and governance issues with the Nigerian authorities. We aim to support NGOs, academics, the media, faith-based organisations and the national and state assemblies to improve accountability, deal with corruption and make effective use of resources. We are also strengthening the hand of Nigeria's anti-corruption agencies. In particular, we are providing equipment for the Economic and Financial Crimes Commission and we are exploring support for the Independent Corrupt Practices and Other Related Offences Commission.
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I am grateful to my hon. Friend for raising what is an enormously important issue not only for Nigeria but for Britain and the wider international community. It has given us an opportunity to focus on a problem that is, as he said, important for the future prosperity of Nigeria and for the future health of British interests there. There is no silver bullet, but the Government are committed to long and patient consensus building to reverse the terrible waste of resources and human effort in the delta region.
The problem of oil wealth among poor regions can be addressed if we bring together the various groups—oil majors, Governments and NGOs—that are interested in helping the delta to revive. In that way we can start to improve the situation. The British Government are committed to our part in the process, but success is dependent on others playing their part. We hope and believe that it is possible for them to do so, and I am grateful to my hon. Friend for raising the matter.
Question put and agreed to.
Adjourned accordingly at twenty-nine minutes past Four o'clock.

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

Patient Information Advisory Group
Baroness Finlay of Llandaffasked Her Majesty's Government:
What is the likely duration of the Patient Information Advisory Group; and what plans are in place to enable the transfer of information about National Health Service patients in the absence of informed consent when the group ceases to exist.
The Parliamentary Under-Secretary of State, Department of Health (Lord Warner): My Lords, the national programme for NHS IT is currently developing improved anonymisation services to support activities that rely on NHS patient information. We expect that by 2007 the Patient Information Advisory Group will have evaluated these services, advised the Government on where anonymised information must be used as an alternative to disclosing confidential patient information without consent, and indicated whether there is a need for continuing legislative support for key work. Consideration can then be given to whether there is a continuing need for an advisory group.
Baroness Finlay of Llandaff: My Lords, I am grateful to the Minister for his reply. I should like to quote him back to himself. He said in a debate on 7 January,
"it remains to be seen whether the wonders of IT will ultimately remove the need for identifiable data for the purposes of epidemiology.[Official Report, 7/1/04; cols. 209ߝ10.]
He shared the scepticism of the noble Lord, Lord Turnberg, about whether that was achievable. I have to add my scepticism to theirs.
We have the most comprehensive cancer registry in the world, from which there has never been a breach of confidentiality. Would it not be safer to continue registration at present, ensuring through public information that everyone understands why such data are so crucial to ensure equity of treatment, detection of carcinogens and so that research findings can be rolled out to the public?
Lord Warner: My Lords, I pay tribute to the work of the cancer registries. I, as always, retain a healthy scepticism about all sorts of things, but in this particular instance, the Government are ensuring that nothing is changed from the present arrangements
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until PIAG has seen that the new secondary uses services that will be introduced under the new IT programmes are working satisfactorily.
Baroness Hayman: My Lords, is my noble friend aware how much the Government's change of view on some issues in the Human Tissue Bill has been welcomed by the medical research community? I remind the House of my interest, as chairman of Cancer Research UK. On informed consent and the transfer of information, will my noble friend do all he can to make sure that the Government take an equally practical and pragmatic approach in order to safeguard life-saving research?
Lord Warner: My Lords, as I was trying to indicate, the Government will, through their new IT programme, be setting up a secondary uses service, which is for the people who do not deal with direct patient care, such as researchers and public health communities. They will have that service, which will protect their research interest. Taking a belt and braces approach, we are keeping the PIAG system in place to ensure that everything is satisfactory and the best interests of researchers and patients are served.
Lord Clement-Jones: My Lords, the setting up of PIAG—for which my noble friend Lady Northover must take a great deal of credit—was a very important step in allowing the transfer of information to cancer disease registries, as the noble Baroness, Lady Finlay of Llandaff, pointed out. When we debated this in January, the Minister said that decisions were imminent, yet we still seem very slow in giving certainty to the disease registries. Has the Minister considered making cancer notifiable so that the information can be passed without recourse to PIAG?
Lord Warner: My Lords, we keep those issues under review. However, I thought that I was giving certainty in my Answer. I said that by 2007 PIAG would be able to evaluate the new services and see whether changes are necessary.
Earl Howe: My Lords, is the Minister aware that there is quite a deal of concern in the medical community about the national patient record system and the effect on patient confidentiality that it may have? Can he assure me that this is being looked at closely and that the department is taking it seriously?
Lord Warner: My Lords, Professor Aidan Halligan, one of the deputy chief medical officers in the department, has been given the job of making sure that the needs and concerns of clinicians are fully met as the NHS IT national programme is rolled out.
Baroness Masham of Ilton: My Lords, will this information be held centrally, because there are many health bodies, and nobody quite knows what each does? Will the information be available to universities and those people who want it for research?
Lord Warner: My Lords, the NHS programme for IT will create a new national patient record system in

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England. There will be a range of abilities to access it, based on people's need to know and the confidentiality and security arrangements that are appropriate. Researchers in universities and elsewhere who are involved in this area will be regarded as secondary users and will have the services that I have described.

Eating Disorders
2.42 p.m.
Baroness Sharples: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I should declare that over 30 years ago, I was diagnosed with anorexia.
The Question was as follows:
To ask Her Majesty's Government what progress has been made in implementing the National Institute for Clinical Excellence guidelines for the treatment of eating disorders, published in January.
Lord Warner: My Lords, implementation of the National Institute for Clinical Excellence guidelines on eating disorders is a matter for primary care trusts, with strategic health authorities and the Healthcare Commission maintaining an oversight role.
Baroness Sharples: My Lords, I thank the Minister for that reply. Is he aware that more than 1.1 million people, most of them young people, are suffering from those illnesses? Their access to treatment is, at best, patchy and, in many places, inadequate. Surely GPs and practice nurses should receive advice on how they can recognise those illnesses so that they can prevent possible death.
Lord Warner: My Lords, services for people with eating disorders are available throughout the country, in both primary and secondary care, but we recognise that expertise and services are unequally distributed around the country. That is precisely why the National Institute for Clinical Excellence guidelines were published in January as part of a programme to improve services.
Lord Clement-Jones: My Lords, one of the problems with eating disorders and their treatment is, to a large extent, the lack of a clinical evidence base on the most effective treatments. There has been some concern about the impact of regulations made under EU Clinical Trials Directive on the ability of those trials to be carried out. What can the Minister say on that subject?
Lord Warner: My Lords, we have been over the ground of the EU Clinical Trials Directive many times and no doubt we will go over it again. The Government's position is clear. We have implemented the EU directive. I am not aware that it is going to have any adverse effect on research in that particular area.
Lord Walton of Detchant: My Lords, does the Minister agree that the recommendations and
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guidelines from the National Institute for Clinical Excellence in this field are extremely welcome? Nevertheless, does he accept that many patients who suffer from eating disorders are very difficult indeed for doctors to identify because they often have a remarkable expertise in concealing the nature of their condition from their doctors, their parents and others who care for them? Does he feel that the guidance from the national institute is good enough to help doctors to identify patients with those conditions?
Lord Warner: My Lords, that guidance was the result of a great deal of discussion and consultation with a wide range of interests. It recommends the best practice that is available in this country.
Baroness Masham of Ilton: My Lords, do those patients come under mental health as a specialty?
Lord Warner: My Lords, the issue of eating disorders was covered in the National Service Framework for Mental Health. The National Director for Mental Health, Professor Louis Appleby, is conducting a review of the provision of all specialised mental healthcare to provide advice to the commissioner. That review will cover eating disorders as well.

Wind Power
2.45 p.m.
Lord Willoughby de Brokeasked Her Majesty's Government:
Whether wind power requires a conventional power back-up.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville): My Lords, all forms of generation require some degree of back-up to cater for unexpected interruptions. The fact that wind power is intermittent has implications for the level of back-up required, but work undertaken by the National Grid Company following the energy White Paper indicates that the electricity system could manage with the increasing reliance on wind generation implied by our renewable targets and aspirations. The back-up could be provided either by conventional or non-intermittent sources of renewable energy such as hydro or biomass.
Lord Willoughby de Broke: My Lords, I am grateful to the Minister for that reply. Are the costs of that full-time fossil fuel back-up currently factored into the costs of wind farms? Does he agree that having full-time fossil fuel back-up generation in place for wind farms means that no matter how many wind farms we build, we will still not attain our emissions target?
Lord Sainsbury of Turville: Yes, my Lords, that is factored into the cost. Where wind power provides up to 10 per cent of the renewable target, that back-up has little effect on the cost. If one reached the probably

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extreme position of 20 per cent of the renewable target being met by wind, one would begin to need to factor in the cost of the back-up, but that would probably come to about 0.5p per kilowatt hour. I see no reason why that should prevent us meeting our emissions targets.
Lord Tanlaw: My Lords, will the Minister advise us once more about the situation in south-west Scotland? That is the best area for wind generation, yet the Ministry of Defence consistently opposes any form of wind farm being sited there. Therefore, how are the Government going to meet their target for renewable energy if the ministry continues to cause delay in planning applications for wind generators?
Lord Sainsbury of Turville: My Lords, the answer is exactly the same as it was on the previous occasion. The MoD and the Civil Aviation Authority, via the wind energy and civil and military aviation working groups, are working to resolve the planning issues to make certain that wind turbines are properly sited.
Lord Ezra: My Lords, in view of the relatively small contribution that wind power is making to electricity generation and to the back-up required, is it not time for the Government to reconsider extending the same kind of incentives to other ways in which emissions can be reduced, such as combined heat and power—the Minister will not be surprised to hear that from me—clean coal technology and the recovery of methane from coal mines?
Lord Sainsbury of Turville: No, my Lords, if that were the right course of action, the Government would have taken it.
Lord Lang of Monkton: My Lords, is it the case that wind power is inefficient and unreliable, having only a 30 per cent load factor, and that it is also environmentally unattractive, intrusive, noisy, harmful to wildlife and ruinous of our countryside? Against that background, would it not be more sensible to place more reliance on the more efficient, reliable and durable source of nuclear power?
Lord Sainsbury of Turville: My Lords, I repeat what I said previously. It is quite extraordinary to refer to wind turbines as environmentally unattractive and promptly suggest that the environmental solution is to have nuclear power. Whatever one's view is about nuclear power, there are considerable and very real environmental issues involved. As far as the cost is concerned, the load factor is taken into account in the calculations, which still show that the market is making the right judgment, which is that, as of today, the cheapest source of renewable energy is almost certainly wind power.
Lord Williams of Elvel: My Lords, is my noble friend aware of academic studies which tend to show that when fossil fuel power stations are ramped up—to use
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the current expression—when the wind does not blow, that almost entirely negates the benefits of wind power when the wind blows? Does he agree with those studies or not?
Lord Sainsbury of Turville: My Lords, I am not aware of those studies. I would be very surprised if that is the case. As far as I am aware, it is quite clear that you can have back-up, particularly if it is gas-fired conventional generation, which very quickly can provide the necessary back-up. That in no way negates the benefits. I find it hard to see how it can, given that it is intermittent, negate the benefits of the renewable.
Lord Dixon-Smith: My Lords, have the Government made any calculation of the point at which the expansion of wind power will require the expansion of stand-by generating capacity to deal with the fluctuations which might arise from that wind power?
Lord Sainsbury of Turville: My Lords, it depends on making judgments about a whole series of issues, such as the geographical dispersal of wind farms, and so on. But as I indicated, up to about 10 per cent of energy from wind turbines has very little impact. If 20 per cent of energy comes from wind turbines, a significant amount of plant margin is needed. But, as I explained, it is only about 0.5p per kilowatt hour that increases the cost.
Lord Stoddart of Swindon: My Lords, is there not a real danger to security of supply by relying on wind turbines as part of the spare capacity? Unless we are going to waste power station output by keeping them running— but not feeding to the grid because there are windmills—we are in fact saving nothing, but also putting security of supply at risk. Will the Minister not listen to the growing dissent about the construction of wind farms as being unacceptable environmentally and useless so far as productivity is concerned?
Lord Sainsbury of Turville: My Lords, I think the noble Lord is unaware that one can turn the back-up on and off as required.
Baroness Miller of Chilthorne Domer: My Lords, does the Minister agree that tidal power is constant and reliable? Is he confident that his department is doing all it can to bring tidal power forward?
Lord Sainsbury of Turville: My Lords, clearly tidal power is another very useful source of energy, but it remains very expensive. Research is under way on how to bring that into an area in which it will make economic sense.
Baroness Miller of Hendon: My Lords, is the Minister aware that his right honourable friend

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the Prime Minister said this morning in a Select Committee that one of the reasons for not committing to nuclear at this stage was because it was more costly than other sources of energy?
Does the Minister therefore disagree with all the authoritative reports that say practically the opposite? They include, for example, the Royal Academy of Engineering, which mentioned that when you consider even the decommissioning costs of nuclear it is less expensive than wind power, because with wind power one has to pay not only for the installations and the subsidies but also for what the Minister referred to in response to the noble Lord, Lord Willoughby de Broke.
Lord Sainsbury of Turville: My Lords, of course the Prime Minister was right. That is an article of faith for all junior Ministers. I shall explain why he is right. He is right because at the moment there are very few data which give the cost of nuclear power to date—there are practically no up-to-date— nuclear power stations being built in the West, although there have been some in South-East Asia. There are very few data about which one can confidently say that they give the current costs of nuclear power.
Lord Roberts of Conwy: My Lords, have the Government taken any steps to arrest the anticipated reduction in electricity generation from nuclear and fossil fuel sources?
Lord Sainsbury of Turville: My Lords, that is what the whole renewal programme is about. It is to provide alternative sources to fill the requirements as we go forward.
The Lord Bishop of Chester: My Lords, far be it from me from this Bench to add to the wind unnecessarily a wind that blows where it will, according to the Holy Scriptures. Does the Minister acknowledge that the sheer volume of questions on this and similar subjects which has arisen in this House over the past year indicates quite a widespread anxiety about the combination of reliance upon intermittent sources and increasing quantities of gas imported over very large distances? It indicates an underlying concern about security of energy supplies in the future.
Lord Sainsbury of Turville: My Lords, that is entirely right. There clearly is anxiety in this House about this question of energy security. That is an important area for this country as we move into a world where we are an importer of energy. It is right that this House should consider this matter very seriously. Equally, it is for the Government to point out what action we are taking.

Africa: Tackling Corruption
2.56 p.m.
Lord Phillips of Sudburyasked Her Majesty's Government:
What progress they are making in the reduction of corruption in Africa by use of powers under Part 12 of the Anti-terrorism, Crime and Security Act 2001.
Baroness Crawley: My Lords, the Government are determined to tackle corruption globally, including in Africa. Corruption is a complex phenomenon and the Government are engaged in a range of measures to tackle corruption in Africa, as well as in other regions of the world—for example, by raising governance standards in African countries. Part 12 of the Antiterrorism, Crime and Security Act 2001 makes a small contribution to that. It gives the UK courts extraterritorial jurisdiction over offences of bribery committed overseas by UK companies or nationals.
Lord Phillips of Sudbury: My Lords, I am grateful to the noble Baroness for that Answer. Given the last point she made—that the whole purpose of Part 12 was to enable us to prosecute UK companies here, where their corruption or bribery had been in states incapable or unwilling to enforce it there—why is it that extra resources have not been made available to the prosecuting authorities here so that they can do the job? I would ask her particularly about the Democratic Republic of the Congo where, according to a recent United Nations report, British companies were identified as being exploiters of its mineral wealth and yet nothing has happened so far. Why is that? Will the Minister not accept that unless there is prosecution here under the Act, the Act is pointless?
Baroness Crawley: My Lords, we are well aware of the strong interest of the noble Lord, Lord Phillips, in the possibility of progress in the DRC. I will come to the UN panel issue that he raised on the DRC in a moment. Part 12 of the Anti-terrorism, Crime and Security Act allows for the prosecution of offences of bribery committed by UK nationals and incorporated bodies abroad. It does not, as the noble Lord knows, apply to other criminal offences.
We take allegations against UK-based companies and individuals extremely seriously, but dealing with allegations is simply not just a matter of resources. However, the noble Lord will know that police funding since 2000–01 has increased by 30 per cent, or £2.3 billion. The UK Customs and Excise assessment of the UN panel report, to which the noble Lord referred in his supplementary question, is that information thus far processed by the UK for the OECD guidelines is not sufficient yet to mount a criminal investigation.
However, I am pleased to tell the noble Lord that the UN has now released additional material collected by the panel in regard to UK-based companies and individuals. The UK, as he knows, has been requesting that material for some time. That means that the

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material is now with the DTI. I am sure noble Lords will understand that I am unable to comment further until the DTI's assessment has been completed.
Baroness Whitaker: My Lords, I declare an interest as a member of Transparency International UK's advisory council, and as a member of the scrutiny committee on the draft Corruption Bill. I ask my noble friend the Minister to join me in congratulating the African Union on its preparations for its own convention against corruption, which is I hope being agreed in Addis Ababa as we speak. Can she tell me how our Government's plans are progressing for our legislation, including the legislation that we need to ratify the United Nation's convention against corruption? We do not want to lag behind the African Union, do we?
Baroness Crawley: My Lords, I certainly agree with my noble friend that we congratulate the African Union on its preparations for the convention against corruption. Indeed, we welcome such regional initiatives, which are designed to complement the aims of the convention.
My noble friend asked me when the UK Government aim to ratify the UN Convention against Corruption. We intend to do that as soon as we are satisfied that the UK can comply fully with the obligations under it. We want the UK to be among the first 30 ratifying countries.
Lord Marsh: My Lords, could the Minister give an example of our ability to influence those other countries, with the aid of our African friends who are on the same side—perhaps starting with Mr Mugabe as a specimen?
Baroness Crawley: My Lords, on the issue of Zimbabwe and corruption, under the Cotonou agreement between the European Community and the African, Caribbean and Pacific states, consultations have led to the application of appropriate measures against Zimbabwe, as the noble Lord will know, under Article 96, which deals with breaches of essential elements of democracy, human rights and rule of law.
The noble Lord asked me about other examples. We provide a wide range of assistance, depending on the particular needs of each country. Anti-corruption strategies in Uganda would be an example.
Baroness Williams of Crosby: My Lords, the Minister began by referring to good governance in Africa, and I am sure that we would all agree with her. However, may I suggest that we should start with better governance in the United Kingdom?
The Minister will be aware that I have been in correspondence now for three years with all the financial agencies and the Home Office with regard to the laundering of some 2 billion to 3 billion dollars-worth of Nigerian state funds. Is she aware of some 15 banks found to be involved in that trade, four were fined and no others were either named or prosecuted? Is she aware that the City of London police decided to prosecute none of them? Is she aware that every other country involved froze the bank accounts held by
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nominees of the Nigerian state funds, while the United Kingdom froze none of them? Finally, is she aware that after a three-year effort to get the Home Office to make its evidence available to the federal government of Nigeria, a poor and democratic major state in Africa, it is still the case that the Home Office has not sent any of the evidence that the federal government need, although Switzerland and other countries have done so?
Baroness Crawley: My Lords, perhaps the noble Baroness would allow me to write to her in detail about the disappointment that she has experienced over the correspondence she has had with the Home Office. The UK's anti-money-laundering regime involves directing primary legislation in the Proceeds of Crime Act 2002 and secondary legislation against the menace presented by money-laundering to the UK and internationally.
The Earl of Dundee: My Lords, will the Minister confirm that the OECD is also examining the position of overseas subsidiaries? What international consensus on methods do the Government favour for dealing with corruption within those subsidiaries?
Baroness Crawley: Yes, my Lords, I am aware of the OECD's involvement in that matter. The noble Earl will know that we have signed arid ratified the OECD's anti-bribery convention, under which we are obliged to do all that we can to combat bribery of foreign public officials in international business transactions. This month we have interviews with officials from the OECD to discuss how our own domestic legislation allows us to conform with the convention. We look forward to those interviews. Other countries that have recently been interviewed are France, Mexico, Canada, Korea and Turkey.
The Lord Bishop of Chelmsford: My Lords, does the Minister accept that some of the rest of us in this House have also pressed the Home Office on the total failure to respond to the Nigerian Government's issues with regard to the banking of funds that properly belong to them? Will she further accept that the tackling of corruption internationally and specifically in Africa is extremely difficult in the absence of effective and accountable political structures, as in the Congo; in the absence of the rule of law, as in Zimbabwe; and in the absence of effective and supportive neighbourly community life, as in many parts of Africa?
Baroness Crawley: My Lords, I very much agree with the latter part of the right reverend Prelate's remarks. The Government, together with our international partners, are doing all that we can to tackle the cancer of corruption in many regions of the world.

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On the issue of repatriation of assets to Nigeria, we have agreed to transmit the evidence that we have on Abacha's assets to the Nigerian authorities. However, Abacha's solicitors have lodged an appeal.
Baroness Rawlings: My Lords, will the Government urgently review whether there are sufficient resources for enforcement of overseas corruption offences? Have the Government ever repatriated any confiscated assets to an African country, or do they intend to do so in the near future?
Baroness Crawley: My Lords, we are not aware of any cases in which assets have been repatriated, and we believe that it is unlikely that there have been any. All cases are dealt with, as the noble Baroness will know, in line with the provisions of international arrangements and UK legislation. She will also know that under the UN Convention against Corruption, the UK will be obliged to return assets to the requesting state when the case involves the embezzlement or laundering of public funds.
Lord Avebury: My Lords, can the Minister say how many cases of alleged or suspected overseas bribery have been recorded by NCIS and what arrangements exist for sharing that information between European jurisdictions—for example, via Interpol?
Baroness Crawley: My Lords, we do work with international partners. I cannot give details today, but I shall certainly write to the noble Lord with details of our work with Interpol. He asked me about the number of reports that we have received on corruption. Seven allegations have been reported by our diplomatic posts, one of several sources of reports. In total, 22 allegations have to date been reported to the UK investigating authorities. Noble Lords may be interested to see the UK bribery and corruption law leaflet that is distributed to all diplomatic posts, to businesses and to NGOs to enable people to learn more about what they can do to tackle corruption.

Iraq: Treatment of Detainees
3.8 p.m.
Lord Lamont of Lerwickasked Her Majesty's Government:
What response they propose to make to the submission to them from the Archbishop of Canterbury and the Archbishop of York on the treatment of Iraqi detainees by coalition forces.
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Bach): My Lords, the letter from the most reverend Primates the Archbishop of Canterbury and the Archbishop of York was addressed to my right honourable friend the Prime Minister. That letter was intended to be private. My
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right honourable friend has replied by letter recently. The reply, as was the intention with the original letter, is private.
Lord Lamont of Lerwick: My Lords, I thank the Minister for that reply so far as it goes. Were not the most reverend Primates absolutely right to state that the happenings in Abu Ghraib prison severely undermined the moral authority of the West? Is it not therefore very important that the forthcoming trials of former members of the Iraqi regime are not also a political own goal? Was it not therefore disappointing that in the court proceedings last week Americans ran the proceedings, the only civilians in the court were American soldiers dressed as civilians, the defendants had no legal representation, and most astonishingly of all, the transcript of the court proceedings was censored by the American military? Is it not essential that these trials should be credible and not just a staged event?
Lord Bach: My Lords, of course, we understand the concern that has been expressed, including by senior clergy in the Church of England, about the alleged abuses of detainees in Iraq. The House will know that we take extremely seriously any allegations that are made against United Kingdom Armed Forces, and we investigate them. Eighteen investigations have been initiated relating to individuals detained by our Armed Forces, but only one of those relates to an incident at a formal detention facility. I want to make it clear that there is absolutely no evidence of systematic human rights abuses by UK forces either at detention centres or elsewhere.
The noble Lord referred to the arraignment of Saddam Hussein on 1 July. He, of course, is now held as a criminal suspect. There did not appear to us to be anything wrong with the hearing that took place on 1 July.
Lord Thomas of Gresford: My Lords, the Minister will know that the American Secretary of State, Donald Rumsfeld, published 24 interrogation techniques which had been applied to prisoners in Guantanamo. Senior people from Guantanamo went to Iraq. Is there a similar list of interrogation techniques published by this country, or available to be published by this country, and, if so, will the Government kindly publish it? It will be appreciated that Mr Rumsfeld admitted that four of the interrogation techniques employed were not in accordance with international standards or with the Geneva Convention.
Lord Bach: My Lords, Guantanamo is rather wide of the Question, which specifically concerns the letter from the Archbishops of Canterbury and of York. I am not in a position today to comment in any detail on Guantanamo. However, the investigative methods used by UK troops and police are absolutely in accordance with the Geneva Convention. There is absolutely no question that any of those proceedings are carried out in a way that would be unacceptable to the noble Lord.
The Lord Bishop of Southwark: My Lords, is the Minister aware that while the two Archbishops wrote

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a letter that was not intended for publication, they wrote on behalf of, and with the encouragement of, their fellow Church of England bishops about a range of issues relating to Iraq and the Middle East, many of which have also been raised on these Benches on previous occasions? Is the Minister also aware that the priority of the letter was to promote a secure understanding of the importance of respect for human dignity, the rule of law and the indivisibility of religious freedom?
Lord Bach: My Lords, I am grateful to the right reverend Prelate for his questions. We are very aware of the spirit in which that correspondence took place. It was written after a meeting of bishops. It is unfortunate that somehow or other that letter managed to find its way into the public domain, but it did and that is the fact of the matter. The more important part of the right reverend Prelate's question concerns the issues of moral authority that he raises. We agree that the matters that were raised in the letter were of great importance and significance.
We agree also, so far as the Middle East is concerned— in particular because the letter referred to the Middle East in terms— that the road map is the best route towards a negotiated settlement but that both parties have to do more to fulfil their commitments. Israel must freeze all settlement activity and reroute the barrier away from the Occupied Territories, and the Palestinian Authority in its turn must act decisively against perpetrators of terrorist acts. To that extent we entirely agree with the contents of the letter.
Lord Richard: My Lords—
Lord Merlyn-Rees: My Lords, might it not be a good idea to look back to 1973 to the Compton inquiry into the ill treatment of detainees in Northern Ireland? It is most informative and relevant to the subject under discussion.
Lord Bach: My Lords, I am grateful to my noble friend. We shall certainly take on board his suggestion.
Lord Howell of Guildford: My Lords, while all abuse of detainees and prisoners is absolutely disgraceful— the Archbishops are right to be concerned about it— and should be investigated properly and thoroughly, as I believe is being done, does the Minister agree that that in no way typifies the very dangerous and difficult work undertaken by the British Armed Forces in Iraq in carrying out their daily programmes and operations, and that they deserve full, continuous and repeated support from all quarters?
Lord Bach: My Lords, I am grateful to the noble Lord for his question. Of course, I agree with him completely. Our Armed Forces have done, and continue to do, an outstanding job in southern Iraq. The House may be interested to know that more than 55,000 servicemen and servicewomen have served in Iraq and that a tiny, tiny minority is alleged to have been involved in incidents involving the ill treatment of
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Iraqi civilians. A number of those have already been cleared of any wrongdoing. It is important not to exaggerate the numbers, as has been done in some cases, and to realise, as the noble Lord suggests, that what our Armed Forces have done in Iraq is, frankly, to get rid of the tyrant, Saddam Hussein, and give that country a chance to enjoy peace and democracy.

Budget (No. 2) (Northern Ireland) Order 2004
3.17 p.m.
The Lord President of the Council (Baroness Amos): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the draft order be referred to the Northern Ireland Orders Grand Committee."—(Baroness Amos.)
On Question, Motion agreed to.

Constitutional Reform Bill [H.L.]
The Parliamentary Under-Secretary of State, Department for Constitutional Affairs (Lord Filkin): My Lords, on behalf of my noble and learned friend the Lord Chancellor, I beg to move the Motion standing in his name on the Order Paper.
Moved, That it be an instruction to the Committee of the Whole House to which the Constitutional Reform Bill [HL] has been recommitted that they consider the Bill in the following order:
Clauses 1 to 3,
Schedule 1,
Clauses 4 to 6,
Schedule 2,
Clause 7,
Schedule 3,
Clause 8,
Schedule 4,
Clause 9,
Schedule 5,
Clause 10,
Schedule 6,
Clause 11,
Schedule 7,
Clauses 12 and 13,
Schedule 8,
Clauses 14 to 20,
Schedule 9,
Clauses 21 to 34,
Schedule 10,
Clauses 35 to 50,
Schedule 11,
Clauses 51 and 52,
Schedule 12,
Clause 53,
Schedule 13,
Clauses 54 to 71,
Schedule 14,
Clauses 72 to 102,
Schedule 15,
Clause 103 to 107,
Schedule 16,
Clause 108,
Schedule 17,
Clauses 109 to 111.—(Lord Filkin.)
On Question, Motion agreed to.

Statute Law (Repeals) Bill [H.L.]
Lord Filkin: My Lords, on behalf of my noble and learned friend the Lord Chancellor, I beg to move that this Bill be now read a third time.
This Bill has been produced by the Law Commission jointly with the Scottish Law Commission and makes progress in the modernisation of the statute book. I am sure that the House will wish to join me in expressing appreciation for the work of the two Law Commissions on this Bill.
Moved, That the Bill be now read a third time.— (Lord Filkin.)
On Question, Bill read a third time.
Lord Filkin: My Lords, I beg to move that the Bill do now pass.
Moved, That the Bill do now pass.—(Lord Filkin.)
On Question, Bill passed, and sent to the Commons.

Gangmasters Bill
Read a third time, and passed.
Gangmasters Bill

  Asylum and Immigration (Treatment of Claimants, etc.) Bill
  3.19 p.m.
  Read a third time.
  Clause 4 [Trafficking people for exploitation]:
  Baroness Anelay of St Johnsmoved Amendment No. 1:

  ( ) For the purposes of subsection (4)(d), inducement includes situations where the person may not be aware of what he is being encouraged to do.
  The Minister of State, Office of the Deputy Prime Minister (Lord Rooker): My Lords, I certainly hope that I can satisfy the points made by the noble Baroness. As she said, Amendment No. 1 relates to the circumstances in which a person is exploited for the purposes of Clause 4 and, in particular, the meaning of the words "induced" and "inducement" in subsection (4)(d).
  The definition of "exploitation" in subsection (4) is crucial to these offences. We have already had substantial debate on the drafting of this subsection, to ensure that the clause captures all the cases where a person is truly exploited.
  The debates have been very useful and constructive. I did not participate in them but, before assisting my noble friend, I was fully updated and briefed on what was happening to the Bill. There is no difference between us that it is important that the offence covers those who prey on the vulnerable. That is why we amended the clause on Report in another place to add subsection (4), which states that a person is exploited if,
  he is requested or induced to undertake any activity, having been chosen as the subject of the request or inducement on the grounds that—

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  he is mentally or physically ill or disabled, he is young or he has a family relationship with a person, and

  a person without the illness, disability, youth or family relationship would be likely to refuse the request or resist the inducement".

  Amendment No. 1 seeks to ensure that the terms "induced" and "inducement" in subsection (4)(d) are broad enough to cover the circumstances where the victim is not aware of what he is being encouraged to do. This is very important in the case of young children, who may not understand what they are being encouraged to do but who may nevertheless be susceptible to persuasion.
  We are satisfied that the ordinary meaning of the word "inducement" is such that a person may be induced to do something notwithstanding his not being fully aware of what he is being induced to do. We therefore consider that subsection (4)(d) as drafted can apply in cases involving very young children, who may not be fully aware of the situation, of their actions, and of what it is they are being encouraged to do.
  Amendment No. 2 also deals with the rights of victims of trafficking. As we understand it, the concern here is that Clause 4 offences may, as drafted, allow for the prosecution and conviction of the victims of trafficking in cases where a person arrives in the United Kingdom believing that another person will exploit him, but who none the less, in an attempt to escape his own country, agrees to come.
  I am aware that there has been some constructive correspondence on this issue between my noble friend Lady Scotland and the noble Lord, Lord Hylton. I am happy to be able to offer the same explanation and reassurances which my noble friend has given in that correspondence.
  We are absolutely in agreement that the offence in Clause 4 should not be used to prosecute those who themselves are victims of trafficking. However, we consider it to be implicit in the drafting of Clause 4 that the accused and the victim must be two different people. The wording of Clause 4 is not appropriate to describe arrangements made by oneself for oneself. Further, it should be borne in mind that criminal offences are strictly constructed in the defendant's favour. We therefore consider that the clause as drafted is sufficiently clear to ensure that the victims of trafficking will not be prosecuted for or convicted of the offences in the clause. Consequently, we do not consider that Amendment No. 2 is necessary.
  I hope that explanation, together with the correspondence which has passed between the Home Office, the concerned bodies, and noble Lords is sufficient for the noble Baroness to feel that I have met the obligations and that she does not need to proceed with this amendment.
  Baroness Carnegy of Lour: My Lords, with the leave of the House, may I ask the noble Lord to enlarge a little on what he said about Amendment No. 1?
  He seemed to imply that the word "induced" means that the subsection covers people who do not understand what it is they are being induced to do. I
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  do not understand that. We all know what "induced" means. The grounds on which subsection (4)(i) and (ii) rely do not include what the noble Lord has said. They do not include the possibility that the person does not understand what they are being induced to do. I think that it is stretching language a little far to say that the clause actually says that. Is the noble Lord certain of that? If he is not, will he make certain before the Bill goes back to the House of Commons?
  Earl Attlee: My Lords, may I take the opportunity to remind the House that we are at Third Reading?
  Lord Rooker: My Lords, I am more than happy to take advice on that. Since the debate started, this matter has been looked at by lawyers. We are satisfied that the ordinary meaning of the word "inducement" is such that a person may be induced to do something, notwithstanding the fact that that person is not fully aware of what it is he is being induced to do.
  That may sound convoluted, but that legal jargonߞif I may put it that way without being pejorative— would stand up in court in the way I have explained. The Bill will obviously go back o the other place, but this is Third Reading in this House.
  Baroness Anelay of St Johns: My Lords, I am grateful to the noble Lord. My noble friend Lady Carnegy was right to try to make even clearer the commitment the Government are giving today.
  It may look to some outside the House as if this is angels dancing on the head of a pin, but we do need to get the number of angels right. The interpretation of this clause must be robust enough to stand up to legal challenge. I am grateful to the Minister, and I hope that is what he has managed to achieve in his further explanation today.
  The Minister has referred to Home Office letters which have been whizzing round. They did not whiz round the ordinary Post Office system because some have still not arrived. However, with the good will of the Bill team, they have certainly been whizzing their way round the electronic systems by email. Perhaps I may put on record my thanks to the Bill team for doing that over the weekend. It has meant that we have been able to foreshorten proceedings today. Yesterday I was able to withdraw two of my amendments that otherwise might have taken some considerable time in a list that is already rather long for today. So, with that explanation, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendment No. 2 not moved.]
  3.30 p.m.
  Lord McNallymoved Amendment No. 3:
  After Clause 8, insert the following new clause—

  IMMIGRATION DECISION PROCEDURE
  An independent inspector shall be appointed after consultation with relevant organisations—

  (a) to report annually on the quality of decision-making in asylum cases;

  (b) to lay that report before Parliament.

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  (2) Section 26 shall not be enacted until and unless the independent inspector is satisfied that the quality of initial decision-making has been improved.

  The noble Lord said: My Lords, if the Government were to accept this amendment, it would mean an extraordinary change of heart and philosophy on their part. The amendment seeks to draw attention to what we have criticised throughout the passage of the Bill as the basic error in its philosophy; namely, that the Government seem to think they can best improve the immigration system by a sanction here and a withdrawal of benefit or of the right to appeal there, and a toughening up further down the process. We on these Benches have continually drawn attention to the quite extraordinary failure at the first stage that has produced these large numbers of often successful appeals.
  In the past we have drawn attention to examples such as Canada, where the issue is approached differently, and there is much better first testing of cases, so that that the subsequent problems that apply in our case do not apply in theirs. We have referred to the junior quality of some of the Home Office officials who appear at first stage, and to the astonishing fact that sometimes there are no such officials at all. We do not have the highest expectations, but we do hope the Minister will use this opportunity to say that the Government recognise that the first stage of asylum applications is a substantial part of the problem this Bill is trying to address. With this amendment we are trying to introduce a suggestion for quality control, which would ensure that the first stage was treated efficiently and properly, and dealt with by a high quality person. We believe if we did, and if we set that as a mark, some of the other measures in this Bill would simply prove unnecessary because the right decisions would be made first time. I beg to move.
  Earl Ferrers: My Lords, the only observation I was going to make was that my noble friend Lord Attlee reminded us that we are on Third Reading. It would be appropriate to remind your Lordships that the amendment has not actually been moved.
  Lord McNally: My Lords, I wonder if we are in the throes of a coup. The Conservatives seem to be intent on running business today. Perhaps the mood will pass eventually, as it may be several decades before they have the opportunity to do so again.
  Lord Hylton: My Lords, I apologise for having been half a minute too late to move Amendment No. 2. However, I had been satisfied by correspondence with the noble Baroness, Lady Scotland, and I would only have moved it formally.
  I wholeheartedly support Amendment No. 3, because throughout the whole of the proceedings on the previous Bill, at the Second Reading of this one, and at one or two stages since then, I have tried to stress the vital importance of the quality of the first decision in all refugee and asylum cases. If this
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  amendment were approved it would be a mechanism for ensuring that we get a better quality of such decisions.
  The Lord Bishop of Portsmouth: My Lords, I thank the noble Earl, Lord Attlee, for reminding the House that at Third Reading a "Thought for the Day" rather than a sermon is appropriate at this stage. However, I think the atmosphere this afternoon indicates a certain amount of creative agnosticism about the details of much of this Bill and whether it is actually necessary. I know that feeling is not shared by the Government, but none the less it resonates in this House. I hope that the Minister will look sympathetically on the spirit of the amendment, even if we cannot vote on it. The amendment will send out a signal that there is a safeguard and that the Government are not appearing to be too heavy-handed, especially as some of us think that reducing the number of asylum seekers worldwide is not as necessary as people sometimes make it out to be.
  Baroness Anelay of St Johns: My Lords, I shall be brief. Of course, like all noble Lords around the House, we have also been concerned about the problem of too low a quality of decision making at first instance. I include the Government in that, because we have all been trying to take the quality further forward; that serves everybody well, and nobody benefits if things go wrong and the whole system gets clogged up as it has done. I was intrigued when I saw the amendment of the noble Lord, Lord McNally, appear yesterday and the approach that it takes. I reflected on our Amendment No. 35, which was published last week and will be moved by my noble friend Lord Kingsland later—I am tempted to say rather much later—today. That amendment adopts a different approach, but with the same objective of trying to ensure that the Home Office is held to account to improve both decision making and the timeframe within which the decisions are made. I am going to reserve our firepower until we get to our preferred mode of approach at Amendment No. 35.
  Lord Rooker: My Lords, I am not the bringer of joy and good tidings. I was not here before 2001, but I often wonder what the debates were like when I was struggling with my constituency before 1997, when there was no decision at all, let alone a high or low quality decision, and the system was in chaos. I sometimes think there is an underlying resentment of the fact that these days almost 80 per cent of first decisions are made within two months. To have no decision, or to have them dragged out for months and years, served the racketeers and vested interests out there that ran the industry. There has been a dramatic change in the past few years in getting speedy decisions for people. They are not all perfect; nobody denies that. Nor do we resent the fact—indeed, we are quite happy—that at various stages we have external monitors.
  I can go through the training programmes of the people making the decisions, if need be. We do not take them off the streets and put them to work making

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  decisions straightaway; far from it. However, we are making decisions. It serves the interests of justice, and of the whole asylum system, to have speedy decisions. In some ways, that little catalogue read out at the beginning by the noble Lord, Lord McNally—"a bit of this, a bit of that"—yes; collectively, that approach has halved asylum applications. I am not saying that is a very sophisticated answer, but the fact of the matter is that it has sent the right signal, the various changes reacting proportionately to events as we found them.
  This is not the first time the matter of decision making has been raised, and I am certainly not claiming that all decisions are perfect. Clearly, the appeals process shows they are not. In terms of seeking the appointment of an independent inspector to assess the quality of initial decision making, I assure the House that we are committed to making high quality decisions.
  We have introduced a range of measures to improve further the quality of the decisions we take. These cover, for example, work on identifying the right candidates for asylum casework—we do not take anyone looking at additional ways of strengthening our training and development of caseworkers, having samples of asylum decisions quality assured by senior caseworkers and external assessors, extending the feedback we obtain from appeal decisions and doing further work on the country information products and instructions that we issue.
  While we consider the quality of initial decisions to be good, we accept that more could be done and we are taking active steps in this area. In taking forward this work, we are keen to involve outside help as appropriate, as we are doing, for example, with the United Nations High Commissioner for Refugees. In some fields of immigration work we have seen the merits of having an independent body or person appointed to provide recommendations to the Secretary of State. For example, we have a monitor for entry clearance work and we recently appointed an independent monitor to see how the non-suspensive appeal powers in the 2002 Act are being used. We have also established the independent Advisory Panel on Country Information to help us to ensure that we produce information of the highest standard about various countries.
  So where appropriate, we will consider appointing external people to oversee that work in the Home Office. On the wider issue of quality decision making, we consider that the work we have in hand to build on the existing good level of decision making is the right way forward. We do not think it necessary or desirable to appoint an inspector as proposed in this amendment.
  I happily re-state the Government's commitment to high quality decision making. It does not serve anyone if there is poor quality decision making by people who are untrained, unskilled and whose work is not even quality assessed—and that is not the case. The existence of published targets on producing "fully effective" decision letters and the involvement of outside bodies to aid our training programmes and
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  assist in the assessment of our performance shows that we are not afraid to have an external light shone on what we do. But in this case we do not see that an independent monitor would add any value.
  The second part of the amendment is misconceived—first, because we are satisfied that the quality of decision making is of a good standard already, although it is capable of improvement; and, secondly, because the new appeal structure set out in the Bill will provide an independent robust means for challenging adverse decisions. The implication seems to be that the appeal structure provided for in the Bill will not be suitable for dealing with the current portfolio of asylum appeals coming its way. There is no basis for that implication and it is not one we can accept.
  We have travelled an enormous distance in the past few years in improving the quality of both the people working on asylum casework and the speed of the decisions. That is important. However, they have to be fair and good decisions. Speed is not the over-riding factor, but it was the case when no decisions were being taken. I used to say to my constituents, "Don't ask me to chase them up. Let sleeping dogs lie". They could continue for three or four years. The system was in absolute chaos. That is no way to run a fair system and it was exploited and abused, certainly by advisers who had a vested interest in spinning things out. So improving the speed is fine. We can certainly improve the quality, but at this point in time we do not need an external independent assessor on this part of the process. However, I accept that there is independent monitoring in other parts of the immigration and asylum process, so we are not opposed to that per se.
  Lord McNally: My Lords, it is always a delight to hear a Rooker reply because it is always in three movements. The noble Lord comes out swinging punches at anyone who is available. Then he attacks the Tories. After that the noble Lord feels much better and then gives us some facts to chew over. That response was a perfect example.
  I have watched the progress of this issue since I entered the House nearly 10 years ago and I have seen Ministers from both sides trying to grapple with the Rubic cube that is immigration and asylum policy. I am sure that when the day comes—which is perhaps not far off—"that a Liberal Democrat is at that Dispatch Box, he or she will be agonising over the same problem. The main point is that whatever has happened in the past the message is that we must do better: we must raise quality and look at best practice in other countries; for example, if the Canadians have a system that seems to work better than ours, we should have a look at it to see if could be applied here.
  However, I appreciate the constructive nature of the Minister's third movement and I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  3.45 p.m.
  Lord Phillips of Sudburymoved Amendment No. 4:
  After Clause 8, insert the following new clause—

  LEGAL AID FOR ASYLUM INTERVIEWS
  The Lord Chancellor shall make a direction under section 6(8) of the Access to Justice Act 1999 (c. 22) (services which may be funded) to require the funding of attendances by solicitors (and other non-solicitor suppliers accredited for the purpose by the legal services commission) and independent interpreters at interviews conducted on behalf of the Secretary of State with a view to his reaching a decision on a claim for asylum (as defined by section 167(1) of the Immigration and Asylum Act 1999 (c. 33) (interpretation) in the circumstances where the supplier has certified that he has a reasonable belief that the asylum applicant to be interviewed—

  is a torture or rape victim;

  has had inflicted on him serious physical harm; or

  has a reasonable fear of being tortured, raped or so harmed if returned to his country of origin."

  The noble Lord said: My Lords, I am moving again the amendment which was moved at previous stages of the Bill and hope that on this occasion the Government will have reflected on the need, in terms of justice, effectiveness and efficiency, of allowing the extra categories to be added to those already entitled to legal aid at substantive first interviews. The three extra categories are torture or rape victims, people who have had serious physical harm inflicted on them, or people with,
  a reasonable fear of being tortured, raped or so harmed if returned to…[their] country of origin.
  One has to return to the untenable position of the Government that those categories are not especially vulnerable. I read before and must read again a letter written to me by the Minister, David Lammy, who said, in relation to further categories of exceptions such as rape or torture victims, that,
  at present—
  that was a month ago—
  neither the DCA nor the Home Office are persuaded that victims of rape or torture, however defined, should be regarded as being in a category of vulnerable people.
  Most of the world would find that an astonishing proposition and, with respect, it does not do justice to the standards that this country upholds normally. I shall read noble Lords just one piece of evidence from the Home Office. The interdepartmental working group set up by the Home Office published a report, Speaking up for Justice, which said, regarding the treatment of vulnerable or intimidated witnesses in the criminal justice system generally, that,
  the offence of rape itself—
  so rape victims were then considered to be vulnerable—
  is often a traumatic experience for the victim, who is likely to need to be treated with care and sensitivity.
  I should not have thought it necessary to read that, but I have done so.
  I shall also refer to another source which I have just discovered in support of the amendment—the comments made by the noble and learned Lord, Lord Scott of Foscote, chairman of the European
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  Union committee that was considering the EU directive on legal aid and assistance. On 21 April he said that the article before the committee,
  has the effect that Member States may decide to provide free legal assistance only for the appeal procedure.
  He was referring to immigration and asylum cases, so I have begun to realise why the Government withdrew legal aid from this class of cases at the end of March. The noble and learned Lord continued:
  The initial decision-taking process is highly important in getting the correct result in these cases because the asylum seeker in a strange country that he has come to, often not speaking the language of the country, does not know what he needs to say in order to get his case properly considered and in terms of getting a correct result. To underwrite a system under which there is going to be no legal aid at that critical fact-finding stage of the process seems to me to be quite wrong.
  No one in any previous debate on similar amendments has advanced the proposition that such advice was not needed in these limited cases.
  I have consulted a number of adjudicators and senior personnel—including, on the one hand, legal representatives and, on the other hand, those who have to sit on asylum appeals. Everyone engaged in the system believes that there would be a saving of cost and time and an overall increase in effectiveness if the categories of persons mentioned in the amendment could have legal representation at the initial substantive interview. The simple reason is that the interview is the rock on which everything subsequently is built. The asylum officer's decision is made on the basis of that interview. In so far as it is inadequate, the chances of appeal will be greater and the appeals will be extended with extra costs for all.
  Clause 2 creates criminal offences for asylum applicants who do not act as required under Clause 2 at the asylum interview. Thus we have a new position that adds to the already strong case for allowing legal representation for asylum interviews in the three cases specified in my amendment. If the Government continue to say that there have been bad cases of poor representation by legal representatives in the field—and I hope that they will not—all I can say is that it is a major objective of the Legal Services Commission to rectify that state of affairs.
  In response to this amendment on 27 April the noble Baroness, Lady Scotland, said,
  The Government have chosen to go for excellence and proper representation at a time when that representation makes a difference. [Official Report, 27/4/04; col. 756.]
  It makes a difference in such cases. Justice points clearly in the direction of allowing the amendments and I hope that at this stage the Government will agree to them so that we can have a more effective, efficient and just system. I beg to move.
  Lord Clinton-Davis: My Lords, I rise to support in principle the remarks of the noble Lord, Lord Phillips of Sudbury. I do not expect my noble friend to accept the amendment but I would like him to outline the

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  procedure. I have been much persuaded by what the noble Lord said. In each of paragraphs (a), (b) and (c), the people involved are essentially vulnerable. The Government have nothing to fear from approaching the issue with an open mind.
  As the noble Lord, Lord Phillips, said, the initial interview is vital. As has been acknowledged, it does not always come up to scratch. More pity for that. The case for applying legal aid to such people in the initial interview is made out. I agree that there will be a saving of costs and time. While I do not think that my noble friend will accept what has been said, I hope that he will be benign in welcoming the arguments in principle. In my view, the noble Lord, Lord Phillips, argued unassailably.
  Baroness Anelay of St Johns: My Lords, I echo some of the sentiments of the noble Lord, Lord Clinton-Davis. We need to be open minded about how we debate these matters. Our views on asylum and immigration applications must change over the years as our communities change and the way in which we manage migration changes.
  I have problems with some of the amendment's drafting. It begins with the word beloved of oppositions and hated by governments: "shall". It says,
  The Lord Chancellor shall make a direction.
  A direction is imposed on the Lord Chancellor: whatever he does he must pay his money on particular cases and say that there will be legal aid.
  The Minister knows that I use "shall" in amendments on a number of occasions. Whenever I do, I always have at the back of my mind that if the amendment is not probing but concerns a matter I wish to press, anything that I provide in the amendment must be so obviously necessary to all noble Lords that they would stand on their heads if it did not happen.
  I do not think that this amendment can justify a "shall", but it justifies proper considered debate. particularly as we have discussed the issue of whether rape should be included in the list on other Bills. I know that there has been a division of opinion over many years. I am minded of situations in the Congo or in Darfur where rape is an everyday fear, not necessarily because the Government in place are carrying out rape but because they are unable to protect their citizens from rape at the hands of armed militia.
  There is a reasonable fear of rape, torture or suffering serious physical harm in too many countries throughout the world. The question is whether our Lord Chancellor has imposed on him the duty to pay legal aid when someone comes to this country to seek either asylum or immigration and claims that he has suffered what is unacceptable.
  I agree with the noble Lord, Lord Phillips of Sudbury, that for anyone who has suffered under paragraphs (a) or (b), or has reason to believe that he might under paragraph (c), it is unacceptable to him,
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  but should it then trigger automatic legal aid for the substantive first interview, as the noble Lord said, for immigration and asylum? That is when it becomes more difficult, because nowhere does the new clause say that the suffering the person has endured is as a victim of a crime rooted in political persecution.
  If one intended to vote on the amendment and first to take it apart, one then could ask, "What if I were involved in drug running in another country—Afghanistan or wherever around the world— and I upset my drug running compatriots? Should I, because I have a reasonable fear of being bumped off by them, be able to come here and expect automatically to receive legal aid in a claim for asylum?".
  I take an extreme example, but it is simply to show why it was right for the noble Lord, Lord Phillips of Sudbury, to table the amendment to make us keep an open mind and to take forward the debate, but why it would be wrong for the amendment to go in the Bill. I know that what I am saying will be controversial to some members of my party, but the issues raised must not be allowed to go away. We have a responsibility in our community for looking after people who seek refuge here and we need to keep those matters under consideration.
  Lord Filkin: My Lords, the amendment, which the noble Lord, Lord Phillips of Sudbury, has tabled not for the first time on the Bill, seeks to include a number of additional categories in the exceptions listed in the accompanying directive to the Community Legal Service (Scope) Regulations 2004. The essential thrust of the regulations is, as the noble Baroness, Lady Anelay, said, to place an obligation on the state to provide funding for the attendance of a lawyer and an independent interpreter at substantive IND asylum interviews.
  The issues have recently been before us. While the regulations were made under the Access to Justice Act 1999, it was only on 31 March that the House passed them. Although the noble Lord, Lord Phillips of Sudbury, has been redoubtable in arguing that the regulations are wrong, it is a fact that this House passed them only a matter of weeks ago. Therefore, in procedural terms, the noble Lord is now saying to the House that we should use primary legislation to reverse something that this House passed in secondary legislation only a matter of weeks ago. He is perfectly entitled to do so; I simply mark to the House that it seems slightly strange to go back over this process so soon.
  4 p.m.
  That of course is not a sufficient answer to the challenge that the noble Lord has made, and perhaps I may explain, first, why we introduced the regulations. The previous practice was that funding was available for a representative—usually an agent or an outdoor clerk working for a legally aided organisation—to sit in on the asylum interview. As I and other Ministers said on previous occasions, we could see little evidence that that

  681
  added significant value to the process. In most cases, the role played by the person accompanying the asylum seeker was simply that of a note-taker as he was not meant to intervene during the interview. In addition, the interviews are non-adversarial, fact-finding processes, and remedies are available to the client to deal with discrepancies or disputes after the interview.
  When we passed the order a matter of weeks ago, we also explained that there were important exceptions where it was right that an applicant's representative should be present at the interview. We signalled those as cases involving unaccompanied minors, applicants going through fast-track initial decision processes, and those suffering from a recognised and verifiable mental incapacity, which would make it impractical to undertake an interview without support. It also includes applicants interviewed at a police station and those who pose a threat to national security.
  My noble friend Lord Clinton-Davis, in his usual courteous but challenging way, said that surely such a move would make a saving. I do not believe that that is the case. The amendment includes not only people who claim that they have been torture or rape victims (our sympathy must go out to them) or those who are seriously physically harmed (again, wherever that is true, one's sympathy would be with them) but also those who had a reasonable fear of being tortured, raped or so harmed. I suggest that that includes the vast majority of people who apply for asylum in this country—for obvious reasons because that is the central thrust of the asylum international obligations.
  Therefore, in practice, the effect of the amendment would be that in virtually all cases a lawyer and a second interpreter would be present at the interview. That would not merely be a backward step; it would take us further backwards towards spending relatively scarce legal aid money in areas where there is not a good case to do so.
  Nevertheless, that still leaves the issue, about which the House should be concerned, of whether people who have experienced rape or torture or who have a genuine fear will still receive a fair hearing. My first point is that it may be desirable for some clients to bring a companion to the interview for medical or emotional support. That does not mean a lawyer; it means someone who will give them support. But it is clear that that is the existing IND practice in such cases, and there is absolutely no impediment to people bringing someone along in those circumstances.
  The IND protocol confirms that any other person may be allowed to accompany an applicant to an interview at the discretion of the interviewing officers. The IND policy sets out clearly that that is how applicants who are particularly vulnerable—those whom we are talking about—should be treated.
  Again, in process terms, what is needed is not a lawyer who sits saying nothing during an asylum interview but one who tries to ensure that a vulnerable
  682
  applicant puts before the IND interviewing officer all the written representations with supporting medical evidence to support and bolster his case for why he has been tortured or why he has a genuine fear of torture. It is far better if lawyers spend their time preparing and presenting a case to put to the IND interviewer rather than sitting there saying nothing but taking notes.
  I also draw attention to the Medical Foundation for the Care of Victims of Torture. I am informed that when that organisation interviews alleged victims of torture, it insists that a legal representative should not be present.
  I turn to the argument that the state should fund not one interpreter but two. But what do we do if they disagree with each other? Do we fund three interpreters? That seems to me to be—how can I put this politely?—unnecessary.
  A point was raised about interviewing people who have a genuine fear or who have genuinely experienced torture or rape. We must do our utmost to ensure that that is done with sensitivity and care, but this is not the way to do it.
  As a crumb of comfort to the noble Lord, Lord Phillips, I draw his attention to our previous debate on these regulations. I think that on that occasion I dealt with this matter, and I was probed on what was meant by "mental incapacity". We define it as a person lacking capacity if, at a material time, he is unable to make a decision for himself in relation to the matter because of the impairment of, or disturbance to, the functioning of the mind or brain. In other words, if, as part of his professional duties, the solicitor preparing the case for the asylum applicant genuinely thinks that, because of his mental impairment, that person is incapable of making his case, the regulations already allow him an opportunity to do so.
  For those reasons, while I respect the vigour with which the noble Lord, Lord Phillips, put his case, I do not feel that we would be wise to accept it.
  Lord Phillips of Sudbury: My Lords, I am grateful for the Minister's reply. He said that a legal representative would provide little added value. But that was answered by the quotation that I gave from the noble Baroness, Lady Scotland, which signals a new regime and one which, by April next year, will see legal representatives accredited by the Legal Services Commission.
  When the Minister said that there would be no saving, he gave no evidence for that proposition. I have discussed this matter with several adjudicators and senior people in the service, and they all say that they are bedevilled by unnecessary appeals and lengthy timescales because of crap first interviews.
  The next point made by the Minister was that the majority of claimants would fall within the exceptions. No evidence is adduced and that argument has not been adduced at previous stages of the Bill.

