Sitting of 22 March 2004

Preamble
The House met at half-past Two o'clock
Orders of the Day
  WAYS AND MEANS
  Order read for resuming adjourned debate on Question [17 March].

  AMENDMENT OF THE LAW
  Motion made, and Question proposed,

  That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.

  This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

  for zero-rating or exempting a supply, acquisition or importation;

  for refunding an amount of tax;

  for any relief, other than a relief that—

  so far as it is applicable to goods, applies to goods of every description, and

  so far as it is applicable to services, applies to services of every description—[ Mr. Gordon Brown.]

  Question again proposed.

  Budget Resolutions and Economic Situation
  4.25 pm
  The Secretary of State for Health (Dr. John Reid): We on the Labour Benches are immensely proud of our national health service and of those who work in it. We say that not because NHS staff never make mistakes; they do. Any organisation that has to treat 1 million patients every 36 hours is obviously fallible. We do not express our support because the system is perfect. No human organisation that depends on the endeavours of 1.3 million people could possibly amount to perfection. However, we express support and our pride in the NHS because it brings more relief to people from pain, distress, anguish and insecurity than any other organisation in the world.
  The question that we face, as we consider the implications of the Budget, is not whether the NHS is perfect or whether some imperfections can be elicited from the 1.3 million people who are engaged in their daily and determined work. The question is threefold. First, has the performance of the NHS improved over the past six years, recovering from its two decades and more of under-investment? Secondly, is it continuing to improve, and will the recent Budget contribute towards that continuing improvement? Thirdly, what alternative policies—in particular those of the Conservative party—would underpin or undermine that improvement, which has been taking place for the benefit of the vast majority of people who depend on the NHS? That is what we must consider.
  The NHS is based on the principle of equal access to health care, free at the point of need. Its comprehensiveness and fairness is admired the world over, except occasionally, perhaps, on the Opposition Benches. It is paid for out of general taxation, and to date I have seen no convincing evidence that there is a

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  better way of providing equity of access for an entire nation—and the beneficiary of the NHS is this whole nation.
  We are proud that the system is British in its origin, British in its originality and British in its basic principle of matching excellence with equity. The Conservative party is proposing policies that would undermine that basic principle. Let us be clear during the debate that we cannot maintain an NHS that provides equal access for all if we subsidise those who can pay to jump the queue to a position above those who cannot afford to do so. Those two aims are incompatible and contradictory. We cannot give everyone the same chance of surviving ill health if we subsidise people who can pay to jump the queue but not those who cannot. We cannot pretend to give everyone a choice if only people who can pay have that choice. Those are simple truths—[Interruption.] We will let the nation decide whether those truths are simple and clear enough, and I look forward to letting it judge support for the national health service at the election.
  The Conservative policies of diverting resources away from the many who depend on the NHS, towards the few who can afford to pay for private operations, are based on a cruel and callous deceit that is disguised as a so-called passport out of the national health service. The British people do not want a national health service in which public money subsidises queue jumping, which is why we welcome the fact that the next election will be fought on the principle of equal access to health care and why the Budget underlines that principle.[Interruption.] There appears to be a fashion for becoming ill at the podium when making a speech, but I assure the House that that is not flattery in any form.
  Mr. Simon Burns: Have some water for the cough.
  Alistair Burt rose—
  Dr. Reid: I will take a drink while the hon. Member for North-East Bedfordshire (Alistair Burt) intervenes.
  Alistair Burt: I thought that I would help the right hon. Gentleman by giving him a couple of minutes. It might assist him if, instead of trying to explain Conservative policies, he left that issue to my colleagues on the Front Bench. He could then use the reduced time available to address his own policies and the deficiencies of the service over which he currently presides.
  Dr. Reid: I was just trying to be helpful.
  When we came to power, we encountered a national health service that had serious capacity constraints—I do not think that any Opposition Member, however critical of the Government, would deny that—and had not received adequate investment for two decades and, indeed, some would say longer. We introduced measures across the system in Budget after Budget to increase capacity, raise quality and decrease variation of quality, which are all based on an increasing number of national service frameworks. We continue to develop those frameworks, which provide clear national
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  standards and identify best practice so that users, managers and professionals alike have information and guidance to improve local services, for which we set a number of targets.
  Previous under-investment was chronic and disabling. We made a start in correcting that from the publication of our 10-year plan onwards, but much more was needed, which is why my right hon. Friend the Chancellor announced in his 2002 Budget historic levels of investment in the national health service. For the five years from 2003–04 to 2007–08, NHS funding in England will increase each year by an average of 7.3 per cent. in real terms—the highest increase over the longest sustained period in the history of the national health service. That investment and reform are already producing results, such as increases in capacity. We have more staff delivering health care in the NHS than ever before—over 7,300 more consultants, over 2,300 more general practitioners and over 67,500 more nurses than in 1997. That is a token of our commitment to the national health service. A vast number of people in more than 70 professions are relieving pain—day in, day out.
  Mr. Kevan Jones: Does my right hon. Friend agree that striking examples of that investment in my constituency are the new hospital in Chester-le-Street, a new doctor's surgery in Craghead and a proposed new health centre in Stanley, which would be put at risk if the Opposition implemented their vision of cuts in public services?
  Dr. Reid: Yes, indeed. Later in my speech I will deal with the Opposition's plans for a massive diversion of funds away from the national health service. My hon. Friend is correct in pointing out that we have the biggest and most sustained building programme in the history of the NHS, not only in terms of hospitals, but through the refurbishment of some 3,000 general practitioners' premises throughout England.
  There have also been real increases in output: 1.7 million more patients were seen for new hospital out-patient appointments last year than in 1997, which is a 15 per cent. increase, and there were 113,000 more cataract operations than in 1997, which is a 70 per cent. increase—all ignored in the so-called productivity figures that are made up by the Opposition. There were 19,000 more knee replacement operations than in 1997, which is a 69 per cent. increase; there were 950,000 more planned hospital admissions last year than in 1997, which is a 22 per cent. increase; and of course the NHS plan target of 6,000 extra heart operations by April 2003 was achieved a year earlier.
  Mr. Andrew Lansley: Given what the Secretary of State has said, how does he explain the fact that just a few weeks ago the Organisation for Economic Co-operation and Development said of the NHS:
  "Productivity seems to have declined as the growth in the number of doctors, nurses, hospital buildings and equipment have (not yet) been fully reflected in a growing number of treatments. In fact, growth in the volume of health care output has slowed down compared to the first half of the 1990s"?
  Dr. Reid: The OECD, like the hon. Gentleman, has ignored the new walk-in centres, the new treatment

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  centres, the 6.3 million people dealt with by NHS Direct, and the 400,000 operations. All those are increases in productivity that are ignored by the Opposition, who consider one element only of NHS operations: the full-time equivalent episodes carried out by consultants in hospitals.
  Let me give an example. Of the 30 to 40 per cent. increase in investment over the past few years, a substantial amount goes in new drugs—statins. Over six years, they have contributed towards the biggest decrease in deaths from heart-related diseases in any country in the world—23.4 per cent. Statins, which account for about 10 per cent. of that decrease, have therefore led to a huge fall in mortality from circulatory diseases. The Opposition regard that as a fall in productivity; it is a fall in productivity because the people thus saved do not end up in hospital. It is a perverse definition of productivity that has been manufactured by the Conservatives purely to run down the NHS, which is their aim.
  Let me deal with some of the increases in quality and access that are also ignored by the Opposition. Nineteen out of 20 people can now see a GP within 48 hours. It was scandalously difficult to see a GP when we inherited the national health service from the Conservatives. Nine out of 10 people can now be seen, diagnosed and treated in accident and emergency departments within four hours—a world-class standard. None of those increases in quality and ease of access has been taken into account by the Opposition. They do not want to concede to the NHS any improvement, because they want to privatise health care in this country.
  Linda Gilroy: May I invite my right hon. Friend to visit Plymouth, where he will see our new cardiac unit, which is now treating 1,850 people a year, compared with some 700 people in 1997? Given that heart disease has not increased by that amount in our area since that time, what does he suppose happened to the patients who were unable to get such treatment before we had the welcome investment that is pouring into the south-west?
  Dr. Reid: What my hon. Friend says is absolutely true. I will be delighted to come to Plymouth if I can arrange a visit, but I am afraid that I have so many openings of so many establishments throughout the country that it may be some time before I can do so. Some 23 NHS-run and two independent sector treatment centres have now opened; between them, they will treat an additional 50,000 patients this year. There are also 42 NHS walk-in centres; 140 million more items were prescribed last year than six years ago; and there has been a 29 per cent. increase in drugs, which is bringing benefits. All those things are ignored, of course, by the Opposition, but they are bringing substantial improvements in people's lives. Indeed, they save lives.
  I have recently given two figures. There have been sustained reductions in death rates from cancer, and a 10 per cent. fall in the rate of premature deaths—that is, among under-75s—from cancer since the 1995 to 97 figures were issued. Furthermore, death rates from heart-related disease among under-75s fell by more than 23,000 in the five years up to 2000 to 2002. That is a substantial saving of lives in this country as a result of the work of the national health service and the investment put into it.
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  None of those things makes me complacent for one moment and nor do they satisfy Labour Members. We will not rest until we have restored our national health service to where it belongs: at the top of the excellence league as well as the fairness league. There is a long way to go in investment, reform, effort, leadership and endeavour. There is also a long way to go in recognising that another core value of the national health service must be better promoted. Nye Bevan's vision was not simply that the people of this country should have equity of access to medical care free at the point of delivery, although it was that. It was also that people should have access to the best medical care.
  That is why we have already started to match our investments with reforms, bringing new ideas and a better range of services to the British public, including new services such as the easily available walk-in centres that I mentioned and the fast-track treatment centres, many of which are inside the national health service. On some occasions, the independent sector treatment service is used and items are purchased in bulk at a reasonable price and delivered free at the point of need to everyone in this country. As to telephone advice, 6.3 million callers spoke to NHS Direct last year.
  All this requires the national health service continually to refresh itself by introducing the latest and best innovations, based on the latest and best available research evidence. That is why we established the National Institute for Clinical Excellence to provide patients, health professionals and the public with the authoritative guidance that they need on current best practice and health technologies and clinical management of specific conditions. That is another advance that is recognised as among the best in the world—indeed, it is the best and it is establishing clinical excellence throughout the national health service.
  Rev. Martin Smyth: I welcome the improvements and changes that are taking place in the health service, particularly in dealing with those with hearing problems and in using the independent and private sector. Is the Secretary of State aware, however, that there is some concern about whether, after new hearing aids are provided and adapted, people go back to that sector or to the national health service? Is he prepared to deal with that situation, bearing in mind the fact that people get used to those who provide the service and want the follow-up to be convenient?
  Dr. Reid: I thank the hon. Gentleman for his comments. By arranging a plurality of provision, we are giving a better degree of service and a choice. That is being introduced steadily. It is not the illusion of theoretical choice for everyone that is being offered by the Opposition, which depends on how much money one has in one's pocket.
  The increased capacity that we are introducing will genuinely extend choice for patients in the NHS. As the hon. Gentleman says, some of that choice is provided by the independent sector, and I assure him that as the years go on we do not intend to limit and narrow the choice available to patients; rather, we intend to

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  preserve that choice and, as far we can, extend information, power and choice for patients.
  Mr. Burns: Does the Secretary of State remember his letter to the Health Committee on 5 February this year in which he stated that last year the national health service spent £100 million in the private sector, but that if the work had been done in the NHS it would have cost £70 million, which is a difference of £30 million? That means that the health service spent 43 per cent. more on private care in the private sector for NHS patients. Is the Secretary of State concerned, and what will he do to narrow the gap?
  Dr. Reid: The hon. Gentleman is right in every particular. Because we bought operations from the private sector at spot prices, we paid extra premiums of 50 per cent., 60 per cent. and above. He is right to point out that that disturbed me, which is precisely why we no longer do it. Now, we buy in bulk the vast majority of operations that we purchase from the private sector. For example, the most recent purchase that I concluded was for 40,000 cataract operations at the quality and price that we wanted, which was, as it happens, 10 per cent. below the tariff for the national health service. That purchase bought us another 40,000 cataract operations delivered free at the point of need, which dramatically reduced waiting times in several parts of the country for old people waiting for free cataract operations.
  Mr. Burns: The Secretary of State says that he thought that those premiums were wrong and that he has taken action. Does that mean that he is criticising the former Secretary of State for Health, the right hon. Member for Darlington (Mr. Milburn), who negotiated the deal?
  Dr. Reid: Not at all. As it happens, the negotiations for the cataract operations that I mentioned began under my predecessor, my right hon. Friend the Member for Darlington (Mr. Milburn). I thank him, and commend him on his foresight in heading in that direction.
  Our ambition for the national health service demands even greater foresight. All knowledge-based elements of the national health service need a constant supply of evidence from new research, especially in fast-moving fields such as medicine. We have always recognised that, and we began to deal with the most pressing needs in 2000, which is why we have invested in cancer research in particular.
  We set up the National Cancer Research Institute, which is a partnership of the 19 largest funders of cancer research in the United Kingdom, including Government, the voluntary sector, industry and patients' representatives, and the national cancer research networks followed on from that. I have no hesitation in saying that the national cancer research networks have been a huge success with both patients and practitioners of medicine in this country.
  Mr. Keith Bradley: My right hon. Friend is absolutely right that the cancer research network has been a huge success, and Christie
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  hospital in my constituency is at the forefront of that progress. The Wolfson molecular imaging centre is a world-class clinical research centre located at Christie hospital, and it currently receives a small amount of money from central Government. In the light of the Chancellor's announcement of a significant increase in the science research budget, will my right hon. Friend re-examine the funding of the molecular imaging centre at Christie hospital to see whether more central Government money can be allocated to it?
  Dr. Reid: I will not give my right hon. Friend a specific answer to that specific question, but in general terms he will not be displeased by the next 15 minutes of my speech. The national cancer research networks are a huge success, and he echoed that point. They have hit the target of doubling the number of patients engaged in trials in only two years. I make the simple point that, just as investment elsewhere saves lives and reduces pain, investment in cancer research saves, and has saved, lives for the national health service.
  We recognise the potential of the new genetics to have an impact on health care. The whole field of genetics offers the possibility of much more personalised treatments and prevention strategies. Accordingly, we invested in six genetics knowledge parks—five in England and one in Wales—to develop for us knowledge of how advances in genetics will affect the national health service. In addition, we have just finished commissioning research work on gene therapy for single gene disorders and safety studies. Investment in research on genetics saves lives for the national health service and for the people of this country.
  We are as ambitious for the British people as they are for themselves and their families. Since we know that this investment saves lives for the national health service and the country, the Government will now go further and faster in investing in clinical research. Our experience with the National Cancer Research Institute taught us that the real power to solve some of our outstanding health problems comes from the Government's investing in collaboration and in partnership. That is why my right hon. Friend the Chancellor announced last Thursday an increase in funding for medical research.
  I can report today that I am making available an additional £25 million in each of the next four years, over and above the inflation-linked increases that have already been agreed, to secure the necessary development of our medical research here in this country. That is an additional £100 million per year by 2007–08, which represents the largest sustained increase in NHS research and development funding ever announced in this House. The hon. Member for South Suffolk (Mr. Yeo) is yawning. I hope that when he rises to his feet he will give a more substantial response to my announcement.

  It is anticipated that that investment, together with the additional resources that are expected to be made available to the Medical Research Council, should allow combined Government spending on medical research to rise to £1.2 billion a year by 2007–08—investment in

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  medical research to save lives in this country through and with the national health service.
  Rev. Martin Smyth: In announcing that investment in the health service, the Secretary of State will recognise that the Northern Ireland Office has to allocate the funds. Does he agree that the new centre of excellence at the Belfast city hospital, which has international links, is making tremendous advances in research on cancer problems; and will he encourage the Chancellor to ensure that some of the extra money goes there?
  Dr. Reid: I will go half way with the hon. Gentleman. Having have seen the prowess of those at that hospital and the developments that have taken place there, I agree that they are significant and worthy of great plaudits. I cannot allocate any of the money that is disbursed in Northern Ireland, since, alas, I moved on from being in a position to do so some two years ago, but I can assure him of two things: first, that under the Barnett formula there will be significant moneys for disbursement on health in Northern Ireland; and secondly, that the Under-Secretary of State for Northern Ireland, my hon. Friend the Member for Basildon (Angela Smith), will judiciously exercise her discretion over that disbursement. I hope that that is to the benefit of the institutions that he mentions.
  Linda Gilroy: If the Secretary of State can accept the invitation to Plymouth that I extended to him, he will appreciate the way in which the new Peninsula medical school is helping us to train more doctors for the health service. However, it is one of eight new medical schools that are seriously exercised by the lack of research funding. Will he give his personal consideration to the new medical schools' need for some of the research funding?
  Dr. Reid: I shall bear my hon. Friend's comments in mind. She would not expect me to make an instant allocation, although I am attracted by the prospect of a visit to her constituency.
  I reiterate that investment in research saves lives. It is not simply a matter of retaining our place at the forefront of research and development in this country—although I am proud of that, too—but of saving the lives of our fellow citizens. The Government therefore wish to make Britain the best place in the world bar none for research, development and innovation. I want to ensure that the NHS contribution to medical research is one of the centrepieces of that ambition.
  Alongside investment we shall also introduce reform. Accordingly, the Government have decided to create a new United Kingdom clinical research collaboration involving the NHS, patients, the Medical Research Council, the Wellcome Trust, the medical charities and industry. The purpose is to create a partnership to oversee the effective and efficient translation of scientific advances into patient care. I should like them to promote the following elements in particular: the development of a clinical research infrastructure embedded in the NHS; an expansion of United Kingdom clinical research, including clinical trials; an extensive and sustained increase in the research work force, and the development and spread of best practice for statutory regulations.
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  We already punch above our weight in health science. The United Kingdom, with 1 per cent. of the world's population, funds 4.5 per cent. of the world's science, produces 8 per cent. of the world's scientific publications and receives 9 per cent. of the citations. Fifteen of the world's top 75 medicines were discovered and developed in Britain. It is a tradition round which this country's reputation and renown have been wreathed with laurels for decades. The Government will ensure that that continues. We shall waste no time in doing that—the inaugural meeting takes place next month.
  Mr. Lansley: I share the Secretary of State's appreciation of the quality of clinical research. Many of the organisations to which he referred expressed serious reservations about the proposed structure in the Human Tissue Bill. Will he assure hon. Members that when the Bill returns to the House for Report, he will have made substantive amendments to deal with the anxieties that the Medical Research Council, the Wellcome Trust and others expressed?
  Mr. Reid: My hon. Friend the Minister of State has met representatives of those who expressed such anxieties. If she decides to make any changes, she will present them to the House. All hon. Members will have noticed the eager support of the hon. Member for South Cambridgeshire (Mr. Lansley) for the comments about our renown, reputation and investment in scientific research and development. We therefore await with bated breath the Opposition's response to our announcement of investing some £200 million extra in that research to ensure continuing quality in Britain.
  Mr. Paul Burstow: In explaining the Government's approach on investment in medical research, will the Secretary of State also set out their plans to expand investment in research to preventive health care and public health? Although there is some investment, it is dramatically less than the amount that he has announced so far for medical research.
  Dr. Reid: That is the subject of considerable and extensive consultation throughout the country. The appropriate time to comment on that is when we publish the White Paper on public health at the end of the consultation.
  As I said, the inaugural meeting will be held next month, and this research will be developed in relation to a number of early priorities. Accordingly, we have been developing a United Kingdom strategy to deliver progress on drugs for use with children. This strategy will network paediatrics research centres and resources to fund the necessary clinical research. I have decided that that should go ahead as quickly as possible, not least because investment in research will save children's lives, which is important to all of us.
  We have already made a start on mental health research by creating the first phase of a research network within the National Institute of Mental Health for England. I am now in a position to give extra resources to expand this network and make it more inclusive. That is critical, because up to now mental health research has not properly informed policy and practice, as too many

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  studies have been too small and too local to permit valid general conclusions to be drawn. Investment in research will therefore help to relieve distress for the mentally ill.
  The Department of Health has worked closely with a wide range of stakeholders to consider other diseases that involve vulnerable groups. I have mentioned particularly children and those suffering from mental illness, but I also want to mention other diseases that involve vulnerable groups or that have associated with them a high level of underlying health need and potential to bring rapid benefit to patients through research. Consequently, in addition to the research already outlined for children and the mentally ill, some of the additional resources for research will be put into three diseases which result in a disproportionate burden on our elderly population: Alzheimer's disease, stroke and diabetes. Investment in this research will also save lives and ease pain and distress.
  We intend that these clinical research networks should use the extra investment to enable research to be conducted across the full spectrum of disease and clinical need. Research that saves the lives of the public costs investment.
  Mr. Burstow: In relation to the Secretary of State's reference to strokes, why did it take the Department and the Committee on Safety of Medicines two years, from notification of the relevant authorities in Canada that prescribing anti-psychotic drugs to elderly people in care homes results in a threefold increase in strokes, to withdraw those drugs from being prescribed to older people in this country, thus causing many additional strokes in this country?[Interruption.]
  Dr. Reid: No, I will hesitate to blame my predecessor—[Interruption.] No, it is because it is always more accurate and efficacious to blame the preceding Government than my predecessor. In this case, the hon. Gentleman has asked a serious question. If I understood it correctly, the information to which he referred was finally decided only relatively recently—in the past few weeks, I think—and brought to my notice. Within about seven days of its being brought to our notice, as a final conclusion of the relevant committee, we released that information into the public domain. I think that that is what he was addressing. If he was asking about another topic, I will certainly write to him. I assure him, however, that we acted as speedily as possible on receipt of that information, although I know that there was a dispute involving one expert in particular.
  I was making the simple proposition that research saves the lives of the public, and research that saves the lives of the public means investment. It costs money. It cannot be done without the Government, who are committed to such research, providing the resources.
  That investment is as much an integral part of the NHS as paying the wages of a front-line doctor or a front-line nurse. It provides those front-line staff with the tools with which to do their essential work. Investment in medical research, therefore, is an inherent, integral and vital part of the contribution that the national health service makes to the people of this
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  country. I wait with interest to learn what commitments will be made by the Conservatives in terms of resources for this vital area.
  In general, we have funded investment in the NHS during the past few years at an unprecedented level, over an unprecedented and sustained period, to produce an unprecedented increase in capacity which in itself improves the accessibility, quality and degree of power, in formation and choice for all beneficiaries of the NHS. Let us contrast that with the Conservatives' plans. Let us contrast our ambition and vision for this national health service of ours with a miserable lack of either vision or ambition. That was evident even before the Budget statement: we knew of their plans to divert some £2 billion of taxpayers' money away from the national health service, which benefits everyone, to passports for the few who are privileged and rich enough to buy half the private operations in the private sector. Now, in the face of the Government's belief in the NHS, their plans are even more exposed: we see them in their threadbare entirety.
  We will invest in the front-line staff of the NHS. The hon. Member for Mid-Worcestershire (Mr. Luff) laughs. He would not laugh if, like me, he had to meet every week of the year people who have been waiting scandalous amounts of time for operations in the NHS because of 20 years of chronic underfunding by the Conservative party. It is no laughing matter when loved ones must wait in pain for cataract operations or hip replacements. We will take no sneering cynicism from the Conservatives when it comes to running down the health service.
  We will invest in front-line staff, but we will also invest in the scientific and research base of the NHS. To us, science and research constitute a front-line service, as they, too, reduce distress and pain and save lives. Members should contrast the Conservatives' ambivalence with our commitment. We believe in the national health service, and just as we have always taken pride in its past, we have faith in its future. We back that confidence with commitment and with investment on behalf of the country. What a pity that the Conservative party cannot bring itself to provide either.
  5.8 pm
  Mr. Tim Yeo: I begin by drawing attention to my entry in the Register of Members' Interests.
  The Secretary of State spoke for 42 minutes. I think that Members in all parts of the House, as well as observers outside Parliament, will conclude that his having spent so little of that 42 minutes explaining what is going on in the NHS and what is happening to the nation's health suggests that he realises that the Government's record contains a great deal of which he should be ashamed.
  This is a Budget debate, and I am sure that many Members will wish to range widely over all the issues raised in the Budget—including, in particular, the inevitable third-term tax rises that the British people will have to pay if Labour continues in power. I, however, will focus primarily on health.

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  Let me start with a statement of principle. Like all my colleagues in the shadow health team and like the Conservative party as a whole, I am utterly committed to the national health service and to its founding principle.
  Dr. Reid: Will the hon. Gentleman give way?
  Mr. Yeo: The Secretary of State had 42 minutes. I have had less than one minute.
  We are utterly committed to that founding principle—that care should be available to patients on the basis of need, not on the basis of ability to pay. So there should be equal access for all, free at the point of delivery. That principle has been reiterated by my right hon. and learned Friend the Leader of the Opposition, by my right hon. Friend the Member for West Dorset (Mr. Letwin), the shadow Chancellor of the Exchequer, and by me on many occasions. It lies at the heart of all our health policies.
  Dr. Reid: Will the hon. Gentleman give way?
  Mr. Yeo: I will in a moment. The Secretary of State must contain himself. He had 42 minutes; when I have had a minute or two to develop this point, I will give way.
  Every part of the Conservative party's health policy will reinforce that founding principle. Although the Chancellor of the Exchequer referred in his Budget speech to increases in spending on health, there was no change, either up or down, in the spending plans that he had already announced.
  Following the speech by my right hon. Friend the Member for West Dorset last month, I can confirm that, in the first two years of the next Parliament, the newly elected Conservative Government will match the present Government's spending plans for the national health service. That means that we no longer need to waste time arguing about how much money will be spent because, regardless of the outcome of the election, spending on the national health service will increase by broadly the same amount. Instead, we can get on to the more crucial subject of how that money is spent. For the avoidance of doubt, let me make it clear that the aim of extra spending under the Conservative Government will be to benefit national health service users, including patients who are on national health service waiting lists. I can announce that it will not be the policy of the next Conservative Government to offer tax relief to people who take out private medical insurance.
  Dr. Reid: Since the hon. Gentleman is so committed to equality of access being granted through public money, will he confirm today that someone who does not have the £9,000 to pay towards a private sector heart bypass operation will nevertheless have equal access to that private sector heart bypass operation, costing £18,000, compared with someone who does have £9,000 in their bank account? Does the hon. Gentleman understand that? I am explaining to him the terms of his own policy—the patients passport. Will he confirm that someone who cannot afford to pay £9,000 to meet half the cost of a heart bypass operation performed in the
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  private sector will nevertheless be entitled, the same as everyone else, to that heart operation in the private sector?
  Mr. Yeo: My understanding is that that is exactly what the Secretary of State proposes. If people have been waiting long enough, they will be allowed access to the independent sector.[Interruption.] Is he not allowing that?
  Dr. Reid: The Secretary of State—i.e. me—is proposing that anyone who has an operation in the private sector will pay nothing towards it. Therefore, everyone, irrespective of how much money they have, will enjoy equal access to treatment. According to the patients passport, a person has to meet half the cost of a private operation in order for the NHS to pay the other half, so can the hon. Gentleman explain how anyone who does not have that money could possibly have equal access compared with those people who have, say, £9,000 for a heart bypass?
  Mr. Yeo: I am interested in the Secretary of State's clarification of the Government's policy. He appears to be proposing that, even if people are willing to pay £9,000 towards the cost, he will pay the whole £18,000. No wonder the Government are in such a spending mess. If they intend to turn down contributions from people who may be willing to pay, their policy will involve an enormous amount of extravagance.
  Dr. Reid rose—
  Mr. Yeo: If the Secretary of State would like to wait, let me provide the clarification of the patients passport policy that he may be seeking. It is designed to give patients and their doctors more control over how and where people are treated and it will help to reduce waiting times by enabling all patients to have access to the entire national health service, not just to their local hospital or the hospital to which their doctor says they must go. For the first time, and under a Conservative Government, the national health service will become a truly national service. All aspects of NHS provision will be available to every patient.
  Like the Government, the Conservative party believes that the private sector has a contribution to make in reducing waiting times. Indeed, I read in The Times this morning that the Government seem to think that the private sector has a rather big contribution to make in reducing waiting times—no matter at what cost. We may be a bit more careful about that. The patients passport will therefore also enable NHS patients to gain access to the private sector, to all those independent providers of treatment to whom they have been previously denied access. That treatment will become available to them under the patients passport, and the precise basis on which that access will be granted is a matter on which we are now consulting.
  Dr. Reid: The hon. Gentleman is taking advice. You can take advice from anyone you like, Mr. Deputy Speaker, but you cannot square a circle.
  Mr. Deputy Speaker (Sir Michael Lord): Order. First, the Secretary of State must use the correct parliamentary language, and I suggest that interventions should be a little briefer.
  Dr. Reid: I want to ask the same question that the hon. Gentleman did not answer the last time that I intervened. Will he confirm that, even with the public subsidy of half the price of an operation in the private sector, someone who cannot afford the other half will not be entitled to have that operation in that sector? In other words, there will be no equity of access in the NHS for those without the money.
  Mr. Yeo: Just because the Secretary of State did not like my previous answer does not mean that I will try to give him a fresh one. I have explained exactly what our policy aims to do, what it will achieve and the basis on which it will be available to all NHS patients. I am confident that the public will see the merits of our policy, just as some people have already seen the merits of the announcement that was made a few weeks ago about extending the availability of the patients passport to 17 million patients who suffer from chronic conditions something that the Government have overlooked and neglected. Shortly after we made it clear that the scope of the patients passport would be extended in that way, I found that it received strong third-party endorsements.
  Mr. Burstow: Will the hon. Gentleman give way?
  Mr. Yeo: I must make a little progress; I will give way in a moment.
  Let us consider some of the ways in which progress has been made in improving both the nation's health and the NHS itself. No one welcomes those improvements more than I do. It is excellent news that progress has indeed been made in some respects, and I warmly congratulate all those staff whose hard work has contributed to those achievements—the doctors and nurses, all the other health professionals, the back-up staff and, of course, the managers, too. For example, let me join in welcoming the news, announced by Cancer Research UK, of a significant drop in UK cancer deaths. That progress has been made over the past generation and reflects the work not only of the health staff, to whom I have paid tribute, but of the researchers, cancer charities and fund raisers.
  We are also thankful for the reduction in death rates from coronary heart disease, which must largely be attributed to advances in medicine and technology. The Secretary of State referred to the increased use of statins, which have played an important part in helping to manage the disease, and stents have substantially reduced the requirement for coronary heart bypass surgery. Progress has also been made in providing cataract surgery for those who need it and the waiting times for that surgery are finally showing signs of improvement.
  I am glad that the Government have recognised the part that treatment centres can play in achieving such goals, but while we join in celebrating those good things—of course, there are others that I do not have time to mention—there is another side to the picture, about which the Secretary of State is more reluctant to speak. The fact that he was at such pains to misinterpret Conservative policy will not prevent me from telling the truth about Labour policy.
  Mr. Alan Milburn: On Conservative policy, the hon. Gentleman is responsible for education policy, as well as health policy, for the Conservative Front-Bench team. Can he explain why it would be permissible. under his patients passport policy, to allow a privately paid top-up for patients to go privately in health, when he would stop that happening under his pupils passport?
  Mr. Yeo: The right hon. Gentleman tempts me greatly. I noticed the dismay among Labour Members last Thursday, when my hon. Friend the Member for Westmorland and Lonsdale (Mr. Collins) explained in detail the basis of our pupils passport. Indeed, as the right hon. Gentleman says, we have made it clear what the scope of that passport will be. I have made it clear this afternoon that we are consulting on the detail of how the patients passport will be usable in the independent sector. The dismay that the Secretary of State for Education and Skills showed last Thursday may provide us with some pointers about what the Government are afraid might happen as far as the patients passport is concerned.
  Mr. Milburn: Will the hon. Gentleman explain whether consultation is another word for confusion?
  Mr. Yeo: In the Government's mind, I am sure that it very frequently is.
  Let us look at the facts. Despite an increase in spending of 38 per cent. since 1999, activity levels in hospitals have risen by less than 5 per cent. We have to consider whether the outcomes that are achieved re present real value for money from the point of view of both patients and taxpayers given the huge rise in spending on the NHS that has taken place. The think-tank, Reform, pointed out in January that the increases in both hospital admissions and out-patient appointments have been slower since 1999 than they were in the previous decade. Despite this 38 per cent. increase in spending, the number of GPs has risen by only 4 per cent. over the period and the number of midwives by only 3 per cent. Where is all the money going? It is going to meet the targets that Ministers keep setting to satisfy the control-freak instincts of new Labour. Managers have had to be hired at almost double the rate of nurses.
  A chunk of the money went on the Modernisation Agency, a typical new Labour invention that was described by the Health Service Journal as the flagship of the Government's health care reforms. The body was formed just three years ago for the purpose of—I quote from the latest departmental report—
  "supporting the NHS and its partner organisations in the task of modernising services and improving experiences and outcomes for patients."
  The same report told us as recently as last July that the agency's focus this year would be
  "to maintain its innovation and to make modernisation move into the mainstream of the NHS."
  Earlier this month, however, we learned that the agency now faces the axe. I wonder just what it has been doing. Was it the Modernisation Agency that decided that student nurses should, as part of their training, have

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  to spend time drawing pictures of how they imagined themselves as pensioners, writing advertisements for themselves as friends, describing how their enemies might view them and looking at the psychology of peasants in Russia? Was it the agency that concluded that outcomes for patients would improve if a student nurse nearing the end of her second year of training had done all the things I have just mentioned but had not been taught how to put up a drip, insert a catheter or administer or take blood? Does modernising the NHS mean that student nurses need only a one-and-a-half-hour group lesson on injections before being let loose on the ward?
  The Minister of State, Department of Health (Mr. John Hutton): These issues have nothing to do with the Modernisation Agency.
  Mr. Yeo: The Minister suggests that this has nothing to do with the health service, but I hope his Department will not claim that it is not aware of those facts. They were all set out in a letter sent to the Secretary of State by a student nurse in London last month, a copy of which was sent to me.
  Mr. Stephen McCabe: Given the hon. Gentleman's analysis, can he tell the House, based on his calculations, how much he estimates he could safely remove from the NHS budget without doing any damage to current levels of patient treatment or care?
  Mr. Yeo: I am sorry that the hon. Gentleman has clearly not been listening to what I have said. The next Conservative Government will, in the first two years of the next Parliament, match the spending plans lent behind by the Labour Government. I am confident that, in that period, we will identify further significant savings because of the extravagance and waste that the policies of the present Government have resulted in. We may then be able to discuss how to use those savings, some, most or perhaps all of which will be available for improved patient care.
  To return to the Modernisation Agency, we cannot be sure how much taxpayers' money was spent on this very short-lived exercise, but I have seen a press release that suggests that the figure was well over £500 million. That sounds like an expensive three-year experiment. The Modernisation Agency, however, was a positive veteran when it got the chop compared with the National Care Standards Commission. That body had been going for only 18 days before it was told that it was going to be abolished. With an approach as chaotic as that, it is no wonder that patients despair of seeing the money that they are paying as taxpayers actually reaching the front line.
  It is not only the way that incompetent Ministers waste money second-guessing managers and chasing headlines that is the problem. In too many areas, we are simply not making enough progress. Derek Wanless, the man chosen by the Chancellor to report on the state of the nation's health, pointed out some of the harsh
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  realities that Ministers prefer to sweep under the carpet. Death rates in England from respiratory diseases are worse than those in France, Sweden, Denmark, Canada, Australia, Finland, Germany and Holland, which are all countries with similar population structures, health care systems and per capita wealth to those of England. Britain also has the worst infant mortality rate among those countries and the second highest death rate from cancer in women. Incidentally, for 34,000 sufferers from ovarian cancer, the mean waiting time is almost 50 per cent. longer than in 1999.
  Deaths from MRSA—the hospital superbug—have more than doubled since 1997. Less than a month ago, the chief medical officer called that "shocking and unacceptable". That is a reflection of the fact that after seven years of a Labour Government, Britain has one of the worst rates of hospital-acquired infections in the western world. People are more likely to catch an infection in a hospital in Britain than in a hospital in France, Germany, Holland, Belgium, Spain, Italy, Sweden, Austria, Denmark or Ireland, as 100,000 people every year find out to their cost. Was that what the Prime Minister had in mind when he told voters seven years ago that there were 24 hours left to save the national health service? Labour promised that the money that it spent would allow it to get the basics right. Its inspection teams have given hospitals the all clear on cleanliness, but as today's edition of The Sun informs us, the truth is a very different story indeed.
  Let us take tuberculosis. According to data released this month by the Health Protection Agency, TB in England and Wales has increased by a fifth since 1999. The chief medical officer points out that the rate of TB notifications in the London borough of Newham is worse that those of India and Romania. What has happened to the TB action plan, which we were promised would be in place early last year?
  It is not only health outcomes that are worrying. In the last full year, the number of cancelled operations was significantly higher than in 1997. The latest quarterly figures show scarcely any improvement in the current year. Cancelled operations can be the result of a shortage of available beds, and there are 20,000 fewer beds now than there were in 1997. With more than 70,000 care home places lost since 1996, many because of Labour's obsession with over-regulation, it is no wonder that people are now queuing to get out of hospital as well as to get in.
  Ministers like to tell us about the fall in the number of patients who have been waiting very long periods to go into hospital, but only last month, the chief executive of the national health service confirmed that average waiting times have actually increased. At the present rate of progress, it will take more than 60 years to clear the waiting lists.
  Out in the community, things are not much better. The number of people receiving domiciliary care has fallen by almost 100,000 since 1997, which is a drop of more than one fifth. The number of health visitors is lower than it was under the Conservatives. The number of district nurses is also lower, and the number of people receiving community mental health care has fallen by almost 8 per cent. since 1997.

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  Even when the Prime Minister himself makes a promise, the situation is no better. At Labour's 1999 party conference, he promised that everyone would have the
  "chance to see their dentist".
  Eight months later, the NHS plan said that the Government were
  "firmly committed to making high quality NHS dentistry available to all who want it by September 2001".
  However, like so many of the Prime Minister's promises, that one, too, has been broken. The proportion of English adults registered with an NHS dentist has fallen substantially while Labour has been in power.
  Whenever Conservatives start to tell the truth about what is happening to the health of the nation, Ministers accuse us of talking down the NHS, but nothing could be further from the truth. We have the highest admiration for the dedication and professionalism of the thousands of people who work in the national health service, and I know that my views are shared by millions of patients. However, we all know that despite all their hard work and the fact that some progress has been made, the NHS could, and should, be better. Today, after seven years of the Labour Government and vast increases in spending, people whose hopes were raised so high are clearly and understandably disappointed. As an ICM poll showed last September, more than half of those surveyed thought that the NHS had got worse since 1997 and less than a third thought that it had got better.
  The biggest obstacle to the further progress for which we all yearn is the attitude of the Secretary of State and his ministerial colleagues.[Interruption.] His meddling ways prevent front-line staff from getting on with the jobs that they have been trained to do. His insistence on targets frequently distorts clinical judgments and often has perverse consequences, like the waiting time target for new out-patient appointments at the Bristol eye hospital, which led to other follow-up appointments being delayed or cancelled, with the result that 25 people went blind. It is no wonder that morale among professionals is so low and frustration is so high. Last month, 500 doctors paid for an advertisement in which they said:
  "We once believed the NHS was the finest healthcare system in the world. Today few healthcare professionals would make that claim."
  The Secretary of State would like us to believe that he and the rest of the Government are about to mend their ways.[Interruption.] He promises that Ministers will set fewer targets, but in a supplement to the Red Book published last week, a report from the Cabinet Office highlighted—
  Mr. Deputy Speaker: Order. Treasury Front-Bench spokesmen must not keep intervening from a sedentary position. Although a certain amount of latitude is allowed, today we are debating not Opposition policies, but the Budget.
  Mr. Yeo: I am afraid the fact is that Government Front-Bench spokesmen do not like to hear the facts about how they run the health service and the damage that they cause to the health of the British people.
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  The report from the Cabinet Office highlighted that
  "many organisations do face excessive externally set targets, measures and compliance requirements".
  It continued:
  "the Department of Health has only 12"
  public service agreement
  "targets across the NHS and Social Care. Front line trusts and PCTs however face more than 4 times as many PSA-related controls … with a further 125 non-PSA related controls".
  So although the Department of Health claims to have only 12 key targets, the overall number of targets with which those on the front line have to comply is 17 times greater.
  The Secretary of State promises that bureaucracy will be reduced and that staff numbers at his Department will be cut. He promises that patients will be given more choice. Those promises, however, are at odds with the Government's instinct for control freakery. Ministers may talk a good game, but the row over foundation hospitals showed just how reluctant the Labour party actually is to allow any genuine freedom to the providers of health care. We are now asked to believe that the very Ministers who presided over a rampant growth in bureaucracy are the best people to tackle the problems that they created. We are asked to believe that the same Ministers who have been obsessed with setting targets, through which they have tried to control every detail of the delivery of health care, will now allow clinicians and managers freedom to do their jobs.
  As for patient choice, the improvements that the Government have promised will be available only to patients on a limited scale and after they have endured long waiting times. The danger is that if the Government's preoccupation with acute and emergency care continues, the needs of the 17 million people with long-term medical conditions will again be neglected. Earlier this month, the Secretary of State suddenly woke up to the fact that most of his targets have overlooked the suffering of those people and their families, but it will take more than a speech about "integrating the care landscape" to tackle the problem. That is why my colleagues and I have opened a dialogue with the Long Term Medical Conditions Alliance.
  Mental health is another neglected area. More than 18 months after the end of the Government's consultation on the draft mental health Bill, we still await publication of the responses. Meanwhile, services continue to suffer. The NHS plan promised to introduce 335 crisis resolution teams by 2004, but fewer than half are in place. Some 50 early intervention teams were promised to reduce the period of untreated psychosis in young people and to help to improve long-term outcomes. Only 27 have been established.
  Public health is another subject of deep and growing concern. I mentioned the rise in TB. Obesity is another problem that is growing worse under this Government. Last month's report from the Royal College of Physicians, the Royal College of Paediatrics and Child Health and the Faculty of Public Health contained a clear warning about where present trends are leading. The British Diabetic Association issued a similar warning.
  The Government's response to these worsening trends is chaotic. Faced with growing concern over obesity, Downing street floated the idea of subsidized

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  gym club membership and a tax on fatty foods. Those wheezes succeeded in getting a headline but little else, and perhaps that is all that was intended. The ideas were soon rubbished by the Treasury's public health guru. Derek Wanless, but, having called for a report on public health, the Chancellor made no mention of that in his Budget. Meanwhile, the Department for Culture, Media and Sport has at last discovered that sport in schools is a good idea after all. As for the Secretary of State for Health, he is so confused that the only thing he can think of is to ask the public for their view—another big conversation when what the public need are answers. Who is supposed to be in charge? These issues are far too important to be dealt with in this muddled way. A coordinated approach right across Government is needed, and the Secretary of State should take responsibility, but taking responsibility is something that Ministers in this Government are extremely reluctant to do.
  Last week, the Chancellor was so busy patting himself on the back, he did not mention that each time he makes a statement to the House the amount of money that he has to borrow to pay for his spendthrift ways increases. He has presided over the biggest trade deficit since records started over 300 years ago, a halving of the rate of productivity growth compared with the last Conservative Government, the destruction of hundreds of thousands of jobs in manufacturing and a collapse in the savings ratio, and he has ruined the expectations of thousands of members of occupational pension schemes. One would search his Budget speech in vain for any reference to those important facts, just as one would search in vain for any admission of the inevitability of tax rises in the next Parliament if Labour wins another term.
  I have given credit where it is due, especially to the dedicated and hard-working staff in the NHS. I have acknowledged that progress is being made in some respects, but to make real improvements to the nation's health a different approach is needed. With the founding principle of the NHS as our starting point we will make far-reaching and radical changes to the way that health care is delivered: by giving patients more control and freedom within the system; by giving genuine independence to health care providers; by having a much clearer focus on public health, the one aspect of health policy which should be delivered from the centre; and by launching a vigorous attack on waste at every level. It will not be enough merely to give patients more say in how and where they are treated. We must give more freedom to the providers, too. We want to give professionals, doctors, nurses and others working in health, including managers, freedom to do the jobs that they have been trained to do.
  We will abolish the star ratings and most of the Whitehall-set targets through which Ministers have constantly meddled with the NHS, often to the detriment of patients' interests. At the next general election the country will have a clear choice when it comes to health: either continue with Labour's wasteful ways, in which standards in Britain lag behind other countries, an over-centralised system demoralises staff, and patients are denied control because Ministers think that Whitehall knows best, in a system where the state is too large and patients are too small. Or follow the new Conservative path, which will transform the way that health care is delivered, ensure that taxpayers' money
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  reaches the front line, put patients in control and let doctors and nurses do their job. That is the choice that we will offer the people of Britain.
  After seven years of tax, waste and spin, the public cannot see where all their money has gone. They know that the Government have not delivered on health, the Labour party knows that the Government have not delivered on health and the Secretary of State knows that the Government have not delivered on health. We relish the opportunity to offer the people of Britain the first-class health care that they have paid for and deserve.
  Mr. Deputy Speaker: Order. Before I call the next speaker, I remind the House that there is a 15-minute limit on Back-Bench speeches, and that applies from now.
  5.39 pm
  Mr. Alan Milburn: It is a privilege to speak after my right hon. Friend the Secretary of State for Health, and I welcome his extremely important announcements. Would that I could say the same about the hon. Member for South Suffolk (Mr. Yeo), whose speech almost made me long for the return to the Dispatch Box of the hon. Member for Woodspring (Dr. Fox). I suspect that the reason for concern on the part of Opposition Members, which was perhaps reflected in the hon. Gentleman's speech, is that last week's Budget was one of not only considerable economic acumen but considerable political acumen. Few right hon. and hon. Members who listened to my right hon. Friend the Chancellor of the Exchequer could have doubted that they were hearing the starting pistol being fired for what promises to be an extremely long and interesting general election campaign.
  Mr. Peter Luff: On a point of order, Mr. Deputy Speaker. I think that the right hon. Gentleman will be grateful to me for raising this matter. There is a considerable problem with the sound system in the Chamber today, and I think that I have guessed correctly that the Hansard writers are having some difficulty hearing him. Can you do anything about that?
  Mr. Deputy Speaker: I think that we shall simply have to carry on and use our voices as they did in days of old.
  Hon. Members: Hear, hear!
  Mr. Milburn: I shall shout at the Opposition—I have done a bit of that in my time.
  The Opposition's locker, which looked reasonably full only a few weeks ago when the shadow Chancellor published the Conservatives' spending plans, looked decidedly empty once the Chancellor had delivered his Budget. I have to say that it never struck me as credible that the Conservative party, purportedly committed to strong defence and law and order, could go into a general election campaign promising cuts at the Ministry of Defence and the Home Office. The truth is that the Budget has made its position even more painful, because the choice that it faces is whether to enter that campaign promising to take extra resources out of education to pay for tax cuts. The Budget has made the

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  choice for the electorate even more stark: cuts in taxes, or investment in services. It was James I of England who was famously described by Henry IV of France as
  "the wisest fool in Christendom."
  The shadow Chancellor may well have laid claim to that epithet now.
  Sixteen years ago almost to the day—in fact, I think the anniversary was yesterday—Lord Lawson, then Chancellor, hailed in this House what he called an "economic miracle". As we now know, his words were to turn to ashes in his mouth within a few short years, as economic mismanagement led inexorably to economic recession. When Lord Lawson spoke, the economy was doing reasonably well, but almost 2.5 million people were none the less unemployed and the inflation rate was just shy of 5 per cent. Today, by comparison, unemployment and inflation are roughly half that. I am not especially religiously inclined, so I do not say that what has been achieved in recent years is miraculous, but it is pretty remarkable. In the midst of a worldwide economic downturn, the British economy has continued to grow year after year, quarter after quarter. Even the most jaundiced economic commentators have been forced to concede that the fundamentals—inflation, interest rates, debt and jobs—are sound. I say that because there is sometimes a temptation to take all the progress for granted, as though it were purely natural. As even a cursory glance at the plight of some of our competitor nations, or at our recent economic history, shows, that is not so: Britain is in a good position because of good economic management.
  We cannot hope to compete on pay or prices with the likes of China or Taiwan. Our future is not at the low-tech, low-skills end of the world market; it lies in high-skill, high-tech services and industries. That is why I applaud the Government's decision to invest further resources in education, just as they have in health. The investment being made in public services is not simply about creating more opportunity for better health and better education, important though they are. Nor is a social dividend all we will reap from that investment, as better-educated citizens lead healthier lives. There will be an economic dividend as well. In the short term, it will come from the stimulus that spending provides to the economy. Oxford Economic Forecasting Ltd. estimates that current spending will boost GDP growth by at least 0.8 per cent. this year and, indeed, next year. It is sound long-term economics for low-debt countries such as our own to be able to borrow so as to invest for the longer term. Providing that our expenditure plans are affordable, which I believe them to be, then public spending—far from being always a burden as too many assume, including, tragically, the Conservative party—can be a benefit. The long-term benefits are even more significant.
  The primary rationale for investing more in health is to relieve pain and extend life. There are also important economic spin-offs. Many historians have noted that perhaps one third of per capita growth over the past two centuries in this country resulted from improvements in nutrition and health status. In a modern, knowledge-based economy, there is an even bigger premium on good health. When the Institute of Directors, not normally known for its political radicalism, still less for
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  its adherence to Keynesianism, says that sickness is a hidden tax on business, undermining competitiveness and reducing productivity, it really is time to take note. The number of long-term sick and disabled people wanting a job but not presently looking for one has more than doubled in the past decade. In an economy that is moving towards full employment and already reporting labour shortages, such morbidity levels pose a real threat to future growth.
  That is why my right hon. Friend the Secretary of State for Health is right to insist on improvements in NHS responsiveness to reduce waiting times for treatment. That will deliver not only a health benefit, but an economic benefit. It is one of the reasons why I also welcome my right hon. Friend's renewed focus on public health and prevention. In time, too, it will make a positive contribution to the UK's longer-term performance.
  If health investment performs an economic function, the same argument can be advanced in spades for education investment. In the United States, it is widely accepted that every dollar invested in early years provision brings a sevenfold payback in lower crime, higher educational attainment and, most importantly, better jobs. Our Government have much to be proud of in that regard, providing extra nursery places and Sure Start projects in constituencies such as mine.
  The Budget promised yet more child care centres. That, too, is welcome. However, in a country in which rising economic prosperity means that there are more two-income earners and more families struggling to balance their working lives and family lives—I speak with some experience about that—child care cannot just be centred on institutions. It must be centred on parents' needs. Above all else, working parents say that they need child care that is affordable and flexible. That is why I hope that the Government will go further than the Budget by ensuring that parents have a choice in how they receive help with child care.
  For some, that care might be in a nursery or a child care centre. For others, it might be in the home. The point is that a one-size-fits-all approach will not work. Nowadays, people need flexible, personalised services. It is vital that choice is widely extended, not only in respect of child care, but for the wider public services. In that way, we shall get services that are not just more responsive but more fair. When we extend choice in the NHS, as my right hon. Friend is rightly doing, so that it becomes accessible to those without the ability to pay for treatment, as well as to those with that ability, and when we ensure, as I hope we will, greater parental choice over schools for those without wealth as well as for those who have it, we will be redistributing opportunity in our society. Today, people who can afford it buy choice in health and education. Those without do without. That is unfair, and it must be a Government priority to change that.
  I suggest one further area where this modern form of redistribution should be taken forward, and that is housing. The promise of more resources in the Budget, alongside the Barker review of housing supply, is welcome and long overdue. Quite simply, our country is short of houses. The result, as Kate Barker rightly points out, is a negative impact on labour mobility. In a modern global economy, such inflexibilities exact a high price, but my principal concern is more social than

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  economic. Over the past four decades, social mobility in our country has slowed markedly. The generation of children born, like me, in 1958, were far less dependent on the economic status of their parents for their eventual economic progress than those born just 12 years later in 1970. Birth, not worth, has become more and more a key determinant of life chances, and sadly, changes in the housing market are opening an ever larger gulf between those with assets and those without.
  Rising house prices are making home ownership more unaffordable for more people. Not surprisingly, the number of first-time buyers entering the market has declined. In the longer term, rising house prices threaten to impede social mobility across generations. While the value of housing assets has increased markedly, the number of people with no assets at all has more than doubled in the past 20 years. The principal inequality in our society today is no longer about income but about ownership of assets, whether a pension or a home. In London today, the child of a home owner stands to inherit an average of £230,000 when the parents die, but a classmate whose family rents will inherit nothing. In other words, the housing market is widening inequality
  It must therefore be the Government's explicit objective and priority to increase home ownership. agree that more social housing is needed, but I do not agree with the orthodoxy that the only future for those without a home lies in social housing. When interest rates are low, it is often cheaper to buy than to rent. Moreover, given a choice, most people prefer to buy rather than rent. Welcome as the Barker report is, we need to do more than simply build more homes; we need to open up more opportunities for people to own their own homes. Helping people on to the housing ladder will not only address issues of labour mobility and economic flexibility, but be a route to greater social justice and fairness in our country. It is a modern means of redistributing wealth in our society. The job of a progressive Government is not just to beat poverty but to help people realise their aspirations so that we are capable of levelling up in society, not levelling down.
  New Labour won in 1997 and 2001 as a party of aspiration. Future victories depend on our pursuing policies that promote aspiration and enhance choice. That requires investment, of course, but also reform. whether in health, education or housing. Good foundations have been laid, and the Budget builds on those foundations. Its proposals for extra resources are welcome, as investment, not tax cuts, can best secure the long-term prosperity of our country. A flexible economy and a fluid society, however, cannot be bought simply by increasing resources. With investment rising, it is time to put our foot firmly on the accelerator, not on the brake, for reform as well, and I hope that my right hon. and hon. Friends will do so.
  5.53 pm
  Mr. Paul Burstow: I should like to start by making some comments about the NHS, and then address other issues in the Budget, particularly preventive health.
  Liberal Democrats support investment in the national health service. At the last general election, we had the courage and conviction to argue the case for increased taxation. We are delighted that that argument has been
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  won—during this Parliament, the necessary resources have finally been provided and we voted for the increase in national insurance that was approved by the House about a year ago. We wish to place on record our appreciation for the dedication and hard work of NHS staff, both on the front line and in the back office. It is important to stress the commitment of both groups and to register our appreciation, not least because the recent survey by the Commission for Health Improvement found that one in six front-line health care staff are victims of abuse and violence when performing their job of caring, nurturing, supporting and trying to help sick people get better. It is entirely unacceptable that staff should be thrown into that battlefield when they already have more than enough stress and worry in the discharge of their duties.
  There was a disappointing if predictable reaction to last week's work force survey, particularly the findings about the increase in the number of managers. Some people have a fixation about what those figures mean, how they are interpreted and what they show, but it is worth bearing it in mind that between 1997–98 and 2002–03, the management costs of the NHS fell from 5 to 3.9 per cent. I do not buy the argument that the NHS has too many managers, and nor do I buy the statistics that are often peddled to justify that argument, because they require a stripping-out of various staff who provide back-up support for front-line staff. However, NHS managers who are trying to do their job have their hands tied by red tape supplied by Whitehall and by the excessive number of targets that determine what goes on at local level to enable people to have choices about initiatives. That undoubtedly stifles the opportunity for innovation in the NHS at local level. It is only by freeing NHS managers and staff from the target and tick-box culture that still drives too much of the NHS from Whitehall that we can hope to get the full value of the investment that is going in. The Commission for Health Improvement commented on that only last week.
  Dr. John Reid: May I place on record my gratitude to the hon. Gentleman for giving the lie to the constantly peddled myth that the NHS is over-managed? Does he accept that the percentage of managers in the NHS is, at under 3 per cent., far lower than in the private health care sector or the private sector? Since 1997, 224,000 more staff have been recruited, of whom 13,000 or 5 per cent. are managers. I wish to underline the distinction that he made between the task that managers face and the myth often peddled by the Conservatives, which is merely another way to beat the NHS. Their figures for managers are manufactured and are frankly not true.
  Mr. Burstow: I am grateful to the Secretary of State. While I have many disagreements with him about priorities and approach, he is right on that point. It is important to put on record the facts about management, because a myth is being spread about the inappropriate deployment of money, which, it is said, is not reaching the front line. There are, however, some examples of money not reaching the front line, which I shall deal with in a minute.
  I mentioned the work force survey, and it is worth looking at one or two of its findings. Last week. there was some premature back-slapping about the progress

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  that has been made. Undoubtedly, additional nurses and doctors have come into the national health service, which is welcome, but there are still grounds for serious concern, not least because of the demographic profile of the nurse population in this country. One in four nurses will be eligible for retirement in the next five years, and recruiting more nurses to replace such large numbers will be a hell of a challenge. Our health care system is increasingly dependent on the recruitment of nurses from overseas. I shall not address the ethics of that now, although there are still concerns about overseas recruitment. We are. however, competing for health care staff in a global market where other players are probably better equipped than we are to compete for our precious health care staff. The United States of America currently has a shortfall of 1 million nurses, and is trying to get UK nurses to work there. Plenty of other countries are likely to do the same thing. Health care recruitment is a global problem, and I do not yet see any international action being taken to ensure that we have an adequate supply to meet the needs of developed countries and to secure the long-term needs of developing countries.
  I shall focus on some of the other figures that emerged from the work force survey. For example, the number of midwives continues to be a cause for concern. The continuing shortage is hitting three quarters of maternity units, where vacancy rates have remained stubbornly high or have been rising since 1999. Given the importance of strengthening primary care, it is particularly worrying that the survey recorded a drop in the number of health visitors and district nurses. A report this month from the Commission for Healthcare Audit and Inspection draws our attention to the continuing crisis in the development and delivery of primary care, and the fact that staff shortages are leading to GPs closing lists, low staff morale and high workloads. All those factors jeopardise and slow down the development, expansion and improvement of primary care.
  Although we celebrate the investment going into health care, it is worth putting on record the fact that there are a number of areas where taxpayers have every right to question whether they are getting value for money. The first such area is NHS spending on temporary doctors and nurses. Every day, £4 million is spent on agency staffing in the NHS. Last year, £1.4 billion was spent in the NHS in that way. Of course it is sensible to spend on agency staff as part of a strategy that makes the best use of permanent staff, but as the Audit Commission revealed only a couple of years ago, too many NHS trusts have lost control of their agency budgets, have no idea how much they are spending, and have no sense of direction and strategic purpose behind that expenditure. Consequently, they are fighting fires, never getting the budget under control. Year after year under this Government, expenditure on agency staff continues to rise.
  There are other areas where there is cause for concern about whether the taxpayer is receiving value for money. The figures for MRSA infections were reported yesterday and today. A few years ago, the National Audit Office reported that hospital-acquired infections were costing £1 billion. At least 100,000 people suffer
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  from such infections, and possibly as many as 5,000 die every year—the Conservative health spokesman referred to those figures. It is fair to say that under the last Conservative Government, there was still a voluntary surveillance system that did not adequately convey to the NHS or anyone else the scale of the problem. It is only in the past few years that we have had a mandatory reporting system, which has provided a true picture of the scale of the problem: it is massive.
  The result of the failure to get to grips with the problem of infections over the past decade or more is that people stay in hospital for longer. That has knock-on effects: operations are cancelled because people who have got sicker while in hospital occupy beds. According to figures from the Department of Health, 17,000 patients had operations cancelled this winter. The number of operations cancelled has increased by 43 per cent. since 1997, so capacity is being wasted. It is not just a question of investing in more capacity; we must make sure that we use practices that avoid the wastage of existing capacity. Poor hygiene practice and under-resourced infection control teams make it difficult to overcome the problem.
  I shall give a final example of an area where there is waste and room for much improvement, and which is costing the NHS a fortune. Every day, the NHS spends £2 million on treating the consequences of bed sores, which are eminently preventable in about nine out of 10 cases. The annual cost is £750 million and the vast majority of those cases could be prevented by simple practices and good nursing.
  We heard an exchange between the Secretary of State and his Conservative opposite number, the hon. Member for South Suffolk (Mr. Yeo), about the Conservatives' plans for a patients passport. I regret that, despite the Secretary of State's best endeavours, we were unable to get any further clarification of what the policy means and, crucially, how the deadweight cost of the policy will be funded. Some 300,000 people already choose to have operations and other procedures in the private sector. They will be the first people banging on the door of a putative Conservative Secretary of State and saying, "Where are my patient passport pounds? I want them now."
  The scheme would cost £1 billion, on a reasonable estimate. I understand that when the shadow Chancellor made his presentation, he was asked how it would be paid for. He said that the Conservatives did not yet know how much it would cost or how they would pay for it. I certainly hope that the consultation that the hon. Member for South Suffolk outlined will spell out in detail how they will fund that deadweight cost. A billion pounds will be passported out of the NHS, and not a single extra operation will be performed as a consequence. In their quest for savings, the Conservatives should identify that as a waste of money, as should the Secretary of State.
  Dr. Reid: Is the hon. Gentleman telling us that the Conservatives do not know how much the scheme will cost, do not know where the money will come from, do not know whom it will go to and think that it is compatible with equity and equal access, even though it depends on how much money people have?
  Mr. Burstow: I had hoped the right hon. Gentleman would direct that question to his Conservative opposite

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  number. Unfortunately, he did not take the opportunity proffered to him. I would not presume to comment further on Conservative policy, except to say that I look forward to the outcome of the consultation and the publication of the details. Since the policy was published 12 months ago or more, we have been told, "The details are coming. The details are there. Look on the website. Look for the background papers. It's already out there." It is not out there. It is a bit like the secret files that we see in television programmes. Perhaps we need to get the FBI in to look for the X-file details.
  Another topic that the Government plan to introduce over the next couple of years, and which they are piloting in foundation trusts, is payment by results. I hope that before rolling it out across the NHS, various issues will be addressed. The first is the decision to introduce a fixed-price tariff. The Government want competition on the basis of quality, not price, but the problem with the tariff in its current form is that trusts that for some reason—in some cases purely for historical reasons—have costs that are 20 per cent. below the average tariff will receive a substantial sum for no extra procedures or extra activity—a bonus for them at the taxpayers' expense.
  I ask the Government to think again about whether that is the best way to use the extra investment that is going into the NHS, and whether there is some scope even now for a maximum tariff, rather than an average tariff, to allow flexibility and to allow local commissioners to ensure that taxpayers get good value for money, alongside good quality care.
  The second concern about the plan is that everything appears to be tied to the tariff, which could undoubtedly trigger some of the problems that arose from the Conservatives' internal market, where trusts find themselves above tariff, unable to make a transition back to the average within a reasonable time and consequently get into serious financial difficulties. There has been talk of transitional arrangements. Will those apply to the entire NHS, rather than just the pilots?
  The third concern arises from the way the system focuses on rewarding activity, which is not necessarily the way to measure a system designed to promote good health. The system currently provides an incentive for more procedures and more treatment, rather than rewarding the postponement and prevention of ill-health. That brings me to the Wanless report and prevention, on which the Government and the House should focus more.
  I was surprised that in his Budget statement last week the Chancellor made no reference to the report by Derek Wanless, which, if I read the foreword to the report correctly, was commissioned by the Chancellor, the Secretary of State and the Prime Minister. The first report published by Wanless set out three scenarios. It predicted a gap between the best and the worst-case scenarios of £30 billion by 2022. It said that the NHS would cost £30 billion more if we failed fully to engage people in their own health. His second report sets out. with great clarity the fact that the NHS is, by its very nature, focused on treating and curing ill health, rather than on preventing it. Wanless records that we have known for 30 years or more the determinants of ill health—economic, environmental and social factors—and the fact that poverty, poor housing, poor
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  environment, bad diet and lack of exercise are the underlying drivers of much of the ill health that turns up in accident and emergency units and GPs' surgeries.
  The inequalities that the right hon. Member for Darlington (Mr. Milburn) mentioned came across very powerfully in some recent work done in Leicester on health inequality. It found that within a distance of only seven miles, life expectancy varied by 20 years. How can such a difference be acceptable in 21st century Britain? Today's debate has so far failed to recognise that we need to move back upstream and tackle the underlying causes of ill health.
  Dr. Andrew Murrison: What conclusion does the hon. Gentleman draw from the fact that health inequalities appear to have widened in the past few years, rather than contracted?
  Mr. Burstow: The conclusion drawn from the work done by Derek Wanless is that the failure over the past 20 years to make dealing with poverty a priority has driven health inequality, and that poverty is at the core of much of that health inequality. It was an underlying driver of health problems in the past, and it is now. It was a failure by the Conservatives when they were in office—[Interruption.] If there is no objection, I would like to develop the point as I see fit. When the Conservatives came to office in 1979, they inherited the Black report from the previous Labour Government, but they shelved it because they were not prepared to incur the up-front costs of shifting emphasis, doing what was necessary and investing in prevention.
  Dr. Murrison: I have a point of information for the hon. Gentleman: the Black report was published in 1980, so we could not possibly have inherited it in 1979.
  Mr. Burstow: That is a very pedantic point. The hon. Gentleman knows full well that the report was commissioned under a Labour Government, but came on to the desk of a Conservative Minister, who shelved it. It was not until 1992 that the Conservative Government finally woke up to the needs that existed and published a White Paper. That is the record of the Conservative Government.
  In my judgment, the current Government's record is not much better. When they came to office in 1997, they initiated work through Acheson and they published a White Paper the following year, but they ditched most of the targets from the 1992 White Paper that could have made a difference. There seems almost to have been a period of boom and bust in activity on prevention and public health. We need sustained investment and reform of the sort that the Government rhetorically describe in relation to other aspects of health.
  When I asked the Secretary of State about investment in research, he gave me the same answer as the Under-Secretary of State for Health, the hon. Member for Welwyn Hatfield (Miss Johnson), who is responsible for public health, gave me in the Select Committee on Health a couple of weeks ago. Effectively, they both said, "You'll have to wait for the White Paper; we are not saying anything just now." Last December, however, the Department of Health announced the

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  establishment of a £3.5 million public health research consortium. My concern is that the scale of the task and the lack of an evidence base, which are documented by the Wanless report, necessitate urgent action. Welcome though the £3.5 million is, it is not enough, and the opportunity should be taken to invest further. I hope that, when the Secretary of State publishes his White Paper, he will give that commitment and roll out a programme of investment.
  I want to mention two final issues. The problem with creating a shift from a sickness service to a health service is that the gains are very long term and do not impact on the Government of the day—unless they are so good that they stay in power for 30 years, but that does not happen very often. For example, in respect of cancer deaths, it takes 30 years after giving up smoking before the individual in question has reduced their risk of cancer to the same level as that of somebody who has not smoked in the first place. Welcome though the reported reduction in cancer deaths is, it is the consequence of action taken by Governments over the past 30 years, not only by this Government in the past five years. That is an important and perhaps salutary lesson for us all, and it needs to be borne in mind when we are trying to build a consensus on public health.
  I want also to ask the Minister about the four-year delay in taking forward a key measure on smoking. The Health and Safety Commission's draft approved code of practice clarifies the implementation of the Health and Safety at Work, etc. Act 1974 in respect of passive smoking. It is four years since that measure was introduced, but the Government have remained silent. The measure does not go so far as to say that there should be a ban on smoking in enclosed public places, but it puts in place arrangements that could make a difference to the workers in those places, as well as to the public who do not wish to be victims of passive smoking. When will the Government act on that measure? As Wanless says, education will manifestly not change behaviour enough, because as those who have smoked know, addiction means that the habit is very hard to shake.
  The timing of the comprehensive spending review is crucial, but the White Paper will be published in the summer. Clearly, the Government have already made quite a few decisions about the additional resources that they might need to earmark in order to roll out a public health agenda. If they have not done that, the White Paper proposals that are published this summer will take a considerable time to implement. I hope that I can be reassured on that point and that things will move forward more rapidly.
  My final point concerns chronic disease. The right hon. Member for Darlington was right to focus on long-term morbidity, as the focus must shift not only to preventing ill health, but to the fact that the success of the NHS means that more people are living for longer with disease. The national service framework is in the pipeline and it will do something in that regard. But is it not curious that there has been a failure to commission any work on the prevalence of most of the chronic diseases that the national service framework on long-term medical conditions is attempting to do something about? There has also been a failure to undertake an
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  audit of the work force to find out where the gaps are so that we can start to plug them. As a consequence, the framework will be hamstrung from the day on which it is published in terms of delivering on the very worthy words that I am sure it will contain.
  The large proportion of NHS staff coping with long-term medical conditions is an important factor. Some 17 million people have long-term medical conditions, and they account for 60 per cent. of GP consultations and hospital resources, so it is important that the NSF delivers not only resources, but the clarity that is necessary for planning at a local level. We need to move from an episodic view of health care to one where patients are equal partners in respect of their own health and care. Nothing in the Secretary of State's speech gave people the sense that the Government want to reorientate the NHS around the needs of those with long-term health conditions.
  We support the investment that is being put in, not so much by this Budget as by the previous one. It is essential, but not sufficient. We need to shift the focus from the treat-and-cure system that we have had since the 1940s to one that is much more about preventing and postponing ill health. We need to lift the burden of the targets and tick boxes that bog down the national health service. Above all, we need to bring health and care closer to home. Accountability must be local, because that is the only way in which we can make the NHS responsive to local needs, rather than to what is dictated by Whitehall.
  After seven years of Labour government, this Budget has failed to set a framework to ensure that our constituents have access to a world-class health care system that not only treats them when they are sick, but ensures that they can enjoy opportunities for good health.
  6.19 pm
  Mr. Kelvin Hopkins: I congratulate my right hon. Friend the Chancellor on committing the Government once again to increasing real-terms spending on health and education. We still have a long way to go, although much improvement has already become evident.
  There has been some debate this afternoon about the efficiency of the national health service. I do not think that there has ever been any question about its efficiency; it is its resourcing that has been the problem. Even in the dark days of Tory government, the national health service's output per unit of resource was remarkable. If one compares the NHS with, for example, the privatised system in America, where they spend twice the proportion of gross domestic product on health but millions of their people do not have proper health care, one sees that the NHS is remarkable but has been under-resourced for many decades.
  Some Budgets ago, the Chancellor decided to announce massive increases in spending on health. At that time, France spent 3 per cent. more of its GDP on health than us. Three per cent. of GDP is roughly £50 million per constituency every single year. Let us imagine the effect of that sum of money over a 30-year period. At that time, I said that I wanted the —50 million in my constituency every year, and we are moving in that direction, which is welcome. The Germans spend even