  683
  I was very disappointed with the remarks of the noble Baroness, Lady Anelay. It was the noble Lord, Lord Kingsland, the Front Bench spokesman for the Conservatives, who, when we considered the statutory instrument on 31 March, made clear that if the Government persisted with their proposal, this amendment would be brought forward in this Bill to reverse the withdrawal of legal aid. I am most disappointed that today the Conservatives are not supporting what they supported then. If they had unease about my drafting, which has not altered over the three stages of the Bill, it would have been helpful to have heard about it earlier.
  Baroness Anelay of St Johns: My Lords, perhaps I may intervene as I have been named. On two occasions at the end of last week, I e-mailed the noble Lord with my comments. Unfortunately, on both occasions I received the message "system unavailable". I do not know whether the noble Lord's e-mail address has changed or whether the PDVN has messed things up, but I did make an attempt to notify him of my concerns.
  Lord Phillips of Sudbury: My Lords, I am grateful to the noble Baroness, but I have a pigeon hole and a telephone.
  I believe that having a friend present at the interview is wholly inadequate when one considers the risk in which this category of persons is placed. No reference was made to the observation of the noble and learned Lord, Lord Scott, or to the imposition of criminal sanctions under Clause 2 of the Bill. I add that the Legal Services Commission does not even have discretion to allow legal aid in a particular case. For all those reasons, I wish to test the opinion of the House.
  4.8 p.m.
  On Question, Whether the said amendment (No. 4) shall be agreed to?
  Their Lordships divided: Contents, 66; Not-Contents, 132.

  Division No. 1

  CONTENTS

  Ackner, L.

  Hooson, L.

  Addington, L.

  Howe of Idlicote, B.

  Alton of Liverpool, L.

  Hylton, L.

  Avebury, L.

  Joffe, L.

  Barker, B.

  Laidlaw, L.

  Beaumont of Whitley,L.

  Lester of Herne Hill, L.

  Bradshaw, L.

  Linldater of Butterstone, B.

  Chan, L.

  Listowel, E.

  Chester, Bp.

  McCluskey, L.

  Colville of Culross, V.

  Mackie of Benshie, L.

  Dahrendorf, L.

  McNally, L.

  Dholakia, L.

  Maddock, B.

  Donaldson of Lymington, L.

  Mar and Kellie, E.

  Ezra, L.

  Masham of Ilton, B.

  Falkland, V.

  Methuen, L.

  Falkner of Margravine, B.

  Michie of Gallanach. B.

  Fearn, L.

  Miller of Chilthorne Domer, B.

  Garden, L.

  Moore of Wolvercote, L.

  Goodhart, L.

  Northover, B.

  684

  Oakeshott of Seagrove Bay, L.

  Smith of Clifton, L.

  Phillips of Sudbury, L.

  Soulsby of Swaflham Prior, L.

  Portsmouth, Bp.

  Steel of Aikwood, L.

  Redesdale, L.

  Stern, B.

  Renton of Mount Harry, L.

  Stoddart of Swindon, L.

  Richardson of Calow, B.

  Taverne, L.

  Roberts of Llandudno, L.

  Thomas of Gresford, L.

  Rodgers of Quarry Bank, L.

  Thomas of Walliswood, B.

  Roper, L. [ Teller]

  Thomson of Monifieth, L.

  Russell-Johnston, L.

  Tordoff L.

  Sandberg, L.

  Wallace of Saltaire, L.

  Sandwich, E.

  Walmsley, B.

  Sharp of Guildford, B.

  Warnock, B.

  Shutt of Greetland. L. [Teller]

  Watson of Richmond, L.

  NOT-CONTENTS

  Acton, L.

  Graham of Edmonton, L.

  Ahmed, L.

  Grocott, L. [Teller]

  Alli, L.

  Hannay of Chiswick, L.

  Amos, B. (Lord President of the Council)

  Harris of Haringey, L.

  Harrison, L.

  Ampthill, L.

  Hart of Chilton, L.

  Andrews, B.

  Haskel, L.

  Archer of Sandwell, L.

  Henig, B.

  Astor, V.

  Hollis of Heigham, B.

  Bach, L.

  Howie of Troon, L.

  Bassam of Brighton, L.

  Hughes of Woodside, L.

  Berkeley, L.

  Hunt of Kings Heath, L.

  Bhatia, L.

  Irvine of Lairg, L.

  Bhattacharyya, L.

  Jones, L.

  Billingham, B.

  King of West Bromwich, L.

  Blackstone, B.

  Kirkhill, L.

  Borne, L.

  Laird, L.

  Bragg, L.

  Laming, L.

  Brooke of Alverthorpe, L.

  Lipsey, L.

  Brookman, L.

  Lockwood, B.

  Burlison, L.

  Lofthouse of Pontefract, L.

  Campbell-Savours, L.

  McIntosh of Haringey, L.

  Carter, L.

  McIntosh of Hudnall, B.

  Carter of Coles, L.

  MacKenzie of Culkein, L.

  Chorley, L.

  Mackenzie of Framwellgate, L.

  Christopher, L.

  Mar, C.

  Clark of Windermere, L.

  Marlesford, L.

  Clarke of Hampstead, L.

  Marsh, L.

  Clinton-Davis, L.

  Mason of Barnsley, L.

  Cohen of Pimlico, B.

  Massey of Darwen, B.

  Corbett of Castle Vale, L.

  Merlyn-Rees, L.

  Craig of Radley, L.

  Mishcon, L.

  Crawley, B.

  Molyneaux of Killead, L.

  David, B.

  Morgan of Drefelin, B.

  Davies of Coity, L.

  Morris of Manchester, L.

  Davies of Oldham, L. [Teller]

  Patel, L.

  Dean of Thornton-le-Fylde, B.

  Patel of Blackburn, L.

  Desai, L.

  Peston, L.

  Dixon, L.

  Pitkeathley, B.

  Donoughue, L.

  Plant of Highfield, L.

  Drayson, L.

  Ponsonby of Shulbrede, L.

  Dubs, L.

  Prys-Davies, L.

  Eatwell, L.

  Radice, L.

  Elder, L.

  Ramsay of Cartvale, B.

  Evans of Parkside, L.

  Randall of St. Budeaux, L.

  Evans of Temple Guiting, L.

  Rendell of Babergh. B.

  Falconer of Thoroton, L. (Lord Chancellor)

  Richard. L.

  Roll of Ipsden, L.

  Farrington of Ribbleton, B.

  Rooker, L.

  Faulkner of Worcester, L.

  Rosser, L.

  Filkin, L.

  St. John of Bletso, L.

  Fitt, L.

  Saltoun of Abernethy, Ly.

  Fyfe of Fairfield, L.

  Sheldon, L.

  Gale, B.

  Simon, V.

  Gavron, L.

  Slim, V.

  Gibson of Market Rasen, B.

  Snape, L.

  Gordon of Strathblane, L.,

  Strabolgi, L.

  Goudie, B.

  Sutherland of Houndwood, L.

  Gould of Potternewton, B.

  Taylor of Blackburn, L.

  685

  Temple-Morris, L.

  Warner, L.

  Triesman, L.

  Watson of Invergowrie, L.

  Truscott, L.

  Weatherill, L.

  Tunnicliffe, L.

  Whitaker, B.

  Turnberg, L.

  Whitty, L.

  Turner of Camden, B.

  Wilkins, B.

  Wall of New Barnet, B.

  Williams of Elvel, L.

  Walpole, L.

  Williamson of Horton, L.

  Resolved in the negative, and amendment disagreed to accordingly.
  4.18 p.m.
  Clause 9 [Failed asylum seekers: withdrawal of support]:
  Baroness Park of Monmouthmoved Amendment No. 5:
  Page 10, line 33, at end insert—
  "( ) The Secretary of State shall, before commencement of this section, publish regulations under paragraph 2(1)(d) of Schedule 3 to the Nationality, Immigration and Asylum Act 2002 (c. 41) (withholding and withdrawal of support) disapplying paragraph 1 of that Schedule in cases of citizens of Zimbabwe to whom that paragraph would otherwise apply by virtue of the provisions of that Schedule other than paragraphs 4, 5 and 7.
  The noble Baroness said: My Lords, in the debate on Report on 18 May, the noble Lord, Lord Bassam of Brighton, said (at col. 711 of the Official Report) that the Government's position was that it would be inappropriate to return Zimbabwean asylum seekers to Zimbabwe at this time. Earlier, he said that should an appeal fail for that individual,
  "return to Zimbabwe would be safe".—[Official Report, 18/5/04; col. 710.]
  I refer the Minister to the debate on Zimbabwe in another place on 1 July for a true picture of how dangerous life can be in Zimbabwe today for anyone returning after having sought asylum in the UK. We know of at least one such case where a man was seized by the CIO as he got off the aeroplane having been identified by another Zimbabwean whom he had known while seeking asylum who was a CIO spy.
  I was glad to see in Hansard of 28 June that the noble Lord, Lord Rooker, said that,
  "we are committed to offering support under Section 4 to those who cannot maintain themselves and who are not in a position to leave the UK immediately."—[Official Report, 28/6/04; col. 19.]
  How can that be squared with the present requirement that those Zimbabweans who have appealed and failed must, after NASS has withdrawn both accommodation and support, apply for voluntary repatriation and must leave the UK at once? I recognise that there cannot be a blanket provision simply on the grounds of their nationality to exempt all Zimbabwean asylum seekers, but I hope that the noble Lord will recognise that in a number of cases the quality of both the legal advice and the country information on which decisions to refuse asylum have been based in the past have been seriously flawed. According to the Medical Foundation for the Care of Victims of Torture, some well founded claims have been arbitrarily disbelieved.
  686
  We are told—I am very glad to hear it—that things will change. That is why I believe it to be necessary in the Bill to provide that Zimbabwean asylum seekers shall be treated as a special case so that the Secretary of State can be expected to exercise his right to offer asylum, whether on the ground of discretionary relief or humanitarian protection. My amendment will, I hope, have that effect. It seems to me that the clear intent of the original Schedule 2(1)(d) and 2(2) is precisely to enable the Secretary of State to disapply the withdrawal of support in certain circumstances.
  There are cogent reasons why the Zimbabwean asylum seekers, like those from Iraq, should be recognised as a special case, warranting special treatment. There is no doubt that Zimbabwe is a country where violence, torture and death are endemic threats for those who are perceived as threats to the regime. Those who have sought asylum here are, for the most part, people with professional qualifications—teachers, doctors, engineers and computer experts—and some brave political opponents of the regime, who come here, often with great difficulty, believing that Britain, with its long history of giving refuge, will take them in, allow them to maintain their skills and to be useful to the country that has taken them in. They are a vital part of the professional infrastructure that Zimbabwe once had and will need again.
  It is not their fault that they are not allowed to work. I understand that they may not be eligible to do community work either. They cannot go home and here they face destitution under the present law, or they must work illegally. A headmaster is working as a cleaner and a senior civil servant is working as a bus driver. We are talking about a limited number of people, since the visa regime of 2002 was imposed, but they should be a significant group when Zimbabwe has to be rebuilt.
  On 1 July the Secretary of State for Foreign and Commonwealth Affairs, listing what we have done for Zimbabwe, said:
  "We have given asylum to those persecuted by Mugabe and allowed others at risk to remain in the United Kingdom for now."—[Official Report, Commons, 1/7/04; col. 456.]
  Later he included that in a list of 10 actions designed, he said, to keep Zimbabweans alive. He did not mention that that meant barely alive and in a state of destitution which they cannot remedy because, despite their own wish to do so, they are not allowed to work. Later he spoke of our readiness to help to rebuild Zimbabwe. These are some of the very people who should play a major part in that.
  As it is, once they are evicted from their accommodation they have no address and dare not exist. I know a charity which offered to help some particularly tragic cases, but it could not do so because the people had vanished, at best to sleep on some anonymous floor—genuine asylum seekers do not have mobile phones. It is unworthy of our country that this should happen to courageous men and women who trusted us. When we are told that the Home Office works closely with other departments and when joined-up thinking is the watch word of the Government, I do not understand how the Secretary of

  687
  State for Foreign and Commonwealth Affairs can speak as he did, I am sure in good faith, while the Home Secretary is not prepared to exercise the discretionary right, which a House of Commons committee has urged him to do. We are not talking of thousands of people, but of a significant and potentially valuable group who will be only too glad to serve the country in some way but are instead being driven into destitution.
  HMG are obsessed with their desire not to play into Mugabe's hands by enabling him to say that we are acting like a former colonial power. They need to remember that the people of Zimbabwe do not think like that. They expect us to behave with decency and humanity and to help them in one of the few areas where we can do so. They look to us to remember them. They fear being forgotten and their instinct has been to turn for help to a country with which they have many natural links through common, educational, sporting and legal systems for a start.
  How do HMG think that the people of Zimbabwe will feel when the present asylum seekers return home to rebuild the country and their experience of us has been enforced destitution? I very much hope that the Government will be able to accept my amendment. It is very small and is designed to meet a specific and unique situation. All that is needed is for the Secretary of State to exercise his power to grant a temporary right to remain in the UK with its concomitant rights to accommodation and support for a relatively small number of people, asylum seekers—not of course the crooks of whom we have recently heard—in a situation which is finite. I beg to move.
  Lord Avebury: My Lords, when the blanket suspension of the removal of Zimbabweans was introduced, it was largely at the behest of my noble friend Lady Williams of Crosby, ably backed by the noble Baroness, Lady Park. It was right that that was done at that time. But I am not sure that setting it in stone, as the noble Baroness advocates, is the right solution and I shall explain why.
  Certainly, there are Zimbabweans going through the system and coming out at the other end whom one considers should have received asylum and did not, when by all accounts they had extremely good reasons for fearing persecution. The noble Baroness has mentioned some of the examples about which we all know and which have come to us via the medical foundation and so on. On the Friday before last I met one such person at a book launch of Andrew Meldrum's autobiographical account of the situation in Zimbabwe. He was a recognised member of the MDC, who had played a prominent part in its activities and yet somehow the asylum system had failed him.
  The Zimbabweans are the only nationality to whom this peculiar rule applies. When they reach the end of the process they are not forced to return, but they are encouraged to do so, as the noble Baroness has explained, at the expense of the IOM. We have ceased to have blanket suspensions for removals to particular countries. The noble Baroness mentioned Iraq which is one of the countries to which we are now returning
  688
  people, as are Somalia and Afghanistan. Although the conditions in Zimbabwe may be very dreadful, as I am sure they are for anyone who is in the least bit unpopular with the regime, and although matters may be getting worse, I am not at all sure that they are so uniquely dreadful that one would put Zimbabwean failed asylum seekers in a different category from those who come from Somalia, Afghanistan or Iraq.
  In correspondence with Home Office Ministers I have suggested that we take a more distinguishing approach to those who have been through the system. As the noble Baroness is aware, quite a few came as a result of the provision of false documentation and criminal activities by a certain organisation in Birmingham, which I understand is now under investigation by the police. It would be useful if the Minister could say something about the progress being made in trying to stamp out that organisation and dealing with the tens or hundreds of people—I do not know how many—who managed to get through the system as a result of those criminal activities. At the same time, I would be warmly in favour of reviewing the failures of some people who, on every possible ground, we believe should have received asylum and who are fully supported by the MDC, by the Zimbabwe Association and by other organisations that can vouch for them as bone fide refugees who suffered at the hands of Mugabe.
  I hope that the Minister, while not necessarily being able to accept the amendment as proposed by the noble Baroness—I am sure she would not press it to a Division—may be able to say something about a more discriminating approach to the Zimbabweans. Although the noble Baroness says that the numbers are not very large, I worked out that from the beginning of 2002 onwards there might have been a couple of thousand people who had been all the way through the system and had come out the other end but were living on thin air because they were not supported by NASS or in any other way. Only a handful of those had accepted the assistance of IOM to go back to Zimbabwe—I think it was 47 in 2003. We cannot just let a couple of thousand people rot. Many of them, as the noble Baroness, Lady Park, has said, would have a useful contribution to make in our own society as doctors and so on.
  4.30 p.m.
  I appeal to the Minister to treat Zimbabweans in a special way in one sense: to allow them to have a review where there is solid evidence to show that a mistake was made. That is either because, as the noble Baroness said, they did not have good representation, or because there was very inadequate country information at one time. But we should not have a blanket policy of not repatriating anybody to Zimbabwe, because we know there are many people here who we do not want and who are not legitimate refugees but who obtained their status by false pretences.
  Lord Rooker: My Lords, I say at the outset, by way of a conditional apology, that I do not have any

  689
  information about the current police enquiries. I suspect, however, that if I did, it would be quite inappropriate to set it out on the Floor of the House at the moment because the enquiries are ongoing.
  I do not have any major good news for noble Lords who have raised this issue; I accept this is not the first time that it has been raised. There is, I hope, an acceptance of what I said at an earlier stage: to make sure our language is correct. I think both the noble Baroness, Lady Park, and the noble Lord, Lord Avebury, used the term "failed asylum seekers", but were not referring to the people we are referring to here every time. The effect of the amendment would be that support could not be withdrawn from failed asylum-seeking families under Clause 9, or where they had failed to comply with a removal direction. We discussed the issues involved on Report, and I suspect it was discussed at earlier stages as well. The Government are not currently enforcing the return of failed asylum seekers, other than for people with serious criminal convictions and others whose presence is not conducive to the public good. That is a general statement of policy, which the noble Lord, Lord Avebury, would agree with: not having a blanket ban.
  We cannot accept the amendment, as we do not believe it is right that families from Zimbabwe should, as a matter of course, continue to receive support indefinitely. As the noble Lord said, the suspension of removals of failed asylum seekers to Zimbabwe, announced in January 2002—to a large extent in this House, as I had day-to-day responsibility for the matter at the time—was in response to concerns about the then serious deterioration of the situation in Zimbabwe, in the build-up to the presidential election held in March of that year. We did not, at that time, regard it as unsafe to return failed asylum seekers to Zimbabwe, but in view of the rapidly changing conditions we considered it would be appropriate not to enforce the returns.
  The Government's position is as it has been since January 2002: each asylum claim—and, indeed, human rights claims as well—made by a Zimbabwean national will be considered on its individual merits in accordance with our international obligations under the 1951 convention and, of course, the European Convention on Human Rights. Each application is considered against the background of the latest available country information, including that obtained from and through the Foreign and Commonwealth Office.
  There is no difference between the government departments in the understanding of conditions in Zimbabwe. The Home Office's Country Information and Policy Unit produces country information materials which are used as the background against which the asylum applications are considered. As I have said, the unit maintains close and regular contact with the Foreign and Commonwealth Office, and consults it about the country information materials prior to their publication.
  We do, of course, recognise that conditions in Zimbabwe are such that there are individuals who are able to demonstrate a need for international protection. Where they meet the definition of a refugee, under the
  690
  1951 UN Convention on Refugees, asylum is granted. There may also be individuals whose circumstances make them particularly vulnerable, and who would engage our obligations under the European Convention on Human Rights. Where this is the case, these individuals will be granted humanitarian protection or discretionary leave.
  If you come to the end of the line and an application is refused, there is a right of appeal to the independent authorities. Should the claim be refused, and any appeal be unsuccessful, that means that, for that individual, return to Zimbabwe would be safe. That is why we consider it reasonable to expect an individual in that position—where there is no successful claim under asylum or human rights—to leave voluntarily instead of being supported indefinitely at the taxpayers' expense.
  It is worth making a note in respect of the voluntary assisted returns and reintegration programme operated by the International Organisation for Migration. It is open to all failed asylum-seeking families to apply to the International Organization for Migration to take part in this programme, and we would expect families to take up the opportunity to make a return home. People returning under the programme are offered reintegration assistance. An application to the International Organisation for Migration would clearly be a practical way for a family to demonstrate that they were seeking to leave voluntarily. Zimbabwe nationals are in fact leaving in a voluntary manner under this programme. It is not as though people are not returning on a voluntary basis under the agreed programme.
  Lord Avebury: My Lords, can the Minister say how many are involved? I have a figure from the IOM of 47 people who had accepted their assistance throughout 2003. Have there been any more since the beginning of 2004?
  Lord Rooker: My Lords, I shall get the latest figure. I am not making a point about the numbers. The point is that it is happening. I merely have a figure for the number of applications for refugee status. In terms of those leaving, if there is an up-to-date figure for the current year, I shall get it. If I cannot obtain it before I sit down, I shall give it in a later debate.
  We already promote the assisted returns programme through a variety of means, and have discussions with non-governmental organisations such as the Refugee Council and the International Organisation for Migration. Information is available at reporting centres and in letters sent at various stages of the asylum process. Our view remains that, although it would be safe for failed asylum seekers to return voluntarily to Zimbabwe, in the wider context of the Government's position on Zimbabwe it would be inappropriate to return them forcibly at this time.
  We will, of course, assess every case on its individual merits before a decision is made to withdraw support. I emphasise that the Secretary of State will not certify under Clause 9, except where a family is failing to take reasonable steps to leave the UK or place itself in a

  691
  position where it can do so, and has no reasonable excuse for its failure to do so. That is the current position on Zimbabwe. That is not a Home Office position, or a Foreign Office position. It is the Government position. The departments do not disagree with the policy I have enunciated in answer to this amendment.
  Baroness Park of Monmouth: My Lords, I have listened carefully to the Minister. I find it extraordinarily difficult to understand how it can be right to consign people who have made an assessment for themselves that it would be dangerous to return—an assessment which would be supported by many people—to destitution.
  I would have liked to hear more about the possibility raised by the noble Lord, Lord Avebury, of the Secretary of State being prepared to consult, or receive advice and recommendations from, skilful and well informed people, who would perhaps be able to make the case better when it has been badly made, as many of them have done in the past. All I am asking is for the Secretary of State to use his powers. As I feel very strongly about it, I wish to test the opinion of the House.
  4.40 p.m.
  On Question, Whether the said amendment (No. 5) shall be agreed to?
  Their Lordships divided: Contents, 35; Not-Contents, 123.

  Division No. 2

  CONTENTS

  Ackner, L.

  Joffe, L.

  Alton of Liverpool, L.

  Lester of Herne Hill, L.

  Beaumont of Whitley, L.

  Mackay of Clashfern, L.

  Bledisloe, V.

  Marlesford, L.

  Carnegy of Lour, B.

  Molyneaux of Killead, L.

  Chorley, L.

  Monson, L.

  Courtown, E.

  Moore of Wolvercote, L.

  Craig of Radley, L.

  Norton of Louth, L. [Teller]

  Park of Monmouth, B. [Teller]

  Dholakia, L.

  Peyton of Yeovil, L.

  Donaldson of Lymington, L.

  St. John of Blets, L.

  Elton, L.

  Saltoun of Abernethy, Ly.

  Falkland, V.

  Sandwich, E.

  Falkner of Margravine, B.

  Selsdon, L.

  Feldman, L.

  Taverne, L.

  Fookes, B.

  Thomson of Monifieth, L.

  Hooson, L.

  Walton of Detchant, L.

  Hylton, L.

  Weatherill, L.

  NOT-CONTENTS

  Acton, L.

  Blackstone, B.

  Ahmed, L.

  Borne, L.

  Alli, L.

  Bragg, L.

  Amos, B. (Lord President of the Council)

  Brennan, L.

  Brooke of Alverthorpe, L.

  Andrews, B.

  Brookman, L.

  Archer of Sandwell, L.

  Brooks of Tremorfa, L.

  Ashton of Upholland, B.

  Burlison, L.

  Bach, L.

  Campbell-Savours, L.

  Bassam of Brighton, L.

  Carter, L.

  Berkeley, L.

  Carter of Coles, L.

  Bhattacharyya, L.

  Christopher, L.

  Billingham, B.

  Clark of Windermere, L.

  692

  Clarke of Hampstead, L.

  Lofthouse of Pontefract, L.

  Clinton-Davis, L.

  McIntosh of Haringey, L.

  Cohen of Pimlico, B.

  McIntosh of Hudnall, B.

  Corbett of Castle Vale, L.

  MacKenzie of Culkein, L.

  Crawley, B.

  Mackenzie of Framwellgate, L.

  David, B.

  Marsh, L.

  Davies of Coity, L.

  Mason of Barnsley, L.

  Davies of Oldham, L. [Teller]

  Massey of Darwen, B.

  Dean of Thornton-le-Fylde. B.

  Merlyn-Rees, L.

  Desai, L.

  Mishcon, L.

  Dixon, L.

  Morgan of Drefelin. B.

  Donoughue, L.

  Morris of Manchester, L.

  Drayson, L.

  Nicol, B.

  Dubs, L.

  Orme, L.

  Elder, L.

  Pael, L.

  Evans of Parkside, L.

  Patel of Blackburn, L.

  Evans of Temple Guiting, L.

  Paul, L.

  Falconer of Thoroton, L. (Lord Chancellor)

  Pitkeathley, B.

  Plant of Highfield, L.

  Farrington of Ribbleton, B.

  Ponsonby of Shulbrede, L.

  Faulkner of Worcester, L.

  Prys-Davies, L.

  Filkin, L.

  uttnam, L.

  Fyfe of Fairfield, L.

  Radice, L.

  Gale, B.

  Ramsay of Cartvale, B.

  Gavron, L.

  Randall of St. Budeaux, L.

  Gibson of Market Rasen, B.

  Rendell of Babergh, B.

  Gordon of Strathblane, L.

  Richard, L.

  Goudie, B.

  Rooker, L.

  Gould of Potternewton, B.

  Rosser, L.

  Graham of Edmonton, L.

  Sainsbury of Turville, L.

  Grocott, L. [Teller]

  Sawyer, L.

  Hannay of Chiswick, L.

  Sheldon, L.

  Harris of Haringey, L.

  Simon, V.

  Harrison, L.

  Snape, L.

  Hart of Chilton, L.

  Haskel, L.

  Strabolgi, L.

  Henig, B.

  Symons of Vernham Dean, B

  Hollis of Heigham, B.

  Taylor of Blackburn, L.

  Howie of Troon, L.

  Temple Moths, L.

  Hughes of Woodside, L.

  Triesman, L.

  Hunt of Kings Heath, L.

  Truscott, L.

  Irvine of Lairg, L.

  Tunnicliffe, L.

  Janner of Braunstone, L.

  Turnberg, L.

  Jay of Paddington, B.

  Turner of Camden, B.

  Jones, L.

  Wall of New Barnet, B.

  King of West Bromwich, L.

  Warner, L.

  Kirkhill, L.

  Watson of Invergowrie, L.

  Layard, L.

  Whitaker, B.

  Lipsey, L.

  Wilkins, B.

  Lockwood, B.

  Williams of Elvel, L.

  Resolved in the negative, and amendment disagreed to accordingly.
  4.52 p.m.
  Lord Avebury
  Page 11, line 16, at end insert—
  5 p.m.
  The Lord Bishop of Portsmouth: My Lords, I should like to speak to the amendments which are tabled in my name as well. Amendment No. 6 is second-best, while Amendment No. 7 is what we really want. I am sorry to have missed debates on this matter at previous stages of the Bill, but I have followed them with keen interest, and I promise that I will be brief.
  I have frankly been disappointed that at every stage the Government have not seen fit to accept any amendments to the clause that would have provided increased protection for children. I remind your Lordships that at all stages the aim of those who oppose this clause has been to ensure that children are best protected and that their best interests are safeguarded.
  The clause is not about voluntary departure. It envisages the separation of children from their families. That, it seems to me, is fundamentally wrong, a view shared by my colleagues on these Benches. It is something of an irony that, in the context of the Government bringing forward the Children Bill, this loophole is not closed.
  I accept the Government's aspirations that people will decide to co-operate voluntarily with removal. At all stages of the Bill, Ministers have sought to assure this House and another place that it is their hope that people will co-operate. Ministers have argued that if they do not, parents will be putting their children at risk by their actions. But it simply cannot be acceptable for this House to pass legislation on the basis only of a leap of faith, in the hope that its worst effects will not be felt by children. It is not acceptable for the Government to argue that if children are affected, the fault lies with the parents. The Government, in my view, must take responsibility for their inadequate legislation.
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  In addressing your Lordships, I am grateful to the Children's Society and the Refugee Children's Consortium for their continued lobbying on this clause and their commitment to the rights and needs of refugee children. I hope very much that the Minister will be able to provide some further information and assurances that will help to allay some of their fears. If not, and were the opinion of the House to be tested, I fear that I would vote against the clause and invite other noble Lords to do the same.
  The Earl of Listowel: My Lords, I support both amendments, Amendment No. 7 being particularly desirable. I should like the Minister to say more about the consultation prior to the implementation of the clause—if it is implemented—on 1 September. I declare an interest as a member, several years ago, of a sponsored visit to Angola by UNICEF to examine the course of the journey of the refugee child. I should also like to take this opportunity to ask the Minister to convey my thanks to his colleague, the noble Baroness, Lady Scotland of Asthal, for her meeting with me in the past, her correspondence, the meetings she has arranged between officials and the Medical Foundation for the Care of Victims of Torture and the Refugee Children's Consortium. They have been very helpful indeed.
  A specific concern has been expressed by the Medical Foundation for the Care of Victims of Torture that vulnerable families would be caught by these provisions. A reassurance that there will be thorough consultation would be very helpful.
  The timing of the clause seems very strange. Given what the noble Lord, Lord Rooker, said earlier, it is admirable that there has been such a reduction in the number of applications for asylum. In a period of months, 80 per cent of asylum claims are processed within two months. That is a grand achievement on the part of the Government. Twice as many failed asylum claimants are now returned to their home country. Good progress is clearly being made. So is this the right time to introduce such a draconian measure, because draconian it certainly is? The clause envisages a situation in which children and families will be put into the street. The Government have made it quite clear that they are also prepared to accept children being taken into care as a result of the clause. This is a very serious matter for these families.
  We still do not know how many children are likely to be affected by this. Any further clarification about the numbers involved would he very welcome.
  I emphasise again that it would be so helpful to have from the Minister some reassurance that there will be thorough consultation before the implementation of the clause, if it is to be implemented. It has been made very clear in discussions on the Bill that the consultation prior to its being brought before Parliament was not adequate. One understands this—the Home Office has very serious responsibilities. It is often the case with Home Office Bills that there has not been the time to consult properly.

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  When we are dealing with children and families, no matter how irresponsible the parents may be, we have a special duty to consult and think very carefully about what guidance and regulations will determine the behaviour of immigration officers. I look forward to the Minister's response.
  Lord Rooker: My Lords, let me make it clear, for the avoidance of doubt —as people do take account of our debates in this place—that Clause 9 is headed:
  "Failed asylum seekers: withdrawal of support".

  The people we are talking about are failed asylum seekers. They have been through the whole process and have no other avenue open to them because their claim has failed. They have no right to remain in the country, at the taxpayers' expense. That is what we are dealing with, although it does not always appear like that when we use the necessary shorthand in our speeches dealing with individual cases.
  I should like to answer a point raised by the right reverend Prelate the Bishop of Portsmouth. He said that he had not been present at the debates but he had followed all the proceedings in detail. Well, he got one thing wrong. The Government have listened on this issue. We amended the Bill—in the Commons, true—to introduce a right of appeal to the asylum support adjudicator. It may have been a fault that the Bill was introduced without the right of appeal, and putting it in was the right thing to do. I want to make that point, because otherwise the folklore gets out that the Government have not been listening, are ramming it through Parliament and are not worried about children.
  The consequence would be an invitation for the very irresponsible parents to whom the noble Earl referred to run this country's immigration policy. That is what the implication is, if we do nothing about the situation. The noble Earl would not say that, and I would not expect him to. But the consequence is that notwithstanding the irresponsibility of the parents, we have to look after the children. We would be saying to those irresponsible parents, "You run the country's immigration policy. If you have failed in your asylum case and you decide not to co-operate and not to return voluntarily, it does not matter. Because of the overwhelming needs of the children, whom you are using as a shield, you can stay for ever and the British taxpayer will pay for you". That is simply not acceptable.
  This is not an issue that has popped up out of nowhere. I realise that the Government never consult enough—I accept that and apologise for it. They do not introduce all the draft Bills that they should. However, the clause did not appear on a whim of the Home Secretary early this year or late last year, when the Bill was introduced. It is not as though such issues had not been discussed; we looked at the evidence and tried desperately to make a reasoned, proportionate response to the issues that arose at the time, and are with us now—to a lesser extent, I accept. But it is no reason to withdraw the clause and take away the idea
  698
  just because the numbers have gone down. They have done so partly as a result of the series of issues to which the noble Lord, Lord McNally, referred earlier.
  There are two issues involved: first, the prospect of ameliorating the clause through guidance; and, secondly, the proposal to leave the clause out, which is a matter of some principle that I know has been debated previously in the House. I assure noble Lords that detailed guidance will of course be published, but it will not be issued in the form of a statutory instrument of secondary legislation. That would not be the normal process in any event, although I realise that that is one way of securing a debate in this place.
  It is common practice for guidance of that nature to be placed on the website of the Immigration and Nationality Department. We will update the guidance as procedures develop and further issues arise. In that way, we can make sure that the procedures used are transparent. Therefore, we cannot accept the use of secondary legislation as proposed by the amendment, but there will certainly be guidance.
  It would be helpful if I indicated the type of information that would be included in such guidance. It will make clear, for example, that any decision to certify needs to be copied to the family's representative, if it has one, in line with the undertaking given during the passage of the Bill. It will make clear also that, if support is withdrawn, the local authority will be informed at that time. The guidance will also advise staff about the particular information they will need to ascertain where the family attends an interview. It will set out how staff can assess whether the family has taken reasonable steps or whether it has a reasonable excuse for not having done so.
  The noble Earl, Lord Listowel, and others have expressed concern that there may not be an adequate assessment of whether a withdrawal of support would breach the European Convention on Human Rights. The noble Lord, Lord Avebury, said much the same thing. We do not accept that. The individual circumstances will be assessed in each case. The guidance will set out the need to examine relevant information put forward by the family about their individual circumstances. That may include, for example, the age of the children and whether there are any special needs in particular cases. Of course, we are willing to receive comments at any time if there are particular concerns and we will assess whether those need to be reflected in the guidance that we issue.
  There has been considerable discussion about Clause 9. I realise that—to put it mildly—it is a highly sensitive issue. It has caused ferocious debate in both Houses. It is an issue on which we have had to take a difficult decision. That is why I said earlier that the clause was not produced on a whim over the course of a weekend. I recall the issue being discussed in the Home Office when I was a Minister there.
  Since the issue was discussed on Report, we have listened carefully to the concerns that have been put to us by the Medical Foundation for the Care of Victims of Torture and representatives from the Refugee Children's Consortium. We are very grateful for the

  699
  constructive approach that has been taken—notwithstanding the fundamental difference of opinion. There is no sense in trying to sugar-coat the issue.
  The clause is not designed to make families destitute. That is not our aim. The clause was never designed to take children into care and to split families. That was never its aim, whatever the original propaganda may have stated. However, we are making it clear that families affected by the clause do not have the option of remaining in the United Kingdom permanently. We have to make that clear, not hint at it by giving families the option of using the children as a shield and sending the wrong signals. That does not help them in any way whatever. We have to make it clear that their appeal against the asylum decision has been rejected. We are not talking about asylum seekers or refugees; we are talking about people who have made a claim for asylum and failed. We have to use that language and not pussy-foot around. Otherwise, we will send the wrong information and the wrong signals to those who are asylum seekers and those whose appeals have succeeded and who have become refugees because their status is different. We have to be absolutely clear about the status of the people to whom Clause 9 refers.
  5.15 p.m.
  Lord Hylton: My Lords, the Minister is no doubt trying to be helpful, but will he explain why it is that if a family whose application has failed is not willing to return voluntarily, the Government do not remove that family? Instead, they seem to prefer to leave such families here to starve and possibly to suffer separation.
  Lord Rooker: My Lords, I shall come to that question as I go through my notes. Without pussyfooting around, I want to make absolutely clear the status of the families that we are talking about. We know that forcibly removing families with children is extremely distressing. However, the question we must answer is whether, if nothing is done, the family should be entitled to indefinite support from the taxpayer regardless of its behaviour. That is the implication.
  We must face up to the reality of those families' position in the country. They are in the country illegally and will not be given permission to stay. Whatever hints may be given, that is the position. They are here illegally and will not be given permission to stay because they have gone through the appeal process. It is not in the children's best interests to remain for long periods in a country where they have no prospect of being allowed to stay permanently. It is quite wrong for the children to be used as a shield for a family that is behaving irresponsibly in taking no steps to leave or that has no reasonable grounds—that is, the caveats in the legislation—for not taking any steps.
  It may be that we do not agree that families should be encouraged to leave voluntarily, but I hope that we would all agree that in those circumstances, with no prospect of a permanent stay and all appeal rights
  700
  exhausted, that the families should be encouraged to leave the country voluntarily. If they are not, people are selling them a false prospectus. The detailed process, which includes the opportunity for interview and warning letters, makes it clear that that is what we want to achieve—that is, a voluntary leaving of the country—but we do not accept that it is enough simply to leave it at that.
  I do not need to emphasise again that we cannot physically remove a family without the appropriate travel documentation, which is why the clause is so important. If we are dealing with families which do not have the appropriate travel documentation and which want to remain here, the obvious question the family will ask is: "Why should we co-operate with removal, because if we don't, we can't be removed and we will be able to stay here, receiving cash and accommodation, indefinitely?" That is bound to be a question at the back of someone's mind. If it was not in the mind of the families, it would be in the mind of their advisers.
  Therefore, at some point, we have to draw a line and say, "The process is finished. Some action needs to be taken". People have to understand that they cannot just ignore our immigration and asylum laws—that is what is happening in these circumstances—and simply expect the British public to pay for them regardless. That is what has been happening and that is what we want to avoid.
  Unless we address these issues, they undermine our efforts to develop better integration packages, which the Government, refugee organisations and other political parties have to sell. They undermine our ability to say why we have a humane immigration policy and why our door is open to genuine refugees. It is much more difficult to do that if the public see another door open at the side where the rules are not followed. That is the consequence of doing nothing. If we do not address these issues, they will undermine our policies for managed migration and undermine taxpayers' acceptance that we need to help many thousands of people, which we do gladly. However, we are not prepared to see the perception of the system undermined by people who simply flout the rules in a systematic fashion.
  The House is fully aware that we do not want to make families destitute—far from it—and we do not want children to be taken into care by local authorities. We will not certify under Clause 9 where the family is cooperating. Where it is co-operating or where it has reasonable grounds not to co-operate and take steps to move, we will not certify. We want people to return home when they have no basis of stay in the United Kingdom and when their legal position is such that they have no prospect of permanently remaining here. However, that will not work unless there is an end point. Amendment No. 7 would remove that possibility and that is why we cannot accept it. As I said, there will be fundamental differences of opinion in this respect. On the issue of consultation, I should say that I am unfamiliar with the date the noble Earl referred to. There is no agreed date for implementation of this provision, whatever he may have heard. I am not in a position to elaborate on that.

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  We are willing to listen to the views of organisations and happy to consider comments. If anybody wants to talk to us, we will listen to them. We have met organisations. We meet the Local Government Association on a regular ongoing basis. I suspect my department has contact with the association every day and will continue to do so. I agree that my explanation will not satisfy people with a point of principle, but I hope that I have spelled it out in not unsympathetic terms. If you are over sympathetic, you send the wrong signals. We are dealing with people who are being unreasonable—because if they are reasonable no action will be taken. They have failed, they have no prospect of permanent stay in this country whatever. We do not want to make them destitute. It is not a policy objective to separate families from their children.
  The Lord Bishop of Portsmouth: My Lords, before the Minister sits down, I am extremely grateful for the thoroughness, energy and care with which he has answered our questions. But I would like to register that, without nitpicking, I respect that he has points of principle and those of us who may not agree with him have points of principle that are actually backed up by experience of the real world.
  Lord Rooker: My Lords, I freely admit that. I have put on the record that when I walked into the Home Office in 2001 I said, "By the way, I am poacher turned gamekeeper. I have used every trick in the book to exploit the rules and your inefficiency"—which is what it was. There were rooms full of hundreds of unopened mailbags; the system was in total chaos. In the end, it did not help my constituents because they were always in doubt, never having a decision, never knowing whether they could put their roots down and so on. So I fully accept that comment. I am not saying that my experience or my principles are any greater than anybody else's far from it. If I even hinted at that, I certainly did not intend to do so.
  Lord Avebury: My Lords, I am most grateful to the right reverend Prelate and to the noble Earl, Lord Listowel, whose knowledge of children's affairs is completely unrivalled in this House. They both speak with the backing of organisations such as the Refugee Children's Consortium. The Minister has correctly said that this is a matter of principle, on which it would be impossible across the Floor of the House today to reach agreement. We would have liked to test the opinion of the House, if we had heard anything at all from the Conservative Benches this afternoon. But, realising that they are unlikely—
  Baroness Anelay of St Johns: My Lords, it is normally not proper to intervene at Third Reading, but the noble Lord, Lord Avebury, has called into question the absence of comment from these Benches. I have adopted the proper course at Third Reading, which is to say nothing because I could add nothing to
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  four speeches I made on this issue. I feel it would be inappropriate to the House to extend the debate any longer.
  Lord Avebury: My Lords, the noble Baroness has not rendered the House any wiser about whether she would have supported us if we had pressed this to a Division. We would only have done that if there had been some chance of defeating the Government on the principle of this clause. Despite the fact that the Minister may say he has not considered this matter solely over the weekend but has been at it for months and months, he has still not explained to us how this clause will be implemented.
  He keeps on saying that we are talking about people who have failed all the way through the system. He may be right about the parents, but he is not right about the children. It is not their fault that the parents have not had an adequate claim to asylum. It is not their fault that the parents have been—as he would put it—irresponsible enough to fail to comply with the arrangements for their voluntary departure—but it is difficult to make my speech when there is another one going on just under my nose. It is not the children's fault that the parents have put them in this position. We are concerned not with the irresponsible parents, but with what happens at the end of the day when the parents have refused to comply with all the injunctions to leave the country voluntarily and to pay attention to the notices which the Minister said will be served upon them, explaining the consequences of their failure.
  I want to know whether the Minister will ultimately take the children into his care. What will the instructions be? We have not seen the guidance, but if he has been at it for all these months then why could we not have seen a draft?Why does not the veil which he lifted to a very slight extent today reveal the substance of the matter?He said only that the detailed guidance would contain instructions on whether the families have taken steps to comply with the need to examine relevant information, but not what happens to the children when that process has reached an end.
  The Minister has not said today how many meetings have been held with the LGA. It is no good telling us that he meets them almost every day. What we want to know is how many discussions have been held on this specific issue, and whether the LGA is satisfied with the instructions it will be given on how to comply with the ECHR, the Children Act and so forth while at the same time support is removed from these families. He has not given a clear process for how potential breaches of Articles 3 and 8 of the United Nations Convention on the Rights of the Child will be assessed. He has not told us what involvement there will be from independent experts in assessing the facilities available to the children in the final circumstances, nor about arrangements for the care and welfare of the children to be made prior to the withdrawal of support.
  We are extremely disappointed in the attitude of the Government and their failure in the person of the noble Lord, Lord Rooker, to answer many of the questions which remain in the minds of the Refugee

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  Children's Consortium. But in view of the fact that we would not win a Division, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendment No. 7 not moved.]
  The Earl of Sandwichmoved Amendment No. 8:
  After Clause 9, insert the following new clause

  REPEAL OF SECTION 55 OF THE NATIONALITY, IMMIGRATION AND ASYLUM ACT 2002
  Section 55 of the Nationality, Immigration and Asylum Act 2002 (c. 41) (late claim for asylum: refusal of support) shall cease to have effect."
  The noble Earl said: My Lords, I speak to Amendment No. 8 which inserts a new clause. I introduced this amendment in Committee. I did not bring it back on Report in the hope that it would encourage the Home Office to look again at the unfair effects of Section 55 of the 2002 Act on genuine asylum seekers who become destitute when they are unable to make claims "as soon as reasonably practicable" or in any case within three days of arrival.
  Many people, in and outside Parliament, now accept that this clause is a thorn inserted into asylum legislation without proper scrutiny, that it sits uneasily with the European convention, that it lacks credibility as a deterrent, and that it should be removed from the Bill as soon as possible.
  The Court of Appeal judges in the case of Limbuela et al on 21 May—mentioned already by the noble Lord, Lord Avebury—had these points in mind when they upheld a High Court decision in favour of three asylum seekers who had been denied support under Section 55. The majority opinion was that the Secretary of State could deny support only if he,
  "has in place realistic arrangements for meeting his responsibilities under the Convention".
  This decision has prompted a welcome, but only provisional, change of policy. That is now visible in the way that NASS interprets the human rights duty under Section 55(5). The latest guidance, which I have in my hand—a 39-page document—produced only on 25 June, states that NASS must provide support,
  unless it is positively satisfied that the individual does have some alternative source(s) of support available to him/her … Failure by NASS to provide support where no other source of support is available may lead to a breach of the applicant's rights under Article 3",,
  of the ECHR . That is a quote from paragraph 6.2 of the IND policy bulletin 75.
  5.30 p.m.
  Alternative support is not always there. Local communities, assisted by churches and voluntary agencies, do a remarkable service to the public in looking after destitute people, including asylum seekers. I have no doubt that the Home Office would like that to continue, especially when local authorities are cutting services. I hear that there are threats of those services being cut in cities such as Leicester.
  Research by the Greater London Authority shows that despite the efforts of local communities, which we all applaud, 29 per cent of people denied support under Section 55 in London last November had to sleep rough. That was a rise of more than half on the previous recorded tally of rough sleepers in London. Furthermore, we know that something like half—a disproportionate number—of those rough sleepers are women. Incidentally, it was unfortunate that in Committee the Home Office brief said that the Greater London Authority's research was based on a very limited sample. In fact, its survey covered 1,999 people in total, of whom 14 per cent, or 283 people, were asylum seekers reporting that they had been denied support under Section 55.
  Under the revised NASS rules, we can assume and hope that only a small number will now be left destitute. The Minister may very well say that we should stop worrying about them. That in itself suggests that the whole purpose of Section 55 has now been undermined and that the Government should recognise that by simply removing the clause. However, we shall have to wait to see what the Minister says now and what the effects of the new guidance will be between now and the Government's further appeal against the decision. It will not look good on the record if policy is shown to be inconsistent as well as discriminatory.
  Finally, I remind the House of three further points, in the unfortunate absence of the noble Earl, Lord Russell, whom we all wish were here today. These are points that arose in Committee. First, I am grateful to the Home Office for confirming through a Written Answer to my Question HL 2729 that a claim made after three days is no less genuine than one made on arrival. I do not personally like to use the word "late" because it carries a stigma. That Answer shows to me how arbitrary Section 55 is, although the provision for three days is often described as a concession.
  Secondly, I am reassured by another government Answer to my Question HL 2728, showing that it is impossible to prove statistically that Section 55 of itself has caused a reduction in applications for asylum. That surely weakens the case for Section 55 as an effective deterrent.
  Thirdly, Section 55 escaped parliamentary scrutiny from the outset. I am sure that the Minister knows that it was never even debated in another place, despite the efforts of his honourable friend Mr Neil Gerrard. The section is still capable of wide interpretation by the Government, even if we leave it alone, through the various non-statutory methods which are open to it. That is why so many people are opposed to the section, are concerned about its use in future and would like it to be repealed. I beg to move.
  Lord McNally: My Lords, I rise briefly to support the noble Earl, and to thank him for his good wishes to my noble friend Lord Russell, which we will pass on.
  In the end, the noble Earl's analysis is right. As it now applies, the measure is neither a deterrent to asylum application or a saving of public money. What

  705
  is left is something that the Minister referred to earlier. It is part of the package of gesture politics that the Government have assembled, although whether it is intended to deter asylum seekers or to appease the Daily Mail, no one is ever quite sure. Whatever it is intended to do, the clause would contain a particularly mean-minded piece of legislation if we were to let it go through. We support the amendment.
  Baroness Anelay of St Johns: My Lords, I shall speak very briefly, as I have spoken on this matter before and I am sure that noble Lords will remember each and every wonderful syllable that I uttered. It is absolutely right that the noble Earl, Lord Sandwich, should introduce this amendment today, because of the timing and the Court of Appeal case. It is right to give the Government the opportunity to make further comment on the opposition to the clause. I appreciate that the Minister may have some difficulties of a procedural nature if the matter is going to appeal, so I do not know how much he will be able to assist us today. However, this was the right parliamentary opportunity for the noble Earl to seize.
  I have told the noble Earl in the past week that I am not able to support his amendment as such. We on these Benches have in the past made it clear that we believe that the policy objective should be achieved, provided that that happens within the legal system. We are concerned to see what has happened in the Court of Appeal. Obviously, we now look forward to seeing a resolution of that question, and would naturally accept whatever the Higher Appellate jurisdiction decides.
  Baroness Park of Monmouth: My Lords, I rise to support very strongly the noble Earl's remarks.
  Lord Hylton: My Lords, I support my noble friend's amendment. Of course we all understand that the Government want people to apply for refugee status when they arrive or, if they cannot do that, within three days. But surely the Government could go a little further than that; surely they could say that cases with merit will be considered, especially if there is some reason for the individual person delaying his application. There should be some little let-out of that kind, should there not?
  Lord Avebury: My Lords, as my noble friend Lord Russell has been mentioned, I draw attention to the fact that he moved an amendment on the clause in the Nationality, Immigration and Asylum Bill on 24 October 2002. The matter was taken up by the Joint Committee on Human Rights, which in its 23rd report of Session 2001–02, HL paper 176, concluded that there was a significant risk that the new clause would lead to a violation of Article 11.1 of the International Covenant on Economic, Social and Cultural Rights. There was a threat of violation of Articles 3 and/or 8 of the European Convention on Human Rights.
  It is worth reminding ourselves of that exchange in October 2002, because we frequently refer to the JCHR. There are always good reasons why the
  706
  Minister of the day rejects its findings, but it is our watchdog in the matter of human rights. We should pay a little more attention to what it says, otherwise there will be more cases in which the Government have to answer to the Court of Appeal, like the one that we are discussing at the moment. If we had paid attention to my noble friend Lord Russell and to the JCHR then, we would not be faced with the difficulties that the Government have encountered with Section 55 in the Court of Appeal.
  Lord Rooker: My Lords, before I start, I reiterate not only on my own behalf but on behalf of others as well that we hope to see the noble Earl, Lord Russell, back in his place as soon as possible.
  I know this is totally out of order, but in this place there are no rules, so you can get away with it. Regarding the earlier debate we had on Zimbabwe, unfortunately we do not collect information on the voluntary returns on a country-specific basis, but I have asked officials to see whether they can obtain a figure from the International Organisation for Migration, and I will naturally follow that up in writing for noble Lords who have been present today.
  Read literally, the noble Lord, Lord McNally, was including me in his term "gesture politics". First, the package is not gesture politics and, secondly, I assure him that I would have no part in sucking up to the ragbag people who run the Daily Mail. Sincerity is a zero sum on this issue. We cannot prove that any part of the changes in the Immigration Rules and procedures in the past few years has been the only or key part, but we know the total effect of the changes of the package of which Section 55 is a part has been a halving in the number of asylum claims since the autumn of 2002. Therefore, while we cannot be precise about the individual components, we see no justification for disturbing the package that has been put together. We cannot be absolutely certain that the signals sent back down the supply chain of people traffickers on one part of the package are translated to another part of the package to get the right effect. Nevertheless, it is not gesture politics; the package was designed for a purpose. We still claim, and rightly so, that the whole issue is proportional to the situation the country found itself in.
  The central point about Section 55 is that we were not prepared to use taxpayers' money to support people who make speculative asylum claims, or indeed anyone who has some other means of support. I freely admit that not every person who claims asylum also claims financial support, but the number of speculative asylum claims was high. We think Section 55 has been effective in tackling that kind of abuse to send a signal to those who are simply economic migrants: first, that there are other ways and, secondly, that if they use the speculative route they will not be supported at the taxpayer's expense.
  I am pleased and grateful that the noble Earl has brought these amendments forward. It is the right and proper thing to do. However, I am obviously fairly constrained in what I can say, because this year the Court of Appeal gave its judgment in those three test

  707
  cases concerning the application of Article 3 of the ECHR in cases where support had been refused under Section 55 and dismissed the Government's appeals in the individual cases. In giving guidance on the issue, the Court of Appeal was divided as to the correct approach, as indeed was the High Court before it. In his minority judgment, Lord Justice Laws points out that the relevant principles in this area are "more than usually elusive". Clearly, these cases raise issues of general public importance and legal complexity.
  The Home Office maintains that Section 55 strikes the right balance between fulfilling our obligations to genuine asylum seekers and protecting the system against abuse. We have therefore sought, and been granted, leave to appeal to the House of Lords against the Court of Appeal judgment of 21 May, although I understand that this will not be heard by the Appellate Committee of your Lordships' House until much later in the year. In the mean time, we have issued new interim policy guidance, to which the noble Lord referred, and we will continue to make decisions in line with the judgment expressed in the Court of Appeal.
  Section 55 is a tough policy. It was designed to be, in order to face a serious issue. The section has been kept under close review since it was introduced, and, where appropriate, has been amended, as demonstrated by the change of approach announced by the Home Secretary on 17 December last year, whereby in general a person who applies within three days of arrival in the UK would be considered to have applied as soon as reasonably practical. Quite why they could not have applied when they reached our shores at the port, heaven only knows, but that is the issue everyone always asks about—"Why not?". There are good reasons why some people cannot apply immediately, but within three days we think they ought to be able to.
  There are already a number of safeguards built in to protect vulnerable people, and those with care needs continue to be supported by local authorities. Moreover, it is open to anyone who may receive a negative decision under Section 55 to request reconsideration of their case. Emergency accommodation will be provided in what we believe are seriously arguable cases in the small proportion of reconsideration decisions that cannot be made on the same day. Each case is considered on its merits. Where the period is longer than three days, people's circumstances will be fully taken into account. We fully accept that, in some cases, three days may not be reasonably practicable.
  There is little evidence of a rise in rough sleeping as a result of Section 55. Rough sleeping on the streets of London has been cut by about 70 per cent since the Rough Sleepers Unit—now the Homelessness Directorate of the Office of the Deputy Prime Minister—was set up. A count is taken, but we have no evidence that Section 55 has caused a rise. Both officials and outreach workers are out on the streets on a regular basis, not just on the nights of the counts, and I have spent one night with them—although I cannot really claim that it was a night, as I knocked off just after midnight. I had to be introduced as Jeff, a researcher from Birmingham, because if I had been introduced as the Minister no one would have talked
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  to me. I did not find any asylum seekers, but that was just one evening for a few hours. The point is that we monitor the situation of rough sleepers because, having achieved a 70 per cent reduction, we want to go the whole hog.
  We accept and freely admit that there were some initial problems with the operation of Section 55, and, where required, we have made changes. The recent Court of Appeal judgment does not alter our view that the policy has been effective or that we have sufficient provisions in place to protect people who are vulnerable. We certainly do not consider that it would be the right to abolish Section 55 altogether, bearing in mind that we have given notice of appeal to the highest court in the land, and that is where it will be decided. In the mean time, we will operate the policy in line with the judgment given down by the Court of Appeal. I hope I have made the position clear. The provision is not totally flexible, but it call be reasonably practicable for the period to be over three days because we judge each case on its merits.
  5.45 p.m.
  The Earl of Sandwich: My Lords, the noble Baroness, Lady Scotland, said that Section 55 was continuously under review, and the Minister has confirmed that today, which is very welcome. I accept and welcome his flexible approach, and the fact that every case will be looked at on its merits, possibly even after the draconian three days.
  This is not a party political matter, and it is partly for that reason that I am speaking from the Cross Benches. Many others are involved in this, and, if it came to a vote in a future Bill, I hope that vote would be free. This matter causes a lot of concern outside this House, among voluntary organisations and those working with asylum seekers. I was tempted this morning to press my amendment to a Division, although of course it would be only a protest vote. But the numbers outside this House are more convincing evidence than those inside it. We will just wait to see what the effects of the Bill are.
  I thank all the noble Lords who have taken part and supported this amendment. I am grateful to the noble Baroness, Lady Anelay, for speaking on this occasion, and because she has said that the Conservative Party is going to give this matter much more thought, which is also very welcome. The Government have moved, albeit under pressure from the judges and, I hope, from some of us. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 12 [Refugee: back-dating of benefits]:
  Lord Rookermoved Amendment No. 9:
  Page 14, line 35, leave out "paragraph 63" and insert "paragraphs 62 and 63"
  The noble Lord said: My Lords, in moving Amendment No. 9, I wish to speak briefly also to Amendments Nos. 10 and 11.
  These amendments make minor consequential changes to the regulations applying in Northern Ireland to ensure consistency with the other

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  regulations referred to in Clause 12. Clause 12 expressly revokes the regulations that set out the current back payments system established under the powers contained in Section 123 of the Immigration and Asylum Act 1999. We discussed that scheme at some length both in Committee on Recommitment and on Report. As I say, these amendments make purely minor consequential changes to the regulations applying to Northern Ireland. I beg to move.
  Lord Hylton: My Lords, these government amendments give me an opportunity to make a special appeal to the noble Lord, Lord Rooker. Would he be so kind as to use his influence in the Home Office on a Northern Ireland matter? What is happening at present is that small numbers of asylum seekers are being imprisoned in Northern Ireland, sometimes for rather long periods. This is something which makes the management of Northern Ireland prisons, which is already extremely difficult, rather more complicated than it need be.
  I suggest to the noble Lord—perhaps he will discuss this with his colleagues both in the Home Office and in the Northern Ireland Officet—that there is a fairly simple solution; namely, to commission a housing association in Northern Ireland, of which there is quite a range, to provide accommodation that is semi-secure, under curfew, or under whatever restrictions the Government wish to impose, so that these people can be held in a known place while their cases are considered rather than having them in prison. I hope that that appeals to the noble Lord's good nature.
  Lord Rooker: My Lords, certainly, it is news to me that asylum seekers are being held in prison as asylum seekers anywhere in the UK. I did not know about that situation in Northern Ireland. I shall ensure that the matter is taken up by my ministerial colleagues in the Home Office who have policy responsibility for the matter. I am but their mouthpiece here, but nevertheless it is a matter for which I am answerable as a government spokesman. I shall ensure that we try to achieve a satisfactory solution to the point raised by the noble Lord.
  On Question, amendment agreed to.
  Lord Rookermoved Amendments Nos. 10 and 11:
  Page 14, line 36, leave out "paragraph 49" and insert "paragraphs 48 and 49
  Page 14, line 47, at end insert—
  "( ) Regulation 11(1) and (2) of the Social Security (Immigration and Asylum) Consequential Amendments Regulations (Northern Ireland) 2000 (S.R. 2000 No. 71) (which make similar transitional savings) shall cease to have effect."
  On Question, amendments agreed to.
  Lord Aveburymoved Amendment No. 12:
  Page 15, line 4, at end insert—
  "( ) No such order shall be made unless the Secretary of State is satisfied that the amount of benefits paid to or on behalf of the refugee while his application was under consideration or under
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  appeal was equivalent in total to the amount a person would have received by way of income support and housing benefit for the same period and for accommodation of the same value."
  The noble Lord said: My Lords, as the Minister may perhaps have gathered, this amendment is designed to resolve the arguments that we had several times during the course of this Bill, as well as on the asylum support regulations a week ago, on the value of the NASS full support package for asylum seekers waiting for their cases to be decided, and whether or not if it comes to less than they would have received on income support, the Government are in breach of their obligation under Article 23 of the Convention relating to the Status of Refugees to,
  "accord to refugees lawfully staying in their territory the same treatment with respect to public relief and assistance as is accorded to their nationals".
  We have said all along that asylum seekers do not get the same treatment as our own citizens, and in 2002 the Government conceded that the voucher scheme constituted inferior treatment not only because the vouchers could be cashed only in certain shops, but also because, as the then Home Secretary Mr Jack Straw frankly acknowledged that,
  "the support that we are providing will be equivalent to the 90 per cent. of income support that is otherwise available to asylum seekers."[Official Report, Commons, 16/6/99; col. 472.]
  When the vouchers were scrapped in 2002, they were replaced by cash amounting to 70 per cent of income support, and the payment of utility bills and household costs continued, as before. So the value of the total package must have remained at the 90 per cent of income support declared by the then Home Secretary, unless for some unexplained reason the utility and household costs for people on income support had increased from 20 per cent to 30 per cent of their expenditure. That seemed to be the claim of the noble Lord, Lord Bassam, when he said:
  "The calculation has been made that the discount, the 30 per cent—
  that was the first we had ever heard of it—

  "is approximate to the value of housing accommodation which is fully furnished and has all the necessary utensils and furniture in place."[Official Report, 14/3/02; col. 1017.]
  But there was never any attempt to justify this astonishing increase from 20 per cent to 30 per cent in a period of less than three years. When the matter came under closer scrutiny on 15 June and again last week, first the noble Lord, Lord Rooker, and then the noble Lord, Lord Bassam, contented themselves with repeating the bare assertion, without giving any of the underlying arithmetic.
  When the Joint Committee on Human Rights examined the matter, it said:
  "The Government has not provided Parliament with the detailed evidence which demonstrates that the value of the benefits in kind provided to asylum-seekers is equivalent to the value of the back-payments being abolished".
  The Government did not provide any evidence and they still have not done so, though it was not the back payments themselves that were at issue; it was whether the total package was equal to 90 per cent, 100 per cent, or some other percentage of income support.