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  more than the French, and it is not surprising that those countries had better health outcomes than ours simply because they were better resourced. As I say, however, we are moving in the right direction.
  I congratulate the Chancellor on his renewed emphasis on public borrowing for investment; he is absolutely right. United Kingdom gross public borrowing levels are very low by international and historical standards, and there is scope for substantial increases in public investment based on public borrowing. Low long-term interest rates reflect low inflationary expectations, so there is no problem there—public investment is in fact very cheap.
  By contrast, our infrastructure needs are great. The Budget shows that the overall quality of our infrastructure compares badly with that in France and Germany. We must invest heavily in infrastructure for the long term, and we should do so through public borrowing. Private borrowing for investment is expensive, and the Exchequer pays a high premium for private investment, which is one reason why I congratulate my right hon. Friend on his emphasis on public investment in this Budget. If we examine the railways, for example, we see that there has been a shift from public to private investment and that the cost of renewing track is four times greater than it was 10 years ago, which is scandalous. That shows how efficient public investment is and how private investment has almost become corrupt.
  I welcome the Chancellor's contrasting the performance of the British economy with that of the eurozone. This year, the forecast for growth in the eurozone is 1.7 per cent., which is not enough to sustain employment levels, and one can expect unemployment to rise still further in the eurozone countries. The forecast for growth in Britain is between 3 and 3.5 per cent. That is an enormous difference between Britain and the eurozone.
  I shall quote from the Chancellor's speech, although it is not strictly in context. He referred to
  "the flexibility to take the right monetary and fiscal decisions at the right time to sustain stability and growth".—[Official Report, 17 March 2004; Vol. 419, c. 324.]
  That sounds like a good old Keynesian view—managing
  the economy by choosing monetary and fiscal policies to suit current needs. That is not possible in the eurozone, and it is not surprising that eurozone countries struggle to deal with serious unemployment and low growth. If I were the German Finance Minister, I would want to be able to reduce interest rates, induce a little currency depreciation and relax fiscal policy to boost the economy. Eurozone countries cannot do that because they are tied into economic and monetary union, which is a millstone around their necks. I congratulate the Chancellor on his renewed commitment to what appears to be a Keynesian, demand-management approach to economics, which is sensible. I also congratulate him on keeping Britain out of the euro for the past seven years. I hope that he will continue doing that good job and keep the euro where it belongs—in the very long grass.
  I have some concerns about the Chancellor's speech, particularly about cuts in civil service jobs. We need more employment rather than less in some areas of the civil service, and particularly in the immigration service.
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  Many of my constituents come to my surgeries with immigration problems. I have certainly not seen evidence of overstaffing in the immigration service; indeed, I have seen the reverse. We have new tax credit schemes that take a lot of administration, so perhaps we need more rather than fewer staff at the Inland Revenue, but I stand to be corrected.
  I visited the VAT inspectorate some time ago. It seems that each new VAT inspector can collect six times their salary in tax, and that Inland Revenue inspectors can collect eight times their own salary in tax. More tax inspectors would produce far more money for the Treasury than the cost of their salaries, so there is a case for more rather than fewer tax inspectors. A report published this week states that some 15.7 per cent. of VAT is not collected, and that that figure has increased. That is the equivalent of £12 billion a year, which is a lot of money that the Chancellor could well do with to spend on public services. We also need more benefits officers, because my constituents have problems with the processing of their benefits claims. I am worried about cuts in civil service jobs—no doubt the civil service can become more efficient in certain areas, but I would not want cuts in the services that I have mentioned.
  I want to finish by referring to health—this afternoon's debate is essentially about health—and in particular alcohol and taxation. A report published two weeks ago by the Academy of Medical Sciences drew attention to the link between price and alcohol consumption. Over the past 30 years, the cost of alcohol as a proportion of income has fallen by about one half. The Academy of Medical Sciences suggests that a small increase—even a 10 per cent. increase—in the real cost of alcoholic drinks could have enormously beneficial effects. A 10 per cent. increase in price would reduce deaths from cirrhosis of the liver by 5 per cent. in men and 7.1 per cent. in women. It would also lower murder rates and reduce alcohol-related deaths by 28.8 per cent. for men and 37.4 per cent. for women. Those figures are astonishing, and they were obtained by research by the Academy of Medical Sciences. We have a national alcohol problem that must be addressed; we cannot ignore prices or run away from the reality that we must raise them for the consumer to reduce dangerous alcohol consumption.
  We should also reduce duty-free allowances and increase the policing of our borders to reduce alcohol smuggling. There is much to be said for restricting the sale of alcohol to the young. I would even suggest minimum retail prices in supermarkets. Pubs and clubs suffer from competition from the cheap alcohol available in supermarkets, and I can see nothing wrong with a health-based minimum price for alcohol in retail outlets, in which case I am sure that we would have better national health, less violent crime, lower death rates, reduced costs to the NHS and would begin to deal with the binge drinking problem.
  Mr. Robert Walter: I am interested in the theory that the hon. Gentleman is expounding, but I wonder whether he will remind the House of what happened in the tobacco market when

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  duties were increased. At one stage, 90 per cent. of the hand-rolled tobacco in this country was illegally imported because duty was so high.
  Mr. Hopkins: I take the hon. Gentleman's point, but tobacco is small and easy to smuggle. We must rigorously police tobacco imports, but I appreciate that it is difficult. Alcohol is larger than tobacco and easier to detect. There is a difference, and it would be easier to control the smuggling of alcohol than tobacco.
  Alcohol imposes enormous costs on the NHS, and it also imposes a policing cost. Every Saturday night in my town, the police are on the streets dealing with young people who have obviously abused alcohol. Social services must deal with children from families where alcohol abuse has led to domestic violence.
  Mr. Burstow: Has the hon. Gentleman considered that it might be worth examining the fact that policing costs do not fall on those who provide alcohol in pubs? Perhaps those costs should be returned to those who provide alcohol and sell it to drunken people.
  Mr. Hopkins: I accept the hon. Gentleman's point, which the Home Secretary is considering. A simple increase in the price of alcohol and the maintenance of a minimum price for it would be effective, but we must take other measures. My proposal is not a complete alcohol strategy and relates to price only.
  Finally, the policy would bring the Chancellor enormous revenues that he could spend on public services to benefit the whole population. I am sure that the policy would be popular. A small number of people would, no doubt, complain about a 10 per cent. increase in the price of their drinks, but the great majority of the population would see the sense in raising prices to reduce the harmful level of alcohol abuse, which would lead to a much more civilised life for everybody. In particular, it would reduce the damage that is done to children by their parents' drinking. I urge my right hon. Friend the Chancellor and other Ministers seriously to consider raising the real price of alcohol through alcohol taxation.
  6.30 pm
  Mrs. Gillian Shephard: I am delighted to be called to speak in this Budget debate. I make no excuse for changing the subject to that of biofuels: that will be no surprise to the Economic Secretary. I am not deterred by the fact that we usefully debated biofuels 10 days ago, on 11 March. That debate, of which I should like to remind the House, allowed hon. Members on both sides to examine with remarkable unanimity the excellent report on biofuels by the Select Committee on Environment, Food and Rural Affairs, which was published last September. During the debate, the hon. Member for Southampton, Test (Dr. Whitehead) said that
  "to get the attention of the House for an idea, one has to enunciate it at least six times."—[Official Report, 11 March 2004; Vol. 418, c. 1731.]
  He went on to say that he had talked about a bioethanol escalator at least five times. I am aware that I am raising the issue of biofuels for at least the fifth or sixth time; I feel as though I am recycling in person.
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  The debate on 11 March illustrates the fact that although there is no problem in gaining the attention of the House on this subject, there seems to be a problem—perhaps rather less so since the Budget—in gaining that of the Government. In that debate, the Minister for the Environment said:
  "I can honestly say that I have attended few debates during which the case has been made so persuasively, and Members have spoken with such authority… All their contributions made a great deal of sense".
  He went on to point out—albeit to an audience of Members who had demonstrated that they needed no persuasion—that substitution of biofuels for fossil fuels would save millions of tonnes of carbon per year, and he added:
  "The question is: how can the Government support this process?"—[Official Report, 11 March 2004; Vol. 418, c. 1743–45.]
  At that moment—I am so glad that he is here—the Economic Secretary entered the Chamber, and there was a frisson of excitement as hon. Members allowed themselves to wonder for a moment whether an announcement was imminent—but no, he had come in to walk the Consolidated Fund (No. 2) Bill, and no pronouncement followed. Perhaps we will have one today.
  As the Minister for the Environment said on 11 March, there is enthusiasm and support from both sides of this House, from the other place, and from a huge range of organisations on the need for more Government help for the development of biofuels. Bioethanol and biodiesel offer proven environmental benefits compared with petrol, because they provide air quality benefits, security of fuel supply, and alternative markets for UK agricultural producers.
  Over the past year, the House has seen several well supported early-day motions, a number of debates and a unanimous report from the Select Committee. The Government can be in no doubt about the size of the political lobby in favour of more support for biofuels. Ministers, especially the Economic Secretary, have received many delegations. Nationally, there is strong support from the CBI, major manufacturers, Friends of the Earth, British Chambers of Commerce, the agriculture industry and many others. Until the Budget announcement last week, the collective view was that although the duty reduction of 20p per litre announced in last year's Budget was very welcome, it was not enough to stimulate further development of the industry. One witness to the Select Committee described biofuels manufacture in the UK as
  "An extremely small cottage industry",
  and on 11 March the hon. Member for Sherwood (Paddy Tipping) described it, rather unflatteringly, as "some chip oil recycling".
  The debate on 11 March—it was timely, because it took place before the Budget—revealed enthusiasm and support not only for our cause, but for a variety of solutions to the problem. The Chairman of the Select Committee, my right hon. Friend the Member for Fylde (Mr. Jack), pointed out that in order for the Government to follow EU guidelines targeting 2 per cent. biodiesel by 2005, there would need to be an 80-fold expansion of production, to 32 million litres per month, compared with current production of 400,000

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  litres per month. He drew the House's attention to an amendment to the Energy Bill tabled in the other place, which would
  "'require all producers selling road transport fuel in the United Kingdom to show that over the course of a calendar year a specified proportion of such fuel was biofuel."'—[Official Report, 11 March 2004; Vol. 418, c. 1718.]
  He added that such a requirement would be without cost to the Government. The hon. Member for Sherwood supported that proposal and suggested that the Government might consider a further duty derogation and capital grants and allowances. The hon. Member for Southampton, Test spoke of an ethanol escalator, which he has advocated with great knowledge on several occasions.
  The Government are not short of support or suggestions on the way forward—nor, indeed, of obligations into which they entered on their own account. Their own policy commission on food and farming recommended in the Curry report that
  "the Government should reduce duty on biofuels to that charged on other clean fuels."
  The Government have committed themselves by introducing the 20p per litre fuel duty reduction that was announced in the previous Budget. They signed up to the requirements of the EU biofuels directive, which will require the UK to notify to the EU Commission by 1 July this year the volume of biofuel that will be used in the UK by the end of 2005—in other words, those decisions will have to be made within the next four months. The Government's own energy White Paper, which was produced a year ago, gave a commitment to produce
  "an assessment of the overall energy implications of both a hydrogen economy and of large scale biomass based fuels, and to develop road maps of the possible transition to these new fuels and vehicles."
  n the light of all that, what does the Budget offer? The 20p per litre duty incentive in favour of biodiesel will be maintained until at least 2007; the same incentive for bioethanol, which was announced last year, will be introduced from 1 January 2005, again with the differential guaranteed until at least 2007; the Government will undertake consultation over the summer to examine in detail the implications of input-based taxation for biofuels; and there will be discussion on the applications of capital allowances to support investment in the most environmentally beneficial biofuels processing plants, with a view to announcing the outcome in the 2004 pre-Budget report.
  Those moves are positive in that they announce stability of duty levels for a given period and point to further consideration of the issue—as well as to further delay, of course. However, I am bound to say to the Economic Secretary that the Budget disappointed people in the field. Global Commodities UK Ltd., which is based in Dereham in Norfolk, says that the Government have failed to listen. The company had been hoping to boost the county's agricultural economy by using rapeseed oil for fuel production, but told the Eastern Daily Press on 18 March:
  "The Germans have just cut tax on their biofuels to zero. It is just not a level playing field. Farmers in Europe are growing rape seed to produce fuel but ours can't."
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  British Sugar, which was planning to create a £55 million bioethanol plant at Wissington in my constituency, said:
  "Many European governments have already put fiscal support measures in place that are proving sufficient to encourage the development of large-scale industries. Regrettably the level of support announced by the Chancellor today is insufficient to create a similar situation in the UK."
  So where do we go from here? The Economic Secretary has said that he has been impressed by the coherence and force of the lobbying for more action to help biofuels. He should know, because he has received, with great courtesy, many delegations and lobby groups on the matter. However, in the House of Commons and the other place, there is perhaps a need to provide a stronger focus at parliamentary level. I am therefore delighted that the hon. Members for Sherwood, for Nottingham, South (Alan Simpson) and for South-East Cornwall (Mr. Breed), all of whom knew that I intended to raise the matter this afternoon, agreed to join me in forming an informal, all-party pressure group to provide such a focus. The Economic Secretary will be hearing more from us.
  Earlier, I referred to the variety of approaches that the Government might adopt in encouraging biofuel production. Let me draw hon. Members' attention to another, extremely imaginative approach that was presented as an entry to the East of England Development Agency's Landmark competition, which is now reaching its final stages. The project, which is called Star of the East, is backed by the university of East Anglia in partnership with Powergen. It has attracted wide, cross-party support in Norfolk and Norwich. It proposes a renewables power station, based on a derelict site in Norwich, with a major research and development component, which will burn biomass, develop new ways of processing biofeedstocks and have a biofuels facility. If the Star of the East wins the East of England Development Agency Landmark competition, the Government will get high-level research, a renewables power station, genuine encouragement for biofuels, an outlet for agricultural produce and a world-class site. I shall happily send the details to the Economic Secretary.
  I have given the Treasury spokesman rather a battering this afternoon, but the Budget affects all aspects of our lives. Many hon. Members have concentrated on health. Biofuels could affect the health of the nation and, indeed, the international community. We have to reduce carbon emissions and be responsible, for the sake of this generation and the next. If the Government gave more encouragement to the production of biofuels, they could congratulate themselves on their initiative. I hope that they will consider increased encouragement in future.
  6.41 pm
  Linda Gilroy: It is a pleasure to follow the right hon. Member for South-West Norfolk (Mrs. Shephard) and to have heard her interesting contribution to the debate. It will be of interest to people in Devon and Cornwall, where biofuels offer new diversification potential in farming crops.

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  I welcome the opportunity to make a contribution to the debate on health. Successive Budgets since 1997 have provided sound public finances and the basis for significant increases in resources for all our public services. They have enabled us to tackle the significant under-investment of previous decades, which was perhaps most apparent in the health service.
  During the 1997 election campaign, it seemed as though people on every doorstep related a difficult story about employment. My constituency has experienced some of the most dramatic falls in unemployment in the country. I remember when my right hon. Friend the Member for Darlington (Mr. Milburn), who made an interesting contribution to the debate, visited my constituency in 1996. We discussed the way in which solving unemployment could contribute significantly to reducing poverty and the attendant stress and ill health. We have made progress on employment.
  In the 2001 election campaign, however, when I knocked on some 4,000 doors, I was struck by the fact that we still had much to do for the health service, even though we had put in place important building blocks on which to base the investment that was announced in the Budget that followed the election. I want to consider what the investment is achieving and what it will and can achieve. I also want to discuss the Government's commitment to spend money, which is matched by their commitment to efficiency. I stress to my hon. Friends on the Front Bench that that is matched by the commitment of our local health authority, primary care trust and acute hospital trust to ensuring that we get value for money. I want to make one or two points, of which my hon. Friend the Minister may be able to take note to help us to do exactly that.
  First, I want to consider the scale of investment as it affects Plymouth and what has happened since 1997. Funding for the former South and West Devon health authority increased from £367 million to approximately £500 million. That is a significant investment, which will set us on course for the 10-year plan to double health investment. Successive Budgets provide for that and dedicate so much more money to our health service than in the past.
  Primary care trust funding for Plymouth will increase from £230 million to approximately £272 million between 2003–04 and 2005–06. We will get a new diagnostic and treatment centre, the Vanguard project, which is funded with £129 million of private finance initiative money. We have a £39 million extension to the south-west cardiothoracic centre at Derriford hospital. In an intervention on my right hon. Friend the Secretary of State, I mentioned that that enabled us to increase the number of cardio-patients from 700 in the mid-1990s to 1,850 this year.
  I will answer the rhetorical question that I posed. Previously, people were referred to Bristol and Brompton, and the unit was built on the premise that some 500 people would be treated locally. We continue to send some 500 people to Bristol and Brompton but we are now treating 1,300 people. I suspect that many of them would have suffered an early death through the previous lack of investment in our health service.
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  In the primary care trust that now covers the former South and West Devon health authority area, the number of people who wait more than 13 weeks for outpatient treatment has decreased by a substantial 66 per cent. since 1997. That is one indicator of good value for money. Primary care trusts spend 75 per cent. of the money for the health service, thus enabling doctors to be our champions. That is accompanied by the radical new way in which hospital funding operates. The hon. Member for Sutton and Cheam (Mr. Burstow) referred to that method of payment by results. I make a plea to my hon. Friend the Minister to examine the way in which we might refine the tariff systems that are being introduced.
  The system has teething problems, which especially affect high cost, low volume services such as those that specialist hospitals like Derriford provide. For example, a cardiac bypass operation has the same hospital reference group and therefore the same tariff as a quadruple bypass operation. Such a system is likely to result in Plymouth hospitals trust losing more than £1 million in cardiothoracics alone, owing to distorting effects in the case mix. My hon. Friend knows that we, like many southern hospital trusts, have an accumulated deficit in hospital funding. I hope that we have the opportunity to discuss that with her before the system is fully rolled out.
  Other aspects need to be considered. For example, pay represents 65 per cent. of hospital costs. Derriford has an effective pay review programme to identify savings and ensure that the money is concentrated on front-line services. For example, it runs a locum bank to try to achieve some cost savings. However, the market forces factor that applies to the hospital reference group increases or reduces the tariff. Plymouth hospitals trust has had its tariff reduced by 7 per cent. from the average. Consequently, St. Mary's NHS trust in London, which has the highest market forces factor, will earn 42 per cent. more per patient than Plymouth hospitals trust for performing the same procedure. That cannot merely represent the differences in the cost factors that operate—undoubtedly, things are more expensive in London, but not by that amount. In 2000–01, Plymouth hospitals trust undertook a piece of work that revealed that the average cost per employee was £27,000. If we make a comparison with other trusts that have similar costs per employee, we find that East London and The City Mental Health NHS Trust has a 30 per cent. higher staff market forces factor than that trust, yet London weighting would amount to no more than a difference of 11 per cent. I therefore hope, as the hon. Member for Sutton and Cheam argued, that we will examine that before it is rolled out much further.
  The primary care trust is also working hard to deliver our community and mental health services in Plymouth. Against the background of considerable challenges, I am pleased that it achieved a two-star rating in the first such exercise this year. Those challenges arise from the health inequalities that have grown up over several decades. As a result of the doubtful legacy of my Conservative predecessor, I represent the poorest ward in England on the 1995 index of local conditions. Our primary care trust must meet challenges such that a man living in inner-city Plymouth, which I represent, will die 10 years earlier than his counterpart living in the leafy suburbs, which are covered by the same primary care trust.

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  The trust is committed to meeting those changes, and has some innovative programmes. For instance, it has one of the most successful smoking cessation programmes in the country at present. Were my right hon. Friend the Secretary of State for Health present, I would have congratulated him on his efforts to take part in his own smoking cessation programme and invited him, as I have done on two occasions already this evening, to visit Plymouth to see the good work being done in that respect. Another programme with which we have had particular success, and which in years to come—although it is not possible to see the immediate payback—will help to reduce social inequalities, is the work to reduce teenage pregnancy, which, of course, is often accompanied by single parenthood and the sort of poverty that leads to a vicious cycle of ill health, unemployment and other problems.
  Our primary care trust has also worked hard with the acute hospital to reduce the prescribing budget, without, of course, reducing the quality of prescribing practice to patients. That has been particularly successful, and it has been able to save seven-figure sums by entering into partnership with consultants in the acute hospital to try to get the prescribing regime right for those in hospital. Therefore when they come out of hospital, the PCT is able to ensure that their medication can continue in a value-for-money way.
  The trust has been so successful in doing this that I was caught in a double bind earlier this year when I was approached by constituents, Mr. and Mrs. Tomes, on behalf of their son, Ashleigh. In that regard, my right hon. Friend the Secretary of State mentioned in his opening speech the great advances that will come as a result of new gene therapies. Some of those are already on-stream, and some of them address rare diseases, so the medicines being developed are therefore required in small numbers, and their developmental costs are very high. If, as in the case of my constituents and those of some 39 other Members of the House, 40 people in the country can benefit from a particular therapy, the cost of developing it and then delivering it will be very high. Recently, I went with an all-party group and members of the Society of Multipolysaccharide Diseases to discuss with the Minister of State some of the issues in relation to prescribing for such rare diseases, and we were much impressed by his grasp of the human issues associated with parents knowing that a drug is available. In this case, the drug can range in cost between £80.000 and £140,000 per prescription per year, and more and more such drugs will come on-stream. That will be an additional challenge to already hard-pressed primary care trust budgets. We will work with the Minister of State, who is seized of the challenge that faces us in the future.
  The Red Book refers to the 10-year framework for science and innovation. I welcome the announcement that the key focus of the Government's commitment to science will be to ensure that clinical research plays its full part in generating health and economic benefits, and that that will be matched by the increase in national health service funding for research and development.
  This Government have made serious inroads into the health challenges, with serious money and serious investment. They are serious about delivering a framework to deliver good health outcomes from that investment, and about making sure that there are
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  enough health care staff, with good terms and conditions. Labour Members will know that that has come about by choice not chance, and if choice not chance informs the next election, this and successive Budgets will give the British people confidence to deliver the strong and stable economy that will allow our public services, which are so important to them, to continue to develop.
  6.56 pm
  Alistair Burt: It is a pleasure to follow the hon. Member for Plymouth, Sutton (Linda Gilroy), who made a skilful defence of the Budget in relation to the health needs of her constituents. I hope to match her eloquence, but I will not necessarily agree with all her arguments.
  It was quiet in Biggleswade last week. The still waters of the River Ivel were disturbed more by the gathering winds and gales that swept across the country at the weekend than by anything that the Chancellor said. That was not a great surprise—my constituents do not expect all that much from this Chancellor, and they were not disappointed. They recognised, as we all do, in all parts of the House, that it was a highly political Budget, of which my constituents were not the targets. It was a speech all about the Chancellor, and his targets were sitting all around him, rather than across the Chamber or among my constituents.
  The Budget included serious political gestures; let me pick out two—one good, and one less good. I am sure that mine is not the only constituency to have a significant number of historic, old churches and, given that, we welcome very much the removal of VAT on church repairs. It will make a difference, and will recognise the position of churches in local communities. Whether or not that is related to their churchgoing and Christian communities, those churches are symbols of what is good and great in our communities. Full marks to the Chancellor for that.
  As a political gesture, the council tax bribe was crass and will be ineffective. The whole point of a bribe is that one is not supposed to see it coming or to know that it is there. The more obvious it is, the less effect it has. My constituents are not fools. My pensioner constituents well understand that their council tax bills have been rising in recent years at the Chancellor's behest. They have seen money taken away from their county council as it has been shifted from rural areas to other areas. They have seen extra responsibilities put on the county council, which have not been paid for. To compound that by effectively taking money from their neighbours and children to pay for what the Chancellor has asked leaves a very sour taste. They will not be fooled—it is like a magician explaining to everyone what the trick is, doing the trick, and then expecting applause for the suspension of disbelief that he has just dispelled. The Chancellor gets no marks for such a crass political gesture.
  Before I say something about health, let me touch on two themes that are increasingly becoming a hallmark of the present Chancellor, and are perpetuated by the Budget. Notwithstanding all the things that are working well and are encouraging in today's UK economy—and how grateful the Chancellor must continually be to my right hon. and learned Friend the Member for

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  Rushcliffe (Mr. Clarke) and my right hon. Friend John Major for the economic legacy that they left him—the Chancellor is steadily taking risks and undermining the very basis of the things of which he can boast so grandly at the Dispatch Box.
  I am indebted for an excellent speech last Wednesday by my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), who patiently explained the cumulative and long-term beneficial effects of Conservative reforms on trade unions, taxation, the competitiveness of the economy, the regulatory framework and the nationalised industries. He explained that it would take time for those effects to show in the economy. The flip side, as he also explained, is the damage being done by failure to understand the impact of those changes. A move away from their beneficial effects is inevitable, but it too would take time to feed through.
  We are already seeing some signs. There is an obvious decline in the UK's competitiveness, which is recognised throughout the world. There is also the growing voice of business and industry, which observe the damage being done. Nothing in the Budget speech suggested to me that the Chancellor understood the danger of throwing away what he was throwing away. Truly, in the words of Miss Joni Mitchell, you don't know what you've got till it's gone.
  The second theme that the Chancellor is increasingly in danger of failing to understand is his inability to restrain his two impulses, towards spending and towards being in complete control. Spending we know all about: it is easy to spend. Whether it does any good, and whether it does the good that it is designed to do, we have already discussed today in relation to health, and we will continue to do so. As for the control issue, the determination to control was illustrated in the Budget by two gestures, one very significant and one throwaway.
  The significant gesture was the casually offered snub to the Prime Minister when the Chancellor made it clear that it was he who would decide whether the Government opted to join the euro—a point picked up earlier by the hon. Member for Luton, North (Mr. Hopkins) when he welcomed "the Chancellor's decision" not to join. I did not think it was the Chancellor's decision to make—someone will correct me if I am wrong—but the Chancellor, of course, makes clear that it is.
  The throwaway gesture was the Chancellor's statement that he accepted a recommendation in Kate Barker's report on housing, published that morning, without much consideration and with no consultation. The report recommended that in the regions there should be one body responsible for housing and planning—no doubt under significant Whitehall control. So there it is: goodbye local democracy. Goodbye to those who understand the importance of greater development in their area, not at regional level but at local level, to the local communities and authorities that must deal with the consequences.
  It is consequences that I want to discuss now. One of the consequences of increasing large-scale development will involve local health services. Bedfordshire will have
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  to accept 54,000 new houses in the next 17 years. Let me give the House an idea of the scale. The two biggest towns in my constituency are Sandy and Biggleswade, which between them have a little under 30,000 inhabitants. It has taken them hundreds of years to reach that size. In less than 17 years, new developments twice that size will come into being.
  In such cases, there is always an immediate pressure on health. Services lag behind development. My county is now irrevocably committed to years of catch-up. Bedford primary care trust already has a shortfall of some £19 million, and it was clear from the latest Government figures, released before Christmas, that there were no plans to close the gap in the next 20 years. Now there will be that further development. The proposal to take planning decisions further away from local communities and towards regional bodies, which the Chancellor so casually recommended, is scarcely good news for my constituents or those who plan health matters.
  It is not just about money. The Government, and the Secretary of State this afternoon, have made it clear that as far as they are concerned the major indicator in all issues related to health and public services is how much is spent—not how good a system is, how efficient it is, how welcome it is in a particular area or how understanding it is of that area's needs. Not all problems are solved in terms of how much is spent. Let me give two examples.
  First, there is the question of how the money is spent. Where in the Budget debate did we sense any confidence in the new GPs' contract and its effects, to which the Secretary of State did not refer? On 1 April. the new contract will come into force. What assurances have been given to primary care trusts, which are taking over its administration, that they will be able to provide a better out-of-hours service for their patients than GPs have been providing?
  We already know that the PCTs have been given a certain amount of money with which to handle the contract. We know how much the GPs were charged by those running out-of-hours services, and how much they intend to charge the PCTs; and we know that the two do not balance. What will happen? Here was an opportunity, just two weeks before the introduction of the new contract, to give PCTs some reassurance about what would happen should the money run out. There was no such reassurance. It is not a question of how much is there; it is a question of how it is used, and how it can be ensured that those responsible for services know what is to be done.
  The second problem is how to deal with the fact that more and more doctors and nurses are leaving the system. The system can have all the money it requires, but if it is not recruiting or retaining doctors and is losing nurses, it will not be able to deliver the services that it wants to deliver. Six months ago, the magazine Hospital Doctor published the results of a survey that indicated that up to three quarters of all hospital doctors intended to retire early. They cited stress, increased work load, declining clinical autonomy and a lack of support from management as key factors.
  Many of the issues are structural. They can be related to an overbearing, over-prescriptive regime in which targets and quotas have played their part. Do the

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  Chancellor and the Government not see that putting money into an inadequately reformed system does nothing to alter those problems? All that happens is that raised expectations are followed by frustration and disappointment as doctors still feel unable to carry out their duties. They leave a poorer service, and patients lose faith as a result. I detected no understanding of that in the Budget debate and the Chancellor's remarks.
  Two weeks ago, the New Statesman reporter Glenda Cooper dealt with the issue of nurses in the NHS. She wrote
  "the NHS still needs to find 35,000 more nurses during the next five years—while at the same time a quarter of the workforce is due to retire, and up to one in five nurses drops out before the end of training."
  She referred to a recent MORI poll which found that one in 10 nurses planned to leave the profession in the next two years, chiefly because of not money but the inadequate shift pattern and the work that they were expected to do. She reported:
  "Nursing, they say, has become divorced from caring, sisters have been reduced to ward managers, and degrees and diplomas have become more important than bedpans and bedside manners."
  That is nothing to do with the money that goes into the health service; it is all to do with understanding the health service, and making the reforms that are needed to retain those valuable personnel. For all the talk and, I am afraid, all the Secretary of State's bluster today, I sensed no understanding of needs of that kind, or of the importance of retaining key people who make decisions.
  Let me end with a short plea. As I said earlier, I welcomed the concession on VAT related to church repairs. Will those at the Treasury have a word with the Minister of State, Department of Health, the right hon. Member for Barrow and Furness (Mr. Hutton) about the charging of VAT on capital projects for the NHS? Where public appeals have been launched to support them, might there be any relief of VAT required for building works resulting from such appeals?
  Recently, the Primrose appeal in Bedfordshire raised more than £2 million to support a new cancer unit at Bedford hospital. Donors throughout Bedfordshire were surprised and disappointed to learn that a concession given to the Macmillan charity, enabling the VAT that it would have to pay to be recovered through an internal mechanism in the health service, would not be available for the bulk of the money raised for the building itself.
  My hon. Friend the Member for Mid-Bedfordshire (Mr. Sayeed) and the hon. Member for Bedford (Mr. Hall) have visited the right hon. Member for Barrow and Furness, and I think that we have a ready ear there. We may be able to find a local solution to our particular problem, but I ask the right hon. Gentleman to investigate whether, where public appeals have been made on behalf of capital projects that will benefit the NHS, there is a way of ensuring that VAT that would otherwise be chargeable is spent on patient care, so that people raise money for treatment, not tax.
  The NHS is a great service, to which I am personally very strongly committed. My father worked all his life as a GP in the health service. My brother is a consultant anaesthetist and neither my wife nor I or any of our children have any private medical insurance. We are
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  members of and wholly dependent on the NHS. Where the Budget has been singularly lacking in terms of response from the Government has been in understanding that money is not the answer, and in the determination of the Secretary of State to continue with partisan and rather tedious arguments and discussion of what we might do. It is not what the debate on the current NHS is all about, and I have offered some examples for consideration. I am perfectly confident that when my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) replies from the Opposition Front Bench today and when he and our colleagues have the opportunity to run the service themselves, the public will finally get not only the Budget debates that they deserve but the NHS care that they have paid for, deserve and are entitled to expect.
  7.11 pm
  Sir George Young: It is a pleasure to follow the high-quality speech of my hon. Friend the Member for North-East Bedfordshire (Alistair Burt), who focused on the health service but began with some comments about broader issues in the Budget. It is quite difficult to explain to a 69-year-old who may have modest income and modest capital that they will get none of the Chancellor's munificence, whereas a 70-year-old who may be infinitely better off will get the £100. That bribe, as my hon. Friend called it, says something about the Chancellor. For seven years, he introduced complicated, focused, targeted means-tested benefits. Now, at the end of the seven years, he has cast that aside and is bringing in a universal benefit. That seems to say something about the failure of his strategy. He introduced those highly complicated schemes and is now moving from that towards universalism.
  I welcome the increase in resources being devoted to the NHS. The Secretary of State said when he opened the debate that we still have a long way to go, which is indeed the case. I got a fax last week from the Southampton University Hospitals NHS Trust about a constituent waiting for a scan appointment at the Wessex neurological centre. I quote what it said:
  "The waiting list for such an examination currently runs at around 52 weeks."
  The constituent in question had already been waiting for a scan for over a year. At a time when we are all being told that early detection leading to early treatment dramatically increases the prospects of recovery and survival, long waits of 52 weeks after a referral for examination are simply unacceptable.
  I know what the Minister is likely to say in response—that extra resources have been allocated, and that it takes time to procure the scanners and to train the staff. I want to look at the claim on resources. This year, there has been a 9 per cent. increase in cash resources for the NHS in Hampshire. With inflation at around 2 per cent., people might think that that left a healthy margin for real terms growth, but they would be wrong because 7.8 per cent. of the 9 per cent. is accounted for by what in health-speak is called "tariff growth."
  Tariff growth is the unavoidable increase in existing costs before one thinks about new commitments. It covers the national insurance increase, the reduction in

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  doctors' hours, wage increases, the increased costs of drugs and so on. In other words, real growth is about 1.2 per cent. However, most of the trusts in Hampshire are running at a deficit. The cumulative total of deficits in Hampshire is £20 million. The trusts have been told to use the growth money to address the deficit and that £20 million is about 1 per cent. of the budget, which almost equates to the growth money.
  Also, in Hampshire many trusts have survived by transferring capital to revenue in order to balance the books, but that practice will no longer be possible because the Government have stopped it. That will exaggerate the underlying imbalance between revenue and expenditure. Therefore, in effect, there is precious little growth in Hampshire and consultation is about to start on difficult measures to balance the books.
  That leads me to a point that I have made before in these debates about the way in which money is distributed. My constituents get less per capita for health than anywhere else in the country—we are now 21 per cent. under the national average, and it was about 16 per cent. when this Government came to office. Therefore, although the totality of NHS resources is increasing, we are getting a reduced percentage of the total available.
  Of course, I accept the argument that resources need to be allocated according to need, and that there are parts of England with more severe health challenges than those that face us in Hampshire. What I do not accept, and what I have never seen justified, is that we can get by with £79 as opposed to £100—the average in England. There are wards of deprivation in Andover. Even people on above average incomes get ill. Indeed, health spend is often linked to longevity. Some of the costs in Hampshire are higher than elsewhere. For example, we spend more on agency nurses because of the difficulty of recruiting full-time nurses in a high-cost housing area such as Hampshire. If the funding we received was 85 per cent. of the national average as opposed to 79 per cent., we could probably cope. I urge the Government to revisit the distribution formula and to abandon the unjustified discrimination against the south-east, which we have seen not just in health but in the revenue support grant.
  To echo what my hon. Friend the Member for North-East Bedfordshire said about what the Secretary of State did not mention, a lot of reforms are taking place in the NHS at the moment and the right hon. Gentleman did not touch on any of them. An entirely new national programme for IT is coursing through the NHS. He did not mention the new GP contracts and the new out-of-hours service, which in my constituency looks as though it will mean that people will no longer be able to go to Andover hospital after 11 pm. They will either have to call out a GP or go to Winchester. We have the new contracts, the working-time directive and we are moving towards the national tariff and payment by results under the reforms to NHS financial flows. None of those was touched on by the Secretary of State but they are all vital matters that the NHS is addressing at the moment.
  Nor did the Secretary of State say one word about foundation trusts. We know that it is a sensitive subject for the Labour party but that is an issue that many of those who work in the NHS are now addressing. With
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  foundation trusts, the Government are confronted with a dilemma entirely of their own making. They have said that all the capital borrowing by those trusts from the City will score as public expenditure, and will have to come out of the NHS Brown envelope. Therefore, the more successful the foundation trusts are in using that freedom to borrow, the greater the penalty the rest of the hospitals will have to pay in having their capital reduced to accommodate that growth. The NHS under Labour is like a hostage ingeniously tied up by his captors. The more he struggles to release the ropes around his hands, the tighter the noose around his neck.
  I have two possible "wave la" trusts in my constituency, and the one-off grant of £175,000 in no way covers the transitional costs, many of which will recur. How much will they be able to borrow? In a letter to me dated 11 March, the Minister of State told me:
  "The Independent Regulator sets the prudential borrowing limit for each NHS Foundation Trust on the basis of a prudential borrowing code... If you have further questions about the code, you may wish to contact the Regulator".
  So the fortunes of the trusts and, dare I say it, of the Government are now in the regulator's hands. What view will he take of the trusts in my constituency that are well run, but that have an excess of expenditure over income for the reasons that I have touched on? The regulator may well say that, because of the accumulated deficit, the imbalance on the revenue account and the backlog of maintenance, the ability to fund debt is very low. They may end up getting less money out of the new system than they would have received, had they remained under the NHS. That would be a severe blow for the Government's health policy.
  The message from the regulator is rather stark. I was reading NHS Magazine yesterday. Bill Moyes, the regulator, was quoted as saying:
  "Convince us you can cope as independent entities."
  He makes it clear that his function is about managing risk, not performance. He asks:
  "Are applicants financially strong enough? Are they financially stable?"
  Well, towards the end of the year, the Government may have some difficult questions to answer if many of the applicant trusts find that they are worse off under the new regime than they would have been under the old one.
  Mr. Lansley: My right hon. Friend and I have discussed this matter, but it may be of interest to him—if not to Health Ministers, who are not present—that I have looked at a "wave 1" trust's service development strategy and it is not entirely in the hands of the independent regulator. That trust, at least, anticipates that nearly £50 million of its depreciation charge—its revaluation reserve on its balance sheet—will be replaced by public dividend capital. Of course, as that involves equity, rather than debt, it may increase its borrowing ratio, but a lot of hospitals elsewhere in the NHS might wonder where that money will come from on the Government's balance sheet.
  Sir George Young: My hon. Friend makes a good point, and if I were a Health Minister approaching a general election, possibly 12 months away, I would be deeply worried about ending up with egg on my face

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  because of that new policy, under which the trusts mat have been encouraged to apply for foundation status may find that they are worse off.
  In passing, I mention the senseless cap on private patient income for foundation trusts. Hospitals in my constituency could increase their income and spend more money on treating NHS patients if it were not for the cap on the percentage of the income that they can generate from private patients—a cap that was not there for the first seven years of the Labour Government. The Government managed perfectly well without that cap until now, but they are now introducing that wholly unnecessary restraint on the ability of NHS hospitals to raise money for NHS patients.
  I want to end with a final word about a subject that has been raised twice at Prime Minister's questions. I have visited and kept in regular contact with a national charity, the Macular Disease Society, as it is based in my constituency. It is a membership society for people with age-related macular degeneration. Ministers will be well aware of the anxiety about the delay in introducing the treatment, photodynamic therapy, for wet age-related macular degeneration. Up to 7,500 new cases of that aggressive condition occur each year, and patients can go from seeing well to severe sight damage in three months.
  The Macular Disease Society is in close touch with patients, who are still being asked to pay £2,000 a time for up to six treatments, and consultants, whose primary care trusts tell them that they are not yet funded to give the treatment on the NHS. Ministers know that some 50 clinics in the country are currently capable of delivering the treatment, yet Ministers insist that training and staffing issues, not cost, are delaying implementation. The truth is that strategic health authorities and PCTs have been given the freedom to delay paying for treatment up to the end of June, and those who have not made provision in their budgets are doing just that. The result is that patients either have to find £2,000 per treatment, to be carried out by the same NHS consultant, or they start to lose their sight. Consultants across the country can deliver the treatment, but they have been refused the funding.
  In many letters to Members of Parliament, Ministers have said:
  "We will do all we can to ensure that services which have the ability to expand sooner than the nine month period do so and that new services come on stream as soon as they are able."
  When he winds up, I should like the Economic Secretary to tell us exactly what those Ministers have done. The treatment was approved in September last year by the National Institute for Clinical Excellence and the Department of Health, but Ministers still have not given direct orders to SHAs and PCTs to start delivering it through existing clinics and treatment centres.
  Although more than 100 patients a week are diagnosed and will be treated in the well-managed hospitals that offer the treatment, others will be invited to pay £2,000 for their first treatment or they will lose their sight and suffer appalling distress. We have made many demands of the Government during the debate, but it would be helpful if the Economic Secretary could say that, between now and June, the Government will take the necessary steps to ensure that the people who have that disease will get the treatment that they need, without having to pay £2,000.
  7.24 pm
  Mr. Robert Walter: The Secretary of State for Health opened the debate with his endless good news story, but some of my constituents would treat his remarks with incredulity. When I first became a Member of Parliament in 1997, I could proudly say that my constituency came top of all lists in respect of health. We had the shortest waiting lists and the shortest waiting times, and so on. There was anecdotal evidence of people moving to Dorset to get treatments that were paid for there—I think of in vitro fertilisation treatment, for example. In those days, I received few complaints from constituents about treatment under the national health service, and those that I did receive were dealt with promptly, with treatment usually almost instantaneous. I am afraid that the story today is very different.
  Several of my hon. Friends have referred to out-of-hours services. The chairman and chief executive of the primary care trust in my constituency explained to me the other day how the new out-of-hours contract was envisaged for patients in Dorset. No longer would patients concerned about a child at home with a temperature of 104° at 10 o'clock at night be able to call their general practitioner in the knowledge that he would come around within a hour or so, be somewhat reassuring and deal with the problem.
  Now, people will have initially to call NHS Direct. They will then be redirected to a call centre in Dorset where a nurse will speak to them. The nurse will assess the problem and, if necessary, will suggest that the patient should visit a treatment centre, which could be anything up to 40 miles away from where they live. If the patient thinks the problem is serious and says, "I'd really like to see a doctor", the nurse is likely to say, "If it is that serious, we will call an ambulance for you." No longer will doctors be available to visit patients out of hours anywhere in the county of Dorset. When I suggested that that was a serious deterioration in service, I received the reply, "Of course, people have been abusing the service." Well, so be it: that is just one example.
  A month ago, a gentleman who had been diagnosed with prostate cancer visited my surgery. The PCT had funded a visit to a specialist centre at the Royal Surrey county hospital, which is some distance away, and he had to make his arrangements to get there. The specialist recommended a certain treatment for my constituent's prostate cancer, and he went home, expecting to be sent details of an appointment for it, Instead, he got a phone call from his doctor, saying that North Dorset PCT would not pay for it. I took up the case with the PCT and got the same answer.
  Lo and behold, another man with the same condition came to my surgery last week having been through the same cruel exercise. He had been sent to a centre of excellence for prostate cancer treatment and a treatment was recommended, but his PCT would not provide the money for it. When we told the PCT that a number of patients in Dorset had received the treatment, it said that the first patient had been given it by mistake because the hospital had not realised that the PCT would not pay. In the case of the second patient, we were told, "Ah yes, but he was under a different PCT in Dorset." If that is not postcode prescribing, I do not know what is.

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  This morning—to add insult to injury—I received an e-mail from a lady whose family has a record of cancer. She said that she wanted a mammogram so that she could be reassured, but the PCT will not pay for one because she is 64 years old, so she will pay for one herself simply to get that reassurance. If that is what the Secretary of State calls equality of access, it has a very hollow ring to it.
  I should also like to take a more global view of the Budget. I listened to the Chancellor and read the Red Book, and it was interesting to compare what they said with what appeared in the report on the British economy produced only this month by the International Monetary Fund. I have somewhat greater confidence in the IMF's assessment of the British economy than in the Chancellor's, and its executive board assessment of the UK said:
  "Directors, however, noted that the buoyancy of domestic consumption has also been fuelled by robust increases in house prices and household debt, which has increased uncertainty on future developments… Directors stressed that the possibility of a hard landing in house prices and consumption cannot be ruled out particularly given uncertainties about the distribution of household assets and liabilities. To minimize these risks, prudent macroeconomic policies are needed… Noting the widening of the fiscal deficit… over the last three years, Directors concurred that the fiscal deficit needs to decline in the period ahead in order to observe the fiscal rules, strengthen fiscal fundamentals, and support monetary policy during the cyclical upswing. However, many Directors recommended a somewhat larger decline in the fiscal deficit in the medium term than that projected in the November pre-budget report."
  That assessment was written before last week's Budget statement. In order to achieve fiscal balance, the directors believe that fiscal policy and private investment in the future
  "should be more consistent with long-term fiscal requirements."
  The assessment continues:
  "Directors in general called for moderating the growth of spending in areas where current plans involve sharp increases, because this would limit… inefficiencies… they recommended that the authorities"—
  that is the Treasury—
  "take further measures to ensure that increased spending is delivering value for money."
  The assessment adds:
  "In contrast, staff"
  IMF staff—
  "saw the deficit declining only modestly over the medium term without new measures, to 2¾ per cent. of GDP, some 1 percentage point above the authorities' projections. Thus, additional measures were likely to be needed. In particular, staff saw a case for moderating the government's ambitious spending plans, as a more gradual increase in public spending would reduce the risks of inefficiencies."
  The staff believe
  "the case for fiscal adjustment, and specifically for revising the government's ambitious spending plans, was strengthened by the risk that the latter could involve significant inefficiencies.… the evidence that increased spending was bearing commensurate fruits was still scarce".
  That point has also been stressed in the most recent report on the United Kingdom from the Organisation for Economic Co-operation and Development. With
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  staff views like that, I am not surprised that the Chancellor excluded himself from consideration as the next managing director of the IMF.
  I want also to concentrate on overall public spending and the consequent borrowing. The main focus of this year's Budget was public spending and, in particular, the announcement of the Government's overall spending target for the next comprehensive spending review, covering the period to 2007–08. In real terms, total managed expenditure is set to rise by 4 per cent. in the next financial year and by an average of 3¼ per cent. over the following three years. As a result, the share of public spending in GDP terms is projected to increase to 41.9 per cent. in 2005. The allocation of that extra public spending will be settled in the summer comprehensive spending review.
  The Treasury's projections suggest that that increase in spending is consistent with the Chancellor's famous golden rule, which says that, across the economic cycle, the Government will borrow only to finance investment. According to the Chancellor, the current Budget deficit is forecast to halve over the next year and to return to balance by 2006–07, with increasing surpluses expected thereafter. The Treasury, however, has already increased its forecast for overall public sector net borrowing in 2004–05 to £33 billion from the £31 billion in the pre-Budget report and the £24 billion in last year's Budget. Let us consider the Treasury's record; we should not forget its forecasts for the current year. The figure was £10 billion in the Budget of 2001, and it went up to £15 billion in the pre-Budget report of that year. In the 2002 Budget, the figure was £13 billion; in the pre-Budget report of 2002, it was £24 billion; in the Budget of 2003, it was £27 billion; in the pre-Budget report of 2003, it was £37.4 billion; and, in this Budget, the figure has reached £37.5 billion. That is above the Maastricht limit with which the Chancellor has proudly boasted compliance in the past. It is almost four times what he said it would be at the last election.
  When considered by independent forecasters such as the ITEM Club, it is clear that the outlook is little changed in subsequent years, with net borrowing projected to decline to only £31 billion in 2005—06, £27 billion in 2006—07 and £23 billion by 2008—09. In its view, the Chancellor's borrowing projections remain over-optimistic. He continues to expect a very strong rebound in tax revenues—nearly 8 per cent. in each of the next two years and well ahead of economic growth in subsequent years.
  The Government also assume substantial increases in the tax take, particularly from income tax, corporation tax and, to use their words, "other taxes and royalties". Nevertheless, the assumptions of revenue buoyancy continue to appear to me and to most forecasters as too optimistic. They imply a large rise in effective tax rates, which seems implausible in the absence of increases in actual tax rates, which we know will not happen before the election.
  The Treasury's detailed forecasts show receipts from income tax and social security contributions rising by 7.3 per cent. in 2004—05. That is well ahead of the likely increase in household income. According to the Treasury, corporation tax receipts are forecast to increase by more than 21 per cent.—about twice as fast as company profits. The ITEM Club's forecasts suggest that overall Government revenues will be about

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  £4 billion below Treasury projections in 2004–05, implying public sector net borrowing of £37 billion. The forecasts expect a revenue shortfall of £7 billion compared with Treasury projections in 2005–06, with net borrowing of £38 billion. That would mean that, even on his definition, the Chancellor would break his golden rule in 2005–06.
  The National Institute of Economic and Social Research says that
  "most people would assess whether the Golden Rule has been met by adding up current surpluses and deficits in each year of the cycle in question".
  However, the Government do not do it that way; they have their own way of looking at it. They have presented no justification for the approach that they adopt. As the institute says, they have
  "merely asserted that it has always done this. Obviously an error is not corrected simply by being of long-standing".
  In conclusion, the Government are projected to borrow £37.5 billion this year, and nearly £155 billion over the following five years. All independent commentators say that that is too optimistic. I know that the strategy will be aided by the £15 billion in savings identified by the Government's efficiency expert, Peter Gershon, but the only other way to look at the issue is through further rises in taxes. The Budget confirms that the Chancellor wants further rises in taxes—there have been 60 since he became Chancellor—but that there will not be any further rises in tax rates until after the general election. Without prosperity, the Government will not be able to deliver without increasing taxation after the next election.
  7.39 pm
  Mr. Crispin Blunt: It is always a pleasure to follow my hon. Friend the Member for North Dorset (Mr. Walter), who gave us an elegant explanation of why the Chancellor's curriculum vitae has remained firmly in London rather than being dispatched to Washington. I hope later to pick up on the wider economic themes that he outlined.
  First, however, I want to pick up the debate's health theme. I listened to the remarks of my right hon. Friend the Member for North-West Hampshire (Sir George Young) on expenditure in Hampshire. I want to lay claim to his speech and say simply, "Delete Hampshire; insert Surrey." The situation is precisely the same in Surrey, which is why there is a crisis in the public service provision of education and health in Surrey, given the relative expenditure in the south-east.
  As I listened to the Secretary of State produce his litany of figures on the numbers of doctors and nurses, it seemed like a flashback to the 1980s when I watched the then Prime Minister—I watched from outside the Chamber—at Question Time reciting statistics in exactly the same fashion about how the health service was improving. Of course, it was improving then, because there was a real increase in health expenditure throughout the time of the Conservative Government. However, a remark made by the hon. Member for Luton, North (Mr. Hopkins) was especially important. He said that the output per unit of resource was quite remarkable during those years. The Conservative
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  party's focus on reform in the health service ensured that the output per unit of resource was sustained throughout its period of government.
  If the Government wonder why they have such a trifling increase in output per unit of resource despite throwing such an enormous amount at the health service, perhaps I can give one small explanation by citing an example that a junior doctor in my local hospital gave me. He pointed out that the Government claim that there are 10,000 more doctors than there were in 1997, of whom 5,000 are junior doctors. However, one should examine the number of hours for which those doctors work. Their hours have reduced from 72 hours a week in 1997 to 56 now. When the Government calculate the increased number of doctors, they calculate the number of whole-time equivalents on the basis of doctors working 40 hours a week. If we use the Government's methods to calculate whole-time equivalents by considering hours worked on the ground, we find that there are perhaps 1,447 fewer doctors in terms of hours worked. That explains why output has failed to keep up with the resources devoted. Of course, the figures calculated by the junior doctor are based on an assumption about the reduction in the number of hours worked by doctors, but it makes a fairly convincing case for why the Government face enormous difficulties in achieving a rise in output that will begin to measure up to the resources provided to the health service.
  It was a huge treat to hear the eloquent testament of the former Secretary of State, the right hon. Member for Darlington (Mr. Milburn), to the property-owning democracy. A friend of mine, Mr. Peter Scrope, was the right hon. Gentleman's opponent in Darlington in 1997, and he would have enjoyed the philosophical journey that the right hon. Gentleman has undertaken over the past six or seven years.
  Mr. David Ruffley: A bit late.
  Mr. Blunt: Better late than never. The right hon. Gentleman's eloquent testament to the need for reform and a property-owning democracy was extremely welcome, even though it came from the other side of the House.
  I would have been more impressed by the statistics cited by the Secretary of State, and, indeed, the case presented by the right hon. Member for Darlington when he was Secretary of State, if the figures had not been subject to the most shocking manipulation. Targets themselves manipulate. They manipulate the behaviour of the health service as clinicians' priorities become secondary to the political priority of delivering targets.
  Of course, the measurement of achievement of those targets is manipulated. We are all aware of waiting lists for waiting lists and of the redefinition of parts of accident and emergency departments as observation wards so that it can be claimed that people have been moved out of those departments. A deeply unhappy story from my constituency shows political manipulation in the health service through the amalgamation of Crawley and East Surrey hospitals into a single trust. Simply disgraceful decisions were

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  made to serve political interests in the marginal Labour seat of Crawley. I have made this case many times, and I shall continue to remind the Government of it. The exercise not only put patients in the area served by the trust in danger by twisting clinical priorities to fit the political necessities of the hon. Member for Crawley (Laura Moffatt), but had a financial cost: some £50,000 a month of health money was taken away from the people of the United Kingdom because the subsidy to pay for the exercise came directly from the Department of Health. Additionally, there was a £200,000 study to investigate the possibility of building a new hospital at Pease Pottage, although it found that that would be economically impossible unless one wanted to bankrupt the entire health economy in east Surrey and northwest Sussex.
  The right hon. Member for Darlington was correct about the Budget's political astuteness. In many ways, it did virtually nothing, and I suppose Conservative Members should be grateful when a Labour Chancellor does virtually nothing because that is usually much better than his doing anything at all. However, my hon. Friend the Member for North-East Bedfordshire (Alistair Burt) pointed out the totally non-Budget elements of the Budget—the acceptance of the Barker report and the appalling proposal that planning should take place at regional level. That represents a total demolition of local democracy because it will avoid responsibility being exercised by people on the ground who are closest to where planning decisions should be taken. They will not be able to decide, in the interests of people whom they represent, whether they want a liberal or restrictive planning process.
  My hon. Friend the Member for North-East Bedfordshire referred to the excellent speech on Wednesday by our right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley). He talked about the length of the economic fuse in the hands of any Chancellor. The Chancellor claims credit for the current performance of the economy, but one should examine the trends that he inherited in 1997. Growth had been sustained since 1992–93 and the fiscal position was improving extremely rapidly. Inflation had been tamed—we had delivered inflation of 2.5 per cent. in 1997—and unemployment was falling so fast that it made a complete mockery of Labour's policy to deal with youth unemployment. Its election manifesto contained a target of dealing with 250,000 young unemployed people, but by the time it got into office, 167,000 of them had already found work. We had a 10 per cent. savings rate, and our future pension provision for the people of the United Kingdom was the envy of the rest of Europe. We also had a high position in the competitiveness league in the developed world. The Chancellor received a golden economic inheritance that was built on work done in the economy, which to a degree had started in 1976 when the International Monetary Fund began to dictate economic policy to the previous Labour Government.
  The Chancellor has gambled successfully on his growth forecasts over the past year or two. His growth forecast last year turned out to be a successful gamble. His Budget presents us with a growth forecast for the next two years of 3.25 per cent., which is well above the
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  trend. Nearly 20 years ago, when I was stationed in Germany with the Army, I spent some of my quieter evenings at the casino in Bad Oeynhausen indulging in a little gambling. A friend and I had a little system. We went around the roulette tables to find a trend, which we would bet against. For an uncomfortably long time, we kept leaving the casino with more money than we went in with. Eventually, the probability of that trend continuing meant that we went back where we started.
  My point is that trends end. To rely on a presentation of economic growth of 3.25 per cent. for the next two years and 2.75 per cent. for 2006 is a pretty serious gamble against an underlying position that has wholly changed since 1997. Public expenditure is set to rise by £120 million a year by 2007–08. Private debt has risen by 93 per cent. to nearly £1,000 billion since 1997. The private savings rate collapsed from 10 per cent. down to a lowly 3.3 per cent. a couple of years ago. It is now at 5 per cent. Our pension provision is worsening rapidly from the position inherited in 1997, when the UK was the second largest relative investor in countries as remotely connected to the UK as Mexico. That investment happened because there was an enormous amount of money, managed by the City of London, that would provide for the future pensions of the people of the UK.
  On the television programme "If… The Generations Fall Out", to be shown, I think, on Wednesday, people speculate that our future pensioners will not be properly provided for and there will be a huge battle between their interests and those of the working population. That was simply not the case in 1997. The Chancellor has presided over a huge missed opportunity.
  The scale of private debt and public debt is accelerating. The simple fact is that those trends are not sustainable. There will have to be a reckoning, which will come at the cost of economic growth. We will need a much tighter fiscal policy, which will mean tax rises and, quite probably, expenditure cuts from the plans presented in the Budget.
  7.52 pm
  Mr. Mark Hoban: I note that I am the fifth consecutive Opposition Member to speak. I wonder why so few Labour Members are prepared to defend their record in a health debate.
  I want to deal with three aspects of the Budget as they affect my constituents. The theme is clear: we should never underestimate the impact of Budget speeches on individual lives. A sweeping gesture by the Chancellor in the Chamber might generate favourable headlines on Budget day, but it could have a long-standing, negative impact on our constituents' lives.
  The first aspect has its origins in the 2002 Budget, when the Chancellor announced a zero-rate ban for corporation tax. Ministers told us that that was to stimulate enterprise. It was based on the false, and perhaps naive, assumption that only limited companies were entrepreneurial. We know, however, that partnerships, sole traders and other unincorporated businesses are also entrepreneurial. Many commentators explained that the measure would encourage unincorporated businesses to incorporate to reduce their tax bill—many hon. Members also made

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  that point. Indeed, I explained the problem both on the Floor of the House during the Budget debate and in the Finance Bill Committee.
  The Paymaster General recognised what would happen, and I am grateful to Taxation for unearthing a quote from the debate in the 2002 Finance Bill Committee, in which she said:
  "the underlying issue is whether the Government have struck the right balance between incentives to incorporate and to remain unincorporated… Surely small businesses will not look a gift horse in the mouth."—[Official Report, Standing Committee F, 16 May 2002: c. 116.]
  Indeed, they did not. What was predicted at the time transpired. A flood of businesses wanted to incorporate to benefit from the lower tax bills that incorporation brought. It was the right thing to do. Who would pass up the opportunity to reduce a tax bill in such a straightforward way, particularly when invited to do so by the Paymaster General?
  However, the increase in the number of incorporations led to the announcement last week of a 19 per cent. tax rate on profits distributed by small companies to minimise the tax benefit that owners of limited companies had, compared with those whose income from their businesses was liable to income tax. It was one of the Chancellor's six stealth taxes announced last Wednesday, taking the total from 60 to 66. It was obvious that that would happen. We knew that business would take advantage of that to reduce the tax bill and, as the Paymaster General said, no small business would look that gift horse in the mouth.
  The Government should pay heed to a lesson: changes in the tax system have a behavioural impact. A tax system that is biased towards a particular type of economic activity or organisation will encourage people to move in that direction. The Government should not be surprised if that bias in the system is exploited by people taking advantage of it. Indeed, the further the tax system moves away from a neutral view on a type of economic activity or organisation, the more likely it is that businesses will take the opportunity to exploit that loophole and subvert the Government's objective. Indeed, how can businesses plan for the future if the Government can change their mind within two years about something as fundamental and important to business as changing the nature of taxation for small businesses?
  The second aspect of the Budget that I want to touch on is the Lyons report on relocating civil servants out of London and the south-east. The Chancellor said that
  "the Government are accepting and will implement the Lyons Review for the relocation of civil service jobs. We will relocate out of Whitehall a total of 20,000 public sector jobs, creating new opportunities in the regions and nations of the United Kingdom."—[Official Report, 17 March 2004; Vol. 419, c. 328.]
  The core of the Lyons report focuses on the additional costs incurred by Departments of being in London and the benefits of dispersal to the regions that gain the jobs. Tucked away towards the back of the report, in appendix A on page 101, is the suggestion that nearly 1,000 jobs in my constituency should be transferred to Wales. Those are jobs at the Office for National Statistics in Titchfield. I have to confess that I had not realised that Titchfield was part of Whitehall, as the Chancellor sees it. Clearly, there is a poor grasp of geography in the Treasury.
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  I accept that we need to make savings in the running costs of government—my right hon. Friend the shadow Chancellor has made that case so persuasively that even the Chancellor has tried to catch up—but I wonder whether the Minister can tell me the likely cost savings of the move. As I said, the Lyons report was clear about the cost of locating Departments in London, but it was less robust on the costs of locating them in the south-east. If we add to that the circumstances of the individual department of the ONS—the national pay rates for its employees and the lack of a supplement for working in Hampshire—it seems that there would be no cost savings to be gained from transferring employees from Titchfield to Wales. Indeed, the ONS owns the building in Titchfield, so no rental costs will be saved by moving the employees and that department to Wales.
  It is hard to see what cost savings will be brought about by relocation. Has an assessment been made of the impact of such moves on the local economy? The Lyons report states:
  "Dispersal of government jobs is likely to have positive effects for regional economies with direct spending for departments and their employees creating jobs in addition to those relocated… this additional impact ranged from neutral to one extra new job for every two moved."
  If that is the case for regions gaining jobs, surely the reverse is true for those regions losing jobs. What assessment has the ONS made of the impact of a move to Wales on the 1,200 to 1,300 employees at Titchfield and what are their chances of finding alternative jobs in the area? Many of those who work in Titchfield are working mothers, for whom the prospect of moving to Wales may not be practical. There are a number of employees whose family arrangements are tied up with living in the area. I understand that no assessment has been made of the number of people who are prepared or able to move out of the area.
  One reason that the ONS is such a popular employer in my constituency is the flexibility it allows to those who have particular care obligations to their families, whether that concerns an elderly relative or children. The Government's aim is to encourage more women to work, and to encourage more single mothers to find work to support their family, but moving that department away from Titchfield is likely significantly to affect many of my constituents who work for it. The Chancellor seemed very proud to be shifting those jobs to the regions and nations of Britain, and he welcomed the move in his Budget speech, but do not let him think that what he proposed is welcome in every household in our regions and nations.
  I turn finally to a point that my hon. Friends the Members for Reigate (Mr. Blunt) and for North-East Bedfordshire (Alistair Burt) made about the Barker report, published on the same day as the Budget. The report was significant; it announced that between 70,000 and 120,000 houses should be built to tackle supply-side problems in the housing market. That is another aspect of the Budget that sounds dramatic; it creates a sense of a Chancellor able to conjure up new houses, but it has consequences for my constituents. I want to see more people able to afford their own home, but the Barker report seems to be about moderating the real growth in house prices, slightly restricting that growth by building

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  additional houses. That approach is unlikely to develop the affordable housing that people in my constituency need.
  My hon. Friends touched on some other, broader concerns. The Barker report recommended diluting the power that local councils can exercise over developments in their own area, by transferring more responsibility for planning to regional planning bodies. It states:
  "Regional Planning Bodies and Regional Housing Boards should be merged to create single bodies responsible for managing regional housing markets, delivering the region's affordability target".
  Miss Barker goes on to say:
  "Even in the absence of elected regional assemblies, a streamlined institutional framework is possible and desirable."
  If those proposals are accepted, the power of local authorities will be further diminished and the ways in which people in areas such as mine can hold their local councillors to account for planning decisions will be reduced.
  The report also talks about land value. It says:
  "Building on intensively farmed land would result in far smaller costs. These alternative land values are part of the framework within which the costs and benefits of housebuilding should be assessed."
  It proposed:
  "Moving towards an alternative approach, whereby land for development is assessed according to its relative value in society… including the implication that some Green Belt land should be re-designated."
  There is no green-belt land in Fareham or south-east Hampshire, but there is some remaining farmland. If the value of that is further reduced to encourage development and to skew the cost-benefit ratio in favour of more development, we shall see a continuous stretch of development from Southampton to Portsmouth along the M27, all to achieve the goal of moderating the growth in house prices in the south-east.
  Where is the infrastructure to support that additional housing? One of the biggest issues facing my constituents is the fact that the current infrastructure fails to meet the needs of the existing housing development in Fareham. Our schools, hospitals and roads are already threatened by planned development. Where will the resources come from to build new infrastructure? The main arterial routes in the area, the M27, A27 and A32, are already clogged with traffic. Only one NHS dentist in Fareham is accepting patients, and even he has a six-month waiting list. It is worth noting that when the Secretary of State for Health talked about increasing capacity throughout the health service, he did not mention dentistry.
  Mr. Luff: A cavity.
  Mr. Hoban: It was, as my hon. Friend says, a cavity in the Health Secretary's speech, but it causes people in my constituency a problem when they cannot find a dentist to meet their needs. The dentists with whom they are registered say that, because of the economics of dental practice, they can no longer accept NHS patients, so all patients are required to switch to private dental services.
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  How much worse will those services become if more and more people are crowded into our area as a consequence of decisions by unaccountable and unelected regional planning and housing boards?
  There is little cheer for my constituents in this Budget. The Chancellor is meddling yet again in the tax affairs of small companies, reversing some of the effects of the Budget of just two years ago. Jobs in Titchfield are being moved around the country as if they were a pile of chips being shunted across a roulette table by a croupier. More houses are being imposed on an area that cannot cope with the additional building already going on.
  The Chancellor gives the impression that he thinks that the economy is like a machine: pull a lever, flick a switch here and open a valve there, and all will be well. He forgets at his peril that what he is playing with is not some theoretical model of the economy or a machine, but the lives of our constituents. He may welcome the headlines the day after the Budget, but the damage that he causes individuals and their families will last far longer than the glow of those headlines.
  8.6 pm
  Paul Farrelly: I am delighted to follow the hon. Member for Fareham (Mr. Hoban), not to defend the Budget, but to proclaim it and the opportunities that if offers the NHS, not least in my constituency and industrial north Staffordshire as a whole.
  This is the eighth Budget under a Labour Government, though only the third that I, as a new Member, have had the pleasure of witnessing from these Benches. I remember, years ago, this time of year provoking pain, not pleasure—so much so that in the 1980s and early 1990s I used to go out of my way to stay out of the way, to avoid listening to news of tax cuts for the privileged few and yet more public service cuts affecting the neediest. Indeed, under 18 years of Conservative government, there was only one Budget that I can loosely associate with improving the health of the nation, or at least a tiny, precious part of it. That was when Nigel Lawson stuck 10p on the price of a packet of fags and my granddad, Tom King, a 40-plus-a-day man since he served in the trenches, said that he had had enough of those damned Tories, as he put it, and never lit up a cigarette again.
  What a difference we have seen in our NHS since 1997, the year that my granddad died. By 2007–08, spending on health care will be more than double what it was a decade ago. That is an achievement that I wish my granddad had lived to see. Let us be clear what that increased investment really means. It does not just mean massive figures plucked out of the air; it means, by 2008, 80,000 more nurses than in 1997, 25,000 more doctors and the biggest hospital-building programme ever. It means that the NHS is safe in Labour's hands.
  What of the Opposition? Have they learned the lessons of 1997 and 2001? They have certainly learned, from my right hon. Friend the Chancellor, to talk the talk—sticking, they say, to our plans for health for two years. However, when one puts those plans under a microscope, one finds that the reality is different. The shadow Secretary of State for Health, for example, says that he is committed to free access to health services,

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  based on need and not on the ability to pay. How does he square that with his so-called "patients passports"? Those self-same patients passports will, to quote him,
  "allow them to take a proportion of the cost of NHS treatment to offset the cost of independent treatment, which can then be topped-up at the patient's own expense."
  How does that make for free and equal access to health care? I noticed that he could not, or would not, answer the Secretary of State's intervention earlier, and no wonder. He certainly has a health plan. It is a plan to give those who can already afford to go private an even bigger helping hand, and it is a pauper's plan for the rest of the population and the NHS.
  Under Labour, the NHS is certainly making progress; otherwise the Conservative party would not want to match our spending. Sadly, though, we have not yet found a cure for forgetfulness or the schizophrenic double-speak afflicting Opposition Front-Bench Members.
  Mr. David Wilshire: If the hon. Gentleman is so certain that the NHS is safe in his Government's hands, can he tell me why the Government are ordering my local primary care trust to cut spending by £17 million next year?
  Paul Farrelly: Clearly, I cannot speak about the financial management of the PCT in the hon. Gentleman's area, but I can speak about the bewilderment that most of the population feels about the Conservatives' fixation with vouchers—now called "passports".
  I shall speak about the successes and the continuing challenges in the NHS in north Staffordshire—an area with some of the worst and most complex health needs in the country. For decades, one of the biggest issues in our area has been hospital facilities that are housed on different sites in outdated, crumbling Victorian buildings. That is not good for patients or for staff, and it is certainly not good enough for the NHS in the 20th century, let alone the 21st. Patients who needed intensive care sometimes faced journeys of dozens of miles. The press labelled Stoke-on-Trent "the sick city". More than 20,000 people signed petitions crying out for a new hospital to replace the Victorian city general in Stoke-on-Trent and the North Staffordshire royal infirmary on a single site. They did not sign for patients passports, or visas, or vouchers; they signed for a new hospital on their doorstep, because if they or their families or friends were ill, they wanted to be treated as close to home as possible.
  If we are to give patients better treatment—to give them that choice—we need to invest in more and modern capacity on their doorstep, which is precisely what Labour is doing in north Staffordshire. Under the Labour Government, work has started on a brand-new £350 million acute hospital on the site of the city general. Gone will be the days when patients were shuttled back and forth on trolleys and in ambulances between the royal infirmary and the wards of the city general. In its place, there will be a super-hospital with a state-of-the-art diagnostic centre, an accident unit, new intermediate care beds and modern wards with the best of facilities for the modern age. That hospital is just one of 114 new hospital developments commissioned since 1997.
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  Labour's ambitions in north Staffordshire do not stop there. As part of the £350 million project, there will be a brand-new community hospital on the crumbling Haywood and Stanfield sites in north Stoke. Before I entered Parliament in 2001, I chaired the north Staffordshire "Elderly Care for All" campaign, fighting for better elderly care locally. I remember only too vividly visiting experts describing those decaying hospitals as the worst that they had ever seen. Now, finally, after many years of flimsy promises, north Stoke is getting its own brand-new community hospital. In my constituency, Newcastle-under-Lyme, our local community hospital at Bradwell is expanding and developing to offer services such as minor surgery to people in the surrounding areas of Bradwell, Chesterton and Kidsgrove. Such services will complement those offered by acute hospitals and take the pressure off them.
  We are not stopping there. We want to invest in primary care—in more local health care on the doorstep—to make sure that there is less need for people to go into hospital at all. In Newcastle-under-Lyme alone, within the north Staffordshire NHS LIFT—local improvement finance trust—programme, work is forging ahead on a brand-new £3 million health centre in Cross Heath, which is among the most deprived 10 per cent. of wards in the country. A brand-new £2 million-plus health centre is planned for Audley, serving the former mining villages in that area. In Clayton, work has started on a £1 million extension of the Kingsbridge health centre, and in the town centre, among other developments, a brand-new GP surgery opened earlier this month. Those are not merely figures plucked out of the air—£1 million in the Budget delivered in London here, another £1 million there. They are real achievements, which my constituents notice and which will improve their lives.
  With our new primary care trust in Newcastle-under-Lyme, we are getting improvements just where we need them. I am always suspicious of continuous organisation change: often it is change for change's sake, or demoralising to NHS staff. However, in my constituency, I appreciate the closer working relationship with my local PCT than used to be possible with the old, more remote health authority. My local councillors appreciate that too. If the House will indulge me, as the first Labour speaker after several Opposition speakers, I shall name them: they include John and Gill Williams and Sylvia Butler in Cross Heath, and my good friend Eddie Boden, chairman of Staffordshire county council, who lives in Audley. Working with the PCT, they have played major roles in the improvements to primary care achieved as a result of the LIFT programme coming into their areas.
  Despite all those advances, not everything in the garden is rosy. More NHS dentists are needed in my locality, as they are across the country. In specialist services, to give just one example, we in Newcastle and north Staffordshire urgently need to tackle the lack of any proper provision for diagnosis and support for people affected by autism or Asperger's syndrome, starting with kids of pre-school age and continuing through to give schoolchildren and adults the support that they need.
  Across the board, we need to deliver all those better facilities, and more, because of the desperate health needs of the people of north Staffordshire. For years, the