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  The noble Baroness, Lady Scotland, has acknowledged at last, in a letter dated 25 June, which I did not receive until the day after the previous debate on this clause, that the package is not worth 100 per cent after all, and that the assertion made on at least three occasions was wrong. The JCHR ought now to consider, in the light of that admission, whether there is a significant risk of a breach of Article 23 of the Refugee Convention or Article 14 of the European Convention on Human Rights in conjunction with Article 1 Protocol 1. The noble Baroness, Lady Scotland, now tells me in this letter that the value of the package is,
  "on average only 4% lower than income support levels".
  I made it 7 per cent, and I gave the details of the calculation, which the noble Baroness has not done, but whether it is 4 per cent or 7 per cent, asylum seekers are worse off by that amount than British citizens on income support levels.
  Ministers have also stated, incorrectly, that putting asylum seekers on level terms with those on income support means that they should not be eligible for payments other than bare NASS support. The noble Lord, Lord Bassam, did not respond when I pointed out last Tuesday that people on income support have access to other discretionary payments which are not available to asylum seekers.
  The noble Baroness, Lady Scotland, in this letter, acknowledges that UNHCR has been critical of the Government's proposals in Clause 12, but she now advances a novel interpretation of the convention, which she has not discussed with the UNHCR, which is under international law the guardian and interpreter of the convention. She has not discussed it with the JCHR either, and its conclusions on Clause 11 were based on the assumption that the Government's previous statements about the arithmetic of their proposal were correct. The noble Baroness now says that short-changing asylum seekers by 4 per cent is,
  "sufficient to meet the requirements of the Refugee Convention".
  I have taken advice on this, and, as I hope the noble Lord will be aware, the UNHCR has explicitly contradicted the noble Baroness's assertion—"a very unusual, if not unprecedented, occurrence. In its letter to me of 2 July it says:
  "UNHCR does not consider that provisions which have 'broadly the same material effect' are sufficient to meet the standards required by the 1951 Convention … UNHCR considers 'same treatment' in Article 23 to mean exactly equal material benefits. This accords with the common usage of the word 'same' as defined in the Oxford English Dictionary. Equal treatment is fundamental to the spirit of the 1951 Convention, and there can be no degrees of equality".
  Clause 12 puts asylum seekers in a benefits regime inferior to that required by Article 23 of the convention, and the Government must not deliberately enact a measure which makes the UK non-compliant with an important requirement of international law. This would be especially heinous, considering that we are members of the executive committee of the UNHCR, with a responsibility to set an example in upholding the standards set by the convention.
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  This amendment would give us the breathing space that is needed to undertake proper consultations and to redesign the NASS package, so that it provides asylum seekers with the same treatment as our nationals and not something which falls short of that obligation. I beg to move.
  6 p.m.
  Lord Rooker: My Lords, there was one phrase used by the noble Lord which I wish he had not used. My response to it is this. The British taxpayer is forking out over £1 billion a year for asylum seekers. To say that we are short-changing asylum seekers is just the kind of thing that plays into the hands of those friends at the Daily Mail, referred to by the noble Lord, Lord McNally—because they will twist it. To say that we are short-changing asylum seekers, when we are spending over £1 billion by way of taxpayers' support, is extravagant language in the extreme and sends out all the wrong signals regarding the policy we are trying to address.
  On the other hand, the noble Lord is right to come back on the issue at Third Reading. I have no complaint about that. However, we are not prepared to accept the amendment.
  In the letter dated 30 June which he wrote to my noble friend Lady Scotland the noble Lord made a number of points, and I am grateful to him for making these known before the debate. He has not yet received a written response from the noble Baroness, and I do not say that the response is winging its way from the Home Office, but it is being put together. I will now try to answer those points.
  The first point the noble Lord makes is about the arithmetical equivalence or otherwise of the benefits available to asylum seekers in NASS accommodation, as compared with UK nationals. As has been said in the exchange of letters, the Government's assessment is that the difference is on average 4 per cent. In the debate on 29 June on the Asylum Support (Amendment)(No. 2) Regulations, the noble Lord set out a calculation which concluded that the difference is 7 per cent for a married couple with no children.
  The Government will happily set out the assumptions by which they have arrived at the figure of 4 per cent. I will not go through them line by line, but the Government do not wish to make a point of disputing the noble Lord's detailed calculations. It so happens that we have used slightly different assumptions and have come up with a slightly different conclusion.
  At the risk of falling foul of the noble Lord, I have to make the point clear. The fundamental difference between the Government and the noble Lord is not whether the answer is 4 per cent or 7 per cent. The question is whether any difference is acceptable at all. That is implicit in what the noble Lord said, and I see that the noble Lord agrees with me. In the Government's view, a difference of 7 per cent, such as is estimated by the noble Lord, is acceptable. However, we do not say that the numbers add up

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  exactly. Our argument is that the two regimes are broadly the same in material effect. We are not arguing about the percentages.
  I also make the point that access to income support opens up another avenue completely. I said at an earlier stage of this legislation that, in the long run, it might have been cheaper not to have had NASS support in the first place. However, I repeat that we are running a system that is costing over £1 billion in support of asylum seekers.
  The noble Lord also said in his letter that we have ignored asylum seekers who have opted for subsistence-only support, and those denied any support at all by virtue of Section 55 of the Nationality, Immigration and Asylum Act 2002. Neither of these groups will have had any support in kind from NASS. If those in accommodation are out of pocket to the tune of 7 per cent, those on subsistence only will be out of pocket to the tune of 30 per cent, and those denied support altogether to the tune of 100 per cent. We have not ignored these cases.
  In so far as Article 23 may be relevant, the Government's view is that it requires only that the treatment of refugees and nationals be broadly the same in material effect, not identical. Mainstream benefits are intended as a basic safety net to ensure that the poorest have a roof over their heads and sufficient money on which to live. Asylum seekers on subsistence-only support will have this.
  Applicants who do not claim as soon as reasonably practicable after entering the UK are still able to access National Asylum Support Service support in the usual way, if they do not otherwise have means of support available to them.
  In Clause 12 the Government are proposing to abolish a discredited and retrospective system of back payments, which rewarded time spent stringing out the asylum process. I have explained today how advisers sometimes become involved in that process. We are seeking to stop that.
  In Clause 13 we are replacing this with a new, forward-looking system of refugee integration loans. The Government are satisfied that this is within both the spirit and the letter of the Refugee Convention, and we hope that it will result in a better deal for refugees.
  As I have said, a proper response to the letter from the noble Lord, Lord Avebury, will be on its way but I hope that, in the light of these explanations, the noble Lord will not press his amendment.
  Lord Avebury: My Lords, the argument is not one solely between myself and the Minister. The argument is between me and the UNHCR on the one hand and the Minister on the other. The Minister has to satisfy the UNHCR that he is in compliance with Article 23 of the Convention.
  He says that it is okay to short-change the asylum seekers by 4 per cent or 7 per cent and, as he says, we are not arguing about the exact figure because we can attempt to reconcile the arithmetic "off-line", as it were.
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  I stick by the figures I gave and I have told the colleague of the noble Lord where the figures came from—the Government's own statistics. If his calculation comes up with a slightly different figure, we will not argue about that detail. However, the noble Lord is now saying that to be in full compliance with Article 23 it is sufficient to give the asylum seekers something less than equal treatment with British citizens. That is not what the Convention says and not what the UNHCR's interpretation of the Convention confirms—which the noble Lord has seen.
  Although we will not take this any further this evening on the Floor of the House, I can assure the noble Lord that he has not heard the last of it. It will be necessary for him to satisfy not just the UNHCR representative in the UK but UNHCR headquarters in Geneva.
  It is a matter of principle. It is the difference between the noble Lord, who says that something which is roughly equivalent, but is less than full equal treatment by 4 or 7 per cent, complies with the Convention, and the authorities of the UNHCR, who say that equal means equal. It is a matter we will not resolve this evening, but I am sure that the noble Lord will hear a great deal more of it hereafter. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 13 [Integration loan for refugees]:
  Baroness Anelay of St Johnsmoved Amendment No. 13:
  Page 15, line 24, at end insert—
  "( ) shall enable the Secretary of State to specify that a loan shall be made by instalments,"
  The noble Baroness said: My Lords, I hope that I can be very brief on this. It may also be for the convenience of the House, given the time we have needed to discuss such important matters this afternoon, if I indicated that I do not need to move Amendment No. 14. I have notified the Front Benches and the ensuing speaker.
  Amendment No. 13 gives the Government the opportunity to carry out a commitment they gave at a previous stage of the Bill when, on 28 June at col. 44, the Minister said that the Government were intrigued by the proposal of this amendment; that they would look at it, and come back with further clarification at Third Reading.
  The Clause enables the Government to provide an integration loan to refugees, which will replace the backdating of benefits. The question I asked was whether it would not be convenient for the Secretary of State to have the power, in making a loan, to be able to make that loan by way of instalments rather than in one lump sum, particularly if a fairly large sum of money were involved.
  I am therefore seeking that the Government put that clarification on the record. I beg to move.
  Baroness Carnegy of Lour: My Lords, I, too, greatly look forward to hearing the Minister's reply. After reflecting on this matter it seems that we do not yet know the nature of the loan scheme or how much it will cost the taxpayer. It will be fairly expensive. However, it could be, without in any way incommoding a refugee, that much money could be saved if it was possible to pay a certain amount of the loan and then proceed later with other sums by instalments. As my noble friend said, a person's circumstances may change and we hope that many refugees, having received a loan, will find a job and begin to earn—perhaps well and will not need the further loan instalments. Will it be possible to incorporate this provision in the loan scheme?
  Lord Rooker: My Lords, yes, certainly; although I should make clear it that this will not cost the taxpayer anything in terms of new money, because the refugee integration loan will be funded from the abolition of the back-payments scheme. This is not new, extra money it is already being paid by the taxpayer. When we discussed this matter on Report I thanked the noble Baroness, Lady Anelay, for her helpful suggestion that the loan could be made in instalments. We still consider that to be a suggestion which we should like to see carried through to the operation of the loan scheme.
  We have now had the opportunity to confirm our original impression that we believe it is possible to make provision for the loan to be paid by instalments through the present drafting of the clause by conferring a discretion on the Secretary of State. There is one caveat. If the Secretary of State makes a loan by instalments it should not circumvent either the provision prohibiting the making of two loans to one person or any provision made for a minimum or maximum amount of a loan. We think that is right. If the Secretary of State makes a loan by instalments, it should be one loan that does not exceed any specified maximum amount, made in staged payments over time. It should not be a route that enables more than one loan to be made to any person or a way to enable a loan to be made in excess of the specified maximum amount. That will be in the regulations.
  During the debate at Report stage the noble Baroness explained that paying the loan by instalments would enable payments to be halted if there was a sudden change for the better in the fortunes of the applicant, given that the loans will be based on need and individual circumstances. The provision to confer a discretion on the Secretary of State or the amendment would not by themselves achieve that objective. However, we have considered this again and would suggest that it might be best achieved by making a provision under subsection (3)(d) for the loan to become repayable in full in specified circumstances, of which sudden affluence could be one.
  This matter will return to the House for detailed examination when we have a scheme to present to Parliament. I should like to thank the noble Baroness for her suggestion.
  Baroness Anelay of St Johns: My Lords, I am grateful for the Minister's helpful answer, not only regarding this matter but for his explanation of how
  716
  the Government could work the loan proposals into the existing skeleton of Clause 13 with, perhaps, regulations coming later.
  The explanation that he gave regarding the use of subsection (3) (i), which confers a discretion on the Secretary of State, went a long way to reassuring me about some of the concerns that I expressed on Report on recommitment. I shall look carefully at Hansard, but the Minister seemed to say that the Government would not be trying to obviate or get out of the provisions in the rest of subsection (3)(a) to (h) by using the discretion provided for in subsection (3)(i). The Minister has satisfied me on more than one point and I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 17 [Retention of documents]:
  [Amendment No. 14 not moved.]
  The Countess of Marmoved Amendment No. 15:
  Before Clause 19, insert the following new clause—

  MARRIAGE NOT A GROUND FOR LEAVE TO REMAIN
  That a person has married a British citizen in the United Kingdom is not a ground for granting leave to remain under the Immigration Act 1971 (c. 77) if that person—

  was granted leave to enter the United Kingdom for a period of less than six months, or

  their period of leave to be in the United Kingdom expires in less than 3 months from the date of their marriage.

  That a person intends to marry a British citizen in the United Kingdom is not a ground for granting leave to remain under the 1971 Act if that person—

  was granted leave to enter the United Kingdom for a period of less than six months, or

  their period of leave to be in the United Kingdom expires in less than 3 months from the date of their application for leave to remain.

  The noble Countess said: My Lords, when I suggested at Report stage the possible introduction of a measure such as that in the amendment it was because I had a sudden vision of a vast bureaucracy waiting in the wings for the enactment of Clauses 19 to 24. I have been in your Lordships' House long enough to recognise that each time we have a new Act of Parliament we seem to double the number of officials and civil servants. That worries me somewhat.
  Would it not be easier to tell all those single people to whom time-limited visas are issued that, should they wish to extend their stay in the United Kingdom, contracting a marriage here would not provide them with a ground to remain? That would be done at the time the visa was issued. I have limited the scope of the amendment to spouses who are British citizens because I recognise that we must observe the terms of EEA treaties.
  I thank the noble Lord, Lord Rooker, for asking two officials from the immigration and nationality department to contact me last week. I was interested to learn that it is now EEA nationals who are a major source of bogus spouses. As the grounds for remaining on the basis of a marriage contracted with a person present and settled in the UK already are enshrined in rule 284 of the Immigration Rules, can the Minister

  717
  say whether the rule is so ineffective as to require the introduction of Clauses 19 to 24 for all marriages? If not, why are those clauses not restricted to applications for marriages to EEA nationals only?Is there a problem?Would such discrimination go against the terms of the treaty?Is this a problem common throughout the EEA and, if not, why is the UK so disadvantaged?
  I have no intention of pressing the amendment to a Division. I realise that the wording is faulty. However, I still suspect that there may be some less cumbersome way to deal with the problem. I beg to move.
  6.15 p.m.
  Lord Dholakia: My Lords, I support the amendment. The Minister was good enough to say earlier on that he does not listen to the ragbag of stuff in the Daily Mail. But this gives a completely different impression that this legislation has been pushed forward in the House of Lords and at one time did not have the scrutiny of the Joint Committee on Human Rights, which we have now received. This is very much a reaction to the headlines in the Daily Mail, the Express and the Sun about sham marriages. No one condones sham marriages. Even one is unacceptable and the figure that the Minister identified—up to 2,700—is worrying. I have studied his letter to the noble Countess, Lady Mar. He said that the main objective of the clause relates to non-EEA nationals marrying EEA nationals. That is a matter for European Community law. Why are we interfering with UK domestic law in this matter?
  It would be particularly helpful to me if the Minister were to provide some statistics about where this fundamental abuse of marriage takes place. Are we talking about non-EEA nationals or people from Commonwealth countries?So far I have not seen any statistic which confirms that.
  The amendment tabled by the noble Countess, Lady Mar, is appropriate for two reasons. First, the present immigration legislation provides adequately for entry clearance to be obtained for the purpose of marriage. One has to make the appropriate inquiries in this country regarding the basis of the issue of a certificate. If that certificate is not issued, one cannot come to be married in this country. If the certificate is issued, there is no problem. Why are we not controlling that aspect to ensure that only people who have the right to marry in this country are granted leave to remain?
  Secondly, one is not allowed to change one's status after entering the UK. A student has to return to his country if he wishes to be married and a visitor has to do the same to obtain the appropriate certificate to enter the UK. Why are those rules not sufficient to deal with this problem?
  Over a period of years the Home Office has moved away from the primary purpose rule, to which the Minister and I did not subscribe, and we have reached a stage where it was initially confirmed that leave to remain would be granted only when someone has had
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  a stable marriage for a period of one year. That period has been increased to two years. If two years have been completed, leave to remain in the United Kingdom is granted.
  There are ample safeguards in the existing legislation. In February, according to published figures, over 60 arrests were made in relation to sham marriages. If that is the case, why do we not use the existing law? Why can the Minister tell us that over 2,300 sham marriages took place in 2003 and only 60 people were arrested? I would much prefer that anyone who gets involved in a sham marriages is not allowed to stay in this country. I do not think that anyone has a problem with that.
  But what the Minister proposes is not the way to deal with the situation. Why do we have to use marriage registrars as tools for immigration control? The Home Secretary at one time said I read it in a newspaper—that people who live in this country should marry people who are here. That does not build confidence. It is the right of individuals to marry whom they wish, but that must not in any way evade immigration control.
  The amendment in the names of the noble Countess, Lady Mar, and my noble friend Lord Avebury makes sense. No one can use marriage as grounds to remain in the United Kingdom. The amendment gets rid of the role of registrars and the Home Secretary's role in determining who should marry whom. There is no need for a separate system of monitoring, because any appeal could be determined under the existing legislation and over 60 arrests have been made, so the present law is adequate to deal with the matter.
  There are matters of serious concern, particularly among minority communities. I saw a headline in one of the ethnic papers, which said,
  "Can we marry, Mr Blunkett?".
  The article was endorsed by the Labour Peers, the noble Lords, Lord Ahmed and Lord Parekh, by the Conservative Peer, the noble Baroness, Lady Flather, and by myself. We must be careful. The Home Secretary has better things to do than going around saying that he objects to particular marriages.
  We have every right to control sham marriages, but it should be done on the basis of the amendment suggested by the noble Countess. If European law needs revision we should consider that rather than interfering with our domestic law.
  Lord Avebury: My Lords, we have had two debates on the Government's new marriage clause, to which the amendment relates, but this is the first time we have considered it, as my noble friend said, with the benefit of the advice of the Joint Committee on Human Rights. I would like to place on the record our extreme gratitude to the committee for the rapidity and thoroughness of its work on all the clauses involved in recommitment as well as on other matters that invariably come before your Lordships that may have human rights implications.
  We fully support the Government's aim of clamping down on sham marriages and we acknowledge that the increasing number of reports made by registrars under

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  Section 24 of the 1999 Act indicates that further measures need to be taken to solve the problem. However, we have not been convinced that the existing powers, as my noble friend said, under criminal and immigration law are insufficient to curb the use of marriage as a means of evading immigration controls.
  In that we are greatly reinforced by the discussion in paragraphs 36 to 81 of the JCHR report. The fact that almost half the report is devoted to the issue reflects its importance and the sensitivity of the human rights at issue, as we have sought to persuade your Lordships on two previous occasions.
  For good measure, the JCHR not only enumerates the ECHR rights in Articles 12 and 14 but also the provisions in the Universal Declaration of Human Rights and the International Covenant on Civil and Political Rights, to which the United Kingdom is also a party. The first question the committee asked was whether the requirement in Clause 19(3) that express authorisation must be obtained for a marriage is a breach of Article 12 of ECHR; the right to marry. As it points out, although that right is according to international law, the wording is not interpreted as conferring an unlimited discretion on governments to circumscribe the right because otherwise Article 12 would be redundant.
  Any restrictions on the right to marry have to be for a legitimate aim and must be proportionate. Thus, for instance, it was held that laws preventing prisoners from marrying were not within the scope of Article 12. We have to apply the same tests of legitimacy and proportionality to the proposals before us. In that regard, the JCHR has picked up the point we made in Committee that without knowing more about the Section 24 reports and the "striking discrepancy", as the report calls it, between the 2,251 reports by registrars and the 37 persons charged with criminal offences, we are not in a position to reach a conclusion.
  As the committee says, we also need to know how many people have been refused leave to remain as spouses on the grounds that their marriages were sham; Amendment No. 15 touches on that point. The JCHR says that there is a significant risk that the proposed restriction on the right to marry may be disproportionate. It gives three substantial reasons, which I shall not attempt to summarise. It concludes that there is a significant risk that the requirement to obtain permission to marry as presently drafted will be incompatible with the right in the ECHR.
  The committee also raised discrimination against persons who belong to a religion other than Church of England, to which I referred in Committee. The noble Lord, Lord Rooker, said that there was,
  "no evidence of sham marriages in the Church of England".—[Official Report, 15/6/04; col. 696.]
  However, the committee did not consider that "a sufficiently weighty justification" for treating members of one religion preferentially in a private matter that affects almost everyone.
  Finally, the committee takes up a suggestion I made in Committee that it should consider the application of Article 14 on non-discrimination together with
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  Article 12 on marriage since the clause restricts the rights of non-EEA nationals to marry and therefore treats them less favourably because of their nationality. The committee says that in principle a prior authorisation requirement could be justified if it applied only to those in the UK unlawfully and that more generally it is legitimate to regulate the right to marry so as to prevent the exploitation of marriage as a means of circumventing immigration control.
  But as drafted, it considers that there is a significant risk that the proposals will be found to discriminate on grounds of nationality without objective and reasonable justification. It is profoundly unsatisfactory that we should be considering the advice of the JCHR on this important matter at the eleventh hour and without the benefit of a reasoned answer from the Government to the detailed objections that they raise to the clause.
  We regret that decisions are not going to be made on the basis of reasoned argument and that Ministers can easily cast aside the opinions of a committee established by your Lordships for the purpose of ensuring that we avoid making human rights errors that will land the Government in the courts. In the past the Government have ignored the JCHR's advice and have good reason to regret it. I hope that that will not happen again.
  Baroness Anelay of St Johns: My Lords, I have tabled two amendments in the group, Amendments Nos. 20 and 23 to which it may be convenient for me to speak. Amendment No. 23 is supported by the noble Lord, Lord McNally, and the noble Lord, Lord Avebury. In referring to Amendment No. 20, it is a case of putting the cart before the horse. The nature of Third Reading procedure means that I know it is difficult for the Minister to move his amendments until the end when he is responding to everyone else's.
  Although the Minister has not yet moved his amendments in this group, I shall welcome them when he does so because they more than adequately respond to the concern I reflected in my Amendment No. 20. The difficulty is that all of us start from the position that the noble Lords, Lord Dholakia and Lord Avebury, have so properly enunciated: we are all against the use of sham marriages for the purposes of obtaining residence in this country. That is not what the institution of marriage is about.
  After that we get into difficulties as to how the measure should be applied. I say to the Government that we want to support them if we can but so far we are not convinced that they have properly put in place a mechanism to prevent sham marriages taking place. Therefore, I think that the Government have gone one step further in the right direction. I shall ask the Minister to speak to those amendments rather than simply repeat everything in relation to my Amendment No. 20.
  6.30 p.m.
  Amendment No. 23 reflects a concern that I had at earlier stages of the Bill. I pointed out that, as we are entering wholly uncharted territory in creating this

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  super-league of registrars, it would be very valuable to have some way of reporting back to Parliament on the work that they were doing, and it would be valuable to know whether or not the Government's new provisions were having the impact that they intended or whether there were unintended consequences. The Minister had given his reasons for rejecting those amendments.
  Last week, I had a very helpful meeting with the Joint Council for the Welfare of Immigrants. I am grateful to its members for taking the time to meet me. They put forward Amendment No. 23, which is before the House today. I hope that the approach that it adopts appeals more to the Government than did my original attempt. It provides for the Secretary of State to appoint an independent monitor, who would report on the refusal of permission to marry. He would report to the Secretary of State and the report would be laid before Parliament. Such an independence of approach could be very valuable indeed.
  Earlier in our debates today—I noted that it was at about 3.40 p.m. when we were debating Amendment No. 3—the Minister seemed to say that he thought that that was a good idea. He referred to the fact that my idea of a monitor has a precedent in the 1999 Act, which creates an entry-clearance monitor. Indeed, he reminded us of other examples. Therefore, I hope that there is an appropriate read-across to this proposal. An independent monitor would be a valuable step forward here as well.
  Baroness Carnegy of Lour: My Lords, government Amendments Nos. 16 to 19, 21 and 22 in this group are a handsome response to my noble friend's Amendment No. 20 and to the discussion that we had at an earlier stage. When we were debating this matter earlier, I asked what the position would be as regards Clause 21, which relates to Scotland. Looking at that clause, I am not sure whether any party to the purported marriage must appear with the registrar. If no one appears, the safeguard which the noble Lord is building in will not be possible. I wonder whether anyone who has it in mind to perpetrate a sham marriage will flee to Scotland to do so. I am not sure that that would be desirable.
  Did the Government discuss this issue with Scottish Ministers to ascertain the position? Last night, I was lucky enough to be invited to a reception at the Scotland Office in Dover House and the First Minister was present. At that point, I had not realised quite what the position was. If I had, I think that I would have discussed it with him over a glass of wine. Does the Minister know the answer to that now?
  In relation to Amendment No. 23, it seems that it is highly desirable to have some form of monitoring, and an independent monitor might well be a fairly unbureaucratic and inexpensive way of achieving that. I hope that the Minister will look sympathetically at the proposal.
  Lord Lester of Herne Hill: My Lords, I intervene as a member of the Joint Committee on Human Rights.
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  I am glad to do so in the presence of the noble Lord, Lord Judd, who, like me, has the great benefit of serving on that all-party, and beyond-party, committee. I shall explain the reason for my intervention.
  Parliament has not been well served by the Home Office in the way in which these human rights issues have been dealt with. At the beginning of our report, which was published yesterday, we say at paragraph 3:
  "We have made it clear in a number of reports that we regard it as unacceptable that amendments having significant implications for human rights should be introduced at a late stage in a Bill's passage through Parliament, without a clear explanation of the Government's view of the human rights implications. We find it particularly regrettable that we find ourselves once again in the very same position so soon after having made clear that such a practice undermines parliamentary scrutiny of legislation for compatibility with human rights. Such scrutiny is crucial to the democratic legitimacy of the Human Rights Act 1998. We once again draw this to the attention of each House".
  We work very hard; we have an excellent staff; we attend meetings; we consider reports; and we produce them as quickly as possible. The earliest that we could produce a report that could be of any benefit to Parliament and to this debate was yesterday.
  My noble friend Lord Avebury has done the House a great service in summarising, in a way that I do not need to do, some of the main issues that we raised in the context of marriage and sham marriages. However, the situation is wholly unsatisfactory for this reason. Having done all that work and having produced what we consider to be a cogent report, it would be impossible for us to expect the Minister now, although we would like him to do so, to respond properly in this debate and before the end of Third Reading to the points that my noble friend Lord Avebury summarised. The net result will be that, in a thinly attended House late in the afternoon, the luckless Minister will have the task of responding to a report as best he can and we shall then move on.
  What will be the result of that? There will be no effective parliamentary scrutiny of these human rights issues and, as my noble friend Lord Avebury said, the matter will end up in court. Although I practise at the Bar, I regard it as a misfortune whenever legislation is passed in a form so defective that judges and lawyers have to come to the rescue. That does no one any good—not even the legal profession. It is dispiriting and it is entirely the fault of the Home Office. I am sure that, when he replies, the noble Lord, Lord Rooker, for whom I have great respect and whose love of parliamentary democracy and respect for Parliament is beyond reproach, will, in some sense, apologise. I am sure that he will. But, of course, that will not make good what has been done on this occasion.
  This is not an ordinary Bill. It is one that affects the rights of one of the most vulnerable groups of people in this country. I must choose my words carefully—I am tempted to go over the top, but I shall not. I hope that this is the last occasion in the lifetime of this Government, or any future government, that something of this kind happens. When it does, we let down the parliamentary process and, ultimately, we must resort to litigation, which is a great misfortune.

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  Finally, I want to ask one specific question. It is a narrow but important one. In paragraph 46 of our report, we point out that:
  "The legislation is… silent about the purpose of the open-ended power in the Secretary of State to exempt certain classes of individuals subject to immigration control from the new requirements".
  We point out:
  "There is no indication of the sort of differentiations which might be made between different categories of people".
  I am sure that we would be grateful for an answer to that specific point and also for a reply to the various other points that have been made in our report.
  Lord Judd: My Lords, I hesitate to intervene. However, I do so simply on this point because I am a member of the Joint Committee on Human Rights. Like the noble Lord, Lord Lester, I am second to no one in my admiration for my noble friend and the way in which he undertakes his work. Therefore, anything that we say contains no personal criticism of him whatever. But the Joint Committee is an all-party committee and the Government should be under no illusions that the points raised by the noble Lord, Lord Lester, were strongly expressed by everyone on the committee, whatever their party allegiance.
  Lord Rooker: My Lords, I am very grateful for, and embarrassed by, some of the things that have just been said, particularly, I freely admit, in view of the fact that, until the noble Lord, Lord Avebury, was on his feet, I did not even know that the report was being published yesterday. Before coming back on the scene, I have obviously tried to get myself briefed on the amendments that we are discussing today and on some of the issues that were not in the recommitted part of the Bill. I wanted to be updated, but I did not know that the report had been published. But I am not hapless; I am angry that I did not know that it had been published. I clearly could not come with a response in 24 hours. I also hope that this is the last time that happens.
  Draft Bills are published much more frequently; in fact, one is due imminently. If we are serious about the scrutiny of legislation, serious about getting it right and serious about human rights legislation, we cannot later say that we regret putting the Bill on the statute book but we have done it we will slip round it. That is not on.
  I do not know the background and the chronology of events or why the committee did not report. I always speak at this Dispatch Box on behalf of the Government, unless I am speaking for myself. At the moment, I am speaking for myself and for the Government in apologising to your Lordships' House. The Government's treatment of the committee could be bordering on contempt in not allowing sufficient time for scrutiny because I cannot respond.
  The Third Reading is set for today. I do not know what procedures will be used in the other place when its Members get this Bill back. Clearly they must have plenty of time to talk about the recommitted issues as they did not debate them when the Bill was before
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  them. I hope that there will be sufficient time for the JCHR report to be considered in the other place, and that the Government somehow concoct a response to the report before amendments are discussed. That is the minimal response. I have no knowledge that this is being put together but I certainly hope so.
  If I were in the House of Commons as a Minister—let alone as an Opposition or Back-Bench Member—and there was no response to the JCHR report in the amendments that come from this place, I would have one hell of a row. It will be very substantial block of amendments—almost a Bill on its own.
  That is my view as a Minister, not just as an individual Member of the House. This situation puts me in a position where I cannot do my job of representing the Government to this House. I am critical of the machinery, but my job is to represent and speak for the Government in this House. I cannot do that as I would wish to as I have been placed in this position. The Government therefore lose out and we ask for trouble next time around. That situation has to be corrected in future.
  I would like to say to the noble Baroness, Lady Carnegy, that she has got it dead right about Scotland. I will come to that point as I will go to my prepared notes in a jiff. In Scotland, there is no requirement to turn up. The situation will be looked at in case there is a problem.
  This comes back to the issue of marriage tourism that I raised in Committee—people from overseas who want to get married, probably not on a bridge but perhaps in a castle or somewhere similar. In those cases, it may not be possible to turn up and give notice. The noble Baroness, Lady Carnegy, has got it dead right and has not misread the Bill or the amendments.
  I will now proceed with the notes that I have. They were prepared by the Home Office in advance of the Bill and the remarks that I have just made.
  Under Amendment No. 15, a person married in the UK, or intending to marry in the UK, would not be eligible to apply for leave to remain where he, or she, has been granted less than six months' leave or only have three months or less of his current leave remaining.
  In April 2003, a similar provision to subsections (1)(a) and (2)(a) of the amendment—the six months' leave point—was included in the immigration rules. Paragraph 284 of the immigration rules requires that persons applying for leave to remain on the grounds of a marriage to a British citizen or person settled here have extant leave to remain in the UK and have been granted over six months' leave since the date that they were admitted to the United Kingdom, or have entered the UK with leave as a fiancé. That is one of the normal routes. Where a person does not meet this criterion, he would be expected to leave the UK and apply for entry clearance as a spouse. Many people do that.
  While subsections (1)(b) and (2)(b) of the amendment—the three month leave point—may have a use in prohibiting persons approaching the end of their leave from entering into a sham marriage, the Government do not feel that it would be appropriate to

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  consider it at this time. Should evidence arise that such an amendment is necessary, an amendment to the immigration rules could be made in secondary legislation. In any event, the immigration rules would be the appropriate place to make provision of this nature, not primary legislation. I hope that that point is accepted because it is well made.
  6.45 p.m.
  Furthermore, the amendment tabled by the noble Countess, Lady Mar, does not assist us in combating marriage abuse when it is undertaken by a non-European Economic Area national marrying an EEA national. It is the act of marriage that gives a right of residence in these cases rather than the act of the Home Office granting leave to remain. Those marrying an EEA national do not need to obtain leave to remain on the basis of that marriage to have a right of residence through that marriage. This is because the rights of residence obtained through the marriage to an EEA national are the subject of European law rather than UK domestic legislation. Their rights are irrespective of an individual's immigration status in the UK at the time of the marriage.
  As noble Lords will know, all EEA nationals have the right of free movement throughout the EU. This means that they are not subject to immigration control and do not require leave to enter or remain in the United Kingdom. In order to ensure that an EEA national can exercise free movement of rights effectively, he is entitled to have his family members accompany or join him when in another member state and exercising a treaty right.
  The family member therefore derives free movement rights through his relationship with the EEA national. This includes a right of residence equivalent to that of his EEA family member. In practice this means that, like the EEA national, he does not have, or need to have, leave to remain when residing in the UK. He is in the UK as a family member of an EEA national exercising a treaty right and is therefore able to obtain a residence document confirming this right. This document is issued for the length of the residence permit his EEA national family member can also obtain. This would normally be for a period of five years.
  Reports from registrars and other intelligence sources suggest that fixers of sham marriages are increasingly favouring this EEA route. As an indication of this, 61 per cent of the Section 24 reports received by the Immigration Service in May involved EEA national spouses.
  While we are not obliged to issue a residence document in the case of sham marriages, the burden of proof in establishing whether the marriage is one of convenience lies with the Secretary of State. This is a very difficult and a resource-intensive activity.
  As such, if we are to stop spouses of EEA nationals abusing immigration law through sham marriages, the most effective option is to stop them from getting married in the UK in first place. Designated register
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  offices in addition to the requirement for entry clearance or a Home Office certificate of approval will provide a complementary two-pronged approach to tackling this marriage abuse.
  With this in mind, I hope that the noble Countess, Lady Mar, will withdraw this amendment. She said that she would not proceed with it. I hope that that explains some of the reasons why the amendment cannot be accepted. It is a seductive one until the question of where those rights come from is considered.
  As noble Lords will recall, the noble Baroness, Lady Anelay, tabled an amendment at Report stage that would have required both parties to attend the designated centre together. This was resisted because as drafted it did not meet the policy aim, but I stated that we were considering the policy intention behind the amendment. Since then, she has tabled Amendment No. 20, explicitly requiring both parties to attend the centre together.
  The noble Baroness stated on Report that it was important that registrars at the new designated centres should be able to use the expertise they will build up in detecting sham marriages effectively, and that it was difficult to see how they could do this if under the new measures the parties to the proposed marriage were able to give notice of their intention to marry at separate designated centres. That would be the position under Clause 19 as currently drafted. The Government agree with the noble Baroness, and have tabled Amendments Nos. 16 to 19 in response to her amendment.
  Requiring only non-European economic area nationals to attend designated centres or allowing the couple to attend separately would potentially leave a large loophole in the legislation. The fixers of sham marriages will be able to have participants to the marriage give notice separately which, of course, will deny registrars the opportunity to observe the interaction between couples at the notice stage and reduce the ability of registrars to identify suspicious marriages for the purposes of Section 24 reporting.
  By requiring parties to the marriage to give notice together we shall ensure that registrars have an opportunity to observe interaction between couples, enabling them to form a view on whether an intended marriage should be reported as suspicious under current legislation. They will become familiar with the signs indicating a sham marriage and, therefore, be in a better position to be able to identify potential offenders and, in some cases, repeat offenders. One would think that people would not be so stupid as to return to the same register office, but it is amazing what people do. It happens; people have a forged passport and turn up wanting it renewed, never thinking that someone may be checking on it the other side of the desk. It is amazing and it could arise.
  Where suspicions are aroused, Section 24 reports can be made and the Immigration and Nationality Directorate's increased commitment to enforcement and intelligence in this area will mean that, where appropriate, action can be taken.

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  Amendments Nos. 21 and 22 will amend subsection (2)(b) of Clause 23 to bring the powers available in Northern Ireland's enabling clause into line with the amended provisions in Clause 19(2). If there are signs that the problem of sham marriages has been displaced to Northern Ireland, these amendments will give the Secretary of State, after consultation with the Registrar General for Northern Ireland, the power to require that parties to a marriage, involving a European economic area national, give notice together and in person at a designated register office. With that in mind, I would hope that the noble Baroness, Lady Anelay, will withdraw her amendment and that noble Lords will agree to the amendments that I shall move in due course.
  The noble Baroness, Lady Anelay, and the noble Lords, Lord Kingsland, Lord McNally and Lord Avebury, have tabled Amendment No. 23 requiring an independent monitor to be appointed in order to report annually on refusals for permission to marry under subsection (3)(b) of Clause 19. Such a monitor does not exist for any of the Immigration and Nationality Directorate's other managed migration functions, such as leave to remain applications. At this point, the Government do not believe that it is appropriate to appoint one to report on this function. We believe that it would be adding unnecessary bureaucracy.
  All the Immigration and Nationality Directorate's practices and procedures are subject to compliance with the Race Relations Act 1976, as amended, and are subject to independent review by the race relations monitor. The current monitor reports annually to Parliament and operations under subsection (3)(b) would be included within that remit. So there would be a mechanism for reporting to Parliament.
  As I have stated in each of our debates, the Government appreciate the importance of parliamentary scrutiny of the workings of these clauses, which I would have thought would have included the JCHR points that I made earlier. However, we do not feel that an annual report from an independent monitor would be a suitable vehicle in this instance. As I stated on Report, the Immigration and Nationality Directorate officials are seeking to identify a suitable government publication in which the numbers of applications made for certificates of approval and the numbers of successful and unsuccessful applications could be included. I pointed out that some of the issues probably could not be reported if people were simply making inquiries. This publication, once we have found a suitable one, would then be laid before Parliament.
  In Amendment No. 24 the noble Lords, Lord McNally and Lord Avebury, have requested that a statutory right of appeal be introduced for those persons who are refused a certificate of approval by the Home Secretary under subsection (3)(b) of Clause 19. The Government do not believe that a statutory right of appeal is necessary in relation to such refusals, as a decision to refuse a certificate of approval will be subject to challenge by way of judicial review.
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  All applications for certificates of approval will be considered and determined in accordance with published guidance, which will set out the factors to be taken into account by caseworkers when determining such applications. Where an application for a certificate of approval is refused, a person would be free to challenge the decision by judicial review on what are commonly known as Wednesbury grounds—by the way, that is a place in the Black Country in the Midlands—which is that no reasonable person in the same position could reasonably have reached the same conclusion. For example, a person might challenge the decision on the basis that it was not made in accordance with the published guidance, or that the published guidance was itself unreasonable. Therefore, we think that judicial review is a sufficient and appropriate method of challenge to decisions to refuse an application for a certificate of approval.
  In light of that, I would hope that noble Lords will not proceed with those amendments.
  Some further points were raised. I shall refer to that raised by the noble Lord, Lord Lester, and my noble friend Lord Judd on the JCHR report. We are satisfied that the provisions are fully compatible. We appreciate that the timing is not ideal. We shall respond in detail in writing, as the points raised merit a detailed response. That is the official Home Office response.
  Lord Judd: My Lords—
  Lord Rooker: My Lords, I have not finished yet. I am saying that in my view a response in writing, even if it is an interim response, should be in front of the House of Commons when the Bill returns to that House with the Lords amendments. That is only fair because of the major changes that have been made in this House. I shall give way to my noble friend.
  Lord Judd: My Lords, I am very grateful to my noble friend for giving way. Does he agree that the advice that he has just conveyed to the House is in itself disturbing? No Minister, of course, would bring any legislation to this House unless there were a statement saying that it was compatible with human rights obligations. Our job in the Joint Committee is to examine that and to see whether it is valid.
  Lord Rooker: Yes, my Lords. No Minister would sign the front of the Bill unless he received written advice to the effect that it was compatible. That is the case. I just do not know what the procedure was. The Bill was introduced, it went through Committee stage and Report stage in this House and was recommitted to a Committee so that some amendments could be added. It was not another Bill. I am not sure whether a signature was required because the Bill was that which was presented to Parliament, both to the first House and then to this House. I have never been required to sign to the effect that a particular amendment to a Bill is compatible. On the other hand, the advice that one receives would cover these points. The Committee has a job to do.
  Lord Lester of Herne Hill: My Lords, the way in which the Minister has put the point is entirely fair and

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  practical and shows his commitment to parliamentary scrutiny. I am sure that in the Commons his words will be read and I am sure that the committee will appreciate what he has said.
  Lord Rooker: My Lords, I appreciate that. I am speaking from experience and I am trying to help the Government. We have placed ourselves in a difficult position. I believe that an interim response in writing ought to be made available and I have said that from this Dispatch Box, so that is it.
  A noble Lord raised the point about people's changing status once they are in the UK. Persons who have been granted six months' leave or less since entering the UK may not switch into marriage. Those may be people on short-term visas, such as students. Anyone else can switch into marriage if he or she has been granted over six months' leave since entering the UK. However, those provisions apply only to persons marrying British citizens and persons settled here; they do not apply to European economic area nationals exercising treaty rights.
  I was asked about Clause 19(3)(c) and who would be exempt. We envisage that persons with settled status in the UK will be exempt under subsection (3)(c). Thus the clause is being left to secondary legislation under the negative resolution procedure, and will be subject to the usual Parliamentary scrutiny procedure. I am not clear whether that answers the point about paragraph 46, which the noble Lord, Lord Lester, asked me about. A note has not winged its way to me, and I shall see if I can get one before we finish tonight, because I can refer to it on another amendment, as I did in our earlier debate on Zimbabwe.
  I hope that is a sufficient explanation, that this apology is accepted, that noble Lords will not, therefore, push their amendments to a vote and that, in due course, they will support the amendments I shall move on behalf of the Government.
  7 p.m.
  The Countess of Mar: My Lords, before the noble Lord, Lord Rooker, sits down, could he respond to my question about Rule 284? Is it working properly?
  Lord Dholakia: My Lords, I hope the Minister can write to me if he is not able to answer my question. The purpose of a sham marriage is one of non-EEA nationals marrying EEA nationals for the purpose of leave to remain in the United Kingdom. Would the noble Lord, Lord Rooker, agree that there is nothing to stop non-EEA nationals marrying an EEA national in a European country and then coming to this country and exercising their rights here? There is no way you can control that particular situation.
  Lord Rooker: My Lords, off the top of my head I think that is correct, but I shall take advice and write to the noble Lord, Lord Dholakia. That was one of the issues raised in our earlier debates.
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  I can only repeat the point I made about paragraph 294 at the opening of my speech. As I made clear, the amendment of the noble Countess, Lady Mar, does not assist us in combating marriage abuse when it is undertaken by a non-EEA national marrying an EEA national. As I said, Paragraph 284 of the immigration rules requires the persons applying for leave to remain on the grounds of marriage to a British citizen or persons settled here, to have extended leave to remain in the UK and been granted over six months' leave since the date they were admitted to the UK, or have entered the UK with leave as a fiancé. Of course, that happens up and down the country many times a week. I suspect.
  When a person does not meet these criteria, they would be expected to leave. Quite clearly, if we have a position of alleged sham marriages, something is not working in the rules the way they are intended. It may sound like a glib answer to the noble Countess, but that must be the position. Hence, we need these extra powers.
  The Countess of Mar: My Lords, the noble Lord, Lord Rooker, will not mind my saying that I think that was a dreadful answer. It does not answer my question.
  I am very grateful to noble Lords who have taken part in this debate. We have given the subject an airing, and perhaps the JCHR will be proved right. My instinct tells me that this group of clauses is not a good one. On that basis, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 19 [England and Wales]:
  Lord Rookermoved Amendments Nos. 16 to 19:
  Page 18, line 37, leave out "a notice" and insert "the notices"
  Page 18, line 39, leave out "may" and insert "shall"
  Page 19, line 1, leave out paragraph (b) and insert—
  "(b) shall be delivered to the superintendent registrar in person by the two parties to the marriage,"
  Page 19, line 5, leave out first "the" and insert "his or her"
  On Question, amendments agreed to.
  [Amendment No. 20 not moved.]
  Clause 23 [Northern Ireland]:
  Lord Rookermoved Amendments Nos. 21 and 22:
  Page 21, line 27, leave out "may" and insert "shall"
  Page 21, line 28, after "given" insert "by both parties together"
  On Question, amendments agreed to.
  [Amendments Nos. 23 and 24 not moved.]
  Clause 26 [Unification of appeal system]:
  Lord Goodhartmoved Amendment No. 25:
  Page 26, line 5, at end insert—
  "( ) If an application under section 103A(1) is brought by a party to the appeal other than the appellant, the appellant's costs—
  (a) in respect of the application, and
  (b) in respect of the reconsideration,
  shall be paid out of the Community Legal Service Fund established under section 5 of the Access to Justice Act 1999 (c. 22) (funding of services)."
  The noble Lord said: My Lords, this is a very short point. The provisions of Clause 26 of the Bill relating to legal aid for reconsideration of the original decision of the appeal at the asylum and immigration tribunal are apparently based on the assumption that the application for reconsideration will be made only by an asylum seeker or immigrant. In fact, an application can be made by the other party to the appeal, the Home Office, which may be unsatisfied with a decision in favour of the asylum seeker or immigrant.
  The provisions are that legal aid can be granted to an asylum seeker or immigrant only retrospectively. In the case where the asylum seeker has been successful before the tribunal and then the Home Office has obtained an order for reconsideration, it does seem unfair that the asylum seeker, or lawyers, should be entitled to the benefit of legal aid only retrospectively. Having won first time, surely the asylum seeker must be entitled to legal aid to defend his or her position. I beg to move.
  Lord Kingsland: My Lords, I find the argument of the noble Lord, Lord Goodhart, very compelling.
  Lord Filkin: My Lords, I can assure the noble Lord, Lord Goodhart, and the House that Clause 103D will only apply to reviews and reconsiderations instigated by the appellant. This is already explicit—or perhaps implicit—in the text of Clause 103D(1) and (3). They use the words "on the application of the appellant" as a prelude to the new provisions conferring new powers on the tribunal and the High Court to order payments out of public funds. In all other circumstances, the usual legal aid scheme will continue to operate, including the means and merit tests and the usual arrangements whereby the court or tribunal can order the losing party to pay the winning party's costs, without any drain on public expenditure. Nothing, therefore, in Clause 103D applies in relation to cases where the review is instigated by a party to the appeal other than the appellant. I hope that that clarification is helpful to the noble Lord, Lord Goodhart.
  Lord Goodhart: My Lords, I am grateful to the Minister. It certainly is not explicit, and it was not clear to me that it was implicit. In view of what the Minister has now said, however, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Lord Goodhartmoved Amendment No. 26:
  Page 26, leave out lines 6 to 8.
  The noble Lord said: My Lords, this is much more serious group of amendments. I speak also to Amendment Nos. 27, 28 and 30 to 33. These are all amendments to Clause 26.
  Clause 26 eliminates the adjudicators and provides for appeals by immigrants or asylum seekers from an adverse decision or an immigration officer direct to the asylum and immigration tribunal. If that appeal is rejected, the immigrant or asylum seeker can apply to
  732
  the High Court for an order requiring the tribunal to reconsider its decision on the ground that it may have made an error in law.
  The Bill inserts new Section 103D into the Nationality, Immigration and Asylum Act 2002. That is the provision which deals with costs. Under Clause 103D(1) and (2), the applicant's costs may be paid out of the Community Legal Service fund if, but only if, the application has succeeded. That is the cost of the application, not of any reconsideration which has been ordered. At the reconsideration stage, the tribunal can order the costs of both the application and the reconsideration to be paid out of the fund under Clause 103D(3) and (4). The reconsideration does not have to be successful in order to get an order, but the result has to be taken into account under these provisions. Clause 103D(6)(a) provides that if payments of legal aid are made, the amount of payments may vary according to the result. That is to enable the Government to provide mark-up success fees for successful applications. Section 103D(6)(c) provides that the power to make an order for the payment of costs,
  "may be restricted by reference to the outcome of the appeal".

  The Government have made it clear that they intend to introduce a conditional fee system for both the application and any reconsideration which may result from a successful application. There is an absolute "no win—no fee" system at the application stage because the order under subsection (1) can only be made if the appropriate court has made an order. At the reconsideration stage, the Government have said that they will limit payments out of the fund to winners or near misses, but as with conditional fees under the Access to Justice Act 1999 there will be a mark-up for successful cases.
  Conditional fees were introduced by the 1999 Act for civil cases involving damages or claims to property. Conditional fees have many defects, but we have to accept they are here to stay in civil cases. Up to now, they have not been introduced in public law cases and they cannot, under the 1999 Act, be introduced for criminal cases. If ever the conditional fee system was applied to criminal appeals, I believe there would be an absolute uproar in the legal profession and beyond it. What would the effect of that be? Of course, it would depend on the amount of the "success fee" or mark-up. If we assume that it is 100 per cent—that is, double the standard fee being given if successful; it certainly would not be more than 100 per cent, and could well be less—it would mean that lawyers would not take a case unless the chances of success were greater than 50 per cent, otherwise they would end up being out of pocket.
  People convicted of crime must obviously be allowed to apply for leave to appeal from conviction even if their chance of success is quite small, and if the judge hearing the application for leave thinks the case is strong enough to justify leave to appeal then the appellant will get legal aid for that appeal, win or lose. The consequences of a wrongful rejection of an asylum claim can be just as disastrous as the consequences of a wrongful conviction, so I believe that legal aid for the

  733
  application and reconsideration should in principle be treated on the same basis as criminal appeals. It is completely unacceptable if lawyers refuse to take a case because it only has a 40 per cent chance of success, or indeed a 20 or 25 per cent chance of success.
  I am prepared to accept that some modification of the criminal appeal basis is appropriate here. For the application, what I propose is to remove the requirement that the costs of the application can only be paid if the application succeeds. That is the result of Amendment No. 26, which leaves payment in the discretion of the High Court judge who hears the application. This discretion would of course be retrospective, but I believe the court, if left with that discretion, would order payment where it was reasonable to make the application, even though it had not succeeded. Conversely, where there were no reasonable grounds for making the application, costs would be refused. The costs of the application are relatively small, because applications are determined on the basis of written submissions of the applicant, without argument. But the reconsideration stage involves considerably more time and work, because the cases have to be argued and are contested. It is true that they are legal arguments only, but they could be time-consuming, involving a full day or more.
  In principle, I believe that if the application is granted, that shows there must be reasonable grounds for reconsideration and legal aid should be granted before the reconsideration hearing. I put forward an amendment at Report which would have had that effect. I have however decided not to bring that amendment back, and have instead put down Amendment No. 28, which gives the High Court power to grant legal aid in advance where reconsideration is ordered. I do not intend to press that amendment because it is not central to the case that I am making. I recognise that there could be cases in which the grounds on which a successful application has been based are misleading or incomplete. For example, failure of the lawyer making the application to cite an important decision in another case of which the judge is unaware.
  7.15 p.m.
  I am, therefore, prepared to accept that the order for payment of costs should be retrospective and in the discretion of the tribunal, but I believe strongly that costs should only be refused where there are no reasonable grounds for making that application. That is the effect of Amendment No. 30. If the costs are refused, reasons must be given so that that decision can be reviewed: that is the purpose of Amendment No. 31. I have passed over Amendment No. 27, which is a very minor consequential amendment.
  It follows that reference to the amount of the payments varying according to the results, and to the order for payments being restricted by reference to the outcome of the appeal should be omitted. That is the effect of Amendments Nos. 32 and 33.
  734
  The Bill as amended will still give protection to the legitimate aims of the Government. Applications will still be dealt with quickly, because there will be no prior applications for legal aid. Hopeless applications will be deterred because the judge or tribunal can dismiss them and refuse, in their discretion, to order costs. Lawyers in the few unreasonable cases which may slip through the filter will be punished by being refused payment out of the Legal Aid Fund.
  If these amendments are not accepted, there is a real risk of injustice to immigrants and asylum seekers. That is the view of the Joint Committee on Human Rights, in a report which was published much longer ago than yesterday. These passages are from its thirteenth report of the present Session. On page 23 the committee says:
  "It seems to us undesirable that the right of access to court for the protection of the most fundamental of rights should be made to depend for its effectiveness on the degree to which lawyers are risk-takers".
  The report continues at paragraph 1.85 to say:
  "The evidence of respected bodies with practical experience in the field is that the legal aid proposals will inevitably lead to meritorious cases not proceeding because of the practical impossibility of obtaining representation, and this will in turn lead to individuals being returned in breach of the UK's ECHR obligations and of the principle of non-refoulement. We remind the Government of its obligation under the ECHR to ensure that there is available a practically effective opportunity to have the substance of any arguable Convention complaint considered, and that this obligation includes a positive obligation to take steps to make sure that there are not practical obstacles to the availability of such an opportunity".
  Then, in paragraph 1.87, the committee says:
  "We agree that the effect of the proposed conditional fee legal aid regime for High Court reviews from the Tribunal will be that meritorious cases do not get brought because of the lack of representation".
  I am astonished that the Government are prepared to put into the Bill provisions which will cause such obvious injustice—doubly so when that injustice could be avoided by alterations to the Bill which would protect the legitimate objectives of the Government: the deterrence of unmeritorious appeals. I beg to move.
  Lord Kingsland: My Lords, the encyclopaedic preamble of the noble Lord, Lord Goodhart, to these amendments has left me with a relatively modest task. I entirely share his views about conditional fees, as indeed I explained at Report. It seems to me that they are, in principle, wrong in the context of public law matters. Not only are they wrong but also, in my submission, unworkable because the financial affairs of asylum seekers are such that they could never afford the insurance premium necessary to guarantee their legal representatives' fees in circumstances where the case was lost.
  On the other hand, I also share the view of the noble Lord, Lord Goodhart, that is appropriate to award costs at the reconsideration stage, retrospectively, and at the discretion of the tribunal. The test should be a merits test and it should be a robust test without being unfair. There is no amendment which seeks to gauge exactly what the merits test should be. I shall be

  735
  interested to hear whether the Government have given any further thought to that matter between Report and Third Reading.
  Some of the amendments carry the name of both the noble Lord, Lord Goodhart, and myself. Since the noble Lord has already spoken to them, I need add nothing. But there is one amendment in the name of the noble Lord, Lord Goodhart, which I have been unable to support. I refer to Amendment No. 28. That is not because I disagree with the spirit of the amendment but because it seems unfair that there should be, as it were, two classes of legal aid rules for those who reach the reconsideration stage.
  There are rules which are established by the High Court judge, because Amendment No. 28 says that a High Court judge,
  "may order that the appellant's costs in respect of the reconsideration shall be paid out of that Fund",
  and rules that apply to those applicants who have not had such an order made by the High Court judge and therefore have to rely on the discretion of the tribunal. That seems to put the second category in a disadvantageous situation. I would like to see all those who come before the tribunal for reconsideration having their legal aid applications treated on the same basis.
  Lord Clinton-Davis: My Lords, I am not entirely persuaded that the Government have alighted on the correct solution to what is undoubtedly a very difficult problem. Nor am I persuaded that the alternatives which have been postulated, notably by the noble Lord, Lord Goodhart, provide the complete answer, although I think that in theory, they are rather more compelling than the Government's case.
  I plead guilty to preferring, in our earlier debates, a view different from that of the Government. I shall not weary the House with a reiteration of all the arguments. Suffice it to say, we are both dealing with situations which, by their very nature, are, at this stage, unproved and, indeed, cannot be verifiable.
  I submit, therefore, that the Government should have an opportunity—two years from the enactment of the Bill, say—to determine whether their preferred way works without having any serious impact on civil liberties or whether we should revisit the matter, giving the Legal Services Commission the task of determining whether there is an arguable case, and that those putting it forward should be in no doubt that their costs will be paid. I ask my noble friend whether this idea is worth contemplating, as I believe it is.
  Lord Filkin: My Lords, in responding to what have been clear and succinct speeches, I shall set out the Government's position pretty fully. That is not because I want to weary the House but if, as may well be the case, we come back to these issues time and time again—and I hope that I have the attention of the noble Lord, Lord Kingsland, on this point—it is fair that noble Lords should understand why the Government are doing this and the force of their position in this respect, so that there is no misunderstanding.
  736
  When we originally introduced the Bill into this House, we had sought to remove judicial review. We did so not for any flippant or frivolous reasons but because we have a duty to this country to try to make the asylum system work. This is in the interests of those who claim refuge in our society but also in the interests of the taxpayer, the efficient use of public money and the confidence of our society that the Government are addressing the issue of asylum properly as well as addressing asylum abuse properly.
  We listened to noble Lords when they said that they felt that ousting judicial review was going too far, and we listened seriously. The noble Lord, Lord Kingsland, had the courtesy to acknowledge that when my noble and learned friend the Lord Chancellor put before the House why we had listened and why we were going to change. But make no mistake—we are not embarking on a process to recreate, amendment by amendment, the old two-tier system of appeals from the original decision process that we currently have. That is for a very good reason. While undoubtedly there are some people who ought to have had further consideration, in practice the process has led to abuse. If this House is party to perpetuating such abuse, the public will express their views on the matter very clearly and strongly. I make a distinction between abuse and trying to ensure that we uphold the civilised standards that we are proud of in our society.
  So we are not going to allow the recreation of a bells and whistles two-tier system which has been the central thrust of this part of the Bill. Why not? First, there is the issue of cost. The cost of legal aid for asylum and immigration cases went from £53 million in 1998–99 to £176 million in 2002–03, while the most recent figure is nearer £200 million. There are plenty of good uses for £200 million.
  The cost of an individual pursuing an appeal through to judicial review is probably about £4,000. Of course it is right and proper that such an individual should be legally aided by the state if there is serious merit in his or her case, but it is not right and proper for the state to fund an appeal when there is not serious merit in the case. Our society would hold us, as a House, in contempt if we were not able to make that distinction.
  There is also the issue of delay. The consequence of a byzantine structure of appeals, which is what we are trying to demolish, is that it takes well over a year—more than 62 weeks—for a person who is persistent with their legal adviser and uses every single step of the process to bring the matter to a conclusion. We are seeking to put in place a system that is fair to the appellant but can nevertheless be concluded within 20 weeks or so.
  The effect of a long-running process also matters. Europol—not me and not the Home Office—estimates that 70 per cent of people who come into the EU are facilitated in doing so by criminal gangs. It is self-evident that they have to have assistance to get to Britain, either through false means of transportation or forged documentation. This is a criminally run and criminally supported business. One of the reasons that

  737
  it is a good business for criminals is that people will pay them substantial sums of money to try to get into Britain and pursue an asylum claim.
  Britain is attractive because the process is long and slow, and removals are difficult. Countries where the process is rapid and removals are certain are a much less attractive proposition for a facilitator who is trying to extract £5,000 from somebody in the Indian subcontinent who wants to get into another country. That is why it matters.
  The final reason why the process matters is that wider society in Britain does not believe that the Government or Parliament are able to make that distinction between people who are genuine asylum cases and those who, supported by criminals, are able to make claims that are not genuine and have a state-funded process that supports them in doing so. That undermines the confidence of society in government and the administration of justice. More seriously, it also undermines the public's belief that people who are granted asylum in our society are genuinely deserving of the refuge that this country gives. That matters in terms of our society. I do not want, nor should this House want, society to think that asylum recipients are liars, cheats, crooks or frauds. That terribly damages community cohesion.
  I have set out with no apology why that matters and why I fear noble Lords will be hearing me say it on a number of occasions again in the future, if, as I fear, both opposition parties choose to ignore that serious picture and vote against what we are proposing.
  I turn to the specifics of the issue. Approximately 70 per cent of people who are given a "no" decision by IND lodge an appeal. In many ways, one would expect them to do so. Of that 70 per cent who have had their case heard by the independent tribunal, which has not found that they deserve asylum according to our laws and international standards, about 50 per cent then appeal to the Immigration Appeal Tribunal. The noble Lord, Lord Newton, who is in his place—
  The Countess of Mar: My Lords, perhaps I may slightly correct the Minister. The first appeal is to an adjudicator, not to an independent tribunal.
  7.30 p.m.
  Lord Filkin: My Lords, the noble Countess, Lady Mar, is absolutely right. The first appeal is to an adjudicator in the Independent Immigration Appellate Authority. The second appeal is to the independent tribunal. I thank her for that correction.
  Those figures demonstrate a level of appeal to the higher stages which one sees in no other tribunals in our jurisdiction. That is for two obvious reasons. First, the applicant has absolutely nothing to lose by playing the appeal process to the maximum. Without being too sharp about it, the lawyer has absolutely nothing to lose by taking cases that do not have serious merit, or even reasonable grounds to argue, to the next stage of appeal because they are fully funded by the state in doing so. Therefore, we have a system which provides an incentive
  738
  for both applicant and lawyer to play it long. That produces the serious, negative consequences that I have described. Those consequences matter to this Government and they matter to this society.
  Finally, I shall speak to the summary figures. If one looks at the number of people who appeal from the decision of the adjudicator to a higher tier of process and if one then tracks the figures around the system, only one in 10 of those people who appeal against an adjudicator's decision has that decision changed at the end of the process. If one wanted evidence of abuse, that figure would provide it. I have identified the motivation for abuse, but that figure demonstrates that there is abuse in the system. Only one in 10 cases actually leads to a change in decision.
  The statistics are complex. I have put a letter in the Library of the House which explains why I am absolutely confident that that is a true and fair figure. It is the figure that should be sitting over this debate. We are not talking about a system where there is no problem and which we do not need to worry about sorting out. We need to worry about sorting it out extremely seriously and I shall watch with interest how the respective parties vote on these issues if the House divides.
  That is why the appeal system matters and why the Government are committed to trying to do something about it. I shall now say where the amendments are deficient and why I do not agree with them. I shall also, as I hope is my wont, signal where there may be some common ground. I shall be interested to see whether there is any common ground on these issues.
  I turn briefly to the process. Section 103D was part of the package of amendments that was introduced to replace the judicial review ouster with a new system of access to the higher courts. It is central to ensuring that only those with a genuine claim apply for review and to discouraging abuse. I have spoken about the abuse and I shall not repeat that. In exceptional circumstances, the High Court will have the power to order legal aid to be paid for the review process. An example of an exceptional circumstance might be a case where, on consideration of the review application, the High Court referred it to the Court of Appeal because it raised a question of law of general importance to the system. In those cases, it is right and proper that legal aid should be awarded, as I am sure that the noble Lord, Lord Goodhart, would recognise.
  Under those new arrangements, we are asking lawyers to share the risk with the taxpayer when deciding whether a case should be pursued beyond the single tier. If we went along with the thrust of the amendment of the noble Lord, Lord Goodhart—for whom I have the greatest respect and who I know has tabled it from good principles—the broad consequence would be that virtually any appellant would be able to argue that there was some reasonable grounds. One would need an absolutely hopeless lawyer or an absolutely hopeless case, or both, not to be able to find some reasonable

  739
  ground for lodging an appeal. The consequence of no reasonable grounds is that virtually everybody would continue to receive legal aid, even for cases—
  Lord Goodhart: My Lords, is the Minister aware of the famous remark of one appellate judge; that the fact that a case has been argued for a week does not mean that is an arguable case?
  Lord Filkin: Yes, my Lords, I take the point. Without speaking at great length, while it is, on the face of it, seductive to the House to think that there are no reasonable grounds, I envisage the consequences of that being our finding ourselves very much where we are now. And where we are now is very unsatisfactory for the reasons that I have given.
  Some of the debate will turn on whether it is reasonable to put the burden on the lawyer to make a judgment about whether he should take a case to appeal. The lawyers who are making that judgment will already know the case, because, in most cases, they will have advised the applicant on legal aid when he was making his appeal to the IND. They will have advised the applicant when he made his application to the IAT. Therefore, they will know the facts and the strength of that case. Essentially, the system will be that they should be rewarded on success and that they should be rewarded on near-misses. They should be rewarded at a higher rate than would normally be the case so that they are compensated for the risk that they take, because none of us can perfectly judge which case is a winner or even which is a near miss. Our intent is not to squeeze out of the system those cases which have reasonable grounds for being argued—those cases should be brought forward. Nor is it our intention to make the legislation so stringent that a good asylum lawyer cannot make a judgment where he thinks that the case has legs and should have a hearing. If he gets that wrong, one wants him to be in a position whereby, on swings and roundabouts over time, sufficient legal aid is granted as to continue an adequate supply of lawyers. Therefore, central to our thinking is that one has to pitch the legal aid, by whatever mechanism—there could be variability in it or a debate about it—so that there is an adequate supply of lawyers who are prepared to come forward and take cases that should be taken up because they have merit. However, we have to squeeze out those cases where there are no reasonable grounds for believing that there has been an error of law on the part of the AIT and that, therefore, they justify a reconsideration.
  At previous stages of the debate, I have been asked why the LSC should do not all of that. There are two reasons for that. First, the LSC will add a further delay to the loop. Secondly, it is extremely difficult, just on the basis of the case that is presented on paper by the appellant's solicitor, to make a judgment about whether that case has strong merit. Therefore what happens is that such cases are put through and it is only when the full case is argued before the AIT on reconsideration that anyone apart from the lawyer will be in a position to make a judgment about whether the case had serious merit or not. The approach involves
  740
  those reasons and not any flippant reasons. If we could have done it another way we would have given it serious consideration, but it does not actually work in practice if we are to achieve what we wish to.
  The mechanism of trying to incentivise lawyers to bring forward good cases—and to reward them at a level that ensures that they do so and take a reasonable level of risk—has to be crafted in detail through regulations. Those require a serious discussion with the professions to get the level right to ensure there is an adequacy of supply. That is not a flippant but a serious point. We want to ensure that there is adequacy of supply so that they do take those judgments and risks. We cannot calibrate the detail of that now.
  Amendment No. 26 would enable the High Court power to award legal aid for review applications even if the application was dismissed. That is totally at odds with the policy underpinning the proposals, which is to encourage lawyers to focus on meritorious cases. Paying legal aid for unsuccessful applications will not give the deterrent effect that is so crucial to ensure lawyers do not flood the High Court and the tribunal with weak cases.
  Amendment No. 28 gives the High Court power to order legal aid to be paid for reconsideration. Again that undermines the policy intention. It is important to understand the process. The review stage is a gateway. It will be a paper-based process and the High Court will only be engaged in deciding whether the tribunal might have made an error of law that affected the outcome. If it does make that decision, it will order the tribunal to consider the case in practice.
  On reconsideration, parties to the appeal will be able to make oral representations and the tribunal will have the opportunity to examine cases fully. It is inappropriate for the High Court, at an ex parte hearing, to make a definitive ruling binding on the tribunal. That judgment should be made at the tribunal, as I think the noble Lord, Lord Kingsland, accepted when he spoke in his support for some of the amendments.
  Let me give an illustration of why that is so. We have some experience from, I think, May 2003 to April 2004 on statutory—
  Lord Goodhart: My Lords, I do not know if it will help the Minister, but I said in opening that I was not intending to press Amendment No. 28.
  Lord Filkin: My Lords, I thank the noble Lord, Lord Goodhart. He is quite right. Perhaps I will spare him some of my further dire statistics, but I can no doubt share them with him on another occasion.
  On Amendment No. 29, if the High Court thinks a review application has no merit, the amendment requires it to issue a certificate to that effect. I recognise the intention behind the amendment, but it is not necessary.
  As the noble Lord, Lord Kingsland, knows, under the Government's proposals, which will be detailed in the regulations made in due course, we foresee the High Court will order legal aid to be paid only in

  741
  exceptional cases—for example, as we stated explicitly in Clause 103D(1) where the court refers a case to the Court of Appeal. In the majority of cases the High Court is only dealing with ex parte application and will not play a part in ordering legal aid to be paid. It will be for the tribunal. Amendments Nos. 30 and 31 require the tribunal to award legal aid in every case unless there were no reasonable grounds for doing so. I have spoken to that already and shown the dire consequences that would come about.
  Amendment No. 32 removes from the Bill the power to award different payments to different cases, based on the outcome of the case. What I heard from the noble Lord, Lord Kingsland—no doubt he will correct me if I heard wrongly—was that while he did not like conditional fees—I think he went so far as to say that they were wrong—he did agree that for having an effective control system, costs had to be awarded retrospectively at the discretion of the tribunal. We are four square on that point.
  The noble Lord also said that he was perfectly comfortable with a robust merits test. What I understand by that is that he would see that there should be the payment of legal aid, clearly on cases that succeeded, and no doubt also, without putting words into his mouth, on cases that had merit or strong merit. Therefore I infer from what he said that there should be a flat fee on all such cases. It is possible that we are talking about whether there should be a two-stage fee or a flat fee, perhaps at a higher level than the lower level might be on a two-stage fee, applied for perhaps a tightly limited number of cases.
  7.45 p.m.
  If that is what the noble Lord, Lord Kingsland, intended—I am not getting a response; yes I am—I do not think the difference between us is necessarily massive. But no doubt he will correct me if I am wrong.
  I have gone on long enough. I am glad to hear that I have the House's support on that as ever. But my length is for a reason. If we do not get this matter right—if this House does something to the Bill that means we fundamentally do not fulfil the duty we have to the country in being fair to asylum seekers, yet also controlling abuse of the system—we will be rightly pilloried, but also the issue will return to your Lordships' House. It is as well that noble Lords understand why we feel strongly on this issue.
  Before the noble Lord, Lord Clinton-Davis, interrupts, I conclude that I agree with him that as regards the system that we intend to put in place—with or without modifications, if there is scope for modifications—we would be very happy to give a commitment that we will review its operation over a two-year period and will put the report of that review into the Library of the House, so that it is there for inspection, debate and evaluation. I hope that answers the point of the noble Lord, Lord Clinton-Davis.
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  I hope that with those reasons the House will not feel it necessary to move to a Division because I have clearly signalled my willingness to debate within the parameters on which I had a discussion with the noble Lord, Lord Kingsland.
  Lord Kingsland: My Lords, I am most grateful to the noble Lord, Lord Filkin, for those remarks. The position is this: we have put our names to Amendment No. 26—it is a joint amendment—and Amendments Nos. 32 and 34. Those amendments seek to remove the conditional fee system from the Bill. As far as we are concerned, those amendments are unnegotiable. We find a conditional fee system unacceptable.
  However, for my part, if the noble Lord were prepared to say that he would go off to another place and introduce a system based on merits with a robust merits test, but which applied equally to winners or losers without any distinction between the two—if he were prepared to give that commitment on the Floor of the House—then I would be prepared to leave the noble Lord to fulfil that commitment in another place and see what came back to your Lordships' House as a consequence.
  Lord Filkin: My Lords, I will respond to the noble Lord, Lord Kingsland. Although I have probably implied as much in what I said, but let me spell out our view for the avoidance of doubt. We are not wedded to the finest detail of the proposed mechanism. We are wedded to a system that focuses legal aid tightly on those cases which have real merit. That is for good reason. That means the decision can be made only at the end of the process by the tribunal. The detail has to be worked out in regulations, for good not flippant reasons, because one is also partly trying to ensure that whatever system one sets up has an adequacy of supply. You have to have an adequacy otherwise you do not meet the interests of justice.
  If the debate is on how we craft a system that has a robust merits test—"significant merit" are the words that I would tend to look at—we are not wedded to a two-tier system and we are open to looking at introducing amendments that brought in a serious merits test and paid legal aid for cases that won or did not win but met the serious merits test. I give that commitment that we would be happy to do so in another place. I hope that answers the noble Lord, Lord Kingsland, clearly and unequivocally.
  Lord Goodhart: My Lords, our amendments meet absolutely the legitimate intention of the Government to cut expenses, because they would make the award of legal aid retrospective, so that it would not be granted when the application for reconsideration was made on unreasonable grounds. The Minister shakes his head, but he said during the course of this debate that the Government's aim was to squeeze out cases in which

  743
  there were no reasonable grounds. That is exactly our aim too. The problem is that the Minister's draft of these clauses will squeeze out not only cases in which there are no reasonable grounds but those in which there are reasonable grounds.
  Lord Filkin: My Lords, I hope that I understand the position taken by the noble Lord. Noble Lords have corrected me previously, but I have said quite a lot. Essentially, I am convinced, as are our lawyers and officials, that the effect of the noble Lord's amendment would be that we would rapidly have a very large number of cases with pretty weak merits coming through the system, legally aided by the state. We would be recreating the two-tier system with all the negative consequences that I have set out.
  Lord Goodhart: My Lords, in that case, I must ask for the opinion of the House.
  7.52 p.m.
  On Question, Whether the said amendment (No. 26) shall be agreed to?
  Their Lordships divided: Contents, 41; Not-Contents, 95.

  Division No. 3

  CONTENTS

  Addington, L.

  Mar and Kellie, E.

  Avebury, L.

  Michie of Gallanach, B.

  Barker, B.

  Miller of Chilthorne Domer, B.

  Colwyn, L.

  Naseby, L.

  Falkland, V.

  Newby, L.

  Falkner of Margravine, B.

  Northover, B.

  Garden, L.

  Oakeshott of Seagrove Bay, L.

  Goodhart, L.

  Phillips of Sudbury, L.

  Greenway, L.

  Razzall, L.

  Hamwee, B.

  Redesdale, L.

  Harris of Richmond, B.

  Roberts of Llandudno, L.

  Hooson, L.

  Roper, L. [Teller] B.

  Howe of Idlicote, B.

  Russell-Johnston, L.

  Kimball, L.

  Sharp of Guildford, B.

  Listowel, E.

  Shutt of Greetland, L. [Teller]

  Livsey of Talgarth, L.

  Smith of Clifton, L.

  Mackie of Benshie, L.

  Thomas of Gresford, L.

  Maclennan of Rogart, L.

  Thomas of Walliswood, B.

  McNally, L.

  Tordoff, L.

  Maddock, B.

  Wallace of Saltaire, L.

  Walmsley, B.

  NOT-CONTENTS

  Acton, L.

  Clark of Windermere, L.

  Ahmed, L.

  Clark of Hampstead, L.

  Amos, B.(Lord President of the Council)

  Clinton-Davis, L.

  Andrews, B.

  Cohen of Pimlico, B.

  Archer of Sandwell, L.

  Corbett of Castle Vale, L.

  Bach, L.

  Crawley, B.

  Bassam of Brighton, L.

  David, B.

  Borrie, L.

  Davies of Coity, L.

  Brooke of Alverthorpe, L.

  Davies of Oldham, L. [Teller]

  Brookman, L.

  Dean of Thornton-le-Fylde, B.

  Burlison, L.

  Desai, L.

  Campbell-Savours, L.

  Dixon, L.

  Carter, L.

  Drayson, L.

  Carter of Coles, L.

  Dubs, L.

  Chandos, V.

  Elder, L.

  Evans of Parkside, L.

  744

  Evans of Temple Guiting, L.

  MacKenzie of Culkein, L.

  Farrington of Ribbleton, B.

  Mackenzie of Framwellgate, L.

  Faulkner of Worcester, L.

  Mar, C.

  Filkin, L.

  Masham of Ilton, B.

  Fyfe of Fairfield, L.

  Massey of Darwen, B.

  Gale, B.

  Merlyn-Rees, L.

  Gibson of Market Rasen, B.

  Morgan of Drefelin, B.

  Gilbert, L.

  Morris of Aberavon, L.

  Goldsmith, L.

  Nicol, B.

  Gordon of Strathblane, L.

  Pitkeathley, B.

  Gould of Potternewton, B.

  Radice, L.

  Grocott, L. [Teller]

  Ramsay of Cartvale, B.

  Harris of Haringey, L.

  Randall of St. Budeaux, L.

  Harrison, L.

  Rendell of Babergh, B.

  Hart of Chilton, L.

  Richard, L.

  Haskel, L.

  Rooker, L.

  Hayman, B.

  Rosser, L.

  Hogg of Cumbernauld, L.

  Sainsbury of Turville, L.

  Hollis of Heigham, B.

  Sawyer, L.

  Hoyle, L.

  Simon, V.

  Hughes of Woodside, L.

  Taylor of Blackburn, L.

  Hunt of Chesterton, L.

  Temple-Morris, L.

  Hunt of Kings Heath, L.

  Triesman, L.

  Janner of Braunstone, L.

  Truscott, L.

  Jones, L.

  Tunnicliffe, L.

  Judd, L.

  Turner of Camden, B.

  Lea of Crondall, L.

  Wall of New Barnet, B.

  Levy, L.

  Warner, L.

  Lockwood, B.

  Watson of Invergowrie, L.

  Lofthouse of Pontefract, L.

  Whitaker, B.

  McIntosh of Haringey, L.

  Wilkins, B.

  McIntosh of Hudnall, B.

  Woolmer of Leeds, L.

  Resolved in the negative, and amendment disagreed to accordingly.
  [Amendments Nos. 27 to 34 not moved.]
  Baroness Crawley: My Lords, I beg to move that the proceedings after Third Reading be now adjourned until five minutes past nine o'clock.
  Moved accordingly, and, on Question, Motion agreed to.

  Scottish Parliament (Constituencies) Bill
  8.2 p.m.
  Report received.
  Schedule 1 [Substitution of Schedule 1 to the Scotland Act 1998]:
  The Duke of Montrosemoved Amendment No. 1:
  Page 4, line 30, at end insert—
  "() For the purposes of sub-paragraphs (9) and (11), references to" Parliament" do not mean the Scottish Parliament (as defined by section 126(1) of the Scotland Act 1998 (c. 46)) but refer to the Parliament of the United Kingdom."
  The noble Duke said: My Lords, I thank the Minister for his detailed reply to a large number of my concerns at Committee stage. Perhaps I should beg the forgiveness of your Lordships as, for those who have seen the noble Lord's letter, some of my amendments will seem a little dated. They were tabled before I received his letter, which he sent me on 30 June. This could be partly my fault, as I do not have a secretary in Westminster to check my mail when I am not here. The internal mail seems occasionally

  745
  to emulate second-class post, and as nothing had appeared by early Thursday afternoon, I caught up with the letter only yesterday.
  It was particularly useful that he pinned down for us that the Scottish Parliament will provide accommodation for 105 MSPs and their staff. I am not sure whether there has been a reappraisal of the needs of the staff, but I understand some of the inquiries have shown that the first estimate for the building was for some 16,000 square metres, which later had to be revised to 23,000 square metres, and now stands at 31,000 square metres. Whatever else, it must surely be adequate for the purpose.
  The amendment once more raises the issue I brought up at Committee stage as to whether references relate to the Scottish Parliament or to our Westminster Parliament here. On reading the Minister's answer about references to "Parliament", I find myself somewhat perplexed. Clause 3 of the Bill talks about "money provided by Parliament"—that is, as the Minister assured me, this Parliament and not the Scottish one. I then mentioned the reference in Schedule 1 to the laying of the Electoral Commission's report before Parliament. The Minister confirmed that my interpretation was correct, and that the schedule referred to the Westminster Parliament. However, he then went on to explain that, as Schedule 1 replaced Schedule 1 to the Scotland Act 1998, definitions would follow those set out in Section 126 of that Act, where references to the "the Parliament" mean the Scottish Parliament.
  These two statements seem to be contradictory, and for the purposes of clarity I have tabled Amendment No. 1 to make absolutely clear how "Parliament" is to be understood in sub-paragraphs (9) and (11). If Section 126(1) of the Scotland Act defines "Parliament" as the Scottish Parliament, surely we need to make certain that, for these references in Schedule 1, it is the national Parliament at Westminster, and not the Scottish Parliament, before which the Electoral Commission should lay its report. I beg to move.
  The Earl of Mar and Kellie: My Lords, I regret to say to the noble Duke that I think his amendment is wrong. I am happy with the idea that the expression "the Parliament" means the Scottish Parliament. I also think, in terms of the content, that it would be entirely right for the Electoral Commission to report to the Scottish Parliament about Scottish parliamentary constituencies.
  Baroness Carnegy of Lour: My Lords, unfortunately for the noble Earl, what we are discussing is what the Government mean in the Bill, not what the noble Earl would like it to mean. That being the case, the clarity here is extremely important. When we are talking about who does what, and whether one Parliament or the other pays, or has to decide, or has orders laid before it, it is essential that the Bill is completely clear. I think it was the noble Lord, Lord Filkin, who replied at the last stage, and admitted that parliamentary draftsmen often thought things were a bit clearer than other people thought they were, or words to that effect. It is absolutely right to try to clarify this matter. I hope
  746
  the Minister has had permission to accept this amendment, or to clarify to some extent what is meant, because the answer we had before was fairly convoluted, and this is an important point.
  Lord Evans of Temple Guiting: My Lords, I am grateful to the noble Duke, the Duke of Montrose, the noble Earl, Lord Mar and Kellie, and the noble Baroness, Lady Carnegy of Lour, for their comments.
  I say at the outset that the letter of the noble Lord, Lord Filkin, was an attempt to clarify what has been a confusing issue. I agree with the noble Baroness, Lady Carnegy, that the matter should be absolutely clear. I hope that during the next couple of minutes I can clarify matters to the satisfaction of the House. I, too, was slightly confused but, after reading carefully my speaking note, I saw the light. I hope that noble Lords will see the light as well.
  As I say, we have sympathy with the noble Duke's concern to have clear legislation and ease of reference for those who have to use it. However, on this occasion I believe that some of the apparent difficulties may arise from the nature and purpose of the Bill not being wholly appreciated. The Bill is not a freestanding measure. We have to understand that the Bill simply replaces Schedule 1 to the Scotland Act in its entirety, I should emphasise, rather than by making specific textual amendments to the existing schedule, precisely because the draftsman saw this as the most satisfactory way to achieve clarity and readability. Since the new schedule will substitute the existing one to the Scotland Act, it has to be understood and interpreted within the context of that Act as a whole.
  The noble Duke said in Committee that for ease of reference and the saving of time, the Bill's architects should ensure that throughout the Bill reference to "Parliament" should mean Westminster. Otherwise, where it did not, it should be qualified. I can reassure the noble Duke and other noble Lords that that is in fact the approach taken in the Bill, although we concede that it may not be quite as obvious as he would wish.
  All references to "Parliament", without the definite article prefixed, are to be understood following established usage in legislation as referring to the United Kingdom Parliament. However, as my noble friend Lord Filkin explained in Committee, under the interpretation provision in the Scotland Act, at Section 126(1), any references to "the Parliament"—that is, with the definite article prefixed—are to be interpreted as meaning the Scottish Parliament.
  I know that that may not provide sufficient clarity to assuage the noble Duke, but I hope he will accept that at least there is a system of differentiation in operation within the Scotland Act—without having to look outside the legislation itself—which consistently distinguishes between the Westminster and Scottish Parliaments.
  I now turn specifically to the effect of this amendment. I have to point out—in the light of the explanation provided above—that if it were accepted, the amendment would in fact relate both provisions to

  747
  the United Kingdom Parliament. However, this would defeat the intention of paragraph 3(11), which is to ensure that the Electoral Commission's report is put before the Scottish Parliament at the same time as it is submitted to the Secretary of State. So, if the amendment were accepted, the currently existing duty to inform the Scottish Parliament directly of recommended changes to its constituencies would be deleted. We believe that that would be a most serious discourtesy.
  As I said earlier, I understand and have sympathy with the noble Duke's concerns here, but a consistent approach has been adopted in the drafting of this Bill—although perhaps a very subtle one—and the amendment itself would upset the purpose of the provision that it would affect. I hope that with that explanation the noble Duke will feel able to withdraw his amendment.
  The Duke of Montrose: My Lords, I am very interested in the noble Lord's reply which, so far as I can see, has given a whole new power and meaning to the word "the". In Committee I suggested that subparagraph (11) should include the words "Scottish Parliament" in order to make it slightly more obvious. Sub-paragraph (11) refers to "the Parliament" but it is interesting to discover that this is a matter of differentiation.
  It is a great relief to hear that the Minister was correct in referring us to the definition in Section 126(1) of the Scotland Act, because the way the argument was developing, it sounded horribly as if he had given the wrong definition. However, I believe that rather more notice will have to be taken of the difference between "Parliament" and "the Parliament". In the mean time, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  The Duke of Montrosemoved Amendment No. 2:
  Page 5, line 27, at end insert—
  "Timetable of review

  The Boundary Committee shall complete the review within twenty calendar months of the date upon which the Electoral Commission instructed that the review be carried out.

  The Boundary Committee shall complete a review which does not involve a local inquiry held in respect of any region or regions within fourteen calendar months of the date upon which the Electoral Commission instructed that the review be carried out.

  The Boundary Committee shall carry out any reconsideration under paragraph 5(4)(a) within two calendar months of the request by the Electoral Commission.

  The Boundary Committee shall carry out any fresh review under paragraph 5(4)(b) within six months of the request by the Electoral Commission.

  Local authorities shall be required to have regard to the need to comply with the timetable laid down in this paragraph."

  The noble Duke said: My Lords, we come now to how reviews are to be carried out. This amendment would impose a timetable on the process whereby the Boundary Committee completes its review, or reconsiders its review, at the request of the Electoral Commission.
  748
  The principle that all government agencies should work to some form of timetable is important. It is not right that decisions which affect the livelihood, home, or education prospects of British citizens should be delayed because those charged with making them have no deadlines.
  Doubtless the Minister will assure me that guidelines will be issued to remedy this situation. Guidelines, however, are not subject to review by Parliament—the Westminster Parliament, that is—and in practice are highly variable.
  We have no idea from the Bill as it stands how long the procedure will take. It would be helpful at this stage if the Minister could give us some clarification or set out what he sees as the likely timing of the review and the report process.
  We believe that it would be in the interests of transparency and accountability for some sort of timescale to be placed on the face of the Bill. The time limits we have suggested are perhaps not totally ideal, but it is the principle behind the amendment which we believe is important. I beg to move.
  8.15 p.m.
  Lord Monro of Langholm: My Lords, I rise to support my noble friend. I think that the Government have got into a bit of a muddle over timing and we would like, with this amendment, to help them get out of their shambles.
  As the Minister knows, we had very little sympathy in Committee and even at Second Reading for the fact that the Government had ended up by having four different methods of voting and representation in Scotland. We will have the local government constituency, the European constituency, the Westminster constituency, and the Edinburgh constituency, each of which may have a different method of voting. Can one imagine anything more complicated for the Scottish public than four systems and four constituencies? The Westminster constituencies will be new ones, of course, so there will be five issues to upset the public in Scotland.
  The Deputy Prime Minister and others have spent a great deal of time saying that we should increase the percentage of votes at elections, that we should have postal votes, and goodness knows what else. All they have achieved so far, however, is a monumental difficulty for the average person to know in which constituency, how they are voting, and who their representatives might be. We also have, in the European Parliament, voting for parties rather than individuals—which I think is totally wrong in the modern world.
  The key point here is that my noble friend has recommended a timetable. If we look at the present schedule, nothing need happen before 2010, which is six years away. In the light of what I have said about the shambles of the different constituencies and voting systems, I think that we have to get on with it a great deal quicker.
  While I do not necessarily say, as my noble friend says, that we have the right timing, the Minister could bring forward an amendment at Third Reading which

  749
  would speed up all the procedures by the Boundary Committee and the Electoral Commission. Between those two bodies and a general letting things drift, we will find that it will be 2010 before people know where we are in relation to half of the constituencies, boundaries and systems in Scotland.
  There is a great deal to be said for getting on with the review after the next election and not letting it drift on to 2010. I should have thought that two years after the next election would be more than adequate. The Government should think of a form of words and an amendment, in order to bring about a little more speed in this regard.
  The Earl of Mar and Kellie: My Lords, the timetable proposed by the noble Duke is perhaps desirable, but I doubt that it needs to be on the face on the Bill. The spirit is right, but it could lead to an ill-considered rush to complete the task. Perhaps this amendment would be better placed in guidance.
  Lord Gray of Contin: My Lords, I think that we are at a slight disadvantage here. We have not had the opportunity of seeing the letter which the noble Duke received, and it may be that we are wasting the time of the House by raising this issue at all.
  If the Minister is to tell us that this is all taken care of in the letter, there is no point in our proceeding further. Assuming that is not the case, however, I would like to associate myself with what the noble Lord, Lord Monro of Langholm, said.
  I do not think that it was intended that this amendment should be sacrosanct. It is just an indication of what we would like to see included. If the Minister has a reasonable explanation for why this amendment should not be accepted, I do not imagine my noble friend would wish to press it. We wait with interest to hear what the Minister has to say.
  Baroness Carnegy of Lour: My Lords, when the Minister replies, will he bear in mind while these reviews are being undertaken that they are upsetting to local activists, because alterations to boundaries alter the way those people work and change many matters to which they must have regard when they are making submissions and so on? A review of boundaries is not a peaceful affair. The public does not worry as much about it. The Minister may well say that and he may be right, because the public do not realise what happens. But I know what it is like to live in an area which is about to move constituencies. I do not know in which area I shall have to operate during the general election, the election for the Scottish Parliament or how those areas will overlap. That is worrying. It is important to bear that in mind and the questions should not take too long. They should be as speedy as they conveniently can be.
  Lord Evans of Temple Guiting: My Lords, I am grateful for the debate and I hope that what I have to say will reassure noble Lords that we are looking at not a shambles or a muddle but a well thought-out policy.
  750
  The amendment would impose various timetables on the review of Scottish Parliamentary constituencies by the Electoral Commission and its boundary committee for Scotland. As was argued by my noble friend Lord Filkin in Committee, we believe that it would be quite inappropriate for this House, as part of its consideration of the Bill, to start challenging and changing matters that will in due course become part of the core responsibilities of the independent Electoral Commission and its boundary committees.
  The provisions in the Bill which relate to the review of constituencies are not some quirky, novel invention. Rather, they closely replicate the well established provisions for the review of Westminster constituencies which are set out in the Parliamentary Constituencies Act 1986, supplemented as necessary by additional provisions regarding the regions for list seats in the Scottish Parliament in the Scotland Act. I should remind noble Lords that the Electoral Commission, which has a wide-ranging remit, was established by the Political Parties, Elections and Referendums Act 2000. It is a UK-wide body, independent of Government and answerable directly to Parliament.
  The way in which the commission was set up and the means by which it is funded were designed to emphasise its distance from the government of the day. The 2000 Act provides inter alia for the transfer to the Electoral Commission of the functions of the four parliamentary boundary commissions. The Act requires the commission to establish four boundary committees—one for each part of the United Kingdom. It should be obvious that these four committees need to operate under the same principles and carry out their functions in a similar manner.
  However, the present amendments would introduce particular requirements and constraints which would be applied to only one of the four boundary committees—indeed, to only one of the reviews which it would be required to carry out. That cannot be right. Furthermore, the proposed timetables appear far too short and restrictive and would impose controls which the parent legislation—the Parliamentary Constituencies Act 1986—on which these parts of the Bill are based, does not require for any of the Westminster boundary reviews.
  I should point out that the current boundary commissions—and in future the Electoral Commission— are required only to submit reports setting out their recommendations on parliamentary constituency boundaries every eight and 12 years between their previous reports. It is important to note that beyond that requirement they have freedom to report when they see fit.
  As we said in Committee, if such restrictive timetabling as is proposed in the amendment were to be appropriate—and we do not think it is—it should be imposed on all the parliamentary reviews across the United Kingdom. The Boundary Commission and other interested bodies would almost certainly have to be consulted on both the principle and details before such far reaching changes were considered for adoption.

  751
  I must repeat that the Government can see no justifiable case for departing unilaterally from the accepted review mechanism, which will continue to operate in relation to Westminster parliamentary constituencies. This is not the time to make such far reaching and important changes to the review of matters that go to the heart of the democratic process. Having heard this explanation, I hope that the noble Duke will withdraw his amendment.
  The Duke of Montrose: My Lords, I listened to what the Minister said. I presume that he realises that we have not in any way questioned the timescale for the reviews of parliamentary constituencies being limited to eight to 12 years. We are saying that when the Electoral Commission thinks that there should be a review, it should take place within a certain limited time.
  The Minister emphasised that such deadlines are not contained in any of the areas in which the various Boundary Committees will work. It is because of that that we have raised the matter at this time, because it will be felt equally by the public in all the other regions in which Boundary Committees will work.
  I suppose that we have the power if we wish to put such a provision in a Bill for the Scottish constituencies, because it would make the people who have to operate the provisions for Scotland far more comfortable. In the mean time, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  The Duke of Montrose The Duke of Montrose moved Amendment No. 3:
  Page 6, line 4, leave out "purporting to be"
  The noble Duke said: My Lords, this matter was dealt with to some extent in the letter that the Minister sent me. It probes the drafting of paragraph 6(8) which refers to the validity of Orders in Council. I raised the issue in Committee. When I challenged the Minister about what "purporting to be" meant, he commented:
  "I will check it, but I assume that the phrase takes its natural meaning from the Bill: 'seeming to mean' and 'appearing to mean'.—[Official Report, 21/6/04; col. 1097.]
  However, in his letter the Minister brings out the point that "purporting to be" is meant to apply if the order is challenged. There is nothing else in the Bill that deals with the challenging of Orders in Council. Perhaps we are supposed to take that interpretation, but our concern is that "purporting" has the connotation of something appearing to be what it is not. I mentioned in Committee the possibility of a counterfeit order. As paragraph 6(8) is drafted, any counterfeit order could not have its validity called into question in legal proceedings.
  According to paragraph 6(8), the Order in Council being challenged would have been approved by a resolution of each House of Parliament and so would already have been open to being challenged there. If the Minister would also like to include in the text, "and purported to have been approved by both Houses of Parliament", that would seem more logical.
  I still do not see what case can be made for including the words "purporting to be" in the Bill because the order by that time has been approved. If we remove those words the Bill will be much clearer and easier to interpret. I beg to move.
  The Earl of Mar and Kellie: My Lords, the noble Duke's amendment implies that "purporting to be" is an unhelpful expression. I believe that it belongs to the same context as the expressions "pretending to the throne" or "a pretender". The old meaning was clear: the person had a good claim to the throne. Therefore, the phrase "purporting to be" may be rather quaint but it means "is rightfully derived from".
  Baroness Carnegy of Lour: My Lords, I did see the letter. I bumped into my noble friend and he very kindly gave me a copy of it. I was fascinated by the part that covered this subject because it almost confirmed what we were saying from this side of the House about the word "purporting". It seems that that word must be used because, if a Minister has a shot at making an order and it is challenged and falls, it is an order that never was. Therefore, it is all right to say that it was "purporting to be" an order. It may be an order which turns into an order. That seems to be what this is all about. I was fascinated by this matter. I have always wondered what the word "purporting" means and that seems to be it—it allows for an order to fall. Will the Minister confirm that that is correct?
  Lord Evans of Temple Guiting: My Lords, before I speak to Amendment No. 3 moved by the noble Duke, I meant to say that we would arrange for the noble Lord, Lord Gray, to receive a copy of the letter from my noble friend Lord Filkin. A copy went to the noble Duke, the Duke of Montrose, and to the noble Earl, Lord Mar and Kellie, and a copy was placed in the House Library. But I think that it will be best if tomorrow we arrange for the letter to be sent to everyone who has taken part in this debate. If we need to discuss certain issues further, we shall be happy to do so outside the Chamber or at the next stage of the Bill.
  The words "purporting to be made" have caused some confusion. It took two discussions with officials and another one with a QC for me to understand what it meant. I always thought that "purporting" meant pretending or whatever. But I think that we have to consider this matter in a legal context. The word is being used in this clause but it is used in many orders and it has an accepted definition.
  I shall try to respond to the concern raised in Committee and again today about the inclusion of terminology which refers to an Order in Council "purporting to be" made. The noble Duke argued that either an order had been made under this schedule or it had not. He raised, as he has done again today, the appalling prospect of "counterfeit" orders which could not be called into question or challenged.
  I hope that I can reassure the noble Duke and other noble Lords that there is little or no chance of such a fraudulent or malicious order being passed by this

  753
  House. If Parliament were ever to pass an order which was in some way wrong, it would always be open to the Government and Parliament to undo that error.
  However, that is not the background to this provision. The noble Duke received a letter in which my noble friend Lord Filkin explained why Orders in Council were described as "purporting to be" made. For the benefit of those who have not seen the letter, I shall repeat the reason that it sets out.
  As my noble friend indicated, the purpose of a challenge to the validity of an order would be to have it declared invalid. If there were claimed to be an error or some procedural defect in the making of an order, it could be argued that, as a matter of law, the order had not been made and was legally invalid. A tiny error could mean that the order was legally invalid. Therefore, if the amendment were carried, such an order would not be protected from court scrutiny as the amendment would protect only orders. It could be argued that legally the instrument being challenged was not an order.
  As orders that have been approved in draft by resolution of each House of Parliament should be above question in legal proceedings, the draftsman is required to protect documents that purport to be an order to prevent this argument being used to introduce scrutiny in legal proceedings. Orders are therefore all described as purporting to be made.
  If this phrase were not included, it would open the Order in Council up to—possibly mischievous—legal proceedings in the courts in some circumstances. This could have serious consequences for the conduct of future elections while the matter remained under dispute. The intention therefore is to prohibit such a challenge where the order has been approved by Parliament.
  But as I said earlier, if in the very unlikely event that Parliament should ever become concerned about any aspect of an order, then of course we could look into this and rectify the matter. That would be for Parliament to decide upon and not the courts.
  I hope that this explanation is clear. I would like to stress that this word is not being used simply in this Bill; it is used with all orders. I hope that the noble Duke, the Duke of Montrose, will withdraw his amendment.
  The Duke of Montrose: My Lords, I thank the noble Lord for that reply.
  I am sorry if we have bored any lawyers who are present but I found it absolutely fascinating. The noble Lord has answered the misunderstanding that we found in the Bill. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  The Duke of Montrosemoved Amendment No. 4:
  Page 10, line 2, leave out from beginning to "aim" in line 3 and insert "It shall not be the duty of the Electoral Commission or (as the case may be) a Boundary Committee to"
  754
  The noble Duke said: My Lords, I can be extremely brief with this final amendment. Again, the Minister has addressed this matter in his letter.
  Throughout the Committee stage of this Bill when we queried some of the points of detail in Schedule 1, the Minister returned again and again to the sanctity of the Parliamentary Constituency Act 1986. Interestingly, he said:
  "The electoral arrangements and the ways in which the boundaries of constituencies are reviewed separate from government—dealt with in the Parliamentary Constituencies Act—should not be changed for one part of the United Kingdom on the back of a specific piece of legislation, even when it is about such an important part of the United Kingdom—namely, Scotland".—[Official Report, 21/6/04; col. 1096.]
  In reference to the rules which we have in Schedule 1, I now understand that they are based on the same rules contained in the Parliamentary Constituencies Act. Rule 2(2) mirrors rule 5 of that former Act and rule 3 mirrors rule 6. For rule 4, however, the idea is similar but the drafting of the rule differs from that of rule 7 in the 1986 Act.
  Our amendment would change the drafting of rule 4 to make it identical to rule 7 of the 1986 Act. In his letter the Minister refers to the change as being in the modern style. Perhaps he could explain to us what difference the variation in the drafting makes? Is there an aversion in the modern style to the wording that mentions the "duty" of the Electoral Commission? I almost expect that soon the wording would include the word "choice" rather than "duty". I beg to move.
  The Earl of Mar and Kellie: My Lords, this amendment gives a rather harsh replacement to the original text. It is important that rule 4 be retained as an override over the previous three rules. My previous Western Isles amendment revolved around the powers in rule 4.
  Lord Evans of Temple Guiting: My Lords, I appreciate that the wording in the amendment replicates that which is used in paragraph 7 of Schedule 2 to the Parliamentary Constituencies Act 1986. On this occasion I acknowledge that we cannot fall back on the argument that the provisions in this Bill are the same as those in the 1986 Act and therefore must not be changed.
  The noble Duke suggested in Committee that rule 4 in the Bill appeared to be a slightly racier version of the similar provisions in the 1986 Act and he thought that not aiming to give full effect was less instructive and produced something that was confusing and nebulous. I am afraid that I have to disappoint him. This provision in the Bill is not materially different from that in the 1986 Act. As my noble friend Lord Filkin indicated to the noble Duke in his recent letter to him, having consulted the draftsman, there is no difference in meaning between rule 4 in the Bill and a similar rule in the 1986 Act. It is, as the letter said—the noble Duke

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  has repeated it—simply drafted in a modern, legal style. I hope, given that there is no difference, that the noble Duke will not press his amendment.
  The Duke of Montrose: My Lords, I thank all noble Lords who participated in supporting my amendments. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.

  Scotland Act 1998 (Transfer of Functions to the Scottish Ministers etc.) Order 2004
  8.40 p.m.
  Lord Evans of Temple Guitingrose to move, That the draft order laid before the House on 20 May be approved [20th Report from the Joint Committee].
  The noble Lord said: My Lords, with your Lordships' permission, we can conveniently consider two further instruments being made under powers provided by the Scotland Act 1998. They are the Scottish Public Services Ombudsman Act 2002 (Consequential Provisions and Modifications) Order 2004 and the Water Industry (Scotland) Act 2002 (Consequential Modifications) Order 2004. It has become common practice to batch instruments being made under the Scotland Act to make the best use of scarce parliamentary time.
  The first instrument is being made under Section 63 of the Scotland Act. The two further instruments are being made under Section 104 of the Scotland Act. Many noble Lords are familiar with these powers, which rather than relating to substantive policy issues are technical in nature. But I hope it will be helpful to outline briefly what the powers under the Scotland Act allow us to do when explaining the policy background to the orders. Before doing so, I should emphasise that the orders have been scrutinised by the Joint Committee on Statutory Instruments and the Lords Merits Committee. They have also been agreed to by the Scottish Executive and relevant Whitehall departments.
  I turn, first, to the Scotland Act 1998 (Transfer of Functions to the Scottish Ministers etc.) Order 2004, which is being made under the powers provided by Section 63 of the Scotland Act. The Scotland Act recognised that, in some cases, it would be appropriate for Scottish Ministers to be able to exercise executive functions in areas where primary legislation continues to be a matter for Westminster. That is the process known as executive devolution. It should be noted that executive, not legislative, competence is transferred under that process. In other words, the legislative competence of the Scottish Parliament is not varied where the Scottish Ministers are given power to carry out the function.
  Section 63 of the Scotland Act allows functions, so far as they are exercisable in or regards Scotland, to be exercisable by the Scottish Ministers, instead of, or concurrently with, a Minister of the Crown. It also allows for functions to be carried out by a Minister of the Crown with the agreement of, or after consultation with, the Scottish Ministers.
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  Orders made under Section 63 are also considered by the Scottish Parliament. This order was considered and agreed by the Scottish Parliament's Communities Committee on the 9 June. A Standing Committee in the other place considered and agreed the order on the 24 June. The order transfers functions in two distinct areas. The first relates to the approval of a cooperative housing association, whose registered office is in Scotland, in connection with a claim for tax relief purposes under Section 488 of the Income and Corporation Taxes Act 1988. The second concerns the executive devolution to Scottish Ministers of concurrent powers to make regulations for Scotland under Sections 4 and 6 of the Fireworks Act 2003.
  I shall set out the content of these two parts of the order in a little more detail. Further information on the policy background and an explanation of what each article of the order does can be found in the Explanatory Memorandum, copies of which can be obtained from the Printed Paper Office.
  Section 488 of the Income and Corporation Taxes Act 1988 provides that a co-operative housing association which meets the criteria set down in the Act can make a claim to the Inland Revenue for certain tax reliefs and exemptions.
  At present, the function of approving an association for the purposes of Section 488 is carried out in Scotland by a Minister of the Crown. Before devolution, officials in the former Scottish Office had delegated authority from the Secretary of State to confirm approval to the housing co-operative and its accountants for the purpose of Section 488. However, this function is not within the competence of the Scottish Ministers.
  Such approvals do not arise very frequently in Scotland—as little as one every six or seven years. However, it is expedient and sensible for these consents to be issued by the Scottish Ministers since, after devolution, the expertise and resources lie within the Scottish Executive. The Government and the Scottish Executive have therefore agreed that it is appropriate for this function to be transferred.
  I should add that the order does not transfer the function of setting out the criteria against which a housing co-operative's eligibility is to be tested. That function will continue to be discharged by UK Ministers.
  I hope it is helpful to noble Lords if I explain a further feature of this element of the order. Executive devolution requires the functions in question to be treated as exercisable in, or as regards, Scotland. To do that, the order uses powers under Section 30(3) of the Scotland Act. This power—commonly referred to as a "paving provision"—assists a transfer of function to the Scottish Ministers by specifying the extent to which the functions are to be treatable as exercisable in, or as regards, Scotland.
  In this instance, the functions transfer to the Scottish Ministers only where the housing association's registered office is in Scotland. For the remainder of Great Britain, the function will continue to reside with UK Ministers.

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  I hope it is helpful to your Lordships if I deal with one final aspect of this part of the order. In another place, a question was asked about whether a claim for tax relief could be retrospective. I should make it clear that the order before us applies only to applications which fall to be dealt with after the order comes into force. Any backdating would be in terms of the existing statutory regime, and not as a consequence of amendments made by this order.
  The second area with which the Section 63 order deals is the Fireworks Act 2003. Noble Lords will recall that this is an enabling Act, which allows a Minister of the Crown to make regulations in a range of areas in relation to fireworks. The order before us will allow functions that could be currently exercised by a Minister of the Crown to be discharged also by the Scottish Ministers.
  Section 4 of the Act provides that fireworks regulations can be made that include provision for prohibiting the supply, purchase, possession or use of fireworks during specified hours of the day or in specified circumstances. It also provides for exceptional dispensation from prohibitions to be made, if necessary, in the same regulations.
  Section 6 of the Act provides that fireworks regulations may include provision prohibiting the operation of public fireworks displays unless specified conditions are complied with. These include the giving of notice and other information, the payment of required fees, training, and prohibiting persons from operating, or assisting in the operation of, displays if they are below a specified age. Section 6 of the Act also provides for exceptions to be made in relation to these conditions, and defines the term "public fireworks display".
  The order enables the function of making these regulations to be exercisable by the Scottish Ministers. It also confers the function on the Scottish Ministers of certain powers under the Consumer Protection Act 1987, which have been applied to fireworks regulations by the Fireworks Act in relation to offences and enforcement. As stated in the explanatory memorandum, this function is transferred only in relation to Sections 4 and 6 of the Fireworks Act. The reason that only those functions, not all the functions in the Act, are being devolved is that the Act covers a complex mix of reserved and devolved areas. Some aspects of the Act are best dealt with on a GB basis or relate to reserved matters, such as consumer protection. The DTI and the Scottish Executive, who agreed the content of the order before us, will be liaising closely on those issues so there is no risk of conflicting regimes.
  I turn to the orders being made under Section 104 of the Scotland Act. That section allows for orders considered to be necessary or expedient in consequence of any provision in an Act of the Scottish Parliament. Section 104 orders are usually concerned with modifying areas of law reserved to the UK Parliament or amending the law of England and Wales—and, in some cases, Northern Ireland—in
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  consequence of an Act of the Scottish Parliament. By definition, it would be outside the competence of the Scottish Parliament to legislate in those areas.
  As a result, Section 104 orders are considered at Westminster only. In this instance, the Scotland Act requires the orders to be subject to affirmative resolution, as they amend primary legislation. The two Section 104 orders before us were considered and agreed by the other place on 24 June.
  The main purposes of both Section 104 orders are to remove spent references in the statute book to bodies which have ceased to exist, and to substitute or make provision for references to new bodies. Neither Section 104 order alters the underlying statutory regime in the legislation as amended.
  The first order is made in consequence of the Scottish Public Services Ombudsman Act 2002. That Act of the Scottish Parliament is designed to streamline and improve the public sector complaints system in Scotland. It transferred to the Scottish Public Services Ombudsman (SPSO) powers previously exercised by the Health Service Commissioner for Scotland, the Commissioner for Local Administration in Scotland and the Scottish Parliamentary Commissioner for Administration.
  A number of articles in the order remove references to the commissioners abolished by the 2002 Act and replace them with references to the ombudsman where necessary. Furthermore, the 2002 Act provides for the ombudsman to co-operate with ombudsmen and commissioners operating elsewhere in the UK in those areas relevant to those officeholders' interests. The draft order makes reciprocal arrangements with other commissioners and ombudsmen.
  The order also makes provision in respect of the Government. The 2002 Act provides that no person is, or may be required, to supply to the ombudsman information relevant to proceedings of the Scottish Cabinet. The draft order makes similar provision in relation to the UK Cabinet.
  Noble Lords will wish to note that that is not a new policy proposal. The statutory frameworks that supported the former Scottish parliamentary and health service commissioners contained similar provisions. Precedent therefore exists for recognising that circumstances may arise whereby either of those officers' work could require access to UK Cabinet papers in pursuance of their functions. The responsibilities of both those officeholders transferred to the SPSO.
  Although it is anticipated that, in practice, the SPSO would rarely have cause to seek sight of UK Cabinet papers, it is sensible that such material should benefit from the protection given by previous ombudsman-related legislation.
  The 2002 Act also provides that a member of the Scottish Executive may give notice in writing to the SPSO that documents and information on which the ombudsman has sought disclosure should not be disclosed, as to do so would be contrary to the public interest. The order makes similar provisions for Ministers of the Crown. However, the order does not

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  undermine the existing regimes on disclosure of information as laid out in, for example, the Freedom of Information Act 2000.
  In summary, the order as a whole addresses issues where the framework provided by the 2002 Act has a read across to matters outside the legislative competence of the Scottish Parliament.
  Noble Lords will surely be delighted that I turn finally to the last order before us this evening. It is again being made under Section 104 of the Scotland Act, this time in consequence of the Water Industry (Scotland) Act 2002. The main purpose of this Act was to provide for the establishment of Scottish Water as the successor to three water and sewerage authorities in Scotland.
  The effect of the order is to remove any references to the predecessor water and sewerage authorities in the enactments and subordinate legislation and to put references to Scottish Water in their place. It would be outside the competence of the Scottish Parliament to make the vast majority of modifications in the draft order. Thus this order is an exercise in making sure that the new devolved body is appropriately represented in the statute book. It also makes amendments to reflect the creation of water customer consultation panels by the 2002 Act.
  Eagle-eyed noble Lords may have noticed from paragraph 5 of the Explanatory Memorandum that the draft order does include two modifications to the Transport Acts 1962 and 1968. That would be within the legislative competence of the Scottish Parliaments to make. It is not our usual practice to include any modifications in orders under Section 104 to matters within the competence of the Scottish Parliament. However, in this instance, these two modifications have been included, since there is no suitable vehicle before the Scottish Parliament in which they could be included and because we wish to see the statute book as tidy as possible to assist the user. I hope noble Lords will agree that this is an example of sensible and pragmatic partnership between the Government and the Scottish Executive.
  These three technical orders are in our view a sensible, expedient and necessary use of the powers under Sections 63 and 104 of the Scotland Act and I commend them to the House. I beg to move.
  Moved, That the draft order laid before the House on 20 May be approved. [20th Report from the Joint Committee].—(Lord Evans of Temple Guiting.)
  The Duke of Montrose: My Lords, the Minister would appear to be in training for a marathon, the way he has gone through all of these—
  Baroness Carnegy of Lour: My Lords, is it correct that we can speak after our Front Bench in discussing these orders? I am not sure, but there is something I want to say.
  Baroness Crawley: My Lords, I understand that it is correct. Of course, we will all keep an eye on the clock.
  The Earl of Mar and Kellie: My Lords, could I ask for clarification as to whether we have to be finished at five past nine?
  The Duke of Montrose: My Lords, I understand that the Motion that was passed was that the Bill on asylum and immigration should not begin before five past nine.
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  When one tries to bring all these Scottish orders together, the kaleidoscope that appears is quite amazing. I feel that the ancients might have been pleased to see that we were dealing with the three basic elements: fire, air and water.
  I am sure the Scottish Executive will be pleased that it has powers under the Fireworks Act. It can be a sensitive issue in a local area, when people wish to have regulation to suit their immediate needs. I am glad to hear the Minister say there is a definition of what is a "public display" because in my area a lot of people have fireworks in their back garden. The minute they fire a rocket, it seems to me that it is then almost a public display.
  I have a few comments about the order on the substitution of Scottish Water for the various authorities in the other Acts. I am fascinated to know whether this was triggered by the EU directive on water or whether it was simply an effort to harmonise charges. I notice that up to last year, 77 per cent of businesses that got water from Scottish Water received an increase in charges, with only 18 per cent receiving a reduction.
  The water industry commissioner reckoned that there would be an increase in revenue of about £30 million since two years ago. One can understand that some regulations may have to be made, but we hope that this money will be properly used.
  Baroness Michie of Gallanach: My Lords, I should like to ask the Minister a question. I appreciate that these draft statutory instruments have to do with modifications, as the Minister explained at some length, and that they are technical in nature. They deal with naming new bodies, and so on. I very much welcome the statutory instrument which allows the transfer of functions to Scottish Ministers. However, I question why the draft statutory instruments on the Scottish public services ombudsman and Scottish Water are being debated here.
  It is ridiculous that we are debating these matters here, when they should be debated in the Scottish Parliament. As long as these reserved powers are in place, the Government are doing nothing to enhance the stature of the Scottish Parliament. The fact that there are only 10 Members in the Chamber demonstrates the lack of interest there is in Scottish matters. I have no quarrel with that, but I think that Westminster does nothing to help the Scottish Parliament to be responsible and accountable so long as it retains these reserved powers. Why are we debating these matters here when nobody really cares about them and they should be debated in the Scottish Parliament? I know what the Minister's answer will be.
  Baroness Carnegy of Lour: My Lords, we care about these matters very much. I do not think that we are making policy.
  The water supply order seems to be a matter of redrafting to include the new titles of the water company. Why has it taken until now to do that, as the Scotland Act was passed so long ago? Is there any reason for that?