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  area depended on coal mining and pottery making—hard physical jobs, done in dirty, dusty and dangerous conditions. Given that the local diet was not the best, it is no wonder that under Labour the Potteries qualified for more investment as a health action zone. To deliver, we must attract and retain the extra doctors, nurses and consultants that Labour's policies and investment in the NHS are already generating. Too often in the past, north Staffordshire and other industrial areas have found it hard to fill vacancies, simply because in our area each job imposes greater demands on each professional than in wealthier, leafier areas.
  Under Labour, the investment to tackle health inequalities is being made—nowhere more so than in the new medical school at Keele university in Newcastle-under-Lyme, which was given the green light by my right hon. Friend the Member for Barrow and Furness (Mr. Hutton) shortly after he became a Minister of State at the Department of Health in 1999. He is to visit Chesterton in my constituency next month: he will always be welcome there, and I hope that he will find time to open our new town centre practice. Our first medical students are now training at Keele and what has proudly become the University hospital of North Staffordshire. By 2009, Keele medical school will be hosting its full complement of 610 medical students. It is therefore already playing its full part in training extra new doctors for the country as a whole, and local people hope that many will choose to stay in north Staffordshire and help us to overcome our historical difficulties of recruitment.
  Labour's investment in north Staffordshire's local NHS, which the Budget continues, is playing a vital role in a much bigger vision of the regeneration of the area as a whole. As well as playing host to a new medical school, Keele university is developing a science park, attracting businesses involved in medical technology and building what is known in the trade as a medical cluster. It is now the home of cutting-edge biotechnology firms such as Biocomposites—a company that develops synthetic devices for tissue regeneration. I was delighted to play a small part in its decision to relocate to Keele, rather than go to Florida or elsewhere overseas.
  The new hospital and other health and regeneration initiatives such as housing market renewal provide opportunities to exploit and develop construction skills. Our regional development agency, Advantage West Midlands, has just backed a new construction skills centre of excellence in north Staffordshire. In the context of regeneration, we are looking closely at the Chancellor's plans to relocate Government agencies to the regions. Envious eyes are being cast over the National Institute for Clinical Excellence and health and safety bodies.
  In our local NHS, we can continue to implement 21st-century health care only with the sort of investment that was confirmed by the Chancellor last week: a 7 per cent.-plus real-terms increase in resources each year to 2008. Patients want that investment. They do not want passports, visas or vouchers; they want investment in our NHS—investment that makes our NHS safe and that we can only trust a Labour Government to make.
  8.18 pm
  Mr. David Ruffley: The Chancellor wanted this to be viewed as a political Budget, setting the battleground for the next general election. I welcome that view of the Budget, because it gives the Conservatives the opportunity to fight on our own ground, where the Chancellor of the Exchequer is naturally far weaker.
  I say that for three reasons. First, the Chancellor does not have a reputation for being an efficient and proficient tackler of waste; nor is he good at delivering efficiency savings. For seven years he has been telling the country how wisely and prudently he has been spending public money. In his comprehensive spending reviews in 1998, 2000 and 2002, he invited us to believe that extra money would be tied to greater efficiency. He invited us to believe also that through his public service agreement system, Departments that delivered on targets would be rewarded and that Departments that did not succeed in hitting targets would be penalised. None of that ever happened; it was for the birds. Instead, there has been a 50 per cent. increase in the cost of running central Government Departments since the Chancellor came to office. That amounts to spending about £7 billion extra and meant last year that an additional 511 civil servants were employed every week. After seven years, and after all the fiddling and target setting, the Chancellor has announced that there will not be 130 PSAs. There will be fewer, and they will be measuring outcomes rather than outputs and inputs. He will be abolishing about 500 service delivery agreements.
  On top of all that, we are given more promises, pledges and talk in the Budget about how there will be a substantial decrease in bureaucracy. We are told that there will be more proportionate inspection, greater incentives for better performance, and more local autonomy and flexibility. My verdict is that we have heard it all before from the Chancellor, for every year for seven years. After seven years of no action but plenty of talk, why should the country believe that he will be any more effective in future?
  Conveniently, but I fear belatedly, Sir Peter Gershon has trotted along at the Chancellor's behest. He has told us that he can find efficiency savings of £20 billion a year by 2008. We are invited to believe that much of that can be done by getting rid of 40,000 civil servants—just for starters—in the Department for Work and Pensions and the Revenue and Excise departments. As most observers have said, that will probably account for £1.5 billion, so Sir Peter is a long way shy of the £20 billion that he noisily advertises.
  As The Economist pointed out this week, the reality is that deep structural reform is needed for the Chancellor and Sir Peter Gershon to get anywhere near savings of £20 billion by 2008. There is a need for deep structural reform that only the Conservative party is advocating and explaining in detail. Answer comes there none from the Labour Benches on serious reform in the health service and serious structural reform in the Department for Education and Skills.
  On efficiency savings and waste cutting, I like the way in which the Chancellor has come on to our ground. In principle, he has conceded that we have been right all along. However, he has done something more in his Budget by shooting himself in the political foot. He will

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  never be able to say again between now and the next election that cutting waste means a cut in front-line services. That is an argument that he wanted to push against the official Opposition. He is now unable to do that because he has conceded, on his own logic, that efficiency savings mean that front-line services can be protected. That has been our argument all along.
  My second reason for arguing that there is a weakness in the Chancellor's political thinking, as expressed in the Budget, is that at the next election, the British public will be asking a basic question. They will want to know whether, for all the money that has been put into our important core public services, there has been a material improvement so that they can say, "Our local schools, hospitals, support services for pensioners and the local police force are better." I do not think that they will be able to answer that question in the affirmative.
  We have seen a 22 per cent. increase in truanting in our state education system. The decline in crime began in 1993 when my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard), who is now the Leader of the Opposition, became the Home Secretary. That decline stopped in 2001 and it is now plateauing. In certain parts of the crime figures—for example, violent crime—we have seen some of the greatest hikes for a long time. Gun crime has doubled since 1997. Overall, the law and order story is not a good one.
  Particular attention should be drawn to health. There should be more beds than administrators. When we left office in 1997, senior managers, administrators and estate staff numbered 196,700. In 2001, there were 224,030. That increase means that although the ratio of administrative staff to beds was 0:9 when the Conservative Government left office, it is now 1:1.
  What about waiting lists? Some of the longest waiting times have been reduced. The more telling figures about waiting times for all other operations—the mean and median waiting times—tell a story of NHS decline. During 1999 to 2000, the mean waiting time in days was 90. For 2000–03, it was 99. The median figure for those same two years was 43 and 49 respectively. Those statistics do not come from Conservative central office; they are not even from the National Audit Office. They come from the Department of Health hospital episodes statistics table 2 from 1999 to 2003.
  Probably most Members receive more mail about health than anything else. Despite the 37.5 per cent. increase in funding of the NHS, hospital activity based on finished consultant episodes—completed operations—has risen by only 4.8 per cent. The source of that figure is the Department of Health hospital episodes statistics from 1999 to 2002. Hospital admissions have increased by an average of only 1.9 per cent. annually from 1999 to 2002. Incidentally, that is less than the 2.9 per cent. annual increase from 1991 to 1999.
  The OECD has reinforced claims that extra NHS funding has not been spent as well as it should have been. It added:
  "Productivity seems to have declined as the growth in the number of doctors, nurses, hospital buildings and equipment have (not yet) been fully reflected in a growing numbers of treatments. In fact, growth in the volume of health care output has slowed down compared to the first half of the 1990s."
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  That is because, as we have argued, the structures are not right and the Chancellor must take personal responsibility for the pace of radical health reform in the NHS. He has frustrated serious reform based on the foundation hospital model because, let us face it, he is pandering—that is the right word—to the Labour movement. He thinks that if he argues for a publicly funded health service with no additional private sector involvement—or as little as possible—he will curry favour with his client groups. He is responsible for slowing down the radical reform that the NHS desperately needs.
  Thirdly, the Budget has great political weaknesses because of its provisions on taxation. The Red Book confirms the Chancellor's tax addiction. By 2008 the tax burden will be 38.3 per cent.—the highest for just over 20 years. We have had 66 tax rises since the Chancellor took office, and the tax take under his chancellorship is up 50 per cent. in cash terms, which is equivalent to about £5,000 more tax per household since 1997. However, the British public should worry about the path of taxation, as he has indulged in a borrowing binge. His borrowing figures are four times higher than he predicted at the last election. The Institute for Fiscal Studies, the National Institute of Economic and Social Research and The Economist all predict that he will break his golden rule at the start of the next economic cycle which, conveniently, will occur in spring 2006, after the likely date of the election. They quantify the gap as at least £10 billion a year, and it must be plugged with either spending cuts or tax increases, or a mixture of the two. It is more likely that there will be £10 billion-worth of tax increases.
  During the last election campaign, the Chancellor was Trappist-like in his refusal to talk about his intentions on tax. After he won that election, however, he introduced hikes in national insurance, thus breaching his promise not to break the upper earnings limit. If the Chancellor of the Exchequer is confident in the Budget that his numbers add up, that he will not break the golden rule at the start of the next economic cycle in spring 2006 and that he will not have to raise taxes, the Financial Secretary and the Economic Secretary, who are in the Chamber tonight, will have no difficulty in giving the House and the country a guarantee that there will be no tax rises and that, because of the Budget judgment, there is no need to raise taxes next year or the year after. If they will not do so, the public and the press will be entitled to recall that the Chancellor has form—and previous. He goes to the electorate denying that he has any intention of putting up tax, but after the election does precisely that. When they have worked out that he has form—and previous—they will be entitled to conclude that a vote for Labour is indeed a vote for third-term tax increases.
  8.32 pm
  Mr. Peter Luff: Ultimately, our debate on the Budget raises a fundamental question—who knows best how to spend our money, the Chancellor or the people, the taxpayer or the tax raiser? In their hearts, most people know the answer to that question. The Chancellor could do himself a great service by listening to the arguments that have been made. He started badly in the debate on Wednesday, as he ignored the two speeches that

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  followed his statement, and chatted to his friend, the Prime Minister, on the Front Bench. He would have done well to listen to those speeches, because in their different ways they were important contributions. He should listen to independent commentators such as the ITEM Club, which today made confident predictions about the black hole and a third-term Labour tax rise, about which my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley) has rightly spoken. The British people believe that those third-term tax rises are inevitable, and the Chancellor should listen to them, as opinion polls show.
  The 2005 election, assuming that that is when it takes place, may be a bad one to win, because of the serious economic problems that the Chancellor of the Exchequer will leave his successor. He, of course, hopes that someone else will succeed him as Chancellor, as he hopes to be Prime Minister then. He hopes that he can blame the new Chancellor for problems of his creation. We have to be honest about the fact that the economy is doing fairly well at present—I do not think that anyone would argue against that. There are looming issues, such as the trade deficit and the appalling savings ratio, which have been mentioned throughout our debate. The truth, however, is that employment is pretty good and people are fairly comfortable. The Chancellor has achieved that with two good decisions and two pieces of good luck. The first of the two good decisions was independence for the Bank of England. which sent a powerful signal to the financial markets about his seriousness of purpose. The other decision, or rather non-decision, was not going into the single European currency—a wise course of action, and I hope that the Chancellor continues to prevail in the argument with the Prime Minister on that.
  The Chancellor has had a couple of bits of good luck, though. One relatively minor but nevertheless significant piece of good luck was the enormous revenues that came from the 3G licence sale, for example, which made a huge contribution to bringing down the national debt. The reduction in the national debt owes a lot to that bit of good luck that fell the Chancellor's way. The other piece of good luck is the one that Labour Members always snigger at when it is mentioned—the golden economic heritage that he had when he took over as Chancellor.[Interruption.] I think I heard a few mumbles of discontent from the Labour Benches.
  If one looks at the Red Book, as I have done in some detail, one does not have to be a statistician to look at the graph on page 21 showing the inflation statistics and to realise that inflation has been pretty stable since mid-1993, which is a good long time before the 1997 general election. Then there is the matter of growth. The Chancellor allowed himself a few jokes in his Budget speech on Wednesday. He rather wittily corrected himself and said that he had accidentally misled the House. The period of sustained growth was the longest not for 100 years, but for 200 years. He apologised for that omission. What he did not say is where that period began.
  The Red Book tells us on page 15
  "with GDP now having grown for 46 consecutive quarters".
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  Let us count back the quarters. Four of them in 2003, four of them in 2002, four of them in 2001, four of them in 2000, four of them in 1999, four of them in 1998 and the first couple, ahead of the Labour party's victory in the 1997 election, in 1997. That makes 27 quarters under Labour's stewardship. Then, of course, there is one in 1997 for the Conservative Government, another four in 1996, four in 1995, four in 1994, four in 1993 and a couple in 1992, making 19 quarters on our watch. Yes, it is true that there have been 46 consecutive quarters of growth, but the credit for that belongs to previous Conservative Chancellors of the Exchequer.
  The present Chancellor's achievement is, for once, not to mess that up, and for that he deserves some limited congratulations. Although he may not be ruining it, there are some worrying signs. The success that he boasts about so confidently from the Dispatch Box is much more limited in reality. The truth is that if one throws money at a problem, some of it will stick and a bit of the problem will get better, but for the amount of money that is being thrown at the problems of this country, things have not got as much better as they ought to have got. And money has been thrown.

  There are guiding lines in the Red Book. On page 189, with reference to income tax, we are told:
  "The starting and basic rate limits are increased in line with statutory indexation and there are no changes to the income tax rates."
  That sounds tremendously reassuring, but table C8 on page 256 shows that over the period 2002–03 to 2004–05 income tax take by the Chancellor will have gone up by 13.5 per cent., social security contributions by 20.3 per cent., value added tax by 15 per cent., fuel duties by 10.5 per cent., council tax by 18 per cent. and total current receipts by nearly 15 per cent. He has taken a huge amount more of our money from us. Since he became Chancellor he has taken in excess of £1,500 more for every man, woman and child in the country. With that kind of extra money, he should be able to do a better job.
  The tragedy is—I am indebted to Ruth Lea in her excellent pamphlet, "The Price of the Profligate Chancellor", for drawing my attention to this—that the people who are paying the highest price for that are not the rich, nor those on middle incomes, but the poor. She draws my attention to a table derived from the work of the Office for National Statistics, which shows that while the percentage of gross income paid in tax is 35.6 per cent. on average, for the poorest quintile—the bottom 20 per cent—it is 42.1 per cent. Increased taxes hurt the poor. That is a message that the Chancellor needs to learn. He has certainly taxed them.
  We have seen a steady growth in taxation as a percentage of GDP, and we have seen the complete and abysmal failure of the Chancellor to predict his borrowing. We are told on page 3 of the Red Book at paragraph 1.13, and it is repeated verbatim at paragraph 2.38 because the Chancellor is so fond of this:
  "The estimated 2003–04 outturn for the public sector current budget shows a deficit of £21.3 billion compared with projected deficits of £19.3 billion and £8.4 billion in the 2003 Pre-Budget Report",
  and so on, with the Chancellor appearing to be quite confident about the relative increases in borrowing.
  Again, I am indebted to Ruth Lea for showing us the truth about those borrowing figures. Actually, the increase in the Chancellor's own predictions has been

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  shameful. In the 2002 Budget, he said that public sector net borrowing for 2002 would be £11 billion. but we now learn that it worked out at £22.9 billion—an increase of £11.9 billion. For 2003, the figure has moved from £13 billion to £37.5 billion, so his error is £24.5 billion. For 2004, he has already increased his estimate from £13 billion to £33 billion—an increase of £20 billion. For 2005 and 2006, he is confidently predicting modest reductions in net borrowing. Let us see what happens, as the trend is far from encouraging.
  Let us turn to spending. On page 9 of the Red Book, we read:
  "The Government's strategy is to deliver improvements in public services through sustained investment and reform to ensure that taxpayers receive value for money."
  We are all in favour of taxpayers receiving value for money, but in an extremely unconvincing performance at the start of the debate, the Secretary of State for Health failed to answer the charge that that simply has not happened in the health sector. The only period for which I have figures is 1996 to 2001. In that period, the number of whole-time equivalents for managers in the national health service rose by 15.5 per cent., while the number of whole-time equivalents for nurses, midwives and health visiting staff rose by 7.3 per cent. In other words, the growth in managers was running at twice the rate of the growth in front-line health professionals. I think that that should worry the Government.
  The Chancellor is fond of talking about enormous gains in employment. If we look at the figures, we see that between September 2002 and September 2003, there was an increase of 153,000 people in the public sector and of 105,000 in construction. To be fair, much of that increase is coming from capital investment, but largely, although not exclusively, it is PFI investment that is again funded by the Chancellor. In fact, 258,000 of the jobs are public sector jobs, while the number of manufacturing jobs fell by 103,000 in one year.
  Paul Farrelly: The hon. Gentleman is being very forensic, but perhaps he is being a touch forgetful. Will he explain to the House whether the 1987 stock market crash, the years of negative equity, withdrawal from the European exchange rate mechanism and the years of imprudently counting one-off privatisation proceeds as negative Government expenditure were, to pick up his theme, bad luck, accidents or acts of God? Or were they were simply bad policy by a previous Conservative Government?
  Mr. Luff: The hon. Gentleman leads me into a whole new speech that I would dearly like to make, destroying the analysis that he has just offered the House. In essence, the current Chancellor has faced relatively benign economic situations nationally by comparison with those faced by previous Chancellors. I know that the hon. Gentleman was not in the House at the time, but if he would care to remember some of the circumstances that the last Conservative Government faced, including the consequences of German reunification in particular, he would paint a very different picture. As for fiddling statistics, this
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  Chancellor's treatment of issues such as PFI debt for the tube, and tax credits, which count as negative income tax, is fiddling statistics on a spectacular scale.
  Paul Farrelly rose—
  Mr. Luff: I shall happily give way a second time.
  Paul Farrelly: If we indeed inherited a golden inheritance, to use the hon. Gentleman's own words, has he ever thought that after 1993, things simply could not have got any worse?
  Mr. Luff: That is the voice of a man who believes his own propaganda—something that I try very hard not to do. I shall happily take the hon. Gentleman to the bar after this debate, sit down and show him the economic series. The fact is that everything started getting better from 1993. Every economic series that one looks at shows that plain, simple and straightforward fact. It would do the House a great service if all Labour Members—I do not blame the hon. Gentleman in particular, as he is following a lead given him by people such as his Prime Minister and Chancellor—looked at the facts and saw what actually happened. If he did so, he would see just how wrong he was in his assertion and its implications.
  Before that intervention, I was discussing public sector employment and productivity. The previous speaker, my hon. Friend the Member for Bury St. Edmunds (Mr. Rufley), gave us a fine analysis of productivity in the health sector, and again, the available statistics, which come from the Office for National Statistics publication on economic trends from July last year, only go up to 2001. Intriguingly, they show roughly no change in public sector productivity in 1996; a 1 per cent. improvement in 1997; and—those were years of austerity in public expenditure—another 1 per cent. improvement in 1998. As we get into the years in which the Chancellor increased spending, however, productivity fell by 2 per cent. in 1999; by 1 per cent. in 2000; and by 2 per cent. in 2001. It should surprise no one that if money is thrown at a system faster than the system can absorb it, the system will not spend it wisely.
  The Chancellor's Budget strategy raises some important questions. He is spending to the hilt and hoping to get away with it, and that is having some strange consequences at a local level in my constituency. I shall highlight the example of education spending—I unreservedly welcome the increased capital expenditure on schools in my constituency. On Friday last week, I opened a new classroom—the increased capital expenditure is clearly having a beneficial effect and I do not pretend that it is not.
  Revenue expenditure is sadly a big issue in Worcestershire, however. By increasing education expenditure in real terms, the Chancellor is bizarrely creating a worse problem for Worcestershire schools, which are falling behind their neighbours because of the rigged funding formula. Straight percentage increases in expenditure on schools means that Worcestershire schools will fall relatively further behind because of the iron law of compound interest. I urge Treasury Ministers to talk to their ministerial colleagues in the Office of the Deputy Prime Minister and say, "If we are

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  putting extra money into schools, we must ensure that it is spent fairly across the country; otherwise anomalies between local education authorities will grow, with very serious consequences for the children in the local education authorities left behind."
  The Red Book—I do not know why it is called that because it is a white book—is the Chancellor's personal manifesto. Governments used to publish about one third of its contents; the other two thirds is public relations, spin and puff. The Chancellor talks glowingly about jobcentres on page 84 and about the role of primary care trusts in helping to address local need on page 150. I repeat my plea, which I have already made twice in this Chamber and intend to make again tomorrow at Health questions, for the Government to examine the consequences of not giving true independence to primary care trusts but running them from the centre, through strategic health authorities, while claiming that they are locally organised.
  That lack of independence has destroyed eight important health projects in south Worcestershire. One such project at Droitwich Spa in my constituency was intended to include a major new Jobcentre Plus, a police facility, a county council facility, a district council facility, a voluntary facility and a new health centre. Arbitrary changes to funding rules mean that we will not get that investment and that the whole project is at risk, which is completely contrary to the Red Book.
  We often hear Labour Members discussing our plans for Home Office expenditure, but I am not too impressed by the Government's plans for Home Office expenditure. Some 300 additional police officers are coming on stream this year in the West Mercia constabulary area, which is welcome. However, who has paid for them? Not the Home Secretary or the taxpayer nationally, but the council tax payer, through phenomenal increases in the police precept. The trouble is that those phenomenal increases are building huge resentment not against the Government—as they should do—but against the police. They lead people to ask, "Why am I not getting the police service I expect for the money that I am being forced to pay?" I urge Ministers to examine that question seriously. There have been 33 per cent. and 15 per cent. increases year on year, and the overall increase in the West Mercia constabulary's precept since the Government came to power is nine times the rate of inflation, which is simply unsustainable and creates problems for the management of the police.
  In a final footnote to my speech, I am disappointed to see the Chancellor's disclosure on page 116 of the Red Book that he wants to give orphan assets, which are unclaimed assets in banks, building societies and—now we learn—life assurance companies, to charity. The victims of failed occupational pension schemes should have first claim on those assets, which would address a real and urgent need caused by a problem that was not of people's own making and which the Government are morally obliged to do something about. The obvious way to do it is through the unclaimed assets, but the Government are turning their back on that route. That is distressing.
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  I trust the people of this country to spend their money better than the Chancellor of the Exchequer, and I look forward to taking that battle to the people in an imminent general election.
  8.50 pm
  Mr. David Wilshire: May I start, Mr. Deputy Speaker, by apologising to the House? When I originally put in to speak, I thought that I could be present throughout the debate, but my duties as an Opposition Whip made life difficult, as I explained to Mr. Speaker earlier. I am sorry not to have heard all the speeches.
  Every time I hear the Chancellor or the Secretary of State for Health, I am reminded how desperately out of touch with reality they are. As my hon. Friend the Member for Mid-Worcestershire (Mr. Luff) said, they have come to believe their own propaganda. If everything is so wonderful in the NHS, why do my constituents face £17 million-worth of cuts year on year at the Government's insistence? If the NHS is safe in the hands of this Labour Government, why are they trying to privatise part of my local hospital? While Ministers stand at the Dispatch Box and spin away about an NHS utopia, my constituents know different—they know the truth.
  I want to tell the House about the reality of the NHS in my part of Middlesex. My local general hospital, Ashford, started as a workhouse. In 1987, when I became the local MP, it was mainly a collection of wartime temporary prefabs. During the time of the last Conservative Government, it was completely rebuilt. Since 1997, it has suffered cut after cut. In 2000, this Government axed its accident and emergency department, scrapped all its intensive care beds, and stopped in-patient paediatric services. Now, they are at it again. This year, they want to scrap the emergency department, which they gave us when they axed the A and E; scrap all the high-dependency beds, as well as the intensive care beds; and close all 150 medical and acute surgical beds. If they have their way, Ashford hospital will have fewer beds than when it was a workhouse, and my constituents will be left with a first-aid post by day and a telephone to ring for a GP deputising service at night. The reality of the NHS in Spelthorne is not what the Chancellor's spin claims it to be. Small wonder that a former A and E consultant at Ashford said of the cuts that the Government have been making, "People will suffer and some will die."
  That is the reality of what this Government are doing to the NHS in my constituency. The way in which they treat the NHS in Surrey is a downright disgrace. It is underfunded so that money can go to Labour cronies, inadequate allowances are made for the additional costs of providing services in the south-east, and the longevity of my constituents is completely ignored when it comes to working out the demands on services. Listening to the Chancellor last week, one would have thought that the Government would do something to help; but not a bit of it. Their response to the problems in my constituency is to demand more and more cuts.
  If I look back, I can see that the rot set in when the Ashford trust was merged with the St. Peter's trust. That was an attempt to save money by shifting services out of Ashford and into St. Peter's. The result was predictable:

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  St. Peter's could not cope. In due course, a damning National Institute for Clinical Excellence report into its maternity services produced another crisis.
  All that led to something else: no stars when the Government produced their first little league table. The Government brought that on themselves. What did they do? They sacked the chairman and the chief executive and had the bright idea of franchising the management of the trust. The purpose of the franchising exercise was made clear—"Sort out the mess that we, the Government, have made of the services and end the overspending." The Government received and accepted a proposal, but to this day, they refuse to publish the franchise plan. They will not tell us what they agreed and what was meant to happen. I have asked time and again only to be answered with a refusal to publish.
  That probably does not matter now because another financial crisis has overtaken the trust and the franchise plan to which I referred is irrelevant. The current crisis is even worse. The Ashford and St. Peter's Hospitals NHS trust is now breaking the law because it overspends by £17 million a year. On top of that, it has an inherited debt. I note that the Government wrote off the debts of some trusts in some places but because the trust is based in Surrey, which they do not like, I guess that our debt will not be written off.
  Paul Farrelly: I am loth to interrupt the hon. Gentleman in full rant, but earlier, I described some of the advances in north Staffordshire. and I should point out that one of the Labour Government's first decisions in 1997 was to give the go-ahead to a brand new hospital in Amersham. I know that because I contested Chesham and Amersham in the general election in 1997. Would the hon. Gentleman describe the hon. Member for Chesham and Amersham (Mrs. Gillan) as a Labour crony?
  Mr. Wilshire: No, I would not. When I asked the hon. Gentleman about £l 7 million-worth of cuts in my constituency, he said that he did not know the position there. Similarly, I do not know the position in Chesham and Amersham, but I stress that the whole of the south-east suffers the same problems and I have no doubt that a Buckinghamshire Member of Parliament would recount that their local health services face the same difficulties caused by having to pay bills and provide services with the money that the Government give them.
  Mr. Lansley: If the hon. Member for Newcastle-under-Lyme (Paul Farrelly) had been present in Westminster Hall three weeks ago, he would have heard Members of Parliament from Buckinghamshire making the same point about the unfairness of the financial distribution in the NHS and the deficits in Buckinghamshire.
  Mr. Wilshire: That is no surprise. Every time I talk to a colleague from the south-east, I hear the same story.
  Mr. Luff: I believe that my hon. Friend the Member for Chesham and Amersham (Mrs. Gillan) made that very point at Prime Minister's Question Time last week, and the same complaint as my hon. Friend makes now.
  Mr. Wilshire: I must read Hansard afterwards. I am sure that that would give the hon. Member for Newcastle-under-Lyme (Paul Farrelly) and me the answers that we need.
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  My trust is breaking the law by overspending by £17 million. The Christmas before last, the position became so bad that suppliers refused to supply the trust until it paid its bills. That is what the Government have done to a trust that tries to provide the services that my constituents want. Their response to the new crisis is not that that the Chancellor boasts about. Given the amount of taxpayers' money that the Chancellor claims to be giving away, one would have believed that we might get some of it. But no, all we have is a loan of £14 million so that we no longer break the law. I must emphasise that the amount loaned is £14 million, not £17 million. There is also a little sting in the tail in that if my trust is good, does what the Government order it to do and makes cuts, keeps quiet and does not complain, the Government will convert the loan into a grant. However, they will do that only if the trust makes the cuts.
  Last September, another interesting development occurred. The Government trumpeted the creation of diagnostic treatment centres—I believe that that name has subsequently been changed. They claimed that that would mean new facilities, more staff and more treatment—the usual spin that we get from theChancellor and the Secretary of State for Health. They told me that a company called Mercury Healthcare would open such a centre at Ashford. We then discovered why it was that the Government want services moved out of Ashford—so that the Government can privatise part of it. It occurred to me that that amounted to certain hypocrisy, because Labour Members are always accusing my party of wanting to privatise the NHS, but in my constituency the Government are trying to privatise part of the NHS.
  To get to the bottom of this curious development, I thought I would ask Mercury Healthcare all about the new facilities, extra staff and extra treatment on offer. I was dumbfounded when I discovered the truth. Mercury Healthcare is not going to provide any new facilities. It is going to take over one of the wards that has been emptied out by the cuts that the Government have ordered to be made. It is going to take over the theatre, which will no longer be used by the NHS, as the patients have been moved somewhere else. Mercury Healthcare is not even going to employ anyone extra, because it intends to take over the staff that the Government have freed up at my hospital. So much for the spin and the boast about using the private sector to do more, to do it more quickly and to provide better facilities. It is just not true. NHS wards, NHS theatres and NHS staff are to be privatised by this Government, and they have the nerve to accuse us of wanting to do that.
  Just after Christmas, somebody within the trust had a little word with me and said, "Have you asked how the Government's plans to produce this treatment centre are going." I said, "No." I therefore made some inquiries. What did I discover? They had got rid of Mercury Healthcare. I have tabled question after question since, and the Government refuse to tell me when they broke off the negotiations or why. All that they do is point me towards yet another press release, which was issued on 17 February this year. What does it say? Surprise, surprise, five more treatment centres will he opened by the Government, to provide new facilities. Who will run them? Mercury Healthcare—the company sacked from Ashford. The Government take them off

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  one job, put them on another, and claim that they have provided extra centres. That is the spin—that is the way in which this Government act. That is what happens when the Chancellor gets to the Dispatch Box. He tells a tale which he hopes that people will fall for, but they will not when they know the truth.
  Just as a little footnote, the Government still hope to have a privatised facility at Ashford. They still want to get rid of a ward and to get rid of the theatres. They still want to hand over some NHS staff, but now they want to hand them over to a private Swedish company. That is the reality of privatisation—they cannot even use British; they give away their facilities to somebody from abroad.
  The reality of the NHS for my constituents is as I describe it, not as the Chancellor claims. The reality is suffering—let us remember that an A and E consultant said that it may even result in death—not what the Secretary of State claims. As a result of this Budget, and as a result of this Government, my constituents are facing cuts in spending, not more spending. They are facing cuts in services, not improved services. To add insult to injury, they are facing the privatisation of their NHS.
  Last Thursday we were treated to the usual round of spin, boasts, claims—all the false things that we have come to associate with a Government who cannot distinguish reality from fiction. Tonight, like it or not, the Government must face the truth—the truth as my constituents see it: the truth that led 12,000 local people to sign a petition pleading with the Government not to make cuts. There seems to be no sign whatever, at least at the moment, that the Government are paying any attention to that petition. From them it is all spin and no delivery; all waffle, and a complete refusal to listen to my constituents or provide them with a decent NHS.
  9.5 pm
  Mr. Stephen McCabe: This may be the only thing I shall have in common with the hon. Member for Spelthorne (Mr. Wilshire) this evening. but like him, I must begin by apologising for being unable to be present for the whole debate. I had other work commitments earlier.
  I congratulate my right hon. Friend the Secretary of State for Health on the commitments that he announced earlier. I note that rather than supporting those advances, the hon. Member for Bury St. Edmunds (Mr. Ruffley) wants to proceed against the non-medical staff in our national health service. I am not sure that I want a health service bereft of security staff: sadly, we need them to protect our nurses nowadays. I do not particularly want to make grand savings by wiping out gardeners in our hospital grounds. I think that medical secretaries do a useful job, indeed an essential one. I think that computer programmers and technicians are crucial to the NHS. By all means let us phase out jobs that we no longer need, but let us not kid ourselves about the people whom the hon. Member for Bury St. Edmunds has in his sights.
  It seems to me that the test of a party's attitude to the NHS is what it does in government. Given the official Opposition's track record, their ever-changing
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  commitments and the constant mantra that their promises are no more than work in progress, it is hardly surprising that many of us have adopted scepticism bordering on cynicism.
  I welcome the Budget, which, as the Chancellor rightly pointed out, hails one of the country's longest sustained periods of growth. I am proud to be a member of a party whose Government can boast the lowest inflation for 30 years and the lowest unemployment since 1973. Despite all attempts by those with a very different agenda to paint an altogether different picture, I am delighted that our Chancellor has ensured that our debt is the lowest of any in the G7 industrialised economies. When I think of what the situation was like when I worked with unemployed youngsters in the late 1970s and early 1980s, I know that this country has been transformed. At that time in the west midlands, it was a novelty to meet a kid who had a father in work—or even a male relative who had had a chance to work.
  Of course there are challenges ahead. There are currently 555,000 vacancies in the economy. We cannot ignore the investment in higher education and skills training that the Governments of India and China are pouring into their economies. I welcome the Chancellor's announcements about education generally, but I particularly welcome the proposals for a new deal for skills and the 10-year framework for investment in the UK's science and innovation base.
  There is an area in which I think we might do a bit more. I want to focus briefly on energy, and renewables and carbon dioxide emissions. It is not clear to me that the Budget has paid quite the attention to those matters that some of us might have hoped. In this country, every year, an estimated 600,000 tonnes of coal mine methane seeps into the air from around 1,000 abandoned or disused former coal mines. That state of affairs, I am told, could continue for the next 50 to 100 years. Coal mine methane has a global warming potential 23 times greater than that of CO2. Capturing coal mine methane and converting it to electricity reduces global warming potential and CO2 emissions by nine times more per kilowatt generated than can be achieved by wind power.
  Why, one may ask, is that area of the renewables market not at the forefront of our energy thinking? The answer is that many companies simply cannot afford it in today's cut-throat, competitive energy market. However, a small shift in the renewables obligation could change all that, and it seems strange that that does not happen given that methane captured from landfill sites or sewage farms is covered by that process. The German Government, I understand, included coal mine methane in their renewables legislation. It could be helpful in terms of energy, reducing emissions and the cost to the health of communities, if I could persuade colleagues at the Treasury to have another look at that.
  Paul Farrelly: I did not expect to intervene on the subject of coal mine methane in a health debate but I suppose that there is a health spin-off. I remember my dad converting from methane—the old town gas—to North sea gas years ago. Does my hon. Friend agree, notwithstanding his point about coal mine methane, that it is different from coal bed methane, and that we do not want a lot of mining companies trampling over

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  virgin greenfield land trying to tap into seams of coal under the ground, as they tried to do in north Staffordshire after stripping assets out of local pits?
  Mr. McCabe: My understanding is that, although health has served as part of the focus for the debate, it is an economic debate on the Budget and we are relatively free to range across subjects, but I take his point. What he describes would be entirely unacceptable and bears no relationship to the matter that I was describing, which is about trying to recycle coal mine methane in order to produce electricity and in so doing relieve the stress on the environment. I am grateful to him for making that point.
  I am aware that the Budget has been well received in a great many quarters. School teachers in my constituency have told me about their plans to build on the progress that they have been able to make. They are already describing equipment that they will purchase and renew. They are already planning what to do for children in the years ahead. People who work in the skills and training sector are already looking forward to what we can do to develop and boost areas of our economy in which we have real difficulties and deficiences.
  I understand that the director general of the Confederation of British Industry has welcomed the Budget. I noticed that not too many Members on the Opposition Benches referred to that today. Of course, pensioners know the difference between what is really in their pockets and what they have a real guarantee of receiving, and promises that are ever out of reach.
  There is really only one obvious place where the Budget has not been welcome: the Opposition Benches. Rather than acknowledging demands for education, training and investment, rather than celebrating the low level of Government debt compared with that of our G7 partners and rather than congratulating the Chancellor on helping this country to avoid the recessions that have done so much damage to the American and Japanese economies and to those in the eurozone, Opposition Members have insisted that this is a Budget that we cannot afford.
  I have listened with fascination for some time now to the arguments advanced by the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) and by the right hon. Member for West Dorset (Mr. Letwin). They like to tell us that they are changed men—new men, as one of them suggested earlier today: the right hon. and learned Gentleman would like us to forget all about his past.
  Paul Farrelly: Is my hon. Friend puzzling, like me, about the real agenda behind Conservative policies? I shall quote what the current chairman of the Conservative party has said about reconstruction:
  "As one of, I think, the unreconstructed Thatcherite free-marketeers in the shadow cabinet, I'm a great believer genetically in markets... The biggest problem that we have in the NHS is that it is not a proper market."
  Does my hon. Friend agree that the choice that the Budget poses is Labour investment in the NHS or Conservative cuts and wholesale privatisation of the NHS?
  Mr. McCabe: I am certainly not puzzled. I could not agree more with those comments.
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  The right hon. and learned Member for Folkestone and Hythe would like us to forget about his past; but, I remember, as do millions of others, what happened to the economy of the west midlands the last time a Conservative Government implemented the policies that the official Opposition now advocate. I have heard the Tories telling us that people are best at deciding how best to spend their tax money, but I remember that Lady Thatcher, as she now is, boasted in 1979 that income tax was too high and that the Conservatives would reduce it and pick up the lost revenues by indirect taxes. That is exactly what they did. It is true that the Conservatives reduced income tax when they came to power in 1979, but in their first Budget, VAT on what were then called luxury items rose from 12.5 per cent. to 15 per cent. and VAT on everything else rose from 8 per cent. to 15 per cent.—virtually double. That is how they believe in people spending their own money.
  Mr. Lansley:While the hon. Gentleman is talking about income tax and VAT, perhaps he would like to tell the House and, in turn, his constituents that the Chancellor expects to increase the take on income tax by £15 billion and the revenue from VAT by £10 billion in the next financial year—so there will be more taxes and more taxes again from the Chancellor.
  Mr. McCabe: I have no problem with increasing the tax yield in an expanding economy. I do not know anyone, other than the hon. Gentleman, who would find that a problem. The way that the Conservatives trust people to spend their money is by creating the illusion of tax cuts by banging up the VAT rate. That is what they did in 1979, when they also taxed sickness and unemployment benefits and doubled the cost of NHS prescriptions. In their second Budget, they doubled the cost of prescriptions again. While they were doing all that to the British people, they cut public spending on education, schools, health, transport, housing and most other areas. In fact, they cut spending on anything that really mattered. That is the real record, but the Tories talk about affordability and waste. In fact, they were so successful in 1980 that their second Budget was described as the meanest by any Chancellor since 1931.
  What was the effect of that great Tory approach? It was the collapse of industries like a set of dominoes right across the west midlands. We were plunged into recession and millions were thrown out of work. Senior managers and factory floor workers were all the same. Many never worked again, and their sons and daughters became the generation who lived in the workless twilight zone of Tory Britain—a generation purged of opportunity and condemned to be the victims of economic madness, Tory obsessions and Tory prejudice.
  Alistair Burt: I am deeply moved by what the hon. Gentleman says but, if that is the case, why on earth did his constituents not vote for socialism at the past two elections? Why do those on the Government Front Bench parade a modern mixed economy? Why do they talk about all the reforms that the Conservative Government introduced on which the Chancellor is now

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  basing the success of his economy? What happened to the socialism that the hon. Gentleman is spouting about? It never worked and never appeared—
  Mr. Deputy Speaker (Sir Alan Haselhurst): Order. This is meant to be an intervention, not a speech.
  Mr. McCabe: The hon. Gentleman should be deeply moved, but he appears to have missed the fact that my constituents and the British public voted in the last two elections for economic sanity as opposed to the economic madness that they suffered under him and his lot, and would do again. At the time that the Tories were doing all that to the British people, they were boasting that it was a price worth paying. I say any price is worth paying to avoid going back to those desperate years.
  My experience and that of most of my constituents and a whole generation in the west midlands tells us that cheap soundbites about credit card Budgets are nothing more than a cover for cuts, recession and untold misery at the very time that we need investment, expansion and growth. That is why I am clear that there is only one man capable of delivering on the British economy. That is why I am delighted to back this Budget.
  9.22 pm
  Mr. Andrew Lansley: I am entertained by the hon. Member for Birmingham, Hall Green (Mr. McCabe); I enjoy listening to him. He was at risk of speaking in a way that was interesting and that reflected a certain amount of expertise. The problem is that that was restricted to his discussion of coal mine methane. Everything else was neither interesting nor displayed any expertise whatever.
  Still less did the hon. Gentleman's remarks have anything to do with health. Of course, he was right to say that he was free to talk about other issues, but it is surprising that so few Labour Members have sought to talk about health. Presumably, in Cabinet, the Secretary of State sought a debate on health because he saw it as a priority issue for the Government. However, Labour Members did not agree with him. Thirteen speeches have been made by Back Benchers; nine of them were made by Conservative Members and all but one—I shall return to that point in a minute—spoke about the substance of the issue of health and with experience of their constituencies. Just four Labour Members made speeches and only three of them spoke about health. Apart from the speech of their Front-Bench spokesman, what was the Liberal Democrat contribution? Nothing.
  I am used to Conservatives winning the argument, but I normally expect the Government at least to mount an argument. However, they did not even do that; they simply caved in. They hope that no one is out there watching and that no one cares whether Parliament debates the Budget—still less debates health. Now, for once, we have it on the record that we care about health and what is happening to the NHS. We care about the health experience of our constituents, and we are prepared to debate the substance of the issue.
  Let me say a few words about the Secretary of State's speech. He was invited to blame his predecessor for the current situation and verged on doing so—we are
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  pleased that his predecessor, the right hon. Member for Darlington (Mr. Milburn), is with us and that he contributed to the debate—but in truth, he actually blames his predecessor but one. He made that perfectly obvious when he said that the Government made a start on remedying what they saw as the failings of the NHS with the NHS plan in July 2000. Everything that came before that represented two or three years of completely wasted time—although we have had pretty much six years of wasted time from the Government.
  The Secretary of State made one or two points of substance to which I want to respond. He talked about the additional money in the Budget that is intended for clinical research, which I welcome. As chair of the all-party group on stroke, I welcome the fact that he has included stroke among the three diseases—Alzheimer's, stroke and diabetes—on which there will be an additional emphasis on clinical research. I hope that he and his colleagues will ensure that research on stroke is directed not only at the disease itself, but at rehabilitation and how we can best achieve that.
  If I may digress for a moment, it is interesting to note the lack of research on stroke compared with the main diseases of cancer and coronary heart disease, so the announcement is extremely timely. We need to begin to understand better the circumstances in which we could intervene early during stroke management and stem the extent of the disease. In the past, we tended to say that if people have a stroke, they are admitted, and that if we are lucky, they are admitted to a specialist stroke unit. Perhaps the Government will be able to tell us at the end of next week how many people are admitted to specialist stroke units. Unfortunately, the figure will not be 100 per cent., which ought to be the target in the national service framework for older people.
  In the past, we tended to say that the degree of disability and deficit that results from a stroke is pretty much fixed and that the effects can be mitigated only through rehabilitation. However, in the future—perhaps research will enable us to identify this—we may be able to use new treatments such as Desmosteplase, which is in use and licensed in America. Although imaging is required for such treatments, their use in early intervention tends to reduce the extent of stroke deficit. Tens of thousands of people are affected by stroke each year and we might be able to reduce the extent of their disease. I welcome the research on stroke. When we discuss health, it is important to talk about health issues rather than only funding and how much money should go where, which is why I welcomed what the Secretary of State said.
  The Secretary of State briefly mentioned drugs for children. I commend the work carried out before the 1997 election by the Select Committee on Health under the chairmanship of my hon. Friend the Member for Broxbourne (Mrs. Roe). The Committee published reports on children's health just prior to that election, one of which drew specific attention to the lack of clinical trials of such drugs, and especially the lack of drugs for which there were protocols on, and indications of, the extent to which they were suitable to be prescribed to children. It is important to begin to remedy the problem so that we have greater confidence in the system.

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  I reiterate the point of principle on which our approach to the NHS is based, which my hon. Friend the Member for South Suffolk (Mr. Yeo) set out: it should be free at the point of use and based on need, not on the ability to pay. The Secretary of State retreated in confusion on that point. He argued at the Dispatch Box that we should spend more in the private sector than my hon. Friend suggested.
  Dr. John Reid: There is no confusion. I ask a question to which I did not get an answer—perhaps the hon. Gentleman can enlighten us. The hon. Member for South Suffolk (Mr. Yeo) insisted that the Conservative party is committed to equity of access. How can two people have equal access to an operation if that is dependent on them both having half the cost of the operation?
  Mr. Lansley: The Secretary of State misses the point again. We have made it clear that the patients passport will be a mechanism for the delivery of patient empowerment. It will give patients control over their health care. It is astonishing that he does not understand when he is playing grandmother's footsteps with the Conservative party.
  At the Conservative party conference in Harrogate two or so weeks ago, my hon. Friend the Member for South Suffolk made it clear, just as we made it clear at our last party conference that we wish to extend the patients passport to chronic disease management, that we are starting work on how we will achieve that, as he reiterated today. It involves placing particular emphasis on diabetes and asthma, as early diseases that would qualify for that approach, and empowering patients to control their health care. That happened on the Saturday. Lo and behold, the following Thursday, the Secretary of State went to a conference organised by The Guardian—the type of event to which he tends to go—and announced that he intends to focus on chronic disease management and self-management of such diseases, with an emphasis on diabetes and asthma. We are forging the way in the health debate.
  The Secretary of State needs to persuade his hon. Friends of his policies. The hon. Member for Newcastle-under-Lyme (Paul Farrelly) spent most of his speech attacking the concept of patient empowerment. He is not interested in the idea that someone might choose the type of health care that they receive and where they receive it. He wants the money spent in his local hospital and does not want anyone to choose anything else.
  Paul Farrelly rose—
  Mr. McCabe rose—
  Mr. Lansley: I shall give way to the hon. Member for Newcastle-under-Lyme, because I just referred to him.
  Paul Farrelly: I welcome the hon. Gentleman's return to the Front Bench. He was a talent wasted on the Back Benches. I also know him to be a reasonable man. Does he truly believe in the voucher, the visa or the passport policy, or is it something that he inherited?
  Mr. Lansley: Before the hon. Gentleman chides me on policy, he should find out about his party's policy,
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  because the Government have been chasing us. For heaven's sake, it is his party's policy increasingly to use the private sector. The Government have been buying services at 143 per cent. of the NHS cost. According to the The Times today, they are negotiating for bulk purchasing in the private sector. We want independent health care providers to stand alongside NHS providers. Our interest is in ensuring that patients get the health care they need and not to be hide-bound by an idea of who provides it, whether it is NHS owned or independent.
  The detail of the Government's plans often reveals that choice is limited. Rather than providing choice at the point of referral, it is choice after six months. As my hon. Friend the Member for South Suffolk said, it is not a choice of any hospital across the country—a genuinely national health service—but a choice of the specific hospitals that the Government say people can go to. My hon. Friend the Member for North Dorset (Mr. Walter) told us about his constituents who were not allowed to be referred to the Royal Surrey County, even though that was their choice. Just as this Government did away with extra-contractual referrals and out-of-area treatments, and have introduced limited choice within the NHS, only a Conservative Government will restore choice to my hon. Friend's constituents.
  Mrs. Patsy Calton: Will the hon. Gentleman give way?
  Mr. Lansley: No, I have only a few minutes left and the Liberal Democrats did not participate in the debate to any extent.
  The right hon. Member for Darlington made some important points. I want to mention just one—his conversion to increasing home ownership, as one of my hon. Friends put it. Given the right hon. Gentleman's record at the Department of Health, surely he could help to shift the definition of affordable housing away from a definition of social housing, which is geared to the rented sector and, in particular, the housing association-owned rented sector, to one that offers opportunities of equity stakes for those in key-worker housing. That would be enormously helpful. That is what people around Addenbrooke's hospital in my area want. They do not want to rent. They want the opportunity to buy, and if they cannot buy the whole of a property, they want to have some equity in it.
  I must not be too unfair: the hon. Member for Sutton and Cheam (Mr. Burstow) did make a speech. He talked about our policies, but he neglected, so far as I could tell, to say anything about Liberal Democrat policies. In particular, he neglected to tell anybody that the Liberal Democrats appear to be opposed to patient choice, but he did talk about public health.
  The Secretary of State did not talk about public health very much. In particular, he did not give us the opportunity to ask him why he supposes that, in a recent survey of doctors published in "BMA News", 78 per cent. of those who responded said that they were not confident that the Government could or would achieve significant improvements in public health. That is exactly why my hon. Friend the Member for South Suffolk and other colleagues put improvements and a

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  new strategy for public health at the forefront of our policies—there is no confidence in the Government on that matter.
  Mrs. Calton: One thing that the hon. Gentleman failed to note is that my hon. Friend the Member for Sutton and Cheam (Mr. Burstow) asked where the £1 billion of dead money for the patients passport is. I should be grateful for an answer.
  Mr. Lansley: I should be glad to answer the hon. Lady, who at least had the patience to listen to the whole debate, but I confess that I do not remember the hon. Gentleman saying that. I must have been in the midst of a rather dull debate. Since the hon. Gentleman had nothing to say about his own policy, however, I shall not bother to say too much. If the hon. Lady wants to chide us about policies, she might like to remind the House that in the debate on foundation hospitals she was against the principle of those hospitals, but when challenged on the fact that in her constituency she supported Stockport district general hospital, which I have visited, in becoming a foundation trust, she said, "Well, of course, in the Liberal Democrats, one changes one's principles according to the circumstances."
  Mrs. Calton: Will the hon. Gentleman give way?
  Mr. Lansley: No, I have given way to the hon. Lady once, and that is enough.
  The hon. Member for Luton, North (Mr. Hopkins) told us a little about his views on the Budget, which should worry the Chancellor because, basically, that consisted of agreeing with the Chancellor that his borrowing an enormous amount of money was a good thing and, if there was one criticism, it was that he was not going to put the price of alcohol up by 10 per cent. I am not sure how that will go down in Scotland, and with the Scotch Whisky Association.
  My right hon. Friend the Member for South-West Norfolk (Mrs. Shephard) departed from the subject of health to tell us some very important things about biofuels. If I may, I will simply say that, from my perspective in East Anglia, I share her view of the importance of giving credibility to the Government's acceptance of the EU biofuels directive and their commitment to 2 per cent. biodiesel by 2005, and the necessity of showing how those targets will be achieved.
  The hon. Member for Plymouth, Sutton (Linda Gilroy) told us about Derriford hospital and went into the subject of payment by result, which I hope Ministers will take note of. I must confess, however, that I would be surprised if she got much of a reception among her colleagues for her criticism of the market forces factor, since that is one of the components of a distribution factor that so benefits the constituencies of Labour Members as compared with the way in which NHS resources are distributed among Conservative Members' constituencies.
  Linda Gilroy: Will the hon. Gentleman give way?
  Mr. Lansley: No, I do not have time. I must respond to the points made in the debate.
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  My hon. Friend the Member for North-East Bedfordshire (Alistair Burt) made some very important points, and I want to echo two of them. The first was about the GP contract. I know from correspondence with Bedfordshire Heartlands PCT that it is concerned about where the money will come from. That concern has recently been reflected in "Health Press". The cost to the trust of running an out-of-hours service is to rise from £1 million to £1.9 million, and the Government's proposals, including the recent announcement by the Minister of State, Department of Health, the right hon. Member for Barrow and Furness (Mr. Hutton), will only take it to about £1.5 million, so it is looking at finding £400,000 from somewhere to maintain the service.
  On a positive point, I shall not chide the Minister of State because I hope that he will be able to deliver for my hon. Friend on the subject of the Primrose appeal and the associated costs. I leave that with him. We will thank him if he is able to deliver satisfaction for the appeal by turning charitable donations not into tax but into the cancer centre for which they were subscribed.
  My right hon. Friend the Member for North-West Hampshire (Sir George Young)—[Interruption.] It is all very well the Secretary of State not listening to me speak—I am used to that—but neither he nor any of his colleagues at the Department of Health came to hear my right hon. Friend speak. They would have learned a great deal had they done so, and I recommend that they read his speech tomorrow, because it illustrated the problems that are being experienced in the areas represented by Conservative Members. Deficits of more than £20 million are reported in Hampshire and Isle of Wight strategic health authority and in the Surrey and Sussex strategic health authority, and similar deficits are anticipated at the end of December in the Norfolk, Suffolk and Cambridgeshire strategic health authority. Then—lo and behold—came the hon. Member for Newcastle-under-Lyme (Paul Farrelly) to say that no deficits were reported in his area. Well, that is a surprise. I wonder how that happened.
  My right hon. Friend the Member for North-West Hampshire also made it clear that the Secretary of State had managed to come to the Chamber and give a speech about health but not talk about all the things that people working in the health services are talking about. They are talking about NHS IT, GP contracts, consultants' contracts, the European working time directive, payment by results, the tariff, and foundation trusts, but the right hon. Gentleman mentioned none of those subjects. People in the NHS might wonder why he omitted them from his speech, but we do not. He missed out all those things because they are problems, and the Secretary of State did not come here to dwell on the problems. He came here to talk about our policies, not about his.
  My hon. Friend the Member for North Dorset spoke about the problems that his constituents are experiencing, and my hon. Friend the Member for Reigate (Mr. Blunt) referred to the European working time directive. The hon. Member for Newcastle-under-Lyme—I am sorry to mention him again—spoke about Keele university and all the additional medical students training there. Well, good—they will be needed, because the BMA estimates that if Labour Members of the European Parliament, who voted to get rid of the opt-

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  out from the working time directive, have their way, by 2009 we will need 9,900 more junior hospital doctors to cope with the demands of that directive. Those demands will hit us this August, and they are causing many in the NHS real concern.
  My hon. Friend the Member for Fareham (Mr. Hoban) referred to relocation issues—I suppose that last Wednesday's announcement of 1,000 jobs to be lost to his area hit like a Titchfield thunderbolt. He also spoke about lack of accountability in planning and housing in the south-east and the east of England. I entirely share his view: that is a disgrace.
  I have referred to the hon. Member for Newcastle-under-Lyme sufficiently. My hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley) reminded the House that only the Conservatives can offer the real structural reforms that are required. My hon. Friend the Member for Mid-Worcestershire (Mr. Luff) drew our attention to the tax increases that already appear in the Red Book, quite apart from the further tax increases that will be required if the evidence of revenue shortfalls and overruns in borrowing is accurate. My hon. Friend the Member for Spelthorne (Mr. Wilshire) quoted personal experience of the effects on the NHS in his constituency, which comes within the North West London strategic health authority—
  Mr. Wilshire: Surrey and Sussex.
  Mr. Lansley: The Surrey and Sussex SHA, which also covers the constituency of our hon. Friend the Member for Reigate and which anticipates deficits of more than £20 million.
  The debate was pretty much a walkover. We know what the link between the NHS and the Budget is. As my hon. Friend said, the Chancellor is in the casino; he is playing not with his own chips, but with ours, and he looks like he might lose. When he cannot manage the risks, who will take the losses? It will be the NHS that has to pay. Just as we have seen him do in the past, the Chancellor will make promises on which it is impossible for him to deliver. The Conservatives have the policies that will ensure that we can support the NHS with the resources that are required to improve health care to the standard that we need, and those resources will not be prejudiced by future demands for additional taxation or a collapse in the public finances. Only under the Conservatives can the NHS be safe.
  9.44 pm
  The Economic Secretary to the Treasury (John Healey): We have had a good debate. I shall do my best to deal with the points that have been raised in the time that is left to me, which will be less than the time that was available to the hon. Member for South Cambridgeshire (Mr. Lansley). I shall pay particular attention to those who contributed to the debate and still remain in the Chamber.
  A central fact at the heart of the Budget statement and this debate is that since 1997 Britain has sustained growth through not one but two economic cycles. Since 2000, our growth has outperformed the EU area, Japan and even the United States. Since 1997, Britain is the only developed country that has grown in each and every quarter in spite of the recent world downturn, and
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  in spite of our record, which was that Britain was usually first in and last out and suffered more in any world downturn that we experienced.
  On Wednesday, my right hon. Friend the Chancellor of the Exchequer confirmed that last year the British economy grew by 2.3 per cent., meeting the Treasury's expectations and confounding the predictions of Opposition Members and many individual commentators. It was only in November 2003 that the shadow Chief Secretary to the Treasury said:
  "There are now growing threats to growth and stability."
  In April last year, the then shadow Chancellor and now Leader of the Opposition said:
  "The Chancellor has misrepresented Britain's economic prospects in the past and he is now once again being less cautious than independent experts."
  In addition to sustained growth, we have had the lowest inflation for 30 years, the lowest interest rates since 1955 and the lowest levels of unemployment since the 1970s. Britain is closer to full employment now than it has been for a generation. New unemployment figures published on the day of the Budget show that since 1997, 1.8 million extra jobs have been created in the British economy, with 1.3 million in the private sector.
  This economic position is supported—it will continue to be supported—by the fiscal discipline that is at the heart of our strategy for long-term stability. We have met our fiscal rules. In addition, debt this year is just 33 per cent. of national income. Net borrowing is 2.4 per cent. of GDP and falling over the forecast period. Both figures are lower than in the past, and both are lower than the rates of our major competitors in the industrialised world. The challenge now is to combine this new confidence in Britain's economic potential with a new determination to make the long-term reforms and investment that will secure stability and growth for the future.
  My right hon. Friend the Chancellor of the Exchequer set out in the Budget some of the necessary investments that we have to make in science, education, skills and enterprise in our country's wealth-creating and job-creating base. He made it clear that he will not neglect the need for long-term investment and will impose an annual balanced budget rule. A policy in contradiction of that, whether imposed by a future Government or by a rigid interpretation of the European stability and growth pact, would repeat the mistakes of Britain's stop-go past and put at risk our stability and growth. It would be a return to stop-go for the economy and a go-stop for public services. My right hon. Friend the Member for Darlington (Mr. Milburn) and the hon. Member for Sutton and Cheam (Mr. Burstow) made the link between a sound economy and strong public services much clearer in their contributions.
  My right hon. Friend the Member for Darlington said that health investment performs an economic function. He added that NHS reforms have delivered health benefits and economic benefits. He went on to say that the same is true in spades for education and child care. That is why the debate has been dominated by public service spending plans. At the same time, it is an essential part of the debate about Britain's economic management and prospects for the future.
  The hon. Member for South Suffolk (Mr. Yeo) made what he termed an important announcement. He said that a future Tory Government would not introduce tax

  669
  relief on private health care insurance. That is the unmistakeable sound of a hasty retreat. It is the unmistakeable sign of a policy that is at sixes and sevens. Neither the hon. Gentleman nor the hon. Member for South Cambridgeshire answered the challenge of my right hon. Friend the Secretary of State when he asked, given the patient's passport plan, how could they honour the pledge that was made this afternoon that there would be equal access to all in the NHS, free at the point of delivery.
  Let us be clear: the plans for health and the health passport would take money out of the NHS to subsidise the private health care industry. It would be used to help the privileged few to jump the queue. Most hardworking families could not afford the £8,000 that they would need to find for a heart bypass operation. They would not be able to find £5,500 for a knee operation, or £4,000 for a hip replacement operation. It is a plan to promote private health care and it would end an NHS free at the point of use—that is what the hon. Member for South Suffolk espoused as the new Conservative path.
  Pupil passports were mentioned in the debate, and Conservative spokesmen are at sixes and sevens over that policy too. On 22 February, the shadow Chancellor said that the money for pupil passports could be used for "cheap private schools" and that parents could top it up. Over the next fortnight, that was confirmed, repudiated, reconfirmed and repudiated again. On 11 March, the shadow Chancellor ruled out using the passport at fee-paying schools. Five days later, the hon. Member for South Suffolk said that parents could spend the passport at fee-paying schools, but could not top it up. The policy has changed half a dozen times in half a dozen weeks, so can anyone be confident that it is not about to change again? It is clear, however, that money will be taken from mainstream schools to subsidise the private education sector and help the privileged few at the expense of every other pupil and student.
  I shall pass over the contributions of the hon. Member for Sutton and Cheam, who is not in the Chamber, and of my hon. Friend the Member for Luton, North (Mr. Hopkins) who, sadly, is no longer in his place. He welcomed the public investment, and I know that he will warn his constituents of the jeopardy to transport and the other things that he mentioned if the Opposition should ever assume office. The right hon. Member for South-West Norfolk (Mrs. Shephard) takes a special interest in biofuels, and she makes sure that I do too. I appreciate her welcome for the Budget measures that she described as positive. I accept that she wants us to go further, but she will welcome the confirmation in the Budget that we are prepared to consider and consult on a biofuels obligation. The right hon. Member for Fylde (Mr. Jack) and my hon. Friend the Member for Sherwood (Paddy Tipping) will do so too, and I look forward to further representations from the right hon. Member for South-West Norfolk and the all-party alliance that she has established.
  The hon. Member for North-East Bedfordshire (Alistair Burt) was poetic about the undisturbed peace in Biggleswade last week. I am glad that he welcomes the extension of the VAT scheme as a zero rate on the repairs of listed churches. He was concerned about the
  670
  Macmillan Primrose appeal, and asked me to investigate. In recent months, I have been much more heavily involved in the issue than he might expect, and I can confirm that the Government have given a commitment that the NHS will meet the VAT costs of projects deemed to be priorities of local cancer networks.
  The right hon. Member for North-West Hampshire ( Sir George Young) wanted a stronger link between NHS investment and improvements in the service—a point to which I shall return. He asked about photodynamic therapy for people with macular degeneration. I suspect that he knows that the National Institute for Clinical Excellence issued guidance in September, and in the same month the Department of Health issued guidance to vary the usual three-month funding directive because of the need both to expand services for those patients in a planned way and to recruit and train staff across the country.
  The hon. Member for North Dorset (Mr. Walter) raised the case of a constituent and funding for his treatment. It is impossible for me to respond, but I am sure that my right hon. and hon. Friends from the Department of Health will consider it, along with the comments of the hon. Member for Spelthorne (Mr. Wilshire), who made a heated contribution about the position of his local NHS trust. The hon. Member for North Dorset complained about the operation of NHS Direct, but last year it received more than 6.3 million calls—almost three times the number of calls it received three years ago. Increasingly, it is gaining the support of patients and the medical professions, and it is part of the reformed service delivery that we need in future. He tried to use detailed figures to argue that the Budget showed that the Government will break the golden rule and that it confirmed tax rises in future.
  The hon. Member for Bury St. Edmunds (Mr. Ruffley) tried to do the same. I say to them both that precisely the opposite is true. We have kept every promise that we have made on tax and we will continue to do so. We have met the fiscal rules that we have set and will continue to do so. We have set out our commitments to invest more in public services. We have shown that they are fully funded, and they are fully funded on the cautious case that one would expect of a Government.
  The hon. Members for Reigate (Mr. Blunt) and for Bury St. Edmunds commented on productivity in the NHS. The definition of productivity is narrowly focused on what consultants do, and they make up only 7 per cent. of what the NHS does. I remind hon. Gentlemen that in March 1997 over 30,000 patients were waiting more than 12 months for treatment. At the end of January this year the figure was 36.
  My hon. Friend the Member for Birmingham, Hall Green (Mr. McCabe) mentioned coalmine methane, and I will consider the points that he made. I remind him that we have already exempted the generation of electricity from coalmine methane sources from the climate change levy, and we have put in place an unprecedented level and length of support to underpin the renewables obligation.
  Despite the Opposition's efforts to run down the improvements, our past investment in health was demonstrated by the practical changes that my hon.

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  Friends the Members for Plymouth, Sutton (Linda Gilroy) and for Newcastle-under-Lyme (Paul Farrelly) described in their constituencies. Every Member of the House can see that progress is being made in their constituency. In my own area in South Yorkshire there are 1,170 more nurses attending to patients in the NHS now than there were in 1997. Our investment in health nationally has already led to an increase of 67,500 nurses and 19,000 doctors since 1997. We have funded the largest ever hospital building programme, improved GP premises, increased the number of beds and decreased waiting times for operations and emergency care. In answer to the hon. Members for Reigate and for North-East Bedfordshire, I point out that last year elective admissions increased 21 per cent. on 1997. That is equivalent to almost 1 million extra hospital admissions. That is no trifling increase in output, as the hon. Member for Reigate suggested.
  In the Budget we have allocated an additional £100 million to NHS research and development. I am glad the hon. Member for South Cambridgeshire (Mr. Lansley) welcomed that. Together with increases to the Medical Research Council, we expect the increase to exceed £150 million per year.
  On education, we have announced in the Budget £8.5 billion extra for UK education in 2007–08 compared with 2005–06—an average annual increase of 4.4 per cent. in real terms across the 2004 spending review period. There will be more bad news for the education sector if the Tories get in. Andrew Neil asked the shadow Chancellor the day after the Budget whether he would match the extra spending on education. The answer:
  "No, we'll stick with our plan."
  We have outlined proposals to boost productivity and growth in the economy through a new deal for skills and a 10-year framework for investing in the UK's science and innovation base. Any serious debate in the House or in the country must set out these Labour commitments alongside the plans of the Opposition. The shadow Chancellor has made it clear that he would impose a two-year cash freeze, which means a 5 per cent. real-
  672
  terms cut. We look forward to hearing how his Front-Bench colleagues will explain to local councils the projected cut of £2.4 billion, how they will explain to those who need child care the projected cut of £340 million, even before the new Budget announcements were taken into account, and how they will explain to those who are most impoverished and most needy across the globe, and to those who try to help them through international development, the projected cut of £229 million.
  The shadow Chancellor has committed the Tories to 5 per cent. cuts in the law and order budget. That is the equivalent of sacking 1,300 police officers. At a time when we are stretched in Iraq, Afghanistan and Kosovo, he has committed them to cut the defence budget by 5 per cent. in real terms. It is not just that they leave us defenceless at a time when we need defence, insecure when we need security and weak when we are in troubled times. It is worse than that. All the major investments we need for the future, they would cut. The very drivers of prosperity would be cut—science cut, skills cut, transport cut, apprenticeships cut, university places cut, further education courses cut and workplace training cut. This Budget and this Budget debate make clear the choice before the British people: cuts, charges and privatisation under the Tories—
  It being Ten o'clock, the debate stood adjourned.
  Debate to be resumed tomorrow.

  COMMITTEES

    FOREIGN AFFAIRS
    Ordered,
    That Richard Ottaway be discharged from the Foreign Affairs Committee and Mr Andrew Mackay be added.—[Mr. John McWilliam, on behalf of the Committee of Selection.]

  TREASURY
  Ordered,
  That Mr David Ruffley be discharged from the Treasury Committee and Mr David Heathcoat-Amory be added.—[Mr. John McWilliam, on behalf of the Committee of Selection.]

  Longlevens Post Office
  Motion made, and Question proposed, That this House do now adjourn.—[ Paul Clark.]
  10 pm
  Mr. Parmjit Dhanda: There can be few occasions on which a Member of this House relishes being forced to rewrite his or her speech just hours before a debate. This, however, is such an occasion. It is also an occasion that has taught me something about the strength of this Chamber and of Adjournment debates, and about the difference that they can make. I have had to amend my speech several times during the day because of the negotiations that I have been in with the private sector today. I shall elaborate on that and on the effect of those discussions, which have been very positive with regard to issues that affect my constituency.
  Five hours ago, my constituents in Longlevens were despairing at the prospect of losing their local post office. I shared their anger about the way in which they had been treated. I knew how important it was to save that vital service, so in recent weeks, I have worked with local people in Gloucester, organising petitions, meeting them in Parliament and even raising the matter with the Prime Minister two weeks ago in Prime Minister's Question Time.
  This evening, we took several steps forward towards achieving a result, although we still have some way to go to resolve the issue totally. I would like to take this opportunity to explain the background to the situation, to discuss the points still to be resolved and to seek the Minister's advice on the wider issues raised by the recent controversy in Longlevens in my constituency. It is a controversy from which I believe that there is a great deal to learn, and my experience of today shows that some learning is going on at the present time as a consequence of the experience.
  In recent years, it has become a commonplace that communication has been transformed somewhat by innovation. For many of us, air mail has been replaced by e-mail and the lick of a stamp has been superseded by the click of a mouse. In such circumstances, it can be all too easy to forget the importance of our local post offices. The residents of Longlevens in my constituency value their local post office enormously. Unfortunately, that service was recently put in great danger. The licence for the Longlevens branch has very recently been acquired by Tesco, which gave just three months' notice that it intended to close the branch to create more space in its local store. My constituents in Longlevens are unhappy about the way in which the decision was taken, and so indeed am I. I am also concerned about the wider implications of closing the post office in terms of the national picture, and I hope that the Minister will be able to elaborate on that point.
  That is why my office and I were so pleased this evening when I received the latest fax from Tesco; I have had two faxes during the day. It has now said that it will not shut the post office on 8 May, as it had originally intended. It has made this promise:
  "it will remain in the One Stop"
  store
  "while we search for a new location."
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  Of course, there is still much more to be done, and a new location in Longlevens must still be found, but I welcome this significant step forward by Tesco.
  I shall elaborate on that letter, which contains three key concessions made today. First, Tesco says:
  "Following our conversation earlier today… the resignation date of 8 May has been withdrawn."
  I certainly welcome that.
  Secondly, on a financial level, Tesco says:
  "We understand that the cost of relocation may be deterring some of those who might consider taking on the relocated post office business. To overcome this, we have agreed with Post Office Ltd. an alternative arrangement whereby the contract transfers directly from Tesco to the new business. This would enable Tesco to significantly reduce the potential cost of relocation—we will not seek any goodwill payment for transferring the post office as a going concern and will contribute to the cost of physically relocating the post office."
  I also welcome that.
  Equally significantly, Tesco made a third concession hours before this debate, when it said:
  "In order to maximise the opportunity for a post office to be transferred, it will remain in the One Stop"
  shop
  "while we search for a new location."
  I welcome all three concessions.
  It may help if I go into further detail about the issue in Gloucester. In January 2003, Tesco purchased the T and S Group, which owned 318 stores containing post offices nationally. Although it stated that it would retain many of those post offices, reports suggest that up to 100 of them could close. It promised that it would give six months' notice wherever possible before closing a post office. In the case of Longlevens, however, it decided that it would only give three months' notice.
  I say to Tesco, "Why the rush?" Post Office Ltd. is due to publish its area plan in the third quarter of this calendar year detailing the need for local post office provision in Gloucester. Tesco pre-empted the plan by deciding to close Longlevens before it saw what the plan had to say. It also failed to seek the views of local people, who were utterly dismayed by the total lack of consultation. Indeed, the public interest did not seem to feature in its initial calculations.
  In my view, that is evidence of a wider lack of strategic thinking about the future of post offices in Gloucester and a lack of effective co-operation between Post Office Ltd. and Tesco. This incident, and others like it, threatens to undermine the Post Office Ltd. urban reinvention programme. Under the programme, the Oxstalls branch, which is also in Longlevens, was recently closed. Since Longlevens is just 0.9 miles away from the Oxstalls branch, it was subsequently designated as a "receiving branch", but now it, too, is threatened by closure, and its future remains uncertain. Post Office Ltd. is obliged to ensure adequate provision for customers in this area. If two neighbouring branches close within months, how can that obligation possibly be kept? The simple answer is that it cannot.
  The closure seems to have surprised Post Office Ltd. as much as it surprised me and, indeed, everybody else. The situation could be exacerbated further because of uncertainty about the future of the nearby Barnwood post office. A planning application has been submitted

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  that would involve the Barnwood site being knocked down to build flats. The operator of a nearby filling station has, however, indicated its willingness to take on the post office in Barnwood on its own site, but it is reluctant to do so until Post Office Ltd. has clarified its views on the future of services in the area plan, which will not be ready until autumn this year.
  As a consequence of that, it is not inconceivable that one 12-month period could see the closure of Oxstalls, Longlevens and Barnwood post offices, resulting in a massive gap in post office provision in the north and north-east of my constituency. If one draws an imaginary circle with a 1-mile diameter around the Barnwood post office, as I have, one will see that the community that it serves includes part of the Elmbridge and Longlevens communities, which would be hit again.
  In those circumstances, it is not surprising that the local community in Longlevens has come together in opposition to the plan. I cannot overemphasise to my hon. Friend the Minister how strongly local people feel about this. Thousands have signed petitions such as those organised by me and by The Citizen newspaper, and many more have phoned BBC Radio Gloucestershire, particularly the Mark Cummings mid-morning show—all calling on Tesco to think again. Tesco's letter demonstrates that it has listened, to some extent, and I welcome the dialogue that it now seems willing to take part in.
  The closure of any post office will cause unhappiness among its users, but I think that I have shown that the situation in Longlevens is particularly serious. Since neither you, Mr. Speaker, nor my hon. Friend the Minister have, to my knowledge, had the privilege of visiting Longlevens—although you are both welcome at any time—I want to talk a little more about the community there. Longlevens is a thriving neighbourhood with between 8,000 and 9,000 residents. On the same street as the post office is a wide range of shops, including the Co-op supermarket, a bakery, a pharmacy and a greengrocer. As the Post Office itself would agree, the post office is not an isolated, struggling service that cannot be justified economically or socially, but in many ways the hub of its local community.
  Longlevens post office is especially valued by local pensioners. More than 22.8 per cent. of the population is aged over 60—that is higher than the average for Gloucester, which is in turn higher than the average nationally. Many of those pensioners are worried that they will no longer be able to rely on having such an important amenity at a close walking distance. Can we really expect them to walk several miles once or twice a week to what will, for some of them, be an unfamiliar part of town? The benefits that they derive from the post office do not relate solely to the transactions that are processed there. For many lonely senior citizens, a weekly or twice-weekly visit to the post office and other nearby shops is an important means of maintaining social contact with others.
  That point was well made by my constituent, Jackie Dee, who runs the greengrocers two doors from the post office, and who visited Parliament with her family a fortnight ago on Wednesday. Jackie and her family feel a strong sense of duty towards their local community. They know their customers well and provide them with a valued service and friendship. It is their friends and
  676
  customers who will lose out as a result of the closure of the local post office. To rub salt into their wounds, Sir Terry Leahy, Tesco's chief executive, told one of my constituents—presumably in a circular letter or round robin—that the post office counter would close to provide space for a much wider range of fruit, vegetables and healthy eating options. But residents can already get that at the greengrocers run by Jackie Dee just two doors away from the post office, as Tesco could easily have discovered with a little local research—what residents want is a post office.
  What can be done about the situation? In recent weeks, I have engaged constructively with local people, Tesco, Post Office Ltd. and Postwatch, which has been very helpful. It would be foolish to make any decision on the future of the post office in Longlevens until POL has published its area plan. After all, that document will provide the context for taking strategic decisions about the future of post offices.
  I therefore asked Tesco to defer a final decision until the area plan was made available. Until earlier this evening, the last trading date was set to be 8 May. I asked Tesco to postpone that and give the people of Longlevens the same extensive period of notice as it gave other post offices that it intended to close elsewhere. I welcome its response, which was made only hours before the debate. I also seek a specific guarantee that Tesco will not close the post office until an alternative location has been found and is ready for business. The guarantee, "while we search" in the letter should ideally read, "until we have found" a new location.
  I understand that the Co-op has shown an interest in taking over the local branch from Tesco and would keep it in Longlevens. A local church and shops are also being pursued as possible relocation options. I should be grateful if the Minister encouraged Post Office Ltd. to take into account, when drawing up its area plan, the uncertainties surrounding the future of the post offices in north-east Gloucester. It should take all necessary steps to meet its obligation to ensure adequate provision for customers in Longlevens.
  The people of Longlevens have made a strong case for keeping a post office in a central location in the neighbourhood. We know that such a post office is economically justifiable as well as socially desirable. Post Office Ltd. would agree with that. We know how hard local people are prepared to work to ensure that their voices are heard. We also know the Government's commitment to investing in strong communities. I therefore hope that if we all—the Government, the Post Office, Tesco and, most important, local people—work together, we can save the service and ensure that Longlevens remains a thriving community and a great place to live.
  I confess to being a Tesco cardholder, like many people in Gloucester. I shop at the Tesco store on the cattle market site in my constituency at the weekends. I have held street stalls there; the staff are always friendly and accommodating. That also applies to the staff at the Quedgeley Tesco supermarket, where I have held many surgery sessions. They have been helpful in the past and I am sure that they will be again in future. That is why I believe that it is important that Tesco works with the local community and retains a good relationship.