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  Paragraph 13 of the order dealing with the transfer of functions to Scottish Ministers gives them the job of deciding that a housing association could make a claim for tax purposes. The Minister said that this used to be done by Scottish Office Ministers and was delegated to officials. Does he know whether Scottish Ministers will delegate this to officials, or will they be in a better position to do it themselves? That would be a useful piece of devolution. Could he tell us that?
  The Earl of Mar and Kellie: My Lords, the transfer of functions order can be welcomed as being devolutionary in trend, albeit being only executive devolution from Ministers of the Crown to Scottish Ministers.
  The transfer of housing association approval for tax purposes strikes me as a tidying-up exercise, as the old Scottish Office used to do this work. This measure is benign and welcome.
  The other order, covering fireworks, is new because the Act only came into force in 2003. It makes eminent good sense for such domestic activities as fireworks and firework displays to be administered by Scottish Ministers. There is a distinct need for the private use of the noisier fireworks to be controlled, certainly in terms of dates. It seems to me that the season for fireworks in Scotland is becoming ever longer, often to the distress of residents and animals.
  The order that relates to the Scottish Public Service Ombudsman is unusual in that it is consequential on an Act of the Scottish Parliament. That is a fact for constitutional anoraks. The order allows the Scottish Public Service Ombudsman to consult with other UK ombudsmen, but prohibits him demanding either Scottish or United Kingdom Cabinet papers or disclosing information that would not be in the public interest. I have one question: is the SPSO allowed to deal with all public service matters in Scotland or just those which are devolved? If the latter is the case, who deals with reserved public service matters?
  The water supply order is another order that is consequential on an Act of the Scottish Parliament. It clearly relates to the reduction of Scottish public water authorities from three to one. The streamlining may be good idea.
  I note the tiny use of the Sewel convention in the two transport Acts, but like my noble friend Lady Michie of Gallanach, I wonder why we have to do this in quite this way. Will the order effect any real change beyond the amendment of legislation?
  Finally, the three orders remind the House of how quite quietly Scotland is going its own way, as it should do. The First Minister, Jack McConnell, is worried about that and the fact that the UK news media ignore government activity in Scotland, except for the silly stories. As a Unionist, he should be worried. However, I suspect that it is "aye been" and that it is a "no bad" thing.
  Lord Monro of Langholm: My Lords, I certainly agree with the recommendation that these matters
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  should have been sorted out in Edinburgh. Will the Minister explain how much of the legislation comes under the Sewel convention, or memorandum of understanding with devolved administrations, and how much under Act of Parliament?
  It is unfortunate that the Scottish Office gave the Minister a brief to put three orders together, because it was very difficult to follow the derivation of each order from its original Act of Parliament. The majority of the legislation seems as though it will come under the Sewel convention, which does not have legislative purpose, but which has become accepted by the Government in Devolution Guidance Note 10.
  The Sewel convention is a way of avoiding debate in Scotland on legislation that we have passed here. That is wrong. The Scottish Parliament should have the right to discuss in detail the Fireworks Act and the Act which deals with consumer protection. It would have been able to give a more detailed answer and it would have a more detailed knowledge of what is going on. More importantly, Scotland would know what was happening. Nobody in Scotland will know about the orders being laid tonight, but they should, because it is part of the democratic process. Yet, under the Sewel convention—the Minister might like to comment on it—the legislation will not be discussed in detail in Scotland nor will it receive the publicity that it deserves. That is particularly true of the order on fireworks. I used to have a fireworks factory in my constituency. One knows just how much legislation dealt with the safety of fireworks and the promotion of the company.
  I make a further point with a rather wry smile, because I was the Minister who took the original Water Act 1994 through Parliament. All hell broke loose among the Labour Opposition and the Liberal Party when we did away with a multiplicity of local government water companies and put them into three units: the east, the north and the west. That worked very satisfactorily until the Labour government returned to power. The arrangements were then used effectively to nationalise the industry and create one company for the whole of Scotland. That is what this order is all about. Since then we have seen the most incredible increase in the cost of water in Scotland. I should think that in many areas it is as expensive as whisky. Even on my humble farm it has gone up about four times in a year, and that is supposed to be because of the cost of putting in new drains and sewers. By and large it is thoroughly unsatisfactory. Scottish Water wants to take a good look at itself before it provides for Scotland the water that it is entitled to have.
  Is that happening under the Sewel rules or under another procedure? People in Scotland would like to know what is going on and why this order is being passed here rather than in Edinburgh in the Scottish Parliament. I should like the Minister to give detailed comments on the Sewell arrangements because that is vital in relation to these orders.
  Lord Evans of Temple Guiting: My Lords, I am grateful to noble Lords for their comments on the orders. I will go through the questions asked and hope that I will

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  be able to give satisfactory answers. First, I thank the noble Duke, the Duke of Montrose, for welcoming the orders. He asked about the cost of water in Scotland. The order does not relate to the cost of water in Scotland. We are simply inserting the term "Scottish Water" into reserved legislation. Water charges are rightly a matter for the Scottish Parliament.
  Unless I completely misunderstood the noble Baroness, Lady Michie, I was amazed at her almost emotional outburst that we do not discuss Scottish matters properly in this House. By her contribution she showed the emotion that sometimes comes to the surface when we discuss Scottish matters. Although very few noble Lords are present, we have most Scottish Peers, and the discussion has been both rather interesting and totally worth while.
  I also said during my speech that these orders have been discussed. They have been discussed by the Joint Committee on Statutory Instruments, the Lords Merits of Statutory Instruments Committee, the Scottish Executive, within Whitehall departments and, as noble Lords will see in Hansard, there was an interesting discussion in the other place. I tried to head off many of the questions that were discussed there by incorporating those into my rather lengthy speech. So I make no apologies to the noble Baroness, Lady Michie, for the way that this matter has been handled.
  The noble Baroness, Lady Carnegy,asked about the water order and whether that is a matter of redrafting. I can confirm that it is. She also asked who will be taking the decisions on housing co-operatives in Scotland—whether it will be Scottish Ministers or civil servants. That is a purely procedural matter. The Scottish Executive officials will be given delegated authority to confirm approval of a housing co-operative for tax-relief purposes, having first considered the rules and constitution of the co-operative. She also asked whether there are any changes in the water order other than in the name. There are no changes.
  The noble Earl, Lord Mar and Kellie,asked what matters the SPSOs deal with. His powers are set out in the SPSO Act 2002. The Parliamentary Commissioner for Administration would deal with reserved matters for the UK.
  The noble Lord, Lord Monroasked why the three orders were being taken together. If we had taken them separately, we would have been here twice or even three times as long as we have. That may or may not have been something that the noble Lord would have welcomed—but that is the reason.
  As for the Sewel Motion, that consent is sought on occasions when the Westminster Parliament is to legislate in devolved areas in primary legislation—not in secondary legislation, such as the three orders that we have been considering.
  I hope that I have answered the questions that have been raised.
  On Question, Motion agreed to.

  Scottish Public Services Ombudsman Act 2002 (Consequential Provisions and Modifications) Order 2004
  Lord Evans of Temple Guiting: I beg to move the Motion standing in my name on the Order Paper.
  Moved, That the draft order laid before the House on 26 May be approved [21st Report from the Joint Committee].—(Lord Evans of Temple Guiting.)
  On Question, Motion agreed to.

  Water Industry (Scotland) Act 2002 (Consequential Modifications) Order 2004
  Lord Evans of Temple Guiting: I beg to move the Motion standing in my name on the Order Paper.
  Moved, That the draft order laid before the House on 26 May be approved [21st Report from the Joint Committee].—(Lord Evans of Temple Guiting.)
  On Question, Motion agreed to.

  Asylum and Immigration (Treatment of Claimants, etc.) Bill
  9.16 p.m.
  Proceedings after Third Reading resumed. [Amendment No. 35 not moved.]
  Lord Kingslandmoved Amendment No. 36:
  After Clause 26, insert the following new clause—

  REVIEW AFTER EXHAUSTION OF RIGHTS OF APPEAL
  Where a person's statutory rights of appeal have been exhausted with respect to an immigration decision, and where that person subsequently makes an application to the Secretary of State for his deportation to be stayed on the grounds that there has been a change of circumstances, if the Secretary of State decides that there has been no change in circumstances or accepts that there has been a change of circumstances but decides that they do not justify a stay of deportation, the applicant within 10 days of the decision may apply to a High Court judge or a judge of the Court of Session to review the decision.

  The review shall be conducted on the papers save in exceptional circumstances.

  The decision of the High Court judge or the judge of the Court of Session is final."

  The noble Lord said: My Lords, as I explained on Report when I promoted the same amendment, its purpose is to exclude the necessity for judicial review in the system of asylum appeals. Since Report, I have been fortunate enough to have a conversation with an extremely able member of the Minister's staff in the Home Office. I am most grateful for that. If I do not, entirely, accept the advice that she gave me, I apologise in advance for what I am about to say.
  A legitimate criticism of my amendment is that it does not make sufficiently clear the difference between three situations. The first one is when a new set of circumstances arise, following the completion of the appeal procedure, that are unforeseeable. The second

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  is when such new circumstances arise in a situation where they would have been foreseeable. The third is when, although there is an assertion of new circumstances, it is, in effect, unsustainable.
  I also understand the criticism that it is not clear from the terms of the amendment what the judge can actually do if he decides in favour of the application. Does he stay deportation indefinitely; or might circumstances arise that would entitle him to reverse his order and subject the applicant to immediate deportation?
  Although I accept that those details might need the attention of the parliamentary draftsman, I do not accept that the amendment is unnecessary. The Government claimed at the outset of the Bill that they wanted to establish a situation in which the whole of the asylum appeal system would be dealt with by statute. However, we are faced with something like the Maginot Line, we have a statutory system that reaches the Belgium border and goes no further. By that I mean that the statutory system under the Bill does not deal with individuals who seek to stay a deportation order. They are, however, entitled to apply for judicial review.
  Unlike my amendment, which introduces a time limit of 10 days, the time limit on judicial review is three months. Unlike my amendment, which focuses attention on a judge who is likely to specialise in asylum matters, a judicial review case can come up in front of any administrative judge, irrespective of his skills. Put that way, in my submission, there is no contest between the Government's solution and my own. I shall be most interested to hear what the Minister has to say in response. I beg to move.
  Lord Filkin: My Lords, with that challenge I shall do my best, without much hope. We start by sharing the concern of the noble Lord, Lord Kingsland, about spurious last-minute delays to removal when there is no merit or substance to them. In that sense, he is exploring similar territory to ours throughout this Bill: our objective is to uphold access to justice where appropriate, but not in ways that worsen the system. However, we do not believe the clause would be an effective solution, or one that is necessary, essentially because a process already exists for dealing with new representations made after appeal rights have been exhausted. Let me try to set it out.
  The Nationality, Immigration and Asylum Act 2002, built on the one-stop appeal process first introduced in the Immigration and Asylum Act 1999. That process provides for, on application, one decision and one appeal, and it has worked. For example, an asylum seeker who makes a claim is required to provide all their reasons for wishing to stay in the country. Any new representations they make later will be considered under paragraph 346 of the immigration rules, to decide whether or not they constitute a fresh claim. If it is decided that the representations do not constitute a fresh claim, but rather simply further representation on the
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  original claim, the Secretary of State may maintain his original decision, and so no new right of appeal arises. This decision can be challenged by judicial review.
  If the new representations are considered to be a fresh claim, however, a new decision will be made by the Secretary of State that will give rise to a new right of appeal, unless the case is certified under Section 96 of the 2002 Act. Certification, as we recall, may take place where a new claim relies on facts that should have been raised at an earlier stage, and prevents any further statutory right of appeal to the appellate authority or the courts—again, as it should do, although there is still the longstop of judicial review where the Home Secretary is open to challenge that it was an unreasonable exercise of his powers under the statute.
  Whether the approach is a fresh claim or simply further representation, the applicant has a remedy, be it a fresh appeal right or the option of applying for judicial review if appropriate. Let me speak to why this is not the scale of problem that the noble Lord, Lord Kingsland, may fear, and then I shall speak to why we cannot support the amendment, not only on principle but also on technical grounds.
  In essence, the remedy of judicial review at such a late stage of the process is a relatively rapid one. We are getting such reviews heard within a very limited number of days in those circumstances. We are not experiencing such a volume of cases and such a delay that we think the existing legal remedies are being excessively abused or frustrated in ways that weaken the fundamentals of the asylum system compared to what we had experienced in the earlier stage of the process, which led us to believe there was a good case for ousting judicial review earlier on. The answer to the noble Lord's question on Report, which I recollect was "If you are against JR then, why are you not against it now?"—I am putting it rather crudely—is essentially that it was a problem there, but it is not a problem here. That kind of pragmatic judgment must drive our thinking.
  To irritate the noble Lord, Lord Kingsland, I wish to comment on the technical reasons why the measure is inappropriate. That is slightly unfair of me. Amendment No. 36 does not make provision for the other party to make representations and an ex parte paper review process is not appropriate in this context.
  Amendment No. 36 would require the High Court judge to have to come to a final substantive decision without the benefit of representation from the other party. However beastly the noble Lord, Lord Kingsland, may wish to be to the Home Secretary, I believe that he would not consider it in the interests of justice that he was not able to put his representations.
  The amendment does not restrict the grounds for appeal on an error of law, which would mean that the High Court would be reconsidering errors of fact and law. It is an inappropriate court to test matters of fact for exactly the reasons that the noble Lord, Lord Kingsland, gave; namely, the administrative court deals with a range of issues and you cannot guarantee that the judge is necessarily an expert in the detail of immigration law.

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  Amendment No. 36 would rule out the Court of Appeal involvement in the deportation process. It plays a useful role in establishing case law and providing guidance.
  I fear that I shall certainly not have satisfied the noble Lord, Lord Kingsland. Further, I suspect that I have not answered all of his probing questions, in which case I apologise. I shall seek to do better if pressed: otherwise, I may have to resort to the lame excuse of further correspondence, even at this late stage of our proceedings.
  Lord Kingsland: My Lords, I am extremely flattered by the Minister labelling my questions as probing. In those circumstances I shall do my best to disguise my deep irritation at his reply.
  I accept that there are technical problems with the amendment. Indeed, I think that it could be truly satisfactory only if it had the attentions of the skilled parliamentary draftsman. Nevertheless, I remain perplexed at the fundamental basis upon which the Minister opposes it. I had understood the Government to wish to exclude judicial review from the asylum process altogether. They tried to do it illegitimately by an ouster clause. However, there is a legitimate way to do it, and that is to provide a comprehensive statutory procedure which expedites the process and yet, at the same time, is fair. I simply cannot understand why the process has gone most of the way to achieve that objective but has left this gap at the end. In my submission it is a big gap.
  It may be that, in certain circumstances, the administrative court expedites these matters; but the fact of the matter is that an applicant is entitled to three months and he may well come before a judge who is not expert in these matters. There is a real danger that not just the issue before the judge, of deportation, is spoken to by counsel, but there is an attempt to rerun the whole case which featured in front of the tribunal. That would bring the system into disrepute.
  I simply do not understand why the noble Lord—I do not, of course, question his good will—is not prepared to make the system absolutely watertight. In those circumstances I feel compelled to ask the opinion of your Lordships' House.
  9.28 p.m.
  On Question, Whether the said amendment (No. 36) shall be agreed to?
  Their Lordships divided: Contents, 46; Not-Contents, 72.

  Division No. 4

  CONTENTS

  Anelay of St Johns, B.

  Carnegy of Lour, B.

  Attlee, E.

  Crathorne, L.

  Avebury, L.

  Falkland, V.

  Barker, B.

  Fookes, B.

  Bridgeman, V. [Teller]

  Garden, L.

  Brougham and Vaux, L.

  Geddes, L.

  Byford, B.

  Glenarthur, L.

  Carlisle of Bucklow, L.

  Greenway, L.

  768

  Hamwee, B.

  Northbrook, L.

  Howe, E.

  Norton of Louth, L.

  Jopling, L.

  Oppenheim-Barnes, B.

  King of Bridgwater, L.

  Park of Monmouth, B.

  Kingsland, L.

  Plummer of St. Marylebone, L.

  Knight of Collingtree, B.

  Renton, L.

  Lawson of Blaby, L.

  Renton of Mount Harry, L.

  Lyell, L.

  Roper, L.

  McNally, L.

  Seccombe, B. [Teller]

  Mar, C.

  Sharp of Guildford, B.

  Mar and Kellie, E.

  Shutt of Greetland, L.

  Masham of Ilton, B.

  Skelmersdale, L.

  Mayhew of Twysden, L.

  Stewartby, L.

  Miller of Chilthorne Domer, B.

  Wallace of Saltaire, L.

  Montrose, D.

  Windlesham, L.

  NOT-CONTENTS

  Acton, L.

  Harrison, L.

  Alli, L.

  Hart of Chilton, L.

  Andrews, B.

  Hogg of Cumbernauld, L.

  Archer of Sandwell, L.

  Hollis of Heigham, B.

  Bach, L.

  Hoyle, L.

  Bassam of Brighton, L.

  Hunt of Kings Heath, L.

  Borrie, L.

  Janner of Braunstone, L.

  Brooke of Alverthorpe, L.

  Jones, L.

  Campbell-Savours, L.

  Lockwood, B.

  Carter, L.

  Lofthouse of Pontefract, L.

  Carter of Coles, L.

  McIntosh of Haringey, L.

  Clark of Windermere, L.

  McIntosh of Hudnall, B.

  Clarke of Hampstead, L.

  MacKenzie of Culkein, L.

  Clinton-Davis, L.

  Massey of Darwen, B.

  Corbett of Castle Vale, L.

  Merlyn-Rees, L.

  Crawley, B.

  Morgan of Drefelin, B.

  Davies of Oldham, L. [Teller]

  Pitkeathley, B.

  Dean of Thornton-le-Fylde, B.

  Ramsay of Cartvale, B.

  Desai, L.

  Randall of St. Budeaux, L.

  Dixon, L.

  Rendell of Babergh, B.

  Drayson, L.

  Richard, L.

  Dubs, L.

  Robertson of Port Ellen, L.

  Elder, L.

  Rooker, L.

  Evans of Temple Guiting, L.

  Rosser, L.

  Farrington of Ribbleton, B.

  Sainsbury of Turville, L.

  Faulkner of Worcester, L.

  Sawyer, L.

  Filkin, L.

  Simon, V.

  Fyfe of Fairfield, L.

  Taylor of Blackburn, L.

  Gale, B.

  Triesman, L.

  Gibson of Market Rasen, B.

  Truscott, L.

  Gilbert, L.

  Tunnicliffe, L.

  Golding, B.

  Wall of New Barnet, B.

  Goldsmith, L.

  Gordon of Strathblane, L.

  Watson of Invergowrie, L

  Gould of Potternewton, B.

  Grocott, L. [Teller]

  Whitaker, B.

  Harris of Haringey, L.

  Wilkins, B.

  Resolved in the negative, and amendment disagreed to accordingly.
  9.39 p.m.
  Clause 29 [Entry clearance]:
  Lord Aveburymoved Amendment No. 37:
  Page 30, line 23, after "rules," insert—
  ( ) relate to an issue of objectively verifiable fact, and not questions requiring subjective assessment of evidence or intention,
  The noble Lord said: My Lords, it should be universally agreed that the quality of initial decisions on entry clearance applications, the subject of this clause, is even worse than that for asylum. In 2002, 46.2 per cent of appeals against refusal of visa applications were successful, in spite of the fact that all of those appeals

  769
  were dealt with on paper only. The percentage of refusals at the 10 overseas posts with the highest rates of refusal for non-settlement applications increased in 2003 compared with 2002. The independent monitor for entry clearance in her report published last month said that at any particular post:
  "Systems need to ensure that any drastic increase in refusing applicants is reflective of the quality of applications rather than a more restrictive regime".
  Do the Government accept the recommendation that research should be conducted with that object in mind? If the Minister can give me an answer I would be grateful.
  The independent monitor found on the basis of her sample that some 10,000 applicants were wrongly denied the right of appeal in 2002; a third of them students and two-thirds family visitors. She dryly remarks:
  "Parliament may wish to consider this when and if consideration is given to removing other rights of appeal".
  Now we have the opportunity to do that. The finding shows that even where the criteria are objective, mistakes can be made on a large scale. It would not be sensible to grant the Secretary of State powers that could be used to deny right of appeal where matters of opinion or judgment are concerned, and entry clearance officers cannot even get it right when they have to decide whether a course of study lasts more than six months.
  Apparently 3,000 students were denied an appeal because one module of their proposed course lasted for less than six months. Family visitors were denied because they were wrongly categorised as not having a qualifying relationship or because the ECO did not believe that they were related as claimed, an issue that should be determined by appeal.
  It is wrong for Parliament to allow the Secretary of State to limit the right of appeal still further when he is not exercising the existing powers in accordance with the law. If we are to grant him an unfettered power to widen the list of those who are to be deprived of appeal rights, we should at least make sure that he can do so only on the basis of objective criteria, as the noble Lord, Lord Rooker, said was the intention.
  The Minister also said:
  "The best brains in Whitehall are on the case. If we can clarify and make more transparent what we seek to do, to meet the points raised, we will do so".—[Official Report, 28/6/04; col. 85.]
  We on these Benches do not claim to match the expertise of the Home Office. However, if its officials have not come up with a solution so far, even if the amendment does not precisely achieve the objective that we share with the Government, by inserting the words in this clause we lay down a marker and give all those brains an extra few weeks to get it right in another place.
  For the noble Lord, Lord Rooker, to suggest, as he did last week, that judicial review provides an adequate alternative remedy for those who may be unlawfully denied their appeal rights is fanciful; it has not provided a remedy for the 10,000 people who were
  770
  unlawfully denied their appeal rights against a refusal of an entry certificate in 2002. No legal aid would be available for those proceedings and I do not know of any successful judicial review applications in relation to wrongful denial of entry certificate appeal rights. If it were a realistic option, hundreds of cases would be flooding the courts.
  I refer again to the JCHR report because it said in relation to this clause that,
  "Not providing a right of appeal in cases where the basis of the refusal is the failure to meet a requirement which turns on an objectively ascertainable fact is likely to be unobjectionable in human rights terms. However, the breadth of the power conferred on the Secretary of State by new clause 29, without specifying on the face of the legislation the types of case in which the power can be used, is a matter of concern. Parliament is being asked to authorise in advance a very wide power which is capable of being exercised in a way which may impede access to an effective remedy or unjustifiably discriminate between different classes of applicant for entry clearance".
  It is common ground between ourselves and the Minister that we want the power to be exercisable only in relation to totally objective and ascertainable facts, which is what the amendment would do. I beg to move.
  9.45 p.m.
  Baroness Anelay of St Johns: My Lords, with the leave of the House, I shall speak to Amendment No. 38, which stands in my name and is grouped with Amendment No. 37. In moving his amendment, the noble Lord, Lord Avebury, rightly addressed the broad principle underlying this clause. When we first debated this issue in Committee on Recommitment, I, like him, raised the concern that we are being asked to sign a blank cheque for the Secretary of State to apply a refusal of a right of appeal in the future to such categories as he or she may designate.
  I then asked at whom the Government were now aiming this provision. Was it aimed at alleged bogus students going to alleged bogus colleges? The Government said that it was. Therefore, my Amendment No. 38 continues to probe the mechanism that the Government intend to put in place properly to prevent people attending sham colleges. It is on that basis that I tabled this amendment for Third Reading.
  Of course, we are aware that those who represent the interests of education in this country are fully behind the Government's policy to land a punch on the sham colleges. We have heard from UKCOSA, the Association of Colleges and ARELS, all of which are in favour of a proper policy. But they all have a difficulty in seeing how the Government's proposals in this new clause reflect a real attempt to cut down on sham colleges.
  On Report on Recommitment, I asked what criteria the Government would use to determine a college's eligibility to get on to a register of bona fide colleges that the Government tell us will be operated by DfES but will be accepted by the Home Office for the purposes of identifying which colleges are all right and which are not. In response, the Minister concentrated on saying what the criteria would not be. He said that they would not relate to quality control or state what the level of education should be. I fully accept

  771
  that because it is not the duty of the Home Office to determine the quality or level of education in either privately or publicly funded establishments.
  Surely we should have some indication from the Government of what their discussions with the DfES have thrown up concerning how a college will get on to a list. The Minister will be aware that the education world is concerned that the DfES may operate a list which will have fewer hoops for people to go through in order to get on to it. It will be easier for the colleges to get on to that list than it will be for them to get on the current Home Office list. The education world is saying that the Home Office's current list of bona fide colleges should constitute the minimum level of entry. Possibly the level set should be tougher than that, but that should certainly be the minimum level of entry.
  One particular concern is that the information from the DfES so far leads some people to believe that it may be sufficient for an organisation or company acting as a college simply to say, "Here are our company accounts. We can prove that we are trading". What we need tonight is an assurance that that will not be sufficient. As we know from apocryphal stories that have come before noble Lords, some organisations can produce trading accounts that, in anyone's view, would be considered to be those of a bogus college. We would not want people to gain right of entry if they were allegedly attending such a college.
  I also asked the Minister whether he could give an assurance that the Immigration and Nationality Directorate would provide colleges with a list of students who had been issued with visas on the basis of an offer letter from a college. I asked that because it was something that the colleges specifically wanted to see in place. The Minister replied that the DfES was consulting representative bodies from the education sector on this matter. He said that he could not give an assurance about how the system would operate because the detail was still being worked out. Therefore, at this late stage—it is only a week later, I know—I am asking whether the Minister has any further and better particulars on the matter.
  The Minister has been playing a straight bat in telling the House that many of these policies are still under discussion. This is our last chance to obtain from the Government an account of their progress. As other noble Lords have commented today, my honourable and right honourable friends in another place will have but a limited time in which to consider these matters when they go to another place. Therefore, I think it is right that we ask the Minister to update us on how far we have progressed on these matters.
  Lord Rooker: My Lords, perhaps I can with the leave of the House and a bit of goodwill put two paragraphs on the record. That will save writing letters—there are delays with letters in the post, as we know
  772
  The noble Countess, Lady Mar, is still in her place and I hope I can give her a decent answer. She thought the last one I gave was appalling. She asked me if paragraph 284 of the immigration rules works. Yes it does.
  Paragraph 284 of the immigration laws requires that persons applying for leave to remain on the basis of marriage to a British citizen or persons settled here have extant leave to remain in the UK and have been granted over six months leave since the date that they were admitted.
  However, paragraph 284 does not affect the spouses of European economic area nationals. It is the act of marriage that gives the right of residence and not the act of the Home Office granting leave. I have probably explained that inadequately. It is working but it does not do the job that we intended it to do.
  In his absence I would also like to answer the specific question asked by the noble Lord, Lord Lester, about paragraph 46 of the JCHR report. Bearing in mind that it will be pretty quick when the other place gets this, it is important to get an answer on the record. The report said that the legislation was silent about the purpose of the open-ended power to exempt certain classes of individuals, and so on, from the new requirements.
  The answer—my brief says "line to take" here—is that the power to exempt certain categories of persons can be found in subsections(3)(c) of Clauses 19,21 and 23. At present the Government envisage that persons with settled status in the UK will be exempted from the requirement for entry clearance or the certificate of approval. We do not feel that it would be appropriate to state this category of person on the face of the Bill. By leaving it to secondary legislation we are able to then consider the effectiveness of the measures and who it would be appropriate to exempt, taking into account fluctuations in the sizes of categories and future changes in immigration rules. I hope that answers the point raised by the noble Lord, Lord Lester.
  The Countess of Mar: My Lords, I refer to the Minister's reply to me. If that provision works for people marrying British citizens, why do we not apply these clauses to those marrying EEA nationals?
  Lord Rooker: My Lords, that was probably the original question that the noble Countess, Lady Mar, asked in Committee. It is not possible to do that as it would mix up European and UK legislation. That is the point at issue. There is a route through. We have clearly stated that people can nip off to France or Germany, get married and go through the route that way. We are not blocking it off. We are doing our best to put a hurdle against some of the alleged sham marriages. Nobody says that it is perfect and completely blocks everything off.
  I turn to these two amendments, with which I will deal in reverse order. I have already spoken at some length about the Government's intention to address the problem of students who enrol at bogus colleges,

  773
  or at establishments that do not maintain proper attendance checks. This amendment resembles closely the amendment that was withdrawn. I understand why it has been placed on the agenda tonight, I have no problem about that.
  The amendment places on the face of the Bill the Government's intention to create a register of bona fide or approved colleges, and of making enrolment at a registered college a requirement of the immigration rules. The order-making power provided by new Clause 29 could then be used to specify this requirement. The consequence of such a specification would be that an entry clearance application refused on these grounds would not attract a right of appeal. This revised amendment makes it clear that the registration requirement should not affect persons domiciled in an EEA state.
  I am not entirely clear as to the reason for this reference to domicile in the EEA. European economic area nationals travel freely to the United Kingdom without the requirement for prior entry clearance. A non-European economic family may require an EEA family permit before travelling to the United Kingdom.
  Baroness Anelay of St Johns: My Lords, with great apologies to the Minister, it was only when he expressed his puzzlement just now that I re-read the wording of the amendment. What I tabled was,
  "who is not normally domiciled in an EEA state",
  rather than,
  "who is normally domiciled in a non-EEA state".
  There has been a trifle of a mix-up in the typing here. It is one of those dreadful things: when I read something in the Marshalled List I see what I think should be there, not what is there. It is my fault and I apologise to the Minister.
  Lord Rooker: My Lords, in that case I can move on. During our debate on 28 June a number of questions were raised about the operation of a register of educational establishments. I should like to answer those concerns because the Bill will return to the other place fairly soon. The noble Baroness, Lady Anelay of St Johns, has expressed the view that there should be a right of appeal for establishments not included in the register. As I explained, the Department for Education and Skills is consulting on the detail of how the register will operate and will be considering whether there should be a right of appeal as part of that consultation.
  The amendment tabled by the noble Baroness and the noble Viscount seeks to place the responsibility for a register of bone fide educational establishments in the hands of the Secretary of State for the Home Department. The Department for Education and Skills is responsible for education and skills within England and it is therefore appropriate that any register which records the existence of learning providers be owned by the department with those responsibilities. Much of the information needed for the register relating to publicly funded providers is
  774
  already held within the Department for Education and Skills and it already has strong working links with those bodies responsible for accreditation of private providers.
  The noble Baroness, Lady Carnegy of Lour, asked whether there would be consultation on the register in Scotland. Once the register is operational, the Home Office will need information about all education providers in the UK and the Department for Education and Skills and the Home Office are therefore in consultation with the devolved administrations to ensure that that is achieved.
  I can therefore assure the noble Baroness and the noble Viscount that the proposition in Amendment No. 26—the original Amendment No. 26—that the power in Clause 29 could be used to specify a requirement relating to approved educational establishments is one with which the Government are in full agreement. It can be achieved using Clause 29 as drafted. We do not consider that it is necessary to refer to the example on the face of the legislation.
  The noble Lords, Lord McNally and Lord Avebury, have tabled an amendment that seeks to ensure that the order making power in Clause 29 could be used only in relation to requirements under the Immigration Rules which relate to an issue that is objectively verifiable and factual, and not to questions which require subjective assessment of evidence and intention.
  I agree with much of the thrust of what the noble Lord, Lord Avebury, said in his opening remarks. We want this to be highly targeted and precise so that there is no argument; otherwise, it would be grossly unfair if the matter were subjective. After the previous debate, we agreed to consider whether Clause 29 could be amended so that the only grounds that could be specified by order are those that relate to a factual requirement of the Immigration Rules. We explained that it would be difficult to define what was meant by "factual". However, we made it clear that we were sympathetic to the principle behind the suggestion; namely, that the power should be used only in relation to requirements of the rules which concern a simple question of fact.
  We explored the suggestion with parliamentary counsel but concluded that Clause 29 should not be amended in the manner suggested. For similar reasons we are resisting this amendment. Inserting the word "factual" or referring to "objectively verifiable facts" would not give effect to the principle behind the suggestions. We reached the same conclusion when, previously, we considered using the word "objective". All the Immigration Rules could be described as relating to factual matters or as being objectively verifiable. The question is the extent to which there is room for debate—the noble Lord gave a couple of examples in his opening speech—and thus scope for appeal, in coming to an objective conclusion about a factual matter. Generic limitations of the kind suggested would not necessarily prevent the use of the power in relation to requirements which we would have no intention or wish to include.

  775
  Whether or not the right of appeal against a refusal of entry clearance on a particular ground should be removed is best judged on a case-by-case basis. That is the effect of Clause 29 as drafted. It requires the Secretary of State to specify by order the grounds in relation to which he intends to remove the right of appeal. The affirmative resolution procedure will ensure that both Houses will be able to consider whether the grounds specified are appropriate for the use of the power. No Minister would want to be embarrassed at the Dispatch Box unless a robust order, which cannot be picked apart, is brought before the House. We would certainly want the order to include consideration of the specific provisions of the immigration rules to which those grounds relate. That would also include consideration of the need for subjective assessment of evidence or intention in relation to those immigration rules.
  10 p.m.
  We have given assurances that we would not wish to use the power in relation to requirements under the immigration rules which are particularly open to assessment or argument. If the power were used inappropriately, the relevant order, as I have said, could be subject to challenge by way of judicial review. I know the noble Lord, Lord Avebury, said that was fanciful. It would not take many such cases by concerned people and organisations outside to start to clog up the system. That would be acutely embarrassing to both the Home Office and the Government, bearing in mind the commitments I have given at the Dispatch Box, which will be repeated in the other place in the next few days.
  There are some grounds for refusal which are straightforward and self-evident, where there should be limited scope for appeal. I have a fresh example to give. It is a fair example and I offer it for the record. The requirements to be met by applicants wishing to set up as a businessperson are set out in paragraph 200 to 210 of the immigration rules. These include the fact that the person has at least £200,000 of his own money to invest in the business. The availability of funds is assessed through scrutiny of the applicant's business plan and supporting documents such as financial accounts. Checks are also made to ensure that funds are the applicant's own and not from another source, and that they are entirely under the applicant's control. Applications can be, and have been, refused solely on the grounds that the applicant has not provided sufficient evidence that he is investing not less than £200,000 of his own money directly into the business in the UK.
  There is not much more to report on the compiling of the register, as I indicated last week. I hope that I have been able to reinforce our intention about the way this new power will be used. We are working with the English language sector to encourage comprehensive accreditation of English language schools so that, in due course, visas will be issued only to English language students who are coming to the UK to study at an accredited school.
  776
  A point was raised—and I regret I did not make a note of it during the speech—asking about the cross-flow of information so that schools know the names of the students who the Home Office knows. I gave a positive response to that. Maximum transparency has got to be best for all concerned, and that is my understanding of the intention as to how this operation will work. Whether or not the position will have been advanced by the time this group of changes goes to the other place, I genuinely cannot say. The latest update on the position will clearly be given when these Lords amendments, as they will be, are moved in the other place in the next few days.
  Lord Avebury: My Lords, it is not a question of argument whether or not we have this register of colleges which is approved on all sides by your Lordships. The only questions that have arisen again today are just how establishments will be put on the register and whether there will be a right of appeal against refusal to list a particular establishment.
  The noble Lord, Lord Rooker, has said that that would be considered for inclusion in secondary legislation. Clearly it could be limited to non-educational matters, such as whether proper records are kept and the hours that students attend, whether lectures are given in the subjects offered, whether examinations are held, and whether they lead to a recognised qualification such as the NVQ. All of those are legitimate matters of fact which should be specified. There will not be any difficulty in, as the noble Baroness, Lady Anelay, put it, "landing a punch" on the sham colleges by listing the criteria which have to be satisfied by an organisation wishing to be on the list.
  We were looking at something much broader than that. Until this evening, the only example that had been given of an objective and factual requirement was the colleges. Now the Minister has kindly given us another one, which needs a little analysis. As the noble Lord has said, whether someone has the funds to set up in business is a question of fact and that would be ascertainable by evidence submitted by the applicant in the form of a bank statement, for example. However, the noble Lord then said that doubts could arise on whether the funds were the applicant's own or whether they were under his control.
  That precisely illustrates our point. If the entry certificate officer says that the funds are not under the applicant's control or belong to someone other than the applicant, but he has no objective reason other than his suspicions for saying that, then these matters ought to be subject to independent appeal. They should not be treated as objective and readily verifiable facts. That is the distinction that we have sought to make all along: between matters of fact, which are properly to be dealt with under this power, and somebody's opinion, assessment or judgment, on which there ought to remain a right of appeal.
  If this example had been given to the JCHR and it had been able to consider it as part of its scrutiny of the legislation, it might have said, as I do, that the example demonstrates our doubts about leaving the clause as it

  777
  is. I did not understand the noble Lord's explanation of why it was impossible to incorporate our suggested wording in the clause. However, we shall have to be satisfied with his assurances, which enable outsiders to rely on the Pepper v Hart statements that have been made more than once on the Floor of the House. If there are any further discussions on this, we shall have to leave them to another place to pursue. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendment No. 38 not moved.]
  Clause 38 [Immigration Services Commissioner: power of entry]:
  Lord Rookermoved Amendment No. 39:
  Page 38, line 34, leave out "or a justice of the peace"
  The noble Lord said: My Lords, Clause 38—
  The Countess of Mar: My Lords, may I interrupt the noble Lord for a minute? It is now five past ten. We had a very late night last night. Although I am not going to move the adjournment of the House, I should be grateful if noble Lords on the Front Bench would convey to the Chief Whip that the organisation of business should be such that there is an understanding that some matters take a lot longer to consider than others and that time should be allowed for them. I ask noble Lords to give me confirmation that they will do so.
  Lord Rooker: Yes, my Lords, I will do that and I shall certainly speed up. There are about four items left and it would be a waste of time to have to come back on another day to deal with them, bearing in mind the time in the parliamentary year and the nature of the Bill. All that I have to do now is move three government amendments, all of which are concessions, so I do not need to spend much time on that.
  The amendment ensures that in Scotland the matter and powers affected are solely the reserve of sheriffs. I think that will meet the points that have been made in Scotland. I do not need to read out the speech that I have. I beg to move.
  Baroness Carnegy of Lour: My Lords, I am extremely grateful to the Minister. It has been rather hard work to persuade the Home Office that there was a mistake in the Bill in this respect. There was never any remote chance that a JP should be dealing with search warrants in this way. I should like to record that we are very grateful for the change.
  Lord Avebury: My Lords, the amendment ensures that in Scotland a sheriff only and not a justice of the peace will be entitled to grant the search warrant referred to in the clause. That was originally suggested by my noble friend Lord McNally in Amendment No. 36JA, which he moved on 27 April, as the noble Baroness will recall.
  Inexplicably, the noble Baroness who replied to that amendment was wrongly advised by the Scotland Office and the Office of the Advocate General that
  778
  provisions limiting the issue of such warrants to JPs occur only in legislation dealing with terrorism or firearms offences.
  The Law Society of Scotland has cited three instances which go beyond those offences. Under Section 289 of the Proceeds of Crime Act 2002, the approval of the judicial officer has to be obtained for searches. Section 290 defines the judicial officer as a justice of the peace in England and Wales but the sheriff in Scotland. Under Section 17 of the Crime (International Co-operation) Act 2003, warrants for searches may be granted by a justice of the peace in respect of England, Wales and Northern Ireland, but in the same circumstances, warrants under Section 18 in respect of Scotland may be granted by a sheriff. The third example was the Extradition Act 2003, where, under Section 156, search and seizure warrants may be granted by a justice of the peace for England and Wales but in Scotland only by the sheriff.
  It is not clear whether there is any recent precedent for powers of this kind being conferred on justices of the peace in Scotland. Section 8 of the Bail, Judicial Appointments, etc. (Scotland) Act 2000 defines two classes of justice in Scotland, and this may be the reason for the confusion. There are full justices and signing justices. The function of issuing warrants relating to the investigation of serious offences, including those related to asylum claims, should be undertaken only by the former. But there could be difficulties in making sure that only a JP skilled in such matters was approached if the class of justice was not specified, and that would subvert the intention of Parliament.
  The Government really should undertake more and better consultation with authorities in Scotland, including the Law Society of Scotland, with a view to agreeing not only how this matter should be dealt with under the Bill but how future instances in legislation should make it more certain that the correct person be appointed as judicial officer.
  On Question, amendment agreed to.
  Clause 42 [Amount of fees]:
  Lord Rookermoved Amendment No. 40:
  Page 42, line 15, at end insert—
  "() An instrument may not be made in reliance on this section unless the Secretary of State has consulted with such persons as appear to him to be appropriate.
  () An instrument may not be made in reliance on this section unless a draft has been laid before and approved by resolution of each House of Parliament (and any provision making the instrument subject to annulment in pursuance of a resolution of either House of Parliament shall not apply)."
  The noble Lord said: My Lords, I can be quite brief in speaking to the amendment because I understand that it has been very well trailed.
  As your Lordships are aware, Clause 42 provides that the Secretary of State may levy a fee for certain specified non-asylum immigration applications at a level which exceeds the administrative cost of processing those applications, and which reflects the benefits that the Secretary of State thinks are likely to accrue to a successful applicant.

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  We have had a number of useful and wide-ranging debates about the operation of this power and the safeguards in place. In response to a recommendation from the Delegated Powers and Regulatory Reform Committee and to points raised by your Lordships in previous debates, we indicated at Report that we would be bringing back amendments to strengthen these safeguards.
  In short, the amendment provides, first, that prior to the introduction of a fee under this power, the Secretary of State shall consult appropriate persons. Secondly, an order made under this power shall be subject to the affirmative resolution procedure, requiring the approval of both Houses of Parliament.
  For the avoidance of doubt, I will explain, if I may, a little about what consultation we have in mind and whom we envisage appropriate persons to be. I shall not use all my notes.
  Prior to the laying of the order to levy fees, we will undertake all possible consultation with appropriate bodies. For example, where the fee is payable by employers, as in the case of work permits, we would expect to consult with a large sample of those organisations on the UK work permit database, members of the UK work permit user panel and sector panels, as well as representative organisations including the Recruitment and Employment Confederation, the CBI, the Trades Union Congress and its Scottish counterparts, the British Chamber of Commerce, the Forum for Private Business, the Institute of Directors, the British Hoteliers Association, the Restaurants Association and the Federation of Small Businesses and others, to name but a few.
  Where the fee is payable by individuals, we intend to consult with a wide range of representative bodies and organisations. These include, but are by no means limited to, the Immigration Law Practitioners' Association, the Law Society, the National Association of Citizens Advice Bureaux, the Immigration Advisory Service, the Joint Council for the Welfare of Immigrants, the Refugee Council, Justice, the Commission for Racial Equality, the International Bar Association, London Refugee Voice, the Association of Regulated Immigration Advisers and the Audit Commission. There will be a whole range of other bodies that will be consulted. I have listed some of those that have been consulted in relation to the education colleges. A fairly substantial consultation operation will be launched. In due course, details of the fees and how they will apply will come back to your Lordships' House because final approval will have to be given here. I beg to move.
  10.15 p.m.
  Baroness Anelay of St Johns: My Lords, with the leave of the House, I shall speak to my Amendments Nos. 41 and 42, which are grouped with the Government's Amendment No. 40. I begin by welcoming government Amendment No. 40, which was a result of amendments that I had pressed earlier when the noble Lord, Lord Bassam of Brighton, was responding to them. He gave the commitment that is now being fulfilled.
  780
  I was particularly grateful to the Minister for taking the care to give some examples of those bodies that can expect to be consulted as a result of the amendment. I fully accept that he was giving the House an illustrative list and not a definitive one, but it was helpful to get a flavour of the bodies concerned.
  My two amendments seek further information from the Minister in two different ways. Amendment No. 41 would ask the Minister to tell the House what progress the Government have made on this matter since Report on 18 May, when I first brought the amendment before the House. A problem has been identified to me by the Refugee Children's Consortium: unaccompanied minors who are refused recognition as refugees, but who are given leave to remain in the UK, are now being charged under Section 5 of the Asylum Act 1999. They would thus face increased charges under Clause 42.
  However, the very fact that they are charged at all causes a problem. Have the Government found a way of resolving it? Are they now in a position to give a satisfactory undertaking to vary the regulations to give effect to the intent which underlies my amendment; that is, to give an indication of when that may happen?
  Like the Minister, I am not going to use my full note—I hope that the Refugee Children's Consortium will forgive me for that—but the nub of my question is whether the Minister is able to give an undertaking.
  I turn to Amendment No. 42, which returns to a matter that has been previously rehearsed, but on which I have yet to receive a convincing reply from the Government. The amendment would put into the Bill the power to correct errors in the charging of fees. I am asking the Government merely to keep to a commitment that was given to this House by the now Lord Chancellor when was at the Home Office. He said:
  "We shall ensure that when fee regulations are made, appropriate provision is made to deal with errors which may occur".—[Official Report, 12/7/99; col. 49.]
  So far, the Government have sought to reject the amendment on the basis that they can already make ex gratia payments if they wish. The difficulty has been that colleges are not persuaded that that brings sufficient certainty and equity into the process and I agree with them.
  One example of an error is what happened on the admission of a student, who had her mother with her as a visitor to help to find somewhere to live. The student stamp was put in the mother's passport and the visitor's stamp was put in the student's passport. That caused all manner of problems. Too many students still receive the wrong leave for no apparent reason.
  My amendment would not direct the Secretary of State to use his discretion in particular way; it is intended to be helpful. When I consulted the Association of Colleges and UKCOSA between 18 May and now, they were very much of the view that if the Government were unwilling to keep to the commitments that were so clearly given by the noble and learned Lord, Lord Falconer of Thoroton, they

  781
  would not be at all disappointed if I were to press the matter to a Division if I did not receive a satisfactory answer from the Government.
  I have been talking to the Bill team between then and now as well as to the colleges. I pointed out that I hoped that we might get at least a little further information from the Government as to the robustness and the fairness of their policy. I have also pointed out to the colleges that, as the noble Countess said, given their timetabling, the Government were likely to come round at an exceedingly late hour, when there might be too thin a House, properly to reflecting the views of the education world. I think that that gives a big enough hint.
  Lord Rooker: My Lords, I am going to take these in reverse order, the reason being that I have a 12-page speaking note on Amendment No. 42 but the nuts are in the last paragraph.
  In order to address the outstanding concerns, Des Browne, the Home Office Minister of State for Citizenship, Immigration and Nationality, has indicated that he would welcome the opportunity to meet with a wide range of representatives to explore further what measures we might take to assist in delivering a more efficient and effective service, particularly to students in the education sector.
  It is not a perfect service; it is getting better; we are working on it; we have hot lines all over the place; and we have been monitoring it since the noble and learned Lord the Lord Chancellor made his Statement. However, the Home Office Minister of State responsible for that, who, of course, takes full responsibility as the Minister should for all the defects in the system, is opening up his office for a grand powwow with all the interested bodies. I hope that is a sufficient answer on Amendment No. 42.
  I am very grateful to the noble Baroness for tabling Amendment No. 41 because it gives me an opportunity to state on the record the Government's position in relation to charges for applications for further leave to remain by former asylum-seeking children. While it would not be inconsistent with our international obligations to impose a charge on former asylum-seeking children whose application for further leave to remain in the UK is not based on asylum or Article 3 grounds, we believe this group is in many ways a special case.
  We know, for example, that many of these applicants are in receipt of benefits and support from local authorities under the Children (Leaving Care) Act 2000 and would find it difficult to pay the fee themselves. Consequently, I can confirm that we agree that children, or all those applicants who sought asylum while under the age of 18 who subsequently apply for further leave to remain should be exempted from the leave to remain application fee.
  However, as we indicated on Report, we do not believe that an amendment to Section 5 of the Immigration and Asylum Act 1999 is the most appropriate means to achieve that. Section 5 enables the Secretary of State by
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  regulation to provide for exemptions to the leave to remain application fee for certain immigration applications, including applications for leave to remain in the UK. We do not therefore believe it is necessary to amend the primary legislation and we shall, very shortly, be making an amendment to the Immigration (Leave to Remain) (Fees) Regulations 2003, which I understand is SI No. 1711, to achieve that aim. By "very shortly" I think that I am allowed to say this summer.
  On Question, amendment agreed to.
  [Amendments Nos. 41 and 42 not moved.]
  The Deputy Speaker (Lord Carter): My Lords, before I call Amendment No. 43 I should tell the House that if Amendment No. 43 is agreed to I cannot call Amendment No. 44 on the grounds of preemption.
  Schedule 1 [New Schedule 4 to the Nationality, Immigration and Asylum Act 2002]:
  Lord Clinton-Davismoved Amendment No. 43:
  Page 45, line 23, leave out "(which may include provision for dismissal)"
  The noble Lord said: My Lords, I am deeply obliged to my noble friend for tabling Amendments Nos. 46 and 47, and with that I am happy to say that I have nothing further to add, except that I beg to move.
  Lord Filkin: My Lords, I rise to respond to the amendment of the noble Lord, Lord Clinton-Davis, Amendment No. 43, and in doing so I shall speak also to Amendments Nos. 44 and 49. I shall be very succinct.
  We have listened to the noble Lord, Lord Clinton-Davis, and others in the House who are concerned that the term "dismissal" seemed to be inappropriate for judges who are, of course, office holders. Therefore we have replaced the word "dismissal" with the word "removal" and I emphasise that no removal can take place without the agreement of the Lord Chief Justice of England and Wales.
  The second concern of the noble Lord, Lord Clinton-Davis, was whether the concept of supervision might be seen to imply an interference with judicial independence. In response we have tabled Amendment No. 49, which removes that entire provision from the Bill, as it is no longer our intention that those matters should be provided for in rules. Instead, Amendment No. 44 specifies that the terms of appointment of an immigration judge may also make provision for training, appraisal and mentoring, which was exactly what we wanted to achieve in the first place. I have now made that more explicit. With these amendments, I very much hope that the noble Lord, Lord Clinton-Davis, and the House are content.
  Lord Clinton-Davis: My Lords, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Lord Filkinmoved Amendment No. 44:
  Page 45, line 23, leave out "for dismissal)" and insert "—

  about the training, appraisal and mentoring of members of the Tribunal by other members, and

  for removal)"

  On Question, amendment agreed to.
  Schedule 2 [Asylum and Immigration Tribunal: Consequential Amendments and Transitional Provision]:
  Lord Rookermoved Amendment No. 45:
  Page 50, line 3, at end insert—
  "At the end of section 2B (deprivation of citizenship) insert "(and section 40A(3)(a) shall have effect in relation to appeals under this section).""
  The noble Lord said: My Lords, paragraph 4(b) of Schedule 2 empowers the Asylum and Immigration Tribunal, in the event of a successful appeal against deprivation of British nationality, to direct that any order for such deprivation made prior to determination of the appeal is to be treated as having no effect.
  The amendment will confer a parallel jurisdiction on the Special Immigration Appeals Commission in relation to successful appeals to that body against deprivation of nationality under Section 2B of the Special Immigration Appeals Commission Act 1997.
  This might be thought to be a minor technical amendment, and I suspect that it probably is, but it ensures that the Bill gives full effect to the policy on joining deprivation appeals with appeals against deportation action and/or certification, as the case may be, under the Anti-terrorism, Crime and Security Act 2001, whose daily passage I remember even now. The measure was described in detail at recommittal, and your Lordships supported it. I believe that the noble Lord, Lord McNally, said at the time that they were sensible and overdue provisions that should be supported.
  I want to make it clear for the avoidance of any doubt, because there will not be opportunities later, that the Bill does not alter the grounds for deprivation of citizenship. It is important to make that clear. The Bill does not have retrospective implications. It is not directed, for example, at Abu Hamza and his appeal. The changes in the Bill would make the procedure for appeals against deprivation of citizenship and the effect of such appeals not retrospective. Any appeal currently in progress will be conducted in accordance with the existing procedure. That is an important point; I would not want people to get the wrong idea. Furthermore, the Bill does not limit the grounds for appeal against deprivation of citizenship or take away appeal rights in those cases.
  Deprivation of citizenship is one issue—but it does not necessarily mean that deportation or removal from the United Kingdom automatically follows. Each case will be considered on its merits and separate decisions taken about the propriety of deportation or removal, as distinct from deprivation of citizenship. There might, for example, be practical or legal difficulties
  784
  preventing deportation or removal which would not prevent deprivation of citizenship, and circumstances in which the latter action would be desirable or appropriate notwithstanding the impossibility of the former.
  I believe that I have milked everything that I can from this minor technical amendment. I beg to move.
  On Question, amendment agreed to.
  Lord Filkinmoved Amendment No. 46:
  Page 51, line 14, after ""it"," insert—
  "( ) for "him" in relation to an adjudicator substitute "it","
  The noble Lord said: My Lords, in moving the amendment I speak also Amendments Nos. 47, 48, 53 and 54. These are minor amendments suggested by parliamentary counsel to tidy up the drafting of the Bill. I do not propose to go into excessive detail, but they all tidy up the drafting of the consequential amendments in Schedules 2 and 4 to the Nationality, Immigration and Asylum Act 2002.
  In Sections 85 to 87, all references to "adjudicators" need to be changed to references to "the Tribunal". The Bill already provides for changing "he" to "it" and "his" to "its". Amendment No. 46 completes the set of changes, by changing "him" to "it". Paragraph 20(e) of Schedule 2 changes the reference at Section 106(2)(e) of the Nationality, Immigration and Asylum Act 2002 from "an adjudicator for the Tribunal" to just "the Tribunal". Amendments Nos. 47 and 53 make the same change to a similar reference at Section 106(2)(f). Amendments Nos. 48 and 54 remove a reference to Section 101 of the NIA from Section 106(2)(m). Section 101 is being repealed by this Bill, as it sets out the old appeals structure. I hope that is sufficiently detailed to be clear. I beg to move.
  10.30 p.m.
  Baroness Anelay of St Johns: My Lords, I do not in any way wish to alarm the Minister by standing up at this point. Of course I have no objection to these amendments being made. However, the moment should not pass without a comment that, at this stage of the Bill, on Third Reading, when we have also had recommitment of clauses, it is interesting that the Government are still able to find drafting improvements, however minor in nature. It is certainly important that they are so made.
  When these and other amendments pass to another place, do the Government foresee that other drafting amendments may be made within the rules to their own amendments? As I understand it, the only way in which the Government may further improve the Bill is if they are able to bring their amendments back to this House in an amended form.
  Lord Avebury: My Lords, since the noble Baroness has asked a question, perhaps I may be permitted to return to a subject I raised at an earlier stage of this Bill. When we have complex amendments of this kind, even though in the particular case we are talking about, as the noble Lord, Lord Filkin, has explained, they are minor and technical, there may be other

  785
  instances where the effect would be more substantial. I said then, and I am sorry if I sound like a bit of a gramophone record on this topic, that it makes things much easier for noble Lords to understand if, in a case of this kind, Keeling schedules could be produced. The noble Lord is aware that that suggestion has been supported on all sides, and other noble Lords have said that it should be a common practice and not confined to a particular instance, such as we are discussing at the moment.
  When the noble Lord comes to reply, I would be grateful if he would at least say that the Government would have a look at this issue. I am not expecting him to give me a definite answer this evening, or to declare of his own volition that Keeling schedules would also be produced by the Government whenever there is a case of complex technical changes to a particular clause or schedule, but if the Government would look at it as a general issue, I feel sure that it would facilitate the work of the House, not just on this particular Bill but in all future legislation.
  Lord Filkin:My Lords, as courteously expressed as that was, how else could I respond other than to say that we will most certainly look at the matter, with all the ambiguity that implies? I will be pleased to write to the noble Lord, Lord Avebury, with a considered view on it. I do not mean to be flippant; I understand the point, and it would be proper to respond to it.
  As for the teasing question of the noble Baroness, Lady Anelay, about whether we think it possible to improve even further an almost perfect Bill, I shall say that the desire of parliamentary counsel to make Bills clear and unambiguous is a good ambition, but I am not aware of any further plans afoot, either by counsel or by the Government—but of course one never knows.
  On Question, amendment agreed to.
  Lord Filkinmoved Amendments Nos. 47 and 48:
  Page 52, line 37, after "(2)(e)" insert "and (f)"
  Page 52, line 42, at end insert—
  "( ) in subsection (2)(m) omit the words from "(which may" to the end,"
  On Question, amendments agreed to.
  Lord Carter:My Lords, before I call Amendment No. 49, I should tell the House that if it is agreed to, I cannot call Amendment No. 50 standing in the name of the noble Lord, Lord Clinton-Davis, on the grounds of pre-emption.
  Lord Filkin Lord Filkin moved Amendment No. 49:
  Page 53, leave out lines 7 to 9.
  On Question, amendment agreed to.
  [Amendment No. 50 not moved.]
  Lord Kingslandmoved Amendment No. 51:
  Page 54, line 35, at end insert "or lay"
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  The noble Lord said: My Lords, I hope that the noble Lord, Lord Filkin, will agree that Amendment No. 51 is consequential upon the vote taken on 7 June, which is recorded at col. 51 of Hansard. I beg to move.
  Lord Filkin:My Lords, I agree with the noble Lord, Lord Kingsland, that Amendment No. 51 is consequential. Having said that, I think the House would have recognised when we discussed previous stages of the Bill that we had considerable concerns not simply about the House's insistence that lay members should be retained but also about the intersection of that with the three member tribunals. It was that latter point—the two matters are interconnected—that caused us particular concern as it appeared to us that it significantly fettered the proper discretion of the president of the tribunal. I say that to be clear regarding the weight of our concerns and to give a slight hint of what is going on in our minds in that respect.
  Lord Kingsland:My Lords, I am most grateful to the Minister for his response to the amendment. I am, indeed, aware of his concerns about its implications on the discretion of the president of the tribunal. I hope that in the few days that lie between now and the next phase, in another place, the Minister will consider what alternatives might be put forward to the draft of the Bill.
  Lord Filkin:My Lords, I accept that this is a consequential amendment, as previously indicated.
  On Question, amendment agreed to.
  Schedule 4 [Repeals]:
  [Amendment No. 52 not moved.]
  Lord Filkin Lord Filkin moved Amendments Nos. 53 and 54:
  Page 62, line 41, after "(2)(e)" insert "and (f)"
  Page 62, line 42, at end insert—
  "( ) in subsection (2)(m), the words from "which may" to the end, and"
  On Question, amendments agreed to.
  Lord Rooker:My Lords, I beg to move that the Bill do now pass.
  Moved, That the Bill do now pass.—(Lord Rooker.)
  Baroness Anelay of St Johns:My Lords, I think it may be appropriate at this time, as this has been an unusual Bill, for me to say one or two words upon its passing. I know that it has been the view of the usual channels over the past three years that there should not be long speeches at this stage. I well remember that the previous Leader of the House, who is much missed, made it clear that one should be as brief as possible.
  However, it has been an unusual Bill in that we have had recommitment of significant new policy issues. The Minister will be aware that it is sometimes difficult in those circumstances for outside organisations properly to brief these Benches on their concerns. Of

  787
  equal concern, it must be difficult for them to brief the Government and for those discussions to go forward in an appropriate way.
  That is a matter which I hope the Government will seek to try to avoid in future. However, we are realistic and we appreciate that all governments at some stage wish to use a Bill as a passing vehicle in which they feel they must put their policy because one may not appear again in the near future.
  I appreciate that the Government have made it clear that they wish this Bill to be on the statute book before the House rises for the Summer Recess. I know that my honourable and right honourable friends in another place would wish me to make it clear that we have no intent now, nor ever have had any intent, to delay this Bill. Our view has always been that the Bill should be given the proper scrutiny that this House, but more particularly the public, deserves.
  Lord Avebury:My Lords, may I add a word to the remarks made by the noble Baroness, conscious of the fact that we are under the strict injunction not to speak for very long at this stage?
  I could not refrain from saying how grateful we are to the Ministers' offices—and I speak in the plural because we have had many letters from the noble Lord, Lord Rooker, and from the noble Baroness, Lady Scotland, during the course of these proceedings—which have assisted us enormously in making better contributions than we could otherwise have done, and in understanding more what is in the minds of Ministers.
  I remember that, when I first came into this House years ago, one would not have dreamt of receiving letters of that kind from Ministers or of having the kind of communication that we have had with the Bill
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  team. We have therefore made progress. This has assisted the work of the House and improved the general parliamentary process.
  We realise that it places an enormous workload not only on those who are in the Minister's offices but also on those who stand behind them in the Bill team and in their departments. We would therefore put on record our gratitude to the noble Lord, Lord Rooker, and his colleagues and to those in his department who have served them so well during the course of these proceedings.
  Lord Rooker:My Lords, I am extremely grateful for the contributions of noble Lords. I would briefly put on record my thanks for the support I have had, having returned to do some Home Office business in this House for the first time in a few years. It is a very complicated Bill with many aspects of policy. It is a large Bill team and I pay thanks to them and to my own private office in the ODPM, which has facilitated communication between two government departments. It has enabled me from time to time to share some of the Government's views with the House. I am extremely grateful for what has been said and I thank everyone concerned.
  On Question, Bill passed, and returned to the Commons with amendments.