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  Headlines such as "Church attacks Tesco on Post Office closure" and "Boycott threats over closure plans" in The Citizen demonstrate the strength of local feeling on the issue. I intended to say, "By at the very least extending their date of notice until we can secure an alternative site for a post office in Longlevens, Tesco can help redeem itself", but it has already gone a long way towards doing that today. In many ways, it is a shame that it has taken until today for that to happen, but I welcome the decision none the less.
  I hope that Tesco will now work with Post Office Ltd., Postwatch and local communities on the reinvention programme to stop the same thing from happening around the country. Earlier today, I was informed of similar incidents in Aylesbury and Swindon. As a result of Prime Minister's Questions and the Adjournment debate, I am conscious that Longlevens has the most famous post office in the country. However, all I want is to ensure that the community continues to have a post office. I am determined that we will succeed.
  10.19 pm
  The Minister for Energy, E-Commerce and Postal Services (Mr. Stephen Timms): I congratulate my hon. Friend on securing this debate and, as we have heard, on the developments for which this debate has provided a catalyst. I am grateful to him for letting me know the concerns that he wanted to raise, which gave my officials an opportunity to make some urgent inquiries today.
  My hon. Friend spelled out clearly the importance of good access to the local post office, and he highlighted the implications of Tesco's intention to remove the post office from its store at Longlevens. Of course, Tesco's decision is a commercial matter for the company. It does not stem directly from Government action, but I recognise the uncertainty that it has placed in the minds of my hon. Friend's constituents, and I want to respond to a number of the important points that he has made. We all share concerns about the future provision of post office services in our constituencies. The Government are fully committed to maintaining a viable nationwide network of post office branches.
  The Post Office is undertaking a restructuring programme of its network in urban areas. I have responded in a number of debates in this Chamber and in Westminster Hall to hon. Members who are anxious to make sure that the rationalisation of post offices in their areas does not disadvantage their constituents. Recently, I have heard from a number of hon. Members who are concerned, like my hon. Friend, about Tesco's intentions for post offices within its stores. Tonight's debate will help to clarify what is going on and, I hope, help to alleviate some of the current uncertainty.
  The Longlevens post office has not been proposed for closure under the Post Office Ltd. urban post office reinvention programme. It is necessary to draw the distinction that a removal from a Tesco store does not equate to a permanent closure of a post office if the service can continue, as my hon. Friend has argued, from somewhere else nearby.
  678
  My hon. Friend rightly made the point that Tesco acquired the T and S group chain of stores at the end of 2002. Tesco took over the post office contracts for the individual sites and is reviewing how many of those post offices will be retained. The group includes stores trading under the One Stop and Dillons names, containing 318 post offices, as he said. I welcome Tesco's assurance that it will work closely with the Post Office when reviewing its stores with post offices.
  Mr. Dhanda: Is there not a point to be made about tying in consultations with urban area plans as well as post office reinvention?
  Mr. Timms: My hon. Friend is quite right.
  Discussions have been held between Post Office Ltd. and Tesco. Tesco undertakes site-by-site review, and in a minority of locations where it chooses to establish a Tesco Express format, and where the site is consequently not large enough to continue to operate a post office branch, the company may wish to end the post office contract. To date, Tesco has confirmed that it intends to remove post offices from 37 stores that are to be converted to the Tesco Express format. It has also confirmed that it will retain around 260 post offices that operate from former T and S stores, including more than 200 in existing One Stop and Dillons stores and another 50 or so in those that are converted to Tesco Express stores.
  On that basis, I can confirm that the figure suggested by my hon. Friend—that about 100 post offices might go—is certainly too large. On the basis of the information that Tesco has given me, the number will be significantly less. It will not be more than 58, I think, and a decision has so far been made on only 37.
  Mr. Dhanda: Will my hon. Friend give way?
  Mr. Timms:I must continue in order to make sure that I put on the record points that will be of wide interest in the House.
  Any decision by Tesco to terminate its contract and to remove a post office from one of its stores is, of course, a commercial matter for the company. But I know that the House would join me in urging Tesco to give careful consideration to the effect on its customers of such a decision.
  The history of the post office network can be traced back as far as 1635, and it has always been reliant on private business people to operate outlets. The vast majority, about 97 per cent., of the more than 16,000 post offices around the country are run by private business people, either by individual sub-postmasters or by chains such as Tesco. Typically, 10 per cent. of the offices in the network change hands from a resigning agent to a new agent each year.
  My hon. Friend pointed out that the last day of trading for the Longlevens post office was to be 8 May, but Tesco made it clear today that that planned date no longer applies. Like my hon. Friend, I welcome that announcement.

  679
  To facilitate the relocation of post office services in Longlevens, Tesco has agreed with the Post Office that the contract can be transferred directly to a new partner, the costs of relocation being met by Tesco. Those arrangements should provide the best possible chance of relocating the post office locally, in line with the hopes expressed by my hon. Friend. I welcome Tesco's more flexible approach, and pay tribute to my hon. Friend for the energetic and, as we have heard, effective way in which he has pursued his constituent's interests.
  My hon. Friend mentioned that the local Co-op might be interested in taking on the service. These matters are of course commercially confidential, but I am certain that the company will ensure that my hon. Friend is notified of the resolution as soon as one has taken place.
  Tesco had given three months' notice of its intention. That is the time required by sub-postmasters' contracts, and it applies equally to either side. Where Tesco wants to remove a post office branch from one of its stores, it has committed itself, where possible, to giving twice that period of notice—six months rather than three. I hope that it will keep to that commitment in future cases, because the additional time will give the Post Office a better opportunity to review the need for an office and find alternative partners to continue to offer post office services where the need remains. Tesco's commitment to delaying the removal of the Longlevens office from its store and to work to ensure a smooth transfer of the business should be applauded.
  To its credit, Tesco has committed itself to helping the Post Office to maximise the prospects of a successful relocation of post offices that it can no longer accommodate in stores converted to the Tesco Express format where the Post Office needs to retain a post office in the area. It will work actively with the Post Office to find alternative individuals or businesses keen to operate the post office nearby.
  I hope that it is clear from what I have said that the proposed closure of Longlevens post office is not connected with the urban reinvention programme, but I shall say a little about that programme in the context of this debate. My hon. Friend has already seen a number of post office branches in his constituency close, as he has said. The aim of the programme is to address over-
  680
  provision in many urban areas and to establish a network of offices that fits the level of business now available.
  Mr. Dhanda: Will my hon. Friend give way very briefly?
  Mr. Timms: I do not think I can. There are a couple of points that I want to put on the record.
  I understand that Tesco has been made aware of the general time scale in which the Post Office is scheduled to produce its urban reinvention programme area plans, and where possible it will try to co-ordinate with the Post Office. I gather that in the case of my hon. Friend's constituency, the Post Office expects to do that in July or August. If, as in this instance, Tesco has reviewed a particular location, wants to end its contract and has advised the Post Office before the drawing up of the urban reinvention programme area plan, the Post Office can take a view, within its overall urban reinvention planning, on whether a post office branch is needed in that location. I think that that reflects my hon. Friend's hope that the two exercises can be brought together.
  Although the review of Gloucester is not due for some months, the Post Office has said that it aims to ensure continued service for the customers of Longlevens. As my hon. Friend said, the branch there was itself suggested as an alternative for customers of the Oxstalls branch, and the company is seeking an alternative partner in the vicinity. In other areas where Tesco decides to remove a post office from one of its stores and there is a need for the service to continue, the Post Office will work to replace the branch nearby. It has given an assurance that in such cases it will not view a decision by Tesco to remove a post office as any kind of blanket opportunity to close branches, over and above those being handled via the proper urban reinvention process.
  My hon. Friend talked of the possible threat to Barnwood post office. The Post Office is aware of the planning application for redevelopment of the Barnwood post office site, but I understand that no notice of termination of the contract or resignation of the sub-postmaster has been submitted. It will consider—
  The motion having been made after Ten o'clock, and the debate having continued for half an hour, MR. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned at half-past Ten o'clock.

ENVIRONMENT, FOOD AND RURAL AFFAIRS
  Badgers/Bovine TB
  Badgers/Bovine TB
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  Birds
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TRANSPORT
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  Romford Station
HOUSE OF COMMONS COMMISSION
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INTERNATIONAL DEVELOPMENT
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TRADE AND INDUSTRY
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FOREIGN AND COMMONWEALTH AFFAIRS
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PRIME MINISTER
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CULTURE, MEDIA AND SPORT
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NORTHERN IRELAND
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DEPUTY PRIME MINISTER
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TREASURY
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CONSTITUTIONAL AFFAIRS

  Fine Enforcement
  The Parliamentary Under-Secretary of State for Constitutional Affairs (Mr. Christopher Leslie)
  Improving fine enforcement performance is an important part of maintaining public confidence in the criminal justice system. Justice must be done, and must be seen to be done.

  To this end, we are launching a national initiative to target those who have defaulted on criminal penalties imposed by the courts. The initiative, called Operation Payback, will see magistrates courts across England and Wales conducting "blitzes" against serious fines defaulters in their areas.

  The operation means that money owed to the court, and therefore the taxpayer, and compensation owed to victims, is collected. The Government is sending a clear message to those who have been fined that payment is not optional and that penalties must be paid.

  The national operation is being co-ordinated by the Department for Constitutional Affairs with support from the Police and the Department for Work and Pensions.

ENVIRONMENT, FOOD AND RURAL AFFAIRS

  Radioactive Waste Management
  The Minister for the Environment (Mr.Elliot Morley)
  With the establishment of the new Committee on Radioactive Waste Management (CoRWM) during the course of 2003, UK Government and the devolved Administrations in Scotland and Wales have been reviewing the future of the Radioactive Waste Management Advisory Committee (RWMAC). This is as we said we would do in the September 2001 "Managing Radioactive Waste Safely" consultation document.

  In light of this review, we have concluded that RWMAC should be put into abeyance for the two to three year period during which CoRWM will be compiling its recommendations on future policy for the long-term management of the UK's higher activity radioactive wastes. At the end of this period we shall carry out a further review of Government advisory machinery needs in the radioactive waste management policy area.

  42WS
  This has not been an easy decision to take given the quality of the past advice we have received from RWMAC. But the key factors that have swayed my colleagues and me in arriving at this decision are:
  we believe that in principle it would be wrong for Government to have two "independent" advisory committees operating in the radioactive waste management policy area;
  we believe this could create problems of perception of the respective roles and requirements of the two Committees;
  we are fully committed to the CoRWM process and the need to drive this forward over the next two to three years, to arrive at a decision on how best to manage the UK's higher activity radioactive wastes;
  the resources available to us must be focussed on this task.

  During the course of our review work, we did receive a proposal from the committee for a reconfigured and slimmed down form of RWMAC operation. We considered this very carefully, but it did not solve the basic problem of having two independent advisory committees operating in the same policy area. And we felt that this could have potentially led to a lesser degree and standard of advice than we, and potentially the Committee itself, have come to expect.

  We recognise that needs for review and advice could arise during the period that CoRWM is conducting work and RWMAC is in abeyance. Our proposal, for the period of CoRWM's work, is to consider and address these in a case by case manner through our Radioactive Waste Policy Group (RWPG). This is a Group made up of UK Government, devolved Administration and regulatory body representatives that meets regularly, several times a year, to discuss radioactive waste management policy and regulatory issues. The Group has the remit to carry out reviews, calling on external advice, as necessary.

  I have written to the current RWMAC Chairman and his Committee members to inform them of this decision and to thank them for the hard effort, and sound advice, that they have provided in recent years. This advice will remain available for scrutiny and use on the Committee's website www.defra.gov.uk/rwmac/.

DEFENCE

  Disturbances (Kosovo)
  The Secretary of State for Defence (Mr. Geoffrey Hoon)
  Last week saw a deterioration of the security situation in Kosovo. Violence broke out between ethnic Serbs and Albanians in Mitrovica in northern Kosovo, which subsequently spread to other ethnic Serb populated areas in Kosovo. The violence has resulted in deaths within both communities, as well as hundreds injured, including some KFOR troops. The situation in Kosovo although still tense, now appears calmer.

  The troops already in Kosovo were heavily committed in dealing with the situation. Commander KFOR therefore took the decision to authorise the deployment of his in-theatre tactical reserves to assist with the situation. NATO also issued instructions to reinforce KFOR with additional SFOR troops from Bosnia, including a UK company of 1st Royal Gurkha Rifles, a US company and a company from the Italian Multinational Support Unit (Carabineri).

  43WS
  In the early hours of Thursday 18 March, NATO called upon the Operational Reserve Force (ORF) Ready Battalion. The ready battalion role is one that the UK has responsibility for during the first six months of 2004. This means that, as part of our overall commitment to the Balkans, the UK provides NATO with a battalion that could, in circumstances such as these, be rapidly deployed into either Bosnia or Kosovo. The lead elements of the ORF, totalling approximately 150 men and 12 Land Rovers, departed from RAF Brize Norton on Thursday afternoon and landed in Kosovo late that evening. The vast majority of the ORF battalion of around 660 men has now deployed. 1st Battalion The Royal Gloucestershire Berkshire and Wiltshire Regiment is providing the core of the battalion group.

  There are now around 1,100 UK armed forces personnel deployed in Kosovo.

  The purpose of this deployment is to restore calm to the province and prevent unrest spreading to areas outside Kosovo, the type of task for which the Operational Reserve was designed. UK troops will conduct routine patrolling, the guarding of sites (such as the UN Mission) and public order duties, as tasked by Commander KFOR.

  Further to the deployment of the UK battalion, NATO has requested that an element of the NATO Strategic Reserve Force, provided by a French battalion, also be deployed to Kosovo. NATO has also requested the deployment of the three standby battalions that make up the full Operational Reserve Force. These battalions are provided by the US, Germany and Italy. The German battalion has been deployed to Skopje, Macedonia, in the first instance.

  It is for NATO to determine how long reserves will be required, but in terms of an initial estimate, and with the situation changing, we believe a sensible course of action is to plan initially for a deployment period of approximately 30 days.

DEPUTY PRIME MINISTER

  "Tackling Social Exclusion"
  The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Yvette Cooper)
  Today I am launching a discussion document entitled "Tackling Social Exclusion: Taking Stock and Looking to the Future". The document is part of a programme of work being undertaken by the Social Exclusion Unit aiming to provide a clearer understanding of how Government policies have worked together to tackle social exclusion and identify future priorities. It aims to seek views and further evidence from a wide range of experts and stakeholders on the material presented.

  The material within the discussion document will be used to stimulate discussion at a seminar for key stakeholders today. Written comments or feedback are invited by 18 April 2004. Copies of the discussion document are available at http://www.socialexclusionunit.gov.uk/ and in the Libraries of the House.

  Draft Regional Transport Strategy (South-east)
  The Minister for Housing and Planning (Keith Hill)
  My right hon. Friend the Deputy Prime Minister is today publishing for public consultation proposed changes to the draft regional transport strategy (RTS) for the south-east. They follow the public examination into the draft RTS in July 2003 and the panel report in October 2003.

  RTS's are an integral part of regional planning guidance (RPG) and the draft RTS for the south-east represents a revision to RPG9, as published in March 2001. On commencement of the Planning and Compulsory Purchase Bill the RTS will be part of a statutory regional spatial strategy (RSS).

  Other partial reviews of RPG9 are at various stages in the process. In particular, a public examination into the Milton Keynes and South Midlands sub-regional strategy is imminent, and the Secretary of State's proposed changes for the Ashford growth area will shortly be published.

  The RTS aims to achieve a transport system that progressively reaches the standards of the best in north-west Europe, by promoting management of and investment in the system; rebalancing the structure and use of the transport system in favour of more sustainable modes; and supporting the regional spatial strategy, particularly managing and investing in interregional corridors and delivering urban renaissance and sub-regional objectives. This approach should also inform local authorities and other agencies in preparing relevant regional and local strategies.

  Overall the panel considered the draft RTS to be broadly compatible with RPG9, with commendably focused policies. The panel did, however, recommend many changes. Aspects of the strategy which the panel proposed changes to include the selection of strategic corridors (the regional frame), the ranking of priority projects in the investment frameworks, car parking standards, community and demand based transport, and walking and cycling.

  The panel supported the identification and development of regional transport hubs and connecting spokes as a core plank in the strategy. In place of the regional frame the panel identified the region's more important international gateways and inter-regional movement corridors. Alongside measures to facilitate urban renewal these elements were viewed as priorities for investment to deliver the spatial strategy.

  Government support these aims, and are grateful for the recommendations of the panel. However, one change to the panel's recommendations is necessary to ensure the strategy and its components are more coherently focused and provide transparent direction for the future development of the regional strategy.

  A key issue for the region is the treatment of priorities. The panel proposed a priority list of 15 schemes, made up of nine heavy rail, one light rail, two bus and three road schemes. While we view establishing regional priorities as a key element in a future RTS, we were unconvinced that the panel identified the most important regional priorities.

  More specifically, the criteria used to identify priorities and the way in which the criteria were applied did not fully reflect the draft Government guidance,

  45WS
  which was published after the examination concluded. Furthermore, the application of the criteria was not transparent and resulted in a priority list that was largely focused on a single mode and failed to identify affordability issues.

  The process of comprehensively reviewing RPG9 has already begun. As part of this work the regional assembly (RA) is intent on improving the evidence base by developing a robust approach to prioritisation, an activity that I am particularly keen to see progress on.

  I have today written to the RA with the proposed changes indicating areas where views are particularly sought from interested parties. There will now be a public consultation period on the proposed changes, which will end on 21st May.

  Copies of the relevant documents are available in the Libraries of both Houses and have been provided for all of the region's MPs, MEPs and local authorities.

TREASURY

  Finance Bill
  The Paymaster General (Davin Primarolo)
  As I announced in the debate on the Budget resolutions on 18 March,Official Report, column 538, the Government intend to publish the Finance Bill on Thursday 8 April. Explanatory notes on the Bill's clauses will be available in the Vote Office and the Libraries of both Houses on that day. Members of the public will be able to obtain copies of the explanatory notes from the Treasury. These will also be available on the Treasury's website http://www.hm-treasury.gov.uk/.

HEALTH

  Health Services for Prisoners
  The Parliamentary Under-Secretary of State for Health (Dr. Stephen Ladyman)
  I am making this statement with the Minister with responsibility for correctional services and reducing reoffending, my hon. Friend the Member for Wythenshawe and Sale, East (Paul Goggins).

  The prison population demonstrates high levels of morbidity, particularly in areas such as mental health and substance misuse. Historically, primary health care services to prisoners have been secured and delivered by the Prison Service independently of the NHS.

  A formal partnership between the Prison Service and the NHS was launched in 2000 to modernise health services for prisoners. In 2002, the Government announced their intention to move this partnership on to a new phase, with the Department of Heath assuming overall financial responsibility for these services from April 2003 and the transfer of full commissioning responsibility for prison health services to NHS PCTs by April 2006. A Development Network of prisons and PCTs was established to provide a test-bed for this transfer at operational level.

  We are today announcing the NHS Primary Care Trusts that will assume responsibility for commissioning primary healthcare services in their local prisons from April 2004. This is the initial phase of
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  transfer of responsibility and involves 22 PCTs that have prisons within their boundaries. Of these 22, four have delegated commissioning responsibility to neighbouring PCTs, giving 18 PCTs the lead for local prison health partnerships.

  Covering 34 prisons across England, the 18 lead Primary Care Trusts have demonstrated a clear understanding of the health needs of their local prison populations and have, in partnership with the prisons themselves, developed robust plans to improve health services for those populations. Funding for primary health services that was previously allocated through the Prison Service will be transferred to the relevant Primary Care Trusts from April 2004. Funding for NHS secondary care services provided to prisoners is already within the financial baselines of PCTs. Investment in health services for prisoners is set to increase by over £40 million a year over the three year period to March 2006. Responsibility for commissioning health services in all publicly run prisons in England will transfer to local Primary Care Trusts by 1 April 2006.

  The 18 partnerships where commissioning responsibility will transfer from 1 April are:

  PCT

  Prisons

  Castlepoint and Rochford

  Bullwood Hall

  Doncaster East

  Lindholme

  Moorland

  Durham and Chester-le Street

  Frankland

  Durham

  Low Newton

  Exeter

  Channings Wood1

  Dartmoor2

  Exeter

  Heart of Birmingham

  Birmingham

  Hounslow

  Feltham

  Huntingdon

  Littlehey

  Islington

  Holloway

  Pentonville

  Lambeth

  Brixton

  Leeds West

  Leeds

  North Liverpool

  Liverpool

  Northumberland

  Acklington

  Castington

  Reading

  Reading

  Richmond and Twickenham

  Latchmere House

  South West Dorset

  Dorchester

  Guys Marsh3

  Portland

  Shepton Mallet4

  The Verne

  Weare

  Suffolk Coast

  Hollesley Bay

  Warren Hill

  Swale

  Elmley

  Standford Hill

  Swaleside

  West Lincolnshire

  Lincoln

  Morton Hall

  1 Managed by Exeter on behalf of Teignbridge PCT

  2 Managed by Exeter on behalf of South Hams and West Devon
  PCT

  3 Managed by SW Dorset on behalf of North Dorset PCT

  4 Managed by SW Dorsest on behalf of Mendip PCT

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

Royal Assent
The Lord Chancellor (Lord Falconer of Thoroton): My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Act:
Consolidated Fund Act.

"Flying Scotsman"
2.37 p.m.
Lord Faulkner of Worcester: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an unpaid interest as a member of the Railway Heritage Committee.
The Question was as follows:
To ask Her Majesty's Government what assistance they are giving to the National Railway Museum in its bid to acquire LNER Gresley A3 Pacific "Flying Scotsman" for the national collection.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey): My Lords, I start by wishing my noble friend a very happy birthday.
The Government have not been asked for assistance by the National Railway Museum with its hid to acquire the "Flying Scotsman" for the national collection. However, I understand that the museum has applied for a grant to the National Heritage Memorial Fund.
Lord Faulkner of Worcester: My Lords, I thank my noble friend for his Answer and, indeed, for his kind wishes. He will know that the "Flying Scotsman" is viewed by the British public as an icon, a national treasure and an extraordinary feat of British engineering. It is almost unthinkable that it could be sold abroad or, worse still, finish up on the forecourt of a pub car park.
Is my noble friend aware of how well the NRM appeal is going? So far it has received over 2,000 contributions in little more than two weeks ranging from £5 to £50,000. I ask the Minister to do two things. First, can he give an undertaking that the DCMS will defer an export licence for an overseas overbidder, if that is the outcome of the tender process, to give the NRM more time to see whether it can match the bid?
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Secondly, the Minister referred to the National Heritage Memorial Fund, which I understand meets tomorrow to discuss the bid. Will he give every encouragement for support by the fund to be as generous as possible?
Lord McIntosh of Haringey: My Lords, my noble friend Lord Faulkner is right about the support for the campaign to keep the "Flying Scotsman" here. I understand that in that regard the National Railway Museum receives more than 100 letters every day. As to whether we support the grant, the arm's length principle requires that awards by the National Heritage Memorial Fund are made independently of government by the trustees of the fund, who will make their decision after receiving expert advice.
As regards an export licence application, my noble friend made a good case for saying that this is a suitable subject for meeting the Waverley criteria. It has a close connection with our history and national life. I am sure that as a railway enthusiast he would say that it is of outstanding aesthetic significance, and it is of outstanding significance for the study of art, learning and history. However, that does not mean that I can anticipate what decision will be taken about an export licence application if and when it is made.
Baroness Buscombe: My Lords, does the Minister not agree that it is imperative that the "Flying Scotsman" remains in the United Kingdom, the country where it was built and where it remains a powerful symbol of our heritage?
Lord McIntosh of Haringey: My Lords, as always, the noble Baroness, Lady Buscombe, makes a very good case.
Lord Bradshaw: My Lords, as someone who was born and brought up by the Great Western Railway, I acknowledge that this locomotive has some value. However, will the Minister acknowledge the great value that the railway heritage industry brings to this country in terms of education and the training of craftsman, and to the tourism industry? Although there are "anoraks" connected with the industry, there is a very serious purpose behind the Question.
Lord McIntosh of Haringey: My Lords, as befits someone brought up by the Great Western Railway, the question of the noble Lord, Lord Bradshaw, is to a wider gauge—perhaps the Brunel gauge—than the Question originally asked. However, I am sure that there can be no objection to the general statement that he made.
Lord Monro of Langholm: My Lords, I appreciate the Minister's response. However, will he bear in mind the relevance to Scotland, where there is a particular enthusiasm for the engine, especially for pulling tourist trains? Perhaps he will drop a hint to the Scottish Executive that it might put some money into this.
Lord McIntosh of Haringey: My Lords, I would not dare. However, on the other hand, the National

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Railway Museum has stated that if it does succeed in acquiring it, the engine will not be kept just at York but will be shown at Shildon in County Durham and will be available for other sites in the country. No doubt that would include Scotland.
Lord Berkeley: My Lords, my noble friend gave the House great confidence when he said that this locomotive would need a licence for export. Is that the same kind of licence that would be required for a Constable painting or any other work of art? Can he confirm that the criteria used to evaluate what should be allowed to be exported and what should stay are the same, and will be the same for any other works of art one might mention?
Lord McIntosh of Haringey: My Lords, in this case the criteria would be that it is more than 50 years old—the "Flying Scotsman" was built in 1923; that it is worth more than £65,000—I think it would meet that criterion; and that it has not been previously exported or imported. The "Flying Scotsman" has been around Canada and the United States but I understand that it has always been under UK ownership. Therefore, my understanding is that it would qualify.

Courts Martial
2.42 p.m.
Lord Thomas of Gresford: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an interest as having appeared as an advocate in various courts martial.
The Question was as follows:
To ask Her Majesty's Government whether, in the light of their objections to the procedures proposed by the United States Government for Guantanamo trials, the practice of the escort accompanying a defendant in a British naval court martial with a drawn and brandished sword, and the wearing and display of sheathed swords by the prosecutor and members of the court martial, is to be maintained.
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Bach): My Lords, the Royal Navy has determined, for reasons wholly unconnected with Guantanamo, that there is no longer a requirement for the escort accompanying a defendant in a naval court martial to carry a drawn sword, or for members of the court martial to wear sheathed swords. The first naval court martial to be held without swords was convened at Her Majesty's Ship "Drake" in Plymouth on 15 March 2004.
Lord Thomas of Gresford: My Lords, I am most grateful to the Minister for that response. I have heard that a drawn sword was used very much later than that—
A noble Lord: Not very much—I can tell you.
Lord Thomas of Gresford: Well, not very much—since. Does the Minister consider whether, in the current atmosphere, courts martial should be confined to questions of military discipline and that the practice of prosecuting soldiers, sailors, airmen and their families for civil offences in cases which are much more apposite to the Crown Court should be abandoned?
Lord Bach: My Lords, first, I hope that the noble Lord will let me know of those cases that have occurred within the past seven days. Secondly, the answer to his serious question is that we do not intend to abandon courts martial. We believe that civilian courts are less likely than service courts to possess a full appreciation of the importance of discipline to the operational capability of the Armed Forces and of the possibility that an offence committed in the service environment may have even more serious implications than a similar offence committed in civilian life. Moreover, at the moment civilian courts do not have jurisdiction to try service disciplinary offences.
There are other reasons, too. As the noble Lord will know much better than I, in most cases civilian courts in the United Kingdom do not have jurisdiction in respect of offences alleged to have been committed overseas. The world-wide application of service law is particularly important for mobile forces which need to be able to maintain discipline as a key to operational capability. Service courts are also able to try alleged offences committed outside the United Kingdom. That can be a useful means of ensuring that the accused are dealt with in English courts and in accordance with the system of English law rather than in foreign courts where language, law and procedures can be rather different.
Lord Astor of Hever: My Lords, in the light of the recent challenges made to the European Court of Human Rights, do the Government believe that the courts martial system is secure from further challenges?
Lord Bach: Yes, my Lords. We do believe that the system is secure from further challenges. After all, the judgments made it quite clear that the principle of courts martial was upheld and was deemed not to be against the Human Rights Act.
Lord Campbell of Alloway: My Lords, how can a drawn and brandished sword used for ceremonial purposes be contrary to any article in the Human Rights Act?
Lord Bach: My Lords, we do not know whether or not it is against any article in the Human Rights Act, because no case has been taken to the European court suggesting that it is against human rights. We are doing this because we want to make our procedures more closely in line with those in the Army—in which I believe the noble Lord served gallantly a few years ago—and the RAF, but mainly in preparation for a

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tri-service Bill, in which a common disciplinary system across all three services is intended. I think the House would agree that that would be a good thing.
Lord Redesdale: My Lords, as they have acted so promptly on the tabling of a Question by my noble friend, can the Minister say whether the Government have any further plans as regards wigs and gowns for judges?
Lord Bach: My Lords, there was a time when I could answer that question, but now I cannot.

Brazil: Street Children
2.47 p.m.
Lord Alton of Liverpool Lord Alton of Liverpool asked Her Majesty's Government:
What representations they have made to the Brazilian Government about the killing of street children and about their obligations under the United Nations Convention on the Rights of the Child.
The Minister of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): My Lords, we engage frequently with the Brazilian Government, both bilaterally and with our partners in the European Union, on a broad range of human rights issues, including about the situation of street children. Together with our European Union partners, we call for all states parties to the Convention on the Rights of the Child to implement their reporting obligations.
Lord Alton of Liverpool: My Lords, I am grateful to the noble Baroness for that reply. Would she confirm that the new dimension that has emerged in the Brazilian favelas is the proliferation of drugs and small arms and that between four and five children and adolescents are murdered in Brazil every day? Does she agree that there needs to be an end to the cycle of retaliation, fear and violence that dominates the streets in Brazil and that the Brazilian authorities need assistance in honouring their obligations under the United Nations convention which they signed in 1990?
Baroness Symons of Vernham Dean: My Lords, I agree that the prevalence of drugs and small arms has the effect the noble Lord has detailed to your Lordships. I thank him for the excellent report he produced after his recent visit to Brazil. Its description of what is going on was horrifying but very vivid.
I agree that the Brazilian Government need some assistance in trying to deal with these terrible problems. They are showing a great willingness to do that. We are engaging with them. Only last month a further round of talks between officials and Brazilian authorities took place. We are trying to help them in relation to prisons, the police and in particular small arms issues.
Lord Janner of Braunstone: My Lords, having seen something of the awful miseries suffered by street
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children in Rio, I plead with Her Majesty's Government to increase assistance to all aspects of help for them, not least projects working with street children in Brazil such as the Sao Martinho Princess Diana Centre for orphaned girls, which the wife of my right honourable friend the Prime Minister opened a short time ago. Recognising the terrible human suffering of all sorts, surely we could make a greater effort to be of help directly and with our European partners.
Baroness Symons of Vernham Dean: My Lords, DfID's Latin America bilateral programme focuses on several issues. DfID will provide about £41 million for the period 2004–05 to 2006–07. The Government fund a number of projects in the human rights field that are aimed at tackling some of those very difficult problems. As I told the noble Lord, Lord Alton, we are tackling issues associated with the police, prisoners and small arms, but my noble friend rightly points to difficulties with orphaned children. Child prostitution is also a very difficult problem in Brazil.
Lord Hannay of Chiswick: My Lords, can the Minister tell us whether, since his administration took over, President Lula has taken any steps to deal with the problem of street children? I should declare an interest as having a son who works with street children in Sao Paulo. Could she also say a little more clearly what help we could give the Brazilian Government in the matter beyond advice?
Baroness Symons of Vernham Dean: My Lords, we are providing quite a lot of money. The noble Lord asks about President Lula. As he will know, under the president's predecessor, President Cardoso, a special secretariat for human rights was set up. I can tell the noble Lord that President Lula has continued that work and made the human rights secretariat directly responsible to him as president. So that is strengthening the human rights dialogue.
There have been several discussions. My honourable friend the Parliamentary Under-Secretary, Mr Rammell, raised the issue last May. His discussions were then taken on by Sir Michael Jay, the Permanent Under-Secretary, when he visited the country in October. I mentioned the visit only last month by FCO officials, but that was a second visit to follow up one in December 2003. So we are providing advice on a wide range of issues but also financial help.
Baroness Miller of Chilthorne Domer: My Lords, does the Minister agree that the problem of killing street children is by no means confined to Brazil? The All-Party Group on Street Children has heard from a number of NGOs working in several countries, including Honduras and Guatemala, that hundreds of children are being killed in those countries every year. The judicial system is simply not following that up. People known to be perpetrating those crimes are not

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being prosecuted or the cases fail in court. Does the Minister feel that it is time to call a special meeting of the United Nations to discuss that widespread issue?
Baroness Symons of Vernham Dean: My Lords, the noble Baroness raises an important point. When I was discussing the issue with officials, I was regrettably told that Brazil is by no means the worst example of abuses of children. On the question of overdue reports, I understand that Brazil is not alone. It currently owes about 13 reports under the six core UN human rights treaties, but 226 reports are overdue from various nations under the United Nations Convention on the Rights of the Child.
The UN has an important role to play here. I take on board the point made by the noble Baroness about some sort of meeting and will talk to my colleagues about it. The UN is the forum where those matters ought to be discussed and where pressure can be brought to bear, as well as through the bilateral help that we are trying to give.
Baroness Rawlings: My Lords, as the Minister rightly said, street children anywhere in the world need help. What support has DfID given to such highly successful organisations as the Bulgarian alliance for children and youths, which helps street children to receive food, clothing, medical treatment and to take part in general education and training programmes? Will Her Majesty's Government tender some suggestions to the Brazilian Government along those lines to help to set up a sister organisation in that country?
Baroness Symons of Vernham Dean: My Lords, I hope that the noble Baroness will forgive me when I say that the Question is about Brazilian street children, so I fear that I do not have any information about the Bulgarian alliance. I can tell the noble Baroness that our bilateral programme takes a regional approach. It is moving away from a country focus to problems; we are trying to deal with them in a holistic way. I have already said that we are approaching a number of problems, including the way in which prisons operate in relation to children and the issue of firearms. As the noble Lord, Lord Alton, told us, many of those difficulties spread through drugs and firearms. One of the most telling phrases in the noble Lord's report was when he was talking to a young boy who told him that there was no way that he could advance from his parlous state in life without recourse to illicit trade in drugs and firearms. We are trying to concentrate much of our help in those areas.
Baroness Hooper: My Lords, does the Minister agree that corporate social responsibility is yet another approach? Will the Government therefore encourage government-led and government-sponsored trade missions run by the British Council and other organisations in the field to raise the issues with companies in Brazil, in order to avoid allegations of indifference or acceptance of the terrible plight of those children being made by the population at large?
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On a recent visit to Brazil, I did just that and. without exception, the companies that I met could point to positive action that they were taking in education and training to help children and young people and to alleviate the problem. But, of course, much more could be done.
Baroness Symons of Vernham Dean: My Lords, I agree that a practical approach to this issue is enormously important. We try to do that by going into the.favelas, as has the noble Lord, Lord Alton, in both Rio de Janeiro and Sao Paulo to talk to young people about alternatives to their involvement in violence and organised crime. The noble Baroness is right: that is an interesting approach that we may try to adopt through our trading partners. I shall certainly bring that suggestion to the attention of my honourable friend the Minister for Trade and Investment.
The Earl of Listowel: My Lords, can the Minister tell us whether there is particular concern about HIV infection with those children? If so, are they being provided with the advice and means to protect themselves from HIV infection?
Baroness Symons of Vernham Dean: My Lords, there is a real problem with young people being drawn into prostitution. I would deduce from that that there are almost certainly problems with the spread of all sorts of sexually transmitted diseases, which would include HIV/AIDS. I do not have any particular information about work being done on HIV/AIDS, but I will see whether there is anything more helpful that I can tell the noble Earl and write to him accordingly.
Lord Clarke of Hampstead: My Lords, does my noble friend agree that running through the excellent report by the noble Lord, Lord Alton of Liverpool, is an indication of the breakdown in the country's administration concerning the police force, which appears to cause many of the problems that it is called on to solve? Whatever may be the position regarding corporate responsibility, the government of that country should be getting their own house in order.
Baroness Symons of Vernham Dean: My Lords, I agree with a lot of what is said in the report of the noble Lord, Lord Alton of Liverpool, but we must be careful not to be too condemnatory of the Brazilian Government's efforts to deal with the problem. There is no doubt in my mind that sincere efforts are being brought to bear on the problem, from which I would not want to detract; rather, I want to encourage the Brazilian Government to do more. Part of the problem is based on the fact that Brazil has a federal set-up. The implementation of policies has to go through state police forces because there is no national enforcement. So although we lobby and try to persuade nationally, implementation is done at state level.

Alcohol Harm Reduction Strategy
2.59 p.m.
Baroness Buscombe Baroness Buscombe asked Her Majesty's Government:
How they propose to implement the new cross-department alcohol harm reduction strategy to challenge the culture of binge drinking.
The Minister of State, Home Office (Baroness Scotland of Asthal): My Lords, the strategy includes a series of measures aimed at achieving a long-term change in attitudes to irresponsible drinking and behaviour. We will work in partnership at both the national and local level with a range of agencies, including the alcoholic drinks industry, to challenge the binge-drinking culture.
Baroness Buscombe: My Lords, I thank the Minister for her reply. In practice, who will be in charge of the so-called cross-departmental national and local new partnership? Will it be the Home Office, which wants to impose more draconian measures, having so far failed to combat binge drinking, according to its own leaked report? Will it be the Department for Culture, Media and Sport, which has liberalised our licensing laws? Will it be the Department of Health, bearing in mind that alcohol is behind 40 per cent of accident and emergency admissions and that alcohol misuse costs £20 billion a year in healthcare and lost earnings?
Baroness Scotland of Asthal: My Lords, in order for the strategy to be successful, it must be owned by all. It is not something that the Government can do on their own. Individuals, communities and the industry must take responsibility, and there must be a joined-up government response. That is what the strategy sets out: a holistic response that will make a difference. The noble Baroness will know that the empirical data support the suggestion that only when we join up will we make a successful impact.
Lord Turnberg: My Lords, does my noble friend agree that one way in which we can reduce excessive alcohol consumption is to reduce the ludicrously large amounts of alcohol that we are allowed to bring across the English Channel duty-free?
Baroness Scotland of Asthal: My Lords, I hear what my noble friend says, but it does not matter how much we bring across; what matters is how much we consume. Some of us consume nothing at all; others consume a great deal.
Baroness Sharples: My Lords, am I alone in wondering how young people can afford binge drinking? Are the parents largely to blame?
Baroness Scotland of Asthal: My Lords, we have a buoyant economy at the moment, and we thank God for it. I do not know how all young people afford binge
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drinking, but it certainly causes great concern. That is why I say that responsibility lies with everyone, not just one sector.
Lord Avebury: My Lords, have the Minister and her colleagues seen the BBC programmes "Drunk and Dangerous"? They portrayed a horrifying picture of mayhem on the streets of our towns and cities every Friday and Saturday night. When will the Government publish the report by Professor Colin Drummond of St George's Hospital Medical School and others, which showed that 70 per cent of attendees at A&E departments between midnight and 5 a.m. were alcohol positive? Does the Minister really think that jargon about holistic approaches is an adequate response to the carnage that we see every weekend?
Baroness Scotland of Asthal: My Lords, it is not jargon. I remind the noble Lord that all the evidence shows that, in order to make an impact, we need a multi-faceted response. I cannot give the noble Lord precise details of when the St George's report will be published, but I can tell him that Professor John Shepherd from Cardiff played a large role in the deliberations that led to the strategy. We are determined to make an impact on the behaviour of young people, particularly with regard to drinking, and I agree with the noble Lord that that will make a difference.
Baroness Howarth of Breckland: My Lords, does the Minister agree that action on binge drinking, like all excessive drinking, must be part of all the other programmes? We discussed that in the domestic violence debate, and we discuss it in child abuse programmes. The matter should be taken forward in all government policies, as it cannot be seen in isolation.
Baroness Scotland of Asthal: My Lords, I reassure the noble Baroness that the matter is not seen in isolation. She is right: crime figures—in particular, domestic violence figures—show that alcohol seems to play a large part in the abuse that takes place. That is why we need an integrated approach across government, together with the industry, to address the issues.
Lord McNally: My Lords, is that not precisely the reason why there is such grave concern? Road accidents, domestic violence and sexual assaults—the litany goes on—are directly related to alcohol, but the Government are going ahead with the relaxation of our licensing laws, even though every report that comes out questions the wisdom of that strategy.
Baroness Scotland of Asthal: My Lords, I hear what the noble Baroness—I mean "the noble Lord"; his attractions are overwhelming—is saying. We will monitor the impact of the Licensing Act 2003 on crime and disorder and on other licensing objectives under the Act. If necessary, we will, in the light of those findings, introduce further legislation, with the consent of Parliament, to strengthen or alter any provision.

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It would be wrong for noble Lords simply to say glibly that the relaxation of licensing laws was a cause. Your Lordships will know that we had a problem before the new Act, which brings in several important measures that will help us to control the abuse of alcohol, not least the ability to remove it from those who have already had a little too much.
Lord Brooke of Alverthorpe: My Lords, does my noble friend agree that the position that we face now is worse than it was when the Government came to power seven years ago? Those of us who have been waiting for the strategy are, to say the least, disappointed that a greater onus has not been placed on the shoulders of the alcoholic drinks industry. If the voluntary approach does not work, how long will we have to wait before we see legislation to toughen things up?
Baroness Scotland of Asthal: My Lords, I hear my noble friend's disappointment. I do not agree that the situation is worse than it was before the Government came into office. We have had a favourable response to the voluntary scheme from the industry. We want to work energetically with the industry to make sure that it takes the issues on board voluntarily. Of course, if the voluntary scheme does not work, we will have to look for other options
Baroness O'Cathain: My Lords, will the Minister say whether the Government are consulting other European countries? This is not just a United Kingdom problem. Binge drinking by young people is going on in many other member states, including Ireland, where there is a huge problem at the moment. Are we finding out what other countries are doing? Is there a sort of pan-European group that could assist to formulate a strategy?
Baroness Scotland of Asthal: My Lords, the noble Baroness will know that, in general, we consider what other countries have done. I cannot answer specifically on those matters, but, as part of the justice and home affairs agenda, we talk regularly with our European partners about the issues that affect us jointly. I shall endeavour to find out precisely what is happening on the European dimension and write to the noble Baroness with a more specific response.

Business
3.8 p.m.
Lord Grocott: My Lords, with the leave of the House, later this afternoon—sometime after 3.30 p.m.—my noble friend Lord Bach will repeat a Statement on the deployment of British troops in Kosovo.

Privileges
The Chairman of Committees (Lord Brabazon of Tara): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That as proposed by the Committee of Selection, the Lord Brooke of Sutton Mandeville be appointed a member of the Select Committee in place of the Lord Trefgarne.—(The Chairman of Committees.)
On Question, Motion agreed to.

Constitutional Reform Bill [H.L.]
The Chairman of Committees: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That as proposed by the Committee of Selection, the following Lords be named of the Select Committee on the Bill:

V. Bledisloe,

L. Carlisle of Bucklow,

L. Carter,

L. Craig of Radley,

L. Crickhowell,

L. Elder,

L. Falconer of Thoroton (Lord Chancellor),

B. Gibson of Market Rasen,

L. Goodhart,

L. Holme of Cheltenham,

L. Howe of Aberavon,

L. Kingsland,

L. Lloyd of Berwick,

L. Maclennan of Rogart,

L. Richard (Chairman),

L. Windlesham;

That it be an instruction to the committee that they should report the Bill to the House not later than Thursday 24 June next;
That the committee have power to appoint specialist advisers;
That the minutes of evidence taken before the committee from time to time shall, if the committee think fit, be printed; and
That the committee do meet on Wednesday 24 March at five o'clock.—(The Chairman of Committees.)
Lord Renton: My Lords, this will be a Select Committee of unusual constitutional importance. I draw your Lordships' attention to the proposal set out in the Order Paper:
"the minutes of evidence taken before the committee from time to time shall, if the committee think fit, be printed".
Your Lordships' House as a whole will need to know what has happened during the discussions of this important committee. I ask, therefore, that the committee be persuaded to have as much as possible of the evidence brought before it printed in the way suggested.
The Chairman of Committees: My Lords, as the noble Lord says, that is a matter for the committee. I

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see the chairman-to-be of the committee in his place, and f am sure that he will take note of what the noble Lord said.
Lord Barnett: My Lords, my question is not really for the Chairman of Committees, it is more for the noble and learned Lord the Lord Chancellor or, indeed, the Leader of the House. Clearly a deal was done in these two matters. It would not be unreasonable for the House to be informed in some detail, before we approve of this Motion, what the deal is, so that we can all approve it or disapprove it.
The Chairman of Committees: My Lords, the setting up of this committee—its composition and the carry-over Motion which the Leader of the House will be moving immediately after this Motion—were all agreed by the usual channels. The House agreed to set this committee up following the Second Reading debate on 8 March. The membership was agreed by the Committee of Selection and was published in its second report on Thursday 18 March. The timing of the first meeting and the time when the report will be made are also subject to the Motion today. All this was agreed by the usual channels.
Lord Peston: My Lords, I should like to ask the Chairman of Committees more than one question on this, assuming that it is in order for someone who is not a lawyer to involve themselves in a committee which seems to have a majority of lawyers as its membership. We might like to reflect on that when we eventually have the committee's report.
In 18 years in your Lordships' House, I have had no experience of a committee of this kind, so I have no idea what sort of committee it is. Is it a committee like other House of Lords' committees, meaning that it will meet in public? Can we be assured that it will meet in public?
Secondly, like other committees, can all other noble Lords attend if they so wish, although they cannot take part without the permission of the Chairman? That is normal with our committees.
Thirdly, it is customary in our House, certainly in the committees that I have chaired or been a member of, that we proceed by consensus. I have never chaired a committee in which I have allowed a vote. Of course, I do not believe in votes anyway, I believe in reason. Will the aim in this committee be to produce a report which is agreed by every member consensually? That is another question that needs an answer.
More generally, what is the point of the committee anyway? Will it go through the Bill as if it were the Committee stage, clause by clause, and, having done so, will it then come back to your Lordships with an enormous list of suggested but agreed amendments that your Lordships will be able to consider? Before agreeing to the membership—and if we disagree to the membership, we would be in the rather nice position of being able to disagree with having the committee altogether, which some of us would dearly like—we need to know, for the sake of your Lordships' House, the answers to the questions I have put to the
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Chairman of Committees. It is not a question of it being up to the committee to decide—this is a committee of the House of Lords and it is up to us to decide.
The Chairman of Committees: My Lords, I do not know if the House would prefer me to answer these questions one by one or to take them several at a time, but I will attempt to answer the questions of the noble Lord, Lord Peston. My understanding is that the committee will normally meet in public. Other noble Lords not on the committee may attend when it is meeting in public. Of course, occasionally it may wish to meet in private, as any committees may when they are deliberating, as the noble Lord knows well. I cannot answer on how the committee will proceed on whether it reaches agreement or not. All I know is that the committee has the power to amend the Bill, but how it will proceed in finding a consensus view is not a question for me.
Lord Marsh: My Lords, we seem to be moving towards a slightly unusual way of looking at this. I intended to speak on the next Motion, but it is already becoming part of the somewhat general debate on the issue.
Given the controversial nature of this Bill, am I right in believing—I think I am because people have already mentioned this—that it is entirely appropriate for the committee to amend the Bill in any way it wishes by a simple majority? It does not have to agree at all. If that happens, is there not a danger that we would go back to square one? I would be interested to hear how we would get out of that.
The Chairman of Committees: My Lords, the setting up of this committee was somewhat controversial in the first place, but it was a decision of the House, not a decision of mine. I cannot, therefore, say what happens if the committee fails to agree. It does, as I have just said, have the power to amend the Bill. That is set down on page 121 of the Companion to the Standing Orders; if noble Lords wish to refer to it, they will see some detail about how these committees proceed. It is a fairly unusual type of committee; it does not happen very often, but it is not my choice that we have found ourselves in this position.
Lord Laming: My Lords, I do not wish to cause offence, and I have no personal aspirations in this, but bearing in mind the nature of the work of the committee, is it wise that the membership is so unrepresentative and unbalanced, in favour of lawyers?
The Chairman of Committees: My Lords, the list of names I am putting forward today was agreed by the usual channels. Had the noble Lord wished to sit upon the committee, he should have made representations to the Convenor of the Cross Benches. This is the list that was agreed by the usual channels—very quickly, by the way—and that is what we have before us.
Lord Barnett: My Lords, I remain unhappy with the answers, but not because the Chairman of Committees

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has given a wrong answer in any way—I understand his problem. I was really putting my question to those who made the deal. If nobody on the Government side is prepared to tell us, perhaps the noble Lord, Lord Strathclyde, will give us the detail. I have no objection to a deal so long as I know what it is and can approve it.
My noble friend Lord Peston asked whether there would be an opportunity to amend the Bill. We are told that if it comes back in the next Session or subsequent Sessions, it will go through pro forma which means, I assume, on the nod. I really would like to know what kind of arrangement has been agreed. No doubt my dear friend the Chief Whip will be able to tell me precisely what is going on here. We have not been told in any detail and we would like to know.
Lord Renton: My Lords—
Lord Grocott: My Lords, I shall briefly answer my noble friend, I hope to his satisfaction, as he invariably did when answering my queries in the other place when the positions were reversed. I do not like the word "deal"—the word is "agreement", and everything is transparent. It is there in the two Motions before the House. There were discussions in the normal way to decide the size of the committee and the respective number of members from each group. I obviously regret that there are only five Government members on the committee, but that is the nature of reaching agreement, and five out of 16 is the number agreed. There is agreement on the length of time that the committee should consider. As has been explained, there are no instant answers to all these questions, because this procedure has been used only three times in the past century—before, even, my noble friend's membership of the House.
Finally, part of the agreement is the Motion that is shortly to come before us; because this obviously delays the progress of a government Bill, agreement has been reached by the usual channels that the Bill should, unusually, overlap from this Session to the next. So I do not think we have done too badly, really.
Lord Renton: My Lords, will the Leader of the House clarify one important matter? It has been suggested that this Committee of Selection would have power to amend the Bill, but surely all the powers that it would have would be to recommend amendments.
The Chairman of Committees: My Lords, that is not correct. The committee has the power to amend the Bill, as set down in the Companion to the Standing Orders. Following that, the Bill will be recommitted to a Committee of the Whole House.
Lord Rees-Mogg: My Lords, will the Committee of the Whole House, to which the Bill will be recommitted, have the capacity to amend the amendments that this committee has passed?
The Chairman of Committees: Yes, my Lords.
On Question, Motion agreed to.
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 to resolve, That it is expedient that if the Constitutional Reform Bill [HL]—

(a) has not completed all its stages by the end of this Session of Parliament, and

(b) is reintroduced in the next Session of Parliament, the new Bill shall, notwithstanding the provisions of Standing Order 47 (No two stages of a Bill to be taken on one day), be taken pro forma through all the stages completed in this Session.—(Baroness Amos.)

Lord Strathclyde: My Lords, I have been tempted by the noble Lord, Lord Barnett, to rise to my feet. I thank the noble Baroness for moving the Motion and I thank the Government Chief Whip for all the work that both of them did in the usual channels with my noble friend Lord Cope to make sure that we had a sensible agreement so that we could complete the bulk of the scrutiny of the Bill in the course of this Session and then use the new carry-over procedure that was introduced by the Labour Party—what a benefit it has been for this legislation—to enable the House of Commons to examine it in the new Session that will begin in the autumn. All those who have been involved in the negotiation have provided a service not just to this House and to Parliament, but to the Government to make sure that we end up with a better Bill.
On Question, Motion agreed to.

Air Traffic Emissions Reduction Bill [H.L.]
Report received.

Energy Bill [H.L.]
3.21 p.m.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whitty): My Lords, I beg to move that the Bill be now further considered on Report.
Moved, That the Bill be further considered on Report.—(Lord Whitty.)
On Question, Motion agreed to.
Clause 18 [Directions by NDA to the person with control]:
Lord Jenkin of Roding Lord Jenkin of Roding moved Amendment No. 36:
Page 18, line 23, at end insert—
"(3A) In any case in which subsection (3)(g) would require the person with control of the installation, site or facility to disclose to the NDA information, the disclosure of which (otherwise than under any enactment) would constitute a breach of confidence actionable by any person—

(a) the NDA shall consider, having regard to any representations made promptly following receipt of the direction by the person to whom the direction was given, whether the provision of the information is strictly

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necessary for the purposes for which it was required to be provided and shall require the provision of the information only if it is strictly necessary; and

(b) the person to whom the direction was given shall have no duty to disclose the information to the NDA unless or until the NDA has agreed to be bound by confidentiality obligations in substantially the same terms as the confidentiality obligations which are binding on that person in relation to the information."

The noble Lord said: My Lords, we have a long list of amendments to debate, so I shall be uncharacteristically brief. The point of this amendment is simply that anyone given a direction under Clause 18 by the Nuclear Decommissioning Authority will have to be subject to some of the usual constraints on what should not be disclosed on the grounds of confidence.
Last Thursday, the Government moved two amendments in response to long debates that we had in Grand Committee on what should be disclosed in the NDA's plans, in the strategy that it publishes and in its annual reports. As far as we could see, the government amendments completely and satisfactorily met the anxieties that had been expressed.
However, those amendments did not cover directions given under Clause 18. That is why I have tabled Amendments Nos. 36 and 37. The whole House accepts that in pursuit of its objectives the Nuclear Decommissioning Authority must have a series of powers, in particular, if I may put it in the vernacular, the power to tell other people what to do. There will be site licensees, contractors and, in many cases, sub-contractors. The clause gives the power to make directions to give effect to that intention.
Most of those are uncontroversial, but there are dangers in the directions that may be given to disclose information. Amendments Nos. 36 and 37 would excuse somebody to whom a direction has been given from a disclosure that would constitute a breach of confidence actionable by any person. Paragraphs (a) and (b) of Amendment No. 36 set out the procedure by which this should be considered. In the first place, the NDA should require information only if it is strictly necessary. Secondly, the person to whom a direction is given shall have no duty to disclose it to the NDA unless the NDA has agreed to be bound by the same confidentiality obligations.
The Government have proved very sensitive to the issue of disclosure of information that could be to the detriment of individuals or organisations, particularly in relation to commercial confidentiality, but there are no restrictions, as I see it, on what they can require to be disclosed in response to a direction. Amendments Nos. 36 and 37 remedy that lack and are one way of dealing with the problem. They are not on exactly the same terms as the noble Lord, Lord Whitty, very briefly described to the House last Thursday on disclosure under the other circumstances, but in the circumstances of Clause 18 they are perfectly reasonable amendments.
Government Amendment No. 38 is also in this group. It is very much shorter than my amendments and I am not sure how, if at all, it deals with the
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problem that I have described. If the NDA is going to do its job properly, of course it must require all the information that it needs, but there must be some constraint because of the need for confidentiality. I am not at all sure that government Amendment No. 38 provides that, but no doubt the noble Lord, Lord Whitty, will satisfy my curiosity and anxieties. I beg to move.
Lord Whitty: My Lords, Amendment No. 38 deals with the balance of the relationship between the NDA and site licensees and others. The rationale behind taking it together with Amendments Nos. 36 and 37 is that our amendment rests on giving the parties flexibility to choose which aspects of their relationship should be governed by the contract and which parts will be subject to directions. It may not be entirely obvious to the noble Lord from the wording, but our amendment addresses some of the concerns that have inspired his two amendments. As he said, we have had prolonged debate on this and other clauses dealing with the disclosure of information.
Clause 20 suspends the entire duty to comply with directions from the NDA given under Clause 18 at any time when an agreement is in force. We have reached the conclusion that the wholesale suspension of the duty to comply whenever there is a contract may be too rigid. There should be greater flexibility so that the parties themselves can agree which aspects of their relationship should be governed by directions and which by contract. That flexibility would have benefits for the NDA as well as for the contractors. It would give the NDA the ability to give directions to the person with control in circumstances where such a person may not be complying with all the terms of the contract. That would enable the NDA to ensure compliance with what needs to be done to discharge its responsibilities without that affecting the rest of the relationship.
The amendment addresses the concerns behind Amendments Nos. 36 and 37 by allowing the flexibility to suit the needs of the contractor—the counterparty—in different circumstances. For example, existing contracts with third parties may contain confidentiality provisions that would be breached if that information was disclosed to the NDA as a consequence of a contract. As part of our continuing discussions with stakeholders, we have been advised that such confidentiality provisions would not be breached if the information were disclosed in order to comply with the statutory requirement. However, they also advise us that there may be instances when it would be preferable for the disclosure of information from the counterparty to the NDA to be provided for in a contract.
We have explored the options with those who would be affected and have had some considerable discussions with them. We have informed them that it would be best if it were possible to choose which aspects of the relationship would be governed by directions and which by contract. They agree. and the amendment is aimed at providing the necessary level of flexibility.

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The effect of the amendment would be that the parties could decide whether Clause 18(3)(g) should be subject to the terms of that contract, for example. In our view, if this amendment were agreed, it would be a more fit-for-purpose framework to deal with confidentiality issues, which are the objective of Amendments Nos. 36 and 37. It will enable companies with control to determine with the NDA on a case-by-case basis which matters are governed by contract and which by statutory powers of direction. The stakeholders—the main companies involved—have indicated that they welcome this flexibility. In such circumstances, when the company in control has a large degree of control over whether arrangements for disclosure of information are governed by contract or direction, and that is the nature of the relationship, we do not consider it necessary to further amend the Bill in line with this and the other amendment, which was moved by the noble Lord, Lord Jenkin.
On that basis, and with that explanation of the admittedly rather terse terms of Amendment No. 38, I hope that the noble Lord will not press his amendments to a Division.
3.30 p.m.
Baroness Byford: My Lords, I thank the Minister for explaining the government amendment and my noble friend for giving the reasons why he moved his amendment. Will the Minister tell the House a little more? He said that the government amendments are there to give greater flexibility, that a decision will be taken on a case-by-case evaluation and that the Government gave the options to the companies involved to come to a decision. I have not had any comeback from the companies as to whether they are happy with the situation—and I do not know whether my noble friend has had any response. But it seems strange that the provision is left so open-ended—in other words, that the matter will be judged on a case-by-case basis to give greater flexibility. The provisions need greater clarification than the Minister has given us, bearing in mind the proposition put by my noble friend. I should be glad for a little bit more from the Minister.
Baroness Carnegy of Lour: My Lords, it seems to me, listening to this debate for the first time, that the important thing is to know what happens if the company concerned will not make an agreement—although the Minister has suggested that those who are likely to be concerned are happy with the government amendment. If the agreement each time is to be case by case, what happens then? The House will probably need to know that.
Lord Whitty: My Lords, when I refer to a case-by-case basis, I am referring to a contract-by-contract basis, not to every individual instance. The House needs to recognise that the vast majority of relationships with the NDA and the site contractors will be covered by contract; they will not be covered by the area that is subject to direction, to which the
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concerns expressed by the noble Lord, Lord Jenkin, relate. Apart from the information for which there is a statutory duty to be published, which we discussed the other day, the NDA will need to pass on the type of information that Amendments Nos. 36 and 37 are seeking to protect only in response to a freedom of information inquiry or, possibly, to fulfil its own functions as required by this Bill and other legislation.
It is feasible that such situations are excluded from the contract, so that there would be areas still subject to direction for those reasons, but for all other areas covered the contract there would be a specification as to how a request for information would be dealt with, and therefore the confidentiality attached to it. The reason for the case-by-case basis is that the process is done contract by contract with each site licensee; that does not mean that an individual case would always be subject to negotiation. They would normally fall within the guidelines set out in the contract.
Lord Jenkin of Roding: My Lords, I am sure that the Minister has done his best to explain what in Grand Committee we found an extremely complex subject. We were very confused about the role that the Freedom of Information Act 2000 would play, which comes into effect next year, and what would have to be dealt with by contract. Indeed, the Government have sought to deal with the issue by putting in specific statutory protection, which they did through the amendments that the Minister moved towards the end of Thursday's sitting, to give protection for personal information and commercial confidentiality.
I am not at all clear from what the Minister said, and in particular from the answers that he gave to my noble friend Lady Byford, exactly how the matter is to be dealt with. However, as we have discovered, there are occasions when one needs to read the Minister's words very carefully to be able to understand them. Mostly, one does understand them—but, sometimes, one does not.
It is splendid to see my noble friend Lady Carnegy of Lour back in her place, as we missed her on Thursday. I do not believe that her question has been answered. I shall not press the amendment to a Division today, but I reserve the right to return to the matter at Third Reading when we have studied the Minister's remarks. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 37 not moved.]
Clause 20 [Duty to comply with directions under s.18]:
Lord Whitty Lord Whitty moved Amendment No. 38:
Page 20, line 4, leave out from "duty" to end of line 14 and insert "to the extent that he is relieved of it by the provisions of an agreement—

(a) between the NDA and that person; or

(b) between the NDA and a body corporate of which that person is a subsidiary."

On Question, amendment agreed to.
Clause 21 [Financial responsibilities of NDA]:
Lord Triesman Lord Triesman moved Amendment No. 39:
Page 21, line 7, after "authorised" insert "or required"
The noble Lord said: My Lords, this group of amendments on Clause 21 make technical and drafting changes, whose purpose is to improve and offer greater clarity to the contracting framework through which the NDA will introduce competition for nuclear site management.
Amendment No. 39 tackles a particular concern on the proper interpretation of the phrase "authorised by" in Clause 21(4). As a consequence of discussions with stakeholders we wish to clarify that all actions under Clause 17, including any costs that may arise as a consequence of doing nothing, are covered by the NDA's funding obligations. There was some uncertainty expressed at an earlier stage over whether Clause 17(2) authorises the person with control to stop using a site. In other words, the concern is that the person with control would not need to be authorised not to do something which could then result in the NDA not meeting the costs of such an eventuality, where for example regulatory action had halted work. Incidentally, I know that there were three "nots" in that sentence; as there was an odd number, noble Lords can see that the sentence ended up in negative form I make that point for the mathematical purists in the House.
The amendment to add "or required" makes it clear that, if there is a cost attached to the person with control not doing something, Clause 21(4)(b) would also cover that. An example might be a situation in which the person with control is obliged to pay off sub-contractors as a consequence of regulatory action, which prevents or delays the work that they were engaged to do being carried out. The amendment means that any cost that the person with control incurs as a result of using the site for regulatory compliance—covered by the term "authorised"—or preventing the use of the site for a purpose which would be a contravention—which is covered by the term "required"—will be met by the NDA.
Amendments Nos. 40 to 43 clarify that the NDA's financial responsibility under Clause 21 does not preclude the person with control from incurring liabilities—for example, to pay staff salaries or sub-contractors—even though the costs will in effect be reimbursed by the NDA. That was always the intent, but we have sought to respond to uncertainty brought to our attention by the stakeholders and their advisers.
Finally, I turn to Amendments Nos. 44 and 45. Clause 21 as currently drafted requires the NDA to pay for everything that relates to its responsibilities unless it is allowed by the clause to pass that burden on under subsection (9). This reflected the view at the time the Bill was finalised for introduction that payment under the contract would be on the basis of reimbursement of costs, plus a fee. We expect this to remain the case in respect of contracts awarded in the initial stages of the NDA's existence.
However, as work on setting up the NDA and on the proposed contract structures has continued it has become clear that in the long term it would be overly
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restrictive if the NDA could not enter into contracts that provided for payment on the basis of a fixed price as opposed to cost reimbursement. We believe that we should enable the NDA and a contractor to agree on the element of risk sharing, for example on outturn cost. I beg to move.
Lord Jenkin of Roding: My Lords, I shall make a few observations on what the noble Lord, Lord Triesman, has said. In the somewhat acrimonious exchanges that we had at the beginning of business last Thursday, when we complained about the plethora of government amendments that have poured on to the Marshalled List in the past few days, I think that I was guilty of not expressing sufficient thanks to Ministers for the amount of trouble that they have taken in writing letters to us to try to explain what they were going to do. Other noble Lords may feel the same. Some of the letters were not wholly intelligible, at least to my feeble mind, but I am sure that Ministers were trying to be helpful.
In this case, the noble Lord, Lord Whiny, sent a number of us copies of an exchange of correspondence between one of his senior officials, David Hayes, director of the NDA team, and Mr Alvin Shuttleworth of British Nuclear Fuels. Unlike some of the other letters I referred to, these were extremely clear. I understand that British Nuclear Fuels now feels that it is sufficiently covered by the addition of the words "or required" in the first amendment.
The only question that I have to ask—which we discussed at length in Committee and again on Thursday—is why the complex relationship between the department, the NDA, which is being set up by the Bill, the management in charge of the site, the site licensees and the contractors could not have been worked out before legislation was brought before the House. One gets the impression that this was all patched up in the department and when the Bill was published a lot of people said that it was not right. It is not a good way of legislating.
Nevertheless, having said that, I agree that the words "or required" will meet the concerns that BNFL has expressed to us: that it would find itself liable to pay and it would not be reimbursed by the NDA if, for instance, a contract had to cease and the work was not done. So I accept these amendments but I express some surprise that they were necessary.
3.45 p.m.
Lord Triesman: My Lords, I suspect that those with great experience of the lengthy passage of complex Bills might observe that it was often thus. As Bills go through, the nature of the debate means that complex issues are understood more thoroughly and the amendments that are needed are then set out in a way that meets the objections. I hope your Lordships agree that this is part of the process. On this occasion, I can say that the exploration led to greater illumination and the changes that noble Lords urged in Grand Committee are in amendments today. I hope they are acceptable to the House in that light.
On Question, amendment agreed to.
Lord Triesman Lord Triesman moved Amendments Nos. 40 to 45:
Page 21, line 13, leave out subsection (5) and insert—
"(5) Nothing in so much of this section as—

(a) restricts the extent to which a person is, or may become, liable to meet any costs in relation to a site, installation or facility, or

(b) requires any costs in relation to an installation, site or facility to be reimbursed or otherwise met by the NDA,
is to be construed as restricting the extent to which the person with control of the installation, site or facility may be or become subject, in relation to a person other than the NDA, to the liability or obligation in respect of which the costs arise."

Page 21, line 17, after "NDA" insert "for the purpose of discharging its financial responsibilities"
Page 21, line 20, after "liabilities" insert "to persons other than the NDA"
Page 21, line 22, leave out "and" and insert—
"( ) It shall also be the duty of the NDA to make all such arrangements as it thinks fit for securing"
Page 21, line 27, leave out subsection (7).
Page 21, line 37, leave out subsection (9) and insert—
"( ) The preceding provisions of this section have effect in relation to an installation, site or facility subject to the terms of—

(a) any agreement between the NDA and the person with control of the installation, site or facility or

(b) any agreement between the NDA and a body corporate of which that person is a subsidiary."

On Question, amendments agreed to.
Clause 27 [Tax exemption for NDA activities]:
Baroness Miller of Hendon Baroness Miller of Hendon moved Amendment No. 46:
Page 25, line 40, leave out paragraph (b).
The noble Baroness said: My Lords, I shall move Amendment No. 46 which stands in the names of my noble friends Lady Noakes, Lord Jenkin of Roding and my own. I shall also speak to the other amendments in this group. My noble friend Lady Noakes apologises for being unable to be with us this afternoon because of other commitments. She has asked me to deal with the amendments standing in our names in this group.
In Grand Committee, my noble friend Lady Noakes put a number of detailed questions to the Government in respect of the tax clauses. In response, the Government said that they would table unspecified amendments. It says something about the quality of the drafting of the Bill that the Government had to table 27 amendments to parts of the Bill that should have been routine and technical. As the Minister is aware, these amendments were available very late. We may want to return to them at Third Reading when we have had a chance to consider them in more detail.
For today, I shall just raise a few issues. The Government have tabled a number of amendments to Clause 27, together with three substantial clauses after Clause 27. However, none of these amendments deals with the points raised by my noble friend Lady Noakes in Grand Committee. I shall therefore repeat those questions today in the hope of getting some answers.
Our Amendment No. 46 probes why a company, other than an NDA company, should get a tax exemption from Clause 27. In Grand Committee, the Minister said:
"Where the activities might be carried out on behalf of the NDA by site licensee companies … it might still be appropriate for them to be exempt".—[Official Report, 22/1/04; col. GC 412.]
But the Explanatory Notes were very clear. Paragraph 130 said:
"It is [the] Government's intention that private companies will not be able to realise tax free profits through the tax exemption".
Will the Minister say what the regulations referred to in subsection (5)(f) will contain? Is this a backdoor way of exempting some particular companies from tax? We think that we should be told whom the Government intend to exempt from tax under Clause 27 and why.
We tabled Amendment No. 50 to delete Clause 27 in order to probe what activities would be exempt. The Government's amendments have shed no light on that. We still need to see the regulations under subsection (3) and I hope that the Minister will now commit to making those draft regulations available before we reach Third Reading.
We also tabled two detailed amendments, Amendments Nos. 54 and 55 to Schedule 4. We were very surprised by the Government's responses in Grand Committee and had hoped to see the Government tabling amendments for Report. But these are not matters of great principle and we shall not be moving those amendments today. I beg to move.
Lord Davies of Oldham: My Lords, I am grateful for the manner in which the noble Baroness, Lady Miller, has moved her amendments. I hope to meet her points in full.
As she has indicated, she is not entirely happy with the government amendments that follow this group. In a sense the two groups form part of a total debate and I will, in moving those amendments, hope to reinforce the arguments I shall make in response to her questions on these amendments. But I shall do my best to answer the questions that she has addressed in Amendments Nos. 46, 50, 54 and 55.
As I mentioned during Grand Committee, we intended to return to these tax provisions on Report. We shall discuss the government amendments later. These amendments are the same as those tabled by the noble Baroness, Lady Noakes, in Grand Committee. I realise that they were tabled again before the government amendments were tabled. I am a little concerned that the noble Baroness indicated that they are also there because of dissatisfaction with the government amendments. We will come to that part of the debate in the next group.
The letter of my noble friend Lord Whitty to the noble Baroness, Lady Miller, that was sent on 9 February—a copy of which was placed in the Library of the House—covered some of the issues that we discussed in Grand Committee and explained the rationale for the tax provisions in the Bill. However, it may be necessary to summarise our general aims

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regarding the tax provisions to set the context for the various tax amendments. I will then speak directly to the amendments to which the noble Baroness spoke.
Clause 27 and Schedule 4 introduce the concept of "relevant site licensees" and allow for Treasury regulations to be made to exempt from tax certain trading activities of the NDA. As we explained, the NDA is not itself exempt from tax; activities such as electricity generation by the Magnox power stations will be taxable in the normal way.
However, our intention is to consider making regulations to provide for exemptions in certain narrow circumstances, particularly for the Thorp and SMP activities that are expected to be loss-making for tax. Such regulations will be appropriate only if the detail of contractual arrangements with site licensee companies is such that any losses or profits would in economic terms be the NDA's.
The concept of "relevant site licensee" also applies to some of the tax provisions allowing for nuclear transfer schemes to be tax neutral for the transferor and the transferee. The detail of the transfer tax provisions is in Schedule 9, introduced by Clause 43. These provisions allow for tax neutral transfers of assets and companies between publicly owned companies, such as BNFL, the UKAEA and the NDA. They also allow for the ownership of site licensee companies that are "relevant site licensees" to be transferred in a tax neutral way.
The challenge that we have faced has been to develop the detail of the tax provisions in the light of the detail of the emerging possible contractual and other relationships between the NDA, site licensee companies and parent management companies. We have been working closely with both the Inland Revenue and professional tax advisers to get that extremely important detail right. Allowing for future flexibility has made the tax provisions somewhat complex.
Returning to the precise points raised by these amendments. Amendment No. 46 would remove site licensee companies that are not 100 per cent subsidiaries of the NDA from the scope of limited exemption and from the scope of the transfer provisions in Part 3 of Schedule 9.
Clause 27 allows Treasury regulations to be made that would exempt from tax certain of the NDA's activities. As I mentioned earlier, the activities that we have in mind are those at Thorp and SMP. I repeat that these are expected to be loss-making for tax purposes, yet computing their tax position accurately would be tricky if their activities are bound up with the decommissioning and clean-up activities of the NDA. It therefore makes sense on pragmatic grounds to exclude them from tax where they are carried on by the NDA.
Activities such as operating Thorp and SMP might be carried out on behalf of the NDA by site licensee companies. Depending on the detail of the contractual arrangements between the NDA and the site licensee companies, it might be appropriate to include site licensee companies within the potential scope of the
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exemption; for instance, in cases where the NDA bears the economic responsibility for losses and profits, yet the detail of the contractual arrangements means that any potential tax liability or tax relief for losses falls on the site licensee. That is what subsection (4)(b) of Clause 27 allows. It also allows for relevant site licensees to come under the provisions for transfer schemes in Part 3 of Schedule 9. Amendment No. 54 would remove the ability to disallow charges—in a tax sense—on income to the extent that they are referable to exempt activities.
That would be inequitable as it would allow charges that are linked to the exempt activities to be deducted against other taxable income. If certain activities are to be exempt, then it is right that their associated charges should not qualify as a deduction for tax. As the noble Baroness, Lady Noakes, mentioned in our earlier debates—and we regret that she is not able to aid us with these deliberations today—it is true that for corporation tax many kinds of deductions that were previously treated as charges ceased to be so treated in 2002. However, it is appropriate to cater for charges such as certain annuities and those relating to payments to scientific research associations and to charities, which might include universities commissioned by the NDA to carry out research on its behalf—and that is the purpose of paragraph 3 of Schedule 4.
Amendment No. 55 relates to the provision in Schedule 4 paragraph 4 concerned with the difficult subject of finance leasing. The provision ensures that the NDA and any subsidiaries it forms cannot, viewed together, have their cake and eat it by enjoying the benefit of the exemption on the NDA's income while obtaining tax allowances, available against its non-exempt income, for expenditure on capital equipment used in the exempt activities.
The amendment would take this restriction even further by preventing finance-lessor companies outside the aegis of the NDA making use of those tax allowances. As the noble Baroness, Lady Noakes, said in Committee, there may be a case, as a matter of fiscal logic, for extending this restriction. However, there is at present no across the board restriction on the availability of tax allowances to finance lessors providing assets for use by public sector bodies enjoying a tax exemption. I am not persuaded that it would be appropriate to break new ground with such a restriction here, especially as my colleagues in the Treasury are currently reviewing the tax treatment of finance leasing generally. I should confirm that the NDA—I made this point earlier—is not itself exempt from tax. Activities such as electricity generation by the Magnox power stations that are clearly separable from the Thorp and SMP activities, and from the decommissioning and clean-up activities, will be taxable in the normal way.
I share the concerns expressed by the Opposition that private sector enterprises should not be able to make tax-free profits. Where the activities are effectively not carried on by the NDA, exemption will not be appropriate and regulations will not be made.

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However, depending on the detail of the contractual arrangements between the NDA, site licensee companies and private contractors, it may be appropriate for the activities of some site licensee companies to be exempt. We had in mind the possibility of site licensee companies carrying on some commercial activities where the losses and profits would in economic terms be the NDA's. But because of the contractual arrangements and the application of normal tax law, the commercial activities will be taxed in the site licensee company and not the NDA. For that reason, Clause 27 allows for the exemption to apply to activities that are specified in Treasury regulations and are carried on by relevant site licensees, the definition of which would also be the subject of regulations.
The concept of "relevant site licensees" is also relevant to the transfer tax provisions in Schedule 9. That schedule allows for the tax neutral transfer of shares in relevant site licensees, which will facilitate the transfer of site licensee companies under transfer schemes. In practice, the principal commercial activities that would be considered for exemption are the Thorp and SMP activities. As I have already mentioned, these are expected to be loss-making for tax, yet the commercial activities are intertwined with decommissioning and clean-up work. Whether it is appropriate to make regulations exempting these activities will depend on the detail of the contractual and other arrangements between the NDA and the site licensee company running these activities.
In our discussion in Grand Committee, the noble Lord, Lord Jenkin of Roding, was right to be concerned about some kind of blanket tax exemption for the NDA along the lines that he recalled debating for the British National Oil Corporation. However, what we are proposing here is a very narrow potential exclusion only for trading profits and losses and then only from certain trading activities. The NDA itself will remain a taxable entity—I cannot emphasise that point enough—and, indeed, trading activities such as the Magnox electricity generation will remain taxable in the normal way.
Regulations to allow for exemption will be appropriate only if the detail of contractual arrangements with site licensee companies is such that any losses or profits would in economic terms be the NDA's. The concept of relevant site licensee also applies to some of the tax provisions allowing for nuclear transfer schemes to be tax neutral for the transferor and the transferee. The detail of these provisions is in Schedule 9, introduced by Clause 43. These provisions allow for tax neutral transfers of assets and companies between publicly owned companies such as BNFL, the UKAEA and the NDA. They also allow for the ownership of site licensee companies that are "relevant site licensees" to be transferred in a tax neutral way.
I apologise for speaking at great length but in so doing I hope that I have allayed concerns about the government amendments and perhaps foreshortened debate on them, although that may be a wish and a prayer rather than the reality. For those reasons we
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believe that Clause 27 will facilitate the NDA's primary role of decommissioning and clean-up of Britain's civil public sector nuclear sites. On that basis I am confident that noble Lords will recognise that Clause 27 as drafted should stand part of the Bill.
The noble Baroness asked the obvious and entirely appropriate question whether we shall have the regulations before Third Reading. I am afraid that we shall not be able to provide the regulations by that time. They involve a great deal of detail on the contractual arrangements between the NDA and contractors. I regret to say that we shall not be able to provide the regulations by Third Reading.
The noble Baroness also asked why we should allow non-NDA companies to be exempt. The site licensee companies will be transferred between management contractors as contracts expire and new contractors win competitive tenders to manage the site licensee companies. Although they are vehicles for the NDA to achieve its objectives, they will not always be—indeed, we do not expect them to be—owned by the NDA. Profits and losses on activities from which the NDA gets the economic benefit may arise so far as the site licensee is concerned.
I hope that I have explained the tax philosophy behind the Government's thinking. I regret that I am not able to provide the additional information at this stage although I think the noble Baroness probably realises that she is asking for rather a lot at this point. Nevertheless, I hope that I have helped to sketch out the Government's general position in such a way that the tax provisions in the Bill make sense and are seen to be equitable and fair.
4 p.m.
Lord Jenkin of Roding: My Lords, I think this is the second or third time that the noble Lord or another Minister on the Government Front Bench has used the phrase "emerging problems". If I may say so, one has the impression that they have been making it up as they go along. When one now hears—as the noble Lord, Lord Davies of Oldham, has just said—that it is not until they know the details of the contracts that will exist between the site licensees and the contractors that they will be able to make the regulations—my noble friend asked whether we might have them before Third Reading—one really begins to wonder how on earth all this is put together.
My mind goes back to the time when—I was a junior Treasury Minister at the time—my party came into government in 1970 with a commitment to introduce value added tax. At the first meeting that my then boss, the late Iain Macleod, held with Customs and Excise we said that we would publish a Green Paper and consult widely. "Oh", said the officials, "you do not need to do that. We understand all about value added tax. We can produce a tax for you more or less straight away". However, we replied, "No, we shall consult widely on the matter". A year later the deputy

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chairman of Customs and Excise—I am delighted to see that my noble friend Lord Higgins has entered the Chamber as he was in government at the same time as me—said, "It was a terribly good idea to have a Green Paper because we learnt a tremendous amount that we would never have known at all".
I get the impression that to some extent Ministers have found themselves in the same situation with this Bill. Their officials will have told them that they do not need to worry too much and that they can put down what is in the Bill. Then, lo and behold, along come all the outside interests saying, "You have not got this right at all". One just wonders how a Bill like this reaches the statute book. The Government had to admit straight away that the questions asked by my noble friend Lady Noakes in Grand Committee were very valid questions that would need to be dealt with.
There are two points here. Is it really the case that the regulations will not be made until after some of the contractual agreements have been made? I find that quite astonishing. Will they have retrospective effect in those circumstances? How much consultation was there before the Bill was published, or has it all happened since the Bill was published last November? I find this a very strange business indeed.
Baroness Miller of Hendon: My Lords, I thank my noble friend for making two of the main points that I intended to make. I am delighted that he was able to do so as there is no doubt that he did it much more effectively than I could.
The noble Baroness, Lady Noakes, would have been here if it were possible but unfortunately she lost her father on Friday. Under those circumstances she is not able to be here today. In Grand Committee she seemed to be the only one who could take all of this under her belt and in her stride. It was extremely nice to have present a person who was so efficient and knowledgeable on these matters. The Minister said that he would take away many of these matters and consider them. We shall most definitely read what he has said extremely carefully. The Minister has no reason to apologise for speaking at length as he provided much detail. However, as my noble friend said, with all the detail in the world, we do not know why we find ourselves in such a position.
I understand what the Minister is saying as regards the regulations. He has to wait to see the contracts and what is negotiated. My noble friend asks whether that means that something will happen retrospectively. On this side of the House, we wonder whether the regulations are likely to come into being and whether the contracts will have been sorted out by the time the Bill reaches Third Reading in the other place, never mind in this place. It is extraordinary that this matter has to be left. However, we shall read what has been said very carefully and by Third Reading I am sure that my noble friend Lady Noakes will have had a chance to absorb the issue, and better than I could. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.

Kosovo: Deployment of British Forces
4.10 p.m.
Lord Bach: My Lords, with the leave of the House, I shall now repeat a Statement made in another place earlier this afternoon by my right honourable friend the Minister with responsibility for the Armed Forces. The Statement is as follows:
"Last week we saw an upsurge in violence in Kosovo resulting in deaths within both the ethnic Albanian and Serb communities, as well as hundreds injured, including some KFOR troops. Although Kosovo is now calmer, the potential for renewed violence remains.
"The troops already in Kosovo were heavily committed in dealing with the situation. Commander KFOR therefore took the decision to authorise the deployment of his in-theatre tactical reserves to assist with the situation. NATO also issued instructions to reinforce KFOR with additional SFOR troops from Bosnia, including a UK company of 1st Royal Gurkha Rifles, a US company and a company from the Italian Multinational Support Unit (Carabineri).
"In the early hours of Thursday 18 March, NATO called forward the Operational Reserve Force Ready Battalion. The ready battalion role is one for which the UK has responsibility during the first six months of this year. The lead elements of the Operational Reserve Force Ready Battalion, approximately 150 men, left RAF Brize Norton on Thursday afternoon and landed in Kosovo late that evening. The vast majority of the Operational Reserve Force Ready Battalion of around 660 men has now deployed, with the 1st Battalion the Royal Gloucestershire. Berkshire and Wiltshire Regiment providing the core of the battalion group. There are now around 1,100 UK Armed Forces personnel deployed in Kosovo.
"The purpose of this deployment is to restore calm to the province and prevent unrest spreading to areas outside Kosovo, the type of task for which the Operational Reserve was designed. UK troops will conduct routine patrolling, the guarding of sites (such as the UN mission) and public order duties, as tasked by Commander KFOR.
"Calling upon the in-theatre tactical reserve, followed by the Operational Reserve, then Strategic Reserve, is the correct, graduated, and planned, response to a situation of this sort. Kosovo has been calmer over the weekend, showing that this was the correct decision.
"Further to the deployment of the UK battalion, NATO has requested that an element of the NATO Strategic Reserve Force, provided by a French battalion, also be deployed to Kosovo. NATO has also requested the deployment of the three 'standby' battalions that make up the full Operational Reserve Force. These battalions are provided by the US, Germany and Italy. The German battalion will be deployed to Skopje, Macedonia, in the first instance.

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"lt is for NATO to determine how long reserves will be required, but in terms of an initial estimate, and with the situation changing, we believe a sensible course of action is to plan initially for a deployment period of approximately 30 days. The situation in Kosovo now appears calmer, although it is still tense.
"I would like to inform the House that we have received preliminary reports of an incident involving British troops in Basra this morning. The House will understand that the information remains incomplete. Initial reports indicate that two explosions took place. We have reports of injuries to 13 British soldiers, although none is believed to be life-threatening. The process of informing next of kin is under way. It would be inappropriate to make any further comment at this stage".
My Lords, that concludes the Statement.
4.14 p.m.
Lord Astor of Hever: My Lords, I am grateful to the Minister for repeating the Statement about Kosovo and about the distressing news from Iraq. We on these Benches hope that when the situation there is clarified the news will be a little better.
With regard to Kosovo, once again Britain is called on to provide the manpower to dampen the powder-keg of ethnic tension. We praise the troops for the speed of their deployment. Last week's violence between the Kosovar Serb minority and the dominant ethnic Albanians was surprising, swift and widespread. There is no doubt that that violence represents a major setback in the Kosovo peace process. The importance of the quick and robust deployment in Kosovo should not be underestimated. The stakes are high. The destabilisation of Kosovo would result in further and more serious bloodshed in the province and further instability in south-eastern Europe. That we cannot afford.
I have one or two questions for the Minister. What is the mission of the Operational Reserve Force? Will the Minister confirm that the troops have been issued with a full complement of personal equipment including enhanced combat body armour? Who will replace 1RGBW as the spearhead battalion?
According to the Serbia-Montenegro army chief of general staffs interpretation of the Kumanovo agreement—between NATO and the then Federal Republic of Yugoslavia in 1999—the Serbia-Montenegro army could be allowed to return to Kosovo in exceptional circumstances. Can the Minister clarify whether that is really the case and under what circumstances would that be allowed to happen? Finally, are Her Majesty's Government confident that the security situation in Bosnia is stable enough to allow the temporary reduction in troop numbers there? We are confident that the British
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troops will play a full and, as always, distinguished part in getting Kosovo back to normality. We wish them every success and a safe and prompt return.
4.17 p.m.
Lord Redesdale: My Lords, our thoughts too are with the service personnel injured in Basra and with their families and all those who at present are serving in Iraq. I thank the Minister for repeating the Statement made in another place.
I have no questions to put to the Minister. This is a difficult and evolving situation that is moving at some rapidity. It was started by the reporting of the tragic deaths of the three Albanian boys who drowned outside Mitrovica. It seems that the situation was stoked by the way in which both the local and the international media reported the incident. The Albanians desire independence, a feeling that has been brought to the fore by the continuing unrest—it is probably the root cause of the unrest.
Troops will be needed, particularly NATO forces, in the build-up to the elections in November. Although Kosovo is calmer now, I believe that it is important that a NATO presence is firmly in place and in control of the situation. There is a real likelihood that ethnic cleansing could take place in different parts of Kosovo. The professionalism and the ability of the British troops to calm down the situation is called for and we wish them the best of luck.
4.19 p.m.
Lord Bach: My Lords, I thank both noble Lords for their kind and supportive comments. The noble Lord, Lord Redesdale, is right that the British troops are amazingly good at the tasks that they are undertaking and I agree with the noble Lord, Lord Astor, that the stakes are high and that it is important to act quickly and speedily. The best way that I can answer his question about the purpose of Operational Reserve Force is to repeat what our troops will be doing. Operational Reserve Force could be asked to do a number of things, but, as I understand it, their purpose in Kosovo will be to conduct routine patrolling, the guarding of sites and public order duties, as well as other tasks given to them by the commander of KFOR.
The forces are appropriately equipped and, regarding the noble Lord's last question about Serbia and the comments that have been made, there has to be an invitation by UNMOVIC—the United Nations Mission in Kosovo—which would only be in the most exceptional circumstances. Those circumstances did not prevail either last week or now. My right honourable friend the Secretary of State for Defence spoke to his opposite number in Belgrade, the honourable Boris Tadic, when the incidents last week were at their height, and the subject referred to by the noble Lord was not raised in the conversation.
4.21 p.m.
Lord Biffen: My Lords, I would like to ask a question deriving from the Statement on Kosovo and it would, perhaps, be appropriate for me to mention

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that my stepdaughter is a humanitarian rights worker in Kosovo and, at the moment, is in Pristina. Can the Minister assess the extent to which the local police force that has been recruited over the past couple of years has been able to play an effective part in the recent miserable troubles? Does the Minister agree that there can be no economic development possible in that country until there is at least some evidence of effective law enforcement? What is the current time-scale for future political development in Kosovo and to what extent will that be adjusted in the light of recent events?
Lord Bach: My Lords, I thank the noble Lord for his question and pay tribute to his stepdaughter, and others like her, who are carrying out such fantastic work at such a difficult time in Kosovo. As I understand the situation, there is a Kosovo police service that works under UNMOVIC and does important work, but which would not directly involve it in the type of incidents that we saw last week. The noble Lord is right that it is crucial that law enforcement must prevail if Kosovo is to play a successful part in the world. I cannot tell him much about future political developments, except that they are at a sensitive stage. There are ongoing discussions and talks at the present time, as the noble Lord would expect, but I have no timetable for their completion.
Lord Lea of Crondall: My Lords, we have heard criticisms in the press that a contributory factor in last week's events was that no progress was being made on the final status of Kosovo. However, our experience in Northern Ireland should be enough to show that we must be careful to avoid a premature attempt to define final constitutional status. The key priority must surely be to keep all the states in the region, including Serbia Montenegro, Albania, Macedonia, Bosnia-Herzegovina and Croatia, in dialogue about the economic and wider future of the west Balkans. All have an aspiration to join the European Union. Given that we must not unravel the thread of the states in the former Yugoslavia, will my noble friend welcome the creation in February of a parliamentary forum for the Balkans, which all of those countries have joined? We were told about that last week by the Serbia Montenegran delegation and we must do all we can to encourage that process.
Lord Bach: My Lords, I am grateful to my noble friend. He was kind enough to show me material about the programme to which he referred. Of course, from this Dispatch Box we welcome any coming together of the various groups and countries in that region if the result will be peace and the possibility of people leading ordinary lives. We welcome that particular example of progress and we would like to see much more.
Lord Hannay of Chiswick: My Lords, can the Minister say whether there were any intimations of such problems arising from intelligence? If the answer is that absolutely no one expected them—that is. the United Nations, NATO or the troop-contributing countries—as appears
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to be the case, is that not somewhat worrying given that one cannot be certain that it will be the last occasion that such problems will arise in that province?
Does the Minister not agree that, while it is legitimate and reasonable for the Kosovar Albanians to aspire to independence and to feel impatient that they have not yet made any progress, it would send an appalling signal if upheavals that led to a great deal of ethnic cleansing were also seen as a reason for accelerating talks on independence? The message has to be taken home to the Kosovar Albanians that their hope of advancing their ambitions is by talking to the Serbs at the conference table, not by expelling them from their homes.
Lord Bach: My Lords, I cannot answer the noble Lord's first question regarding intelligence not because I know something and am unable to say, but because I just do not know what notice there was of those impending difficulties. If there was none, then I agree that it is worrying.
I agree with the noble Lord's second point. The international community will not and cannot tolerate inter-ethnic violence in Kosovo. Kosovo Serbs have to be allowed to return to their homes and live without fear. We and the rest of the world will continue to work for a stable, democratic and multi-ethnic Kosovo and we refuse to be deflected from that by recent violence. The timetable will also not be affected by the sort of violence that we saw last week.
Earl Russell: My Lords, while I agree with all of the comments made by the noble Lord, Lord Hannay, will the Minister say what consultations have taken place between his department, the Foreign and Commonwealth Office and the Home Office about whether the classification of Kosovo as a safe country for the return of refugees—and a safe country in general—should be suspended pending a more settled view of the situation? I hope he will remember that errors in this matter may cost lives. Regarding whether it was foreseen, I have previously discussed precisely that possibility with two people. One was a Kosovar waiter who had attempted to return home and found it too dangerous; the other was my noble friend Lord Ashdown before he took up his appointment.
Lord Bach: My Lords, I am afraid that there have so far been no consultations of the sort referred to by the noble Earl. However, such matters are, and will be, discussed by the Government in the usual way.
Earl Attlee: My Lords, many people will be pleased that this task has been given to the UK Spearhead Battalion, a standard high-quality British infantry unit. Too often we have reached for highly specialised units and ignored the Spearhead Battalion that has been at a state of high readiness, and at some personal cost.
Lord Bach: My Lords, I am grateful to the noble Earl. He speaks with a lot of experience and knowledge on these matters. I am grateful for his comment.

Energy Bill [H.L.]
4.30 p.m.
Further consideration of amendments on Report resumed on Clause 27.
Lord Davies of Oldham Lord Davies of Oldham moved Amendment No. 47:
Page 25, line 42, leave out paragraph (a) and insert—
"( ) it is not a company falling within paragraph (a) of that subsection
The noble Lord said: My Lords, I beg to move Amendment No. 47 and speak to the other government amendments in this group. In seeking to advance the discussions that we had on the last amendment with regard to taxation provisions, I want to emphasise the following points. It was suggested during the course of our debate on the previous group of amendments that the Government were drafting legislation on the hoof and had not consulted widely on some significant features of this Bill until late in the day. I want to put the record straight. Noble Lords will recall that the Bill was preceded by a White Paper in the summer of 2002. The draft Bill was published in July 2003. We have been involved in detailed discussions with stakeholders throughout the whole of the drafting and presentation of the Bill.
Through the framework of these amendments I am addressing myself to the general case which the noble Lord, Lord Jenkin of Roding, put with particular force on the last group of amendments. There are some things that are quite impossible to sort out in advance. He will recognise that we are seeking to create a flexible framework that will last over a significant period of time. As we all recognise, we are dealing with an industry with very long timescale operations. We need to allow the NDA to decide how it wishes to operate. We need to give it room to respond to the developing market when it is in place. Therefore, this necessary flexibility and conditionality with regard to specified aspects of the work is bound to take a period of time.
I responded to the noble Baroness, Lady Miller of Hendon, by indicating that she was making a plea for regulations which are frequently requested at this stage of a Bill. I wanted to emphasise to her that this was no general response. I am genuinely not able to deal with detailed regulations until we are further advanced both with the NDA and the nature of the contracts to be established. These will determine the appropriate taxation arrangements.
I make these general points purely in the interests of progress on the Bill. I also want to ensure that the House is fully aware of the Government's argument so that we can address ourselves succinctly to the issues at stake. I particularly refer to this group of amendments that the Government have tabled in response to the debate in Committee and also in response to the developing situation as negotiations take place with important stakeholders.
Amendments Nos. 47, 48 and 49 revise in three ways the definition of relevant site licensee in Clause 27, principally for the purposes of the exemption of
492
certain trading profits from corporation tax and also in relation to the transfer tax provisions applying to site licensee companies.
First, Clause 27(5) was drafted on the assumption that site licensee companies would be owned directly or indirectly by the NDA before being transferred to a contractor. Recent detailed discussions as to the likely contractual structure have made it clear that this may not be the case. These changes ensure that site licensee companies that have never been a subsidiary of the NDA may be a relevant site licensee for the purposes of Chapters 1 and 2, if they meet the other conditions, which are relaxed as I shall explain.
Amendment No. 48—the second proposed change—relaxes the condition that a site licensee company can only come within the provisions if there is a management contract in force for the site. The change means that the case where the SLC's responsibilities are set out in NDA directions may come within this provision, which could apply to the AEA and its subsidiaries. The detailed requirements will be the subject of regulations.
Thirdly, Amendment No. 49 relaxes the ownership requirement so that where the management contract is with the parent of the site licensee, the site licensee company need be only a 90 per cent subsidiary, rather than a wholly owned subsidiary. This is to allow for the NDA to retain golden shares in relevant site licensee companies.
Amendment No. 51 introduces a new clause to confirm that the income generating activities of the NDA will be taxed under Case 1 of Schedule D, rather than Case VI of Schedule D (by virtue of Section 18 of the Income and Corporation Taxes Act 1988). This is being introduced in case the contractual relationships between the NDA and site licensee companies are such that the income generating activities of the NDA would be taxable under Case VI under the general tax rules. Taxing significant activities, such as electricity generation, under Case VI would cause difficulties in two ways. First, the tax clauses in the Bill are drafted on the assumption that the NDA would be trading under Case 1. Also, Case VI does not have a comprehensive set of computational rules in the same way that Case I does, so it would not be appropriate to rely on Case VI for a significant activity such as electricity generation. Subsection (2) limits the scope of this provision to sources of income within Case VI, under the general tax rules mentioned above, relating to the functions specified in subsection (1) (a), (d) and (e) of Clause 3.
Amendments Nos. 127 and 129 are consequential amendments that are made necessary by new paragraph 26A introduced by Amendment No. 24. They ensure that paragraph 26A will take precedence over paragraphs 3 and 4 (for the purpose of corporation tax on capital gains) where site licensee companies are transferred as part of a nuclear transfer scheme.
Amendments Nos. 140 to 144 amend paragraph 26 of Schedule 9 and add two new paragraphs, 26A and 26B. They concern transfers of securities in relevant site licensee companies as defined in Clause 27. The amendments allow for transfers of relevant site licensee companies to or from the NDA, or between one

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contracting group and another, to be at such a price that neither a gain nor a loss arises for the purpose of corporation tax on capital gains. The overall effect is that the transfer of ownership of site licensee companies between different owners is tax neutral.
Amendment No. 146 adds a reference to the new Clause 26A at section 35(3)(d) of the Taxation of Chargeable Gains Act 1992, which is concerned with assets held at 31 March 1982 and lists other provisions allowing for disposals at no gain no loss.
Amendment No. 145 is a technical amendment to enable the NDA to be treated as a company for the purposes of the capital gains tax rules applying to groups of companies. Similarly, it enables the NDA to be a company for the purposes of the intangible fixed assets rules. The amendment confirms that the NDA is to be taxed as if it were an ordinary company—subject to the special rules that are in this Bill. I beg to move.
On Question, amendment agreed to.
Lord Davies of Oldham Lord Davies of Oldham moved Amendments Nos. 48 and 49:
Page 26, line 4, leave out paragraphs (c) to (e) and insert—
"(ba) in a case where there is in force a management contract relating to the whole or a part of the site to which that licence relates, or to an installation or facility in or on that site, the parties to the contract include either—

(i) the company in question; or

(ii) a company which owns directly or indirectly at least 90 per cent of the ordinary share capital of that company;"

Page 26, line 16, leave out from "conditions" to end of line 18 and insert "that are required by regulations made by the Treasury to be satisfied have been satisfied."
On Question, amendments agreed to.
[Amendment No. 50 not moved.]
Lord Davies of Oldham Lord Davies of Oldham moved Amendment No. 51:
After Clause 27, insert the following new clause—
"TAXATION OF NDA ACTIVITIES CHARGEABLE UNDER CASE VI OF SCHEDULE D
(1) For the purposes of the Corporation Tax Acts so much of any activity of the NDA as—

(a) is an activity the profits and gains from which would (apart from this section) be chargeable to tax under Case VI of Schedule D, and

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

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

(a) it is carried on by the NDA otherwise than in connection with something mentioned in section 3(1)(a), (d) or (e) of this Act; and

(b) the profits and gains from it would, in the NDA's case, be chargeable to tax under Case VI of Schedule D by virtue of an enactment other than just section 18 of the Income and Corporation Taxes Act 1988 (c. 1).

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

(a) shall be treated as carried on as part of the same trade; and

(b) may be treated as carried on as part of another trade carried on by the NDA.

(4) Subsection (3) is subject to any other provision made by or under the Corporation Tax Acts that requires an activity to be treated as carried on as part of a separate trade (with or without any other activity).
(5) This section is to be construed as one with the Corporation Tax Acts."
On Question, amendment agreed to.
Lord Davies of Oldham Lord Davies of Oldham moved Amendment No. 52
After Clause 27, insert the following new clause—
"DISREGARD FOR TAX PURPOSES OF CANCELLATION ETC. OF PROVISIONS
(1) This section applies where—

(a) a relevant provision is recognised in the accounts of a relevant company in accordance with generally accepted accounting practice;

(b) that provision relates to decommissioning or cleaning-up which the NDA acquires responsibility for securing by virtue of a direction under section 3; and

(c) that responsibility includes the financial responsibility under section 21.

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

(a) it arises on the occurrence of an event mentioned in subsection (4); and

(b) it relates to the effect of that event on the relevant provision or the subject matter of the provision.

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

(a) the coming into force of the direction mentioned in subsection (1)(b); and

(b) a transfer of property, rights or liabilities of the company to the NDA or a subsidiary of the NDA in accordance with a nuclear transfer scheme authorised by section 36.

(5) In this section—

"BNFL company" means BNFL or a wholly-owned subsidiary of BNFL;

"relevant company" means a BNFL company that is publicly owned;

"relevant provision" means a provision for liabilities or charges as defined in paragraph 89 of Schedule 4 to the Companies Act 1985 (c. 6).

(6) This section is to be construed as one with the Corporation Tax Acts."
The noble Lord said: My Lords, in moving Amendment No. 52, I shall speak also to Amendments Nos. 53 and 67. This group is a response to the NDA taking responsibility for decommissioning and clean-up. The provisions have been drafted taking into account the recent clarification of a number of issues that affect the provisions and related assets recognised for accounting purposes in the SLCs and NDA and the consequent likely tax effects. The issues include the likely effect of nuclear transfer schemes, the undertaking of financial responsibility by the NDA and the making of "directions" in relation to sites, installations and facilities.
Amendment No. 52 introduces a new clause that provides that the accounting entries made by a BNFL site licensee company arising from the initial recognition of the NDA's taking responsibility for nuclear clean-up and decommissioning liabilities would not be included in the tax computation; namely, a disregard. This disregard would apply only to the initial recognition of the NDA taking responsibility. This will most likely involve the recognition of an asset representing sums recoverable from the NDA when it first takes responsibility as a result of a direction under Clause 3 of the Bill. This asset would match the nuclear liabilities that had been provided for in the accounts of the BNFL site licensee.
Without this provision, the credit arising in these circumstances would generate a very substantial tax charge on the BNFL group of companies. The disregard would not apply to any subsequent change in the estimated value of the undertaking or the expenditure to which it relates. Subsequent changes would generate a corresponding credit or debit in the site licensee's accounts and so the accounting entries would match one another for tax without the need for a special rule.
Amendment No. 53 introduces a new clause for the NDA that mirrors the effect of the new clause introduced by Amendment No. 52 for BNFL. This disregard in Amendment No. 53 applies to the NDA so that the entries recognised in its accounts immediately for taking responsibility for BNFL's nuclear liabilities would not be brought into account for tax purposes. As for Amendment No. 52, this disregard would not apply to any subsequent change in estimated value of the expenditure to which it relates.
Finally, Amendment No. 67 introduces a new clause after Clause 40 that extinguishes BNFL's losses for tax purposes. This is a quid pro quo for the disregard mentioned earlier. The accumulated losses in BNFL companies that have built up over time largely arise, one way or another, from provisions made in BNFL's accounts for decommissioning and clean-up. The losses will be extinguished when the NDA takes responsibility for decommissioning and clean-up under Section 21 or when assets and liabilities are transferred from BNFL under Section 36, whichever occurs first. I beg to move.
4.45 p.m.
Baroness Miller of Hendon: My Lords, I thank the Minister for explaining this group of amendments. I was grateful that his explanation was somewhat shorter than previously, which made it possible to remember at the end what the Minister began with. I have a couple of small questions in respect of Amendment No. 67.
First, the amendment refers in subsection (4) to,
"a 75 per cent subsidiary of BNFL",
which does not appear to be defined. Could the Minister say precisely what this means? Does it mean that BNFL has to own precisely 75 per cent of the subsidiary for it to
496
be within the clause, which appears to be the literal interpretation, or does it mean a company which is owned to the extent of 75 per cent or more? And can he explain why a different definition, using 100 per cent ownership, is used in Amendment No. 53, which disregards some provisions for tax purposes?
Secondly, subsection (4) also refers to,
"a BNFL parent company",
of which BNFL is a 75 per cent subsidiary. Apart from the same definition point I have raised, will the Minister explain why this is included? What plans do the Government have to place a holding company above BNFL and for what purpose?
Thirdly, could the Minister explain how this clause works if BNFL is only 75 per cent owned or if a BNFL company is 75 per cent owned? As I understand the definition of the trigger point in subsection (4), this will come into play in respect of the Section 21 responsibility if BNFL is a "publicly owned company". That is defined in Clause 34(3) as 100 per cent public ownership. So my simple question is: why have the Government introduced this complication of 75 per cent companies if the tax rules in the clause will operate only if BNFL or its subsidiaries are 100 per cent owned?
That leads me to ask the Minister why the definition of a trigger point in subsection (4) is so complicated as between paragraph (a) and paragraph (b), with (a) applying to 100 per cent ownership and (b) applying to 75 per cent ownership. Will the Minister explain what the practical impact of this convoluted drafting results in?
Lord Davies of Oldham: My Lords, I am extraordinarily grateful to the noble Baroness, Lady Miller, for asking those questions. I shall first answer the straightforward one before getting into the more complex issue. With regard to the 75 per cent, it is simply 75 per cent and above. That figure is meant to be a minimum.
On the possibility of a parent company, looking forward over decades rather than years, we are not in a position to say whether within the Bill it would be wrong to make provision for a precise structure of the industry 10 or 15 years or beyond from now. In setting up the NDA and dealing with the future of the industry, we intend to maximise flexibility and to meet every conceivable development. Therefore, we are merely making provision within the Bill for possible change, although we have no plans or vision on precisely how the structure might develop. The noble Baroness will recognise that we are seeking to create a new framework in which there are a range of possibilities in the relationship between the NDA and the site licensee companies and with regard to BNFL and other companies.
As we see the position, the situation with BNFL will involve the development of the holding company with the consequence of the creation of site licensee companies to hold nuclear site licensees in operate sites. That is what the site licensee company is going to do. The rest of BNFL to which the noble Lady referred will be transferred to the new holding company and

497
will contain non-UK clean-up businesses. It will be a management contractor function that will initially manage site licensees but its future structure in detail will need to have a degree of flexibility against changes in circumstances.
We expect the practical impact to be that BNFL will not incur a tax charge as the NDA takes responsibility, nor will it be able to carry forward its losses. We are seeking to create a tax position that gives some recognition of flexibility with regard to the future development of BNFL. We have a minimum position and, should BNFL fall below it, which is unlikely, it will not fall within the Bill's framework. My answer to the noble Baroness, Lady Miller, is to point out that we recognise that we need within the Bill's framework, and in relation to situations that no one can foresee with total precision, an element of flexibility that takes account of all possibilities.
Baroness Miller of Chilthorne Domer: My Lords, when the Minister refers to flexibility, will that mean more transparency for the public as to the true costs to the public purse of the generation of nuclear power were it to happen in the future? With the regime he envisages, were new nuclear power stations to be built—although I certainly do not support the idea—would the suggested scheme make all the costs that fall on the public purse more transparent, whether the tax is foregone or deferred?
The Minister is frowning, so clearly I am not making myself plain. One of the past difficulties has been that one price was quoted for the generation of nuclear power but the bills that eventually fall on the public purse kick in some years later and the true costs are much higher. Is the Minister confident that the clause as drafted will contribute to making the costs of nuclear clean-up and decommissioning more obvious to the public?
Lord Jenkin of Boding: My Lords, before the Minister replies, will he confirm to the noble Baroness, Lady Miller of Chilthorne Domer, that if—we always stress that word—there were to be a new nuclear build it would be carried out not by the NDA or the Government, but by one of the major private sector companies, which would consider that the market had reached the position where it would find a ready market for its output? That would be a taxable operation and subject to all the normal rules affecting companies. With the greatest respect to the noble Baroness, I am not sure that this issue has much to do with that.
Baroness Miller of Chilthorne Domer: My Lords, I know that we are not in Committee, but with the leave of the House I am not under a misapprehension: the clean-up is part of the cost.
Lord Davies of Oldham: My Lords, I hesitate to put my head above the parapet when two noble Lords are engaged in a most interesting debate. I am grateful to the noble Lord, Lord Jenkin, because he expressed exactly the points I would have sought to make but
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with greater eloquence and accuracy. These clauses are about the tax liability of NDA and BNFL as public companies. Of course I recognise the point in the longer run about aspects of tax impact on the cost of electricity, but the noble Baroness will recognise that we are seeking to identify how we deal with public companies, not translate them into a major operation in which they are making tax gains and losses that have to be computed in all their activities at enormous cost, when they all effectively come from the same pot.
My answer is that this part of the Bill is not directly concerned with the issues raised by the noble Baroness. The noble Lord, Lord Jenkin, is right that with the future generation of nuclear electricity, should there ever be a new build, that would be in response to the market and wider public considerations.
Baroness Miller of Hendon: My Lords, I thank the Minister for his explanation. He did not answer my fourth point, which was about why the definition of the trigger point seems so complicated in paragraphs (a) and (b), other than perhaps in the general terms that everything has to be flexible because we do not know exactly what it is going to be. We understand all that, but it seems in relation to the other matters that we have gone a long way down the line of the Bill without any detailed answers about anything, even when we were talking earlier about regulations.
Although we accept what the Minister is saying, it seems that the Bill will go through Third Reading without getting any further. Anyway, it is a government amendment. All I was going to say to the Minister at this stage was that I am sure that my noble friend will read his explanation carefully and if she is not happy with it she will no doubt return to the matter at Third Reading.
Lord Davies of Oldham: My Lords, in moving the amendment I have a chance to express my sympathy with the noble Baroness, Lady Noakes. We recognise how sad it is that she is not with us today and the reason for that. We miss her contribution.
As it is a government amendment, when I sat down we had concluded proceedings on that part of the amendment.
On Question, amendment agreed to.
Lord Davies of Oldham Lord Davies of Oldham moved Amendment No. 53
After Clause 27, insert the following new clause—
"DISREGARD FOR TAX PURPOSES OF PROVISIONS RECOGNISED BY NDA
(1) This section applies where—

(a) by virtue of a direction under section 3 the NDA acquires the responsibility for securing the cleaning-up of a site falling within subsection (2), or the decommissioning of an installation or facility in or on such a site;

(b) that responsibility includes the financial responsibility under section 21; and

(c) on the coming into force of the direction mentioned in paragraph (a), the NDA recognises in its accounts, in accordance with generally accepted accounting practice, a relevant provision that relates to that responsibility.

(2) A site falls within this subsection if—

(a) at the time the direction mentioned in subsection (1)(a) comes into force there is a nuclear site licence in force in relation to the site; and

(b) the holder of that licence at that time is a BNFL company that is publicly owned.

(3) In computing the profits, gains or losses of the NDA for the purposes of corporation tax, no amount shall be brought into account in connection with the recognition of the relevant provision in the accounts of the NDA.
(4) But subsection (3) shall not affect the amount (if any) to be brought into account in computing the profits, gains or losses of the NDA in connection with an adjustment at a time after the first recognition of the relevant provision in the accounts of the NDA.
(5) In this section—

"BNFL company" means BNFL or a wholly-owned subsidiary of BNFL;

"relevant provision" means a provision for liabilities or charges as defined in paragraph 89 of Schedule 4 to the Companies Act 1985 (c. 6).

(6) This section is to be construed as one with the Corporation Tax Acts."
On Question, amendment agreed to.
Schedule 4 [Supplemental taxation provisions for exempt activities]
[Amendments Nos. 54 and 55 not moved.]
Clause 32 [Power to modify Chapter 1 of Part 1]:
Baroness Byford Baroness Byford moved Amendment No. 56
Page 29, line 38, leave out paragraph (b).
The noble Baroness said: My Lords, when I raised this issue in Committee in the form of a question as to precisely how the Secretary of State would amend Clause 11 without weakening it, the Minister said:
"The position is that we cannot possibly envisage a situation that would require us to change the constitution of the NDA".[Official Report, 22/1/04; col. GC 419.]
I stress that the Minister used the word "constitution". Yet the Bill contains the measure that would allow for the possibility of a change even though its nature is not presently foreseeable. Clause 11 relates not to the constitution of the NDA but to its strategy.
I repeat my original question: will the Minister explain in what way Clause 11 on the strategy of the NDA can be changed without weakening it? I should also like to quote from his reply five days later to my noble friend Lord Jenkin of Roding, who had sought enlightenment on the transfer of information. The Minister said:
"Officials at our departments have spoken to BNFL and UKAEA and recognise that there is an anxiety in the background, but they can come up with no specific situation where such a claim from a third party is likely to arise in practice. It would be difficult to justify a statutory measure without being clear of the kind of situation in which it could possibly arise". [Official Report, 27/1/04; col. GC 68.]
Surely I am not the only one who feels that those two statements are totally contradictory.
During Grand Committee when I moved the original amendment, the noble Baroness, Lady Miller of Chilthorne Domer, expressed her concerns about this clause. She said:
"I am worried that the clause, with sweeping powers to amend so much of Chapter 1, is included". [Official Report, 22/1/04; col. GC 417.]
I was also supported by my noble friend Lady Noakes, who is not with us for reasons that have already been explained. She said:
"I cannot remember a power which makes such sweeping changes because we cannot think at the moment about what we might want to do in 10 years' time".
Later, when we were talking about the affirmative procedure, the noble Lord, Lord Whitty, said:
"It is less than primary legislation but nevertheless one House has the ability to [consider it]".
But my noble friend Lord Jenkin came back again and said:
"This entire set up requires a more regular scrutiny by Parliament than seems to be currently envisaged".—[Official Report, 22/1/04; cols. GC 419–20.]
Therefore, I do not apologise for returning to this issue because I consider it to be important. As I said, the two statements that I quoted suggest that there are different answers to two different issues—or, rather, to linked issues. I believe that it is difficult to justify a statutory measure without being clear about how the need for it might arise. In those circumstances, I believe that this amendment should succeed. If we leave the subsection in the Bill, we shall grant powers which the Government have accepted are unjustifiable. The Minister knows only too well how much I dislike measures being brought forward in regulations. I beg to move.
5 p.m.
The Deputy Speaker (Viscount Allenby of Megiddo): My Lords, I should inform the House that, if this amendment is agreed to, I shall not be able to call government Amendment No. 57.
Baroness Miller of Chilthorne Domer: My Lords, I supported this amendment in Grand Committee and continue to do so. I believe that if the Opposition were to propose such wording, the Government would say, quite rightly, "This amendment is far too loose. We can't have this sort of wording on the face of the Bill". In the light of that, I offer the noble Baroness, Lady Byford, my continued strong support.
Lord Whitty: My Lords, in a moment I shall move government Amendment No. 57 in this group. Noble Lords will recall that it was the subject of some procedural discussion in Grand Committee. I apologised to the Grand Committee that the Delegated Powers and Regulatory Reform Committee had not had the opportunity to consider the amendment before we tabled it on that occasion. The committee has now had a chance to consider the amendment and has approved it.

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Amendment No. 57 does not indicate any change of policy but simply makes clear that the powers set out in Clause 32 to modify the provisions extend to both the strategy and the annual work plans, which are covered by Clauses 11 and 12.
The noble Baroness asked why we need this power in relation to Clause 11 of the Bill. The answer is that, although the detail that would be modified is in Schedule 2, Clause 11 introduces Schedule 2. Therefore, in order to provide for delegated powers, which I know the noble Baroness objects to almost in principle, we must mention Clause 11 as well. However, it does not mean that the powers could completely change the whole of Clause 11 as it relates to this provision.
Perhaps I may refer to the government amendment. I know that the noble Baroness is not keen on affirmative resolutions, but such resolutions provide a substantial parliamentary power in allowing some flexibility. At the same time, they provide Parliament with a means of control over the Executive. This provision relates mainly to the NDA's strategy. The Bill sets out in some detail in Schedule 2 the issues which must be covered by the NDA strategy, and that level of detail reflects our determination to provide a framework for the strategy over time.
However, as my noble friend Lord Davies said in respect of another amendment, here we are legislating for a function carried out by the NDA which will last for decades and, indeed, on occasion for at least a century. Over time, the situation is bound to change in ways of which we cannot easily conceive. Therefore, it is sensible to provide flexibility to make amendments in respect of issues where the strategy and annual plan would need to cover a change in circumstances.
In a sense, Amendment No. 57 would make good a gap in the original draft of the plan. The Bill already makes such a provision in respect of the annual plan in Clause 31(1)(c) but not in relation to the NDA's strategy. However, the intention was that the flexibility would apply to both. Before the noble Lord, Lord Jenkin, rises to say that this is muddled legislating, perhaps I may explain the logic behind it. During the course of revising the NDA provisions for introduction as part of the Energy Bill, the clause covering the strategy was divided into two but the consequential change required in Clause 32 was missed.
I apologise for that oversight, but the intention had already been made clear in the White Paper and subsequently. Therefore, I hope it will be recognised that the need to provide some flexibility in the content of the strategy and the annual plan and the provisions relating to parliamentary scrutiny through the affirmative resolution is appropriate. Indeed, it is also true that in future we shall have an additional procedure in relation to the Select Committee on the merits of statutory instruments. That may be of some comfort to the noble Baroness in any future application of this amendment. I hope that I have explained why the noble Baroness's amendment is not necessary and why, in a moment, I shall wish to move my amendment.
Baroness Byford: My Lords, I thank the Minister. He did not answer my first point when I quoted what was said in Grand Committee. We are dealing not with the constitution but with the strategy. If that is the case, why was it a slip of the tongue when the noble Lord referred to the "constitution'. when he was responding to questions of the "strategy"'? I am not enormously happy with what he said and I wish to test the opinion of the House.
5.7 p.m.
On Question, Whether the said amendment (No. 56) shall be agreed to?
Their Lordships divided: Contents, 110; Not-Contents, 127.

Division No. 2

CONTENTS

Addington, L.

Lindsay, E.

Alton of Liverpool, L.

Liverpool, E.

Anelay of St Johns, B.

Livsey of Talgarth, L.

Astor of Hever, L.

Ludford, B.

Attlee, E.

Luke, L.

Avebury, L.

Lyell, L.

Barker, B.

McColl of Dulwich, L.

Bradshaw, L.

Mackie of Benshie, L.

Brooke of Sutton Mandeville, L.

Maclennan of Rogart, L.

Brougham and Vaux, L.

Maginnis of Drumglass, L.

Buscombe, B.

Mancroft, L.

Byford, B.

Marlesford, L.

Caithness, E.

Masham of Ilton, B.

Carlisle of Bucklow, L.

Miller of Chilthorne Domer, B.

Carnegy of Lour, B.

Miller of Hendon, B.

Chorley, L.

Monson, L.

Clement-Jones, L.

Murton of Lindisfarne, L.

Colwyn, L.

Newby, L.

Cope of Berkeley, L. [Teller]

Northesk, E.

Craigavon, V.

Oakeshott of Seagrove Bay, L.

Dholakia, L.

Onslow, E.

Erroll, E.

Palmer, L.

Fearn, L.

Park of Monmouth, B.

Fookes, B.

Phillips of Sudbury, L.

Freeman, L.

Razzall, L.

Freyberg, L.

Rennard, L.

Geddes, L.

Renton, L.

Glenarthur, L.

Roper, L.

Goodhart, L.

St John of Fawsley, L.

Gray of Contin, L.

Scott of Needham Market, B.

Greenway, L.

Seccombe, B. [Teller]

Griffiths of Fforestfach, L.

Selsdon, L.

Higgins, L.

Sharman, L.

Hodgson of Astley Abbotts, L.

Shutt of Greetland, L.

Hooper, B.

Skelmersdale, L.

Hooson, L.

Steel of Aikwood, L.

Howe of Aberavon, L.

Stewartby, L.

Howe of Idlicote, B.

Ullswater, V.

Howell of Guildford, L.

Walmsley, B.

Jopling, L

Walpole, L.

Knight of Collingtree, B.

Williams of Crosby, B.

Lamont of Lerwick, L.

Williamson of Horton, L.

NOT-CONTENTS

Acton, L.

David, B.

Ahmed, L.

Davies of Coity, L.

Andrews, B.

Davies of Oldham, L. [Teller]

Bach, L.

Dean of Thornton-le-Fylde, B.

Barnett, L.

Dixon, L.

Bassam of Brighton, L.

Donoughue, L.

Berkeley, L.

Evans of Parkside, L.

Bernstein of Craigweil L.

Evans of Temple Guiting, L.

Blackstone, B.

Falconer of Thoroton, L. (Lord Chancellor)

Bragg, L.

Brennan, L.

Farrington of Ribbleton, B.

Brooke of Alverthorpe, L.

Faulkner of Worcester, L.

Brookman, L.

Filkin, L.

Brooks of Tremorfa, L.

Gale, B.

Campbell-Savours, L.

Goudie, B.

Carter, L.

Graham of Edmonton, L.

Clark of Windermere, L.

Grantchester, L.

Clarke of Hampstead, L.

Grenfell, L.

Crawley, B.

Grocott, L. [Teller]

542

Harris of Haringey, L.

Pitkeathley, B.

Harrison, L.

Puttnam, L.

Haskel, L.

Ramsay of Cartvale, B.

Hayman, B.

Randall of St. Budeaux, L.

Hilton of Eggardon, B.

Robertson of Port Ellen, L.

Hogg of Cumbernauld, L.

Rogan, L.

Hoyle, L.

Rooker, L.

Hughes of Woodside, L.

Sainsbury of Turville, L.

Hunt of Chesterton, L.

Sawyer, L.

Hunt of Kings Heath, L.

Scotland of Asthal, B.

Jones, L.

Sheppard of Liverpool, L.

Jordan, L.

Simon, V.

King of West Bromwich, L.

Smith of Leigh, L.

Kirkhill, L.

Stoddart of Swindon, L.

Lea of Crondall, L.

Stone of Blackheath, L.

Levy, L.

Strange, B.

Lipsey, L.

Symons of Vernham Dean, B.

Lockwood, B.

Taylor of Blackburn, L.

Lofthouse of Pontefract, L.

Thornton, B.

Macdonald of Tradeston, L.

Triesman, L.

McIntosh of Haringey, L.

Turnberg, L.

MacKenzie of Culkein, L.

Turner of Camden, B.

Mackenzie of Framwellgate, L.

Warner, L.

Mitchell, L.

Warwick of Undercliffe, B.

Morgan, L.

Whitaker, B.

Orme, L.

Whitty, L.

Patel of Blackburn, L.

Winston, L.

Pendry, L.

Woolmer of Leeds, L

On Question, amendment agreed to.

Resolved in the negative, and amendment disagreed to accordingly.
5.17 p.m.
Lord Whitty Lord Whitty moved Amendment No. 57:
Page 29, line 38, leave out "section 11" and insert "sections 11 and 12"
The noble Lord said: My Lords, I have spoken to this amendment in the course of the previous discussion. I beg to move.
On Question, amendment agreed to.
Clause 38 [Recovery of property from private ownership]:
Lord Triesman Lord Triesman moved Amendment No. 58:
Page 36, line 2, after "applies" insert "in the case of a nuclear company ("the transferred company") all the shares in which were transferred for the purposes of a management contract to the contractor or to a subsidiary of the contractor"
The noble Lord said: My Lords, the aim of this group of amendments is to ensure that the recovery powers available to the NDA in Clause 38 are fit for purpose and cover all the situations we want them to cover.
Where a management contractor is in breach of contract, or where the contract is at an end, Clause 38 enables the recovery of shares in a site licensee company that were transferred to the contractor, together with other property, rights and liabilities which were transferred at the time in relation to that contract.
That is necessary because although ownership of the SLCs will be transferred for the duration of the site management contract, the SLCs will remain de facto assets of the NDA. So the NDA needs to be able to recover these assets if, as Clause 38 indicates, a site management contractor breaches its contract, becomes bankrupt or has its contract terminated.
In reviewing Clause 38 it became clear that its powers did not cover two situations in which we would want the NDA to be able to recover its assets. Amendments Nos. 58 to 65 therefore extend Clause 38 to cover these situations. The two situations are as follows: first, recovering any new shares that are issued by an SLC since it was transferred; and, secondly, new property that is acquired by the SLC during the operation of the management contract—for example, to replace property that was originally transferred by the scheme. In practice, such purchases are likely to have been funded by the NDA, and we wish to have powers to recover that property.
I hope I have made the principle behind the powers in Clause 38 clear. The amendments seek to ensure the proper application of this principle in all situations where we want the NDA to be able to recover its assets from site licensee companies. It corrects a gap in the original clause. I beg to move.
Baroness Miller of Hendon: My Lords, I make a brief point about Amendment No. 58. I understand the Minister's explanation, but I must say that I find it quite extraordinary that such an important part of a clause was left out in the first instance.
Lord Triesman: My Lords, the provision should have been inserted in the first instance. The clause

505
needed correcting and the amendment corrects it. I think that the clause is now in proper order and I hope it will now commend itself to your Lordships.
On Question, amendment agreed to.
Lord Triesman Lord Triesman moved Amendments Nos. 59 to 65:
Page 36, line 3, leave out "a contractor under a management contract" and insert "the contractor"
Page 36, line 5, leave out "a management contract" and insert "that contract"
Page 36, line 14, leave out paragraphs (a) to (c) and insert—

"(a) securities of the transferred company (whether transferred as mentioned in subsection (1) or issued afterwards);

(b) property, rights and liabilities to which the transferred company was entitled or subject immediately before the transfer so mentioned;

(c) property, rights and liabilities transferred for the purposes of the management contract, to the contractor, to a subsidiary of the contractor or to the transferred company or a wholly owned subsidiary of the transferred company;

(d) property, rights or liabilities to which the transferred company or a wholly owned subsidiary of the transferred company first became entitled or subject while that contract was in force."

Page 36, line 27, leave out "they" and insert "the property, rights and liabilities or the shares mentioned in subsection (1)"
Page 36, line 28, leave out subsection (5) and insert
"(5) A transfer is authorised by this section notwithstanding that what is transferred has ceased, before the transfer, to be the property or a right or liability—

(a) of a person to whom anything was transferred for the purposes of the management contract mentioned in subsection (1);

(b) of the transferred company or of a wholly owned subsidiary of that company; or

(c) in the case of securities issued after the transfer mentioned in that subsection, of the person to whom they were issued."

Page 36, line 41, leave out "and" Page 36, line 45, at end insert "; and
"transferred", in relation to shares, property, rights or liabilities, means transferred in accordance with a nuclear transfer scheme."
On Question, amendments agreed to.
Clause 40 [Undertakings given by the Secretary State]:
Baroness Byford Baroness Byford moved Amendment No. 66:
Page 38, line 5, at end insert—
"( ) This section will apply to the Magnox undertaking.
( ) Should the Secretary of State consider that the section should be applied to any other undertaking he will lay the proposal before Parliament."
The noble Baroness said: My Lords, on 27 January I rose to move that Clause 40 should not stand part of the Bill. The Minister very kindly and clearly explained:
"Although Clause 40 is drafted in general terms its purpose is to allow the Secretary of State to extinguish what is called the 'Magnox Undertaking"'.—[Official Report, 27/1/04; col. GC 76.]
He went on to state at col. GC 77:
"It is true that the Magnox undertaking is the only significant undertaking that may be caught by the clause, but others may arise in the course of time".
506
Perhaps I may remind your Lordships of the Minister's reply to my noble friend Lord Jenkin earlier that day. He stated:
"It would be difficult to justify a statutory measure without being clear of the kind of situation in which it could possibly arise".—[Official Report, 27/1/04; col. GC 68.]
I believe the amendment admirably covers the situation. It clarifies that Clause 40 deals with Magnox and allows for an unforeseen situation to require its application to something that is not Magnox, while ensuring that Parliament will have the right to approve that application.
During our debates in Grand Committee my noble friend Lady Noakes said:
"I completely understand the Magnox Undertaking and not paying it out when it is no longer necessary because of the restructuring. Why, then, is the clause drafted in this oblique way as though it is trying to catch all kinds of things".—[Official Report, 27/1/04; col. GC 76.]
I do not think we had a satisfactory answer to that. The noble Lord, Lord Whitty, responded at col. GC 77. He said:
"It is true that the Magnox undertaking is the only significant undertaking".
I wanted to bring back the provision because I think that we are dealing with future issues rather than present ones—something we have been saying throughout the various stages of the Bill. Whereas we can all understand what the Magnox undertaking is about, we do not understand the rest; that is, those things that apply in the future. Therefore, I have tabled the amendment again today in the hope of a slightly better response from the Minister. Surely, if we have all agreed that we understand what the Magnox undertaking is, we should not be laying down such great flexibility. In fact, the Bill becomes one of the Bills with so much missing one that is left to the future and greater flexibility. I beg to move.
Lord Jenkin of Roding: My Lords, I have a horrid suspicion about the reason why the Clause is drafted in the way it is, with this extraordinarily wide provision, as my noble friend Lady Byford has said. I suspect it is because of the well-known legislative convention that if you seek to legislate in a public Bill to deal with a private right it is then open to those affected to insist on going through the private Bill procedure, with a committee to examine the Bill, and for it then to be reported back to the House.
However, I think it is being less than frank if the Minister does not actually tell us that that is the reason. It may be a clever wheeze to make the provision apply to any number of undertakings, which might or might not be given in the future in order to avoid that legislative trap. But I think that the principle of openness and transparency, to which Ministers so frequently appeal, requires them to tell the House whether that is the real reason.
Lord Whitty: My Lords, as we indicated in Grand Committee—and I then wrote to noble Lords opposite on 9 February—the purpose of Clause 40 is to allow the Secretary of State to extinguish undertakings given

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to publicly owned companies. That clearly includes the undertaking that was given to BNFL when it took over responsibility for the Magnox nuclear power stations; the so-called "Magnox undertaking". That is the obvious use of the clause.
There are two key reasons for the clause being drafted in general terms. First, we want to avoid any problems with similar undertakings that might be given in the future. Specifically, we want to avoid the possibility of government paying for nuclear liabilities that are no longer the financial responsibility of the company to which the undertaking was given. I think noble Lords would agree that the Government should not, as a result of passing responsibility for clean up to the NDA, be obliged in effect to pay twice for clean up.
Secondly, we need to allow for the possible renewal or novation of any undertaking with different companies. Restricting the scope of Clause 40 to any one publicly owned company—that is what the Magnox undertaking is—would severely hamper the ability of the Secretary of State to renew or novate the undertaking with a different company. Being too specific in Clause 40 risks the provision being overtaken by future events and being made redundant.
Those two reasons lie behind the formulation of Clause 40. It indeed has the additional benefit to which the noble Lord, Lord Jenkin, refers. Even without that, we need to draft the clause in more general terms than specifically referring to the Magnox undertaking as the noble Baroness's amendment would.
It is worth pointing out that, were the noble Baroness to press the amendment, the wording is probably defective. Its second part does not state what process Parliament would adopt in dealing with any undertaking. It says that the Secretary of State,
"will lay the proposal before Parliament".
There is no clarity on what procedure Parliament would then use. So, I think that there are good and strong arguments for accepting that the clause has to be drafted in general terms. However, the noble Baroness's amendment would not resolve the position even should she be unpersuaded and wish to restrict the provision to the Magnox undertaking full stop.
Baroness Byford: My Lords, I am grateful to the Minister for his response. I am even more confused about the matter. I understand—though I may be wrong—that the provision would be restrictive as far as concerns the Magnox company anyway; and that it would not get a chance to go to Committee. No? Forgive me, I shall leave that point.
The Minister has said clearly that the provision would avoid similar and future liabilities. I obviously accept that. I am not happy if the Minister has said to me that he understands that I do have a point—which I think he has—but that it restricts the issue too much for the future. That is one matter. He went on to say that my amendment was defective. If it is his view that I have a point but my amendment is defective, I would be grateful if the Minister could consider whether the amendment has any merit, before Third Reading. If he
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says, "No, it hasn't", I am at the end of the line. Either I divide the House or not, and, having just divided the House, that might not benefit me anything at this stage.
I hope that the Minister will think about the amendment.
5.30 p.m.
Lord Whitty: My Lords, I must clarify my point. I said that I did not accept the amendment substantively, for the reason that I gave. It is too tight an amendment. The second part of the amendment would require further amendment to be effective, even if the House were to be convinced of the noble Baroness's argument. Therefore, I oppose the amendment substantively, as well as procedurally.
Baroness Byford: My Lords, I thank the Minister for that clarification. I will read what he said, and, at this stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Whitty Lord Whitty moved Amendment No. 67:
After Clause 40, insert the following new clause—
"EXTINGUISHMENT OF BNFL LOSSES FOR TAX PURPOSES
(1) In relation to accounting periods beginning on or after the trigger date, all the relevant losses of every BNFL company arising before that date shall be treated for the purposes of corporation tax as extinguished.
(2) The following are relevant losses of a BNFL company for the purposes of this section—

(a) losses incurred by the company in a trade;

(b) losses incurred by the company in a transaction a profit or gain from which would have been chargeable to tax under Case VI of Schedule D;

(c) excesses to be carried forward in the company's case under section 75(3) of the Income and Corporation Taxes Act 1988 (c. 1);

(d) Schedule A losses (within the meaning of section 392A of that Act) incurred by the company;

(e) losses to be carried forward in the company's case under section 392B(1) of that Act;

(f) any tax loss of the company falling within section 400(2)(d) of that Act;

(g) allowable losses (within the meaning of section 8 of the Taxation of Chargeable Gains Act 1992 (c. 12)) that have accrued to the company;

(h) deficits of the kind mentioned in section 83(1) of the Finance Act 1996 (c.8) to the extent that they are to be carried forward in the company's case under subsection (3A) of that section;

(i) excesses of the kind mentioned in section 260 of the Capital Allowances Act 2001 (c. 2) in relation to the company;

(j) losses of the kind mentioned in paragraph 35(1) of Schedule 29 to the Finance Act 2002 (c. 23) incurred by the company;

(k) unrelieved surplus advance corporation tax of the company (within the meaning of section 32 of the Finance Act 1998 (c. 36)).

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

(a) BNFL;

(b) a company that is a 75 per cent subsidiary of BNFL at a time during the qualifying period; or

(c) a company (other than BNFL) that is a 75 per cent subsidiary of a BNFL parent company at a time during the qualifying period;

"BNFL parent company" means a company of which BNFL is a 75 per cent subsidiary;

"qualifying period" means the period beginning with 16th March 2004 and ending with the trigger date;

"trigger date" means whichever is the earlier of the following—

(a) the date of the first occasion on which section 21 operates so as to confer financial responsibilities on the NDA in relation to an installation, site or facility the person with control of which is a BNFL company that is publicly owned; and

(b) the date of the first occasion on which a transfer takes effect which is a transfer to the NDA or a subsidiary of the NDA in accordance with a nuclear transfer scheme authorised by section 36 of property, rights or liabilities of a BNFL company.

(5) This section shall be construed as one with the Corporation Tax Acts."
On Question, amendment agreed to.
Schedule 7 [Finances and accounts of transferee companies]:
Lord Whitty Lord Whitty moved Amendment No. 68
Page 161, line 21, leave out from "corporate" to end of line 22 and insert "which is—

(a) a body corporate to which a transfer has been made in accordance with a nuclear transfer scheme; but

(b) not a subsidiary of the UKAEA."

The noble Lord said: My Lords, in moving Amendment No. 68, I shall speak to the other amendments in the group.
Essentially, the amendments make two technical changes to the Bill. The first is to clarify the statutory powers on borrowing and issuing guarantees that will apply to UKAEA subsidiaries, such as any site licensee companies that might be created to facilitate the NDA's objective of promoting competition. As with other amendments, in reviewing the mass of past nuclear legislation, we have spotted a potential source of confusion that the amendments will remove.
UKAEA subsidiaries are already subject to the borrowing and guarantee powers in the Atomic Energy Authority Act 1986. Schedule 7 introduces a similar regime for transferee companies. The schedule was principally designed to update such provisions in respect of BNFL companies. As drafted, however, it will have the additional effect of incorporating UKAEA subsidiaries which are transferee companies as well.
On reflection, we considered it appropriate to maintain the existing borrowing and other limits for UKAEA subsidiaries from previous legislation, rather than roll them into the pool applicable to BNFL companies or the pool applicable to other transferee companies that are not UKAEA subsidiaries. To do otherwise would be to lower the overall total that applies to BNFL and UKAEA combined.
The second change made by the amendments is to paragraph 8 of Schedule 7. Paragraph 8 is a technical provision that provides that the vesting of assets and liabilities in accordance with a transfer scheme,
"shall be taken to have been effected immediately after the end of the last accounting year of the transferor".
That paragraph also enables a nuclear transfer scheme to contain valuations of any transferred assets or liabilities. The provisions are drawn from standard privatisation precedents to ensure continuity between the accounts of the transferor and transferee companies.
The amendments will apply the provisions of paragraph 8 to the statutory accounts of transferor companies, as well as those of transferees, thereby facilitating the transfer. We consider that the amendment would assist in the maintenance of continuity between the two sets of accounts. I beg to move.
Lord Higgins: My Lords, I intervene briefly. This is an enormous group of amendments—something like 47 or 48.
Noble Lords: It is not this group.
Lord Higgins: My Lords, I see. I am sorry.
On Question, amendment agreed to.
Lord Whitty Lord Whitty moved Amendments Nos. 69 to 73:
Page 161, line 27, after "if' insert ", without being a subsidiary of the UKAEA,"
Page 164, line 34, leave out "not a designated BNFL company" and insert "neither a designated BNFL company nor a subsidiary of the UKAEA"
Page 166, line 2, leave out "a transferee company" and insert "each of the following—

(a) a transferee company;

(b) a subsidiary of the UKAEA to which a transfer has been made in accordance with a nuclear transfer scheme;

(c) a company that is the transferor in relation to a transfer in accordance with such a scheme to a company falling within paragraph (a) or (b)."