  University of Manchester Bill [H.L.]
  Returned from the Commons agreed to.
  Medway Council Bill
  Brought from the Commons; read a first time, and referred to the Examiners.
Preamble
House adjourned at seventeen minutes before eleven o'clock.
Official Report of the Grand Committee on the

  Pensions Bill
  (First Day)
  The Committee met at half past three of the clock.
  [The Deputy Chairman of Committees (Baroness Thomas of Walliswood) in the Chair.]
  The Deputy Chairman of Committees (Baroness Thomas of Walliswood):Before I put the Question that the Title be postponed, may I remind your Lordships of two points of procedure: noble Lords will speak standing and the House has agreed that there shall be no Divisions in a Grand Committee. Therefore, unless an amendment is likely to be agreed to, it should be withdrawn. If there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and will resume after 10 minutes.
  Title postponed.
  Clause 1 [The Pensions Regulator]:
  On Question, Whether Clause 1 shall stand part of the Bill?
  Lord Higgins:I rise to oppose the question that Clause 1 stand part of the Bill. We meet in rather unfamiliar surroundings but they seem to me better than those of the Moses Room. The only constructive suggestion I have at this stage is that perhaps we should follow the practice on the Floor of the House of Commons and have the gap between the tables two sword lengths apart. That would open the room up rather more.
  In rising to oppose the question that Clause I stand part of the Bill, I should explain that, as noble Lords will have noticed, we have tabled a number of similar amendments to various clauses. The reason is that it seems to us that this is an extremely difficult and complicated Bill. In some cases it is very difficult to put down meaningful amendments, and that is the case as far as this clause is concerned. It simply says that there should be a body corporate called the Pensions Regulator. If, in the event, the debate has already covered the main points that need to be raised on subsequent clauses, we will not speak to those amendments. The Public Bill Office, in its wisdom, has put the list of all the places where we have tabled such Motions on the front of the Bill. It may be that your Lordships will find the pension grouping list rather more convenient since it shows the point at which the clause stand part debates appear.
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  At Second Reading, we were very clear that the basic objective of the Bill—to ensure that those who are in danger of losing their pension entitlements are protected—is one that we support. The trouble on this clause, and on others, is that there are unfortunate side effects that may result in the provisions of the Bill causing damage in various ways to pensioners and to others. In due course, we shall come to consider those.
  To some extent, that is even true of the simple clause that we are now debating because it will incur a considerable additional cost, something over £23 million, and there will probably be other costs on top of that figure. Those will be met by a levy on pension schemes. Inevitably, there will be some employers—but one hopes very few—who will feel that they do not wish to bear the additional cost. It is very simple to avoid the levy by closing down the pension scheme.
  There is a danger that the Bill overall puts another nail in the coffin of final salary schemes. The Bill is primarily concerned with defined benefit schemes—or final salary schemes, as they are sometimes called—although there are some clauses that affect defined contribution schemes as well. There is a balance to be struck about the best way to proceed to achieve the objectives that we all wish to see.
  The pension regulator is a successor to the existing regulator, OPRA. I speak from personal experience as a one-time chairman of a pension fund when I say that OPRA has done a very good job indeed. But, at the same time, the Sandler, Pickering, NAO and other reports suggested that a rather more wide-ranging regulator would be appropriate.
  The problem with that, again, is one of balance. In the Commons, it was said that the regulator would be proactive and focused. We will return to those points in detail later when we will need to consider to what extent this adds to the problems that trustees and pension funds generally have to contend with by way of red tape. There is not the slightest doubt that the change from OPRA to this regulator will significantly increase the degree of work that the pension trustees will have to do to achieve the objectives of their schemes. That is all a question of balance.
  I would not go so far as to say in regard to various clauses—particularly, for example, Clause 35—that the road to hell is paved with good intentions. But there are some very important side effects. Therefore, in discussing this and subsequent clauses, we will need to consider very carefully the extent to which we can minimise the unfortunate side effects of these proposals.
  My understanding is that there are still a large number of government amendments to come. That is surprising at this stage, given the amount of preparatory work that was done and given that the matter has already been through the House of Commons. Perhaps the Minister can give an indication of what we may expect so that we can be forewarned and can take action to deal with that situation.

  GC 103
  Overall, we shall act as constructively as we can without taking undue time: this is a massive Bill of very great complexity that we have to get through. We can all work towards co-operating to improve the Bill.
  Lord Oakeshott of Seagrove Bay: I declare my interest as a pension fund investment manager. At Second Reading, we made clear our general approach to the Pensions Regulator. I do not propose to add to that, save to say that our approach to this Bill—I share several of the detailed concerns of the noble Lord, Lord Higgins—will be one of proceeding by amendment rather than outright opposition. Therefore, we will not support any suggestion that Clause 1 do not stand part of the Bill.
  Baroness Turner of Camden: At Second Reading, my noble friends and I, who have put down amendments to this Bill, nevertheless supported the general idea of the regulator. We believe that it is necessary to take some further means to protect pensions. The regulator is the way that the Government have chosen. We on this side support that.
  The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham): I am grateful for the opening statements made by the noble Lords, Lord Higgins and Lord Oakeshott. As and when, and if and when, this Bill gets full parliamentary approval, that will not be the end of the process. There will still be consistent regulations to be explored and negotiations will continue. I recognise the skills, experience and abilities of Members of the Committee on all sides. I am looking at my colleagues here: three of us were engaged in the arguments on the Pensions Act 1995. Other noble Lords have direct experience of DWP work or other pensions experience. As a result of your Lordships' scrutiny, I am confident that we will ensure that the Bill is as robust, and will have as much staying power, as can be achieved. The essence of pension planning is that it has staying power so that people can have some degree of security in the years ahead.
  Clause 1 establishes in law the Pensions Regulator. Subject to Parliament's approval, it will be in place from 6 April 2005, which is only some nine months away. The current regulatory body, OPRA, will be replaced by a new non-departmental public body (NDPB); that is, the Pensions Regulator. I am pleased to be able to agree with both the noble Lord, Lord Higgins, and my noble friend Lady Turner that, since it was established in 1997, OPRA has laid good foundations in the regulation of work-based pensions. We propose to build on its experience of more than seven years of regulation. Having talked with the chairman, it is clear that the authority feels that this is an appropriate way forward in building on the work it has already done.
  As noble Lords who took part in the debates in 1994 and 1995 will recall, OPRA was designed specifically to avoid another Maxwell-type situation. At the time of the 1995 Act, the fraudulent use of pension scheme assets was considered the greatest risk to pension
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  scheme members. OPRA was given the task of monitoring employers' contributions to occupational pension schemes and the activities of the trustees responsible for those schemes. Given the context, I would say that an almost adversarial relationship developed between the interested parties. Someone had to act as a form of "gamekeeper", keeping watch on possible defaulting trustees or employers.
  Since 1995, however, the pensions environment has changed significantly for reasons that all noble Lords will know. We would argue that the problem is no longer one of fraud, but of underfunding. OPRA has no powers to tackle the risks associated with the underfunding of pension schemes. It has no powers to ensure that errors, omissions or other breaches of pension legislation are put right; it has very little scope to take a flexible, proactive and responsive approach to regulation to adapt to changing circumstances or, indeed, to influence those changes through information, advice or education.
  We believe that our proposals for the new regulator will address these issues. We shall concentrate on problems that generate risks. The body will be given an additional range of powers to help those with duties under pensions legislation to comply and will be able to put things right at an earlier stage through its preventive as well as remedial powers. As the noble Lord, Lord Higgins, said, our proposals will implement the wide-reaching recommendations about the regulation of work-based pensions made in a number of key reports. Pickering, the quinquennial review of OPRA and the National Audit Office study of the authority all recommended that the regulator of pensions should target resources on cases where members' benefits are at greatest risk and avoid "cheapening the regulatory currency" by wasting time on petty breaches that have little or no effect on members.
  That is exactly what we propose the Pensions Regulator will do. The issue of risks to members' benefits was a key theme of the discussions held both in the other place and during the debate on Second Reading in this House. Moreover, the Better Regulation Task Force has concluded, from its experience of working with regulators across government, that regulatory bodies are most effective if they can focus their resources on areas of real risk rather than the "graffiti" problems of reporting a day or two late and so forth, which make up over 50 per cent of OPRA's caseload.
  The task force has also recommended that regulators should, whenever and wherever possible, adhere to the principles of better regulation. Regulators should be accountable, proportionate, targeted, consistent and transparent in their approach to regulation. I am sure that noble Lords will want to measure our proposals by those five standards. We intend that the Pensions Regulator will embed these principles in its design, working processes and overall approach to the effective regulation of pension schemes.

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  As OPRA is now, the Pensions Regulator will be funded indirectly through a levy on pension schemes. The noble Lord, Lord Higgins, asked about costs. As he stated, we currently estimate that the running costs of the regulator will be around £23 million. This compares with a projected £17 million for OPRA's final year, 2004—05. Those increased running costs reflect the staffing and processes required to support the wider powers of the body, as well as its additional responsibilities in respect of the Pension Protection Fund, and our approach to regulation.
  We shall be developing other themes as we proceed through Part 1 of the Bill but, as noble Lords accept, the Pensions Regulator should concentrate on risk in order to reduce as far as possible, without in any sense being able to make a guarantee, risks to the security of defined benefit schemes. That is to be the core of its job. It will monitor compliance with the provisions of this Bill and other pensions Acts; it will help trustees and others to get it right and keep it right, taking appropriate action where necessary; and it will be the "eyes and ears" of the Pension Protection Fund, tackling the risks associated with underfunding and employer solvency. By doing all that, we hope to ensure that members' benefits are protected so that people have some certainty about their pensions in retirement.
  I hope, with my very "blue sky" description of the intent of the Pensions Regulator, that noble Lords will agree that Clause 1 should stand part of the Bill.
  3.45 p.m.
  Lord Higgins: Perhaps the noble Baroness would give us a little breakdown of how the costs compare. She says that they go up from £17 million to £23 million, which is an addition of only £6 million, yet there appears to be a huge increase in the amount of work that the regulator will do compared with what OPRA does.
  Baroness Hollis of Heigham: I was looking for my statistics on the number of staff. We are expecting an increase of about 40 staff to the current number at OPRA, which as I recall is about 240 in both Brighton and Newcastle. The increment is of that order. I shall certainly be happy to write to the noble Lord with any further details but, relying on my memory, we are talking about taking staff numbers up from about 240 to 280 or 300, which would account for the additional costs. The Pensions Regulator will have his or her own staff as well, of course.
  Lord Oakeshott of Seagrove Bay: How many of the additional staff will be in Brighton, and how many in Newcastle? Will additional office space be taken in each place?
  Baroness Hollis of Heigham: At the moment, I cannot help on that. One job that OPRA has encompassed in the past is tracing activities. In some cases, decisions still have to be made on where some of those jobs may be located, or whether they will come back to the department, as in that case. I think that I am right in saying that no final decisions have been
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  made as to where precisely all the additional staff will be, but the presumption is that staff currently in Brighton will remain in Brighton, and staff currently in Newcastle will remain in Newcastle. The pension protection staff will be placed accordingly.
  Lord Oakeshott of Seagrove Bay: I am grateful for that, but it does not take us much further. Will the Minister undertake to write to us and let us know when the decisions are made, just to give us some general feeling?
  Baroness Hollis of Heigham: Certainly.
  Clause I agreed to.
  Clause 2 [Membership of the Regulator]:
  Baroness Turner of Camdenmoved Amendment No. 1:
  Page 1, line 11, leave out "five" and insert "six"
  The noble Baroness said: Amendment No. 1 is really a paving amendment for Amendment No. 4, with which it has been grouped and to which I shall speak as well. Amendment No. 1 changes the number of persons appointed by the Secretary of State as membership of the regulator from five to six. We are doing that to make arrangements for our proposals in Amendment No. 4.
  The Bill establishes bodies with more power than we have yet seen. I agree with that power in the main, as the objective is to protect the rights of pension scheme members now and for the future, as the Minister indicated. The Government accept, as do most people, that there has been a decline in confidence in pension providers generally. That is rightly felt to be something that must be dealt with, and the Bill is an attempt to do that. It is therefore important to ensure that the new bodies charged with administering the Bill should be seen to be widely representative.
  When OPRA was established, legislation laid down a basis for representation that pretty much guaranteed that there would be a TUC nominee. However, this Bill is non-specific on the origins of board members, and the Government have talked about members being properly equipped to do the job; I agree, of course. Consumer interests are also very important, and consumers in this context are employees. As I am sure that the Minister will tell us, the provision of pension schemes is at present a voluntary matter for employers, so there has to be representation of employer interests. There obviously must also be a level of technical competence among board members, and our amendment seeks to deal with that through having a member who knows about life assurance business and someone with experience of management and administration of pension schemes.
  I am indebted to my union, Amicus, for the text before the Committee. My union has always taken a very considerable interest in pension provision for members. We do our best, as do other unions, to ensure that members are knowledgeable about pension matters. We run training courses so that that can be achieved. We have tabled a similar amendment for when we consider the PPF board. So far as the

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  regulator goes, the amendments show our view of the way in which there should be representation on the board, so that it becomes publicly and generally acceptable. We believe, as do the Government, that we have to do something to restore the lack of confidence in the pensions industry. I beg to move.
  Baroness Dean of Thornton-le-Fylde:I support my noble friend Lady Turner in Amendments Nos. 1 and 4. Traditionally, there has been a representative voice of employees on OPRA. That is entirely logical when it is acting as regulator of people's pension funds through their employers. This is not a principle change in the Bill; it brings in some fairness. I may be wrong, but I am sure that at the weekend I saw in the press an advert for members of the Pensions Regulator. No? I will get my paper out of the bin then.
  Lord Oakeshott of Seagrove Bay:It is for non-executive directors of the Pension Protection Fund.
  Baroness Dean of Thornton-le-Fylde:Non-executive directors of the Pension Protection Fund, not the regulator; we will come to that later. Nevertheless, we are going down the same sort of alley, because we will be putting forward the same kind of arguments when we come to that issue.
  The amendments are straightforward; I do not want to make a Second Reading contribution. I entirely support the two amendments that my noble friend has put forward, and I will be interested to hear the Minister's response.
  Lord Freeman:I seek some clarification, because the spirit of Amendments Nos. 1 and 4 must be right. I have three concerns. First, I am somewhat confused by the maths in Clause 2, because if at least two members appointed under subsection (1)(c) must be appointed from the staff of the regulator, then by definition they cannot be non-executive. If you are to have a majority of the board who are non-executive, you must appoint five other persons appointed by the Secretary of State, because it has been assumed that the chairman is non-executive.
  Baroness Turner of Camden:The clause says "at least" five.
  Lord Freeman:It must be five.
  Baroness Turner of Camden:It says "at least" five, so it is flexible.
  Lord Freeman:Yes, I appreciate that. I think we agree that we are talking about five or more in the first place. I am also concerned as to whether the noble Baroness interprets,
  "management or administration of occupational pension schemes",
  to include a trustee nominated member; in other words an employee.
  Baroness Turner of Camden:It could be a trustee, of course. It simply says a member who could be "representative of employees", or,
  "a member who appears to the Secretary of State to be knowledgeable about life assurance",
  or a member who had some knowledge of "management or administration". As far as (d) is concerned, that could well be someone who had trustee experience.
  Lord Freeman:I am grateful. My final point involves the numbers in Amendment No. 1. The experience of running public bodies such as this is that the chairman normally reserves his or her right to intervene. If you are to have a majority who are non-executive, you need six, not five, because the chairman is being included in the majority according to the Higgs principle.
  Baroness Turner of Camden:I keep on having to get up. That is what our amendment says. Our amendment says to leave out five and insert six.
  Lord Freeman:I am agreeing with it.
  Baroness Turner of Camden:The noble Lord is agreeing with it. Okay.
  Lord Freeman:I was seeking to explain the reasons why the amendment should be supported.
  Lord Borrie:When I first saw the opening clauses of the Bill, I found rather odd the use of the words "pensions regulator" to mean something other than one person. However, Clauses 1 and 2 together make it perfectly clear that it is a corporate body and, whether or not we take this amendment, what the membership is to be. I do not have any view on whether in addition to the chairman and the chief executive there is a minimum of five other members, as the Bill says, or six as proposed by the amendment. After all, the Bill provides a minimum and there is freedom to have more than that number.
  But in relation to Amendment No. 4, the principal amendment, I am not sure whether we should be as specific and prescriptive as proposed. As the noble Lord, Lord Freeman, indicated, the categories seem reasonable, although, as the noble Lord's questions indicated, one or two may require interpretation as to exactly what they are. Why not leave the matter of a well-balanced board, which everyone wants, to the judgment of the Secretary of State and, insofar as they act together, with the chairman?
  I recall from experience that being over-specific can cause a certain amount of difficulty. I was once appointed to a quango under a specific provision, which I did not quite fit. Fortunately for me and for the department, no one questioned it; no one seemed to notice. Everyone thought I was a splendid appointment—or so they let me assume—and certainly no one sought judicial review. This was some time ago in the early days of judicial review, and perhaps it was just as well.

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  My main reason for mentioning that example is to raise the rhetorical question of why create unnecessary difficulties by having specific categories, some of which may or may not be easy to interpret at any given moment? With the prospect of numerous meetings of the Grand Committee—I do not know how many—surely none of us here today would happily contemplate another major Bill of this kind for a decade or so. Being over specific on this and other matters would be unwise because we may not in 2004 anticipate all future possibilities.
  The categories set out by my noble friend are perfectly reasonable, but I do not want such categories. Perhaps we should place greater trust not only in the present Secretary of State but in others who may come from other parties and other political backgrounds in the future. On the matter of appointments, I doubt whether more specificity than is in the Bill is required.
  Lord Skelmersdale:My noble friend Lord Higgins has already explained the general philosophy of our amendments. As my name is attached to Amendment No. 1 but not to Amendment No. 4, I was slightly surprised to see them grouped; we tabled Amendment No. 1 for a totally different reason. Nevertheless, the noble Baroness, Lady Turner, and I caused unwitting confusion in the Public Bill Office by unknowingly tabling exactly the same amendment within two hours of each other. However, the matter seems to have been resolved. I am most grateful to the noble Lord, Lord Hoyle, and the noble Baroness, Lady Gibson, for agreeing to their names being removed from the amendment.
  As I said, we tabled the amendment for totally different reasons. For us, its purpose was to determine two matters. First, what kind of animal is the regulator to be? Am I right to assume that, by virtue of Clause 8, as he will chair a non-executive committee he will himself be a non-executive? Or is it the case that he will be an executive chairman by virtue of his functions transferred from OPRA under Clause 4(1)(a)? There is confusion in my mind. In either event, Part I and Schedule I together comprise an almost unique form of corporate governance. I shall have more to say about that when we get to Clause 4.
  The second reason for the amendment is tied into the first. Clause 2 informs us that there are to be not less than three non-executive members. As my noble friend Lord Freeman said, it is clear that this is a minimum because Clause 2(1)(c) states that there are to be at least five members other than the regulator and the chief executive. If the regulator is to be a non-executive, as I suspect, then the minimum number of people on the non-executive board will be four.
  4 p.m.
  I cannot for the life of me see how so few people can do justice to the work encompassed in Clause 9, for example. Nor indeed are they really non-executive as they can be authorised to do anything that is in the province of the regulator. Be that as it may, what happens if the committee needs to have a vote and it
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  splits 2-2? Does the chairman have a casting vote? If so, should the Bill make provision for it? If not, then there should be an even number of non-executives other than the regulator. I do not really mind whether there are six, 10 or whatever even number the Minister picks out of the air, but an even number there most certainly should be.
  Amendment No. 4, as I said, has been grouped with Amendment No. 1, and I am afraid that I have to agree with the noble Lord, Lord Borrie, on this. I cannot be nearly as complimentary to the noble Baroness, Lady Turner, as I was on the last amendment because I simply do not like shopping lists in Acts of Parliament. However, I would say that she is right in wanting to know what sort of people are to be appointed as non-executive members. Clearly employers, employees and pension fund managers are all suitable people, but the danger of a list is that of leaving out those from other backgrounds.
  It further occurs to me that paragraph (b), which refers to employees, could cover employees who are not members of their company pension schemes, which if memory serves me right is not compulsory. Indeed we had quite a lot of chat on that on Second Reading.
  For those reasons, I very much look forward to what the Minister has to say.
  Lord Oakeshott of Seagrove Bay:Perhaps I can start with a tribute to the noble Baroness, Lady Turner, for her lifetime of service for the members and pensioners of Amicus and of what she and I as former members will remember as ASTMS. I link that also to the work of the noble Baroness, Lady Dean, for the print union members.
  I have some sympathy for the amendment. Although I think it is possibly a little rigid as it stands, if it is interpreted in a particular way, might that not solve the problem? Can all these categories overlap? Can people qualify as someone with experience in the management? If the categories could be overlapped so that they were flexible, I would be happy to support the proposal.
  One of the noble Baronesses touched on the question—and this a question, indeed a suggestion, also to the Minister—of having seen this advertisement. Can we be assured that no advertisements have yet appeared for the non-executive directors of the regulator, which I think would be very discourteous to the Committee? There are amendments on the composition of the PPF. I believe that it was very discourteous that, before we have even had a chance to consider those amendments, on the very day that we are starting to discuss the Bill, this should have come out. Will the Minister assure us that it will not happen until more time has gone by? I really do think that this is taking things for granted.
  Baroness Turner of Camden:Perhaps I can respond to that. I see no reason why some of these categories could not overlap, particularly as far as paragraphs (a) and (d) are concerned. Unions often have members who have had managerial experience; it is certainly

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  true of my union. There is no reason why the overlap should not be flexible. I do not see any reason why not. The essential point is that there should be representation of those interests.
  Baroness Hollis of Heigham:Before I speak to the amendments it might be helpful if I gave a brief explanation of the purpose of Clause 2, which deals with membership of the regulator and the reasons for the structure. Afterwards, Members of the Committee can press me on any points that I have left undiscussed.
  As the Committee will be aware, the regulator will consist of executive and non-executive members. It will have a chairman—who has not yet been appointed—who is appointed by the Secretary of State. The chairman cannot be either a member of staff of the regulator or of the Pension Protection Fund. So in that sense he is one of the non-executives, as your Lordships surmised perfectly correctly.
  The chief executive—the former chief executive of OPRA, Tony Hobman—will be a member of the regulator. The first appointment will be made by the Secretary of State with subsequent appointments to be made by the regulator with the approval of the Secretary of State. Given that we do not yet have a chairman, we have gone down only to the other members.
  The chief executive's main function is to ensure that the regulator's functions are carried out efficiently and effectively. The regulator will have at least five other members who are appointed by the Secretary of State. That is the minimum. As I understand it, OPRA has nine members. However, it needs that larger number because it must encompass a determinations panel which, in this regulator, is a separate and independent body. So the numbers are not dissimilar and are perhaps more generous than the old OPRA numbers.
  At least two of those five members must be appointed from the regulator's staff. The majority of the board of the regulator must be non-executive members. That will provide appropriate scrutiny of the rest of the board and the regulator's activities. The structure has been chosen deliberately—following Higgs and the various reports coming from Cadbury on corporate governance—to strike a balance between ensuring sufficient flexibility in the skills, knowledge and experience of members, and creating a governing body that is effective and accountable while being kept to the minimum number.
  Amendment No. 1 is required in order to increase the minimum number of members of the regulator and thus accommodate Amendment No. 4. Amendment No. 4, requiring board appointments to be subject to consultation with representative organisations of employers and employees, is—as I would hope your Lordships will accept—superfluous and inappropriate. I believe that it places disproportionate emphasis on the interests of employers and employees. Although it follows from the current OPRA structure, the OPRA structure of specified interests was set up in the context of Maxwell in which there was theft of individual members' assets in the name of fraud. My
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  noble friend was powerful in her exposure of that fraud. Nevertheless, I think that we have moved on from that adversarial context.
  I have the same hesitation about shopping lists. Like the noble Lord, Lord Borrie, I was a member of a regional health authority. Because my friends, allies, mates and so on within the then eastern region wanted me on that body, they decided that they had better put me in as a representative of the trades unions. That was fine, although I was a member of the Association of University Teachers and had no connection whatever to any of the health unions which should probably have been represented. We had to fiddle, construct and organise it, and I met regularly with trade union colleagues to take on board their concerns; I did an honourable job. However, it was actually a limitation of capacity rather than a representation of capacity. Like the noble Lord, Lord Borrie, we had to find a way round it very precisely.
  The Secretary of State's exercise of the power to appoint members to the board of a statutory public body must in any event be exercised in accordance with administrative law principles, in a reasonable, proper manner, taking into account the interests of the public in general, including the interests of employers and employees.
  As I say, noble Lords will be aware that the proposed structure is from the OPRA structure. I do not think that it is appropriate to reproduce such a structure in a very different climate. However, I should like to reassure my noble friend. When discussing this, she may want to consider that we are significantly and, in my view, absolutely rightly strengthening the role of member-nominated trustees from among the ranks of employees and, where appropriate, involving trade union negotiation. That seems to me exactly where we should be strengthening the role of employees' representatives—at the trustee scheme-specific level. I am delighted that we will be addressing that later in the Bill. However, when it comes to the regulator, I think that we would be denying ourselves the capacity to have people with experience who can range across fields without trying to confine ourselves to shopping lists. I hope that my noble friend will accept that.
  Appointments to the regulator will be made in accordance with Cabinet Office guidelines, following open competition. There will be nothing to prevent groups representative of employers, or of employees, from encouraging their members to apply. But if such a person were to be successful, it would be on the basis of their abilities alone rather than because they represent a specific interest. We are effectively asking them to operate under trust law rather than to be delegated representatives of a body or sectional interest.
  Mindful of the Division Bells, I hope that, with that explanation, my noble friend and noble Lords opposite will feel able to withdraw or not to press their amendments.

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  [The Sitting was suspended for a Division in the House from 4.9 to 4.19 p.m.]
  Lord Skelmersdale:The Minister invited her noble friend Lady Turner to withdraw Amendment No. 1 on the basis of what she had just said, but she did not actually answer the question to which we all seek a response; that is, are three non-executive directors plus the regulator, himself non-executive, sufficient to cover the work of both the non-executive committee and, more important, the Determinations Panel, to be established under Clause 10? There is no reason why one or two of the non-executive directors should not be appointed to that panel.
  Baroness Hollis of Heigham:I am sorry, but I thought that I had made that point clear. At present OPRA has nine members precisely because it is carrying out a determinations function which, quite legitimately, creates problems as regards chinese walls and so forth. Under the Bill, the Determinations Panel will have no overlapping membership at all. Therefore the members of the panel will be over and beyond the members of the Pensions Regulator. I said that in my response, and I am sorry if I did not make myself clear.
  Lord Skelmersdale:I apologise, but the Minister speaks so fast sometimes that I find it very difficult to keep up. However, my original question still stands. There is a perfectly good non-executive committee that is given all sorts of roles. Is three plus the regulator enough for that purpose? I suspect that the answer must be no, in which case I say, for totally different reasons from the noble Baroness, Lady Turner, that there should be an unequal number of individuals on the non-executive committee.
  Baroness Hollis of Heigham:I do not want to be rude, but I wonder whether we are making heavy weather of the provision. We are simply talking about a minimum. I am sure that, if the need is there and the workload justifies it, the chairman and/or the chief executive would make representations to the Secretary of State to increase the membership. At present, of the five people appointed by the Secretary of State, three would be non-executive, at least two would be from the staff, and there would be two others—the chairman, who is non-executive, and the chief executive, who might be regarded as a member of staff. Therefore, we would end up with four plus three. There should not then be a problem about majorities. As I say, we are talking about a minimum, so it is open to the Secretary of State to increase the number.
  Lord Oakeshott of Seagrove Bay:However fast the Minister was speaking, I did not hear her answer my question about the appointment and what the timing would be. Will she confirm whether any advertisements have appeared for non-executives to the regulator? When is that likely to happen?
  Baroness Hollis of Heigham:I sought to answer that by saying that there would be no question of advertisements for members going out until the chairman had been appointed.
  Baroness Turner of Camden:I thank all Members of the Committee who have participated in the debate, which has been very interesting. I would like to consider very carefully, as I always do, what the Minister said. I note that she said that the ball game was now different from OPRA. Presumably it is not the same as the Occupational Pensions Board, of which I was a member for 17 years. In those days, there was a trade union seat on that body. I did not occupy it; I was one of the then Minister's nominees, but the TUC had a right to be nominated.
  Baroness Barker:In going away to consider the matter, might the noble Baroness consider in her efforts to secure representation the potential problem of how people in such categories would be nominated? How would one ensure representation of the groups that she seeks to have on the board?
  Baroness Turner of Camden:Historically the TUC has been invited to make nominations for seats on the Occupational Pensions Board, and presumably on OPRA as well. I was not a member of OPRA, but I was for a long time a member of the Occupational Pensions Board, which had a specific seat allocated. The Minister put forward nominees, as did the industry. We had a board which, as far as the Minister was concerned, was representative of all the interests involved.
  Certainly, my noble friends who have attached their names to the amendment are anxious to ensure that arrangements are made for interests to be represented, as am I. It may be that the wording is not very good—there may be all kinds of other ways in which this can be expressed—but we believe that it is necessary to have some indication that there will be representation for not only the interests of employees but the interests of the other bodies referred to in the amendment.
  I note with interest and welcome what the Minister said about the increase in powers of member-nominated trustees. That is obviously very important. But this is a different matter; it is not about trustees but about an overall regulator for the industry as a whole and the interests of members who hope to benefit from what the industry can offer.
  We shall consider very carefully what has been said and probably come back again at Report stage with another form of wording in order to ensure that the interests for which we think it is so important to secure representation are acknowledged on the face of the Bill. In the mean time, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Lord Higginsmoved Amendment No. 2:
  Page 1, line 11, leave out from "the" to end of line 12 and insert "chairman and approved by the Secretary of State"
  The noble Lord said:The amendment may seem excessively cynical. In effect, it seeks to change the balance in the Bill from the Secretary of State making appointments after consulting the chairman, to the chairman making appointments with the approval of the Secretary of State.
  It is important that the appointments should be impartial and there is some concern that there may be a degree of cronyism in such appointments. On the other hand, the Minister may be able to reassure me as far as that is concerned. I should be further reassured if she could make it clear that, if it is to be done by the Secretary of State, he may not make an appointment under subsection (2) unless the procedures recommended by the Office of the Commissioner for Public Appointments have been followed. Perhaps she will assure me that that is so.
  There are provisions in the Bill for payment of pensions to staff and so on, but I am not absolutely clear whether these are to be full-time appointments. It may emerge later, but I am not sure whether an amendment has been tabled in that regard. Again, that is not irrelevant to the people making the appointments. My feeling is that they will have considerable responsibilities—certainly much greater than OPRA.
  The noble Baroness has been forthcoming to some extent about the timing of these matters: is it the intention that the chairman and others will not be appointed until after the Bill has received Royal Assent? We ran into a little problem with the Energy Bill in regard to advertisements and appointments. Of course you can advertise if a Bill has had its Second Reading in the Commons—which applies to this Bill—but employers and employees would like to know roughly what the timing will be for getting the scheme up and running. Obviously we do not want to set it up, with the corresponding costs, until we get fairly close to the implementation of the Bill. I should be grateful if the noble Baroness would clarify these points.
  Lord Borde:This seems a modest suggestion. I am not sure whether the noble Lord, Lord Higgins, has done the same for the public protection board. I have not read that far into the amendments; perhaps he has.
  He is suggesting a subtle change. However, it is not desirable because the Secretary of State, while of course consulting with the chairman—and this applies whether it is the regulator or the public protection board—should be responsible for the appointments because he or she is responsible to Parliament for the functioning of the Bill and the many different parts of it that we have to discuss in Committee. It is a subtle but undesirable change.
  4.30 p.m.
  Baroness Hollis of Heigham:Amendment No. 2 would move the primary responsibility for the appointment of the members of the regulator from the Secretary of State to the chairman of the regulator. We believe that this raises significant accountability issues,
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  which was an issue of concern at Second Reading. In establishing the new Pensions Regulator, we are seeking to achieve an appropriate balance of powers and responsibilities between the sponsoring department and the regulator. In that context, the regulator will be answerable to the Secretary of State and, through him, to Parliament.
  We believe that it is right for the Secretary of State to take responsibility for ensuring two things. One is that the chairman is fully consulted and involved in the process of selecting the members of the regulator. The other—which goes back to our previous discussion—is that the board fully reflects the skills, knowledge and experience needed to run this key organisation. The effect of this amendment would be that these tasks would fall primarily to the chairman rather than to the Secretary of State. It is not appropriate to delegate such key responsibilities from the Secretary of State, who is directly answerable to Parliament.
  On the specific questions on public appointments, the OPCA will be fully involved, as it was for OPRA. The expectation is that appointments will not necessarily be full-time but we cannot yet confirm that. Appointments will need to be advertised, but official appointments cannot be made before Royal Assent. We will write to noble Lords when we have a clear idea of the timetable. The chief executive has already been appointed: Tony Hobman, the chief executive of OPRA, will move across to the Pensions Regulator. The chairman has not been appointed. We will need a chairman in place before the Secretary of State can consult him about the rest of the members of the board. My understanding is that his appointment cannot legally be confirmed until after Royal Assent. I hope that answers noble Lords' questions.
  Lord Oakeshott of Seagrove Bay:I am persuaded by the Minister's arguments that we need a clear line of responsibility and accountability here.
  Lord Higgins:I also find the Minister's reply extraordinarily persuasive—I could have said unusually persuasive. But I am concerned at the suggestion that these may be part-time appointments. What will these people be doing the rest of the time? That is relevant because it is likely that the people appointed to those posts will have considerable expertise in this area, which I think we will discuss on the next amendment. It seems undesirable that they should still be involved in this area outside the regulator on a part-time basis. We will wish to pursue this point further but, in view of the Minister's excellent reply, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Lord Higginsmoved Amendment No. 3:
  Page 1, line 12, at end insert—
  "( ) In nominating or appointing the chairman and members of the Regulator (including members of the Non-Executive Committee and of the Determinations Panel, as defined in sections 8 and 10 respectively, and of sub-committees of either of them), regard shall be had to their skills and experience (both as

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  individuals and combined as a group) in view of the functions to be carried out and the requirement for knowledge and understanding under section 238(4).
  () The affairs of the Regulator shall be conducted having appropriate regard where relevant to the principles set out in the Combined Code on Corporate Governance (as amended or replaced from time to time)."
  The noble Lord said: The objective of this amendment is to ensure that in making the appointment of the chairman, the regulator and the sub-committees regard should be given to the skills and experience of the individuals and the group of individuals who comprise the regulator.
  The amendment makes specific reference to the requirement for knowledge and understanding under Section 238(4), on which I shall make two points. The first is that the Bill is a two-volume work. It would be helpful if the schedules were in one volume and the rest of the Bill in another. We constantly have to find where on earth we have got to with Schedule 1. The other problem with this amendment is that it refers to Section 238(4) and I cannot find subsection (4).
  But I think the intention of the first part of the amendment is clear enough. Clauses 236, 237 and 238 require individual trustees to have knowledge and understanding—I am sure that we shall come back to this at later stages in the Bill—and if trustees are to have that, it is very important that the regulator should have the corresponding knowledge. We cannot expect the regulator to encourage the type of provisions that exist in Clauses 236, 237 and 238 unless it has adequate knowledge. That is the purpose of the first part in the amendment.
  The second part of the amendment requires that the regulator shall be conducted in line with the Combined Code on Corporate Governance. The chairman and chief executive are divided in the case of the regulator and these provisions would combine with that. But there are other provisions in the code that the Minister may perhaps be prepared to accept it is important that the regulator should implement. If she gives an assurance to that effect, that will carry the necessary weight with those concerned with these matters. I beg to move.
  Baroness Dean of Thornton-le-Fylde:Can the noble Lord, Lord Higgins, shed a little more light on the second part of this amendment? What does he regard as appropriate? There is a tendency today to cherry-pick between the public and private sectors. The Combined Code on Corporate Governance is from the private sector. As the noble Lord says, the separation of the powers of the chief executive and chairman are covered in that code, but here we are dealing with primary legislation. I think I understand the gist of what the noble Lord is saying, but it is not clear. There are parts of the Combined Code on Corporate Governance that would be entirely inappropriate for a public sector regulator.
  Lord Oakeshott of Seagrove Bay:It is hard to object to the first paragraph but the second paragraph is pretty meaningless. It is far from clear how the
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  Combined Code on Corporate Governance works in private companies. I do not know what the amendment means.
  Baroness Hollis of Heigham:The amendment would restrict the skill bases of the Pensions Regulator board members because the Pensions Regulator is not an individual but a corporate body. Individual members and the board, the non-executive committee and the Determinations Panel, as groups, would be required to have knowledge and understanding of the law relating to pensions and trusts, the principles relating to funding and investment and such other matters as may be prescribed. The amendment would place an undue prominence on such limited areas as knowledge and understanding of the operation of occupational pension schemes at the expense of the operation of personal pension schemes, including stakeholder pensions, or the more widespread regulation of work-based pension schemes. In any event, general administrative law principles would encompass the overall need for the knowledge and skills base of the board relevant to the functions it exercises. I do not think that the first part of the noble Lord's amendment takes us forward.
  On the second part of the amendment, the noble Lord, Lord Oakeshott, and my noble friend Lady Dean have very effectively made the point that I was going to make. A requirement for the regulator to have regard to the Combined Code on Corporate Governance is unnecessary. As an NDPB, the regulator will be subject to periodic review and scrutiny by the National Audit Office, as well as to any other review considered appropriate by the Secretary of State.
  The combined code has no statutory force and, particularly if amended from time to time, it may not be entirely appropriate to the management of a NDPB. The amendment would therefore have the effect of irreversibly tying the regulator to guidance that has no statutory force and to which no other organisation in the public or private sectors is required by law to adhere. Members of the Committee may well deem that to be inappropriate. I hope that in the light of my explanations the noble Lord will feel able to withdraw the amendment.
  Lord Higgins:I am grateful to the Minister for her reply and for the contribution made by the noble Baroness, Lady Dean. I take the point that setting a non-statutory code in a statutory framework would not be appropriate. I made the point about the chairman and the chief executive but I understand what the Minister and the noble Baroness, Lady Dean, said. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendment No. 4 not moved.]
  [The Sitting was suspended for a Division in the House from 4.40 pm to 4.50 p.m.]
  Lord Higginshad given notice of his intention to move Amendment No. 5:
  Page I, line 15, leave out subsection (3).

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  The noble Lord said: Amendment No. 5 stands in my name and that of my noble friend. In my opening remarks I did not refer to the fact that we are sitting in Grand Committee rather than on the Floor of the House, but I feel bound to say that it is not a satisfactory arrangement. First, we cannot vote in Grand Committee, whereas we could if the Bill was being considered in a Committee of the Whole House; and, secondly, because our proceedings are continually being interrupted by votes downstairs, so that the flow of the discussion tends to be broken. It is wrong, and it will probably mean that the usual balance between the number of days in Committee in relation to the number of days on Report on the Floor of the House will need to be rather more weighted in favour of the Report stage rather than the Committee stage.
  I turn to page 1, line 15, which is concerned with whether two members to be appointed must be appointed from the staff of the regulator. On reflection, that seems to be not an unreasonable proposal. I shall not move the amendment.
  [Amendment No. 5 not moved.]
  Lord Higginsmoved Amendment No. 6:
  Page 2, line 9, at end insert—
  "( ) At least one of the non-executive members of the Regulator shall be a representative of an occupational pension scheme subject to the pension protection levies under this Act."
  The noble Lord said:Amendment No. 6 is simple and straightforward. It concerns essentially a question of balance, in the same way that some of our earlier discussions were concerned with the body being representative. It seems to us that there ought to be someone who is representative of those who are to pay the levy in the course of the deliberations in the regulatory body itself. I beg to move.
  Baroness Barker:Members on this side of the Grand Committee have the same sympathy with this amendment as we did with the amendment proposed by the noble Baroness, Lady Turner. They seek to do slightly similar things; to ensure that the regulator has within its corporate structure the relevant experience. However, this amendment perhaps ought to suffer the same fate as that proposed by the noble Baroness, Lady Turner. It would be wrong to treat the two proposals in wholly different ways just because people come from different backgrounds.
  That said, the noble Lord, Lord Higgins, has a valid point. Representatives of occupational pension schemes put into this position would have an insight into the work of the board. None the less, for the sake of consistency, perhaps this proposal will receive the same response from the Minister.
  Baroness Hollis of Heigham:I am sorry that we were not able to encourage Opposition Members to allow us to group this amendment with Amendments Nos. 1 and 4, because it effectively reproduces the same argument and I am not sure that I can take it very
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  much further. At least that will allow me to be not only brief, but possibly slow, which will mean that I shall avoid criticism from the noble Lord, Lord Oakeshott.
  The position is the same. The amendment would put an undesirable limitation on flexibility, which is designed to ensure that appointments to the regulator are based purely on the skills and knowledge required and the relative merits of each candidate. Although the regulator will have a role in respect of the Pension Protection Fund, its primary objective is to protect members' benefits. That is best served by an ongoing, properly funded scheme and a solvent employer. It is also worth noting that the regulator has responsibility for many types of schemes, including defined contribution occupational schemes, personal pensions and stakeholder schemes, as well as defined benefit schemes which will be subject to the pension protection levies.
  The amendment applies unnecessary pressure to try to introduce what I would call sectional interests, as opposed to breadth of experience. If I can make the distinction, we are on the side of breadth of experience. The arguments are much the same as before. If we agreed the amendment, we would then go down the road of saying, "Here are the employers, here are the employees", and so on. We could not escape that, so I hope that the noble Lord will withdraw the amendment.
  Lord Higgins:Again, I find the argument persuasive, so I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  On Question, Whether Clause 2 shall stand part of the Bill?
  Lord Higgins:I indicated earlier that whether we opposed Clause 2 or not would depend on the state of play at this stage in the proceedings. I do not propose to say anything further on the matter.
  Clause 2 agreed to.
  Clause 3 agreed to.
  Schedule 1 [The Pensions Regulator]:
  Lord Skelmersdalemoved Amendment No. 7:
  Page 233, line 22, leave out paragraph 2.
  The noble Lord said: Schedule 1 contains the "nuts and bolts" provisions for the appointment of the members and chief executive, the proceedings of the regulator and its funding, accounts and so forth. My first question concerns paragraph 2, which states:
  "Where a person ceases to be employed as Chief Executive, he ceases to be a member of the Regulator".
  That states the obvious. The question that originally sprang to my mind was, "What happens then?".
  It seems obvious that a former chief executive could easily make a most useful contribution to the regulator's activities in a non-executive post. He or she would certainly have the experience for which the noble Baroness, Lady Turner, was looking in her list in Amendment No. 4. If the chief executive were sacked for some misfeasance, by definition he would not have

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  that experience, but in the case of a normal retirement why should he not hold such a post, perhaps after a short gap? I beg to move.
  Lord Borrie:I should be interested to know from the Minister, on the last point made by the noble Lord, whether after ceasing to be chief executive there is a gap and that person may then be appointed as a member of the regulator; I imagine that he would be. When a chief executive ceases to be a chief executive—if someone else has been appointed at the end of his term of office or whatever—the paragraph may be stating the obvious but makes the matter clear.
  On the earlier part of the noble Lord's speech, I would have thought that, certainly immediately after and perhaps for a certain period, it would be inappropriate for the chief executive to be part of the regulator because there is a new man in the job; it is usually undesirable for the previous holder of the office to appear to lean over his successor's shoulder immediately thereafter.
  5 p.m.
  Lord Oakeshott of Seagrove Bay:It must be right that the chief executive ceases to be a member if he is then reappointed as a non-executive. Otherwise the balance would suddenly change between executives and non-executives.
  Lord Skelmersdale:I used to think exactly the same as the noble Lord, Lord Borrie. But during my time as chairman of the Stroke Association, I suggested to my fellow trustees that a new chairman of the executive committee be appointed because the other one wanted to retire. Against my better judgment, the new chairman insisted that his predecessor remain on the executive committee. It caused absolutely no problems. It was a matter of personal choice for the new chairman of the executive committee. Perhaps, in a sense, we are both right.
  Baroness Hollis of Heigham:I think that there is a great deal of consensus on the matter. As my noble friend Lord Borrie suspected, after a period of time there is no reason why the former chief executive, if that person so wished, could not be reappointed, through public procedures, to membership of the committee as a non-executive director. That would depend on the harmony of views and whether the new chief executive felt in any sense threatened by such an appointment. I suspect it would also depend on the circumstances under which a chief executive left and to what extent he or she continued to command the support and confidence of other members of the board.
  As regards the second point raised by the noble Lord, Lord Oakeshott, my understanding is that in such a situation a new chief executive would serve on the board and therefore the balance of non-executive and executive members would be maintained. With that explanation, which does not rule out drawing on
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  appropriate expertise if it is done in the proper public way, I hope that the noble Lord will feel able to withdraw his amendment.
  Lord Skelmersdale:I am very relieved to hear the Minister's answer. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendment No. 8 not moved.]
  Lord Higginsmoved Amendment No. 9:
  Page 233, line 31, leave out paragraph (a).
  The noble Lord said:In moving Amendment No. 9, I shall speak also to Amendment No. 10. Amendment No. 9 relates to paragraph 5(a) of Schedule 1, which states that the regulator may,
  "pay to…any person who…has been a non-executive member such pension, allowances or gratuities as the Secretary of State may determine".
  Amendment No. 10 relates to paragraph 5(b), which states that the regulator may,
  "make such payments as the Secretary of State may determine towards provision"
  of these payments.
  It seems curious that on the one hand the regulator is to make the payment, but, on the other hand, the amount is to be determined by the Secretary of State. Paragraph 5(b) seems to be a question of the Secretary of State determining what provision should be made. The implication is that the regulator may decide to pay something and the Secretary of State will decide how much, but he may decide to pay some of it and not the rest which, presumably, would then fall to individual members to contribute to the cost of the operation. That seems somewhat convoluted.
  If I have understood the paragraph affected by the second amendment correctly, the Secretary of State seems to have been given discretion as to whether or not he pays the whole amount, having determined what the gratuity or pension should be. Perhaps the Minister could clarify the situation.
  Baroness Hollis of Heigham:I do not think that there is anything sinister about this; it is conventional. Cabinet Office guidance to departments who are setting up NDPBs—Chapter 7 of NDPBs: A Guide for Departments—states that key decisions, such as the appointment of members and chairs and their appropriate remuneration, allowances and pensions are a matter for departments, and not for the body itself. In other words, members should not be setting their own pay. That is not appropriate. They should follow general guidance about pro rata pay per number of days attached responsibility.
  I do not think that businesses funding the levy would want to see members setting their own salaries. They would prefer this to be along the lines of the existing Cabinet Office guidance. With that explanation, I hope that Members of the Committee

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  will feel the proposed alternative method is more appropriate and that the noble Lord will feel able to withdraw his amendment.
  Lord Higgins:I am not sure that I fully understand exactly what the noble Baroness said. I understand that she is referring to normal Cabinet Office guidance as regards the gratuity, pension or whatever being determined by the Secretary of State. But I do not understand, as regards paragraph (b) on page 234, that he may determine what provision he shall make. The implication seems to be that he will not fully finance whatever award he has made. This is a little inconvenient because we have to turn over from page 233 to page 234.
  On the one hand, the regulator pays the amount that the Secretary of State has determined. On the other hand, the Secretary of State decides whether to pay the whole lot or not. I may be mistaken, but no doubt the noble Baroness can clarify this because it is not clear. In Amendment No. 10, we suggest deleting paragraph (b)—that is, the Secretary of State can determine how much of a provision to make. He has decided what should be paid. Then he will have a second bite of the cherry or, more accurately, not bite the cherry at all. I understand that there is slight confusion on the other side, but no doubt the noble Baroness will sort this out.
  Baroness Hollis of Heigham:I was just clarifying. I think that what the noble Lord is pressing me on hinges on the word, "towards". I think that he is concerned about the weight being carried in paragraph (b), which states that,
  "the Secretary of State may determine towards provision",
  for the payment of a pension, thus suggesting that there may be some part that is not. I think that it is the word "towards" on which the noble Lord is pressing me.
  I am advised that that is the exact wording of Section 8 of Schedule 1 to the Pensions Act 1995. It is a straight lift from existing regulations in which salary, allowances, provisions and so forth made to members of the board are paid for entirely by the levy as currently exists. So no change is envisaged in the existing method of remuneration. Perhaps I may write to the noble Lord if there are any further points on this.
  Lord Oakeshott of Seagrove Bay:There is one point that strikes me. Under what circumstances would pension payments be made to non-executive members? The combined code is very clear that non-executive directors' service is not pensionable. I seek clarification on that. It seems rather odd.
  Baroness Hollis of Heigham:The noble Lord is right. My understanding is that we would not expect that for the run-of-the-mill non-executive directors. But, of course, the chairman is a non-executive director who would, as I understand it, be entitled to pensions and allowances. That covers that.
  Lord Higgins:Well, it ought to say the chairman. I detect that in what the noble Lord, Lord Oakeshott,
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  has just said, he, like me, has found that non-executive directors do not receive pensions. Suddenly, we seem to have a situation where they will. That may be in the Pensions Act 1995—which perhaps was not as closely scrutinised as we scrutinise now.
  Baroness Hollis of Heigham:On the contrary, with the Opposition present, I can assure Members of the Committee that the Act was very fully scrutinised. I will check whether this is a problem. If it is, I shall either write to the noble Lord or come back to him.
  Lord Higgins:The alternative is simply for the noble Baroness to put down an amendment at Report.
  Baroness Hollis of Heigham:Let me first determine whether there is a problem to be addressed as opposed to whether the words might simply carry an imputation that needs to be corrected.
  Lord Higgins:In the light of what the noble Baroness has said, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendment No. 10 not moved.]
  Lord Skelmersdalemoved Amendment No. 11:
  Page 234, line 4, leave out paragraph 6.
  The noble Lord said: My query is two-fold. First, under what circumstances might it be,
  "right for that person to receive compensation"?
  But my more important point is, who pays? Perhaps I can better explain that by asking out of whose budget the payment is to be made? Is it that of the Secretary of State or that of the regulator? After all, as we have been discussing in the previous amendment, it is a decision of the Secretary of State, which is made, presumably, after a discussion with the regulator. Although the Bill does not say that, surely it should be spelt out. Unless my surmise is incorrect, it would be helpful for the noble Baroness to give us an answer. I beg to move.
  Baroness Hollis of Heigham:I hoped that I had covered this previously. It would be paid for by the regulator.
  Lord Skelmersdale:I am grateful. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Lord Higginsmoved Amendment No. 12:
  Page 234, line 18, leave out paragraph (c).
  The noble Lord said: Amendment No. 12 raises the question of whether the Secretary of State should make available any additional staff. I think that it is also convenient to take Amendment No. 15, which states,
  "Page 235, line 5, leave out paragraph 10".
  Since this body is effectively somewhat remote from central government, I am not clear why the question of whether it needs extra staff is to be determined by the Secretary of State.