Page 166, line 4, after "company" insert "mentioned in subparagraph (1)(a) or (b)"
Page 166, line 5, leave out "a" and insert "the"
On Question, amendments agreed to.
Schedule 8 [Pensions]
Lord Whitty Lord Whitty moved Amendment No. 74:
Page 166, line 35, at end insert—
""BNFL company" means BNFL or a subsidiary of BNFL;"
The noble Lord said: My Lords, we are now at the enormous group of amendments, for which I apologise. The group has two straightforward aims. It ensures that the coverage of the pension provisions in Part 1 is appropriate, and it ensures that the drafting of Part 1 is consistent. We want to be clear in our drafting and in our definition of those to whom the provisions apply.
Discussions in Grand Committee showed that there was broad support for our approach to protecting the pensions benefits of existing employees who were transferred as a result of the restructuring of the UK

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nuclear clean-up industry. We take workforce conditions and the retention and development of nuclear skills and expertise seriously, and that is what Schedule 8 is about. However, it is important that we achieve appropriate coverage of the pension protections afforded by the Bill.
Probably, the most significant amendments in the first batch are Amendments Nos. 91 and 125, which safeguard the position of employees of the new BNFL—the restructured BNFL—who are currently members of the UKAEA pension scheme. The amendments will enable the UKAEA pension scheme to be extended to designated new BNFL companies while such companies are publicly controlled. Such extensions will enable UKAEA scheme members who are transferred to those companies to remain members of the UKAEA scheme.
With regard to BNFL employees who are members of the BNFL group scheme, Amendments Nos. 80, 83 and 85 clarify the ability of the NDA to modify that scheme. We may wish the NDA to take control of the BNFL group scheme. In particular, we wish the NDA to have powers to modify the scheme rules, so that existing members of the scheme will be able to remain members, even if they are transferred to a different employer or their current employer is no longer eligible, under existing rules, to be a participating employer in the scheme. However, as drafted, the Bill pre-dates the conclusion of the joint BNFL strategy review, so we need the amendments to ensure that the provisions of paragraph 2 of Schedule 8 do their intended job of allowing the NDA to modify the BNFL group scheme.
Those are the two main amendments, but there is a significant number of technical amendments to ensure appropriate coverage of the Bill's provisions and consistency of drafting. I shall go through them.
Amendments Nos. 89, 90 and 92 make it clear that certain pension provisions apply to non-employee officers and directors of a company who might otherwise have been excluded by constant references to "employees". Amendments Nos. 74, 75 and 99 make provision for the application of the pension protections during the early stages of the restructuring of the nuclear clean-up industry. They also make it clear that the protection is afforded only to public sector employees.
Most of the rest of the amendments—Amendments Nos. 76 to 79, 86 to 88, 90 and 95 to 122, I think—deal with a potential loophole in the Bill's pension provisions. There may be one or two gaps in that list. Amendments Nos. 110 and 111 are excluded. Amendment No. 109 deals with the same thing. I am receiving clarification from the noble Baroness from a sedentary position. I am sure that she is right.
Baroness Miller of Hendon: My Lords, I beg the noble Lord's pardon; I was trying to be helpful. It was just that Amendment No. 111 is not in the group, and the noble Lord said that it was. Amendment No. 109, which he thought was definitely in the group, is not his amendment but is in the name of the noble Lord,
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Lord Lea of Crondall. I was trying to be helpful to the noble Lord, but I beg his pardon and that of the House.
Lord Whitty: My Lords, I am clear that Amendment No. 111 is not in this group. Amendment No. 109, which is on my list, probably should not be, so I apologise to noble Lords and in particular to my noble friend Lord Lea.
The rest of the group, which I will not repeat, deals with a potential loophole. There may be instances when an employee is not transferred but his employer—the site licensee company, for example—changes ownership. That could lead to employees having to leave their nuclear pension scheme. As previously drafted, the Bill's protection may not have been triggered in that case, and we want to make sure that it is.
Employees' pensions should be protected when they are transferred, as the Bill says, "for NDA purposes"—that should include such people—and when ownership of their employer is transferred, for example, following a competition for site management. The amendments are also intended to clarify the definition of "for NDA purposes" to ensure that it does not catch transfers which are unrelated to the NDA's own functions.
Finally, Amendments Nos. 151 and 152 simply make minor amendments to the Civil Nuclear Constabulary pension provisions in Schedule 10 to ensure that they, too, mirror the relevant provisions in Schedule 8.
As I have explained, therefore, the amendments are intended to ensure that the provisions of Schedule 8 do exactly what we want them to do—to protect the future pension benefits of staff who are required to transfer for NDA purposes. I beg to move.
Lord Higgins: My Lords, I apologise to your Lordships for intervening too quickly. When I used to be preoccupied with athletics, on the running track it was three false starts and you were out. At present, it is down to two false starts, and the Minister very nearly got himself disqualified. Be that as it may, we are grateful to him for explaining this huge group of amendments. Am I right in thinking that none of them actually arises as a result of the discussions which took place in Committee on 27 January? These are all changes which have resulted either from subsequent reflection by the Government on the loophole the noble Lord mentioned or because the original drafting was wrong. It seems quite extraordinary that at this stage of the Bill, which has been through the Committee stage, these amendments are before us now rather than earlier. Perhaps the Minister could clarify why we did not have a chance of debating them in Committee.
On the loophole, if I understand it correctly, the Government are saying that people who are at present employed by a company may not be protected if the employer moves but the employee remains in his present post. That would certainly seem appropriate.
While we are obviously very keen that the present position of the existing pensioners should be protected, are these largely final salary schemes, are they contributory

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and, in particular, are they index-linked? There is an increasing concern at the burden which public sector pensions are placing on the economy and the fact that they are in a privileged position. We might wish to return to the matter at Third Reading, and it would be helpful if the Minister could tell us whether a final salary scheme is being transferred to this new structure, whether it is contributory and whether it is index-linked.
5.45 p.m.
Lord Whitty: My Lords, on the first point, the amendments arise partly through drafting errors at an earlier stage which clearly needed tidying up, but also because the original form of the Bill pre-dated the review of the so-called BNFL strategy review. Therefore, further changes in Government policy needed to be reflected in how we were treating the current members of BNFL schemes in the context of some being transferred to the NDA and some being left in BNFL companies and what is provisionally being called new BNFL. So it is not so much an error in the original drafting as Government policy becoming clarified on the future of BNFL.
In relation to whether these amendments reflect discussions in Grand Committee, the honest answer is "only tangentially". Concerns were expressed, some of which were covered by subsequent amendments, which dealt with the position of employees who were being transferred at various stages and how far the guarantee continued down the various transferors through the change in the site management position.
As for the nature of the current UKAEA and BNFL schemes, as I understand it, they are final salary schemes and they are contributory. However, I think I should set out in a letter the rest of the detail that the noble Lord wants.
New starters in these schemes will have three choices. They can enter a final salary scheme within the overall nuclear clean-up pension scheme which would effectively reflect the previous schemes; they can enter a defined contribution—stakeholder—benefit within the nuclear clean-up pension scheme; and the new employer, or the employer entering the situation, could offer a good quality employer scheme which was the equivalent benefit. So a number of schemes could result from these various transfers, and a number of options could be available to companies and employees in the future. However, I shall set out in correspondence the nature of the existing schemes, beyond what I have already said.
Lord Higgins: My Lords, I would be grateful if the Minister would write. He will be aware that in the private sector, many companies are closing their final salary schemes to new entrants and some of them are closing them for existing potential pensioners. Will the guarantees that are now being given ensure that such a change cannot be made by the companies concerned under this Bill?
Lord Whitty: My Lords, as long as they are public companies, the Government's general commitment in relation to public pension schemes continues to apply.
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Therefore, the continued guarantees to the individuals through the system would continue to apply. New starters would have a choice and their employer could offer them a different scheme, which was a good quality scheme. However, the guarantees would reflect the Government's current commitments to existing staff regarding the existing guarantees on their BNFL or UKAEA pension.
On Question, amendment agreed to.
Baroness Byford Baroness Byford moved Amendment No. 81:
Page 168, line 29, leave out "to any extent."
The noble Baroness said: My Lords, we return to an issue that I raised in Committee. This amendment was discussed at great length in Committee, when a number of your Lordships indicated that its use was not calculated to inspire the average ex-BNFL employee with confidence that his or her pension rights would be fully protected. After some discussion, the Minister stated that,
"on the question of the words 'to any extent', I shall take further advice".—[Official Report, 27/1/04; col. GC 82.]
Would he now tell us what that advice is, and whether he is prepared to drop the phrase from the Bill? If he is not prepared to do so, how does he propose to ensure that it does not,
"dilute the commitment in any way, and no less favourable treatment will be given to those employees"?—[Official Report, 27/1/04; col. GC 82.]
In Committee, I was supported by the noble Lord, Lord Gray of Contin, the noble Lord, Lord Ezra, who expressed his concern about the threatening tone of this section, and by my noble friend Lady Carnegy of Lour. I beg to move.
Lord Whitty: My Lords, the noble Baroness and others made this point in the course of the previous debate in Grand Committee. I have taken further advice on this, and the conclusion is that the lawyers would take the opposite interpretation of 'to any extent', in the sense that deleting the phrase would dilute the provision. It could be held to deprive the scheme members of the absolute guarantee we are trying to give, that the NDA could not deprive the scheme members of pension rights that had accrued to them. Our advice is that, without these words, there would be a risk that an employee whose pension rights were reduced, but not utterly extinguished, could not be protected. Deleting the phrase would actually make the employees more vulnerable, rather than less. I can understand that in common parlance there is a certain ambiguity in the words 'to any extent', but nevertheless I have the firm opinion from parliamentary counsel that the inclusion of the phrase is a greater protection than its deletion. I therefore hope the noble Baroness will not pursue this amendment.
Baroness Byford: To be honest, my Lords, I find the Minister's response surprising. If he thinks that removing the phrase 'to any extent' would weaken the thrust behind my amendment, then I would question whether the words were necessary in the first place. Why do they have to be included? Could it not just have read straight through? The Minister has given his response to that, and obviously I will have a look at it

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in the light of his response. It is a pity that he or his legal colleagues did not write to me to give me some indication, having said they would do so at Committee stage. I will look carefully at their response and seek advice myself. At this stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lea of Crondall Lord Lea of Crondall moved Amendment No. 82:
Page 168, line 30, after "him" insert "whether by virtue of service rendered, contributions paid or any other things done"
The noble Lord said: My Lords, the purpose of this group of amendments is to try to secure protection for transfer of accrued rights. In July 2002, the White Paper, Managing the Nuclear Legacy—A Strategy for Action, recognised that, on transfer to a contractor, employees,
"who opted to transfer their accrued pension would be protected by way of a Bulk Transfer Agreement. This would be a contractual condition for any potential site licensee company and would allow staff who chose to do so to preserve the link between their final salary and their past service".
This is of course government policy, as set out in the Fair Deal paper from the Treasury, in respect of all staff who are transferred from the public to the private sector. However, it is a matter of policy rather than a legal requirement, and experience demonstrates that this policy is not always achieved in respect of second-generation transfers. Given that it is a statement of policy, we believe that the proposed amendments are necessary to make the provision of bulk transfer terms a legal requirement.
Lord Whitty: My Lords, these three amendments relate to the protection of pension rights accrued by staff who are required to transfer their employment for NDA purposes. I want to stress at the outset that, as I said in Grand Committee, the Government do not intend to use employees' terms, conditions or pensions as a means of driving down costs. Instead, we intend to protect the existing employees and their future benefits in circumstances where, as a result of a decision by the NDA, they are required to transfer either to new employers, for example the newly created site licensee companies, or to the private sector, for example if a private sector contractor won a contract to manage an NDA site.
Amendment No. 82 seeks to qualify the way in which members of a pension scheme can accrue pension rights under that scheme. I can assure my noble friend that the first two qualifications suggested, "accrual by service rendered" and "contributions paid", are not needed, because the concept of accruing pension rights by its nature includes those means of accrual. That does not need to be stated on the Bill.
The third qualification that my noble friend puts forward suggests accrual by "other things done". That is, frankly, a bit open-ended. I am not entirely sure what "other things done" would be in these circumstances, and this could lead, for example, to an argument that a statement of intent on the future of a pension scheme of
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itself creates an accrued right, because it is another thing done. However, it is not normal to include anything that is not formally part of the pension scheme in terms of the accrued rights, and therefore I do not think I can accept that third part of his Amendment No. 82.
The other two amendments, Amendment No. 109 and what is now Amendment No. 118A, seek to extend statutory protection of pension benefits under the Bill to accrued benefits of existing pensions that are required to be transferred for NDA purposes. As I said a moment ago, we intend to protect the future pension benefits of existing employees during this restructuring, and that essentially means employees of AEA and BNFL who are required to transfer to a new employer by the NDA. This policy is applied to a whole host of comparable systems where public sector workers have been required to transfer to a new employer, or to the private sector. There is well established documented guidance on that.
However, because the Government recognise how important are the skills of the people who make up the NDA workforce, we have taken the rather exceptional step of underpinning in statute the policy to protect the future pensions benefits of transferred staff, with careful drafting of the Bill. This is based on experience of previous examples of transfers within the nuclear industry, and does not of itself impose an excessive regulatory burden. In my view, it is not appropriate to go further than the terms now in the Bill, and to extend the protection offered under the Bill to the accrued benefits of staff transfer for NDA purposes. We simply cannot attempt to pin down in statute the whole range of complexities involved in bulk transfer agreements relating to accrued benefits. I am told by the experts in the Government Actuary's Department that each bulk transfer is unique, and that they need the flexibility to deal with that.
As my noble friend said, there is an existing and well established government policy in this area, published in 1999, in the document, Fair Deal for Staff Pensions. For transferred staff who are required to be early leavers of a public sector scheme, the policy is that there should be an agreement between that scheme and the new employers' scheme, giving staff the option to transfer their past service into the new scheme on preferential terms. Such a bulk transfer agreement should allow transferred staff,
"to secure credit for their past service in the new pension scheme on a day-for basis (or the actuarial equivalent if the differences between the schemes are significant".
That remains government policy. Given that we have made the exceptional step of protecting in statute future benefits provisions of existing employees in the nuclear clean-up industry, which we have not done for other situations, and given the longstanding government policy protecting accrued benefits for transferred public sector staff, I cannot accept the amendments. They would need to be spelt out far more than they are in any case, and would result in great complexity, because almost every accrued benefit package is a unique package to that particular employee. Therefore, the policy stands, but I cannot accept my noble friend's amendment.
6 p.m.
Lord Lea of Crondall: My Lords, I thank my noble friend for putting on record that useful clarification. My noble friends and I will wish to study carefully what the Minister said, but I believe that we have made progress on the matter, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Whitty Lord Whitty moved Amendment No. 83:
Page 168, line 32, after "modification" insert "of a pension scheme".
On Question, amendment agreed to.
Lord Lea of Crondall Lord Lea of Crondall moved Amendment No. 84:
Page 168, line 33, leave out "the trustee of the scheme" and insert—

"(a) the trustee of the scheme; and

(b) such persons as appear to the NDA to represent the employees likely to be affected by the modification"

The noble Lord said: My Lords, given that pension provision in this industry, as in many others, is by common consent of key concern to the staff who work in it, this group of amendments would secure a statutory right to consultation with regard to any actions taken under the Act in respect of pensions schemes. While certain provisions in the Bill relating to pensions place on the NDA and/or the Secretary of State the duty to consult employee representatives in respect of pensions issues, that is not consistently the case.
For example, Part 4 of Schedule 8 gives the Secretary of State the power to modify an NDA pension scheme. We consider that, before exercising that power, there should be a statutory duty to consult the representatives of the employees who would be affected. Writing into the Bill a statutory duty to consult employees on all such matters would not only make the Bill internally consistent but bring it into line with the Pensions Bill, which is expected to include a statutory duty on an employer to consult trade unions or other elected workplace representatives in respect of changes to pension schemes. While amendments to that effect clearly do not provide any guarantees in respect of the outcomes—the substance of the matter that is being consulted about—they at least provide an assurance to staff and their representatives that the due processes will be followed and that there will always be a route through which concerns can be properly considered. I beg to move.
Lord Whitty: My Lords, I assure my noble friend that the Government have no intention of taking any steps that would significantly impact on employees without there being a full engagement with their representatives, especially the trade unions. On a wide range of issues, we shall develop a stakeholder engagement framework that will set that aspect, together with others, into a standing procedure for consultation. It is not possible to lay down in statute every particular instance in which consultation should arise.
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However, I accept that on pensions issues, especially with modifications to pension schemes, it is important that we ensure that the trade unions and employees are kept informed and are fully consulted. The Bill already requires the Secretary of State and the NDA to consult extensively before making modifications to the UKAEA pension scheme and before making a transfer scheme or transfer arrangement for NDA purposes, which would require employees to leave their current scheme.
The amendments before us seek to create similar consultation requirements for any modification made under paragraph 2 of Schedule 8, which relates primarily to the BNFL group scheme. The modifications envisaged by those paragraphs are expected to be made as a result of the transfer scheme—for example, when staff are transferred to the site licensee companies. They would be caught by the requirement in paragraphs 9 and 11 of Schedule 8 to consult on transfer schemes and arrangements made for NDA purposes that force employees to leave their current nuclear pension scheme.
There are provisions already in the Bill that would cover most of the areas on which my noble friend is expressing his concern in moving the amendment. However, in order to absolutely clear that employees and their trade unions will be consulted before anything is done and to reinforce the commitment that we have made generally in protecting pension rights, I will consider his amendments further and see whether there are any minor changes that the Government might introduce to make clear the position in relation to the circumstances in which he expresses his concerns in the amendments.
Lord Lea of Crondall: My Lords, employees in the industry will be very glad to hear the remarks just made by my noble friend. I am sure that there is no great point of policy at issue here, but to have the provision in the Bill will be a very great reassurance. At this stage, therefore, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Whitty Lord Whitty moved Amendments Nos. 85 to 108:
Page 168, line 39, leave out paragraph (b) and insert—
"(b) a nuclear pension scheme designated as a relevant pension scheme for the purposes of this paragraph by an order made by the Secretary of State."
Page 169, line 2, at and insert—
"Transfers of employment for NDA purposes
2A For the purposes of this Part of this Schedule a transfer of a person's employment is made for NDA purposes if his employment immediately after the transfer takes effect is—

(a) employment with the NDA or a subsidiary of the NDA; or

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

Page 169, line 22, leave out paragraph (a) and insert—
"(a) the transfer is made for NDA purposes; or"
Page 171, line 13, leave out from "or' to end of line 16 and insert—

"(a) a transfer of his employment in accordance with a nuclear transfer scheme or transfer arrangements; or

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

Page 171, line 28, after "employees" insert ", or directors or other officers,"
Page 171, line 31, leave out "officers or employees" and insert "employees, or directors or other officers,"
Page 171, line 36, after "under" insert "paragraph 12 of this Schedule,"
Page 171, leave out lines 40 to 44 and insert "Where employees, or directors or other officers, of a relevant public sector employer to whom employees are transferred in accordance with a nuclear transfer scheme or transfer arrangements participate in a UKAEA pension scheme by virtue of paragraph 3 or 4, the employer must pay to the UKAEA such amounts in respect of that participation as are—"
Page 172, line 8, leave out sub-paragraphs (1) and (2) and insert—
"( ) For the purposes of this Part of this Schedule a person is entitled to pension protection in relation to a nuclear transfer scheme or any transfer arrangements if—

(a) sub-paragraph (3) applies to him; and

(b) he is a person falling within sub-paragraph (4)."

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

"(a) in accordance with the scheme or arrangements, a transfer mentioned in sub-paragraph (3A) occurs; and

(b) immediately after the time at which that transfer takes effect, the person's employment is for NDA purposes.

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

(a) a transfer of the person's employment to the UKAEA, the NDA, a publicly controlled company or a private sector employer;

(b) where his employment is not so transferred, a transfer of securities of, or voting rights in, a company by which he is employed or a company of which such a company is a subsidiary.

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

(a) employment with the NDA or a subsidiary of the NDA; or

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

Page 172, line 31, after "arrangements" insert—
"(i)"
Page 172, line 35, at end insert "; or
(ii) his employer will be entitled to do something the effect of which will be so to preclude him."
Page 172, line 46, leave out from second "if to end of line 3 on page 173 and insert ", his employment throughout the relevant period has been for NDA purposes (within the meaning of paragraph 8(3B))."
Page 173, line 4, leave out "the transfer of a person's employment" and insert "a person to whom sub-paragraph (3) applies"
Page 173, line 7, leave out paragraph (b) and insert—
"(b) the period up to the relevant time since the last occasion prior to the present case on which sub-paragraph (3) applied to him.
(8A) For the purpose of a person being entitled to pension protection in relation to a nuclear transfer scheme or any transfer arrangements on the first occasion on which sub-paragraph (3) applies to him, this paragraph shall have effect with the omission of sub-paragraph (4)(c).
(8B) A person is not entitled to pension protection in relation to a nuclear transfer scheme or any transfer arrangements—

(a) at a time before the designated date unless he is a public sector employee at that time; or

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

Page 173, line 10, leave out "the time when"
Page 173, line 11, at beginning insert "the time when,"
Page 173, line 11, leave out "he becomes an employee or and insert "the transfer of his employment to"
Page 173, line 13, after "employer" insert "takes effect"
Page 173, line 14, leave out paragraph (b) and insert—
"(b) in relation to a person whose employment is not so transferred, the time when, in accordance with the scheme or arrangements, the transfer of securities of, or voting rights in, the company by which he is employed or the company of which it is a subsidiary takes effect."
Page 173, line 18, leave out "to which this paragraph applies" and insert "in relation to which persons are entitled to pension protection"
Page 173, line 22, leave out from second "persons" to end of line 23 and insert "who are entitled to pension protection in relation to the scheme."
Page 173, line 25, leave out from "person" to "will" in line 26 and insert "who is entitled to pension protection in relation to the scheme"
Page 173, line 30, leave out "applies" and insert "will apply immediately before the relevant time"
On Question, amendments agreed to.
[Amendment No. 109 not moved.]
Lord Whitty Lord Whitty moved Amendments No. 110:
Page 173, line 32, at end insert—
"( ) The Secretary of State's duty under sub-paragraph (2) is owed to every person who is entitled to pension protection in relation to the transfer scheme.
( ) In the case of a person to whom paragraph 8(4)(d)(ii) applies, the references in sub-paragraph (2) to a person being entitled to exercise an option are to be construed as references to a person being entitled to exercise an option if his employer exercises the entitlement mentioned in paragraph 8(4)(d)(ii)."
On Question, amendment agreed to.
[Amendment No. 111 had been re-tabled as Amendment No. 118A].
Lord Whitty Lord Whitty moved Amendments Nos. 112 to 118:
Page 173, line 46, leave out from second "to" to end of line 6 on page 174 and insert—

"(a) in the case of a person who has not previously been owed a duty under either sub-paragraph (2) or paragraph 10(3), the scheme by reference to which paragraph 8(6) will apply to him immediately before the relevant time; and

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(b) in other cases, the scheme by reference to which paragraph 8(6) applied to him immediately before the time that was the relevant time in relation to him on the first occasion on which he was owed such a duty;"

Page 174, line 9, leave out from "time" to end of line 12 and insert "specified in sub-paragraph (4A).
(4A) That time is—

(a) in a case falling within sub-paragraph (4)(a), the relevant time; or

(b) in a case falling within sub-paragraph (4)(b), the relevant time in relation to the person on the first occasion on which he was owed a duty under either sub-paragraph (2) or paragraph 10(3)."

Page 174, line 23, at end insert—
"( ) Sub-paragraph (6) does not apply in relation to a person to whom paragraph 8(4)(d)(ii) applied when the Secretary of State discharged his duty to that person under sub-paragraph (2) unless the person's employer exercises the entitlement mentioned in paragraph 8(4)(d)(ii)."
Page 174, line 28, leave out "to which this paragraph applies" and insert "in relation to which persons are entitled to pension protection"
Page 174, line 34, leave out from second "persons" to end of line 35 and insert "who are entitled to pension protection in relation to the arrangements."
Page 174, line 37, leave out from "person" to "will" in line 38 and insert "who is entitled to pension protection in relation to the arrangements"
Page 174, line 42, leave out "applies" and insert "will apply immediately before the relevant time".
On Question, amendments agreed to
[Amendment No. 118A not moved.]
Lord Whitty Lord Whitty moved Amendments Nos. 119 to 122:
Page 174, line 44, at end insert—
"( ) The NDA's duty under sub-paragraph (3) is owed to every person who is entitled to pension protection in relation to the transfer arrangements.
( ) In the case of a person to whom paragraph 8(4)(d)(ii) applies, the references in sub-paragraph (3) to a person being entitled to exercise an option are to be construed as references to a person being entitled to exercise an option if his employer exercises the entitlement mentioned in paragraph 8(4)(d)(ii)."
Page 175, line 8, leave out from second "to" to end of line 17 and insert—

"(a) in the case of a person who has not previously been owed a duty under either sub-paragraph (3) or paragraph 9(2), the scheme by reference to which paragraph 8(6) will apply to him immediately before the relevant time; and

(b) in other cases, the scheme by reference to which paragraph 8(6) applied to him immediately before the time that was the relevant time in relation to him on the first occasion on which he was owed such a duty;"

Page 175, line 20, leave out from "time" to end of line 23 and insert "specified in sub-paragraph (5A).
(5A) That time is—

(a) in a case falling within sub-paragraph (5)(a), the relevant time; or

(b) in a case falling within sub-paragraph (5)(b), the relevant time in relation to the person on the first occasion on which he was owed a duty under either sub-paragraph (d) (3) or paragraph 9(2)."

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Page 175, line 33, at end insert—
"( ) Sub-paragraph (6) does not apply in relation to a person to whom paragraph 8(4)(d)(ii) applied when the NDA discharged its duty to that person under sub-paragraph (3) unless the person's employer exercises the entitlement mentioned in paragraph 8(4)(d)(ii)."
On Question, amendments agreed to.
[Amendments Nos. 123 and 124 not moved.]
Lord Whitty Lord Whitty moved Amendment No. 125:
Page 176, line 4, at end insert—
"PART 5
UKAEA PENSIONS FOR EMPLOYEES OF DESIGNATED BNFL COMPANIES
12 (1) A pension scheme maintained by the UKAEA under paragraph 7(2)(b) of Schedule 1 to the Atomic Energy Authority Act 1954 (c. 32) ("a UKAEA pension scheme") may apply to employees of a designated BNFL company which is publicly controlled as it applies to persons to whom it applies apart from this paragraph.
(2) The Secretary of State may, by direction, require the UKAEA to make such modifications of a UKAEA pension scheme as the Secretary of State considers appropriate in respect of the participation in such a scheme of employees of a designated BNFL company which is publicly controlled.
(3) The Secretary of State may also, by direction, require the UKAEA to make such modifications of a UKAEA pension scheme as the Secretary of State considers appropriate for applying the provisions of such a scheme to persons—

(a) who are directors, or other officers, of a designated BNFL company which is publicly controlled; and

(b) who are not employees of that company.

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

(a) the UKAEA;

(b) the designated BNFL company in question;

(c) the Treasury; and

(d) such persons as appear to him to represent the employees, or directors or other officers, likely to be affected by the direction.

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

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

is to be disregarded in construing those powers.

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

(a) agreed between the company and the UKAEA; or

(b) in the absence of such agreement, determined by the Secretary of State.

(8) In this paragraph "designated BNFL company" has the same meaning as in Schedule 7."
On Question, amendment agreed to.
Schedule 8 [Pensions]:
Lord Jenkin of Roding Lord Jenkin of Roding moved Amendment No. 125A:
Leave out Schedule 8.
The noble Lord said: My Lords, I beg to move the amendment standing in my name but I make it clear that I shall not press this to a Division. I tabled the amendment because I am appalled by the way that this schedule has had to be amended by the Government in order to effect its intentions.
I am not the least surprised that the noble Lord, Lord Whitty, from time to time became confused about which amendment he was moving and had to be corrected by this side of the House. My mind went back to an occasion that my noble friend Lord Higgins will remember when in a Finance Bill Standing Committee in another place the same thing happened and the Minster got totally confused about which amendments he was replying to. The Daily Mail, which was then quite a sensible paper, wrote a leading article headed, "Laughter in Committee Room 10". It was shaming to find that the press had recognised the incompetence in the way that that Bill was being dealt with by the then-Ministers. I cannot help feeling that Ministers must be inordinately pleased that there are never any members of the press here to listen to our affairs. Otherwise, I suspect that we would have had more leaders about laughter in this House. But there is a serious point to this. I shall be very short.
I believe that there is a culture in Whitehall that Ministers inherit and appear to be quite happy to adopt. In that culture, officials say that it does not matter how many amendments are tabled in the House of Lords because nobody notices and nobody makes much of a fuss. They say that a Bill can be introduced and then, if necessary, literally hundreds of amendments can be tabled in the House of Lords. I believe that it is something that Ministers should say is unacceptable. They should say that they are not prepared to put themselves forward in the House of Lords and have to apologise again and again for what appears to be very sloppy drafting of Bills.
I invite noble Lords to look at Part 4 of this schedule. I have the pages here. I always mark each amendment on the page. Where it is a government amendment I put a dot in the side of a ring. For page after page there are dozens and dozens of amendments to one single part of this schedule. It is not good enough. I hope that Ministers will go back to their departments and say that they are not going to subject themselves to this kind of criticism and that these matters must be got right. Ministers must lay down the law. It is not good enough to bring legislation before this House that has subsequently to be corrected in this way. There are one or two amendments made to reflect the points made by my noble friends Lord Higgins and Lady Byford but most of them are simply to correct sloppy drafting. That is not good enough. I believe
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that I am justified in taking two or three minutes of your Lordships' time to say so unequivocally and strongly; and I mean it. I beg to move.
Lord Brooke of Alverthorpe: My Lords, I shall intervene quickly. I was pleased to hear the noble Lord, Lord Jenkin, say that he does not intend to press this to a Division. We wish to place on record that we hope that there will be no Divisions whatever on Schedule 8 because it contains a great deal of protection for people working in the industry. We would not wish to see anything moved that might interfere with that, while we accept that there is some justification for criticism about the great number of changes that have had to be tabled late.
En passant, I did not say anything on government Amendments Nos. 88 and 104 but we were very pleased that the Government have reflected on the terms that had been offered for pension protection. They have wisely extended the protection and it will be to the benefit of employees. So while there may be grounds for criticism, I want to place on record that some useful advances have been made that will be to the benefit of the workforces and help provide for the better operation of the NDA in the future.
Baroness Carnegy of Lour: My Lords, I am sure that my noble friend Lord Jenkin was not criticising the content of the schedule. He was talking about the timing and what the House is confronted with as a result. Both this schedule and the changes in the taxation of the NDA have been amended today in the most extraordinary way. It is very difficult for noble Lords to understand what is happening. The hurrying makes one suspect that there may be further changes that have to be made. I would not be in the least surprised. One has little confidence in the control that Ministers have over this piece of legislation when they are legislating on the hoof in this way. But I am sure that I am right in saying that my noble friend was not implying that everything was wrong with the schedule. He was simply talking about the way in which it is being presented to the House.
6.15 p.m.
Lord Whitty: My Lords, I think that the House accepts that the substance of Schedule 8 is desirable for the protection of employees and the skills that they represent in the nuclear sector. Therefore in moving this amendment—although he has indicated that he does not intend to pursue it—the noble Lord was not criticising the substance but raising a point of process.
It would be extremely efficient and desirable if all drafts were 100 per cent correct. But Ministers are fallible and even—dare I say so?—parliamentary counsel is fallible. There is no more important area of law to get right in its detail than pensions and taxation law, to which the bulk of the amendments that are before noble Lords at this Report stage are directed.
I remind noble Lords that we are dealing with a Bill that was introduced in the House of Lords. If the Government do spot mistakes, it is surely important that they draw those to the attention of Parliament at

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the earliest possible point. For the most part, this House is dealing with legislation that has been started in the Commons and has gone through a lengthy procedure there. I have some sympathy with noble Lords opposite who ask why we are introducing government amendments so late in the process of a Bill when we are dealing with them in the House of Lords. That is not the position in this case.
This is a complicated Bill and it is particularly complicated in what are not its main provisions—that is, those that relate to tax and pensions. It is important that we get the Bill right. It would be wrong if we had left these amendments to Third Reading, which I think we would have hesitated to do, or to the Commons, so that the Bill would have to be brought back to your Lordships at a much later stage. Therefore, the Government are right to bring such amendments before the House at the earliest possible opportunity. In some cases that opportunity was at Committee stage. In other cases, because of discussion in Committee, because of other developments, or because parliamentary counsel was still drafting the amending clauses, it was not. Nevertheless, we have brought amendments before the House at every stage at the point when they are available to Ministers. I think that that is the correct procedure.
It is slightly irritating to Ministers, and hugely irritating to the House, to see a large number of clarifying government amendments. But it is better than allowing the stages of the Bill to go through without having made those amendments. As for this schedule, we hope to produce an amended draft of Schedule 8, which will be available to noble Lords, so that by Third Reading it will be clear how all the amendments that have been adopted by that stage stand together. I hope that the House will appreciate that that is something that will help noble Lords to see where all these amendments pan out in the schedule.
I make that point because if we are to start Bills of this complexity in this Chamber—and I hope to see more of such Bills starting in the House of Lords then some of the consequences have to be accepted by noble Lords. I take back every time to my department in this case, other departments; and, in some cases, not even the main department dealing with the Bill—the request that we should minimise such changes. Nevertheless, there will always be cases where changes have to be brought forward by the Government. As I say, we try to do so at the earliest possible opportunity.
Lord Higgins: My Lords, I agree with my noble friend who moved this amendment. As regards these amendments on pensions, nothing has really changed since Committee, but they suddenly appeared on the Marshalled List. Officials simply did not check them early enough. We could have debated them in Committee and discussed them back and forth, from one side of the House to the other. The trouble is that if the Government do what they are doing now, we only have one chance to intervene, and with complexity of this kind you simply cannot sort it out on Report. It ought to be put right and the amendments ought to have been tabled in Committee.
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On the other point that the Minister has Just made, it is true that Bills very often come to this House from the other place and have already been considered. It used to be true that they had been looked at properly on previous occasions. That is no longer the case. Because of the way Bills are programmed in the other place, we get Bill after Bill coming here large chunks of which—sometimes a third of the Bill—have not been looked at properly in the other place because of the way in which the proceedings have been curtailed.
Finally, I want to make a constructive suggestion, because we are discussing pensions in these clauses. The pension credits Bill arrived from the other place in a totally unworkable state. The back half of the Bill had absolutely nothing to do with the front half. The Minister in another place clearly had not understood it at all. I had discussions with the Minister responsible for pensions in this place, and we adjourned the Committee. The Government then produced a whole series of amendments to put things right, but they also provided the Opposition with explanatory notes as to what the amendments were about.
I do not ask the Minister to respond now—I merely put forward this constructive suggestion—but we found that that enabled us to sort out the Bill in a way which simply is not true if all one has is a single speech from the Government Bench and then only a single speech from this side, and so on. I ask the Minister to consider generally whether on matters of this complexity there might be a case for providing explanatory notes to the Opposition, because on these clauses the explanatory notes which were formerly provided have been totally overtaken by events.
Lord Jenkin of Roding: My Lords, I am grateful to those who have joined in this short debate and I have no wish to prolong it. I do not know whether the noble Lord, Lord Whitty, realises, but what he is proposing is called a Keeling schedule. I am glad that he nods assent. That will be welcome, because Schedule 8 as it now stands after the amendments have been made is totally unintelligible and will need to be completely rewritten, as he promised. I welcome that.
On the substance of the matter, the noble Lord, Lord Whitty, made the best of a very bad case. We recognise that he is in a particular difficulty as a Minister for one department being responsible for legislation which is the responsibility of another. Many of the problems that we have had to deal with have stemmed from that curious division of responsibility. Nevertheless, having said that—he is waving at me, but I will not give way because I will withdraw the amendment—I hope that Ministers will take note that this House will not put up with shoddy legislation which then needs to have literally hundreds of amendments tabled by the Government on Report. It is not good enough. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 9 [Taxation provisions relating to nuclear transfer schemes]
The Deputy Speaker (Baroness Fookes): My Lords, we turn now to Schedule 9 and Amendment No. 126. I point out that if Amendment No. 126 is agreed to, I cannot call Amendment No. 127 by reason of pre-emption.
Baroness Miller of Hendon Baroness Miller of Hendon moved Amendment No. 126:
Page 177, line 4, leave out paragraph 3.
The noble Baroness said: My Lords, Amendment No. 126 repeats a probing amendment tabled for Grand Committee by my noble friend Lady Noakes. One purpose of that amendment was to ask whether the Government intended this provision to exempt from tax rolled-over or held-over gains, which may well have arisen in connection with activities that had nothing to do with the activities which are being transferred to the NDA.
In Grand Committee the Minister did not answer that point, and so we have tabled the amendment again in the hope that we will get a straight answer. Will the Minister confirm whether it is the Government's policy to allow a rolled-over or held-over gain to escape tax as a consequence of Schedule 9? Will he explain why it is that BNFL or the UKAEA, which are basically taxable entities, should not pay tax in respect of gains on assets not related to NDA transfers?
The equivalent of Amendment No. 128 was also tabled in Grand Committee. The Minister partly explained paragraph 4 of Schedule 9, to which the amendment relates, along the lines that keeping tax records is too onerous for the NDA. We shall not challenge that today though we find it an odd proposition. We would, however, like the Minister to explain the logic of sub-paragraph (3). Why is it that the Bill has gone to great lengths to exempt the trading activities of the NDA but imposes a capital gains liability on 100 per cent of the proceeds of assets acquired under a transfer scheme even if those assets are connected with the tax-exempt activities? What is the policy intent behind that? I beg to move.
Lord Davies of Oldham: My Lords, we have had extensive—even intensive—discussions on the tax provisions in Clause 27 and Schedule 4. With these two amendments we now turn to Schedule 9, which contains the detail of the transfer tax provisions. The provisions allow for tax neutral transfers of assets and companies between publicly owned companies—I emphasise that point—such as BNFL, the UKAEA and the NDA. They also allow for the ownership of site licensee companies that are relevant site licensees to be transferred in a tax neutral way.
The amendments tabled by the noble Baroness are specifically concerned with the provisions in the Bill that deal with the tax consequence of nuclear transfer schemes. The broad aim of Clause 43 and Schedule 9 is to ensure that tax charges or tax reliefs are not
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triggered by a transfer. In other words, we want transfers under nuclear transfer schemes to be tax neutral so that both transferee and recipient are not penalised, nor receive a windfall gain in tax terms. The detail of Schedule 9 is necessarily complex because it attempts to cater for the flexibility of the various transfer scheme arrangements.
Amendment No. 126 would remove the provision that allows for assets to be transferred at value for tax purposes that would give no gain and no loss. The provision ensures that the transferor would not face a tax charge on any chargeable gains as a result of the transfer. That is a standard tax provision in Bills that are concerned with public reorganisation and transfers. We are legislating simply to provide for the public sector the equivalent facility that exists under the normal tax rules for groups of companies. Under the normal tax rules intra-group transfers are deemed to take place at a value that gives no gain and no loss, and that is what we are replicating here. The intra-group tax rules cannot apply to the publicly owned companies because there is no head. A publicly owned group comes under the Crown. Therefore, BNFL and its subsidiaries form a group but BNFL and the NDA do not, even though they are both effectively owned by the Crown. That is why we need the tax provisions in Schedule 9 to allow for tax neutral transfers.
Amendment No. 128 would remove a pragmatic computational provision concerning the calculation of any tax on chargeable gains for the NDA. This provision is included to reduce the disproportionate effort and cost that the NDA would otherwise incur. Without this provision it would be necessary for the NDA to maintain registers and associated base costs of publicly owned assets through potentially numerous transfer schemes and over lengthy periods of time. That seems to be unnecessary given the overall intent behind the provisions in the clause and in the schedule. I refer in that connection to the government amendments, some of which we have already discussed. The next group is also germane to this matter. We hope that the noble Baroness will consider that that is a watertight explanation and will feel able to withdraw the amendment.
6.30 p.m.
Baroness Miller of Hendon: My Lords, I thank the Minister for his explanation. I think that it is a little clearer than the explanation that we received in Committee. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Whitty Lord Whitty moved Amendment No. 127:
Page 177, line 10, at end insert—
"( ) This paragraph does not apply in relation to a transfer to the NDA or to a subsidiary of the NDA in accordance with a nuclear transfer scheme of securities of a company, in consequence of which that company ceases to be a relevant site licensee.

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( ) In this paragraph "relevant site licensee" has the same meaning as in subsection (4) of section 27 (see subsection (5))."
On Question, amendment agreed to.
[Amendment No. 128 not moved.]
Lord Whitty Lord Whitty moved Amendment No. 129:
Page 177, line 26, at end insert—
"( ) This paragraph does not apply in the case of a disposal which under paragraph 26A is to be treated as a disposal on which neither a gain nor a loss accrues to the NDA or a subsidiary of the NDA.
On Question, amendment agreed to.
Lord Davies of Oldham Lord Davies of Oldham moved Amendment No. 130:
Page 178, line 17, at end insert—
"( ) For the purposes of the allowances and charges provided for by the 2001 Act, the trade is not to be treated as permanently discontinued, nor a new trade as set up; but sub-paragraphs (2) and (3) of this paragraph are to apply."
The noble Lord said: My Lords, in moving Amendment No. 130, I wish to speak also to Amendments Nos. 131 to 139 and Amendment No. 147 with which it is grouped.
These amendments relate to the transfer provisions in Schedule 9. They include extending Part 2 of Schedule 9 to cover UKAEA and other technical amendments. They take into account recent discussions and clarifications on the proposed contractual structure.
Amendment No. 130 is a technical amendment to put beyond doubt that for capital allowance purposes no balancing adjustments or recognition of disposal proceeds arise to a company that transfers its whole trade, or part of its trade, to the NDA. Together with the rest of paragraph 7 of Schedule 9 this ensures that transfers, for instance from BNFL and UKAEA, are neutral for capital allowance purposes.
Amendment No. 131 amends paragraph 9 of Schedule 9 so that for capital allowance purposes assets are transferred to the NDA at their book value for accounts purposes, rather than treated as a gift at a market value which might have been difficult to ascertain. The transfers to which this applies are those under a Section 36 scheme where property is transferred other than as part of a transfer of a trade or part trade.
Amendment No. 132 introduces a new paragraph 14A. This ensures that where a trade or part of a trade is transferred from a BNFL company to the NDA there is tax neutrality and the transferee effectively stands in the shoes of the transferor for tax purposes. This will ensure that there will be no tax consequences where the transferor writes off sums in its books as part of the detailed transfer arrangements. The rule will apply to trading items, such as trade debtors or sums received in advance for the supply of goods or services by the transferor, or trade creditors and sums paid in advance for the provision of services to the company.
Amendments Nos. 133 to 137 extend Part 2 of Schedule 9 to wholly-owned subsidiaries of BNFL and to 1JKAEA and its wholly-owned subsidiaries. As drafted, Part 2 currently applies only to BNFL. This
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allows the provisions in Part 2 of Schedule 9, that generally allow for tax neutral transfers to publicly owned bodies other than the NDA, to apply more widely to cater for possible future transfers from BNFL and UKAEA companies. For instance, transfers as a consequence of any reorganisation of the publicly owned BNFL and UKAEA groups would be covered by this extension.
Amendment No. 138 amends paragraph 20 of Schedule 9 in a similar way to Amendment No. 131 for paragraph 9. For capital allowance purposes assets will be transferred from BNFL or the UKAEA to another publicly owned company at their book value, rather than treated as a gift at a market value, which, as I indicated earlier, could be difficult to ascertain.
Amendment No. 139, mirroring Amendment No. 132, introduces a new paragraph 25A. This ensures that where a trade or part of a trade is transferred from a BNFL company or a UKAEA company to another publicly owned company that is not the NDA, there is tax neutrality and the transferee effectively stands in the shoes of the transferor for tax purposes. This will potentially apply to trading items such as trade debtors or sums received in advance for the supply of goods or services by the transferor, or trade creditors and sums paid in advance for the provision of services to the company.
Amendment No. 147 introduces a definition of "transferee" to the list of definitions in paragraph 32 of Schedule 9. In relation to a nuclear transfer scheme, the transferee means the person to whom the transfer is made. I beg to move.
On Question, amendment agreed to.
Lord Davies of Oldham Lord Davies of Oldham moved Amendments Nos. 131 to 139:
Page 179, line 14, leave out sub-paragraph (2) and insert—
"(2) For the purposes of Part 2 of the 2001 Act (capital allowances for plant and machinery), the NDA or its subsidiary is to be treated—

(a) as having incurred capital expenditure on the provision of the plant or machinery at the time of the transfer; and

(b) as having owned the plant or machinery as a result of having incurred that expenditure.

(3) The amount of that expenditure is to be treated as being the book value of the plant or machinery.
(4) For the purposes of the application of section 61 of I hat Act in relation to the transferor the disposal value of the plant or machinery is to be treated as being the book value of the plant or machinery.
(5) The references in this paragraph to the book value of the plant or machinery are references to the amount which, in accordance with generally accepted accounting practice (within the meaning of the Tax Acts)—

(a) was recognised as its value in the accounts of the transferor at the time of the transfer; or

(b) should have been so recognised at that time.

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

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Page 181, line 3, at end insert—
"Computation of profits and losses in respect of transfer of trade
14A (1) This paragraph applies where, in consequence of a section 36 scheme—

(a) a BNFL company ceases to carry on a trade or a part of a trade; and

(b) an NDA group member begins to carry on the trade or that part of it.

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

(a) the trade or part is to be treated as having been a separate trade at the time of its commencement and as having been carried on by the NDA group member at all times since its commencement as a separate trade; and

(b) the trade carried on by the NDA group member after the time when the section 36 scheme comes into force is to be treated as the same trade as that which it is treated by virtue of paragraph (a) as having carried on as a separate trade before that time.

(3) This paragraph is subject to paragraph 11.
(4) In this paragraph—

"BNFL company" means BNFL or a subsidiary of BNFL;

"NDA group member" means the NDA or a subsidiary of the NDA;

"relevant trading profits and losses" means profits or losses under Case I of Schedule Din respect of the trade or part of a trade in question."

Page 181, line 7, leave out "it is"
Page 181, line 8, at beginning insert "it is"
Page 181, leave out line 9 and insert "a BNFL company or of property, rights or liabilities of a BNFL company; and"
Page 181, line 10, leave out from beginning to second "is" and insert "the transferee"
Page 181, line 11, at end insert—
"(2) This Part of this Schedule also applies to a transfer if it is a transfer in accordance with a section 36 scheme to a transferee falling within sub-paragraph (3) of—

(a) property, rights or liabilities of the UKAEA;

(b) securities of a wholly-owned subsidiary of the UKAEA; or

(c) property, rights or liabilities of such a subsidiary.

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

(a) a publicly owned company which is not a subsidiary of the NDA; or

(b) the UKAEA.

(4) In this paragraph "BNFL company" means BNFL or a wholly-owned subsidiary of BNFL."
(4) Page 182, line 16, leave out sub-paragraph (2) and insert—
"(2) For the purposes of Part 2 of the 2001 Act (capital allowances for plant and machinery), the transferee is to be treated—

(a) as having incurred capital expenditure on the provision of the plant or machinery at the time of the transfer; and

(b) as having owned the plant or machinery as a result of having incurred that expenditure.

(3) The amount of that expenditure is to be treated as being the book value of the plant or machinery.
(4) For the purposes of the application of section 61 of that Act in relation to the transferor the disposal value of the plant or machinery is to be treated as being the book value of the plant or machinery.
(5) The references in this paragraph to the book value of the plant or machinery are references to the amount which, in accordance with generally accepted accounting practice (within the meaning of the Tax Acts)—

(a) was recognised as its value in the accounts of the transferor at the time of the transfer; or

(b) should have been so recognised at that time.

(6) Expressions used in this paragraph and in Part 2 of the 2001 Act have the same meanings in this paragraph as in that Part."
Page 184, line 3, at end insert—
"Computation of profits and losses: transfer of trade
25A (1) This paragraph applies where, in consequence of the section 36 scheme—

(a) a BNFL company ceases to carry on a trade or a part of a trade; and

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

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

(a) the trade or part is to be treated as having been a separate trade at the time of its commencement and as having been carried on by the transferee company at all times since its commencement as a separate trade; and

(b) the trade carried on by the transferee company after the time when the section 36 scheme comes into force is to be treated as the same trade as that which it is treated by virtue of paragraph (a) as having carried on as a separate trade before that time.

(3) This paragraph is subject to paragraph 22.
(4) In this paragraph—

"BNFL company" means BNFL or a wholly-owned subsidiary of BNFL; and

"relevant trading profits and losses" means profits or losses under Case I of Schedule Din respect of the trade or part of a trade in question."

On Question, amendments agreed to.
Lord Whitty Lord Whitty moved Amendment No. 140:
Page 184, leave out lines 9 and 10 and insert "the application of the enactments mentioned in sub-paragraph (2A) to the assets of"
On Question, amendment agreed to.
Lord Whitty Lord Whitty moved Amendments Nos. 141 to 146:
Page 184, line 11, after "licensee" insert ", that company"
Page 184, line 14, at end insert—
"(2A) Those enactments are—

(a) the 1992 Act;

(b) Schedule 29 to the Finance Act 2002 (c. 23);

(c) paragraphs 5, 14, 18 and 25 of this Schedule."

Page 184, line 21, leave out sub-paragraph (4).
Page 184, line 22, at end insert—
"26A (1) This paragraph applies where—

(a) as a consequence of a transfer in accordance with a nuclear transfer scheme of securities of a subsidiary of the NDA, that subsidiary becomes a relevant site licensee;

(b) as a consequence of a transfer to the NDA or to a subsidiary of the NDA in accordance with such a scheme of securities of a company, that company ceases to be a relevant site licensee; or

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(c) there is a transfer in accordance with such a scheme of securities of a company that is a relevant site licensee from one person to another person for purposes connected with securing that the condition in section 27(5)(ba) continues to be satisfied in relation to the company.

(2) For the purposes of the 1992 Act, the securities shall be treated as disposed of to the transferee for a consideration of such amount as would secure that, on the disposal, neither a gain nor a loss accrues to the transferor.
26B In this Part of this Schedule "relevant site licensee" has the same meaning as in subsection (4) of section 27 (see subsection (5))."
Page 185, line 33, at end insert—
"Groups of companies
30A References to a company in the following enactments shall apply to the NDA—

(a) sections 170 to 181 of the 1992 Act;

(b) Part 8 of Schedule 29 to the Finance Act 2002 (c. 23).

"Page 185, line 37, after "17" insert ", 26A"
On Question, amendments agreed to.
Lord Davies of Oldham Lord Davies of Oldham moved Amendment No. 147:
Page 186, line 11, at end insert—
""transferee", in relation to a transfer in accordance with a nuclear transfer scheme, means the person to whom the transfer is made;"
The noble Lord said: My Lords, this amendment has already been spoken to. I beg to move.
On Question, amendment agreed to.
Schedule 10 [The Civil Nuclear Police Authority]:
Baroness Anelay of St Johns Baroness Anelay of St Johns moved Amendment No. 148:
Page 186, line 29, at end insert "at least one of whom shall have specialised policing knowledge"
The noble Baroness said: My Lords, in moving Amendment No. 148, I wish to speak also to Amendments Nos. 149 and 150 that stand in my name and appear to be supported by the noble Lord, Lord Bradshaw. However, in his defence I should point out that his name appears in error against Amendment No. 150. In Grand Committee the noble Lord made it clear that he did not support that amendment although some accord has broken out between us on all other matters in this part of the Bill.
We now reach the part of the Bill that creates a new nuclear civil police authority to oversee a reconstituted nuclear constabulary which will be directly accountable to the Secretary of State. On Second Reading we made it clear that we believed it would be more appropriate for the Secretary of State concerned to be the Home Secretary who is accountable to Parliament for the vast majority of police forces in the UK. But that aside, we support the thrust of the provisions for setting up the new police authority.
I was intrigued to receive a letter from the Minister stating that the Government now accept that in certain cases Home Office Ministers have a role with regard to the ministerial confirmation of authorisations given under Section 44 of the Terrorism Act 2000. As the Minister reminds us in that letter, Clause 53 of the Bill extends the powers in Section 44 to senior officers of the Civil Nuclear Constabulary so that they can
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authorise the stop and search of persons or vehicles without grounds of suspicion. That is similar to other police forces. Under this Bill, as with other police forces, Ministers must confirm an authorisation within 48 hours for it to apply for more than 48 hours. Can the Minister confirm that the DTI has now had further discussions with Home Office colleagues and that the Government have now concluded that Home Office Ministers—not DTI Ministers—will have that responsibility?
My amendment to this part has been tabled for the following three reasons. If I outline them now I shall save time later. The first reason is to follow up answers given in Grand Committee by the Minister and in ministerial letters to me following Committee stage. The second reason is to probe more extensively the issues that I raised in Grand Committee, as I believe that the Government have not yet provided a satisfactory answer. Thirdly, I have some new material. I shall put forward some issues raised by the UKAEA Police Federation since the end of the Grand Committee stage. I am grateful to the federation for coming to the House of Lords to brief me and my noble friend Lady Byford.
All the amendments in this group refer to Schedule 10 which sets out the rules governing the appointment of the members of the authority and the good governance provisions for its operation. Paragraph 172 of the Explanatory Notes states:
"The Government intends that the rules on appointment set out by the Office of the Commissioner for Public Appointments (OCPA) will be followed",
and that,
"membership will consist of independent members and representatives of the civil nuclear industry".
Amendment No. 148 has been tabled specifically at the request of the atomic energy police federation. It would ensure that at least one member of the new police authority would have specialised policing knowledge. The police federation explains that it will be important for the new authority to have at its disposal the expertise of at least one person who can advise on policing techniques and the way in which they can most effectively and efficiently be delivered. That seems eminently sensible to me.
Do the Government agree with the police federation that given the particular nature of this police authority, with some members appointed from the industry that is funding the constabulary, this would be an important safeguard and one that would help the authority to fulfil any statutory functions? What are the Government's plans in that respect?
Amendment No. 149 has been tabled to follow up on the discussion about the nature of Scottish representation and consultation. That is reported at col. 106 in Grand Committee on 27 January. I would be grateful if the Minister could tell the House what discussions the DTI have had with the Secretary of State for Scotland on such matters since Grand Committee.
Finally, Amendment No. 150 is an old friend. It comes back from Grand Committee and follows questions that I asked then about good governance at col. 103 on 27 January. The amendment provides that the chairman of the police authority should not be able to serve in office for more than 10 years as chairman. That proposal did not find favour with the noble Lord, Lord Bradshaw, who said that it takes about three years to understand how an authority works before one becomes an effective member. I have considered his view, but I remain concerned about the importance of ensuring that the chairmanship should not remain in one pair of hands for more than 10 years. After all, my amendment would allow the chairman to serve first as a member to obtain experience and then to be appointed as a chairman and to serve a maximum of 10 years from the date of his or her appointment.
I was also encouraged to return to this proposal as the Government have tabled an amendment in the Domestic Violence, Crime and Victims Bill at Report stage. In response to amendments that I had tabled on good governance, the Home Office tabled its own amendment which states in Schedule 2, subparagraph (4) that a person who is appointed as either a commissioner for victims or a deputy commissioner,
"must not hold office for more than 10 years in total".
I believe that it is important to get good governance right from the beginning. In Grand Committee the Minister, the noble Lord, Lord Whitty, said that the chairman would be able to serve for more than 10 years only if the Commissioner for Public Appointments gave her agreement. Why is an exception to good governance required here? The Home Office was prepared to follow good practice in the domestic violence Bill and I am simply asking that the DTI should follow suit. I shall say that very quietly so that Home Office Ministers do not hear me praising them. Let us have joined-up thinking on good governance. I beg to move.
6.45 p.m.
Lord Bradshaw: My Lords, I support the noble Baroness, Lady Anelay of St Johns. There is certainly a need for some police expertise in what I feel would be a somewhat closed and probably fairly secretive organisation. Some knowledge of how the police work will be valuable to the new police authority. Scottish Ministers should be consulted.
On whether someone should serve as chairman for more than 10 years, I recollect that when I referred to the matter in Grand Committee, I probably did not take into account the years that someone should have served as a member of the authority before aspiring to chairmanship. I would think it very unlikely that anyone's term of office, in almost any public office, should exceed 10 years. In a matter that is not open to public scrutiny, the chances of complacency,
536
connivance or slightly corrupt procedures may grow if someone holds a seat for many more than 10 years. In the authorities with which I have been concerned, the practice is for the chairmanship to rotate about every two or three years. I broadly support the amendment.
Lord Gray of Contin: My Lords, I support the amendment, particularly the suggestion that someone with police knowledge should be a member of the board. That is very important because this matter has assumed a completely new aspect in recent times due to the dangers with which we now live and the complete irresponsibility of people who are prepared to commit the most vile crimes to kill others. It is important that police forces, especially this particular police force which has such an important responsibility throughout the country, should have the very best experience available to it.
The policing issue is of special importance. All British police forces are extremely competent and able to look after their own areas very well indeed. But there is so much specialisation in the nuclear industry that it is very important that that police force, as well as those who operate those vitally important installations, should have the best knowledge available to them and the best instruction in how to cope with the awful situations that they are liable to encounter. I support my noble friend in moving the amendment and I trust that we shall have some co-operation from the Government when the Minister answers.
Baroness Carnegy of Lour: My Lords, I, too, rise to support my noble friend. It is important that this police force should be acceptable to local police forces and the public because the very nature of their responsibilities and what they will be up to will require the confidence of people. If one member of the board has specialised policing knowledge that will help local chief constables and police have confidence that that force is being led from the top in a knowledgeable manner. That may be a small point and we have talked often in this House about representation, but sometimes it matters more than at other times; and that is the case now. So Amendment No. 148 is important.
As for Amendment No. 149, can the Minister reveal the outcome of his discussions regarding consultation with Scottish Ministers or the Secretary of State? It is important for the constabulary in Scotland to be accepted as a United Kingdom matter—which, of course, includes the Scottish element.
Regarding the position of the chairman of the authority, the noble Lord, Lord Bradshaw, slightly changed his position when he said that the person might not be completely new to the authority. A term of 10 years as chairman is a long time by any measure, particularly for a public body, so it would be a good amendment. I hope that the Government will look sympathetically at all three amendments.
Lord Triesman: My Lords, I thank noble Lords who have contributed to the debate. After a period of dealing with tax and other matters, this has been closer to matters that I can understand and to sets of arguments whose power is evident to me. This group brings together a number of amendments concerning appointments to the Civil Nuclear Police Authority.
Amendment No. 148, as noble Lords, including the noble Baroness, Lady Anelay, have said, would require at least one member of the Civil Nuclear Police Authority to have specialised policing knowledge. The current UKAEA constabulary police authority includes a member with senior level experience of policing and the constabulary has probably benefited considerably from that expertise—that may be what is in everyone's minds.
The Managing the Nuclear Legacy White Paper also gave a clear commitment that it was the Government intention that one of the independent members appointed to the Civil Nuclear Police Authority should continue to have a background in senior level policing. I can confirm that commitment.
The Bill does not specify the detailed composition of the police authority for reasons that were touched on in Grand Committee, when an amendment was considered seeking a minimum number of industry representatives to be appointed to the police authority. I cannot envisage circumstances at this time where the Government would not think it sensible to appoint an independent member with police experience. But circumstances change. We believe it is important that the Bill should allow sufficient flexibility for the Secretary of State to vary the composition of the police authority so that it always has available to it the skills it needs, both now and in the future. Limiting that flexibility in legislation would potentially be restrictive.
Could I conceive of circumstances in which it might not be appropriate to have a policing expert on the authority? Indeed, it is difficult to think of any specific reason at this stage. The built-in flexibility is about the future and in our debate today there has been considerable discussion about the length of time over which this legislation would have an impact and circumstances unquestionably would change over that period. In responding to some of the points made by the noble Lord, Lord Gray, in particular, there are good reasons why other people would say, "If we are going to construct an authority of this kind and it is useful to have expertise of a one kind, why not reserve places for other kinds of expertise in that authority?" That would be to the detriment of constructing the sort of' authority that, as the guidance notes that were just quoted say, needs a degree of flexibility.
I shall put the matter in the following terms—almost any senior police officer with an area of expertise will have a specialised knowledge in that area. But it does not necessarily follow that that would be the most critical area of expertise needed if, for example, issues of terrorism or security emerged. They may have expertise in the guarding of sites and making sure that they are secure, or in making sure that there is no leakage of material—for bad reasons—from sites,
538
particularly the types of material with which we are dealing. It is not necessarily the case that the expertise will be of precisely the kind that is needed.
I suggest that, like most bodies which have to take on diverse and complex issues, this body must always take advice, whether in confidence or not. I refer to the potential for secrecy mentioned by the noble Lord, Lord Bradshaw. It would be bound to take detailed advice needed in any specialised area. That is not an argument for not having a senior police officer or a person with expertise, but other kinds of specialist—for example, with anti-terrorism knowledge—may equally be useful in other circumstances. I understand why the UKAEA Police Federation has made its comments. I do not disparage it by saying that I have yet to serve on any body that has not thought its expertise was absolutely essential to one authority or another. They are the sort of comments that people are likely to make.
Regarding the question asked by the noble Baroness, Lady Anelay, about which government department would have authority, the Home Office will have all authority in respect of terrorism: the DTI will have authority in respect of the nuclear matters contained in the legislation. I hope that that clarifies matters. So I ask your Lordships not to press the amendment, because I do not believe that it necessarily accomplishes the objectives that your Lordships have described. Of course the expertise needs to be available. It is important that the authority can call on that expertise from whichever source it feels is most useful, but the authority might be limited if it was compelled to call on that expertise in the way suggested by the amendment. Having said all of that, at present it is extremely unlikely that that kind of expertise would not be available on the authority when it is established.
I shall answer the question put regarding Amendment No. 149—the Scottish Executive has discussed the matter and has agreed to the propositions. We touched on the role of Scottish Ministers in Grand Committee, when my noble friend Lord Whitty made it clear that, while we would expect to take account of Scottish Ministers' views, appointments to the Civil Nuclear Police Authority were a reserved matter. The Scottish Executive is content with that interpretation. That is because the authority will be part of nuclear security and not of public policing and the arrangements will be those for a reserved body. I understand that the constabulary clauses were also not a matter of concern in the Scottish Parliament when it debated the Energy Bill. I hope for those reasons that noble Lords will feel that their concerns have been satisfied and that the amendment will be withdrawn.
Amendment No. 150 was also discussed in Grand Committee and concerns the period of membership of members of the authority. At that time the noble Lord, Lord Whitty, said that the Government's intention in making appointments, including that of the chair, was to follow the letter and the spirit of the Commissioner for Public Appointments' code of practice.

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It is perfectly correct to say that the maximum period in office must not normally exceed 10 years. The code of practice allows that this will be exceeded only in exceptional circumstances provided there is full and open competition. There is no obvious reason why this flexibility should not also be available to the Government in appointing members to the Civil Nuclear Police Authority—including its chair.
It does not mean that, in general, people will serve for more than 10 years but it does mean that the same degree of flexibility, common in all public appointments conducted under the code of practice, would apply to this post. I understand the point made by the noble Baroness, Lady Anelay of St Johns, in relation to the domestic violence legislation. However, as noble Lords made clear in an earlier amendment, we may be talking about appointments of people in some highly specialised areas. It may well be that one of those areas is of signal importance when this changeover might otherwise take place. I would like to think that the Secretary of State would take account of those circumstances and make the judgment whether it was sufficiently unusual and would decide in that light. Accordingly, I ask that this amendment also be withdrawn.
7 p.m.
Baroness Anelay of St Johns: My Lords, I am grateful for the support I have received from my noble friends Lord Gray of Contin and Lady Carnegy of Lour. I also thank the noble Lord, Lord Bradshaw. The point he made at the beginning of this debate is absolutely right. One has to be wary when one is thinking about the appointment of people to this authority because they will have to perform a very specialised task. They may be drawn from a very closed group of people, not because they are secretive but because they are carrying out secret work.
My noble friend Lord Gray was right to point out that the writ of this police authority is nation-wide. It will be a very important organisation. We need to get right, from the beginning, the rules that govern it. I listened to what the Minister said about Scotland. He said that the Scottish Parliament did not find the Energy Bill a problem. I was simply asking whether the Government had taken seriously what we said at Grand Committee and whether they had consulted with the Secretary of State for Scotland. The Government appear to have taken the view that it was unnecessary to talk to the Secretary of State because the Scottish Parliament had not raised the issue. That is a matter for the Government not for me. Obviously it is something I shall consider further with my colleagues who have far greater knowledge of Scotland than I ever could.
The Minister rebutted my argument that there was a need to have one person on the authority who has specialised policing expertise. The Minister seemed to say that it was what the Government want but they do not want it in the Bill. He wants that old friend flexibility so the Government can change things in the future if they think it appropriate. I was a little more unpersuaded here
540
than is normal. I try to be reasonable on flexibility, especially since the Minister specifically said that he could not envisage circumstances where the Government would want to avoid having one person with police experience on the authority.
He posed the question, "Could I conceive of circumstances? Well, it's difficult at this stage. It's all about the future." Sometimes that is true. But we are talking about policing. Policing is policing is policing. It was in Peel's day. It was even prior to that, before there was such a thing as a police force. The actual activity of policing remains constant and I do not believe that our language will change so much that we will not know what we mean in 100 years' time—if this Bill is still going. I do not believe that we will not know what we mean if we say we want someone who has specialised policing knowledge.
The Minister said that, if adopted, this argument could limit the kind of people appointed. It may be that at some stage it would be necessary to find someone who knows about guarding site perimeters. You might want someone to advise on spills or on terrorism. Well, I specifically left my definition of this person to be appointed broad enough so that the Government would be able to appoint someone knowledgeable without having a specifically targeted knowledge. Just because there is someone with specialised policing knowledge on the authority, it does not mean the authority cannot bring in additional advisers as various tasks arise. I want to build this into the authority from the word go, something that the Minister himself recognises. This was put to me very strongly by the UKAEA police. We need to build a level of expertise into the authority to enable it to deliver its particular task properly.
The Minister also referred to my good practice issues. He referred to the appointment of a chairman and repeated the Government's commitment that they would wish to follow the code of practice. This states that a chairman would not serve more than 10 years except in exceptional circumstances. We are back to flexibility again. The Government want the Secretary of State to be able to appoint someone beyond 10 years, subject to the post being advertised. But they say that in general they would not wish people to serve more than 10 years. On that one I am flogging a very dead horse at the DTI. They obviously do not wish to come into the fold as the Home Office has done. I would argue that there are occasions when it is absolutely right to get the rules correct from the beginning. However, I can see that the Government will not move on that.
I feel I have a responsibility with regard to the request from the UKAEA police. They say that what has worked well so far in the authority should continue. There should be someone on the authority with a senior level of experience in policing. It is important to put the will of the Government to the test. In response to the request from the police, I wish to test the opinion of the House on Amendment No. 148.
7.7 p.m.
On Question, Whether the said amendment (No. 148) shall be agreed to?
Their Lordships divided: Contents, 84; Not- Contents, 93.
7.17 p.m.
[Amendments Nos. 149 and 150 not moved.]
Lord Whitty Lord Whitty moved Amendments Nos. 151 and 152:
Page 188, line 28, leave out "amending" and insert "modifying"
Page 189, line 3, at end insert—
"( ) References in this paragraph to the modification of a UKAEA pension scheme include references to the modification of any one or more of the following—

(a) the trust deed of the scheme, if there is one;

(b) rules of the scheme; or

(c) any other instrument relating to the constitution, management or operation of the scheme."

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

(a) training other national and overseas police forces; and

(b) establishing and developing liaison with overseas police forces."

The noble Baroness said: My Lords, after the recent excitement, I want to make it clear that Amendment No. 153 is only a probing amendment.
In Grand Committee, I asked how the provision in Clause 48(6) differed from Section 6 of the Police Act 1996. Since then, noble Lord, Lord Whitty, wrote to me a helpful letter setting out the effect of Clause 48 as a whole. During that response, the Minister referred to the secondary functions of the constabulary and I have

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tabled this amendment to probe further the extent of those functions and, more importantly, how they will be funded.
Amendment No. 153 makes it clear that the secondary functions of the constabulary can include training other police forces, both in the United Kingdom and overseas, and establishing liaison with those police forces. That is based on the guidance in the Explanatory Notes and in the Minister's letter.
The Minister, in his letter, said that the circumstances in which the constabulary performs such functions will be fairly limited. But, presumably, that is only a guess because, as we heard from the Government in the previous group of amendments, they hope that this Bill will deal with future circumstances and are therefore trying to cover all eventualities. We do not know how the authority will develop.
That will be the case unless the Government plan to use the powers that they have given themselves in Clause 48(5) to prevent the development of secondary functions beyond what they consider to be an acceptable limit. What on earth will they consider to be "an acceptable limit"? What will govern that decision?
Secondly, who funds the carrying out of the secondary functions? The police authority and the police working for it will have highly specialised knowledge. They are experts in their field. They will have an expertise that is valued overseas; we know that from the existing experience of the police who worked for the UKAEA, so we assume that that will continue.
It is vital that we make it as straightforward as possible for the expertise possessed by the new civil nuclear police to be of benefit to other police forces. I do not want to end up in a position where our own civil nuclear police, in developing the expertise of other police forces by sending their people to a system find, themselves out of pocket. My commercial attitude asks why they should not also make some money out of it for their own purposes. It seems good practice that they should be able to make some income for themselves out of what will be a worthwhile activity.
Can the new police authority make a commercial charge for its services and keep control of those funds? I beg to move.
Lord Bradshaw: My Lords, I support the amendment. It is a matter of fact that the police authority will be kept short of funds. Every other police authority is and they are enjoined by the Government to trade and train people and do everything in their power to raise funds. The police force will also have levels of expertise that, despite the fact that we are not now developing new nuclear power stations, will be of great value to countries overseas. I foresee that many will seek to avail themselves of the training and education opportunities available in the force.
The secondary functions described in the amendment are likely to be important functions which, while they do not serve the principal function of the constabulary, will be necessary, especially to raise funds. I know from my
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experience that when new equipment comes into use it is the contribution of other police forces that makes it possible not only to afford one's own training facilities but often to afford the capital cost of equipping oneself. I am happy to support the amendment.
Earl Attlee: My Lords, I am grateful to my noble friend for introducing the amendment. I have one or possibly two questions. Will the civil nuclear police force be sending contingents to international police task forces such as those in Bosnia and Kosovo? It is important for the experience of senior officers in their earlier career to have done different things and worked with international police task forces. If they will be so dispatched, who will pay for it?
Lord Triesman: My Lords, it is always intriguing to try to anticipate the questions one is likely to be asked. I must confess that having spent a good deal of the day thinking about Kosovo I had not anticipated that question.
Amendment No. 153 specifies possible secondary functions for the civil nuclear constabulary, including training and liasing with overseas forces. In a moment I shall pay special attention to the questions asked by the noble Baroness, Lady Anelay, and the noble Lord, Lord Bradshaw, about that matter. The present UKAEA constabulary already occasionally undertakes some activities of training and liasing with overseas forces. The intention is that the new constabulary will continue to do so where there is a need in relation to its core function or where it is part of a wider UK co-operation programme.
I am not aware at the moment—and if I am wrong I shall certainly write to the noble Earl, Lord Attlee—that there is an intention that we would be taking part in international policing operations of the kind that he described, although I want to go back to the sorts of things we have done and are likely to continue to do, which are slightly different.
Earl Attlee: My Lords, if we do not allow them to go off on international police task forces, is there not a danger that officers from the civil nuclear police authority will be less experienced than others and therefore will not be able to compete for promotion in other forces?
Lord Triesman: My Lords, the definitive answer which I was giving to the noble Earl's first question is no. I wanted to be direct and use one word. I understand the argument that a variety of experience in different police forces would give rise to more varied career opportunities, but our task in setting up this police force must be that it focuses specifically on the tasks of protecting the nuclear decommissioning work and the sites on which it happens. That has to be the principal focus of our work.
The functions, which include training of and liasing with overseas police forces, would not be an end in themselves. I imagine that if it were conceived as a major distraction, the Secretary of State should have a right to veto those activities if, for example, the

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director for civil nuclear security, who is the regulator, had concerns about the effects of carrying out such activities on the ability of the constabulary to undertake its principal tasks, which is my general point.
The amendment would restrict the Secretary of State's ability to intervene in such circumstances. But I know that the UKAEA constabulary has liased with overseas police forces as part of the discussions to agree arrangements for the handover of security responsibility for sensitive nuclear material when they have been escorted by the constabulary and when it is delivered, for example, to overseas ports by ships. Such movements have not been particularly frequent, but they have occurred.
A recent initiative may lead the constabulary to be involved in the training of guard force commanders responsible for the protection of Russian nuclear sites utilising the limited spare capacity of its training centre; obviously an area of major international importance where we might from the UK make an extremely valuable contribution to the security of the world.
In such cases the constabulary's costs will be reimbursed fully by the Department of Trade and Industry. It will not find itself out of pocket, which was one of the concerns that arose. I hope that the amendment can be withdrawn. It restricts the Secretary of State's ability to intervene, but it will not restrict us from doing some of the sensible things that noble Lords have described in this brief debate.
Baroness Anelay of St Johns: My Lords, I am grateful to the Minister for his response. To take the last point first, he gave an assurance that he has given in the past, although not quite so clearly, with regard to the reimbursement of costs by the DTI to the civil nuclear police when it is carrying out its secondary functions.
I was trying to go a little further in my probing of the Government's intentions in asking whether they can foresee a situation where the civil nuclear police authority could make a commercial charge which it could keep. Will the Minister consider that further and write to me between now and Third Reading? As the Government keep saying, we are considering a Bill that is intended to remain in place for some time. We need to respond to different circumstances.
In response to my noble friend Lord Attlee the Minister narrowed down the circumstances in which the Government foresee a role for the police forces outwith this country in international circumstances. I am grateful to him for the way in which, on the hoof, he tried to narrow that down.
As I cover the Home Office brief, what immediately came to the forefront of my mind when my noble friend was speaking was the fact that this weekend the Home Secretary has been in discussions with his European colleagues about how the Government might take forward with the rest of Europe some form of supranational force to deal with terrorist incidents. I raise that now simply because I believe that between
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now and Third Reading it may be worth considering the role that the civil nuclear police might play in such a force if it were to come about.
Of course, as the Minister rightly said, the force's expertise is in the area of nuclear decommissioning. However, it is very much an expertise that could be used to counteract terrorism and any attempts to gain access to such material. It may well be that the force will have a role in future discussions about how we can all try to counteract what is a very real terrorist menace. I began by saying that this was very much a probing amendment and therefore I beg leave to withdraw it.
Amendment, by leave, withdrawn.
Lord Davies of Oldham: My Lords, I beg to move that further consideration on Report be now adjourned. In moving the Motion, perhaps I may suggest that Report stage begin again not before 8.31 p.m.
Moved accordingly, and, on Question, Motion agreed to.

National Health Service Staff
7.31 p.m.
Baroness Knight of Collingtree Baroness Knight of Collingtree rose to ask Her Majesty's Government what is their response to the recent report from the National Audit Office on the suspension of National Health Service staff.
The noble Baroness said: My Lords, I have lost count of the number of times that I have raised in Parliament the disgraceful way in which Britain deals with suspended hospital doctors, but I have been doing so for some 16 years. Successive governments have failed to listen but one must never give up trying to right a wrong. Where there is rank injustice and a way to end it, one must just keep on trying.
We treat criminals who have committed the worst crimes in the calendar—murder, rape, violent assault, robbery, child abuse; any crime one cares to mention—with more justice, compassion and mercy than we treat suspended hospital doctors. I hold no brief for incompetent doctors or those who break the law but, of all doctors accused and suspended, about 92 per cent are subsequently found to be innocent.
Suspension comes like a bolt from the blue. The doctor is instantly sent home in disgrace and barred from re-entering his hospital. He is not told what he is alleged to have done. He receives no legal aid; he has no lawyer or friend to help him; there is no appeal. He or she has no idea how long that situation will continue. I know of one case where a woman doctor remained suspended for 11 years.
Since then, a rule has been made that suspension can continue only for what is termed a "binding time". But it does not seem very binding to me. Out of 350 suspensions, hospital trusts have adhered to it only twice. Even being suspended for a year or 18 months—the average is two-and-a-quarter years—can mean the end of a career. Medical advance is too fast for gap years.
It is true that there is now some attempt at retraining but that is by no means always effective, and the cost is not small. In scores of cases, suspension destroys both one's career and one's reputation. Whole families suffer grievously. I know of five suicides and eight deaths from heart attacks which are directly attributable to doctors' suspensions. It is no compensation that the doctor is paid his full salary during suspension. His patients, of course, lose his care and skill, and the NHS is not blessed with such a surplus of doctors that that does not matter.
Last year, the National Audit Office studied this situation, and that led to this debate. The NAO reported last November. I immediately tried for an Unstarred Question and asked for it weekly since then. The report shows that the annual cost of suspension, including clinical staff, is £29 million. The average cost per doctor is £188,000, while clinicians obviously cost less—some £21,400. Therefore, doctors account for three-quarters of all costs. However, that is not all. The NAO total includes neither golden handshakes, which often have to be paid, nor the costs of retraining. Those costs are substantial. We are not talking peanuts here. My case is partly that this is a scandalous waste of scarce resources and partly that we should not treat dedicated, trained professionals so cruelly and unjustly.
In July 2000, I received support from all sides of your Lordships' House for a Bill which would have stopped both the waste and the unfairness. That Bill was a good six months in preparation. I worked with the BMA and the bodies which protect hospital doctors to have the Bill correctly framed, arranged and agreed. The Bill got through this House but the Government ignored it. Instead, they set up the National Clinical Assessment Authority, which was supposed to put everything right. I hoped; I waited; I gave it time. Alas, after three years, it has proved to be an abysmal failure. In its first two years, it dealt with just five cases. I found it rather difficult to drum up much sympathy for the excuse that it needed time to bed down. My theory was that it never got up.
The ruling that trusts "could", not "must", refer cases to the NCAA, together with the fact that trusts are allowed to ignore NCAA recommendations, has rendered this body both weak and toothless. It has an annual budget of almost £8 million but it has neither reduced the number of suspensions nor lessened the time that doctors are kept waiting. In fact, it has tended to increase that time.
Had my Bill, instead of the NCAA, come into being, researchers tell me that, by now, £100 million more would have been available to the NHS. I am bound to say that that figure staggers me. I do not believe that anyone will disagree that it is a lot of money.
Scotland adopted very similar regulations to those in my Bill and they have proved to be most successful. I claim, without blushing, that, had my Bill been permitted to go through and become law, equally we should have seen success in this very distressing matter.
When I tabled this Question, there had been no government response to the report. One emerged very quickly, in December, announcing new regulations. I have read them: immediate suspensions are allowed but they should last for only two weeks; doctors should be told what they are alleged to have done; and alternatives to suspension should be considered. Again, it is the use of the word "should" instead of "must" which worries me.
Only this morning, we heard that a hospital trust, which must have been sent those new rules and has certainly had time to read them, suspended a top brain surgeon who took an extra helping of croutons in his soup. Oh, vile crime! Had he been prepared, perhaps, to be a little less keen on croutons, he would have continued in his job. I find that incredible. In my Daily Mail this morning I read that he has been sitting at home fully paid since last week, no doubt thinking about croutons. Heaven knows how much suffering that has caused and will cause to his patients. Once a doctor is suspended, his return is neither quick and easy nor inevitable.
When I heard of this case this morning I found it incredible. I found it so impossible to believe that I telephoned the BMA, which checked it. I have to tell noble Lords that every word in the Daily Mail report is true. If that can happen when the Government have produced their new guidelines and the hospital trust has read and absorbed them, surely the guidelines are useless.
I have a dreadful feeling that I shall have to go on for another 16 years pleading the case for doctors who have been suspended, the suffering they are forced to endure and the amount of money that that costs the NHS. Obviously, what the Government have tried to do, no doubt with every good intention, has been utterly useless. Words fail me.
7.41 p.m.
Lord Clement-Jones: My Lords, as a veteran of debates involving the noble Baroness and this very important area, I pay tribute to her tenacity in raising this issue once again in response to an extremely interesting report from the National Audit Office.
The noble Baroness quoted figures from that report which are hair-raising. That affirms—the point has been made by her and a few others on a consistent basis—that such cases are extremely costly to the NHS, particularly when agency or locum doctors or nurses have to be hired in order to replace doctors and nurses who have been suspended. That may be on a temporary basis but, if the suspension is not quickly resolved, that temporary hiring seems to be almost semi-permanent. Not only is that costly for trusts in those terms, but the money spent on dealing with suspensions cannot go where it should, that is, on treating patients.
The NAO arrive at the figure of some £14 million per year spent as a result of inappropriate suspensions which could otherwise have been spent on NHS services. However, there is some light. I was interested in the comments of the noble Baroness on the

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December guidance, which was published shortly after the NAO report on maintaining high professional standards in the modern NHS. That makes clear that there are options which go far short of suspension but can restrict practice according to certain conditions and can provide an alternative to suspension.
Doctors and nurses can be selectively restricted from carrying out certain procedures or from working with certain patient types while problems are investigated as quickly as they can be. That then saves trusts from paying for extra or replacement staff and keeps clinicians from losing their skills because of long periods away from work.
Obviously, unnecessary suspensions cause huge detriment. If options exist, a trust should be compelled to explore them before suspension becomes the immediate option. The guidance issued in December wisely keeps patient safety as a priority, but it also emphasises the importance of reducing suspensions that are not necessary. In that sense it must be welcomed.
Suspension is meant to be a neutral procedure, which gives investigators time to examine a particular situation, not a disciplinary action. For physicians and surgeons, whose expertise depends on regular practice of complex and technical procedures, long suspensions can lead to deterioration of skills, potentially causing an even more risky situation. Clearly, suspensions should not be treated lightly or used too liberally. The new guidance, which I welcome, includes many factors that, if they can be implemented and monitored properly, will address some of those problems, especially by putting time limits on immediate exclusions and limiting further exclusions to four-week periods with active reviews.
Programmes that allow doctors, dentists and nurses to return to work as soon as possible and with full support are necessary to ensure that clinicians who are suspended do not drop out of the NHS workforce entirely. These programmes need to be as strong, comprehensive and consistent as possible. In view of the lack of current capacity in the NHS, we cannot afford to lose qualified staff, especially if they have been suspended unnecessarily or for spurious reasons.
Even for those who are eventually cleared of any wrongdoing, the personal stress, possible depression and loss of reputation caused by a suspension may keep them from returning to work even when they are perfectly qualified to do so. So suspension is an issue not just about cost but also about sustaining a strong workforce and being able to provide services for patients at as high a level as possible. If patient safety and patient care are priorities, getting qualified, safe medical staff back to work quickly and efficiently has also to be a priority.
I welcome the very clear statement in the guidance that clear reasons are now needed to suspend doctors. But, as the noble Baroness mentioned, that is all very well and, in a sense, so far so good until one looks at the practice. Like the noble Baroness, I am fairly accustomed—it is one of my rules of life—to questioning what the Daily Mail has to say. I, too, was in contact with the BMA and
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I, too, was told that the facts of the matter are as stated on the front page of today's Daily Mail. Clearly, the guidance issued in December has not passed the radar of a number of trusts, as we have seen. Surely, that is a matter of considerable concern. I hope the Minister will address that in his remarks.
What interested me about the guidance issued in December was the fact that it was joint guidance. It refers to,
"the full integration of the work of the National Clinical Assessment Authority (NCAA) in providing advice I o NHS employers on the handling of cases".
I do not know whether I misread it, but it did not seem that the NCAA was integral to that guidance; it seemed to have been issued by others involved. Why has not the NCAA been fully integrated in the NHS process for suspensions? Was not that the key reason for setting up the NCAA at the start?
The NCAA's website states that it provides advice about the local handling of cases and where necessary carries out clinical performance assessments to clarify areas of concern and make recommendations on how difficulties may be resolved. That seems to me to be a curiously limited remit.
When we debated the effects of the NCAA on suspensions last March, the NCAA had been in place for only 18 months. One year later, do we know with any more certainty whether the NCAA provides good value for money in its work, or, indeed, in fulfilling the objectives for which it was set up? Many of us felt that it should be an integral part of the National Patient Safety Agency or should be integrated into other regulatory bodies in a more secure way. I wonder whether this is the right model going forward?
Is the NCAA really sufficiently involved? Is it a proactive player in resolving the problems with the suspension process? As a special health authority does it have the necessary powers to deal with hospital trusts in such circumstances? If not, should not the Government propose that it should have such strengthened powers?
The misgivings on these Benches are similar to those expressed by the noble Baroness, Lady Knight. I know that the Minister will say that we are now fully devolved and that I simply want to take control of hospitals. But, in these circumstances, it seems to me that, at the very least, the NCAA should have much greater powers to influence the behaviour of trusts.
I am sure that we are all agreed that, with the NHS already suffering from long-standing staff shortages, the emphasis should be on helping clinicians to develop their skills and practise at their highest levels and providing support at an early stage for staff with performance problems. Hiding problems or waiting until they threaten patients' safety is not the way to proceed.
Many of the questions revolve around the NCAA. I believe that the guidance issued by the Government in December goes in the right direction. What we now need is a much firmer platform and programme for implementing that guidance.
7.50 p.m.
Lord Skelmersdale: My Lords, as my noble friend said, she has been pursuing the subject of suspension of clinical staff for many years now, both in your Lordships' House and in another place. It must have been like a red rag to a bull to be told by successive Ministers to "go away and don't fuss". But fuss she has continued to do and now her activities have been vindicated by the very recent National Audit Office report of 6 November last.
One has only to read the introduction to see that this report makes quite appalling reading. At a time when NHS resources are under such strain, it really cannot be right that cases often drag on for months and sometimes years with highly trained staff left kicking their heels at home rather than doing the skilled job for which they are being paid. To that extent I go along with the noble Lord, Lord Clement-Jones.
It is in everyone's interest—patients, clinicians and the taxpayer—for cases of suspension to be settled quickly and openly. But I am the first to admit that the solution is not easy, although the report makes some commonsense recommendations that bear very careful scrutiny.
Noble Lords know better than I do, but as a newcomer to this difficult subject I can see that there are three sides to it. The protection of patients is clearly one; the protection of the reputation of the hospital trust or PCT is another; and the proper treatment of clinicians is a third. These three sides—a triangle if you like—add up to waste in the health service and often worse—slower treatment for the patients themselves.
As the report makes clear—and virtually all noble Lords have referred to this—the costs of exclusion are high and growing. Between April 2001 and July 2002—the period covered by the report—the annual additional costs of exclusion are £29 million. It is additional because the excluded clinicians are still on the payroll to the tune of some £11 million.
I get the impression from reading the report that suspension is management's first rather than last course of action. My noble friend has in the past told us that sometimes clinicians are not even told they are being investigated. Does the Minister believe that this is still happening?
We hear a lot about patients' rights from the Government, but doctors have rights too. Some years ago a Conservative government, of which I was a member, went to great lengths to persuade the medical profession that clinical audit was in its own best interests. We succeeded and increasing clinical competence is the result; and less competent clinicians have been given extra training, transferred to other duties, or weeded out altogether. That has been a major plank in the NHS management armoury, but can one say that it is working as well as it should?
There are still problems: problems of personality, called in the report "professional conduct", where there are concerns about the clinicians' professional relations with patients; and of course personal conduct
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unrelated to patients. Perhaps the case my noble friend mentioned would be covered under that. More than half all suspensions are because of these two things.
An investigation should be the first step with a nominated investigator. The clinician should be told immediately that he or she is being investigated and by whom. If the investigator finds that the accusation is justified, can he find a way not to suspend? If suspension is the only option, then management should be at the right level at which to do it. Once suspension is in place, the report recommends steps that should be taken. For example, not only should trust boards be informed immediately, but they should know of the likely duration and forecast cost, updated as necessary, with, it is suggested, a non-executive director to scrutinise exclusions and encourage expeditious management and resolution of cases—something of course we all want.
Two weeks should be long enough to decide whether a clinician has a case to answer. The department has fairly recently, as has been referred to, set up the National Clinical Assessment Authority. The royal colleges have their own clinical assessment teams. Both bodies should be turned to for advice when suspension seems the only option. Is it the norm—to coin a phrase—to consult these bodies when a suspension is imminent? It certainly should be.
It is in nobody's interest that the resolution of the case should take long. There is a problem, though. Even when trusts have completed their investigations and decided to reinstate the clinician, it can take a considerable time to achieve it—a point mentioned by the noble Lord, Lord Clement-Jones. Retraining in the same or another trust may be necessary. Obviously, the more specialist the retraining, the more difficult it is to achieve. I doubt that this is soluble.
So, what is soluble? From what the noble Lord, Lord Hunt, said last time your Lordships discussed the matter, the initial investigation should be speeded up. Of course, we can all agree with that. But, has it? Has today's Minister any information on this? In the 23 months that have elapsed, he should have received some up-to-date figures. What is the current average length of a suspension? Has the length gone down as a result of the internal review by the department, as it badly needs to?
Notwithstanding all this, suspension remains; it has to in serious cases. I am sure that the seriousness of a case should in the first instance be determined by the hospital trust or the PCT in question, with ultimately the help of the royal colleges and the National Clinical Assessment Authority. The message from the department should be—and here I agree with my noble friend—"You must use them; they're there". I think this is part of the trouble: trusts do not actually go to the National Clinical Assessment Authority, which would certainly be a very good reason why, as my noble friend has said, it has conducted so few cases.
I am sure that it is in the best interests of patients that this bottom-up approach is used. After all, it is they who suffer from the inevitable longer waiting lists, or have to find another doctor or dentist, often remaining in pain for longer than is necessary.

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We all know that the Government have a commitment to reduce all waiting lists to three months by two years' time; and with 29,000 still waiting more than nine months for treatment, it is not a very good prognosis.
In passing, is the article in today's Times correct in asserting that some NHS trusts are block booking beds in private hospitals to get waiting lists down?
The report says that if, during the period it covered, exclusions had been completed in six months, there would have been a saving of £14 million a year. Using the department's own national average unit costs, this means that an extra 2,215 planned coronary heart bypasses, or a mammoth 19,200 inguinal, umbilical or femoral hernia repairs could be done every year. I repeat—extra. My noble friend believes that if her Bill had become law the figure would be at least double. Surely, these savings would fit the Government's ethos better than farming out?
But, to be serious, it was somewhat of a surprise to me to see that only one month after the NAO report was published, the Government published new guidance to trusts on this subject, Maintaining High Professional Standards in the Modern NHS: A Framework for the initial handling of concerns about doctors and dentists in the NHS. The department, the NHS Confederation, the BMA and the British Dental Association signed up to this guidance. No doubt the Minister will use it extensively in his response in a few minutes.
However, I hope he will not be too gung ho. My noble friend and I found it—I suppose I would not misrepresent her if I said—wishy-washy and full of possibilities not instructions. Even one of what the noble Lord, Lord Warner, would doubtless call by the horrible word "stakeholders", namely the BMA, could only say of it that it was a significant "initial" step along the way to addressing its concerns about the current misuse of suspensions. It is clear to me that, if today's Daily Mail article about a consultant being immutably suspended for having a double helping of croutons, about which we have heard, is even half true, the BMA's use of the word "significant" is erroneous, to say the least.
With that sort of behaviour, trusts are cutting their own financial throats. I am sure that a quiet word in the consultant's ear would have saved the trust what will assuredly turn out to be thousands of pounds. The noble Lord's predecessor would be foaming at the mouth about it.
The key to all this is better management in the health service—not only over this issue, but over M RSA and a host of other subjects. I even read today a story that revolved around telling a nurse off for not washing her hands between patients. "That", said one manager to another, "would be harassment".
Those problems will not go away until the Government take a firm grip. I await with eagerness to hear what sort of a grip the Minister has in mind.
8 p.m.
The Parliamentary Under-Secretary of State, Department of Health (Lord Warner): My Lords, I am grateful to the noble Baroness for bringing to our attention today the National Audit Office report into the management of suspensions of clinical staff in NHS hospital and ambulance trusts in England, published on 6 November last year. I must say that I am full of admiration for her persistence on this subject. I hope that some of what I shall say will be of some comfort—and possibly even some reward for her persistence.
The noble Baroness has asked the Government to respond to the NAO report. I should explain that the NHS chief executive, the Chief Medical Officer and the Department of Health's director of human resources gave evidence at a hearing of the Public Accounts Committee on the NAO report on 28 January. A report from the committee containing its conclusions and recommendations is expected shortly, and the Government's formal response will appear as a Treasury minute following its publication.
As several noble Lords have said, a major development since the publication of the NAO report has been the launch on 29 December last year of the framework document Maintaining High Professional Standards in the Modern NHS: a framework for dealing with the initial concerns about a doctor or dentist. I must say that that was the result of several years' negotiations with the professions. Several noble Lords have chided the Government for not cracking on and dealing with the issue, but I would gently say to them that they would be the first to criticise the Government if we did not negotiate those matters with the professions and their representatives. As noble Lords will know, sometimes these things take a little longer than all of us would like.
The framework has been issued to the NHS under a Secretary of State direction and compliance is mandatory. It represents an entirely new way of dealing with concerns about poor performance of doctors and dentists. It has been agreed with the BMA and the British Dental Association.
The first of the NAO's recommendations is that the Department of Health should review its guidance on the exclusion process to take account of the work of the NCAA and the NAO report findings. I am glad to say that the recommendations contained in the NAO report concerning the management of exclusions have been largely addressed in the new framework. I do not accept the remarks of the noble Lord, Lord Skelmersdale, that the document is wishy-washy.
It is important to acknowledge that the NAO report shows all too clearly the costs of failing to manage the exclusion process effectively in both the effect on the individual clinician and the diversion of resources from patient care. However, it is worth bearing in mind that the £29 million annual cost of suspensions reported by the NAO and mentioned by several noble Lords is a fraction of the NHS payroll of £55 billion. It must be considered in that context. Some of that is the price that we must pay to ensure patient safety.

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That said, we agree that there are still too many suspensions and that too many still last more than six months, but we believe that we are beginning to see the end of very long suspensions.
The work of the National Clinical Assessment Authority and the Chief Medical Officer's special adviser have made significant inroads into the problem. Despite what the noble Baroness said, we believe that the establishment of the NCAA in 2001 to provide support and advice to NHS employers on the management of poor performance has had a significant impact. In the first two and three-quarter years of operation, the NCAA received more than 900 requests for help. Many of those cases were dealt with through advice and continuing support and did not require the authority to undertake a detailed assessment of the doctor. So there was an attempt, using prevention rather than cure, to stop problems occurring.
Baroness Knight of Collingtree: My Lords, I am grateful to the Minister. Would it not have been more efficacious to have given the NCAA the power to say, "You must do this", instead of, "You should"? When we consider the history, so often trusts have not done what the NCAA would have liked them to have done. Indeed, they do not have to report a case to the NCAA at all; they can go on suspending people. If they had to report a case, would that not be more helpful?
Lord Warner: My Lords, my response to the noble Baroness is to ask her to let me develop the rest of the Government's case. I would further say that the new framework document was issued only on 29 December and it is not mandatory until 1 April, so there is still time for us to see how the new arrangements work. I shall try to deal with her question in some of my responses.
There are three key strands of the NCAA's work that are aimed at tackling suspension. The first, and our priority, is preventing inappropriate suspension in individual cases. It is not true to suggest that the NCAA is doing nothing. An analysis of cases between April and September 2003 showed that the NCAA was able to recommend an alternative to suspension in 85 per cent of cases where suspension had been considered—that is before the new framework comes into effect. If I may say so, that does not suggest that trusts are not listening to the advice given to them by the NCAA.
Lord Skelmersdale: Yes, my Lords, but how many of its suggestions to the various trusts and organisations in those 85 per cent of cases achieved results? Two.
Lord Warner: My Lords, noble Lords opposite are eager to ask me questions. If they could just contain their eagerness, I could deploy my case, as I listened patiently to them. They may get the answer to some of their questions, if I could be allowed to continue what I was going to say.
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The second key strand of the NCAA's work is aimed at tackling ongoing, long-term suspension. Through the intervention of the Chief Medical Officer's special adviser, a significant number of those long-term cases have been resolved. Finally, there is the identification and sharing of good practice throughout the NHS. It is not just an issue of short-term suspensions; it is a more comprehensive approach by the NCAA to the problem.
The authority predicts steady growth in referrals to it resulting from the key role that it will play in the new procedures for managing exclusion. It is not true, as was suggested, that trusts do not go to the NCAA. About 75 per cent of NHS employers have made use of its services so far. I acknowledge that that is not 100 per cent, but not all have doctors suspended. As the new framework becomes embedded in local procedures, the number is bound to increase.
The National Audit Office fully supports our view that NHS employers should seek the advice of the NCAA in all cases concerning doctors. That is implemented by the new framework, which states that the NCAA should be consulted and contacted at an early stage, when action on clinical concerns is considered, and that the NCAA must—a word that the noble Baroness is keen on be consulted, where formal exclusion is being considered. We have provided an element of dirigisme in our approach.
I shall use two short case studies to demonstrate how the NCAA has contributed to public protection and worked in the interests of doctors to help to prevent an unnecessary suspension taking root. They are real cases, not hypothetical. In the first, it had been agreed that the NCAA should undertake a full clinical performance assessment of a doctor about whom there were performance concerns. The NCAA fast-tracked the assessment due to the nature of the concerns. During the part of the assessment where the doctor's clinical practice was observed, it became apparent to the assessors that there were serious deficiencies in the doctor's clinical capability that compromised patient safety. The assessment was immediately halted, and the referring body was advised to suspend the doctor and refer the doctor to the GMC. The advice was taken, and the doctor was suspended and referred to the GMC within five days. So, the public were protected. They are not all cases involving doctors who need not be suspended. Action needed to be taken, and that example shows how the NCAA went through the process, observed that patients were at risk and worked with the employer to deal with the situation satisfactorily.
In the second case study, a referring body contacted the NCAA because it had been led to believe that a doctor working for it had a criminal record and that the nature of the alleged criminal activities might jeopardise patient safety. However, it had no way of substantiating the concern. The NCAA, working with

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the referring body and using its contacts with the police and others, was able to establish robustly and within three days that the allegations were unfounded, completely clearing the doctor's name. In that way, the NCAA was able to prevent the injustice that would have occurred had the doctor been suspended.
There are examples of how other NAO recommendations have been reflected in the framework that we have been discussing. They include a requirement for strategic health authorities to scrutinise the length and cost of exclusions; ensuring that exclusion is used only if there is a threat to patient safety; considering, as alternatives to suspension, restrictions on practice and retraining; and ensuring that trust boards are kept in touch with the duration and costs of exclusion and that they review progress. For the first time, the new exclusion framework will provide for an initial immediate exclusion of no more than two weeks; formal exclusion for up to four weeks; notification of the NCAA before formal exclusion; active review to decide renewal or cessation of each exclusion; a right to return to work, if a review is not carried out; and, significantly, a maximum period of exclusion of six months, except for cases involving a criminal investigation.
It is clear that exclusion or suspension should be used in only the most exceptional circumstances and that the NCAA is fully integrated into the system. It has been fully consulted on the work of drawing up the framework, and it has key roles to play at different stages of the process.
I understand the views of those who say that it has taken far too long to get to this stage. It has been due to a number of things. It has taken time to accept the need for a fundamental shift in thinking about the way in which poor performance is managed in the medical profession. The work was led by the work of the Chief Medical Officer in his consultation document Supporting Doctors—Protecting Patients, which was published in 1999. It was here that the NCAA was conceived. However, such fundamental changes take time for professions to accept. The hearts and minds of the profession and its leaders had to be gained. I am glad to be able to say that the integrated approach of support and assessment that the NCAA has established is, I am reliably informed, a world leader and, to an increasing extent, accepted by the medical profession.
The noble Lord, Lord Clement-Jones, asked whether the NCAA was right in this context. He knows that there is a review of arm's-length bodies, and this review includes the NCAA. There is no more significance in my remarks than that.
At the same time, lengthy negotiations have continued with the profession to reform the investigation of cases and to replace the guidance on suspension. This is now in place. There is still the disciplinary strand of the framework to complete. Future progress requires co- operation from the profession, and I hope that we will be able to complete the package in the near future, but it takes two to tango.
The noble Baroness referred to the story in the Daily Mail about a brain surgeon allegedly suspended for consuming a bowl of soup—with or without croûtons, I
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am not altogether sure, but without paying. I am not sure that I share her confidence that the report was quite as full as she suggests. I do not recall it, for example, mentioning anything about actions caught on CCTV. This is, of course, a matter for the Nottingham University Hospital NHS Trust. The NCAA is not a disciplinary body. It may be helpful if I tell the House that the NCAA has offered its help, but it is of course for the trust to decide whether it wishes to accept.
The NAO has produced an important report. It highlights serious issues facing not only individual clinicians, for whom suspension can cause great difficulties, both professionally and personally—here I agree with the noble Baroness, Lady Knight—but also the NHS as a whole and, of course, patients.
The new framework which, I am pleased to say, embodies many of the recommendations contained in the NAO report, has its focus on helping doctors and dentists to keep up to date and practise safely and not to punish them for any problems arising from clinical performance.
I am confident that the innovative work of the National Clinical Assessment Authority, underpinned by the new framework document, will help the NHS to manage poor performance more constructively, and see an end to the suspension culture of the past. But I am sure we can rely on the noble Baroness to keep us on our toes on this issue.
Baroness Knight of Collingtree: My Lords, before the Minister sits down, I ask him very seriously not to brush aside the case that was reported today and to imagine that there has been a misreporting. As I explained, I took the trouble to ring the BMA—as did others, as we have heard—which confirmed that every word of that report was true. Surely we cannot regard lightly such a case, which has denied some very needy people some very expert care, at least for the time being.
Lord Warner: My Lords, on that last point, I am reliably informed that there will be no detriment to patients because the work that that doctor was due to perform will be covered by his colleagues. On that particular point, I can set the noble Baroness's mind at rest.
I was not trying to brush this aside, but the employer of this doctor is neither the Department of Health nor me—it is the local trust. It is the trust's responsibility to deal with this issue and, as I have said, I know that the NCAA has offered its help to the trust. I have also made it clear that it is for the trust to decide whether to accept that help.
Lord Skelmersdale: My Lords, before the Minister finally sits down, I asked him a question arising from something he said about the percentage of the number of cases referred to the NCAA where it did not recommend suspension. Will he be good enough to

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write to me, telling me in how many cases—I mean actual numbers rather than percentages—was the NCAA's advice ignored?
Lord Warner: My Lords, I will certainly let the noble Lord know, if we have the information, in how many cases the NCAA's advice was accepted, and ignored.
Baroness Farrington of Ribbleton: My Lords, I beg to move that the House do now adjourn during pleasure.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 8.18 to 8.31 p.m.]

Energy Bill [H.L.]
8.31 p.m.
Further consideration of amendments on Report resumed.
Clause 52 [Jurisdiction of Constabulary]:
Baroness Anelay of St Johns Baroness Anelay of St Johns moved Amendment No. 154:
Page 43, line 21, at end insert "(irrespective of how far that is from a civil licensed nuclear site)"
The noble Baroness said: My Lords, I beg to move Amendment No. 154. In doing so, I shall speak also to Amendments Nos. 155, 157, 159 and 160, all of which are in my name and are supported by the noble Lord, Lord Bradshaw.
In a sense, these are two slightly different groups. The amendments all refer to jurisdiction, but have a slightly different objective. Amendments Nos. 154, 155 and 157 are, as a whole, a sub-group. They cover the same ground as amendments that I tabled in Grand Committee, and they are brought back to invite the Government to clarify further the jurisdiction of the constabulary as described on the Bill. There was some confusion on this matter in Grand Committee, and the Minister kindly wrote to me afterwards. In his letter he signalled that the Government acknowledged that there had been some confusion about jurisdiction. He then tried to clarify the matter further; but he did so within the confines of the Bill, as it is currently drafted, and within the confines of the Government's intentions. These amendments are about clarification.
I then go on to new ground in my two new clauses within Amendments Nos. 159 and 160. They have been tabled at the direct request of the UKAEA Police Federation. The purpose is to ask the Government to put on the record their reasons for treating the Civil Nuclear Police Authority differently from the British Transport Police and the Ministry of Defence Police in relation to the powers introduced into the Antiterrorism, Crime and Security Act 2001, covering both jurisdiction and collaborative agreements. I thought it would be convenient for the House if I put those two clauses together. Since they were tabled the wrong way
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round, which is entirely my fault, I think it might be more helpful if I spoke first to Amendment No. 160, because that continues the theme of the first sub-group of amendments with regard directly to jurisdiction.
I have read the debates of the Anti-Terrorism, Crime and Security Act in full over the past couple of weeks, because we have had two debates on these matters within the Home Office brief on successive Thursdays. The Part 4 powers of that Act were renewed last week, on 15 March. As a result of reading the record carefully—because I was not in my brief at that stage and did not take part in the debates on that Act—I discovered for the first time the position taken by the Government and the other parties at that stage. Therefore, I am fully aware that the Government's proposals had a rocky passage through this House, since it was considered that they were going beyond what was strictly necessary to respond to the new terrorist threats. There was a feeling that the Government were trying to enlarge police powers and response beyond what was demanded by that particular threat. The noble Lord, Lord Wallace of Saltaire, said at col. 956 on 6 December 2001 that it was,
"not only an anti-terrorism Bill but a convenient vehicle for putting through a number of other measures".—[Official Report, 6/12/01; col. 956.]
I fully recognise that there was resistance to the idea of extending the jurisdiction of police forces beyond what was specifically related to a response to terrorist offences. But the Government got their Act, which left the United Kingdom Atomic Energy Authority police authority out of the loop; it was not included, as others were. I noted that the noble Lord, Lord Bradshaw, made some very telling points about the need for the British Transport Police to be covered—and indeed, they were, and it is right that they were. I hope that he will contribute to this debate, too.
The Minister will be aware that there was a strong feeling in the Atomic Energy Police Federation that the Government have got this matter wrong. Indeed, it is supported by other police federations in the matter—by those police federations that are within the purlieu of the Home Office, which support the request by the United Kingdom Atomic Energy Authority police that they should be within the family of those who have wider jurisdiction.
The constabulary are responsible people; they want to be able to respond to emergencies in the proper way, so they want to be able to go to the assistance of other people immediately that help is needed in an emergency, and not to have to be in the same position as any other private citizen in any action that they take to assist. On the face of it, there seems no good reason for members of the constabulary to be prevented from acting with the full powers of other Home Office police forces in an emergency, particularly when they come across something in an area where they would not normally have constabulary powers. We have to take into account that this Bill, rightly, transforms the special constables into full constables.
The federation advises me that it has examined case studies and scenarios in which the absence of such emergency powers could have dire implications and consequences for national security. It also makes the very practical point that, apart from those considerations, emergency powers are required for the plain and simple reason that members of the public expect all police officers, especially those in uniform, to act in an emergency and protect the public interest. They are concerned that the public see them as being a source of assistance when it is an assistance that they are not able to give.
On collaborative agreements, will the Minister confirm that in the DTI's original consultation, the Government suggested the power to enable the constabulary to enter into formal collaborative arrangements with other forces, mirroring Section 23 of the Police Act 1996? That seems to have been proposed by the Government but has not apparently made its way into the Bill. Will the Minister explain the Government's reasoning for not taking that forward? Surely, the omission of collaborative agreements might seriously undermine all necessary future joint initiatives with other police bodies.
In summary, I am asking for a clarification of the Government's earlier position on jurisdiction with regard to the Civil Nuclear Police Authority and asking what consideration the Government have given, not only since Grand Committee but before that, to the proposal that is so strongly supported by the United Kingdom Atomic Energy Authority police that they should be brought into line with the British Transport Police and the MoD with regard to both jurisdiction and collaborative agreements. Will the Government explain why they have decided to turn against that proposal? I beg to move.
Lord Bradshaw: My Lords, I support the sentiments of the noble Baroness, Lady Anelay of St John. On these Benches, we expect every police force to adhere to the same standards in respect of jurisdiction, training, uniform and equipment as any other police force. The noble Baroness made a very good point when she said that when people see a constable in a uniform that is the same apart from cap badges and buttons, which people in a fracas probably do not study in great detail, they will expect the same service. To the extent that the Government are sheltering behind the fact that these people are not properly trained, equipped or uniformed, the regulations need to be changed. I believe we should seek absolute uniformity so that the public can expect a uniform service. I accept that the UKAEA Constabulary and the British Transport Police are specialised police forces, but nonetheless, when they are off their sites or are dealing with matters adjacent to their sites, people will expect them to behave in the same way as any other police force.
Baroness Byford: My Lords, I rise to support my noble friend's amendment. I was lucky enough to be with her when we met the UKAEA Police Federation, which feels strongly that the Government have got it
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wrong. I shall be interested to hear the Minister's answers to some of the questions posed by my noble friend.
I shall give one or two examples of matters that we would like clarified. My understanding from the UKAEA Police Federation was that the UK AEA Constabulary operates on UKAEA sites and has full control of what goes on within them. But what happens if UKAEA police are escorting somebody from one point to another, which takes them outside their boundary, and they come across a road accident? Are they supposed to go by that road accident without stopping and helping? Members of the general public would be appalled if there was somebody in uniform who they expected could give some help but who, under the Bill, was not allowed to do so. The UKAEA Police Federation gave other examples but that is one I would like the Minister to address. There is a difference between the role of the UK AEA Constabulary within its area and outside it and it is the role outside it that raises questions.
I also wish to underline what my noble friend said and ask when it was decided not to treat the UKAEA Constabulary in the same way as the other examples that have been given tonight: MoD Police, the British Transport Police, the Civil Nuclear Constabulary and the ordinary police forces? At some stage somebody must have made a conscious decision. If not, is it an oversight? It could be. That is something about this stage of a Bill. We can pose questions and often the Government say that something was an oversight, that they had not thought in that way.
My next question then follows: if the UKAEA Constabulary are not to be included, does the Minister accept that UKAEA police might find themselves restrained from giving help to the general public when it would be in everybody's interest that they should be allowed to do so? I suspect that they would refrain from helping because they would not be covered by insurance because they were technically beyond their boundaries. It is something that it is important to understand.
The noble Lord, Lord Bradshaw, raised the question of why we should not have the same standards for all these forces. It is hugely important. Members of the general public do not have regard for whether a policeman is in the MoD Police or the British Transport Police. Certainly, when I have travelled on trains there have been British Transport Police constables and I have been truly thankful that they were there. I have never doubted that they were not in their jurisdiction. Yet with the Bill, the situation is different: the UKAEA Constabulary cannot be included.
I pose those four specific questions but the one I have tried to make a little wider than my noble friend did in her introduction is what happens when U KA EA police are doing escort work or work that takes them outside their perimeters. What is their legal liability if they go to help somebody? I am sure that in some cases they would be asked to do so. It seems to us to be

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slightly strange that this decision has been arrived at without any explanation being given either to this House or to the UKAEA Constabulary.
Baroness Carnegy of Lour: My Lords, I hope that when the Minister replies he will not spend all his time criticising the wording of these amendments, because what is really important is what they say. He looks very hurt at that suggestion, but sometimes that happens and it is a way out for Ministers sometimes.
What matters is what these amendments suggest—from two points of view: first, because the police want to be able to do the job properly—both the ordinary local police forces and the future constabulary; secondly, because of the public perception which is extremely important in this instance. All the points have been made about why the police feel that they would do the job better if they could have collaborative agreements and jurisdiction that overlaps. The point has also been made about public perception. Whatever the reason for trying to create this separateness—and there is of course a distinction of function—it is probably counter-balanced by the disadvantages; and that is what we want to hear about.
I am sorry that we are doing this on Report because it would be nice to pick up on what the Minister says—once we have heard it. I do not know what he will say. This stage is a very bad way of legislating, but we cannot help that—those are our rules. I hope that the Minister will tell us why the Government take the position they do, whatever it is; and I hope that perhaps they are sympathetic to these amendments.
Lord Triesman: My Lords, I think that it is probably a very normal way of legislating. As I read the reports of debates on legislation and Committee stages in the other place, I frequently see processes which probably bear some reflection on this and probably reflect the fact that this legislation started in this House.
I will start with some general points rather than being tempted into criticising the wording of the amendments, which had not occurred to me until the suggestion was just made. The points made by the noble Baronesses, Lady Carnegy and Lady Byford, about the reasons why the legislation is framed in rather different terms here than happened with the Ministry of Defence Police and British Transport Police need immediate scene setting.
Legislation is very much a creature of its times. To be candid, when the legislation that established the MoD Police and the British Transport Police was drawn up, these questions were not raised. The legislation that created those forces was brought into law and no one raised the issue about whether there should be a very specific separation of functions and powers. That was not the way in which the debate was conducted at that time. This legislation, I suppose, has been constructed looking through the telescope from the other end, if I can put it that way. We started with the question: what should these functions be? and then tried to make sure we focused very precisely on that in order to make sure that the functions were
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precisely those that were required by this legislation. Therein lies the difference: it is more a matter of history than of anything else.
This group of amendments brings together a number of different themes in amendments concerning the jurisdiction and powers of the Civil Nuclear Constabulary. As I hope I tried to make as clear as I could in the debate in Grand Committee, the objective of the Government here is very precise: it is to create a civil nuclear constabulary which has the powers that it needs, and precisely the powers that it needs, to ensure that civil nuclear sites and materials are effectively safeguarded. That is the purpose; there is no other. I am sure that that objective at least has the support of the whole House. I shall come back to whether, in the course of their duties, people come across other kinds of incidents, but let us at least start by seeing whether we are agreed that that objective most certainly must be fulfilled.
I shall not take the amendments in the precise order that they were put to me. I should like to try to get a whole picture by taking your Lordships through the amendments in an order that seems rational to me.
Amendment No. 159 duplicates provisions already in Schedule 14 (paragraphs 1 and 5) to the Bill, which will enable the constabulary to enter into collaborative agreements with other police forces, both in England and Wales and in Scotland—right across the whole of Great Britain. I believe that was one of the first assurances that I was asked to give—that the collaborative arrangements would certainly be in place. There are, of course, at present a number of similar operational arrangements between the constabulary serving the UKAEA and other police forces. There is a close relationship with local forces with which that specialist force needs to interact. Formal relationships are set out in the national policing protocol that forms the basis of the detailed operational memorandum of understanding between the relevant local forces. I assure noble Lords that those agreements and those arrangements will continue. The national policing protocol sets out the overall approach to policing and the responsibilities and obligations of the constabulary and the regional forces supplemented by detailed agreements between chief constables in the regions where the constabulary polices nuclear sites. In that sense we see this provision as carrying real continuity into the future arrangements.
As I have said, there are a number of detailed provisions regarding entering into collaborative agreements. The provisions achieve this effect by making appropriate amendments to Section 23 of the Police Act 1996 and to Section 12 of the Police (Scotland) Act 1967, both of which deal with collaboration agreements, to ensure that the constabulary is also covered by those provisions. For those reasons I suggest that the amendment is not necessary.
Let me dwell for a moment on the jurisdiction and powers of the constabulary. Given its role in protecting civil nuclear sites and material, it is obviously vitally important that we get the jurisdiction and powers available to officers of the Civil Nuclear Constabulary absolutely right for that task. I therefore very much

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welcome the attention that is being given to this part of the Bill. The jurisdiction in the Bill is based on that of the present UKAEA Constabulary (set out in Section 76 of the Anti-terrorism, Crime and Security Act 2001), and the Government believe that this core jurisdiction, as set out in Clause 52, is what is required to allow the constabulary to undertake its nuclear security function.
For clarity and to make sure that we get the issues of jurisdiction powers absolutely right, the provisions cover the following places in Great Britain: civil licensed nuclear sites and the area within five kilometres of those sites—the reason for the five kilometres was discussed in considerable detail in Committee—any transhipment site at which the constabulary needs to protect nuclear material while it is al the site—that adds to the diversity and the scope—and anywhere the constabulary needs to be in order to protect nuclear material in transit which, of course, could cover very wide areas of Great Britain—and to pursue or detain a person reasonably believed to have unlawfully removed or interfered with nuclear material being safeguarded by the constabulary, or to have attempted to do so. That could take a constable in this domain anywhere. These provisions are broad in scope.
Amendments Nos. 154, 155 and 157 seek to clarify that further by making it more apparent that those categories—the protection of nuclear material in transit and the pursuit or detention of people who are believed to have removed material, or attempted to do so—apply irrespective of how far those places are from a licensed nuclear site. The advice that I have received is that the Bill is already sufficiently clear on that point and the addition of the words in these amendments would have no substantive effect on those points in terms of the scope of the jurisdiction of the constabulary. For those reasons I hope that they will be withdrawn.
I turn briefly to one or two points that have been made, understandably, about what a constable in uniform will do when he appears at a non-nuclear incident and where the public may reasonably expect that he could intervene to helpful effect. I suppose it goes without saying that any constable, just like any other citizen in those circumstances, would be entitled to intervene using citizens' powers. I suspect some authority would be conveyed by the appearance of constables in those circumstances. In considering the exercise of powers across Great Britain, and allowing for the fact that people would be able to pursue and detain anyone who stole or interfered with materials that are being safeguarded, there is no doubt in our minds that such occasions may occur. We see no reason why people should not be able to intervene. We would expect any citizen to be able to intervene because, as citizens, people are in a position to do so. The Bill provides for that and for the mobility point that I have already made.
These amendments extend the jurisdiction to anywhere in Great Britain as long as the exercise of the police powers is outside the constabulary's core jurisdiction which is in connection with the safeguarding of nuclear materials. I know that the UKAEA Police
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Federation has been arguing strongly for the same emergency and assistance powers available to the MoD Police and British Transport Police. They are subject to Amendment No. 160 and allow officers of those forces to intervene in certain circumstances with police powers outside their usual jurisdictions. The Government, together with the Home Office, have considered that very carefully. The extension of those powers to the Civil Nuclear Constabulary—especially as we expect there to be very few incidents and a relatively limited role for the constabulary in policing the public—suggest to us that such a clause would not be justified on the face of the Bill.
While we know that there has been support in some circles for the proposition, there is not widespread support for the proposition from the Association of Chief Police Officers. It is not at all clear that such a proposition would be welcomed by all bodies involved in public policing. A full consultation would be required. That situation is bound to be kept under review while those with authoritative voices conclude that these powers are not adequate. However we should not draw the conclusion that there is widespread support for such a change.
I now turn to Amendments Nos. 156 and 158. It has become apparent that the constabulary may occasionally have to exercise police powers or privileges outside its core jurisdiction in order to exercise police powers within that core jurisdiction—that is the point to which I have referred—or for purposes connected with that core jurisdiction. An example might be an application for a search warrant for a place within the core jurisdiction that has to be made at a place outside the core jurisdiction, or where the constabulary is escorting someone it has arrested within its core jurisdiction to a police station located outside its core jurisdiction.
Amendment No. 158 and the consequential Amendment No. 156 address that problem. They would also allow constabulary officers to pursue throughout Great Britain anyone who commits a crime within their core jurisdiction. This would allow, for example, a member of the constabulary who, while undertaking his nuclear security duties comes across a general crime incident occurring within his core jurisdiction, to pursue the offender until such time as control can pass to the local force. But it must be desirable and we would normally expect those requirements to go to the local force so that it could do the work for which it is best trained and is most expert.
While there may be occasions when the constabulary's role in protecting civil nuclear sites and materials in transit means that it might become involved in public policing, that is not the constabulary's role and it is not resourced to become involved in such matters except on an exceptional basis. Amendments Nos. 156 and 158 allow for such exceptions.
Amendment No. 160 would take that flexibility further. It would allow the constabulary to exercise police powers outside its Clause 52 jurisdiction, for the purpose of providing assistance to other police forces which they have requested or required in certain emergency situations. As noble Lords may be aware, such powers are available to officers of the Ministry of Defence Police and the British Transport Police.

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The BTP and the MoD police have such powers for two reasons. First, they are regularly policing the general public and have developed a level of expertise in dealing with the public across a wide range of incidents and circumstances. Secondly, it has been established that the number of situations that have arisen which would require the use of those extended powers justifies their being available in those circumstances, and none of that is true of the UKAEA Constabulary. The operational duties of the constabulary mean it will have much less experience in public policing than either of those other forces.
The Government are concerned that the constabulary should not have powers until there is an established operational need—that is the criterion—and constabulary officers will not be in a position regularly to exercise such powers. It is a small constabulary and reacting to circumstances and demands from other forces might also divert it from the core tasks of protecting civil nuclear sites and materials. Any significant level of assistance would seriously weaken its ability to carry out its nuclear security role and that would be unacceptable.
The Government are prepared to keep the matter under review, but at this stage they are not prepared to accept the extensions that have been suggested and I trust that the amendment will be withdrawn.
9 p.m.
Baroness Byford: My Lords, I seek clarification from the Minister before he sits down. He said that he could not imagine many instances when the new police force might come into contact with the public or might be needed. He has said that the force would have the same powers as any civil person. I do not believe that my noble friend Lady Anelay and I did not accept that. I asked him about liability. For example, if the force helps at an incident and something goes wrong—as can happen—is it covered under its own existing framework, or, because it is acting outside that framework, is there a liability if anything goes wrong and who bears it? If the force is not covered in those circumstances, surely it is much less likely to be willing to become involved in something that is beyond its brief?
Lord Triesman: My Lords, I wish I could give a simple answer. I cannot do that—not because I wish to evade the question, but because the number of possible circumstances is huge and the extent of liability would reflect those circumstances. It is the case with police forces now that there are some areas where there are outcomes of actions that are covered and some that are not, depending on the level of responsibility in any situation. But I am willing to ensure that I can answer her question as precisely as I can, despite the diversity of such circumstances and I shall write to the noble Baroness with further indications. I hope that it will not be an overly long and complex letter when it arrives, but we can imagine many such circumstances. They potentially range from the police making a simple mistake to driving so fast and recklessly in
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pursuit of someone, that any injuries would carry a liability, because no reasonable person would have done that. I use those examples purely for illustration.
Baroness Anelay of St Johns: My Lords, I am grateful to the Minister for the care and attention he has taken in answering questions on this complex issue. It is very dear to the heart of the Police Federation both in its current form and when translated into the new one and is an issue I take extremely seriously. This is a body that is trying its very best to act in the best interests of the public, not just for the businesses it is protecting.
I am grateful for the Minister's further clarification on the three amendments I brought back from Grand Committee. He has made the Government's current position clearer. I accept the government amendments. They improve the Government's position, but not enough. However, they are still stuck in the same mindset. The Government's overall approach to my amendments seems to be, "Yes, we know we've done this to other police, MoD and British Transport Police, but we don't want to start from there." Well, we are there. We have now got a police force that will have to continue to deal with emergencies.
I certainly shall not refer to every point, but there are a couple of issues that really jump out of the page. First, the Government are saying the responsible constables in the new civil nuclear police can act as any other responsible citizen may do when faced with an emergency. Indeed they may. The constables are saying that they not only want to react, they want to have the authority to be able to react in a proper capacity as the public expect. They are faced with the difficulty of a private citizen making a citizen's arrest. That is not the same as a police arrest. If you are a policeman carrying out an arrest acting in your capacity as a constable and you are assaulted by the person whom you attempt to detain, that person could be charged with assault on a police officer. As the Minister will know, according to magistrates' guidelines that offence carries a higher starting point in sentencing terms. It is seen as a more serious crime. That is taken seriously by those who think to take a swing at a police officer. Those people may not have the same reserve when it comes to someone they think is not a police officer.
There is the other issue that my noble friend Lady Byford raised. If these constables act in a way that they consider to be proper and responsible, they might find themselves faced with a claim for compensation for any assault they carry out. They are acting in a private capacity, which puts a heavy responsibility on them when they are seen by everyone around them as being the person in authority.
The other issue that jumps out of the page is that of the Government saying that it is not needed because it will not happen. We need to consider this further. The Minister said that he will keep this matter under review. This is the Government saying, "Don't do it now, but we'll think about it." Well, that may never come to pass. Accidents may happen in the mean time. We are being told that there will be few incidents and therefore it is not justified and we need consultation

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first. But the Government have had the chance to carry out consultation. They knew that this was of particular concern to this constabulary. The Government say that there will be few incidents but we simply do not know what the future may hold.
The Minister's parting shot is to tell me that this constabulary is different from the British Transport Police and the MoD because those two forces are regularly policing the public. Well, this member of the public has not been regularly policed by the MoD in 50-something years. I shall say no more than that. I do not accept the force of the argument that the Minister has sought valiantly to make today. I do not mean to be condescending but he has tried to throw every missile at me he could. However, I can tell him that with the support of the United Kingdom Atomic Energy Authority Police behind me, he has missed every single time.
On this occasion, I give notice that although I shall beg leave to withdraw the first amendment in the group, when Amendment No. 160 is called I shall seek to test the opinion of the House.
Amendment, by leave, withdrawn.
[Amendment No. 155 not moved.]
Lord Triesman Lord Triesman moved Amendment No. 156:
Page 43, line 25, leave out "also"
[Amendment No. 157 not moved.]
Lord Triesman Lord Triesman moved Amendment No. 158:
Page 43, line 30, at end insert—
"( ) A member of the Constabulary shall have the powers and privileges of a constable throughout Great Britain for purposes connected with—

(a) a place mentioned in subsections (1) to (4);

(b) anything that he or another member of the Constabulary is proposing to do, or has done, at such a place; or

(c) anything which he reasonably believes to have been done, or to be likely to be done, by another person at or in relation to such a place."

[Amendment No. 159 not moved.]
Baroness Anelay of St Johns Baroness Anelay of St Johns moved Amendment No. 160:
After Clause 52, insert the following new clause—
"JURISDICTION OF CONSTABULARY IN ASSISTING OTHER FORCES
(1) Where a member of the Constabulary has been requested by a constable of—

(a) the police force for any police area,

(b) the Ministry of Defence Police, or

(c) the British Transport Police Force,

("the requesting force") to assist him in the execution of his duties in relation to a particular incident, investigation or operation, members of the Constabulary have for the purposes of that incident, investigation or operation the same powers and privileges as constables of the requesting force.
(2) Members of the Constabulary have in any police area the same powers and privileges as constables of the police force for that police area—
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(a) in relation to persons whom they suspect on reasonable grounds of having committed, being in the course of committing or being about to commit an offence; or

(b) if they believe on reasonable grounds that they need those powers and privileges in order to save life or to prevent or minimise personal injury.

(3) But members of the Constabulary have powers and privileges by virtue of subsection (2) only if—

(a) they are in uniform or have with them documentary evidence that they are members of that Constabulary, and

(b) they believe on reasonable grounds that a power of a constable which they would not have apart from that subsection ought to be exercised and that, if it cannot be exercised until they secure the attendance of or a request under subsection (1) by a constable who has it, the purpose for which they believe it ought to be exercised will be frustrated or seriously prejudiced.

(4) In this section—
"British Transport Police Force" means the constables appointed under section 53 of the British Transport Commission Act 1949 (c.xxix) (as to appointment of constables)."
The noble Baroness said: My Lords, I beg to move Amendment No. 160 and I wish to test the opinion of the House.
9.11 p.m.
On Question, Whether the said amendment (No. 160) shall be agreed to?
Their Lordships divided: Contents, 35: Not-Contents, 43.

Division No. 3

CONTENTS

Addington, L.

Hooson, L.

Anelay of St Johns, B.

Jenkin of Roding, L.

Astor of Hever, L.

Jopling, L.

Attlee, E.[Teller]

Knight of Collingtree, B.

Barker, B.

Lamont of Lerwick, L.

Bradshaw, L.

Livsey of Talgarth, L

Bridgeman, V.

Lyell, L.

Mackie of Benshie, L.

Brooke of Sutton Mandeville, L.

Maddock, B.

Brougham and Vaux, L.

Masham of Ilton, B.

Byford, B.

Miller of Chilthorne Domer, B.

Caithness, E.

Miller of Hendon, B.

Carnegy of Lour, B.

Palmer, L.

Courtown, E. [Teller]

Park of Monmouth, B.

Fookes, B.

Rennard, L.

Gray of Contin, L.

Roper, L.

Greenway, L.

Shutt of Greetland, L.

Higgins, L.

Windlesham, L.

NOT-CONTENTS

Ahmed, L.

Dixon, L.

Andrews, B.

Evans of Parkside, L.

Bassam of Brighton, L.

Evans of Temple Guiting, L.

Bernstein of Craigweil, L.

Farrington of Ribbleton, B.

Brooke of Alverthorpe, L.

Gale, B.

Campbell-Savours, L.

Graham of Edmonton, L.

Carter, L.

Grocott, L. [Teller]

Chandos, V.

Hollis of Heigham, B.

Clark of Windermere, L.

Hughes of Woodside, L.

Crawley, B.

Hunt of Kings Heath, L.

Davies of Coity, L.

Jones, L.

Davies of Oldham, L. [Teller]

Jordan, L.

Dean of Thornton-le-Fylde, B.

Levy, L.

571

Lockwood, B.

Sawyer, L.

Lofthouse of Pontefract, L.

Smith of Leigh, L.

Macdonald of Tradeston, L.

Stone of Blackheath, L.

McIntosh of Hudnall, B.

MacKenzie of Culkein, L.

Triesman, L.

Morgan, L.

Warner, L.

Ramsay of Cartvale, B.

Warwick of Undercliffe, B.

Rogan, L.

Whitty, L.

Rooker, L.

Winston, L.

Resolved in the negative, and amendment disagreed to accordingly.

9.21 p.m.
Clause 54 [Government, administration and conditions of service]:
Baroness Anelay of St Johns Baroness Anelay of St Johns moved Amendment No. 161:
Page 45, line 7, at end insert—
"(d) such other persons as appear to the Authority to represent the employees of the Authority"
The noble Baroness said: My Lords, in moving Amendment No. 161, I shall speak also to Amendment No. 162, both of which are in my name and are supported by the noble Lord, Lord Bradshaw.
I can deal briefly with the subject matter of this small group of amendments. Their purpose is to ask the Government to place on the record their view of the pay and conditions that should be enjoyed by the Civil Nuclear Constabulary. By that, I do not mean only the uniformed constabulary; here, I am asking specifically about the civilians—that is, the non-constable staff. The UKAEA Police asked me to make that point. Will there be comparability with the MoD? Also, will the Minister explain what the pay and conditions will be during the transitional period and how they will be determined? I beg to move.
Lord Triesman: My Lords, this group concerns the conditions of service of members of the constabulary and the civilian support staff. Clause 54 places a statutory obligation on the new police authority to ensure that, where it makes provision about conditions of service of the constabulary and the provision relates to matters dealt with by regulations made under Section 50 of the Police Act 1996, the provision made by the police authority will differ from the regulations only in so far as it is necessary to reflect the circumstances and structure of the constabulary.
That obligation applies only in relation to the police officers of the constabulary and not to the civilian employees, as civilians are not subject to the Section 50 regulations of the Police Act 1996. The clause therefore contains an obligation on the police authority to consult the Police Federation and any relevant rank-related association approved under Clause 61 before making provision about the conditions of service of the police officers of the constabulary. I believe that that was broadly the statement that I made in Grand Committee. That is the full extent of the bodies that will be able to represent the officers of the constabulary.
The effect of Amendment No. 161 would be to extend the obligation to consult other representative bodies; namely, those representing civilian employees
572
of the police authority, whose members could not be affected by the provision that the police authority was proposing to make in connection with the underlying Police Act regulations.
The Government have also given a clear commitment that staff terms and conditions will be fully protected on the transfer of members of the UKAEA Constabulary and the civilian support staff from UKAEA to the Civil Nuclear Police Authority in accordance with the requirements of TUPE. I repeat that commitment here and do so unequivocally.
The transferred employees will also continue to be eligible for membership of the UKAEA pension scheme. The transfer arrangements that will apply to the constabulary are set out in Clause 66 and Chapter 2 of Part 1 of the Bill. Paragraph 10 of Schedule 5 gives legal effect to the TUPE undertaking, which I have just given your Lordships.
I hope that that explanation demonstrates that the Bill already deals adequately with the intent behind the amendments and that the noble Baroness will feel that the amendment can safely be withdrawn.
Baroness Anelay of St Johns: My Lords, I am grateful to the Minister. There is a difference in approach between how civilian staff in the constabulary are to be treated. He is right to trace that back to the different source in legislation for that treatment. I am grateful for the explanation he has further put on the record today. I shall go back to the UKAEA police and ask whether they are satisfied with the commitments the Minister gave today and whether they feel that they have properly covered their concerns. If I am requested by them to bring the matter back, that may be by way of correspondence rather than by amendment. At this stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 162 not moved.]
Clause 58 [Inspection]:
Baroness Anelay of St Johns Baroness Anelay of St Johns moved Amendment No. 163:
Page 46, line 15, leave out "from time to time" and insert "at least once every three years"
The noble Baroness said: My Lords, we now turn to the issue of the inspection of the new constabulary. We discussed this matter in Grand Committee on 27 January at cols. 125 to 128, so I shall be relatively brief.
At present the UKAEA Constabulary is subject to a voluntary inspection by Her Majesty's Inspectors of Constabulary. Clause 58 puts that on a mandatory statutory basis. Subsection (1) provides that HMIC,
"must inspect the Constabulary from time to time".
My amendment would introduce a minimum requirement of an inspection at least every three years. I think that that is advisable from the point of view of good practice. It does not prevent HMIC carrying out an inspection more frequently—that could be its decision. However, it does prevent it going outwith the three years.
The amendment does not prevent HMIC doing what the Minister claimed in Grand Committee at col. 126 it would do; that is, move to a system of baseline assessments. I do not think my amendment stops HMIC doing that. It can still have a system of baseline assessments within the required three years for a statutory full inspection.
My amendment would not prevent the new constabulary establishing its own programme and using its own professional judgment in setting up systems that prepare it effectively and efficiently in readiness for an HMIC inspection. I do not think that my amendment is overly restrictive; it simply provides the legislative backstop for good practice. I know that earlier the Government did not like my move to good practice being required in the Bill. However, I hope on this occasion they might have changed their mind. I beg to move.
Lord Bradshaw: My Lords, I believe that the amendment is particularly important. To some extent it is unfortunate that we live in times which are changing very rapidly and when the Government are heaping legislation on police authorities, setting up new bodies and a new independent complaints authority, and when new targets, new best-value regimes and new training regimes are being imposed on them. I cannot envisage a period of longer than three years passing without the need for a full inspection. I am sure that this police authority, which is well hidden from public view, merits as does any other police authority, regular, thematic inspection. The amendment has great validity. I almost defy the Minister to tell us why it should go longer than three years without being subjected to an HMIC inspection.
9.30 p.m.
Baroness Byford: My Lords, I rise to support my noble friend's amendment. I think that, as the noble Lord, Lord Bradshaw, has just said, this is a very important amendment. I should like to press the Minister a little more. Perhaps he would like to have a go at describing the phrase "from time to time". It is rather like "shortly" or "very soon". However, we shall listen with interest to what the noble Lord has to say.
The Government have used the phrase "from time to time". Have they considered and dismissed any other time period, or have they not considered in the first instance giving some guidance as to what that time lag might be? My noble friend has spoken to her amendment so I shall not enlarge upon it, but I wanted to seek greater clarification on those two issues.
Lord Triesman: My Lords, I am the first to agree that this is an important area. The noble Baronesses, Lady Anelay and Lady Byford, and the noble Lord, Lord Bradshaw, made that point with great force. I can assure noble Lords that I accept it. Inspection is plainly important and a good inspection regime in the Civil Nuclear Constabulary is certainly in the forefront of importance.
574
I do not know that I shall have a huge amount to add to what was said in the discussion about the identical amendment tabled by the noble Baroness, Lady Anelay, in Grand Committee. But I hope I can say with some clarity what I believe the inspection regime will be like.
The UKAEA constabulary is currently the subject of voluntary inspections by Her Majesty's Inspector of Constabulary, as several noble Lords have pointed out. This takes place about every three years. I repeat that: it takes place about every three years. Clause 58 rightly puts these inspection arrangements on a mandatory, statutory footing for the first time. In doing so, it follows the precedent of the Police Act 1996, the Ministry of Defence Police Act 1987 and the Railways and Transport Safety Act 2003, which established the British Transport Police. None of these Acts sought to constrain Her Majesty's Inspector of Constabulary in deciding the frequency of its inspections of a particular force. Specifying a minimum period in legislation for the Civil Nuclear Constabulary, which does not apply to any of the other 43 police forces inspected by HMIC, seems probably rather restrictive by comparison with them.
If it were true, as was argued during Committee, that this amendment would help ensure the new constabulary got off to the best possible start, it would be hard not to have sympathy for the amendment. But it is at odds with the actual circumstances where the constabulary, whose functions and role is not changing significantly as a result of the Bill, has already been subject to regular HMIC inspections over many years. That brings us to how inspections are likely to take place in the future and what might be meant by "from time to time" in these particular circumstances—words which, it is quite true, probably defy any kind of dictionary definition. If that is the point the noble Baroness, Lady Byford, was making, I shall of course agree with her.
I understand—and I can see great strength in this—that Her Majesty's inspectors are currently in the process of moving, and with some vigour, to a system of assessments which are based on risk. These are the thematic kinds of inspection that we want. There are some activities probably in every police force which do not change dramatically or pose any very considerable risk, and probably can be looked at so long as you are convinced of a strong audit system within that force periodically without much fear of consequences. There are some activities which I would venture to suggest go very much beyond that and where everyone would want to be certain, because of the nature of the risks involved, that inspection was more frequent, went into matters more thoroughly and did not rely, for example, entirely on there being an appropriate internal audit system, much as that would be desired.
So, in these cases where the risks are higher, where the assessment based on risk is more telling, the inspections of these forces' performance need attention far more frequently than those which do not. In that sense, the noble Baroness, Lady Anelay of St Johns, is right: her amendment is not incompatible with the change that I described, and I do not suggest that it is.

575
None the less, there is a need to give Her Majesty's inspectors flexibility in the approach that they take to the task that they have been given. That will be a significant encouragement to them. In short, we are looking for something that is highly effective, which is why this is an important area to debate; but it must also be proportionate, must not become an end in itself and must not distract everybody from their other duties. It must be done properly and be relevant. Doing the inspections in terms of an assessment of risks is a relevant process.
Clause 58(2) also gives the Secretary of State the power to require an inspection. It provides the necessary fallback, should it be necessary to require an inspection to be undertaken at any time. The Secretary of State would have to pay close attention to whether it was desirable or necessary and take the right action, should the judgment be made that it was necessary.
It is on that basis that I ask that the amendment be withdrawn. That is not to diminish the importance of the issue, but the arguments about the assessment of risk, proportionality and relevance should give the best guidance to all of us.
The Earl of Caithness: My Lords, having listened to what the Minister said, I feel that his arguments on the amendment are exactly the same as those adduced by my noble friends Lady Anelay of St Johns and Lady Byford on Amendment No. 160. The noble Lord has just said that he was using the precedents of the Ministry of Defence Police Act 1987 and the Railways and Transport Safety Act 2003 and that he wanted a flexibility of approach. That is exactly what my noble friends argued on Amendment No. 160, when the noble Lord said, "No. We're not going to have it".
Lord Triesman: My Lords, I am delighted that the noble Earl has given me the opportunity to respond to that. The inspectorate is entirely different: it is an independent body, not one of the police forces. It inspects the police forces, and its independence is cardinal to the process in which it engages. That is why it is important to be supportive of its general judgment about frequency, assessment of risk—noble Lords will forgive me for repeating the point—and the processes that should be used. We have a first-class, independent system at work, and it would be as well to let it do its work and make those judgments.
Lord Bradshaw: My Lords, that was a poor answer. We need assurance that the force will be inspected. It is hidden away in the sort of place that may not get the full light of the public inspection that police authorities receive. If that is the best answer that the Minister can give—I shall study his reply closely—I may return to the issue at Third Reading.
Baroness Anelay of St Johns: My Lords, the Minister has clarified what he said previously but has not diverted from his position. He said that HMIC could carry out a thematic review or risk calculation.
576
He acknowledged that that system was not incompatible with what I propose. Indeed, I do not see how it could be. One can have a thematic review or risk assessment when one needs to carry out an investigation, but it can be done more often than every three years. Three years is not a straitjacket that does not fit; the assessment can be done more often than every three years. I do not think that there is a problem there.
The Minister responded to the question raised by my noble friend Lord Caithness about how the Government seemed to want to have it both ways. They would not accept Amendment No. 160, but they are adducing the same arguments now. The Minister said that it was different—different legislation, different organisation and an independent body. But the principle is the same. My noble friend is right. The Minister is saying that the Government cannot accept three years as the minimum period for an inspection because it does not apply to the other 43 police forces. He says that we must treat them all the same. The trouble is that, in other cases, the Government do not try to treat all forces the same. I do not think that the Minister is right.
The Government cannot have it both ways. It is right to have an inspection at least every three years in the interests of good practice. I wish to test the opinion of the House.
9.40 p.m.
On Question, Whether the said amendment (No. 163) shall be agreed to?
Their Lordships divided: Contents, 27; Not-Contents, 42.

Division No. 4

CONTENTS

Anelay of St Johns, B.

Higgins, L.

Astor of Hever, L.

Hooson, L.

Attlee, E. [Teller]

Jenkin of Roding, L.

Bradshaw, L.

Knight of Collingtree, B.

Bridgeman, V.

Liverpool, E.

Lyell, L.

Brooke of Sutton Mandeville, L.

Mackie of Benshie, L.

Byford, B.

Maddock, B.

Caithness, E.

Miller of Chilthorne Domer, B.

Carnegy of Lour, B.

Miller of Hendon, B.

Cope of Berkeley, L. [Teller]

Palmer, L.

Courtown, E.

Roper, L.

Gray of Contin, L.

Shutt of Greetland, L.

Greenway, L.

Steel of Aikwood, L.

NOT-CONTENTS

Ahmed, L.

Dean of Thornton-le-Fylde, B.

Andrews, B.

Dixon, L.

Bassam of Brighton, L.

Evans of Parkside, L.

Bernstein of Craigweil, L.

Evans of Temple Guiting, L.

Brooke of Alverthorpe, L.

Farrington of Ribbleton, B.

Campbell-Savours, L.

Gale, B.

Carter, L.

Graham of Edmonton, L.

Chandos, V.

Grocott, L. [Teller]

Clark of Windermere, L.

Hollis of Heigham, B.

Crawley, B.

Hughes of Woodside, L.

Davies of Coity, L.

Hunt of Kings Heath, L.

Davies of Oldham, L. [Teller]

Jones, L.

577

Jordan, L.

Rooker, L.

Levy, L.

Sawyer, L.

Lockwood. B.

Smith of Leigh, L.

Lofthouse of Pontefract, L.

Stone of Blackheath, L.

Macdonald of Tradeston, L.

Triesman, L.

McIntosh of Hudnall, B.

Turnberg, L.

MacKenzie of Culkein, L.

Warner, L.

Morgan, L.

Warwick of Undercliffe, B.

Ramsay of Cartvale, B.

Whitty, L.

On Question, Amendment No. 171 agreed to.

9.49 p.m.
Clause 59 [Supervision by Secretary of State]:
Baroness Anelay of St Johns Baroness Anelay of St Johns moved Amendment No. 164:
Page 47, line 13, at end insert—
"(2A) Before exercising his powers under this Chapter, in Scotland the Secretary of State shall consult the Lord Advocate."
The noble Baroness said: My Lords, in moving Amendment No. 164, I shall speak to Amendments Nos. 165 to 167. I have tabled the amendment to invite the Minister to put on record the progress made by the Government since Grand Committee on a matter raised at Clause 59 stand part, at col. GC 128, by my noble friend Lady Carnegy of Lour. It may be that the Minister has written to the noble Baroness on this point, but since I have not received a copy of such a letter, and knowing that the DTI tries to keep all noble Lords who take part in debates informed of further progress, I assume that there is no copy in the Library of the House. Therefore, I thought it was right to ask the Government to put the response on the record.
My noble friend asked the Minister whether he was content that Clause 59, which relates to the Secretary of State's supervision of the nuclear police, should not include the consultation or involvement of the Lord Advocate, to whom the police answer in Scotland. In the case of the inspectorate, Her Majesty's Inspector will consult Scottish inspectors before undertaking any inspections related to Scotland.
Clause 59 lists the ways in which the Secretary of State will supervise the nuclear police. The Minister said at Grand Committee that there would be some interaction with local police and local people. However, the Secretary of State for Trade and Industry will direct the police in Scotland without reference to the person who has responsibility for them—the Lord Advocate. My noble friend pointed out that there could be an occasion when the Scottish Parliament might have a different political complexion from the Westminster Government. The Minister undertook to consider whether the Government needed to do anything to ensure that the Scottish authorities were informed. What progress has he made in that undertaking?
Amendments Nos. 165 to 167 are probing amendments to ask the Minister to clarify the Secretary of State's intention with regard to setting
578
guidelines and procedures and to explain how the process is complemented by the role of the Office for Civil Nuclear Security. I beg to move.
Baroness Carnegy of Lour: My Lords, it will be very interesting to hear what the Minister has to say about this matter. He said earlier that the Scots Parliament had been consulted and had been quite happy about the Bill. That was when the Parliament considered originally whether it was happy that the part of the Bill relating to the relevant functions should be taken at Westminster, and that it should have a Sewel Motion. In doing that, the Parliament does not consider the detail of the Bill but gets a general picture, and agrees on it.
The amendment is important. I do not know whether, if the amendment was made, the Lord Advocate or the Scottish Ministers or both would be involved. The Scottish police are answerable for their operations to the Lord Advocate, but their pay and conditions of service are a matter for Scottish Ministers. It might be both—but my noble friend's point is to ask the Minister where we are on this matter.
Lord Triesman: My Lords, I stress, as my noble friend Lord Whitty did during Committee stage, that the intention as far as possible is for the Civil Nuclear Police Authority to operate at an arm's length from government. Much as now, Ministers would not expect to interfere in the detailed affairs of the authority. That is precisely how we anticipate the process continuing. However, the Bill needs to provide for the intervention of Ministers, should circumstances require it.
Amendment No. 164 requires the Secretary of State to consult the Lord Advocate before exercising her constabulary-related powers, such as issuing a direction to the Civil Nuclear Police Authority in relation to Scotland. As my noble friend Lord Whitty explained in responding to the noble Baroness, Lady Carnegy of Lour, when she raised the point during Grand Committee, the role of the Scottish Ministers here is very limited. The Civil Nuclear Constabulary and its police authority is part of the arrangements for ensuring the security of civil nuclear sites and materials, while the constabulary's jurisdiction extends of necessity into public areas. We discussed that only a short while ago in your Lordship's House. The constabulary has no general role in public policing.
The general proposition has been discussed with Scottish Ministers, and in my earlier answer I said that discussions had taken place with both Ministers and the Scottish Parliament. There are no objections: they are fully aware of the arrangements set out here, and are satisfied, if the Bill becomes law, that all the powers required are contained in it.
I said earlier, and I shall not make the point at any length, that nuclear security is a matter reserved to this Parliament and it is not appropriate for the Lord Advocate or other Scottish Ministers to be consulted formally about directions given to the Civil Nuclear Police Authority on such matters. In debating the Sewel Motion on the Energy Bill, the Scottish

579
Parliament raised no concerns on the devolved parts. This reflects the fact that, even if it is not a matter for its jurisdiction, thorough conversation on such matters is prudent.
Amendments Nos. 165 and 166 together preclude the Secretary of State from issuing directions to the police authority under Paragraph 2(1) of Schedule 13 that would require the authority to reduce the quality of the services and tasks performed by the members of the constabulary. The Secretary of State is accountable to Parliament for the security of the civil nuclear industry. It is very unlikely that she would wish to do anything that interfered with the efficiency or the effectiveness of the constabulary. In any event, Clause 59(2) already places an obligation on the Secretary of State to exercise her powers to give such directions in a manner and to such extent as appears to her best calculated to promote the efficiency and effectiveness of the constabulary. With great respect, the amendment of the noble Baroness, Lady Anelay, does not add significantly to this general duty. Of course, if the Secretary of State were to exercise her powers in an unreasonable manner she would vulnerable to a judicial review challenge. I hope that noble Lords opposite will agree that in these circumstances the amendment is not necessary.
I turn to Amendment No. 167. Paragraph 2 of Schedule 13 provides for the Secretary of State to be able to direct the police authority on a wide range of matters relating to the activities of the constabulary. It is required principally to preserve the existing arrangements whereby the director of civil nuclear security, acting on the Secretary of State's behalf, specifies, and inspects compliance with, the security standards, guidelines and procedures to be followed by the UKAEA Constabulary. These are currently specified by the Secretary of State in directions made under Section 3 of the Atomic Energy Act 1954. The constabulary is a core component of defence-in-depth security arrangements regulated by the security professionals in the Office for Civil Nuclear Security responding to intelligence threat information.
It is not the intention to change these regulatory arrangements for what I hope noble Lords will agree are obvious reasons. The direction-making powers in this part of the Bill are therefore required to preserve the existing regulatory function. The Bill describes the scope of these powers comprehensively in Paragraph 2(1) of Schedule 13, but it is simply not possible, certainly not in this day and age, to anticipate every possible occasion when the director of civil nuclear security, acting on behalf of the Secretary of State, may have to take steps to ensure the efficient and effective operation of the constabulary.
The general power of paragraph 2(2) is required to give the Government sufficient leeway to act should such circumstances arise. I recognise that this is a fallback power. In this day and age, we need fallback powers because it is always difficult to see the full extent of what some of these risks may be. I know that your Lordships' House has been sensitive to these issues in a number of regards, particularly so in the
580
recent past. I hope, therefore, that the amendment can be withdrawn and it is felt that the arrangements that are currently in the legislation meet the absolutely proper concerns that have been expressed.
Baroness Anelay of St Johns: My Lords, I am grateful to the Minster for his reference to the Scottish issue and for making it clear that when these matters were discussed on the Sewel Motion there were no objections. I looked very carefully at my noble friend Lady Carnegy and I saw that she is content for that matter not to be pursued. I am also grateful to the Minister for his words with regard to the role of the Office for Civil Nuclear Security that clarified matters further. The final issue is that of Amendment No. 166, which was only a probing amendment, that tried to look at precautions to ensure that a government could not reduce the quality of service provided by the constabulary. I accept entirely what the Minister said. He pointed out that if the Secretary of State tried to do such a thing—tried to reduce the level of services—she might be subject to judicial review. No government like that, particularly not the Home Secretary when the Court of Appeal finds against him. But that is another matter.
I am reminded yet again of the domestic violence Bill and the fact that the Home Office was prepared to look more kindly on proposals to ensure that there were enshrined in that Bill commitments that services could not be reduced, but I entirely take the good will that was expressed by the Minister that this particular Secretary of State would not wish to reduce services. Of course, government reshuffles can happen during the summer months—we hope that any successor to the present Secretary of State would pursue the same good practice. But at this late stage, at this time of night, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
10 p.m.
Schedule 13 [Directions by Secretary of State about Constabulary]:
[Amendments Nos. 165 to 167 not moved.]
Schedule 14 [Minor amendments relating to Constabulary]:
Lord Whitty Lord Whitty moved Amendment No. 168:
Page 201, line 24, at end insert—
"Public Records Act 1958
A1 In paragraph 3 of Schedule 1 to the Public Records Act 1958 (c. 51) (administrative and departmental records of certain bodies to be public records), in Part 2 of the Table, at the appropriate place, insert—
"Civil Nuclear Police Authority.""
The noble Lord said: My Lords, this group of amendments is to ensure that relevant legislation that currently applies to the UKAEA will apply to the civil nuclear constabulary once it is formed. Amendments Nos. 168 and 169 deal with the Public Records Act and the Race Relations Act. Amendment No. 170 ensures that the civil nuclear constabulary is a public authority in the same way that the UKAEA is, and that

581
individuals designated are able to authorise directed surveillance on the use and conduct of covert human intelligence sources under Sections 28 and 29 of the Regulation of Investigatory Powers Act 2000. We recognise why that might be necessary in the nuclear field. The other two amendments are consequential. I beg to move.
Lord Whitty Lord Whitty moved Amendments Nos. 169 and 170:
Page 202, line 11, at end insert—
"Race Relations Act 1976
2A In Part 2 of Schedule 1A to the Race Relations Act 1976 (c. 74) (persons subjected after commencement of duties to general duties with respect to discrimination and equality), after the entry relating to the chief constable of the Ministry of Defence Police insert—
"The Civil Nuclear Police Authority.
The chief constable of the Civil Nuclear Constabulary.""
Page 203, line 7, at end insert—
"Regulation of Investigatory Powers Act 2000
5A (1) In section 46(3) of the Regulation of Investigatory Powers Act 2000 (c. 23) (persons in relation to whom authorisations may apply to any place in the United Kingdom), after paragraph (d) insert—
"(dza) the Civil Nuclear Constabulary;".
(2) In Part 1 of Schedule 1 to that Act (relevant authorities for the purposes of sections 28 and 29), for paragraph 1A substitute—
"1A The Civil Nuclear Constabulary.""
Lord Whitty Lord Whitty moved Amendment No. 171:
After Clause 75, insert the following new clause—
"ADDITIONAL FUNCTIONS OF UKAEA
(1) The functions of the UKAEA shall include—

(a) power to carry on such activities as they consider appropriate in connection with anything that the NDA has a responsibility for securing under this Part;

(b) power to enter into such arrangements with the NDA or any other person as they consider appropriate for that purpose; and

(c) power for that purpose to develop and commercially to exploit an expertise in relation to things in which the NDA requires an expertise for the purpose of carrying out its functions.