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  Earlier, we discussed the additional costs of this regulator against the present costs of OPRA. I expressed some hesitation about whether the additional costs or the increase in staff would be adequate to deal with the much heavier workload—as it seems to me—of the new regulator—certainly if it is to be proactive, focused and so forth. That might reasonably be decided by the chief executive in conjunction with other members of the regulator. Why the Secretary of State suddenly comes back into it, rather than it being done independently in the light of the workload, does not seem a very sensible way of proceeding. I beg to move.
  Lord Oakeshott of Seagrove Bay:The noble Lord, Lord Higgins, makes a strong case. The Minister will need to be at her most persuasive to persuade me otherwise.
  Baroness Hollis of Heigham:That sounds an irresistible invitation; I am not sure whether I shall succeed. It is custom and practice for the department to have such an arrangement. It is certainly in place with OPRA now, as empowered by the Pensions Act 1995. Schedule 1, paragraph 11(5) enables the Secretary of State to make available to OPRA additional staff, and vice versa. This secondment—that is what it is because their rations, so to speak, are paid for by their home employer and not the one to which they go—has proved useful to both the department and OPRA.
  From personal experience, some of the policy briefing and some of the work on this Bill has come from OPRA staff who have been seconded to the DWP for that purpose. We would be denying ourselves a wealth of hands-on experience that is available to us. This is part of the standard workings of government departments. We second staff to appropriate bodies; they second staff back. I am used to it in other forums within the department. I should have thought that this is enriching for both sides and it is pretty standard.
  Lord Higgins:Again, I am grateful to the noble Baroness. I am becoming increasingly suspicious of "pretty standard" things; not least because we were told on the previous amendment that it is what is in the 1995 Act. Now we are agreed that it needs to be looked at again. None the less, we will consider what the noble Baroness has said. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendments Nos. 13 to 15 not moved.]
  5.15 p.m.
  Lord Higginsmoved Amendment No. 16:
  Page 235, line 12, leave out paragraphs 11 to 16.
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  The noble Lord said: Amendment No. 16 concerns the Determinations Panel. This is a complicated point, which I shall seek to explain as best I may. It seems that Part 3 of Schedule 1 relates to Clause 10.
  Baroness Hollis of Heigham:Is the noble Lord speaking to Amendment No. 16 together with Amendments Nos. 28 and 36 with which it is grouped?
  Lord Higgins:Yes, that is right. I think that is the most convenient way to deal with this. In a sense, it is a drafting point, but it may be more substantive than that. No doubt we can establish the true position. It seems that Part 3 of Schedule 1 relates to Clause 10—"The Determinations Panel". Amendment No. 16 would leave Part 3 out of the Bill. Amendment No. 28 would reintroduce it as Schedule 1A, relating to Clause 10. That seems to be the way in which it ought to be done.
  Baroness Hollis of Heigham:Why?
  Lord Higgins:The noble Baroness asks why. The provision does not fall appropriately in Schedule 1, which is largely related to parts of the Bill not concerned with the Determinations Panel. It is a drafting point. Perhaps I may try the argument again. Part 3 of Schedule 1 relates to Clause 10, whereas the rest of Schedule 1 does not. It relates to earlier parts of the Bill. Therefore, this group of amendments sets up a separate schedule which would relate to Clause 10. Currently, Schedule 1 deals with matters that ought to be dealt with separately. I beg to move.
  The Deputy Chairman of Committees (Lord Brougham and Vaux):I remind the Committee that if Amendment No. 16 is agreed to I cannot call Amendments Nos. 17 to 24.
  Lord Borrie:Part 1 of the Bill is headed, "The Pensions Regulator". Within Part I, Clause 10 deals with the Determinations Panel. That seems to be paralleled in Schedule 1—headed, "The Pensions Regulator"—where one would expect to find details on all aspects of Part 1 of the Bill dealt with, including membership of the Determinations Panel. I am not sure what is wrong with the present drafting in that respect.
  Baroness Hollis of Heigham:I see what the noble Lord seeks to do. But this part of the Bill is about "pay and rations". Throughout Schedule 1 there are references—for example, on page 242 of the Bill—to the nature of disqualification of members of the Determinations Panel. Right through the schedule there is an understanding that the Determinations Panel is part of the regulator, although there are no overlapping members between the non-executive and executive members of the regulator with the membership of the Determinations Panel. Conceptually, it is all part of the regulatory function. Therefore, throughout that schedule, there are numerous references. Obviously, we have followed the advice of parliamentary counsel that this is the appropriate place to put it, which makes perfectly

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  good sense. I am not persuaded that we add anything to clarity or understanding by pulling it out into a separate schedule.
  Lord Higgins:I have heard what the noble Lord, Lord Borrie, said, and I take his point. I simply refer to what extent the Determinations Panel, while under the overall aegis of the regulator, would really be a separate body. That emerged from some of the remarks made by the noble Baroness earlier. I shall think again about this and, if need be, return to it at Report. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Lord Higginsmoved Amendment No. 17:
  Page 235, line 12, leave out paragraph 11 and insert—
  "11 The chairman of the Determination Panel must be appointed by the Regulator."
  The noble Lord said: We come here to the various provisions for the Determinations Panel. It seemed to us that this would be a more appropriate way of making the appointment. I beg to move.
  Baroness Hollis of Heigham:Amendment No. 17 seeks to remove the provision for an appointments panel to appoint the chairman of the Determinations Panel, and instead allow the regulator to make that appointment.
  I will not go into the functions and purposes of the Determinations Panel at this stage. We have modelled our proposals on the regulatory decisions committee of the Financial Services Authority. Your Lordships will remember, although I was not a player in that Bill, that it was thought important by the House to ensure separation between investigation and decision-making. In setting up the determinations procedure, we have therefore followed the Financial Services Authority model—that means the chairman of the Regulatory Determinations Committee being appointed by the regulator on the recommendation of an independent group established by the regulator for that purpose.
  Suitable people on that committee could, for example, come from the Department for Constitutional Affairs, and the Council on Tribunals, to ensure that the chairman has the appropriate decision-making skills. A non-executive member of the regulator will, as is the case with the FSA, chair that independent group on the appointment. The regulator also appoints all other members of the Determinations Panel on the recommendation of the chairman of the Determinations Panel. Again, that mirrors FSA procedures. I hope that the noble Lord will be content with that explanation.
  Lord Higgins:I am grateful for that explanation, and I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Lord Higgins moved Amendment No. 18:
  Page 236, line 2, leave out "may" and insert "must"
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  The noble Lord said: This is almost a traditional amendment. The top of page 236 states:
  "The Regulator may pay, or make provision for paying, the members of the Determinations Panel such remuneration as the Secretary of State may determine".
  The implication of that seems to be that they may be amateurs rather than professionals. Therefore, it seems strange. One would have thought that the regulator must pay, or make provision for paying, the members of the Determinations Panel. We are not clear why he is apparently given discretion. No doubt the noble Baroness can tell us. I beg to move.
  Baroness Hollis of Heigham:Am I right in thinking that Amendments Nos. 18 and 19 are grouped? No, it is Amendments Nos. 18 and 20. I take it that the noble Lord is also speaking to Amendment No. 20.
  The amendments seek to shift responsibility for determining the appropriate provisions for paying Determinations Panel members from the Secretary of State to the regulator. That is the effect of the amendment. As I have already explained, the Determinations Panel is there to ensure an appropriate degree of independence from those who investigate and those who take decisions, to ensure that the procedures are seen as fair. It would be inconsistent with that approach for the regulator to have sole control over the pay of the Determinations Panel. It is more appropriate, following non-departmental public body guidelines as reflected in the Cabinet Office and so on, for the Secretary of State to determine the appropriate remuneration for panel members. I hope that the noble Lord will feel able to withdraw his amendment.
  Lord Higgins:I think we are slightly at cross purposes. The clause as it stands states:
  "The Regulator may pay, or make provision for paying, the members of the Determinations Panel".
  I assume that he will pay—indeed, he must pay—the members of the Determinations Panel, unless of course they are to be amateurs. I do not imagine that that is what the Government envisage. The reply given by the noble Baroness does not make the point.
  Baroness Hollis of Heigham:The point is whether it is to be the regulator or the Secretary of State—and the Secretary of State sets levels of pay and so on for non-executives on NDPBs, following, as I said, Cabinet Office guidelines. Not all non-executive members seek, want or receive pay—but that is a subsidiary point. Basically, the Secretary of State sets the levels rather than the regulator because that is consistent across NDPBs.
  Lord Oakeshott of Seagrove Bay:It may be a question of English, but I cannot see how anyone can object to saying that the regulator must pay such remunerations as the Secretary of State may determine. That seems to cover the point.
  Lord Higgins:We are being rather pedantic over what is a traditional amendment. Almost every Bill I can remember has an amendment which seeks to leave

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  out "may" and insert "must"; or, alternatively, leave out "must" and insert "may". However, in this case it clearly ought to be "may".
  Noble Lords:"Must".
  Baroness Hollis of Heigham:I agree.
  Lord Higgins:Very well. After what the noble Baroness said, it seems even stranger that the Secretary of State will make provision and the regulator may pay or not as the case may be.
  Baroness Hollis of Heigham:I shall have yet another go. We have provided that the regulator "may" make such payments as the Secretary of State may determine, rather than requiring the regulator to make such payments. The reason for that is that the regulator should have that slight degree of flexibility within the maxima set by the Secretary of State for NDPBs in accordance with Cabinet Office guidelines.
  The Secretary of State will determine a maximum salary level for panels, but the regulator may agree with some or all members of a panel that they should work, for example, on an expenses-only basis and not receive a salary. This is similar to the way in which some noble Lords have been known not to claim their full entitlement to allowances.
  Baroness Turner of Camden:Does not the noble Lord, Lord Higgins, recollect that nearly all governments, of whatever complexion, usually like to retain the flexibility that "may" rather than "must" gives them?
  Lord Higgins:I do not want to delay the Committee longer. I do not think that one can read into the clause what the Minister has said. We shall think about the matter and come back to it if necessary. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendments Nos. 19 and 20 not moved.]
  Lord Higginsmoved Amendment No. 21:
  Page 236, line 7, leave out "Secretary of State" and insert "Regulator"
  The noble Lord said: In moving Amendment No. 21, I shall speak also to Amendments Nos. 22, 23 and 24. The amendments seek to determine whether pay and so on should be determined by the regulator or the Secretary of State. It would appear that the Secretary of State will be setting these levels rather than leaving it to the regulator. I beg to move.
  Baroness Hollis of Heigham:I am having some difficulty with this. The basic structure—and this applies to a whole range of bodies—is that there is a maxima payment, on a pro rata basis, for certain services. It may be that three days of work a month represents £10,000 a year or £30,000 a year or whatever. Therefore, certain jobs and responsibilities come with those days attached. The maxima for the work is based on Cabinet Office guidelines and is reflected in the determination by the Secretary of State.
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  Retired Ministers of the Crown in your Lordships' House, for example, have refused to draw their salary in the past—noble Lords will know several such—and the clause allows for that possibility and for the regulator to react to it. It is no more significant or sinister than that.
  Lord Higgins:I understand what the noble Baroness is saying. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendments Nos. 22 to 24 not moved.]
  5.30 p.m.
  Lord Higginsmoved Amendment No. 25:
  Page 239, line 42, leave out sub-paragraph (1).
  The noble Lord said: Paragraph 25(1) states:
  "The Secretary of State may make regulations authorising the Regulator to charge fees to meet the costs incurred by the Regulator in connection with applications made for the modification",
  and so on. This again raises the question of the relative position of the Secretary of State and the regulator, this time in relation to the fees which are to be charged. This is the first mention of regulations in anything that we have discussed so far. The noble Baroness has always been helpful on previous occasions in providing us with draft regulations all the way through, and no doubt those subject to the Bill will be interested to know what the fees are likely to be and on what basis they are likely to be charged.
  Perhaps more generally the Minister could give an indication, because at later stages of the Bill almost entire discretion is given to deal with matters in regulations, particularly in Part 6. Could she give some indication as to what extent she is able to follow the practice she has developed in the past of presenting draft regulations—let us say before Report stage? It has always been very helpful. I beg to move.
  Baroness Hollis of Heigham:Dealing with the second point first, I shall do my best to be helpful but I do not think that I shall be able to be so. Many of the regulations will require extensive consultation with industry, and the consultation is an ongoing process. I can assure noble Lords that as soon as I have the regulations I shall bring them to the House.
  However, if there are any areas of proposed regulatory powers that the noble Lord would like explained, if we cannot produce the drafting we can provide at least an explanation of how we might propose to use them. I am very happy to offer that facility to him as a substitute at any stage. It will allow him a sense of what the scope might entail.
  Amendment No. 25 seeks to remove the provision for fees to be charged in relation to applications under Section 69 of the Pensions Act, which deals with the return of surplus. Applications under the section are made in order to return surplus to the employers—so they are getting, so to speak, a quasi-windfall. In the last case OPRA dealt with under this section, involving the return of £50 million to an employer—I have the details with me but it might not be appropriate to read

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  them into Hansard—it had to write to the affected parties three times with details of the case. With 30,000 members that was done at a cost of more than £75,000, which was borne by other employers who were paying a levy to sponsor the return of the £50-million surplus to an individual employer. We think that it is appropriate in such cases for the employer benefiting from the return of surplus to bear the burden of costs rather than all levy payers.
  As part of the consultation for the quinquennial review of OPRA, a specific question was asked to test the response to the charging of fees; my understanding is that there was no negative feedback on the proposal. Given those two points I have sought to establish, I hope that the noble Lord will feel able to withdraw his amendment.
  Lord Higgins:These have been rather tedious probing amendments but one can never tell what is going to happen next. One suddenly finds that what appears to be a minor amendment turns out to cost £50 million.
  Baroness Hollis of Heigham:That was the surplus.
  Lord Higgins:I am sorry. A surplus of £50 million. So it shows that it is important sometimes, however tedious it may be, to sort out exactly what some of the meanings of apparently bland and unimportant words in a Bill actually mean.
  I should be very grateful if the noble Baroness can help as much as possible with the regulations. She has always been, in my experience, extremely co-operative as far as that is concerned. I merely make the point I made earlier in regard to the compensation. Part 6 is to be introduced almost entirely by regulation and it could do absolutely anything about everything or everything about anything. Before we get to that, we must be a lot clearer than we are about the true situation. I am grateful for the explanation. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendment No. 26 not moved.]
  Lord Higginsmoved Amendment No. 27:
  Page 242, line 31, leave out sub-paragraph (1).
  The noble Lord said: I think that this amendment is rather more important, on the exemption from liability to damage. The provision suggests:
  "Neither the Regulator nor any person who is a member of the Regulator ... or a member of its staff is to be liable in damages for anything done or omitted",
  in the course of its operations. That is a very sweeping statement and gives the regulator very considerable protection indeed. I wonder whether, when we come later to questions of disclosure, unauthorised disclosure and so on, we ought to examine this matter a little more clearly. For example, in the context of the present takeover business at Marks & Spencer and so on, the regulator might suddenly and wrongly disclose information that could have very important consequences.
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  No doubt the noble Baroness can tell us to what extent there is precedent for this clause. However, the statement seems extremely wide-ranging. One should perhaps consider whether it needs to be quite as broad as it appears in this clause. I beg to move.
  Lord Oakeshott of Seagrove Bay:This provision raises fundamental questions. It states that the regulator, any member of the committee or any member of staff is not to be,
  "liable in damages for anything done or omitted in the exercise or purported exercise of the functions",
  and so on. It is a very comprehensive whitewash clause, as I think lawyers call it, or a blanket exemption. The effect is obviously, in a certain sense, to put the regulator and his staff above the law. I hope that the Minister will be able to give us the fundamental reasons for that and not just say that there are precedents or that it is standard practice. As we have discovered in other clauses, life moves on. I believe that there are fundamental issues here.
  Baroness Hollis of Heigham:As your Lordships have said, Amendment No. 27 would remove the regulator's exemption from liability in damages. Without this protection, the regulator would be liable in damages for the actions, or failures to act, of its staff. It is not just sins of commission but sins of omission as well. When one thinks of the number of schemes that go down and some of the current rows about regulating regimes, one can see the implications of the provision.
  The effect of this would be to prevent the regulator achieving its objectives, in particular protecting members' benefits. I can understand that this exemption may raise eyebrows, as it has today, but perhaps I can suggest why it is necessary.
  Say, for example, that the regulator receives information from a scheme auditor that a particular trustee is about to remove scheme funds for his own purpose. The regulator, if it reasonably believes that to be the case, should act, via the special procedure, to appoint a trustee with exclusive powers, to take control of the scheme's bank account and ensure funds cannot be removed. However, if the regulator were liable for damages it would have to consider before acting the consequences and cost of being wrong—the cost of defending potential actions by trustees of the scheme, the employer and any members affected, and of course any damages award.
  One might think that there is therefore a disproportion between the injury done and the amount of risk that might go by the board if one did not have this protection. Ultimately, the costs of all of those damages and action would fall on all members of pension schemes. That would prevent the regulator from acting in the majority of cases—just about any case—unless the evidence is 100 per cent certain and he feels that there is therefore no risk of liability to damages.
  Your Lordships will have noted that, over the page in sub-paragraph (5), there is provision for damages where the regulator has acted in bad faith. Damages

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  are, of course, also available when the regulator has acted, or failed to act, in contravention of the Human Rights Act 1998. I was told not to believe in precedent, but that is the situation for OPRA. My understanding is that it is also the position for the FSA and its members. It therefore seems appropriate.
  From my experience, if there are issues of liability in any sense that involve an intervention, improvement notice, freezing order or other preventive action in which one may be liable for damages, I think it is possible to return to a situation where there are few options between doing nothing or having such certitude that one winds up the scheme and goes for the full nuclear option.
  Throughout the Bill we have provided an array of graduated steps of intervention, with powers attached, in order to prevent the worst case scenario—that of a scheme failing and calling on the Pension Protection Fund because the promise cannot be delivered. Provided that the regulator acts in good faith, is acting reasonably on the information he has been given and is not contradicting human rights legislation, it is right that he is given this degree of protection in the same way as it is given to OPRA, the FSA and similar financial supervisory bodies.
  Lord Oakeshott of Seagrove Bay:I understand the term "in bad faith", but who will decide whether the regulator reasonably believes it to be the case—which I think were the words just used by the Minister?
  Baroness Hollis of Heigham:Obviously there is a full appeals procedure in place as regards the decisions taken by the regulator—the tribunal through to the ombudsman and so forth. That is available to individuals if there is a view that someone has acted unreasonably. That remedy is always available.
  I am assured that the exemption we have provided is narrower than that currently given to OPRA by Section 1(4) of the Pensions Act 1995, in that it would not apply to acts or omissions committed in bad faith; that is, it would not prevent an award of damages under the Human Rights Act 1998.
  All I would say is that, over and beyond the bad faith and the human rights points, there are rights of appeal against the judgment of the regulator if that judgment is ill founded in fact and in law. Surely that is where we would want to be.
  Lord Oakeshott of Seagrove Bay:No one would argue that there should not be some protections. In a sense, the noble Baroness was arguing against the principle of having no protection, but there must be some. However, the issue that we are trying to probe is whether the protections need to be quite as whitewashing and draconian as this. We have talked about the conditions under "bad faith", but are there other conditions in which the exemptions should not be quite so sweeping?
  Baroness Hollis of Heigham:I understand that this is a significant issue and I shall be happy to follow up
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  my response in more detail in a letter. On that basis, it may be that noble Lords can then decide whether they wish to revisit the matter on Report.
  Baroness Turner of Camden:Without this kind of protection, it might be difficult to persuade people to come forward to take on these jobs.
  Baroness Hollis of Heigham:Following the point made by my noble friend, noble Lords will understand that some of these concerns read across to other areas about the form and degree of regulatory practice and the resultant exposure of members of such bodies to criticism, judicial review and the like.
  Lord Lucas:One understands that people are reluctant to put themselves at risk. Later in the Bill shareholders will be exposed to just that kind of risk, because we are breaking limited liability in a way which may put them at great risk if a pension fund in a company in which they have invested goes wrong. We have to be even-handed and understand that these motivations work on everyone, not only on regulators.
  Lord Higgins:I should like to say a word before the noble Baroness responds, otherwise we shall become rather too conversational.
  As the noble Baroness has said, this is drawn very widely indeed because otherwise it may be difficult to persuade people to do the job or join the staff of the regulator. We have to balance all that. However, it may be that a person or organisation suffers damage, only to find that they have no form of redress whatsoever. Even where there is no question of bad faith, they none the less would have suffered damage. The question here is about to what extent the balance is right in ensuring that, however bad the damage may be—such as on disclosure of information, wrongly or otherwise, which may amount to tens of millions of pounds—the appropriate redress and the limits of the matter are agreed.
  In effect, the cost is carried by the person who is damaged, or the regulator and those paying the levy or, possibly—my old Treasury hackles rise when saying this—the taxpayer, or I suppose that it could be insured. I am not sure to what extent that might be possible. In any event, we need to look at this subparagraph again. The general opinion of the Grand Committee is that this provision is very broad.
  5.45 p.m.
  Baroness Hollis of Heigham:Before the noble Lord decides what to do with his amendment—given the conventions of the Grand Committee, he should withdraw it—perhaps I may say a few more words. We all accept the point about bad faith and understand that the remedy of judicial review is available if the actions taken were inappropriate. However, I am puzzled by the notion of the basis on which we think the regulator will intervene. He would intervene on the basis of a scheme return which has raised concerns about the level of underfunding and the capacity of the pension scheme to meet its pension promise. The regulator would then proceed on that basis, in

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  conjunction with Standard & Poor's risk assessments and so forth, to produce—we hope in consultation with the trustees—a remediation strategy. Only if that fails, or if it is impossible by virtue of the issues to be raised in Clauses 35 onwards that the company is unwilling to make good, would we then be drawn into a much more adversarial situation.
  At what point in that process would one regard the regulator as being liable for damages for acting in the way laid down by law, even if ultimately he is able to reach agreement with the company and the trustees to make good the funding of the pension scheme? Is it a slur on the character of the trustees that the regulator has asked them to remedy the situation? Yes, I suppose it is, but then so they should. The fact that the trustees are carrying an underfunded pension scheme is a perfectly proper piece of public information based on the scheme return.
  I am finding it quite hard to conceive of the circumstances in which one would regard the proper activity of the regulator, which may rightly be critical of the company or the trustees, as inappropriate. Only if the criticisms were not well founded in fact, based on the scheme returns, could an issue of damages payable due to the unjustified imputation of reputation be justified. As I say, I have difficulty in envisaging the scenario.
  I imagine that the noble Lord will want to come back to this on Report. At that point perhaps he will describe for us the situation in which he thinks that there should be some constraint on the regulator acting for fear that if he did, a claim for damages might be pursued on other members of the body. The amendment would serve to limit the capacity of the regulator to act. Do we wish to see that, and in what circumstances would the noble Lord want it to happen? If the noble Lord can help me on this point, we may be able to take the argument further on Report. However, I repeat that I am perfectly happy to write on the legal and technical details of this point.
  Lord Oakeshott of Seagrove Bay:Perhaps I can help the noble Baroness, because I think that she has moved on a tack concerning reputation. The kind of situation one can envisage is that where the regulator said to a struggling company, "You have to put much more money into your pension fund quickly". The Minister has talked about the regulator acting reasonably and carrying out his obligations, and that is fine. But the question is whether there is any kind of remedy for a company which genuinely believes that the regulator has been acting unreasonably because it is being pushed into bankruptcy. Does it have absolutely no power to pursue damages?
  Baroness Hollis of Heigham:If the regulator failed to act in those circumstances, presumably he would be liable to a claim for damages brought by the scheme members.
  Lord Oakeshott of Seagrove Bay:Yes, although I do not think that they would be able to pursue it.
  Baroness Hollis of Heigham:That is exactly the situation we have established; that there is in a sense a stand-off. If we go down that route, any decision that is unfavourable to one party—and by definition that will often be the case—will mean that on paper, the regulator could be exposed to a claim for damages. I should have thought that that was not the route we wanted to take.
  Lord Higgins:I do not think that we should prolong the debate because the problems have been set out quite clearly. We need to consider two points. The first is what the possible damages that might be incurred are. The noble Baroness gave one example and the noble Lord, Lord Oakeshott, another. But all kinds of things could arise, such as the wrongful disclosure of information which results in a loss. The difficulty with the clause as it stands is that it is complete in its scope. Anything done by the regulator would be exempted or protected.
  The second point to consider is where we think the balance should lie as to who actually pays if some damage has been done and loss incurred. We can all brood on these issues. In the mean time, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  The Deputy Chairman of Committees (Lord Brougham and Vaux):When they wish to speak, noble Lords at the back of the room should move forward to the table so that Hansard can record their remarks.
  On Question, Whether Schedule 1 shall be agreed to?
  Lord Higgins:I indicated earlier that we have discussed the schedule exhaustively. I do not wish to say anything further.
  Schedule 1 agreed to.
  [Amendment No. 28 not moved.]
  Clause 4 [Regulator's functions]:
  Lord Skelmersdalemoved Amendment No. 29:
  Page 2, line 27, leave out paragraph (a).
  The noble Lord said: I am afraid that this is not going to be one of my short, snappy question-and-answer sessions. I am told that we must settle into this particular amendment.
  As I said in my contribution to Amendment No. 1, moved by the noble Baroness, Lady Turner, the Bill sets up a most peculiar form of corporate governance. I do not claim to have any expertise on the matter, but the advice I have received from my noble friend Lady Noakes, who most definitely has, is that the only place that she knows of where such a scheme exists is in the Bank of England Act 1998.
  The Explanatory Notes make great play of relying on the Higgs report on corporate governance for the regulator's governance performance, yet there is no recommendation in that report or in the Combined Code on Corporate Governance, which now implements it, for a non-executive committee in the form and shape envisaged by the Bill. To make matters worse, under the Bank of England Act there is in the

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  Bank a sub-committee of non-executive members of the Court. The non-executives massively exceed the executives, by 16 to three. We have had that discussion, but I wanted to make the point for future reference.
  Paragraph 28 of the Explanatory Notes quotes the Higgs review as recommending a balance between executive and non-executive members including—I underline the point—independent non-executives. The Bill makes no reference to independent non-executives, who are key to the Combined Code recommendations on audit committees and remuneration committees. Under Higgs and the Combined Code the chairman, even if non-executive as is currently the case in the Bill, is not independent except at appointment. Hence, the chairman of a public limited company is not a member of an audit or remuneration committee, but in the Bill he actually chairs the non-executive committee, which seems to cover at least the audit committee territory and some of the remuneration committee territory.
  A non-executive committee is objectionable because it potentially undermines the unitary nature of the board/regulator overall. The functions of the non-executive committee ascribed in Clause 9(3) are only loosely derived from the Higgs report and the Combined Code, but the important point is that under Higgs they are not functions of the non-executives acting as a separate group. Rather they are a definition of the contribution of the non-executives to the unitary board as a whole.
  Technically, as we have discussed, in Clause 8 the Bill creates the non-executive committee as a subcommittee of the regulator's board, which means that it derives its authority from the board and must report to it. This seems strange because in essence it would be reporting to itself.
  I have some questions to put to the Minister. If Higgs is the model, why is there no differentiation between independent and non-independent non-executives and why, in particular, is it appropriate for the chairman to chair the non-executives? Do the Government believe that the Bill creates a new unitary board for the regulator? How do they reconcile their provisions with the first Higgs principle, that:
  "The Board is collectively responsible for promoting the success of the company by leading and directing the company's affairs".
  Why are the non-executives' roles spelt out in the Bill but not the role of the whole board? Why have the Government chosen to set up a non-executive committee at all? Higgs said that non-executives should meet without the executives present and at least once a year without the chairman present. Clearly, the Bill provides otherwise.
  There is nothing equivalent to Clause 9 in the combined code. It also says that the non-executives should meet once a year without the chairman to discuss the chairman's performance. Why is that not in the Bill? Why does Clause 9(4) require a separate report in the annual report from the non-executives? I understand that there is no parallel in commercial or any other practice, except in the Bank of England Act.
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  Lastly, why is there no recommendation for a remuneration report in the Bill? That is required under Higgs and in the DTI regulations for Plcs. I apologise for firing a great list of questions at the Minister but I would like some answers so that I can think on it more thoroughly. I beg to move.
  Baroness Hollis of Heigham:As the noble Lord accepts, those are technical questions, and if he wants a serious answer to appear in Hansard it is helpful to have notification of questions that are not on policy and are therefore open to general debate. I shall write to the noble Lord and make sure that your Lordships have copies of the answers to all of the questions. I may be able to answer eight or 10 of them as we go along but I doubt whether I have the answers to all of them here today.
  This amendment removes Clause(4)(1)(a), and I ought to respond to it as it is set out in the Marshalled List. Clause 4 sets out the functions of the regulator and makes provision for the exercise of some of those functions. The transfer of OPRA's functions to the Pensions Regulator is achieved by Clause 7(1), which transfers to the regulator all OPRA's functions conferred by the Pension Schemes Act 1993, the Pensions Act 1995 and the Welfare Reform and Pensions Act 2000.
  I am sorry, I am responding on Amendment No. 29.
  Lord Skelmersdale:I shall give the Minister a little time and perhaps help on this occasion. I am very grateful to her for saying that she is happy to write to me to answer the very detailed and technical questions that I asked her. I am very happy with that response. I should perhaps have said when I began that the amendment in the Marshalled List is merely a peg on which to hang the questions. I know exactly what the effect of leaving out Clause 4(1)(a) would be.
  Baroness Hollis of Heigham:Clause 9 sets out the functions exercisable by the regulator's non-executive committee. The noble Lord was pressing me on why, given Higgs and the like, this particular structure has been chosen. We have looked at the Higgs report and have had the best advice, and it seems to us to be appropriate to make the distinction between the non-executive directors and the executive members of the regulatory body and to have the chairman of the regulatory body chairing the committee. I agree that there may be an issue about whether he does that more than once a year.
  Clause 9 sets out the functions of the regulator's non-executive committee, which is to separate the day-to-day running of the organisation, undertaken by the executive directors, from the responsibility of ensuring efficiency, effectiveness and transparency, which is discharged by the non-executive committee. As the noble Lord acknowledged, this separation of accountabilities is the recommended arrangement promoted by Cadbury and the Higgs report. Ofcom and the FSA, as new regulators, have non-executive committees, as does the Bank of England, as the noble Lord accepted. In addition, all public limited

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  companies are encouraged to develop governance arrangements that include a chair, non-executive directors and committees.
  6 p.m.
  I am a little puzzled that the noble Lord, Lord Skelmersdale, thought he was aware of only the similar example of the Bank of England. From the advice that I have been given, it seems as though the practice is fairly common in most non-departmental public bodies following Cadbury and Higgs.
  The clause spells out what the non-executive committee does. It will: keep under review the strategic direction of the regulator; scrutinise the performance of the chief executive; monitor the extent to which the regulator meets its objectives and targets, which is the subject of other opposition amendments; monitor the regulator's reporting of the activities to the Secretary of State; review whether the regulator's internal financial controls are in order; and, subject to the approval of the Secretary of State, determine the terms, conditions and remuneration of the chief executive.
  Those functions are for any non-executive committee and are consistent with those of the Court of Directors of the Bank of England and with the Financial Services Authority. They allow the separation of the day-to-day running of the organisation from the checks-and-balances accountability that we need for the regulator to remain efficient, effective and accountable.
  I shall see whether there are any questions that I have not answered, but most of those asked were covered by the Higgs report on corporate governance. The only one with which we were slightly at odds was on whether the chairman of the regulatory body was also the chairman of the non-executive committee. That was the only one on which we had some divergence, so I shall come back on it.
  Lord Skelmersdale:I am grateful, but not very grateful. I did not hear the noble Baroness mention the independence of the non-executives. Perhaps she could write to me on that. She referred to my merely citing the Bank of England Act. As she will remember well, the Opposition do not have quite the access to research facilities that a Minister of the Crown has. That said, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Lord Higginsmoved Amendment No. 30:
  Page 2, line 40, at end insert—
  "( ) In discharging its functions the Regulator (and, where relevant, the Non-Executive Committee and the Determinations Panel) must act in a way—

  which is compatible with its objectives under section 5, and

  which is appropriate for the purpose of meeting those objectives.

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  ( ) In discharging its functions the Regulator (and, where relevant, the Non-Executive Committee and the Determinations Panel) must have regard to—

  the need to use its resources in the most efficient and economic way,

  the principle that a burden or restriction which is imposed should be proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction,

  the need to minimise any adverse effects that may arise from anything done in the discharge of those functions, and

  the interests of all persons who may be affected (including members, employers and others with an interest in, or an obligation in respect of, the scheme concerned).

  ( ) The Regulator (and, where relevant, the Non-Executive Committee and the Determinations Panel) shall have regard to the need for openness regarding its activities and shall consult with interested persons and their representative bodies when developing policies procedures and practices."
  The noble Lord said:The objective of the amendment is effectively to set guidelines for the way in which the regulator may discharge its function and, to some extent where relevant, the way in which the non-executive committee and the determination committee shall operate. It sets out the fact that the objectives must be compatible with Clause 5 and in a number of other ways, such as the need to use resources most efficiently and the principle that any restriction or burden imposed should be proportionate to benefits. It seems appropriate that the regulator should have some guidelines set out in legislation, and that it should have the need for openness on its activities.
  I am trying to remember to what extent that is true so far as OPRA is concerned. My experience has been in relation to particular issues rather than the general extent to which its operations shall be published and public. The guidelines may not be ideal, but they seem the kind of thing that the industry as such—we have had representations on the matter—thinks appropriate to include. I beg to move.
  Lord Oakeshott of Seagrove Bay:It is hard to object to the amendment; it seems quite sensible.
  Lord Borrie:It does seem hard to object to the amendment. It contains a number of favourite governmental words, such as "openness", "proportionate" and "efficient". I do not know what the inverted commas at the end mean, but, subject to that, the amendment is splendid. However, is it really necessary to add it to the Bill?
  Baroness Hollis of Heigham:My advice states that it is not, splendid though the amendment is and despite the seemingly universal assent. The regulator has the functions transferred to it from OPRA and the other functions conferred on it by the Bill. The clause sets out further detail on how the new regulator will discharge its function and reserves certain functions to the non-executive committee. It also reserves the discharge of certain of the regulator's regulatory functions to a special committee called the Determinations Panel, as the Committee is aware. The

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  regulator's general powers to delegate certain functions are subject to the Secretary of State's power to make regulations.
  The amendment seeks to make the regulator more accountable in its policies, procedures and practices. It also aims to ensure that the duties and functions of the regulator discharged to the non-executive committee and the Determinations Panel meet the regulator's objectives specified in Clause 5. That is, indeed, our intention. The proposals for a new regulator have been developed in the findings of the Pickering report of July 2002, the NAO report on OPRA of November 2002 and the quinquennial review of OPRA in December 2002. They all recommended that, in future, the Pensions Regulator should target its resources on those areas where members' benefits were at greatest risk.
  That view is supported by the Better Regulation Task Force's Principles of Better Regulation, published in 1998 and revised in 2000, which recommends that regulators be proportionate, targeted, accountable, consistent and transparent. The introduction of statutory objectives is one way to address the criticisms of OPRA. The objectives provide a driving force for the organisation and will allow for flexibility of regulatory approach. In the light of that reassurance, I hope that the noble Lord will withdraw his amendment. We do not think it necessary.
  Lord Higgins:That was a rather disappointing reply. As the noble Lord, Lord Borfie, pointed out, the sentiments are admirable and might reasonably provide some guidance to the regulator on the way in which he would operate. There is certainly feeling in the industry that it would be appropriate to have some guidelines. Perhaps those suggested in the amendment are not sufficiently concrete. By Report, we might try to formulate something rather more specific.
  Lord Lucas:I want to reinforce some of what my noble friend says. The regulator will not be subject to being sued, so there is not that sort of restraint. There is not even any requirement on him that he not be negligent. It is as well to have that offset to some extent by a set of objectives whereby he can be judged in the court of the public, as it were, where we can all see whether he is doing what he is supposed to do. To have a requirement for openness is absolutely key if we are dealing with someone as protected as the regulator is to be.
  It is also important to look at the wider interests of the people whom the regulator is supposed to cover, as opposed to the narrow interests in relation to their immediate pensions. Unless we have these requirements in the Bill, or something very similar to them, we will find that we are dealing with an organisation that is not as accountable or responsible as it should be, as there is no way for the public to judge it or for a body that has suffered at its hands to seek redress. It is enormously important, because of the restrictions on suing, that we have an explicit commitment to openness and breadth of judgment.
  Lord Higgins:I am encouraged by my noble friend's intervention. We ought to table a rather more specific amendment when we come back to the matter on Report. Meanwhile, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  On Question, Whether Clause 4 shall stand part of the Bill?
  Lord Higgins:I shall add a word or two about this clause at this stage. My noble friend Lord Skelmersdale posed a number of specific questions regarding the way in which the regulator will operate and the Minister said that she will write to us about that. The main point he was making was that the Explanatory Notes make great play about the Higgs report on corporate governance in relation to the governance requirements of the regulator, but when one comes to look at the detail, it does not seem to be the case that Higgs is reflected. For example, the case my noble friend gave about whether the non-executives should meet at least once a year to consider the position of the chairman is tremendously important.
  Over recent years, we have seen considerable developments in the role of non-executives. I know from personal experience that the relationship between chief executive and chairman can be very important for effective governance in any organisation. I think that the point my noble friend made is important. I also think that the idea of a non-executive committee undermines the unity of the board to some extent; it is not helpful. Having sat on various boards, I think that once the non-executives start getting together, particularly in a formal situation such as a committee, it does not, on the whole, result in the governance being as coherent as it would normally be.
  I shall not go over all the specific points made by my noble friend but I think that the claim that this is based on the Higgs report is open to considerable doubt when one goes into the matter. I hope that the noble Baroness will write to us about it. I wonder specifically whether at the moment the arrangements are as correct as they ought to be. We have some doubts about the structure of the regulator, which is obviously very important.
  Lord Lucas:I entirely agree with what my noble friend said. This is not a Higgs arrangement. In England, we do not have supervisory boards in the general run of corporations, which are what the Bill is moving towards creating. Non-executive directors act as part of the board; we have a single board and non-executive directors work through that. There will be committees of the board and there will be functions that will be operated separately, but the responsibilities belong to the board. That is, by and large, the structure that Higgs addresses in his report.
  We obviously want to be informed by what my former colleague says about the way in which companies should be run. I hope that we will produce something in line with current thinking. But if we are

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  producing a structure that is as far from the basic structure that Higgs addresses in his report as the one we are now contemplating—which is much closer to a continental model of how a board should be run than to a UK model— then we must review matters from the base upwards. Higgs cannot be applied as if it is the current best practice because it does not address this kind of situation. Either we have to go to something that more closely reflects the way in which a best-practice company operates or we must review the conclusions that Higgs reached to see whether they apply to the rather strange model in front of us.
  I have not heard any arguments advanced about why this is the right way to do things. Why do we have to invent our own way of doing things just for pensions? Why is the existing model, as it works with companies and corporate boards, not the one to follow? What is wrong with the unitary board? Why do we need to create this second tier? If we are creating a second tier, we need to be much more precise about what it is and what the relationship between it and the executives is. On the continent, there is a structure and a tradition that governs the way in which the two parts work together and the relationship between them. It is quite different in concept. Although one uses the same words when talking about it, it is quite different in concept from the way in which non-executives work with boards in this country. It may be the best way of doing things, but I want to hear the arguments about why we should follow the Dutch model rather than the English one.
  6.15 p.m.
  Baroness Hollis of Heigham:I am slightly puzzled by this. Obviously, this has been discussed and consulted on. We have had either silence or support for these proposals. I do not quite understand why we are trying to reinvent either Higgs or Cadbury when, as I understand it, we are proposing to extract from Higgs the appropriate bit that fits a non-departmental public body. That is what we are doing. That separation is in the Bill in Clause 9 and other clauses, clearly laying out the functions of the non-executive committee—a strategic review function that needs to be set aside from the daily running. One reason why the chairman is an appropriate member of that body is that his salary is determined by the Secretary of State rather than by the rest of the board, which is perhaps different from private companies.
  Lord Higgins:Would the noble Baroness say that sentence again? I did not quite catch it.
  Baroness Hollis of Heigham:The chairman's pay is set by the Secretary of State. Therefore, it is not subject to review by the rest of the non-executive members. I was being pressed on why the chairman was a member, and that is one distinction from a non-departmental board, because it comes within the guidelines of the Cabinet Office.
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  So I am a bit puzzled about why people are puzzled by this structure. It seems to me consistent and congruent with developing good practice, following Cadbury and Higgs—and following abuses in the City—as applied to non-departmental public bodies in the light of the review of OPRA and other consultation exercises we have had. As I understand it, until today we have had no dissent from anywhere about this structure.
  I am perfectly willing to believe that your Lordships have concerns that have not been picked up outside. However, I am a little surprised by this. I am very happy to write back more fully on the detail of how we expect this to operate. If there are still concerns, then your Lordships will no doubt want to revisit them. My understanding, however, is that across the industry there has been either silence or consent to this structure as the appropriate way forward given the responsibilities that we are asking this body to carry. So I am a little taken aback by the assault on this structure as somehow un-British. If British structures have led to some of the problems we have seen in the past, perhaps it is time we moved on.
  Baroness Turner of Camden:Did the noble Baroness say that the FSA had been consulted on this and had approved?
  Baroness Hollis of Heigham:I did not say that any particular body had been consulted. However, two or three weeks ago when I myself had discussions on this and other matters with senior FSA members, they seemed entirely comfortable with the structure. I was interested in exploring whether we shared some of the concepts of risk, analysis of the structure and ideas on the roles of the regulator and the appropriateness of the division of responsibility between the two bodies. I was given full reassurance on all those points.
  Lord Higgins:Will the noble Baroness tell us which bodies have been consulted? It seemed to us apparent that the claim in the Explanatory Notes about Higgs was not well founded. It was a fashionable thing to say, "This is in conformity with Higgs", but when you begin to look at it, it turns out that it is not. For example, the point I made earlier about whether the non-executives will meet at least once a year without the chairman present does not seem to appear at all. There are real issues here. Although the noble Baroness apparently has not had representations on them, these issues are important. Can she tell us who has been consulted on this specific aspect of the Bill?
  Baroness Hollis of Heigham:It is not like that. We are proposing this structure as a result of Cadbury, Higgs and the like. The structure is known and has been exposed and is in the Bill. I had a meeting a fortnight or 10 days ago with the senior players, including the chairman, from NAPF. Of all the concerns they could have raised with me, one that they did not raise was this structure. Obviously we have consulted with OPRA members about their experience, but both myself and my colleagues in the other place have had a series of meetings with

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  interested and very powerful parties, including NAPF and the FSA, at which we discussed a whole agenda of issues of mutual concern. This could have been raised by them if they thought it inappropriate. In all the meetings that I have had, no one has mentioned at any stage that this is not the appropriate way forward.
  As far as I am aware, we seem to have narrowed this down to one issue—we discussed it previously with the noble Lord, Lord Skelmersdale—and that is whether the chairman of the regulatory authority should chair the non-executive committee, which is not a Higgs recommendation. One of the distinctions I made was that a non-departmental government body chairman has his or her salary or pay determined by the Secretary of State. That is why there may not be a parallel with private companies, which may wish the non-executive directors to consider that role. It is not appropriate here.
  Apart from that, I have not heard anything from Members opposite to suggest that the structures we have in place are in no sense appropriate or, indeed, are inappropriate. I have been asked why we have developed them in this way; I have gone through the history of the corporate governance structure we have pursued. It has been exposed in the form of the Bill and through numerous meetings with important players, who have not shown any concern about the structure.
  I am a little puzzled why Members of the Committee opposite seem to be labouring the point. Let me put a question back to the noble Lord. Has he had representations from any bodies or professional groups indicating that they have worries about the structure, in particular the role of the chairman, that he feels we should have addressed but have not done so? If he has, I shall be very happy to take them away and consider them, but I have not heard him or any noble Lords opposite put such an argument. Obviously we can argue about particular words, but does the noble Lord have any evidence that this is a concern to other bodies?
  Lord Higgins:The arguments put forward by my noble friend Lord Skelmersdale spell out very clearly where the concerns exist. The Higgs report is the basis on which the Government have promoted their view. It is not the case, as the noble Baroness said, that there is only one outstanding item. When she reads Hansard she will find that there are a number of areas where we have expressed concern.
  But let us not delay the Committee longer at this stage. These are important points. We need to ensure that the regulator, which will have a much more active role than OPRA, is itself operating in terms of best governance. It is something that we should all be concerned about.
  Clause 4 agreed to.
  Clause 5 [Regulator's objectives]:
  Lord Higginsmoved Amendment No. 31:
  Page 3, line 7, leave out paragraph (d).
  The noble Lord said:In moving Amendment No. 31, I shall speak also to Amendments Nos. 32 and 33. The amendments are concerned with the clause, which sets out the regulator's objectives. Clause 5(1)(d) states that the regulator has a function,
  "to promote, and to improve understanding of, the good administration of work-based pension schemes".
  I can see that, in a way, that is an appropriate function, but is it really appropriate for someone regulating a part of our society to seek to tell us how to go about it? Is it really an educational function of a regulator? There may be a strong case for ensuring that trustees and others understand their responsibilities—we shall come to that at a later stage—but I have some doubts whether that educational function is an appropriate role for the regulator.
  Amendment No. 32 seeks to insert an additional objective for the regulator—namely, to promote occupational pension provision by minimising regulatory burdens applying to well run schemes and their sponsoring employers. The trouble with this is that the regulator itself will impose considerable extra burdens on employers sponsoring schemes and on trustees, so some injunction to the regulator to minimise those burdens is important. Similarly, at page 3, line 8, it is suggested that, in conjunction with the pension protection fund, the regulator should take steps to ensure that the cost of the levy on occupational schemes is kept to a minimum.
  Our concern is that while the objective of the Bill is desirable, its effect is likely to reduce rather than increase the number of occupational pension schemes that survive—I think that that is the right word—in the present environment. While it is clearly desirable that the regulator should carry out its operations that protect pensioners, the fact that the regulator will be more intrusive is no great help if a particular group of pensioners finds that its scheme closes or closes to new members as a result of employers getting fed up—I think that that is the right expression—with additional burdens on top of those they are carrying at the moment.
  Elsewhere, particularly in the Finance Bill, the Government have sought to simplify matters. But there is no doubt that, as a result of introducing the Bill, the regulator will increase the burden on pension funds and the amount of work that they have to do, without any benefit to their members. These amendments seek to ensure that that is kept to a minimum. I beg to move.
  Baroness Turner of Camden:I hope that the Minister will not feel disposed to accept these amendments. I do not suppose that she will. Clearly, they would set out in the Bill the desire to keep regulation down. No one wants to have unnecessary regulation or to have an unnecessarily high levy. However, to put these two requirements in the Bill sends out entirely the wrong message. One has to have regulation in order to protect people. That is what all this is about. If one does not have regulation, one does not have protection. It is a question of getting the balance right. If this is put in the

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  Bill, it looks as though the balance is too much in one direction and not enough in the direction of the protection of members.
  Lord Borrie:I entirely agree with my noble friend Lady Turner. I also hope that the Minister will not agree to Amendment No. 31, which would leave out the objective of promoting and improving the understanding of good administration. Surely, the noble Lord, Lord Higgins, would be only too glad if pension schemes were carried out better. It would produce fewer problems for the regulator.
  Lord Oakeshott of Seagrove Bay:I support Amendment No. 31. It may seem odd to seek to take out an objective to promote and improve understanding of the good administration of work-based pension schemes. But it is important to be clear about the functions of the regulator. If we look at the Financial Services Authority, there is increasing evidence that it is getting itself into hot water and is undermined in carrying out its proper functions in cracking down on the split capital trust scandal because it also has a duty to promote, inform and educate. Some of the material it issued a year or two ago is being used by the people in the split capital scandal to say that it was partly encouraging people. A regulator in this position, with very important quasi-judicial powers, should not at the same time have this sort of wiffley-waffley clause saying, "promote these things". That is a different job. It is not an appropriate job for the regulator and we support Amendment No. 31.
  6.30 p.m.
  Baroness Hollis of Heigham:First, Amendment No. 31 would remove the responsibility to promote good practice. It is important that the regulator has clear objectives. It provides a framework for regulatory activities. The establishment of such objectives was a strong recommendation of the National Audit Office study of OPRA in 2002. We hope to combine that, as my noble friend said, with appropriate flexibility.
  The two major changes proposed by the noble Lord are to add in two additional amendments that were criticised by my noble friend Lady Turner. The concern is to reduce burdens on pension funds. Obviously, we seek to minimise inappropriate regulatory burdens; it would be wrong to seek to minimise appropriate regulatory burdens. The risk-based approach will concentrate on those schemes where scheme members' benefits are most at risk, with minimal regulatory intervention for well run schemes. Surely, that is what we all wish for. Well run, appropriately funded schemes will have less contact with the regulator than they did with OPRA, which did not have the discretion to make that judgment and did not operate in a risk-focused way. A risk-focused approach to regulation does exactly what my noble friend asked for, which is seeking to protect members' benefits where they could be at risk, without in any
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  sense being oppressive to a well run scheme. By a well run scheme, we also mean an adequately funded scheme where benefits are not at risk.
  The second new objective laid down by the noble Lord is that, in conjunction with the PPF, the regulator should take all reasonable steps to maintain the cost of the levy to the minimum compatible, which would oblige the regulator to work with the board of the PPF to minimise the levy payable by occupational pension schemes. Obviously, we want that partnership, but the board of the PPF will be responsible for setting PPF levy rates and structures. It will be the responsibility of the board to understand the implications that the levy structure will have on pension schemes and the overall funding position of the PPF.
  Before altering the levy rate or the structure, the board will be required to consult the stakeholders and publish any determination that it makes relating to the levies. There are already appropriate measures in the Bill to check the cost of the levies payable by schemes. The cost of the PPF rather than the cost of the regulator is the most significant financial responsibility of the companies affected. The regulator, like OPRA, is being funded indirectly through a levy on pension schemes. The regulator will collect that levy on behalf of the Secretary of State, who will set the rate as he does for OPRA. As previously discussed, we envisage that being around £23 million a year, compared to £17 million a year.
  It is not right to expect, or to require, the regulator at this stage to move into the territory of determining the levy rate, which is the responsibility of the PPF board and will be subject to consultation in the appropriate way. I hope that with those responses, the noble Lord will feel able to withdraw his amendment.
  Lord Lucas:I very much hope that the noble Baroness will address herself to what the noble Lord, Lord Oakeshott, said about Amendment No. 31. It causes problems when an organisation that sets out to be a regulator becomes at the same time an adviser. They will presumably under the powers in the Bill put forward suggestions and schemes as to how a pension fund should be organised. When one of those proves to be deficient, and some new way is discovered of defrauding pensioners, the defence will be, "Oh well, you told us how to run a good scheme and you did not warn us against this". That is happening to the FSA at the moment. It is not necessary to dig that pit in front of this regulator. It has a job to do; it should do that job, which is to protect pensioners. If it gets into the business of advising companies on how to run pension funds, it will only make its future work more dangerous and difficult.
  Baroness Dean of Thornton-le-Fylde:I hope that the Minister does not give way on that point. I was somewhat taken aback by the support for paragraph (d) coming out. I take the point about the FSA. I accept that it is not just in one area, but in two areas, that it is in trouble because of its advice. Here, we are dealing with the administration of work-based pension

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  schemes. Many of those schemes have got into trouble because they have not had anyone to advise them properly. Hopefully, that is what the regulator will do in the areas of good administration. Certainly, improved understanding is absolutely necessary. If they do not go to the regulator, where do they go? It is terribly important that this paragraph stays in.
  While I am on my feet, I have some difficulty with Amendments Nos. 32 and 33. Having been the chairman of a regulatory body, a housing corporation, I can see people having a field day with these amendments if they go into the Bill. You have only got to judge by "minimising regulatory burdens". Who decides? To some people, that means no regulatory burdens.
  I will try not to take up too much time. Amendment No. 33 includes the phrase,
  "to maintain the cost of the levy".
  It is important that in our exchanges, as recorded in Hansard, it is noted that we must somehow keep the levy level down as low as possible. We cannot let the regulator run away with that. Once we take on board in the primary legislation,
  "take all reasonable steps, maintain the cost of the levy on occupational pension schemes to the minimum compatible",
  what you are trying to do is have hurdles that are far too high for a regulator to be able to do its job properly.
  Lord Lucas:I will answer the point raised by the noble Baroness. If you are running a company, you do not go to a regulator for advice on how to run it. The most immediately obvious adviser that you would turn to is your accountant, or perhaps your auditors. Amendment No. 156, in my name, brings in that part of the European directive that requires schemes to be properly run. That becomes a matter on which the auditors report and the auditors have an interface. That would be the ordinary way in which a scheme would become and be seen to be well-regulated. To my mind, that is how it should be done, rather than compromising the regulator.
  Baroness Dean of Thornton-le-Fylde:The noble Lord has more confidence in accountants and auditors than I do.
  Lord Lucas:That is because I am one.
  Baroness Dean of Thornton-le-Fylde:Yes, well, that is fine. We talked about two cases that are with the FSA at the moment. If we look at the record of the City, the scandals and their implications for the position of the professional bodies, accountants, auditors, lawyers, I suggest that their record is far worse than the record of the FSA.
  Lord Lucas:Yes. That is exactly why the regulator should stick to its business of criticising and leave advice to other people.
  Baroness Hollis of Heigham:Before the noble Lord, Lord Higgins, decides what to do with his amendment, I shall come back. I am disappointed that noble Lords
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  opposite, certainly the noble Lord, Lord Lucas, have such a negative, disciplinary idea of the role of the regulator. We are trying above all to create a culture of compliance, information and best practice. One should not extract that from what else is going on in the Bill. For example, I referred earlier to the fact that for the first time all companies will be required to have at least one third of their trustees nominated by members. That will mean that for the first time we will have a new cohort of trustees who possibly have not been trained. We hope and expect that they will be trained and will act in a responsible way, and there are clauses dealing with that.
  That is the sort of thing that I would expect the regulator to be issuing as guidance; whether you call this information, education, or a climate of compliance, I do not really mind. It might also be guidance to trustees to ensure that accounts are provided on time, or checking the cash equivalent transfer values.
  I was talking to an old friend who is chief executive of a major media company, and he is also on the pensions board of the consortium of those companies, from the Anglia region. I asked him what percentage, in his major company, of member nominations trustees there were. There was something like half. I asked him if they were useful, and he said "Yes. For example, we wanted to adapt, or change, the cash equivalent transfer value of schemes, which as far as existing employees were concerned, was absolutely fine by them, but none the less the trustees, including the member nominations, said that we had to do a broad consultation exercise, which we had not expected to do". That was their experience.
  If you are trying to lay down lines for CETV—and there are new rules under the Pensions Bill which will allow you to do that—you will want to establish the good practice in the minds of employees and employers alike that you do not milk people who are leaving the scheme and who may as a result never build up a decent pension portfolio.
  Whether you call this information, education, compliance or informed choice I do not really mind or care, it is a job that needs to be one—particularly given the increased responsibility of trustees for the scheme specific funding, which they will have to monitor with the aid of the one-size-fits-all minimum funding requirement that we have had in the past. This suggests that the regulator needs to act in a proactive way, which I think is highly desirable.
  I cannot conceive that the regulator and members of the regulatory body will wish to go down any route that interferes with their task of ensuring the protection of members' benefits. The best way to do that is to have alert and empowered trustees. The regulator has a part—but only a modest part—to play in developing that expertise.
  Lord Higgins:I shall come back to the role of trustees, which is extremely important, at a later stage of the Bill.

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  I do not think there is any difference between the noble Baroness, Lady Turner, and myself; we are all agreed that it is important that the position of pensioners should be protected. But if one is not to deter companies from continuing to have such schemes, then it is important that the burden on them should be minimised. That is what the amendment seeks to do. Whether it is a function or an objective is an arguable point.
  So far as concerns the first amendment, the question is whether it is an appropriate objective of the regulator—it is interesting that it appears as an objective and not as a function—to promote better understanding and so on. The noble Baroness, Lady Dean, saw it as more of a function. If the regulator is to intervene in the kind of situation she described—where a particular fund has problems and so on—it may be appropriate for it to intervene in ensuring that pensioners are protected. but a role in educating trustees across the board would seem to be a quite different function.
  There are various other organisations to which trustees can go for advice.
  Baroness Hollis of Heigham:How I envisage that might happen, for example, is that the regulator would issue a document offering advice about best practice which may or may not have statutory authority. Why would it not be appropriate for the regulator to issue a code of guidance on some aspect of best practice to all trustees, not only in the major companies but in the tiny companies that will come within this remit for the first time? Why should it not do that?
  If we do not have this power in the way laid out, it is conceivable that someone could complain on the grounds of ultra vires that it did not have the power to use it. That would be absurd.
  Lord Higgins:If it were a power it would be under "regulatory functions". I think I am right in saying that this is an objective, not a power. But, by all means, let us transfer it to regulatory functions. In that case it is clear what it will be doing; it will be issuing codes of practice and so on.
  It will certainly not be possible to operate within the very tight manpower restraints referred to by the noble Baroness earlier; there will be only £7 million a year more than for OPRA to go into the highways and byways and carry out a broad educational process. It does not seem to me that that is what a regulator is about. The regulator's function and its objectives are rather different. I should like an exhortation, if you like, on the face of the Bill that the carrying out of its prime responsibilities to protect the benefits set out in paragraphs (a), (b), (c) and so on should be exercised with the minimum of cost to pension schemes. I think that is important. I would very much like to believe the Minister when she says that there will be interventions only in badly run schemes. I will probably never know, but I would be astonished if the scheme of which I was chairman until recently£it was even commended as a
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  well run scheme by the NAPF—did not find itself having heavier burdens imposed on it as a result of the change.
  6.45 p.m.
  Baroness Hollis of Heigham:It is not a change. OPRA already does everything about which we are talking. Again, I am puzzled.
  Lord Higgins:I am not on the promotion point, but on the one about the extent to which there is intervention. I take note of what has been said. Again, the question is one of balance. We must make sure that we do not create a situation where, because things become too interventionist and heavy handed, schemes close down and pensioners do not have the benefit of a scheme. It is all very well to protect them in the existing scheme, but if employers get fed up and decide that they will not have it anyway, the object is pointless.
  The amendment sought to ensure that the risk of schemes closing down was reduced, as the regulator would always have in mind the costs that it was likely to impose on business. There may not be any difference between us, but the balance seemed better restored with the amendments. If we do not have them, things are more lopsided. However, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendments Nos. 32 and 33 not moved.]
  On Question, Whether Clause 5 shall stand part of the Bill?
  Lord Higgins:I have only a very small point on the matter. I do not quite understand the terminology, and one would have thought that I would by now. Subsection (2), at line 11 of page 3, refers to,
  "members who are employees in respect of whom direct payment arrangements exist".
  I do not think that I have previously come across the expression "direct payment arrangements". I do not know what it means, and it might help if the noble Baroness told us.
  The subsection refers to subsection (1)(b), which protects the benefits and so on. That seems rather restrictive, as it applies to only those who have direct payment arrangements, whatever they may be, and when the pension is a stakeholder pension. We agree that most of the Bill is concerned with defined benefit schemes, but the provision seems to extend it to defined contribution schemes. Is that why the provision is there? Is it simply to make it clear that not merely defined benefit schemes are covered?
  Alas, we do not appear on television in this Room, so the nods from the advisers behind the noble Baroness will not be seen. I have often been inclined to agree with Edith Sitwell, who said that television was a good way of killing time for those who like it dead. At all events, one disadvantage of being in Grand Committee rather than downstairs is that we do not

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  appear on Sky at four o'clock in the morning. Be that as it may, perhaps the noble Baroness will clarify the point.
  Baroness Hollis of Heigham:I did not understand that there was such a time gap, and that the noble Lord suffered such jetlag, in moving from here to the Hague. Clearly that is how he occupies his early morning hours. He was querying his understanding of Clause 5(2)(a), but he is exactly right. It is about where the employer pays on his behalf to the pension scheme. It is in existing OPRA legislation.
  Lord Higgins:I am so sorry, but I understand the matter even less than I did earlier. Subsection (2) states that:
  "For the purposes of the preceding subsection (1)(b)",
  which outlines the protection of benefits and so forth—
  Baroness Hollis of Heigham:The noble Lord is referring to Clause 5(2)(a).
  Lord Higgins:Let me start again. Subsection (2), set out on page 3 at line 9, states:
  "For the purposes of subsection (1)(b)",
  which is the subsection above, or perhaps it is the subsection below. The problem is that there are two subsections (1)(b). It is not clear which subsection is being referred to.
  Baroness Hollis of Heigham:It refers to subsection (1)(b) above. It is a cross-reference back to subsection (2).
  Lord Higgins:It is not made at all clear. There are two subsections (1)(b). I had assumed that subsection (2) refers to subsection (1)(b) above, but it does not say so. There is also a subsection (1)(b) below, but it cannot mean that because it refers to a stakeholder pension scheme.
  Baroness Hollis of Heigham:Subsection (1)(b) above cross-refers back down to subsection (2), which is the subsection the noble Lord is dealing with.
  Lord Higgins:I believe we are agreed that subsection (2), where it refers to subsection (1)(b), is to protect the benefits under personal pension schemes and so forth. It then specifies those who are to be the subject of the regulator's objective set out in subsection (1)(b) above; namely,
  "the members who are employees in respect of whom direct payment arrangements exist",
  or stakeholder pension schemes. I do not understand why one of the objectives of the regulator does not apply to pension schemes in general. Moreover, I still do not understand the explanation given by the Minister about the meaning of "direct payment arrangements".
  Baroness Hollis of Heigham:Clause 5(2) expands on the understanding of subsection (1)(b). I understand that there are personal pension schemes that are quasi-occupational schemes, into which the employer pays.
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  That includes stakeholder schemes. This provision would establish that the regulator has an overview of such schemes.
  Lord Lucas:I should like to know where this definition arises. To what do we refer in order to get a definition of "direct payment arrangements"?
  Baroness Hollis of Heigham:They are set out in the Welfare Reform and Pensions Act 1999. The obvious case is where an employer pays a 5 per cent contribution into stakeholder personal pension. If the employee pays in 5 per cent, the employer hands over 10 per cent to the pension scheme administrators. This provision would cover that situation, which is a version of direct payment, thus bringing it within the remit of the regulator.
  Lord Higgins:In that case, which pension schemes are not covered by it?
  Baroness Hollis of Heigham:It would not necessarily cover some defined contribution schemes. The regulator will have two functions: protecting the security of the pension promise so far as defined benefits are concerned; and taking responsibility for ensuring that there is no fraud in all schemes. That function would include defined contribution, stakeholder and other schemes. The Pensions Regulator will undertake both functions.
  Lord Higgins:I still do not understand why the protection of subsection(1)(b),
  "to protect the benefits under personal pension schemes",
  is then limited to those specified in subsection (2). If the objective of the regulator is to protect the benefit under personal pension schemes and so forth, which schemes are not covered?
  Baroness Hollis of Heigham:I shall take a moment to check that I understand the point. There will be pension schemes where the employer makes no contribution whatsoever. The regulator has no remit to ensure that the conditions of the scheme are met because it does not exist. It is a private personal pension and is therefore not covered.
  We are talking about schemes, of which hybrid schemes are an example, where the employer and the employee make contributions and the employer pays the total sum across to the pension scheme managers. The purpose of the provision is to make it clear that the regulator has only a limited role for personal pensions because the FSA looks after the regulation of personal pension providers. However, in so far as these are versions of workplace schemes to which the employer contributes, the remit of the regulator would extend to them.
  Baroness Turner of Camden:As I understand it, this is where the individual himself pays for a personal pension and the employer makes no contribution. That case would fall outside the remit of the regulator.
  Baroness Hollis of Heigham:You could have a situation in which a husband takes out a stakeholder

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  pension for a non-working spouse. In that case it is clear that no contribution would be made by an employer. I do not see how that arrangement would be any business of the regulator.
  Lord Lucas:I am having difficulty in finding the definition. If I could be directed to the right page, I would be most grateful.
  Baroness Hollis of Heigham:Yes, indeed.
  Lord Higgins:I had rather assumed that the Pensions Regulator would regulate all pensions, but obviously I am mistaken in that. Perhaps that is why I have delayed the Grand Committee unnecessarily. Can we be clear which pensions will not in any way come under the remit of the regulator?
  Baroness Hollis of Heigham:I shall be happy to write to noble Lords at greater length on this point. The regulator will regulate what conventionally would be called defined benefit salary schemes; that is, occupational, workplace-based salary schemes. But also, where appropriate, the regulator will ensure that schemes to which the employer as well as the employer makes contributions and which are paid direct may also come within the regulator's protection. That is not necessarily in terms of the benefits that may accrue, because a defined contribution scheme does not guarantee the benefits that may accrue, but the regulator will provide protection against fraud, for example.
  Essentially, the regulator will ensure that final salary schemes or, where appropriate, hybrid schemes that are workplace based and to which the employer on behalf of the employee makes contributions are sufficiently funded to meet the pension promise that formed part of the original pension contract. However, the Pensions Regulator will also take on wider functions, such as against fraud, where contributions are made by both the employer and the employee. But there will some pensions, such as my example in which a husband purchases a stakeholder pension for his non-working spouse, which are not workplace based and are therefore not in any sense the function of the regulator. However, if such pensions have been inappropriately sold, they may be the responsibility of the Financial Services Authority, to be dealt with under the remit of mis-selling. That is my understanding of the structure of the pension schemes. I am not quite sure why we are at odds on this point.
  Lord Higgins:I do not think that we are at odds; it is merely a question of my being educated. I had mistakenly thought that, overall, the regulator was a pension regulator and would regulate all pensions. However, clearly that is not the case. As the noble Baroness has made clear, there is a division between the Pensions Regulator and the Financial Services
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  Authority and, presumably, other bodies. However, it would be very helpful to have a note on which pensions are covered and which are not.
  Baroness Hollis of Heigham:I thought that we had covered some of this in the briefing file I made available to Peers, but I shall check it and, if it is incomplete, I shall be happy to augment it.
  Lord Higgins:I am most grateful to the noble Baroness.
  Lord Lucas:Since minds greater than mine are having difficulty finding the definition, would the noble Baroness consider including either the definition itself or a reference to it in the Bill?
  Baroness Hollis of Heigham:I am looking at Clause 5(3), which states that,
  "In this section—'stakeholder pension scheme' means a personal pension scheme which is or has been registered under section 2 of the Welfare Reform and Pensions Act 1999 (c. 30) (register of stakeholder schemes)".
  Lord Lucas:I do not see a definition of "direct payment arrangements".
  Baroness Hollis of Heigham:"Direct payment arrangements" refers to where the employer—
  Lord Lucas:I understand exactly what it is, but so far as I know there is no definition set out in the Bill. The estimable experts behind the noble Baroness cannot find it either.
  7 p.m.
  Baroness Hollis of Heigham:The definition of subsection (2)(a) on direct pension arrangements is covered by the Pensions Act 1995, but the stakeholders come in under the 1999 Act, which was when such pensions were set up.
  Lord Lucas:A reference to it would help.
  Baroness Hollis of Heigham:Let me look at whether a reference to it as defined in the Pensions Act 1995 would be helpful. I am perfectly happy to see whether we could include those words.
  Clause 5 agreed to.
  Clause 6 [Supplementary powers]:
  Lord Higginsmoved Amendment No. 34:
  Page 3, line 25, leave out "(except borrow money)"
  The noble Lord said:I have just realised that there was a point on the previous amendment that I forgot to make.
  Amendment No. 34 is nice and straightforward, so we need not worry unduly. Clause 6 states:
  "The Regulator may do anything (except borrow money) which ... is calculated to facilitate the exercise of its functions, or…is incidental or conducive to their exercise".
  When I first tabled the amendment, I thought that it concerned the Pension Protection Fund which, when we come to discuss it, I will suggest is very likely to be short of money and may need to borrow. That is not

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  the case at all at this stage and the amendment is actually concerned with the regulator. For reasons about which we are not clear, the regulator is not allowed to borrow money. The regulator may well find that it needs to borrow money because it has underestimated the levy or its costs are more than originally thought, and the Treasury will not give it any more.
  I have an incidental point that the noble Baroness may be able to clarify, again based on my failure to understand the situation. There is obviously a levy so far as the Pension Protection Fund is concerned, but is the levy to be used to finance the regulator the same levy or part of the same levy? They are two quite separate levies. We will come to how the levy for the Pension Protection Fund is calculated, but I am not clear how the levy for the payment of the regulator will be calculated. If it is inadequate and the regulator needs to borrow money, perhaps we should be clear about the situation and why the paragraph is in the Bill. I beg to move.
  Baroness Hollis of Heigham:It is delightful that the noble Lord is encouraging us to allow the regulator to increase his expenditure. A previous amendment would have reduced his expenditure on the grounds that it was a burden on business, but I am sure that he will not mind the tease.
  The provision on not borrowing money is also the position for OPRA. Given the concern of the noble Lord, Lord Lucas, for sources, I should say that paragraph 2 of Schedule 1 to the Pensions Act 1995 limits that power. The basic reason for the provision is that the regulator's expenses, apart from staffing, are the likes of office leasing, IT equipment, stationery and so on. The resources produced by the levy of £23 million should be more than adequate. If not, it is obviously available to the regulator to increase the levy in due course.
  That is entirely different from the Pension Protection Fund. When we reach that part of the Bill, we will all agree that its costs are much more volatile and unpredictable. When a scheme goes under, for example, one does not know whether it has 200 members or 2,000 members. One does not know what assets may be brought into the scheme or what degree of transfer has already taken place. One does not know the proportion of existing pensioners to employees and deferred pensioners, and therefore what the liabilities will be. For the Pension Protection Fund, apart from the assets coming in and the levy, there is therefore a fallback power to be able to borrow money if necessary, as a smoothing activity, to deal with quite substantial contingencies. A major company going under could produce a very swift and substantial contingency.
  That is not the case with the administrative levy, which is essentially predictable and continues from year to year. We think that it is adequately funded and so we do not see the need for the amendment. I am intrigued that the noble Lord would like the regulator
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  to have this power, but we do not think that it is necessary and, if your Lordships agree, we are not minded to give it to him.
  Lord Higgins:I shall seek to persuade your Lordships otherwise on this occasion. It is not the case that this is a proposal for the regulator to ask for more money. If it has the power to borrow, it will have a little flexibility and, instead of over-estimating how much it needs to levy to make sure that it does not have to borrow, it will be able to steer a more moderate course between being in surplus and being in deficit. If it is not allowed to borrow, it must make absolutely sure that the levy is enough, and to be safe, more than enough, than would otherwise be the case. So it will levy more than it needs. It can levy less if it can borrow. I leave the Minister with that thought.
  Baroness Hollis of Heigham:That is very interesting. I had not thought of that before. Surely the point is that we are dealing with a budget of £23 million, which is an increase of £6 million or so on OPRA's budget. The costs are essentially those of administrative, recurrent revenue expenditure. They are not lumpy, but predictable and therefore, we do not see the need for this power in the same way that we did not see it as necessary for OPRA. If the regulator finds after one year that the flat-rate levy is inappropriate, he can come back to the members and, if necessary, seek to raise the levy for the following year. We think that that is better than having borrowing powers.
  Lord Oakeshott of Seagrove Bay:I do not think I heard the Minister answer the question of the noble Lord, Lord Higgins, about the basis on which the regular budget is raised. I have been leafing through the Bill and I cannot spot it. Can the Minister help us with the section number so that we can see it?
  Baroness Hollis of Heigham:The levy provisions are in Section 175 of the Pension Schemes Act 1993. They are wide enough to allow a carry-over or carry-under from year to year. My point about predictability has been confirmed as OPRA has not changed its levy. It has remained fixed at the same rate for the past three years. Apart from the theoretical point made by the noble Lord, I do not see any need for this power.
  Lord Oakeshott of Seagrove Bay:Given that we all accept that the Pensions Regulator is quite a change from OPRA, would it not be a good idea to have the basis of the levy stated in the Bill rather than referring to old Acts? Have we just got a blank cheque?
  Baroness Hollis of Heigham:I am puzzled by this. We are talking about the administrative levy for the Pensions Regulator. We are not talking about the infinitely more complicated issue for the Pension Protection Fund. The levy is a flat-rate levy for all members of appropriate schemes, as it was for OPRA. That was raised by OPRA and will be raised by the regulator in accordance with deemed expenditure. OPRA has got it right over the past three years and kept the same levy, so in real terms it is fractionally reduced. There are powers to carry over or carry under

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  if it has not been fully or appropriately calculated. I do not see the problem. It has been a regular, routine administrative levy.
  Lord Oakeshott of Seagrove Bay:We are not seeking to question the whole matter. It is just a straightforward question. Is it just a straightforward bob-a-nob, flat-rate levy per member?
  Baroness Hollis of Heigham:Yes, it is. I said that just now.
  Lord Oakeshott of Seagrove Bay:I thank the Minister.
  Lord Higgins:It may be, but it is not in the Bill. The fact that there are levy provisions in earlier legislation to finance OPRA, which is going to disappear and be replaced, does not on the face of it give the new regulator power to raise the levy unless it somehow appears like the smile on the face of the Cheshire cat after he has disappeared. Surely there must be provision in this Bill for raising a levy to finance the regulator. The fact that there was earlier legislation enabling OPRA to be financed cannot be right.
  Baroness Hollis of Heigham:As noble Lords will know, many of the regulator's powers have been taken over directly from OPRA, and the Bill makes that clear. I share the noble Lord's view about schedules and clauses. Paragraph 26 of Schedule 1, on page 240, in volume II, spells out exactly what is happening, does it not? It states:
  "Section 175 of the Pension Schemes Act 1993 (c. 48) (levies towards certain expenditure) is amended as follows".
  It then goes on to say how it is amended. So I should have thought that noble Lords' concerns are covered by the cross-reference in the schedule.
  Lord Oakeshott of Seagrove Bay:I read that provision when I was leafing through the Bill, but it was certainly not very clear to me. If we believe that it is right that this should be done on a straightforward flat-rate levy, why not say so in the Bill?
  Baroness Hollis of Heigham:That is current practice.
  Lord Oakeshott of Seagrove Bay:Why does it not say so?
  Baroness Hollis of Heigham:As we discussed earlier, when an employer is, for example, facing a surplus, part of OPRA's job is to interrogate members of the scheme on whether the surplus should be returned to the employer. In this case it was a £50-million scheme, and I am very happy to give any of your Lordships the details of the company to which I am referring. That cost OPRA £75,000. Would it be right to have that as the levy or to have it as a recharge of fees? It seems to me that we can discuss that type of issue later when we look at the detail of the Pension Protection Fund and other matters.
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  As for earlier legislation, no Bill starts anew unless it is a consolidation Act. As a Pensions Bill, this Bill is amending relevant previous legislation that continues. Therefore, as we discussed, quite a few OPRA functions go over into the new regulatory body to which are added new functions, which may or may not be welcomed by the regulator, and new powers.
  In this legislation we are saying that previous provisions have been amended by other legislation. That is normal drafting. One does not go back and restate the whole provision. I suppose that we could do that and have a Bill of four volumes rather than two. What we are doing is absolutely conventional practice. In the Welfare Reform and Pensions Act, for example, we were amending the Child Support Act with new child support proposals. We did not spell it all out in a consolidating Bill and then put it all in the relevant Bill. We cross-referred continuously back to the previous legislation. I do not think that there is anything unusual about that. The time to clarify that is, I think, when one makes a consolidation Bill.
  Lord Oakeshott of Seagrove Bay:We are trying to keep things simple here. Can the noble Baroness tell those of us who do not have her extensive knowledge of previous Acts whether the Act that is being amended states the basis on which the levy shall be raised and whether it should be flat-rate? I have read in the Bill—I have just gone through it£that the regulator will have power to make a specific charge for a specific fund, which was the example that the noble Baroness raised, but what does the "old Act" say about how OPRA, now the regulator, shall fix its normal annual running charge? In terms of this amendment, that is the relevant factor in whether it is likely to need to borrow money.
  Baroness Hollis of Heigham:The regulations as approved by Parliament within the framework of the 1993 Act specify precisely that.
  Lord Oakeshott of Seagrove Bay:That they should be flat-rate?
  Baroness Hollis of Heigham:Yes.
  Lord Higgins:It has always been the case that parliamentary draftsmen are paid huge sums and have nervous breakdowns pretty regularly. From time to time we can see in the legislation when that situation has arisen. However, following the point made by the noble Lord, Lord Oakeshott, I will take a bet with the noble Baroness—though I may not be here to cash in—that it is most unlikely that there will be a consolidation measure affecting this legislation in the next 20 years. I think that the noble Lord the Deputy Chairman of Committees is inclined to agree with that view. When a member or the chairman of trustees of a pension scheme comes along and says, "Why am I paying this levy?", would it not be a good deal easier to answer "Look at the clause in this Bill" and not go on to say "but you must dig out the other Bill"—which is probably out of print and only annotated in the Libraries of the House of Lords and the House of

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  Commons? There is no reason at all why it should not be done in a straightforward way. The argument that it will be eventually consolidated is absurd.
  7.15 p.m.
  Baroness Hollis of Heigham:I respect that argument, but frankly that would have to be done with practically every line throughout the Bill.
  Lord Higgins:Good.
  Baroness Hollis of Heigham:In that case you would expect to turn the Bill into a consolidation measure. You cannot have it both ways. You cannot have a Bill of two chunks—the noble Lord has complained already, perfectly legitimately, about the length of the Bill—spelling out and specifying every time it cross-refers back to the 1995 Act, the 1993 Act, or any other previous amendments.
  In all my history in social security—I am sure that the noble Lord has had the same experience—I have found that Bills build on each other by cross-referencing back. You can clarify them and bring them up to date with a consolidation measure, but that may or may not happen. The Bill will be for scheme actuaries, scheme trustees and so on to operate. It is not for the general public.
  Existing members already pay a flat rate levy and there is no proposal to change that. They would not expect there to be any changes to the system, and that is what we are proposing here. It is possible that at some stage in the future Parliament may, through regulations or whatever, decide to amend it because it wishes to see certain expenses incurred by the regulator referred back to the organisation that generated the costs—for example, in the paying back of surpluses. I can conceive that in that situation regulations may come before your Lordships' House for approval.
  At the moment, it seems to me that the Bill is absolutely conventional in its handling of pensions and other social security legislation. We are not doing anything new. If we were, there might be a case for the amendment. However, we are continuing existing practice and we are not dealing with a consolidation Bill. If we were to take the approach suggested by the noble Lord, almost every clause would require a fuller explanation because we could not rely on the heritage of existing Bills as we do in all other areas of government legislation.
  Lord Higgins:The justification for referring back is that there have been settled court cases setting out what the legislation actually means. I very much doubt that that is true in this case. Together with the noble Lord, Lord Oakeshott, I do not understand why it is necessary to do this in a form that requires actuaries to tell you how much you are going to be charged. The actuaries or other advisers will charge you even more for telling you. I do not wish to pursue the matter further.
  Lord Lucas:Before my noble friend withdraws the amendment, what definition of "borrowing" are we
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  using? Would it preclude PFI projects? Would it preclude equipment leasing? Where do 1 go to find out what is and is not allowed?
  Baroness Hollis of Heigham:I shall be happy to write to the noble Lord about what we mean exactly by "borrowing money". My understanding is that anything that came within ongoing revenue expenditure would not count as borrowing money. Most of the equipment will come across from OPRA: it already exists; it is already out there; it is already in place; it is already being run by 260 staff. The IT system might be updated at an appropriate point to take on additional functions. In that situation I doubt whether we will get into PFI issues. We might, I suppose—it might he appropriate—but I think that would come within the normal Exchequer guidelines.
  Given that we are referring to ongoing, regular. predictable administrative expenditure—as shown by the fact that OPRA has not increased its levy over the past three years—there will be no need to borrow money. The regulator can fine tune from year to year the levy he needs to raise. I think we all agree that it is very different with the Pension Protection Fund, where we are dealing with a much more volatile and unpredictable situation without such capacities.
  Lord Higgins:We have had an interesting set of exchanges. The only matter I am unclear about is if the levy is to be the same as the levy raised for OPRA, and as the regulator will clearly be more expensive than OPRA, how will it be financed in full?
  Baroness Hollis of Heigham:The point that I was making was not that the OPRA levy will stay the same; merely that given OPRA's current responsibilities the level of funding necessary to deliver those responsibilities has been predictable in such a way that the levy has remained unchanged for the past three years. I said earlier that I thought that there would be another 40 or so added to the 240 to 260 members of staff that are currently part of OPRA. Obviously, more staff would require an additional levy. That is reflected in the fact that it is going up from £17 million to £23 million. In so far as that is borne by schemes, there will be a modest increase in the levy paid by members to do that. I am surprised that noble Lords are surprised by that.
  Lord Higgins:If the levy is not going to be the same, I am not sure why the noble Baroness must refer back. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 6 agreed to.
  Clause 7 [Transfer of OPRA's functions to the Regulator]:
  On Question, Whether Clause 7 shall stand part of the Bill?
  Lord Higgins:I have only one point. As far as the pensions of the employees of OPRA are concerned, are those provisions going to be transferred in most cases to the new authority? Is the procedure consistent with

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  that which we would normally regard as best practice in the private sector? Will the pensioners in OPRA who transfer over—
  Baroness Hollis of Heigham:In TUPE?
  Lord Higgins:Yes, TUPE, in short. I do not like the word TUPE.
  Baroness Hollis of Heigham:Neither do I; we are agreed.
  Lord Higgins:In short, will they be TUPE-d? If so, will all of them be TUPE-d, or will some of them be made redundant?
  Baroness Hollis of Heigham:Will some of them be made redundant? That is territory that I do not have the faintest intention of straying into. Basically, the existing staff of OPRA will all shift over into the new regulator, and their existing conditions of service, particularly as regards pensions, as I understand it, will be protected accordingly.
  Clause 7 agreed to.
  Clause 8 [The Non-Executive Committee]:
  On Question, Whether Clause 8 shall stand part of the Bill?
  Lord Higgins:As far as Clause 8 is concerned, we have a non-executive committee, which includes the chairman, which is partly the point that we referred to earlier. That reflects our concern that it will tend to be a divisive arrangement rather than otherwise. I will not pursue the matter at this stage.
  Clause 8 agreed to.
  Clause 9 [Functions exercisable by the Non-Executive Committee]:
  Lord Skelmersdalemoved Amendment No. 35:
  Page 4, line 33, leave out "and targets"
  The noble Lord said:I must admit to a rather personal prejudice. The prejudice is not that were I a detective story writer I would be preparing to write a book about the metaphor that got away after the last amendment; the prejudice is that I hate the word "targets", especially when I do not know what they mean. Ever since this Government came into power, my hackles have risen at the very mention of the word. The noble Baroness earlier admitted to having been a member of a health authority. That was under a Conservative government. That is a political point that she can forget about.
  Baroness Hollis of Heigham:That is why I was sacked. I was sacked because of my political affiliation.
  Lord Skelmersdale:So was I, but in a different context. We will leave that aside.
  One only has to read reports of patients spending hours in ambulances in order to meet the centrally-set targets for time spent in accident and emergency departments. The fact that the parliamentary website
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  contains 97,147 other references to targets shows that this Government have gone target mad. Why this obsession with targets? I am not asking the noble Baroness, but I am making a general point. It is not quite a rhetorical question, that would be under-kill. I do not particularly want to have a philosophical discussion about targets but I note that the Little Oxford Dictionary describes them as "anything aimed at". I would have thought that that is fair enough. But if one looks up the word "objective", definition 2 states that it is a noun meaning:
  "object or person aimed at".
  Does that not say it all? Objectives and targets, certainly in the way they are mentioned here, are one and the same thing. Years ago, I was taught that that amounts to tautology, which, in my children's language, is a "no-no". Why do we need both words in the Bill? I beg to move.
  Baroness Hollis of Heigham:Being very crude about this, objectives are strategic goals or aims, maybe to eradicate child poverty or something like that. Targets are when one turns the qualitative into the quantitative so that progress can be measured down the road. They may break down into low level targets about how many phone calls are answered within nine rings or how quickly letters are returned or, in the example about child poverty, they could be that one wishes to do half by such and such a date or a quarter by such and such date so that the target is measurable. For example, one could have a target for the regulator to reduce the number of schemes in the high-risk category by 10 per cent, which is to fulfil the objective of protecting members.
  My experience in government is that the target is something one can quantify and therefore measure on one's way to fulfilling the objective. It is the difference between the blue-sky high level and the accountable and measurable way of delivering it. One might say that the objective is to protect members and the target might be to reduce the number of schemes in the high risk category by 10 per cent, or it might include a much lower level target, for example to ensure that all scheme returns are produced within 30 working days. One could have a range of different targets at different levels of blue skyness in order to meet the bigger objective.
  It seems to me to be perfectly proper to have the objective on the face of the Bill. It seems to be perfectly proper to allow the organisation to work out how best to meet those objectives by specifying its targets, which would then be widely available and known. I do not know any organisation that does not work in that way.
  Baroness Barker:I am struggling to remember who the management consultant was who said that an objective is what one tells the world one's organisation aims to do and a target is what one tells one's boss one will struggle to achieve in the perfect knowledge that one can do so very easily.
  Baroness Hollis of Heigham:This is a digression but we are coming to the end of the day. The point is that

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  the trouble with targets is that staff tend to perform to the targets because pay is very often related to them. By definition, targets have to be quantifiable. One ends up putting more value on quantifiable things than qualitative things. There is a problem about turning qualitative objectives into measurable ones for staff at quite modest junior levels whose pay is related to them. This happens in every field whether in universities, research publications, health authorities or in this body. But I am in no doubt that there is a distinction. It is sensible to preserve that distinction, which the Bill currently does.
  Lord Skelmersdale:This is a very academic argument. I am not sure that after four hours on the Bill I can quite take it in. But who will set the targets? Will they be set by the regulator so that it aims at its own benchmark or will it be set by the Secretary of State and the department? Does this apply to both the objectives and the targets?
  Baroness Hollis of Heigham:If I am wrong on this I shall write to the noble Lord, but my understanding is that we will expect the regulator and his regulatory body to come up with proposed targets and to see that they satisfy the Secretary of State. This happens with the Child Support Agency, for example. The chief executive of the agency produces a proposed list of targets on matters such as accuracy, speed in answering letters and telephone calls, the number of complaints that go to the independent case examiner and so on. Those come through to me so that I can make a recommendation to the Secretary of State on whether those targets are sufficiently demanding or whether they perhaps need to be revised upwards. On that basis, the targets are publicly available. When the agency's annual report is done, its performance is measured by the agreed targets.
  I have no reason to think that the procedure will be any different here. If it is, I will write to the noble Lord.
  Lord Skelmersdale:I am very grateful. Like the noble Baroness, I hope there is not a need for a letter. But if there is, I shall receive it very gratefully, and I am sure that I will understand it at that point. In the mean time, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  7.30 p.m.
  On Question, Whether Clause 9 shall stand part of the Bill?
  Lord Higgins:One of the advantages of sitting in this room is that one can hear Big Ben. I have only three
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  very brief points on the clause, which is about the functions exercisable by the non-executive committee. First, the committee has to scrutinise the performance of the chief executive, but, as we have pointed out before, no one seems to be scrutinising the performance of the chairman.
  Secondly, there is a kind of throwaway line about Northern Ireland here. After the interesting exchanges we had on the Civil Partnership Bill last week as far as Northern Ireland is concerned, I am not clear why that is not spelt out in rather more detail.
  Thirdly, it is said that the committee will contribute to and keep under review the strategic direction. I am not the least bit clear why the whole organisation, the non-executive committee and the rest of the board, are not simply all working together to look at the strategy. To have it divided so that the rest of the board decides the strategy, but the non-executive committee contributes to it and then monitors it, seems an excessively complicated system and not one likely to produce a united front on the overall position.
  Baroness Hollis of Heigham:I will be as quick as I can, as I too am aware of Big Ben. The non-executive committee does not scrutinise the chairman, who chairs that committee, because that is the function of the Secretary of State, whereas the committee does scrutinise the other functions.
  I wonder whether I need to answer any other point. Perhaps I can write to the noble Lord on the Northern Ireland point. The provision of Clause 5 objectives will be enacted in Northern Ireland by Order in Council, exactly the same as in the proposals we considered the other day—
  Lord Higgins:I hope that we are not going to deal with it as we did on the Civil Partnership Bill, which was an unmitigated disaster.
  Baroness Hollis of Heigham:The problem in Northern Ireland was not the process—an Order in Council—but the strong views, I think, held by those who have affiliations to Northern Ireland. I think that that produced the problems that we ended up in.
  Clause 9 agreed to.
  Baroness Andrews:This might be a convenient time for the Committee to adjourn until Thursday 8 July at 3.15 p.m.
  The Deputy Chairman of Committees (Lord Tordoff):The Committee stands adjourned until Thursday at 3.15 p.m.
  The Committee adjourned at twenty-seven minutes before eight o'clock.

  Questions for Written Answer
  Lord Jopling
  asked Her Majesty's Government:

  Whether the Ministry of Defence and the Northern Ireland Office will explain why they currently have 26 and 30 House of Lords Written Questions respectively awaiting reply of the 85 such Questions which have lain unanswered for over 21 days, when the standard period for replies is 14 days. [HL3319]

  The Lord President of the Council (Baroness Amos):
  All government departments endeavour to answer Questions for Written Answer within the 14 day deadline. I regret, however, that it has taken so long to answer these Questions.

  The majority of the overdue Ministry of Defence questions relate to operations in Iraq and in many instances this has meant contacting personnel there to obtain details to be able to answer them. Clearly personnel on operations are subject to operational pressure which can result in delays in obtaining the information required.

  A number of the Northern Ireland Office questions have required co-ordination between several parts of the Northern Ireland Office and the 11 departments of the Northern Ireland Administration which has occasionally resulted in the deadline not being met.

  I can assure the noble Lord that officials in both departments are working hard to provide the necessary information and ensure that the outstanding Questions are answered as soon as possible.

  Lord Avebury
  asked the Leader of the House:

  Whether she will take steps to ensure that Ministers date the copies of Written Answers which are sent to Members. [HL3492]

  Baroness Amos:
  My office has written to all government departments requesting that, wherever possible, Answers to Written Questions are dated.

  Millennium Development Goals
  Baroness Gale
  asked Her Majesty's Government:

  What assessment they have made of the relationship between the millennium development target to eliminate gender disparity in education and similar targets for halving the proportion of people without safe water or basic sanitation. [HL3491]

  Baroness Amos:
  DfID's assessment of this relationship is twofold. First, access to basic facilities such as school toilets, safe drinking water, clean surroundings and information on hygiene all improve the quality of the school environment and influence
  WA72
  better learning. This is important in terms of the overall goal of achieving universal education and eliminating gender disparity in education. Basic sanitation for girls in particular can lead to a lower dropout rate for girls, especially at puberty. For example, in Bangladesh, a school sanitation and hygiene education programme reported to increase girls' attendance rates by 11 per cent.

  Secondly, the opportunity costs of parents sending girls to school are substantially reduced when households have ready access to safe drinking water and girls are no longer required to collect water from distant water pumps.

  As part of its support for the peace process in Sudan, DfID has provided approximately £2 million to assist UNICEF's education programmes in the conflict-affected areas of the country, providing books and materials to over 2,000 primary schools and supporting the construction of water and sanitation facilities where these were priorities.

  Terrorism: Interrogation of Suspects
  Baroness Williams of Crosby
  asked Her Majesty's Government:

  Whether they have sent any British citizens suspected as terrorists to other countries for interrogation. [HL3242]

  The Minister of State, Home Office (Baroness Scotland of Asthal):
  Under the terms of the Crime (International Co-operation) Act 2003, foreign jurisdictions are able to seek mutual legal assistance from the UK. This usually means collecting evidence (as opposed to intelligence which is handled on a police-to-police basis) for use in criminal proceedings or investigations.

  Individuals who have been charged with a criminal offence or have already been convicted of one in a different country may be extradited to another country provided all criteria are met.

  British citizens suspected as terrorists are not sent to other countries for interrogation purposes.

  Since 11 September 2001, no one has been extradited for terrorist-related activities.

  Emergency Services: Sirens
  Lord Thomas of Swynnerton
  asked Her Majesty's Government:

  Whether they will devise an alarm for the use of the police, fire brigades and the ambulance service, which is less noisy than the present one. [HL3456]

  Baroness Scotland of Asthal:
  The police and other emergency services need to alert other motorists and pedestrians to their presence if they are to provide fast response times and to do so safely. Much work has previously been undertaken to identify the most effective means for doing this. The sirens now in use

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  are designed to operate in such a way as to attract the attention of pedestrians, to be heard by motorists in different situations and to indicate the direction from which the vehicle is approaching. They are often supplemented by the use of alternate flashing headlights. We have no current plans for further work in this area.

  Gulf War 1990–91: Vaccines
  Lord Clement-Jones
  asked Her Majesty' Government:

  Further to the Written Answer by the Lord Warner on 12 May (WA 45–46), whether any part of the Gulf veterans' illnesses research will provide information on potential adverse consequences of the Ministry of Defence's decision to plan the timing of the anthrax immunisations of troops involved in the 1990–91 Gulf conflict differently from that in the marketing authorisation and to give fewer immunisations than were recommended. [HL3069]

  The Parliamentary Under-Secretary of State Ministry of Defence (Lord Bach):
  Detailed information about the schedule of anthrax vaccinations offered to protect United Kingdom Forces during the 1990–91 Gulf conflict is contained in the paper Implementation of the Immunisation Programme against Biological Warfare Agents for UK Forces during the Gulf Conflict 1990/1991, a copy of which is in the Library of th House. The paper makes clear that the timing of the third anthrax vaccine dose was varied, and that the main immunisation programme was suspended before the point at which a fourth dose would have been due. There is no formal record of consultation between the Ministry of Defence and the manufacturer and supplier, the then Centre for Applied Microbiology and Research (CAMR), Porton Down about these variations. There is no association between failing to complete a course of immunisation and adverse health effects, other than possible failure to achieve full protection.

  Information about the vaccine schedule associated with the core study of the MoD's vaccines interaction research programme was given in my Written Answer of 6 November (Official Report, col. WA 140) and 18 November 2003 (Official Report, col. WA 280). The schedule includes anthrax vaccinations at 0, 3, an, 7 weeks.

  Gulf War 1990–91: Destruction of Chemical Weapons
  Lord Morris of Manchester
  asked Her Majesty's Government:

  What consideration they are giving to th implications for British troops deployed to the 1990–91 Gulf conflict of the United State Accounting Office's new findings, published on 6 June, on the number of coalition troops potentially exposed to chemical warfare agents,
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  including sarin and cyclosarin, from fallout from the destruction of the Iraqi chemical arms bunker at Khamisiyah in southern Iraq in March 1991; and whether they will revise their estimate of the number of British troops who could have been affected. [HL3183]

  Lord Bach:
  The Ministry of Defence is currently reviewing the General Accounting Office report, and the Department of Defense/CIA responses to it. It is intended that the MoD will be publishing its own assessment of the destruction of chemical warfare rockets at Khamisiyah this autumn.

  Geneva Conventions: UK Interrogators
  Lord Lester of Herne Hill
  asked Her Majesty's Government:

  Further to the Written Answer by the Lord Bach on 23 June (WA 126), whether they are aware of any occasions when members of the British Armed Forces or other United Kingdom personnel have used interrogation techniques involving physical or mental coercion contrary to international human rights and humanitarian law. [HL3457]

  Lord Bach:
  United Kingdom interrogators are specifically instructed that individuals being questioned must be treated at all times in accordance with the Geneva Conventions. We are not aware of any incidents in which UK interrogators are alleged to have used coercion techniques that are banned by the conventions during current operations.

  School Performance Tables
  Lord Lucas
  asked Her Majesty's Government:

  Whether they will amend the methodology of the key stage 1 and key stage 2 value added performance tables to:

  provide for sub-levels at key stage 2; and

  provide for levels above 5 at key stage 2.

  to provide further details on the measurement of pupils' progress, notably the progress made by pupils who achieve 2A or 3 at key stage 1. [HL3570]

  The Parliamentary Under-Secretary of State, Department for Education and Skills (Baroness Ashton of Upholland):
  The simple and transparent methodology now in use has done much to put VA on the education map and help people to understand the general concept. Now these foundations have been laid, we hope to move on and develop a methodology which takes account of contextual factors beyond pupils' prior attainment.

  However, we have no plans at present to provide for sub-levels at key stage 2 (KS2). We would need the marks data to be more robust before we could consider incorporating these sub-levels into the VA methodology. Nor do we plan to provide levels above level 5; this is the highest level a pupil can currently achieve in the tests.
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  The autumn package shows how pupils from different parts of the KS1 range are performing. This can be found on the web at:

  http://www.standards.dfes.gov.uk/performance/ap/2003 additional/?version =1

  Lord Lucas
  asked Her Majesty's Government:

  Whether they will amend the methodology of the key stage 1 and key stage 2 value added performance tables so:

  the arithmetic mean rather than the median is used to decide what a pupil is expected to get at key stage 2; and

  a stability indicator is used that begins in year 3, to include junior schools.

  [HL3571]

  Baroness Ashton of Upholland:
  We have no plans to change the present value added (VA) methodology to include the use of the arithmetic mean rather than the median. We know of no particular advantages this would bring.

  This year we will be publishing a mobility indicator, for each primary school, showing the proportion of pupils in the school for the whole of key stage 2, i.e. from the beginning of year 3 to year 6. This indicator, which will replace the stability indicator, can be applied to all including junior schools.

  Lord Lucas
  asked Her Majesty's Government:

  Whether they will publish an indicator of the uncertainties which arise in performance measures in educational performance tables. [HL3572]

  Baroness Ashton of Upholland:
  We have no plans at present to publish an uncertainty indicator in performance tables. The explanatory text we publish does, however, have a section on the significance of the value added measures and how to interpret them, alongside examples for different cohort sizes. The text can be viewed on the department's website at www.dfes.gov.uk/performancetables

  Northern Ireland Judiciary
  Lord Laird
  asked Her Majesty's Government:

  Further to the Written Answers by the Lord Filkin on 15 June (WA 61–62) whether the personal information requested is in the Lord Chancellor's possession; and, if so, why is it not being released, considering that the Northern Ireland Judicial Appointments Commission will be required by statute to publish such information. [HL3461]

  The Parliamentary Under-Secretary of State, Department for Constitutional Affairs (Lord Filkin):
  It would not be appropriate for the Lord Chancellor to release personal information held in relation to individual members of the judiciary or statistical information from which the identity of any person could be readily ascertained.
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  Under Schedule 2 to the Justice (Northern Ireland) Act 2002, the Northern Ireland Judicial Appointments Commission will be required to ensure that information published must not identify any person or include information from which the identity of any person could be readily ascertained.

  Lord Laird
  asked Her Majesty's Government:

  Further to the Written Answers by the Lord Filkin on 15 June (WA 61–62) whether the senior judiciary in Northern Ireland is reflective of the community there; if so, when it became reflective of the community; and, if it is not, when they expect the senior judiciary to reflect the community in Northern Ireland; and

  [HL3462]

  Whether Roman Catholics are under-represented or over-represented in the senior judiciary in Northern Ireland, distinguishing between the posts of Lord Chief Justice, Lord Justices of Appeal and High Court judges. [HL3481]

  Lord Filkin:
  The reflectiveness of the senior judiciary is not monitored.

  Retirement Age
  Lord Taylor of Warwick
  asked Her Majesty's Government:

  What plans they have to raise the retirement age to 70. [HL3421]

  The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham):
  There is no national statutory retirement age. Many employers set a compulsory retirement age for their employees—typically 60 or 65, but there are variations. The Government have no plans to raise the state pension age beyond changes provided for by the 1995 Pensions Act which will, between the years 2010 2020, equalise women's state pension age with that of men at 65.

  The Government's position on state pension age was made clear in the pensions Green Paper— Simplicity, security and choice: Working and saving for retirement. The Government are considering the approach they should take to employers' compulsory retirement ages in legislation to outlaw age discrimination in employment and vocational training when implementing the European Employment Directive.

  Electricity Consumption
  Baroness Byford
  asked Her Majesty's Government:

  What is the annual amount of electricity used by:

  the National Insurance Contributions Office;

  the National Health Service Estates; and

  the Department for Environment, Food and Rural Affairs.

  [HL3473]
  WA77
  The Parliamentary Under-Secretary of State Department for Culture, Media and Sport (Lord McIntosh of Haringey):
  National Health Service, Estates are not the sole occupiers of buildings and their electricity consumption cannot be assessed.

  In 2003–04, 20.4 million kwh were used at sites on which the National Insurance Contributions Office, was the major occupier and 23.39 million kwh at locations where the Department for Environment Food and Rural Affairs was the major occupier.

  Depleted Uranium
  Baroness Miller of Chilthorne Domer
  asked Her Majesty's Government:

  What role the Department of Trade and Industry plays in the regulation of the use of depleted uranium. [HL3451]

  The Parliamentary Under-Secretary of State Department of Trade and Industry (Lord Sainsbury of Turville):
  The DTI UK Safeguards Office is concerned with the application of international safeguards on civil nuclear material in the UK, including depleted uranium This involves working with the UK nuclear industry (and others with safeguards reporting requirements) and safeguards inspectors from the European Commission (currently part of the Directorate for Transport am Energy (DG-TREN) and based in Luxembourg) and the International Atomic Energy Agency (IAEA). The Office for Civil Nuclear Security (OCNS) the security regulator, promotes a robust security regime for civil nuclear material. We cannot comment on the security measures taken, which could be of potential use to terrorists.

  Imports of depleted uranium into the United, Kingdom do not require the specific approval of the department. All imports of armour-piercing ammunition, whether or not containing depleted, uranium, require an individual import licence granted by the department under the Import of Goods (Control) Order 1954. No other product containing depleted, uranium requires such an individual import licence.

  Although strategic export controls do not regulate the actual use of depleted uranium, any exports of depleted uranium from the Community are controlled, under Council Regulation (EC) No 1334/2000. The DTI is responsible for the licensing of goods controlled by the regulation.

  Battery Recycling
  Lord Beaumont of Whitley
  asked Her Majesty's Government:

  What are the next stages towards implementation of the European Union Directive on Batteries (2003/0282 CD); when these are likely to take place; and what steps they are planning to take to implement domestic battery recycling to meet the targets laid down. [HL3503]

  Lord Sainsbury of Turville:
  The Government have issued a consultation document seeking views from stakeholders on the Batteries Directive proposal by 5 August 2004. These views will be taken into account as negotiations on the proposal continue within the European Council over the coming months. Collection and recycling targets have yet to be agreed, and it is unlikely that negotiations will be completed until 2005.

  The Government have been actively involved in a pilot battery collection scheme in Bristol involving key stakeholders and are in discussions about establishing other schemes elsewhere. Domestic battery recycling facilities are also likely to be established in the UK.

  Lighthouse Vessels
  Lord Mackenzie of Culkein
  asked Her Majesty's Government:

  Whether permission has been given to the Commissioners of Northern Lighthouses and to the Trinity House Lighthouse Service to obtain new vessels; and, if so, what is the estimated in-service date for those vessels.

  [HL3534]

  Lord Davies of Oldham:
  Ministers have approved proposals to replace three of the general lighthouse authorities' current vessels with two new multifunction tenders (MFTs) and a smaller rapid response vessel. The new MFT's will replace the Trinity House;.vessel "Mermaid" and the Northern Lighthouse Board vessel "Pharos".

  Invitations to tender to construct the vessels were issued in June. Approval to procure the vessels will be dependent on the cost of the bids received. If agreed, the contract to build is expected to be awarded in October 2004. The vessels are expected to come into service between 2005 and 2007.

  I have asked my officials to keep the British Egg Industry Council posted on developments.

  UNAIDS
  The Lord President of the Council (Baroness Amos):
  My right honourable friend the Secretary of State for International Development has made the following Statement.

  I am announcing today a new commitment of £36 million over four years (2004–07) for UNAIDS (the Joint UN Programme on HIV/AIDS). This will support the UNAIDS secretariat, its country co-ordinators, and the 10 co-sponsor agencies that together make up the Joint Programme1. The new commitment represents a tripling of our core funding to UNAIDS compared with the past four years. DfID is finalising a new UK strategic partnership with UNAIDS to accompany the multi-year financing arrangement, linked to UNAIDS' own work programme. DfID is also increasing its direct funding to several co-sponsor agencies including the UN Population Fund (UNFPA).

  UK funding will enable UNAIDS to expand its work to ensure developing countries affected by HIV and AIDS can access appropriate and co-ordinated support from donors. UNAIDS will be working with governments to take forward the "Three Ones" initiative, which stresses the responsibility donors have to work through one national HIV and AIDS action plan, through one co-ordinating authority and to work to one monitoring and evaluation framework in each country.

  UK funding will also support UNAIDS' advocacy work. This includes helping to ensure new or neglected issues are taken up, and building partnerships across government, the private sector and civil society. UNAIDS will be working with the World Health Organisation and others to ensure that treatment programmes address equity and access issues and that a proper balance is maintained between prevention and treatment. UK funding will also support UNAIDS' technical work, including helping countries to access new funding and ensuring it is used properly. UNAIDS has a strong track record in this area.

  1 The UN Children's Fund (UNICEF), the UN Development Programme (UNDP), the UN Population Fund (UNFPA), the UN Office on Drugs and Crime (UNODC), the International Labour Organisation (ILO), the UN Education and Scientific and Cultural Organisation (UNESCO), the World Health Organisation (WHO), the World Bank, the World Food Programme (WFP) and the UN High Commissioner for Refugees (UNHCR).

  Sexual and Reproductive Health
  Baroness Amos: My right honourable friend the Secretary of State for International Development (Mr Hilary Benn) has made the following Written Ministerial Statement.
  I am today publishing a DfID position paper on sexual and reproductive health and rights. It describes progress to date and sets out what remains to be done. It will form the basis for planning future investment and activities. The paper complements the UK's Call for Action on HIV/AIDS and DfID's target strategy papers on Better Health for Poor People and Realising Human Rights for Poor People.
  The paper recognises sexual and reproductive health and rights as central to human development and to achieving the millennium development goals. The UK is firmly committed to the programme of action of the International Conference on Population and Development of 1994 and its targets of reproductive health for all by 2015. The paper states our continued commitment to work with country governments and partners to achieve improved maternal and newborn health, accessible, high quality family planning choices, elimination of unsafe abortion, reduced incidence of HIV and sexually transmitted infections, greater awareness of sexual health and reduced risky behaviour.
  The paper recognises the progress that has been made since 1994, but also highlights new challenges, including the increased burden of HIV and AIDS. DfID will use opportunities to integrate HIV and sexual and reproductive health services in ways that respond better to people's needs, especially those of women and young people.
  I am placing a copy of the paper in the Library of the House. It is also available on DfID's website at www.dfid.gov.uk.
  Today I am announcing increased funding for the United Nations Population Fund (UNFPA). The UK will be providing £80 million over four years (2004–07) in core funding to UNFPA to support its work on sexual and reproductive health and rights, population and development, and gender. UNFPA's work is also a critical part of HIV/AIDS prevention efforts within the framework of the Joint UN Programme on HIV/AIDS (UNAIDS).

  Intelligence and Security Committee: Annual Report 2003–04
  Baroness Amos:
  My right honourable friend the Prime Minister has today laid before the House the Government's response to the Intelligence and Security Committee's annual report for 2003–04. Copies have also been placed in the Libraries of the House.

  Iraq: Export Licence Applications
  The Minister of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean):
  Following consultation with the Foreign and Commonwealth Office and the Ministry of Defence, the Department of Trade and Industry recently approved two licences to export military list goods to Iraq. The arms embargo against Iraq remains in place under United Nations Security

  WS31
  Council Resolutions 1483 (22 May 2003) and 1546 (8 June 2004). UNSCR 1483 (2003) includes an exception for "arms and related materiel required by the (Coalition Provisional) Authority to serve the purposes of this and other related resolutions".

  Accordingly, prior to the hand over of power on 28 June and the Coalition Provisional Authority ceasing to exist, Her Majesty's Government considered it appropriate to grant licences for the export of the military listed goods on these two applications for use by private security companies, one working under contract to the Foreign and Commonwealth Office, the other working under contract to the Coalition Provisional Authority, the US Department of State and the project management office in Iraq. The licences are consistent with the consolidated EU and national arms export licensing criteria. Future applications will continue to be assessed on a case by case basis against the UN embargo and consolidated criteria, taking into account the circumstances prevailing at the time.

  Trade and Investment White Paper
  The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville):
  My right honourable friend the Secretary of State for Trade and Industry (Ms Hewitt) has made the following Written Ministerial Statement.

  I am today publishing the White Paper on Trade and Investment, entitled Making Globalisation a Force for Good.

  This White Paper is being published at a pivotal moment in the history of the international trade agenda. The European Union and the new European Commissioners taking up their posts this autumn will have a vital role in ensuring the benefits of globalisation are delivered in Europe and beyond, notably through the completion of the WTO Doha development agenda.

  The White Paper presents a positive vision of globalisation and Britain's approach to trade and the WTO negotiations, to achieving our objectives of boosting prosperity at home and fighting poverty overseas. It explains how countries benefit as much, if not more, from opening their own markets as from persuading others to open theirs.

  The White Paper therefore presents a series of challenges to the European Union. In order to thrive in a globalising world, the EU has to redouble its efforts to improve its own competitiveness. At the same time, it needs to look outwards, placing new policies and regulations in a global context. The EU, together with other developed countries, has to reject the mercantilist approach to trade which prizes only exports and inward investment as opposed to international trade and investment as a whole.
  WS32
  Specifically, it must tackle the continued harmful effects of the common agricultural policy. The EU and other developed countries should commit to eliminate export subsidies, to make further reductions in trade-distorting domestic support and to reduce agricultural tariff peaks towards the maximum levels allowed for non-agricultural products.

  The White Paper describes the changing nature of international trade and investment. International trade is moving away from traditional patterns of imports and exports towards a world of global partnerships and joint ventures. Government services to UK companies have to respond to this. I announced in this House on 1 July the new arrangements which we are setting in place for the Export Credits Guarantee Department. The White Paper also sets out the role of UK Trade and Investment—the Government's lead national provider of international trade and investment support for business.

  The White Paper sets out how we think international trade and investment can and should work to reduce poverty in the poorest countries. The need to reduce poverty—working towards the millennium development goals—is a key challenge for this Government.

  To fight poverty, the EU and other developed countries must tackle the barriers—both tariffs and non-tariff barriers such as excessively burdensome technical regulations—which currently prevent poor countries selling to us.

  The evidence shows that the developing countries that have been more successful in fighting poverty tend to be those that have opened their own markets to international trade. But we have learnt that developing countries need to open their markets in a properly sequenced way as part of a broader plan for their economic development and poverty reduction.

  In order to benefit from international trade and investment, the poorest countries need to put in place a full range of complementary policies. We need to work with these countries to help them to tackle the key challenges: health, education, the transport and communications infrastructure, good governance and effective social protection.

  This White Paper has been produced following widespread consultation with interested parties in the UK. We are grateful to everyone who has helped us and we look forward to continuing a dialogue on these issues.

  In the mean time I look forward to working with ministerial colleagues in other countries—both inside and outside the EU—to win the argument against protectionism and mercantilism in international trade. We will take the opportunity of the UK presidencies of the EU and of the G8 next year to take this forward.

  I am confident that this White Paper will contribute to pursuing the UK's objectives in the area of international trade and investment.

  Public Expenditure: Provisional Outturn 2003–04
  The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)
  My right honourable friend the Chief Secretary to the Treasury (Paul Boateng) has made the following Written Ministerial Statement.

  The Treasury will publish the 2003–04 public expenditure provisional outturn White Paper on Tuesday 20 July.
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  The White Paper is an annual report to Parliament on the provisional outturn for public expenditure. It focuses on spending within departmental expenditure limits (DEL) and annually managed expenditure (AME), including information on individual supply estimates and administration costs limits.

  The outturn figures are described as provisional because they may be revised when department's final accounts are published, usually in the autumn.

  A copy of the White Paper will be available in the Libraries of the House and will be accessible on the Treasury website.