(2) In the case of responsibilities of the NDA in relation to an installation, site or facility it is immaterial for the purposes of subsection (1) that the UKAEA is not, for the purposes of Chapter 1 of this Part, the person with control of it.
(3) The functions of the UKAEA shall also include—

(a) power to manage and commercially to exploit any land or other property of theirs that is no longer required by them for or in connection with the carrying out of their other functions; and

(b) power to carry on a business of providing services for the administration of nuclear pension schemes.

(4) The UKAEA has power, for the purpose of carrying out its functions (whether conferred by this section or otherwise) to do all such things as appear to them to be likely to facilitate the exercise or performance of their powers and duties, or to be incidental to doing so.
582
(5) The ways in which the UKAEA may carry out those functions include (by virtue of subsection (4)) carrying them out through subsidiaries and carrying them out in association with, or through arrangements with, other persons.
(6) Subsection (5) of section 7 (things in which the NDA requires an expertise) has effect for the purposes of this section as it has effect for the purposes of subsection (4) of that section.
(7) In this section "nuclear pension scheme" means a scheme that is a nuclear pension scheme for the purposes of Schedule 8."
The noble Lord said: My Lords, this group of amendments is to ensure that the UKAEA is properly equipped to operate in the post-NDA world of nuclear clean-up. Essentially the amendments do three things. First, they ensure that the UKAEA has the necessary powers to establish site licensee companies at all its sites, which includes the ability to set up contracts in relation to non-UKAEA sites. Secondly, they ensure that UKAEA is able to administer nuclear pension schemes other than its own UKAEA pensions scheme—that is partly to recognise the excellent reputation of the UKAEA's Thurso pensions office. Thirdly, they clarify the extent to which the UKAEA has powers to manage property that it owns. It needs to continue the excellent work of diversification on those sites which has already taken place.
Taken as a whole I am sure that the amendments will ensure that the UKAEA has the necessary statutory powers it needs to operate in the post-NDA situation. I beg to move.
Baroness Miller of Chilthorne Domer Baroness Miller of Chilthorne Domer moved, as an amendment to Amendment No. 171, Amendment No. 171A:
Line 20, leave out "pension schemes" and insert "or public sector pension schemes as may be directed by Ministers"
The noble Baroness said: My Lords, I speak to Amendment No. 171A in the name of the noble Lord, Lord Maclennan of Rogart. This is an amendment to find out from the Government whether the public sector pension schemes would be covered by the wording of those functions of the UKAEA in its power to carry on the business of providing services to the administration of nuclear pension schemes. I would be grateful if the Minister would say whether that would incorporate the public sector schemes mentioned in the amendment. I beg to move.
Lord Whitty: My Lords, in my earlier remarks I referred to the excellence of the UKAEA's Thurso pensions office. Clearly, the noble Lord, Lord Maclennan, is already well aware of that.
The amendment would take matters beyond what is currently provided in the Bill and perhaps would go beyond the strict provenance of the Bill itself. Nevertheless, in view of what I believe both the noble Lord, Lord Maclennan, and I recognise regarding the matter that we are discussing, we shall take away the measure to see whether we can amend the Bill to allow flexibility to consider other public sector schemes. Without giving an absolute commitment on that other than a commitment of intent, I hope that the noble

583
Baroness will be prepared to withdraw the amendment. We shall probably return to the matter at Third Reading.
Baroness Miller of Chilthorne Domer: My Lords, on behalf of my noble friend Lord Maclennan, I am very grateful to the Minister. I beg leave to withdraw the amendment.
Amendment No. 171A, as an amendment to Amendment No. 171, by leave, withdrawn.
Lord Davies of Oldham: My Lords, I beg to move that further consideration on Report be now adjourned.
Moved accordingly, and, on Question, Motion agreed to.
House adjourned at six minutes past ten o'clock.

Official Report of the Grand Committee on the Companies (Audit, Investigations and Community Enterprise) Bill [H.L.]
(Third Day)
Monday, 22 March 2004.
The Committee met at half past three of the clock.
[The Deputy Chairman of Committees (Baroness Ramsay of Cartvale) in the Chair.]
Clause 9 [Statement in directors' report as to information disclosed to auditors]:
Lord Hodgson of Astley Abbotts moved Amendment No. 63:
Page 12, line 24, at end insert—
"(4) It is a defence for a person charged with an offence under section 234(7) for a director to show—

(a) that he had no actual knowledge of the information in question that ought to have been disclosed to the company's auditors;

(b) that proper arrangements had been established by resolution of the Board of Directors, allocating responsibility (whether in a specific or generic manner) to one or more directors other than himself for ascertaining the facts or circumstances to which the information in question related; and

(c) that he had relied, and it was reasonable in all the circumstances for him to rely, on that other director or directors to ascertain the facts or circumstances in question and to disclose them to the Board of Directors.""

The noble Lord said: We are still dealing with proposed new Section 234ZA, entitled:
"Information to have been disclosed to auditors before directors' report approved".
This follows on from the debate we had towards the end of the previous sitting of the Grand Committee in regard to materiality, reasonable inquiry and the concept of "ought to know".
The amendment seeks to add an extra safeguard for directors with a view to balancing better their greatly increased responsibilities and liabilities. It also attempts to address the relative responsibilities of those directors who work in the company in question and those who do not—that is, in modern business parlance, the difference between executive and non-executive directors.
It is appreciated that under present company law all directors are equally responsible for the company and therefore are equally liable but, in the real world, a non-executive director simply cannot be as well informed about the operations of the company as an executive director. Indeed, there is a real argument that he should not be. One of his important roles is to stand back from the day-to-day operations of the
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company and provide advice on strategic developments. Another important role is to provide cross-fertilisation between company boards to ensure that best practice is spread and new ideas and approaches tested out.
Let me give a practical example. One of my non-executive directorships, which I have from time to time declared, is on the board of one of the United Kingdom's largest regional brewers. We operate 1,500 pubs, 1,000 of which are tenanted and 500 managed. We have many community pubs, but some are in densely populated inner-city areas and some are high street wine bars. We also have a brewing operation. I do not—I cannot—know the details of these operations to the extent that my executive directors can and do. My role is to help the company with the challenges of strategic development, as I did, for example, last year with the new Licensing Act and do now with issues raised by increasing public concern about passive smoking. But when the annual report is now approved, and when in future this new statement is added, I shall have to rely on my co-directors, particularly my executive directors.
The report we have recently published runs to 64 pages; each year it gets longer and goes into greater detail. I shall refer further to this when we come to Amendment No. 83, tabled by the noble Lord, Lord Sharman, but let me give a simple example. As I said, we operate 1,500 pubs. In our environmental policy we are now required to report about cooking oil. We have stated:
"Used cooking oil is collected by waste contractors who dispose of it in the most responsible manner commercially available".
That is fair enough and I have no objection to that being stated. But I increasingly have to be aware of this kind of detailed information. I have no idea whether or not the Dog and Duck in Much-Binding-in-the-Marsh deals with the cooking oil requirements; I have to rely on my fellow executive directors to tell me that there is a proper system and that it is being enforced. So whether or not the law at present recognises it, there is inevitably a difference between the executive and non-executive director.
The amendment seeks to address this increasingly important issue. We have been helped in this by David Kershaw, a partner in the City law firm Ashurst. The details of the amendment allow that it will be a defence for a director charged with an offence under Section 234(7) to show that, first, he had no actual knowledge of the information in question that ought to be disclosed to the company's auditors; secondly, that proper arrangements had been established by resolution of the board of directors allocating responsibility, whether in a specific or generic manner, to one or more directors other than himself for ascertaining the facts or circumstances to which the information in question related; and, thirdly, that he had relied, and it was reasonable in all the circumstances for him to rely, on that other director or directors to ascertain the facts or circumstances in question and disclose them to the board of directors.

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The amendment presents three distinct safeguards for the future. The first defence is that the director can prove that he was unaware of the information required by the auditor. The second is that he can prove that the responsibility for ascertaining particular facts had been allocated to another director. The third is that he had relied on the information provided by the director so allocated.
Boards of directors work on the basis of a delegation or division of responsibilities. It is not reasonable to expect every director to ask every question that needs to be asked. To some extent, each relies on the most appropriate in their midst to ask the relevant questions and report to the board. After all, that is the basis of the establishment of committees of the board, a prime example of which would be the audit committee. In several ways, the Bill increases the burden on directors, with their liability being increased under several clauses. Without the safeguards that we propose in the amendment, the role of a director—particularly a non-executive director—will seem increasingly undesirable. I beg to move.
Lord Sharman: I support the amendment. Since our previous sitting, I have thought long and hard about the clause. We are struggling very hard with the results of a piecemeal approach to reform of company law. The provision introduces a new criminal liability for directors—I dare say that civil liability will flow on the back of that—in an environment in which we have not adequately redefined the roles and responsibilities of directors, the functions of the board, and the relationships between the audit committee, the other committees of the board and the board as a whole. All those were written into law 50 years ago, but the practice and expectations of members of a board have moved on.
I am perplexed on how we shall resolve the matter without that wholesale reform. If we are to tackle it piece by piece, we have to build into the legislation as it stands some reasonable safeguards, and I regard the amendment as providing some.
Lord Wedderburn of Charlton: The noble Lord, Lord Sharman, might not give full credit to the Minister. At the end of our previous sitting, as I understood him, my noble friend guaranteed that, before the Bill reached the statute book, we would have a statement from the Government on the conclusions from their consultative document and what has happened since about the standard that they propose for directors overall. We may not have a Bill, but we will have made progress.
I had intended to speak to the amendment, but perhaps I misunderstood it altogether and must therefore adjust my remarks. I had thought that it was all part of the matter that we had discussed; namely, the business attempt to dilute what is proposed as the objective standard of care for directors, just as there is an objective standard for doctors, accountants and nurses. That is what is involved in the "ought to know" problem.
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The noble Lord, Lord Hodgson, suggested that the amendment distinguished executive directors from non-executive directors, however. I do not find that in the amendment at all. It might lead to a certain difference in the application of standards to executive and non-executive directors, but it would do so rather strangely and not altogether consistently compared with the clause. The clause states that any director "ought to know" if a matter would be known by a reasonable person with,
"knowledge, skill and experience … carrying out the same functions as",
he has on the board. That may allow for a different view of some non-executive and executive directors. Previously, we discussed in particular finance directors and people with that kind of specific function.
If the noble Lord says that he is not used to inquiring what goes on in the Duck and Drake—or whatever the name of the pub is—under the present clause, there may be circumstances when he should. I do not know the circumstances of the Duck and Drake; I am not sure that I visit his range of pubs. Perhaps I should.
Lord Hodgson of Astley Abbotts: You certainly should.
Lord Wedderburn of Charlton: I shall try to do so. The noble Lord is ignoring the fact that what I say is true. The Bill will adjust the standards of what people perhaps ought to inquire into on an objective basis. He may have to get used to slightly new ways.
But the amendment makes the position even worse; it is not of itself consistent. Paragraphs (a) and (c) in the amendment push towards a subjective test. The person on the board would be judged, first, on his actual knowledge and, secondly, on what it would be reasonable in all the circumstances to rely on in regard to,
"other directors … for ascertaining the facts or circumstances",
and disclosing them to the board. Those are predominantly subjective tests.
Paragraph (b) in the amendment is an additional required test: paragraphs (a), (b) and (c) have the word "and" connecting them. The director would have to show,
"that proper arrangements had been established by resolution of the Board of Directors, allocating responsibility … to one or more directors … for ascertaining the facts".
That is an objective test.
If a director cannot show that there are proper arrangements—whatever the court may think are proper arrangements—he could not come under the amendment. A non-executive or executive director or anyone else on the board may have voted against the arrangements. They may have been carried in the face of his intense opposition because he did not think that they were proper. Yet, under the amendment, in the eye of the court, if they are not objectively proper the clause would give such a director no comfort or assistance.

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This is a very strange amendment, which shows the lengths to which some stables will go in running horses against the objective test. I urge the Government to stay with the test of what a reasonable person ought to know who carries out those types of functions—I stress "those types of functions"—on the board.
3.45 p.m.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville): I shall first cover the point made by the noble Lord, Lord Wedderburn, about what I said at the end of' the previous sitting. The noble Lord, Lord Sharman, asked me to answer his question about whether he could expect a statement on the plans for reform of directors' liabilities before the Bill was passed. I said yes.
We are talking about precisely that, not a statement about the duties of directors. We will simply make a statement after we have consulted on directors' liability about that consultation. I do not think that Members of the Committee should read anything more into my statement than what it actually said.
I have listened with interest to what has been said. The amendment seeks to address some of the concerns expressed by Members of the Committee when we debated previous amendments to Clause 9 last Wednesday. There was particular concern that one director might be required to take too great a responsibility for the failure by another director to disclose information to the auditors.
It therefore might be helpful if I outline what we are trying to achieve through the statement in the directors' report, to remove any misunderstanding.
The purpose of Clause 9 is to make each director think carefully about the disclosure of information to the auditor for the purposes of the audit. We can tackle that question without a wholesale reform of the duties of directors. It is not sufficient for a director to have to consider only information of which he or she is already aware, but we do not expect directors to pursue every possible avenue that could yield relevant information. A director should have to direct his or her mind to whether there is information that is relevant to the auditor's opinion that has not been disclosed and which that person thinks is incomplete or false.
We cannot give such glamorous examples as the noble Lord, Lord Hodgson, with his experience of pubs and breweries. My noble friend Lord Evans and I have a simpler example: that of the sales director of a publishing firm who sees in the accounts a figure for stocks of books which seems to that person unrealistic—perhaps because he knows that the stock consists of political memoirs and is therefore not saleable. He must consider whether he should examine those figures to make certain whether the information has been properly disclosed to the auditors or, on the other hand, is incomplete or false.
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We believe that a director should have that responsibility. It is much clearer and more limited than the noble Lord, Lord Hodgson, fears. However, as we suggested last Wednesday, we will reflect carefully on what has been said about this clause and consider whether we need to introduce amendments to clarify the provisions. We are mindful of the need to produce balanced legislation that is fair to directors but which also protects shareholders. All the amendments to this clause tabled by the noble Lord, Lord Hodgson, would limit what directors would need to consider in making a statement. Although it is not our intention to impose unreasonable requirements on directors, we must not forget that the purpose of this clause is to facilitate the audit process, providing greater market reassurance to the benefit of shareholders and others. We must not lose sight of that.
I hope that I have made it clear that we will reflect carefully on the points made both last week and today. In the light of that, I hope that the noble Lord will feel able to withdraw his amendment.
Lord Wedderburn of Charlton: Perhaps I may press my noble friend on what he said in his clear opening remarks. Is it the case that, in the statement that the Government intend to make in the face of the consultation, he does not believe that we will get the Government's preliminary view in choosing between an objective test of the type in subsection (3) for directors generally and the business judgment rule?
Lord Sainsbury of Turville: My remark was carefully made. I said that it was a statement and noble Lords should not read into that anything more than that it is a statement. We will have to wait until the statement is made to find out what it says.
Lord Hodgson of Astley Abbotts: I am grateful to the Minister for his further reassurance that this clause will be reconsidered. His example of the sales director went to the heart of what I was driving at. The sales director is an executive and therefore would be expected to know. My problem is with non-executives who, perforce, are slightly more distanced. The noble Lord, Lord Sharman, partly underlined the issue of the difficulty that we all face in this area if we include this piece of the jigsaw but not the rest of the pieces that he outlined in his remarks.
The noble Lord, Lord Wedderburn, took me to task on several counts. However, I think that he now understands that he will not get the objective statement of government policy on directors' duties in time. He said that directors will have to get used to new ways. The reality is that boards of companies have, over the past five to 10 years, faced an unprecedented rate of change. The noble Lord may shake his head, but he need only look at the quality, length and detail of annual reports and how they have expanded to know that that is the case.
I was not suggesting that this clause would commend itself to the parliamentary draftsmen word for word—that would be asking far too much. When an amendment is even partially accepted, it always needs to be redrafted and given an imprimatur. However, I

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am grateful to the Minister for his reassurance on this point. Pending his further consideration and reflection, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 64 and 65 not moved.]
Clause 9 agreed to.
Clause 10 agreed to.
Clause 11 [Disclosure of tax information by Inland Revenue to facilitate application for declaration that accounts are defective]:
Lord Hodgson of Astley Abbotts moved Amendment No. 66:
Page 13, line 10, after "disclosed" insert "at the request of, and"
The noble Lord said: The Government will note that we have given notice of our intention to oppose the Question that Clause 11 stand part, which we wish to raise later. Although we are concerned with the overall implications of the clause, we wish to raise specific points within it, as can be seen in the group of amendments to which I shall now speak—Amendments Nos. 66, 67 and 68. Clause 11 provides for the disclosure of information by the Inland Revenue to a person authorised under Section 245C of the Companies Act 1985.
Amendment No. 66 concerns subsection (1) and requires that information disclosed by the Inland Revenue to the authorised person has been requested by the authorised person. The Bill appears not to specify whether a request from the authorised person is a pre-requisite to disclosure. The amendment will guarantee that information can be disclosed only if so requested.
Amendment No. 67 would delete lines 17 to 19—subsection (2) of new Section 245D. The subsection provides that information held by the Inland Revenue,
"may be disclosed despite any other restriction on the disclosure of information whether imposed by statute or otherwise".
It appears that that would effectively override any claim to confidentiality of information as laid out in past Acts, bar the Data Protection Act, as specified in subsection (2)(b). Such an exceptionally broad base for disclosure combined with meagre safeguards could have the undesirable consequence of reducing taxpayers' readiness to be frank in their dealings with the Inland Revenue.
I notice that the rather draconian wording of subsection 2(a) in new Section 245D is similar to that found in Section 19, entitled "Disclosure of information held by revenue departments", of the Anti-terrorism, Crime and Security Act 2001. Section 19(2) states:
"No obligation of secrecy imposed by statute or otherwise prevents the disclosure … of information".
The Anti-terrorism, Crime and Security Act was created to combat terrorism, which is one thing; but, according to the Government, this Bill has been introduced to help restore investor confidence in companies and financial markets following recent major corporate failings, many of which have been overseas. Although I accept that the former case—that
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is to say, anti-terrorism, crime and security—permits extreme measures, this is a company law Bill and should not follow such a precedent; nor is it appropriate that it should do so.
Amendment No. 68 adds to the Bill the requirement that the Inland Revenue may disclose information only,
"if that information was lawfully obtained by the Inland Revenue for tax purposes".
Without such a safeguard, any information could be routed through the Inland Revenue for onward disclosure. For that reason, and in the interests of maintaining public confidence, the amendment should be included. I beg to move.
Lord Sainsbury of Turville: This group of amendments has a common theme in seeking to constrain and limit the way in which the Inland Revenue can pass information through the information gateway created by Clause 11.
A number of points and questions have been raised on the amendments in this group. It would be most helpful if I looked at each amendment in turn, starting with Amendment No. 67, which deletes subsection (2)(a) of new Section 245D of the 1985 Act, and without which the clause would not operate. As such, we oppose the amendment, but I acknowledge that the purpose behind it is not to wreck the whole clause but to explore why we need such a provision.
The subsection in question permits a disclosure through this gateway, despite any statutory or other limitations on disclosure of information by the Revenue. It has to do this, for that is how gateways work. The starting point is that the Revenue is not permitted to disclose its information. Legislative gateways may then be opened that permit Inland Revenue information to be disclosed for particular purposes and to particular people or bodies. This is one such gateway.
I imagine that when we come to debate the clause—I note that the noble Lord has indicated that he wishes to oppose its inclusion in the Bill—we will discuss the principle and use of such gateways more generally. For the purposes of this amendment, I hope that it is sufficient for me to say that without a subsection that states that the new gateway is not overridden by existing barriers to disclosure, this would be a gateway whose gate would remain firmly locked.
I listened carefully to the noble Lord's points, because it has not been entirely clear to me what Amendment No. 68 was seeking to do. The Inland Revenue obtains information in the course of carrying out its statutory functions, the most pertinent one here being the assessment and collection of corporation tax. This may include using statutory information powers or gateways provisions. Perhaps the noble Lord was concerned about the prospects of wrongfully obtained information getting into the hands of the FRRP without the company's knowledge, where it might then be further misused, possibly in some sort of witch hunt through a company's accounts. I can reassure the House that that will not happen. The Revenue's function remains unchanged.

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I remind the noble Lord of the reassurance given by the Inland Revenue to its Large Business Forum. The Revenue will only be dealing with information that has come to it in the course of normal business. The reassurance goes further—we expect that information to be shared with the company before it is disclosed to the FRRP. The company would have ample opportunity to clarify its position and correct any misunderstandings rather than being a passive bystander as information passes from the Inland Revenue to the FRRP. If he Revenue ever considered that there was doubt about the lawfulness under which it was holding certain information, it would not disclose this information to the FRRP until this question had been resolved. I hope that this gives the noble Lord the assurance he was seeking.
Amendment No. 66 inserts a requirement that information is disclosed to the FRRP at its request. We do not think that this is appropriate. We would not wish to see the FRRP demanding information from the Revenue. This is a permissive gateway in that it allows the Revenue, if it so chooses, to pass on any information it may come across that it feels could be of use to the person who is authorised to review company accounts against the requirements of the Companies Act—that is, the FRRP. It is for the FRRP to decide how to act on this information. We do not want to see the FRRP demanding information from the Revenue. Furthermore, under this amendment, a situation could easily arise whereby the Revenue uncovered a potential departure from the legal requirements, but was unable to share the information with the FRRP. In short, under this amendment, where the Revenue identified information concerning the compliance of company accounts, it would be powerless to alert the body responsible for the enforcement of the accounts, the FRRP.
I hope that I have offered the noble Lord the reassurance he was seeking, and that he will withdraw his amendment.
4 p.m.
Lord Hodgson of Astley Abbotts: I am grateful to the Minister. I listened very carefully to what he said. The "no witch hunt" assurance is important. There has been some concern that this is another lever that the Inland Revenue could use. I have come across cases in my professional life where businessmen—I am not suggesting that they are angels—have sought to take legitimate advantage of the tax laws of this country. The Inland Revenue has disapproved of the way in which they have done so, and those cases have gone to court and have been found in favour of the taxpayer. When the taxpayer wins the battle he probably loses the war, since his affairs are given such a going over for the next four or five years that he probably wishes that he had not started in the first place. The Inland Revenue is legitimately entitled to do it, but you can get in that way. It is important that this should not be another lever by which pressure can be applied to companies. I am grateful to the Minister for that assurance.
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I understand about the "at the request of" issue, and the fact that if the Inland Revenue identifies something that it wants, it will pass it on. I accept the force of that argument. It is a question of being absolutely certain about "no witch hunt". Once there becomes this easy passage of information, things slide across in a way that was not originally envisaged. I will read carefully what the Minister said about, "at the request of", but I see the points that he was making. For the time being, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 67 and 68 not moved.]
Lord Hodgson of Astley Abbotts moved Amendment No. 69:
Page 13, line 24, leave out "for the purpose of facilitating" and insert "to enable"
The noble Lord said: We are staying with Clause 11. Amendments Nos. 69 and 70 are on the issue that we have just discussed. Amendment No. 69 tightens up the wording of subsection (3) of new Section 245D. The Bill reads:
"For the purposes of subsection (1), a disclosure is made for a permitted purpose if it is made for the purpose of facilitating—(a) the taking of steps … or (b) a determination by the authorised person".
Replacing the words "for the purpose of facilitating" with the words "to enable" gives a degree of certainty to the subsection. As I argued in the previous group of amendments, the existing wording tends to suggest the possibility of fishing expeditions. It also helps to maintain the Queen's English by removing from the Bill one of three uses of the word "purpose" in that one sentence. The amendment would ensure that the Inland Revenue must focus on the real justification for its actions in each case of disclosure, rather than just falling back on the more comfortable word "facilitating".
Amendment No. 70 seeks to include an addition to the same subsection, reading:
"For the purpose of subsection (1) a person is only permitted if the authorised person has good reason to believe that there are grounds for an application under section 245B of this Act or Article 253B of the Companies (Northern Ireland) Order 1986".
Again, that is a safeguard to ensure that the authorised person has good reason to authorise disclosure. Nothing else in the Bill ensures that to be the case. While it may be very well to claim that disclosure will never be given without good cause, for the sake of good administration such things ought to be spelt out in the Bill. I beg to move.
Lord Sainsbury of Turville: I shall speak to Amendments Nos. 69 and 70. As with the previous group of amendments, they are concerned with the way in which the Inland Revenue can pass information through the information gateway under Clause 11.
The words in Amendment No. 69 "for the purpose of facilitating" were carefully chosen. As the noble Lord said, the words that we have put in the clause have a wider meaning than the words "to enable", proposed by the amendment. In order to explain why we oppose this amendment, I will say a few words

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about how the gateway will operate. I hope that by doing so I will explain why "to enable" would be unnecessarily restrictive.
I stress that we do not expect information provided by the Inland Revenue to lead to the FRRP taking action against a company without further investigation. Inland Revenue information is likely only to act as a catalyst for the FRRP to initiate its own investigation. It is as a result of that investigation that the FRRP would decide whether to make an application for an order to prepare revised accounts. It follows that we want the Revenue to be able to pass information over to the FRRP that may help it to decide whether any corrective action is needed; in other words, "for the purpose of facilitating such action".
While this may seem a purely semantic point, if the higher test of "enabling" the FRRP were put in place of "facilitating", it would make a real difference in practice to the way in which the gateway would have to operate. In order to establish whether certain information would enable the FRRP to take action—as opposed to facilitating action—the Revenue itself would have to carry out some sort of preliminary review of the data in question. It would have to place itself in the position of the FRRP to determine whether the information was of such a key nature, bearing in mind other information that the FRRP might already have, that it could be said to enable the action in question.
The noble Lord may say that of course the Revenue will need to carry out such a review of the data—indeed, how else will it decide whether it has information that ought to be shared with the FRRP? I agree that the Revenue will need to consider which bits of information, if any, should be passed over to the FRRP. Our objective here is to enable the Revenue to pass on information that may help the FRRP to fulfil its function—the reviewing of company accounts against the requirements of the Companies Act—if it should come across such information in its day-to-day work. The clause as drafted would enable it to do that in a straightforward way.
Under the amendment, the Revenue would have to do more than that. It would have to stand back and analyse what it had discovered, using the very expertise that rests with the FRRP, in order to ascertain whether the information would or would not enable the FRRP to take action. It would also have to consider whether it was information already held by the FRRP, or otherwise available to it. That is an impractical, time-consuming and perhaps impossible task, yet it would have to satisfy itself on all these counts, for if it was not able to do so, it would be a criminal offence for the Revenue to pass the information over.
Amendment No. 70 inserts a requirement for the Revenue in effect to pre-clear any disclosure that is proposed to be made to the FRRP, by satisfying itself that the FRRP has good reason to believe that there are grounds for it to make an application to court to require a re-statement of the accounts under Section 245B of the Act. Under this amendment, disclosure
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would be permitted only where the authorised person already had a good reason to consider that accounts were non-compliant, creating a confusing chicken and egg situation. If the authorised person already had a good reason, the need for information to be disclosed would be reduced. This amendment would place the Revenue in the position of having to judge what information the authorised person had and what conclusions that person could draw from it with regard to making an application to court before the Revenue could make any disclosure under the gateway.
As I have said already, the gateway allows the Revenue, if it so chooses, to pass on any information that it may come across that it feels may be of use to the person who is authorised to review company accounts against the requirements of the Companies Act. However, the gateway does not require the Revenue to pass any information to the FRRP. Of course, the Revenue and FRRP will work together ahead of using this gateway to identify the types of information likely to be of most use in helping the FRRP to fulfil its functions. That is a practical way of supporting the intention of the clause without swamping the FRRP. That is a far cry from the FRRP specifying particular companies to the Revenue and asking for data on those companies, as a kind of fishing expedition. That is not how the gateway would operate in practice. The Revenue's statutory functions do not include acting as an investigative agent for the FRRP. The gateway is there so that, should the Revenue come across potentially valuable information in its day-to-day work of looking at company accounts, it will not be prevented from sharing this with the FRRP.
However, the FRRP cannot chase after specific information that is held by the Revenue. It cannot look at what the Revenue is holding and decide what it might find useful. The FR RP will be the passive recipient of any information that the Revenue chooses to pass on. Under subsection (1)(b), the disclosure must be made by the commissioners of the Inland Revenue or be authorised by them, and we expect the number of referrals to be low. I hope that I have offered the noble Lord the reassurance that he was seeking and that he will withdraw the amendment.
Lord Hodgson of Astley Abbotts: The Minister's last few sentences about being a "passive recipient" were reassuring. He said that the amendment would make a difference to the way in which the gateway operated—it was intended to do that. I wanted the Inland Revenue to have to stand back, as his speaking note said. That was the idea—that it should stand back. I accept the point about whether the FRRP knew the information already. The Minister gave a long, detailed answer to that, which I will read and reflect on. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 70 not moved.]
On Question, Whether Clause 11 shall stand part of the Bill?
Lord Hodgson of Astley Abbotts: Under existing legislative provisions, the gateways for the provision of information by the Inland Revenue relating to taxpayers' affairs are strictly limited. As a general rule, the Inland Revenue has a strict legal obligation, as the Minister has just been telling us, to maintain the confidentiality of the information that it holds. A breach of that confidentiality by a Revenue officer is a criminal offence. There are good reasons of principle in favour of upholding that duty of confidentiality. A taxpayer is much more likely to be candid in providing information to the Revenue if he is assured that that information will be treated in confidence. It must be in the public interest that the Revenue should be assisted in the carrying out of its functions by the provision of full and frank information from taxpayers.
Statutory provision for the disclosure of data on taxpayers held by the Revenue already exists, as the Minister pointed out, but the circumstances are strictly circumscribed. The Inland Revenue does not make public a list of its statutory gateways. The section of the Inland Revenue manual listing them is stated on the website to be,
"withheld under the code of practice on access to Government information".
That is a helpful statement. It does not say on what basis the list of gateways qualifies as confidential information so as to render it exempt from the disclosure obligations created by the code.
To discover more detail about these gateways, I tabled a Written Question, which was answered on 28 January. The Question was about:
"Under what circumstances the Inland Revenue can lawfully pass on information which they have received in the course of their duties".
The Answer, even by Sir Humphrey's standards, was anodyne, stating:
"The position under successive governments has been that the law on taxpayer confidentiality only allows the Inland Revenue to pass on information outside the department if it has the individual's consent or the disclosure is otherwise permitted by law".—[Official Report, 28/1/04; col. WA 50.]
That took us hack to where we started from, so I subsequently tabled a series of hopefully more probing Questions. I asked about:
"On what grounds decisions are taken to transfer personal … data held by the Inland Revenue to other government departments".
I asked about:
"On what statutory basis transfer of personal … data takes place from the Inland Revenue to other government departments; and how many such transfers take place each year".
I asked:
"What kinds of personal … data held by the Inland Revenue"—
whether on computer or manually—
"are transferred to other government departments".
I asked:
"What records are kept of transfers of personal … data",
from the Inland Revenue,
"to other government departments; and whether the Data Protection Registrar has access to the relevant records".
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The further responses were slightly more helpful, stating:
"The Inland Revenue's statutory duty of confidentiality is in Section 182 of the Finance Act 1989. This prevents it disclosing any information to third parties. There are exceptions in Sections 182(5) and (6) of the Finance Act 1989, which allow disclosure in the following circumstances:
when a customer has consented, or
for the purposes of the department's duties, or if authorised by the board or certain other authorities, or
for the purposes of a prosecution in relation to Inland Revenue, or
following a court order binding on the Crown, or
in response to a witness summons or subpoena served in legal proceedings, or
when the department's legal duty to maintain confidentiality is specifically overridden by statute i.e. information gateways".
The noble Lord, Lord McIntosh of Haringey, answered:
"The Inland Revenue does not keep central records of the number of disclosures that it makes".—[Official Report, 12/2/04; cols. WA 185–86.]
The gateways for Inland Revenue disclosure were listed in a Written Answer given in the other place on 20 February 1990. There were then about 14 grounds for disclosure, which are contained in several Acts. At least some of these 14 or so gateways have subsequently been altered by legislation. Recent legislation creating new gateways has included the Tax Credits Act 1999, the Anti-terrorism, Crime and Security Act 2001, and the Proceeds of Crime Act 2002. However, as regards company law, the principle of Revenue confidentiality has to date escaped unscathed by these incursions. It is one thing to erode the principle of Inland Revenue confidentiality in pursuance of serious crime, but another thing to do so in supporting auditing standards. Nothing in any consultation paper so far that I can see, and nothing in the Explanatory Notes accompanying the Bill, explains why it is thought necessary to encroach on that principle now. Rather than undermining this long-standing principle of confidentiality. the Government should initiate a proper consultation and review of Inland Revenue policy on this matter. In the mean time, Clause 11 should be removed.
4.15 p.m.
Lord Sainsbury of Turville: Clause 11 allows information to be passed from the Inland Revenue to the person authorised under Section 245C of the Companies Act 1985 to review accounts against the requirements of that Act. This person is the Financial Reporting Review Panel. Opening this information gateway follows on from a recommendation by the Co-ordinating Group on Audit and Accounting Issues. The view of that group, and the Government, is that there may be occasions when the Revenue, in the course of its normal review work, uncovers potentially important information which had particular relevance to a company's accounts which could, and should, be made available to the FRRP.
In the course of its business, the Revenue already considers whether accounts show a true and fair view in accordance with accountancy principles. At present,

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the Revenue could uncover some potentially significant departures from the legal or accounting requirements but, in the absence of a legal gateway, be unable to share the information with the FRRP—the body responsible for enforcing such requirements in statutory accounts.
In summary, therefore, this clause ensures that in future, if the Inland Revenue identifies information that raises a question about the compliance of company accounts with the requirements of the Act, it will be able to disclose that information to the FRRP, for its consideration and, as appropriate, investigation.
In practice, we expect the number of referrals to be low. None the less, we believe that this is an important measure in providing market reassurance about financial reporting. It also brings an important element of cost-effectiveness to the overall package of "post-Enron" measures that we are taking forward.
We have heard concerns raised about the whole principle of confidential Revenue information being passed on and used for other purposes. Of course we understand those concerns. It is a well understood principle that any information the Inland Revenue holds about its customers in general and company accounts in particular is confidential. The Revenue is governed by a strict legal duty to maintain the confidentiality of its customers' information. Any unauthorised disclosure of Revenue information in respect of an identifiable person by a Revenue official is a criminal offence, punishable by imprisonment and/ or a fine.
However, there are, of course, certain limited circumstances in which disclosure is permitted. The noble Lord, Lord Hodgson, was extremely concerned about these gateways and the secrecy attending them. They are all well known because they are in the legislation. A number of gateways already exist to address exactly these sorts of issues, such as those from the Revenue to the Financial Services Authority, Customs and Excise and the Home Office. I do not think that this gateway is totally out of keeping with the others. I cannot see why this one should be dealt with in the context of a major consultation on the overall issue of Inland Revenue gateways. This clause creates a new gateway and, like other gateways, it is subject to strict restrictions on the use to which such information can be put and on any further disclosure of the information.
In particular, I should like to draw attention to the fact that, under proposed new Section 245E(1), the information may be used by the FRRP only in order to establish whether there are grounds for an application to the court with regard to defective accounts, and in any proceedings on such an application. Under subsection (2), the information may not be passed to anyone else, other than the person to whom it relates, or in connection with court proceedings. Subsection (3) makes it a criminal offence to breach these restrictions on use and disclosure.
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I have listened carefully to the noble Lord's concerns about the use of information gateways. I sympathise with his concerns about the use of confidential information. However, he will understand that a balance has to be struck between protecting companies' information and protecting the interests of the public as a whole. In my view, the public good is served by opening this gateway.
Of course I agree that confidential information should not be allowed to be abused, misused or passed willy-nilly around various regulatory bodies at the whim of officials. Parliament and the business community has every right to seek reassurances that this will not be the case. But, equally, we must remember the powerful public good objective behind this policy.
The noble Lord, Lord Hodgson, appears to have forgotten that the purpose of the Bill is to deal with accounting situations, particularly where scandals are involved, and to ensure that they can be more effectively dealt with. Accounting scandals can and do happen. When they happen, they can cause enormous financial and personal misery which, as in the case of Enron, can reverberate around the world. We must take action against such scandals occurring and facilitate their early detection.
The end objective must be to have an early warning system in place to detect potential accounting problems in the accounts of UK companies. The Revenue is one potential source of such a warning. We believe that it would be wrong to ignore the opportunity to revise the current law, under which Revenue officials are unable to notify the FRRP of any worrying signs they detect in regard to company accounts.
We cannot know, of course, whether or not the Revenue will come across the next Enron in the course of its work. It is equally possible—in fact, more likely—that such early warning would come from the auditors or from the FRRP itself under its proactive regime. But it is certainly a possibility that the Revenue could spot that something was amiss ahead of anyone else, or that others had not spotted, and we do not want to find ourselves locking the stable door after the horse has bolted.
I can well imagine the furore if, in the inquest over this hypothetical UK version of Enron, it transpired that the Revenue had suspected something was wrong with the accounts all along but had been unable to tell the body tasked with correcting those accounts. There would undoubtedly be a great clamouring for a gateway as a result. Our argument is simple: prevention is better than cure and we should create the gateway now.
I hope that I have explained to the Committee's satisfaction that this is a strictly controlled gateway with all the necessary protections against abuse and that the clause should stand part of the Bill.
Lord Hodgson of Astley Abbotts: Obviously, all of us, on all sides of the Committee, are against scandals. That is motherhood and apple pie. We do not want

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scandals. The question is whether the breaching of Inland Revenue confidentiality in this companies Bill will justify the results.
The Minister was very careful in his response to make clear that there would not be a great deal of information passed and that it was quite unlikely that the Inland Revenue would be able to pick up such scandals in time. His case rested on the basis that if there was a scandal and it was found that the Inland Revenue had known about it, there would be an outcry. I think that is a thin argument for making such a significant change and introducing a new gateway. If that were to be the case, it seems to me that that is not a very likely outcome.
The Enron scandal grew over a period of time but the Internal Revenue Service of the United States had no knowledge. It seems that these kinds of major frauds are usually extremely well concealed. It seems that we are giving the Inland Revenue powers or duties to breach confidentiality but we will not get much bang for our buck. However, we have had a good thrash through this issue and we will leave it there for the time being.
Clause 11 agreed to.
Clause 12 [Power of person authorised to require documents, information and explanations]:
Lord Sharman moved Amendment No. 71:
Page 15, line 23, leave out from "where" to end of line 24 and insert "a person who is authorised under section 245C (other persons authorised to apply to court) of this Act reasonably believes there is a question as to"
The noble Lord said: We now come to the powers of the authorised person—in this case the FRRP—to require documents, information and explanations, and the ability of that person to apply to the court for an order in that regard.
The amendment relates to the issue I raised at Second Reading in regard to what I described then as a test of reasonableness. As drafted, the clause refers to whether,
"there is, or may be, a question whether the annual accounts of a company comply".
Once the Bill becomes law, it will open up the opportunity for anyone to write to the FRRP to draw its attention to any set of accounts, whatever the basis of their suspicions, inquiries or motivations.
As the noble Lord, Lord Hodgson, has said, accounts are becoming increasingly voluminous and complex. I do not believe that it is intended that the role of the FRRP should be to explain accounts to those who have not taken the trouble to understand them. Again, I return to the statement that it would be very easy to raise an issue on accounts. It may help the Committee to know that recently it took me three and a half hours to read from cover to cover—discharging my responsibilities diligently, I hope—the draft annual report on the accounts of a FTSE 100 company, the audit committee of which I happen to chair. That will give Members a measure of the kinds of documents that we are talking about.
The authorised person—in this case, the FRRP—should be required to exercise reasonable judgment before deciding whether to ask for documents and to pursue a matter. We must avoid a situation where every hint or suggestion, whatever its basis, gets followed up by the FRRP applying to the company for documents—which will not be short in volume, I am sure—otherwise, we will end up with an FR RP with a cast of thousands. One need only look at what has happened in the United States on the back of the Sarbanes-Oxley Bill, with the oversight board and the scale of its staffing, to understand what could happen.
Therefore, I urge the Government to employ a test of reasonableness. I beg to move.
Lord Razzall: In supporting my noble friend Lord Sharman, perhaps I may make one brief point that probably he would be reluctant to make. We ought not to build into the legislation a structure under which an auditor, in order to avoid potential criticism of himself or itself, will always ask for information. If this provision is passed in the form that the Government propose, there will always be a temptation for an auditor, whenever there is the slightest whiff of a problem, to ask for information and to impose even greater obligations on the company. Surely. we ought to have some test of reasonableness—otherwise, whenever there is the slightest whiff, it will be the refuge for any auditor simply to ask for more information.
Lord Evans of Temple Guiting: Clause 12 provides the Financial Reporting Review Panel Ltd. the body which reviews the annual accounts of public and large private companies, with a statutory power to obtain relevant information from the company and from any officer, employee or auditor of the company.
To date, the Financial Reporting Review Panel has relied on voluntary co-operation to get the information that it requires, and that has worked. The FRRP has rarely, in practice, encountered serious difficulties in obtaining what it needs to carry out an investigation. However, the FRRP is moving on to a proactive footing, which increases the number of accounts that it reviews. There is obviously an increased likelihood of a company failing to cooperate. For that reason, we are introducing to the clause a power for the FRRP to require the provision of documents, information and explanations that it may reasonably require to carry out its function.
The amendment addresses subsection (1) of the clause, which sets out the circumstances under which the authorised person—that is, the FRRP—can exercise its power. As drafted, the clause permits the FRRP to use its power where it appears that there is or may be a question whether the annual accounts of a company comply with the requirements of the Act. The amendment substitutes for this a test of reasonable belief that there is such a question.
The difference, in our view, comes down to the difference between there being an actual question and a possible question about whether the accounts comply with requirements. The noble Lord, Lord

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Sharman, is quite correct to imply and to say that our test, that there is a possible question about the accounts, is an easier test to pass than the one introduced by his amendment. This is deliberately so. We want the barrier to be set quite low. His amendment would require the FRRP to show that it believes such a question exists rather than to show that it appears that there might be such a question. We think that this raises the barrier too high.
The question of what the test should be, or how high or low the barrier should be, before the FFRP can exercise its powers raises some important practical considerations about how the FRRP is going to carry out its role of proactive enforcement. It might help if I provide an example which explains what our drafting allows, but which would be prevented by the amendment.
Suppose there is an accounting standard which is of particular relevance to one industry sector. Let us say that the FRRP uncovers serious problems with the way that one particular firm in the sector has dealt with that standard. The company under investigation may well assert that it is "common practice in the sector" or use as its defence that "they're all at it". If this is a credible claim, the FRRP will naturally be concerned that other firms in that sector have used similar accounting treatments and may conclude that it needs to require information from those other firms.
The problem is that in order to have a right to that information under the noble Lord's amendment, the FRRP will have to show that it appears to it that there is a question about those accounts. But it may not be able to do so. The reason for requiring information would be on the basis of circumstantial rather than direct evidence. In other words, the test may not be passed under such circumstances. On the other hand, the FRRP would certainly be able to show that it believes there may be a question, which is the test that we have put into the clause as drafted.
The difference goes to the heart of what it means to be a proactive enforcement body. At present, the FRRP waits for information about suspect accounts to come to it before deciding whether to open an investigation. Under the new regime, the FRRP will select company accounts for review based on an assessment of the risk, taking into account the likely impact on the markets and public confidence of a potential error in those accounts.
The way it will work is as follows. Following review of the selected accounts, the FRRP will determine whether, and if so, at what level more detailed investigations might be required. Where it is unclear whether the accounts do comply with the law, we would want the FRRP to be able to require further information to help the panel decide how to take matters forward. It is the FRRP's experience that many companies approached in this way are able to provide an explanation, for example, to provide or amplify a narrative description. From this it transpires that they do comply in respect of the particular matters
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raised and the matter is not pursued further, although frequently the net result is improved future disclosure by the company in question.
Nevertheless, we would not wish the FRRP to be precluded from requiring information about an issue on the grounds that there is an element of doubt over whether there is a question of compliance.
In summary, we do not wish the FRRP to be in any doubt over the circumstances under which it can exercise its powers. We believe that these circumstances have been drafted in sufficiently wide terms to achieve that. This is consistent with a proactive approach. To put it another way, if investigations can be carried out only when the FR RP has received firm evidence that there is a problem, we shall be back to square one with the existing reactive approach. I do not believe that this is what noble Lords wish to see.
The move to a more proactive regime was one of the key recommendations of the Co-ordinating Group on Audit and Accounting Issues which reported to the Government in the light of the Enron and other major accounting scandals. The aim of the clause is to support that move. In our view, the amendment would weaken the clause in a small but significant way. I therefore ask that the amendment be withdrawn.
4.30 p.m.
Lord Wedderburn of Charlton: I should like to preface a question to my noble friend by saying that I could not more strongly support the Government in their efforts to adopt a proactive approach in the way he has described. It is obviously the right policy.
However, I am disturbed by his example citing an accounting standard which might raise problems in a certain industry sector. He referred to how the problem might be based on circumstantial evidence, its effect on the market and so forth, and how that might give rise to reasonable grounds for a belief that there is a question over the compliance of the accounts. I do not know about the drafting of the amendment, but I took it to mean "a belief on reasonable grounds", which might have been a better phrase to use.
Can my noble friend give an example where there were no reasonable grounds for it appearing to the person involved, and where it would be sensible to raise the question?
Lord Evans of Temple Guiting: What we do not want to allow is random sampling. We do not want the FRRP to go on fishing expeditions and to approach firms where there is no reason to do so. The point I raised was this: within a group of companies, the FRRP finds a problem with one. It is then told by that company that the problem arises in other similar companies and so it decides to move on. I take the point made by my noble friend that that is not a precise example of the point I sought to make.
Lord Sharman: I have listened with great interest to the Minister. At the beginning of his remarks he had it absolutely right when he said that the bar should be raised just a little—as I have sought to do with my

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amendment. I am indebted to the noble Lord, Lord Wedderburn, for helping me with the drafting of the amendment. What he suggested sounded much more reasonable.
However, the issue is that of the fishing expedition, and I think we are at one on that. If there is a circumstance with no element of reasonableness in it, then we shall see an exponential explosion in the number of cases that arise. Industry and the FRRP itself will then become bogged down.
I should like to look in greater depth at what the Minister has said. In the mean time, I beg leave to withdraw the amendment.
Lord Sharman moved Amendment No. 72:
Page 15, line 28, after "(3)" insert ", subject to subsection (3A),"
The noble Lord said: We are still considering Clause 12. This amendment seeks to address the issue of who should have the principal responsibility for providing information to bodies such as the FRRP. I have started on the premise that the principal responsibility for providing information about the accounts of a company should fall with that company, its board of directors, its officers and its employees. I am not in any way opposed to the notion that the FRRP should also be able to request that the auditors provide information and explanations. I support the provisions allowing the FRRP to request that company auditors provide documentation, because sometimes that may be unavailable from the company itself. However, I do not believe that the FRRP should have unrestricted access to all the working papers of the auditors, which is what this amendment addresses.
Amendment No. 72 would make the application subject to new subsection (3A), which would state:
"Where the relevant person mentioned … is an auditor of the company, the reference to a document … does not extend beyond documents that have been exchanged between the auditor and the company, its officers or employees that are relevant to the particular matters being investigated".
Again, this is a fishing expedition issue. I do not believe that the FRRP should be able to have access to the whole of the auditor's working papers en bloc. Access should be specific to the issue being considered and only to the relevant documents. I beg to move.
Lord Freeman: I support the noble Lord, Lord Sharman. I have no idea what the opposition Front Bench will say about this amendment, but I associate myself with what the noble Lord, Lord Sharman, said for a number of simple, practical reasons. The FRRP is bound to ask a catch-all question of auditors for documents. If the FRRP does not know which documents to ask for, it will ask for all documents, working papers and, indeed, correspondence exchanged with the audit client—the company—relating to a specific issue. That is the only way in which a request system can work. The noble Lord, Lord Sharman, is right to say that that presents a problem.
The Minister should offer to reflect on two specific problems at a later stage in our proceedings. First, the audit staff' will commit to writing fewer notes. That is
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bound to happen. I know that the argument will be made that, in the case of Enron, Andersen shredded a lot of documents. The shredding, not the documents, was the offence as far as Andersen was concerned. Nobody knows what was in the documents that were shredded in the Enron case. However, if the Bill is passed and these provisions are included, the auditor's job of reaching a true and fair view will be made far more difficult.
Secondly, when an auditor is preparing documentation, a lot of collateral information is collected—what other clients of the audit firm do, for example, in relation to calculating reserves of oil in the ground. If the FRRP requests all documents in relation to accounting treatment on reserves, for example, in the case of one company the auditor will have no chance to make a discretionary judgment but will have to release all the documents, including confidential collateral information which it is unfair to reveal. For those two reasons, I support my noble friend.
Lord Borrie: Does that mean that, if this amendment is agreed, no more information can be obtained from the auditor than can be obtained from a company?
Lord Freeman: No, not at all. As the noble Lord, Lord Borrie, will appreciate by studying Clause 12, the auditor has to respond to requests for information and explanations and must reveal all documents that have been exchanged with the company. The amendment tabled by the noble Lord, Lord Sharman, relates only to the internal working papers of the auditor. The provisions in Clause 12 that provide a let-out, which I am sure the noble Lord, Lord Borrie, has already put his finger on, do not go far enough in preventing the problems that the noble Lord, Lord Sharman, talked about.
The restrictions are that it is a defence to say that, as a professional firm, you complete legal professional privilege exemption. That will certainly not apply in many circumstances. The commitment by the FRRP not to pass on documents to third parties does not affect my argument; nor does the defence that documents obtained from the auditors will not be used as evidence in criminal proceedings. So none of those apply or in any way endanger or jeopardise the thrust of the argument made by the noble Lord, Lord Sharman.
Lord Wedderburn of Charlton: With respect, I have not quite understood the grounds of opposition. I understand the problem that it might be thought that this would give rise to requests and that the auditors would have to look into floods of documents. New subsection (3A) would apply to,
"documents … exchanged between the auditor and the company, its officers or employees that are relevant".
On mentioning the Enron shredding problem, I wonder whether the noble Lord, Lord Freeman, did not overlook the fact that subsection (2) of the new clause applies to documents and "information or explanations". By limiting documents in that way, under new subsection (3A), one wonders whether that

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might have some inhibiting effect on the effect of new subsection (2) where the authorised person may require any of these persons to provide "information or explanations". In a shredding case, presumably, it would be "information and explanations" that would be relevant. Do noble Lords intend to limit "information and explanations" relating to documents which once existed to limitation under new subsection (3A)?
4.45 p.m.
Lord Sharman: That may be the inadequacy of my drafting. The reference in subsection (3A) is only to documents. It does not refer to "information and explanations". Therefore, my intention—I think this is what it says—is that the FRRP would be entitled to ask the auditor for any "information or explanations". It is only the documents—that is, working papers—that I am concerned about.
Lord Wedderburn of Charlton: Therefore, the FRRP could ask for "information and explanations" about any document.
Lord Sharman: Yes.
Lord Hodgson of Astley Abbotts: I have two amendments in this group. Obviously, I listened carefully to the arguments on Amendments Nos. 72 and 79. I came to this point agnostic and listened with interest to the powerful points made. I should like to reflect on whether they are sufficiently strong to put the auditors in a special position.
My two amendments run in parallel because they focus on the potentially unreasonable demands that might result from the authorised person—planned to be the FRRP—having the power to demand that,
"any officer, employee, or auditor of the company"
must provide any document or "information or explanations" required. We want to address the concern caused by this drafting as regards any documents, any information or any explanation. Our amendments aim to confine that power strictly to explanations by or documents of the company.
As I read it, under the Bill as currently drafted, the authorised person may require documents, information or explanations stemming from other companies or sources, which could result in excessive or even impossible demands being placed upon an officer or employee of the company. In theory, for example, an officer or employee could be asked to produce a document belonging to another company to which he has no access. The consequence of not providing the authorised person with the requested document will be an application to the court, under Section 4. The court could require the person to take such steps as it directs under Section 5 for securing the required documents.
If the authorised person wished to gain access to documents from other companies, surely the approach must be made to the other companies. We would like the Government to take that on board as a subset of
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the important point raised by the noble Lord, Lord Sharman, on the special provision of auditors and auditors' working papers.
Lord Evans of Temple Guiting: I hope, during the next minute or so, to answer the very interesting points raised. As I have already said, Clause 12 provides the Financial Reporting Review Panel with a statutory power to obtain relevant information from the company, and from any officer, employee or auditor of the company. The aim of the amendments is to limit the information that the FRRP can require. Of course I am aware and understand noble Lords' desire that the FRRP's powers should be no wider than absolutely necessary.
We have already discussed the FRRP's move from a voluntary approach to a more proactive footing and the repercussions of such an approach. Let me assure Members of the Committee that we have considered what information the FRRP may need in order to carry out its functions effectively and who may have that information. We have taken careful note of the principles set out in the standards developed by the Committee of European Securities Regulators (CESR) on the enforcement of accounting requirements.
Standards issued by CESR are not legally binding in the sense that a directive would be; none the less, it is important, not least for the credibility of our arrangements internationally, that the UK complies fully with them. The Financial Services Authority, supported by the Financial Reporting Review Panel, has been at the forefront of taking them forward and getting their acceptance across Europe. One key principle is that a competent enforcement authority should have sufficient powers to obtain the information and explanations that it needs to undertake its work. That information needs to be available both from the company that it is investigating and its auditors.
Amendments Nos. 73 and 74 would limit the FRRP's powers to obtain documents of the company and explanations by the company. In the majority of cases, companies and others will co-operate with requests for information from the panel. Even where the FRRP needs to use those powers, it will in most cases be able to obtain documents that belong to the company, or explanations that refer to the company. But that need not always be the case. There may be documents that are not "of the company" but which fulfil the key criteria in subsection (2)—that is, they may reasonably be required for the purposes of discovering whether there are grounds for an application to the court under Section 245B, or for determining whether or not to make such an application.
A good example would be a letter from one director to another. The existence of such a letter might be referred to by an employee or director in the course of an FRRP investigation. The FRRP might then conclude that the content of that letter is crucial to determining the accuracy of the accounts. Were the noble Lords' amendments agreed, the FRRP might

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not be able to require production of that letter, if the directors could show that it was not "of the company". Other examples might be correspondence between a company director and a customer or supplier, or, to take the example given by the noble Lord, Lord Hodgson, between a director of one company and a director of another.
Those considerations are also relevant to Amendments Nos. 72 and 79, which, in the case of documents sought from auditors, would restrict the FRRP's access to documents that have been exchanged between the auditor and the company, its officials or employees, as we have heard in this discussion. However, in considering what papers the FRRP may require from an auditor, it will not always be the case that the only relevant papers are ones that have been exchanged between the auditor and the company or its officers or employees. For example, there may be a note of a meeting taken by the auditors and not exchanged with the company, which the panel may reasonably require for the purposes set out in this clause. It is relevant and has a bearing on the FRRP's work.
While I understand the concerns of the audit profession to protect audit working papers from the idle curiosity of others, we are not persuaded that in what we expect to be rare circumstances they should not of within the powers of the panel.
Although the clause in its present form indeed allows the FR RP to obtain documents, it does so within strict legal parameters. Those are set out in subsection (2). In short, that says that such information can be sought by the FRRP only if it is reasonably required by the panel to carry out its statutory function. Otherwise, it would have no power to require the information in question and, under subsection (5), I would not expect a court to make an order ensuring compliance with the FRRP's purported requirement.
I hope that these comments and explanations are sufficient to enable noble Lords to withdraw or not to press these amendments. However, I should repeat one point. The main restriction protecting the internal audit papers is that, under new Section 245F(2), the FRRP can ask for documents and so on that,
"he may reasonably require for the purpose of",
carrying out his statutory functions. So the FRRP cannot simply ask for everything.
Lord Sharman: I am grateful to the Minister for his detailed response, to which I have listened carefully. I am grateful also to the noble Lords, Lord Freeman and Lord Hodgson, for their support in this matter.
I have to say that, as yet, I am far from convinced. I think that the noble Lord's familiarity with audit working papers is probably somewhat less than mine in the sense that I know what is in them. In drafting this amendment, I had in mind the advice I was given by a very leading attorney in the United States who told me that he thought the best working papers I could have would have nothing in them. Then he said, "You could have nothing proved against you". That is the advice
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that I got. I worry that the greater the likelihood of audit working papers being produced for all sorts of other things, the less there will be in them.
The noble Lord mentioned notes of meetings. Clearly those are outside the scope of the amendment, and that was an error on my part; notes of meetings and so on should be included. However, it is also true that there may well be whole rafts of information about industry practice and the affairs of other companies. In debating a previous amendment, noble Lords said that, at times, the FRRP will be examining a point and people will say, "This is an industry-wide practice". Will the FRRP ask the auditors for their industry-wide briefs? If so, we are going way beyond audit working papers and right into the technical workings of the auditing firms. That is what I am concerned about. I am concerned about the FRRP's very wide discretion in this regard.
I shall not delay the Committee much longer. I shall look very carefully at what has been said and probably return to the issue on Report. In the interim, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 73 to 79 not moved.]
Lord Sainsbury of Turville moved Amendment No. 80:
Page 16, line 29, at end insert-—
"( ) An order under subsection (4) must not—

(a) amend Part 1 of Schedule 7B by specifying a person unless the person exercises functions of a public nature (whether or not he exercises any other function);

(b) amend Part 2 of Schedule 7B by adding or modifying a description of disclosure unless the purpose for which the disclosure is permitted is likely to facilitate the exercise of a function of a public nature;

(c) amend Part 3 of Schedule 7B so as to have the effect of permitting disclosures to be made to a body other than one that exercises functions of a public nature in a country or territory outside the United Kingdom."

The noble Lord said: This group of amendments have in common the fact that they all make changes to provisions in the Bill relating to information gateways.
I shall deal first with Amendments Nos. 80 and 98. These are part of the Government's response to the recommendations in the fourth report of the Select Committee on Delegated Powers and Regulatory Reform. We are very grateful to the Committee for its consideration of the delegated powers in the Bill and have accepted all the recommendations it has made. In paragraph 7 of its report, the Committee recommended that,
"the negative procedure with respect to the disclosure provisions in Clause 12 and Schedule 2 is appropriate so long as the power to add categories of person or disclosure were limited to public or other authorities and the purpose of facilitating the exercise of public functions".
Amendments Nos. 80 and 98 restrict the use of powers in Clause 12 and paragraph 17 of Schedule 2 to modify gateways for passing information. Their effect is to provide that new exceptions to the prohibitions on disclosure can be made only in respect of persons exercising public functions, or in relation to the exercise of public functions.
Amendment No. 99 rectifies an oversight in new Schedule 15D to the Companies Act 1985, which is inserted by paragraph 24 of Schedule 2 to the Bill. The effect of the amendment is to allow information gathered under the investigation provisions of the Companies Act 1985 to be disclosed to assist a body appointed under Clause 14—we intend it to be the Financial Reporting Review Panel—to exercise the functions that it will have by virtue of that appointment. Without the amendment, it would be possible to pass information to the FRRP for only some of its functions under the Companies Act, rather than for all its functions under that Act. That was not our intention, and the amendment seeks to rectify the omission. I beg to move.
5 p.m.
Lord Hodgson of Astley Abbotts: We are content with the amendments, and grateful to the Minister for having written to explain the background to them. We raise no objection to them.
On Question, amendment agreed to.
Clause 12, as amended, agreed to.
Schedule 1 agreed to.
Clause 13 [Power to specify bodies who may issue reporting standards]:
Lord Razzall moved Amendment No. 81:
Page 17, line 11, leave out "may also make provision"
The noble Lord said: I think that there is common ground between us that companies ought to adopt standards of corporate social responsibility. Indeed, research by Friends of the Earth, for which I am very grateful, demonstrates that Her Majesty's Government agree. In 1994, the Labour Party's environment policy, which was wonderfully entitled In Trust for Tomorrow, promised that when there was a Labour government there would be,
"a requirement on larger companies to report on environmental performance and strategy, helping to optimise resource use, reduce pollution, and disseminate best practice".
Of course, the Prime Minister made that a requirement of his own. In October 2000 in a speech entitled—would you believe it?—"Richer and Greener", delivered to the CBI and the Green Alliance, he challenged the top 350 companies in the United Kingdom to publish the reports by the end of 2001. He said then:
"I would also like to see more reporting on environmental and social performance. The pioneers of environmental reporting—companies like BA, BT, British Gas, and BP—are seeing increasing benefits from both improved efficiencies and public image as a result. This is something that all companies should be doing, and I am issuing a challenge, today, to all of the top 350 companies to be publishing annual environment reports by the end of 2001".
We are now in 2004. Tony Blair recently recognised the failure of his companies to live up to his challenge when he said:
"As far as I am aware, 124 FTSE 350 companies currently produce social and environmental reports".—[Official Report, Commons, 12/2/04: col. 1675W.]
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In the amendment, we ask the Government to live up to the challenge that the Prime Minister set, and to have it as a mandatory requirement for companies between now and 31 December 2005. I hope that the Government will support the amendment. I beg to move.
Lord Sharman: In supporting my noble friend Lord Razzall, I reiterate the declaration of interest that I made previously: I am a director of a number of listed companies; in particular, I am a director of British Gas, which my noble friend Lord Razzall and the Prime Minister mentioned.
Clause 13 adds to the powers of the Secretary of State to alter accounting standards. It inserts into Section 257 of the Companies Act the power of the Secretary of State to specify bodies that may set standards for matters to be included in company reports. The amendment adds to that permissive power a duty to ensure that standards for environmental and social reporting are put in place by the end of 2005. It allows the Secretary of State to nominate the body, or bodies, that would draw up those standards. I shall not repeat the various commitments that the Government have made in that regard, as my noble friend Lord Razzall covered them very well. The benefits of environmental and social reporting are becoming increasingly widely accepted.
It may be argued—although I would not agree—that the Bill is too early a stage at which to specify such standards. But the amendment does not specify standards; it just puts an enabling mechanism into place. It would also help, and perhaps strengthen the OFR and what will be in it when it comes, if the standards body could have the scope to set relevant specific indicators, for example. One of the great problems with social and environmental reporting today is that it is all over the place. There are no standards; different people do different things; some reports are audited and some are not, and so on.
I strongly support the amendment. We need to reach a position whereby one cannot simply say that bodies should report but then give no guidance.
Lord Hodgson of Astley Abbotts: The noble Lord, Lord Razzall, normally gives us bravura, combative performances, and today was no exception. Hearing him talk, I was reminded of the words of a hymn that I sang at school:
"Wider still and wider shall thy bounds be set".
I felt that this was a matter where best practice should lead to encouragement rather than legislation. We are trying, at least on this side of the Committee, to ensure that regulation is kept to a minimum; therefore, where possible we should use encouragement rather than legal statute.
I do not wish to go back over my brewery example—the noble Lord, Lord Wedderburn, has gone now, so I think that I could dare to. Two of our 64 pages relate to corporate and social responsibility, covering subjects such as alcohol, working with the Prince's Trust and employee consultation. We also have a page

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on environmental policy. I talked about cooking oil on the previous occasion, but passive smoking and other such issues are also covered.
[The Sitting was suspended for a Division in the House from 5.8 to 5.18 p.m.]
Lord Hodgson of Astley Abbotts: I was responding to the point made by the noble Lord, Lord Razzall. I was saying that while the idea of companies being environmentally and socially responsible and reporting thereupon was a very good idea, I was not convinced that that should be made a statutory requirement. I was making the point that encouragement is the best way to obtain compliance.
I pointed out that most of the companies with which I am involved already take the matter seriously and that the report of the brewery to which I referred contained two pages relating to corporate and social responsibility. It also wishes to have a serious and sensible look at the way it acts in regard to the environment.
It is not just a question of a perfunctory tick in the box. We deal with attitudes towards alcohol, support for community education action zones, charitable donations, working with the Prince's Trust, listening to employees, diversity in work-life balance and a board on health and safety. In our environmental policy we cover issues such as passive smoking, energy and water use, solid waste, grease and cooking oil, sewage treatment, radon and refrigerants, and asbestos. This covers three pages.
I am not trying to say that that is unique; most companies now work in that direction. My concern is that, when that is put into regulations, one emphasises the letter as opposed to the spirit and it becomes a box-ticking exercise. Good companies will do it anyway because it gets their reputation better for their shareholders and it gets them a better rating in the City. Bad companies will simply go through the motions and tick the boxes. I am therefore in favour of seeing the practice continue on the basis of encouragement rather than statute for the time being.
I remind the noble Lord, Lord Razzall, that the title of the Bill is about auditing and investigation, not environmental and social performance. I am not saying that it is not worthy—companies should definitely be encouraged in that direction—but this is an audit and investigation Bill and we should not clutter it up with that matter at this stage.
Lord Sainsbury of Turville: The amendment would require an order to be made to specify a body to prepare a standard in relation to the environmental and social performance of companies for reports which the directors are required to prepare under Part VII of the Companies Act 1985. It would require the Secretary of State to make such a specification by 31 December 2005 and arguably—this appears to be the intention of the amendment—for the standard to be in place by that date.
I listened carefully to the noble Lord who moved the amendment and I can say—it may disappoint him—that the Government are in broad agreement with the
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views underlying the amendment. However, we intend to achieve a similar objective through different means. There is an important distinction to be drawn between the Prime Minister's challenge to companies to report of their own volition and a compulsory approach as proposed by the amendment. I see no reason why the Prime Minister should not issue a challenge to companies on the subject.
The noble Lord also ignored what is probably the latest statement on the subject, which is the important one made by my right honourable friend the Minister for Industry and the Regions. She announced in a Written Statement on 10 July 2003 the Government's intention to bring forward regulations to require certain economically significant companies to prepare a new report, the Operating and Financial Review or OFR. The Government believe that the OFR will make an important contribution to improving corporate governance through increasing transparency and accountability. It will provide shareholders with better and more relevant information on the business, its performance in the past and the directors' policies for the future.
The OFR will differ from existing reporting requirements by placing a strong emphasis on identifying the future prospects of the business and the factors, developments, opportunities and risks that might affect those prospects. Directors will need to include information on environmental, social and community issues where such information is necessary to enable shareholders to assess the strategies adopted by the company. The White Paper Modernising Company Law, published in July 2002, envisaged that a new standards board, to be created by the main companies Bill, would make standards for the OFR and other aspects of company law. However, because the Government now intend to introduce the OFR in regulations ahead of the main companies Bill, we propose to use the power conferred by Clause 13 to specify the Accounting Standards Board to make the first standards for the OFR, building on its existing statements of 1993 and 2003. We shall give full details of our proposals for the OFR when we publish the consultation document after Easter.
The OFR standard envisaged by Clause 13 will support the legislative requirement to be contained in the regulations and provide guidance on best practice. The standard will naturally expand on the legislative requirements and I assure Members of the Committee that these will cover environmental and social issues. It is therefore not necessary to make specific requirements for that in Clause 13.
Lord Razzall: I thank the Minister for that reply. I have some sympathy with the two points made by the noble Lord, Lord Hodgson. First, one of the reasons that, to use his phrase, we want to "clutter up" the Bill with the proposed new subsection is—as he knows about and expressed support for at Second Reading when we said so—that we have been waiting a long time for the Government's promised comprehensive review of company law. I believe that we have had six years of consultation and therefore we are using every

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opportunity available in legislation to add requirements that we feel ought to be implemented. It is not our fault that we need to clutter the Bill with this provision; rather it is—dare I say?—the inability of the DTI to secure the necessary legislative time in the Queen's Speech to enable a proper and comprehensive review of company law.
It is for that reason that we are a little sceptical of the Minister's comment that we shall see all this dealt with in the regulations that will require companies to produce the Operating and Financial Review, as, he rightly said, was promised in the 2003 White Paper. Those regulations are promised soon, but as we know, "soon" in the history of company law reform under this Government often happens to be never. That is our fear.
Dealing with the second point made by the noble Lord, Lord Hodgson, this is only an enabling subsection. The requirement that we are seeking to put in the Bill does not impose any standards or regulations on companies. It is simply an enabling provision to enable standards to be produced. For that reason, we do not think it falls foul of his criticism to the effect that we are imposing regulations on companies.
Having said that, I shall read all that has been said by the noble Lord and the Minister and think further on it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments 82 and 83 not moved.]
Lord Hodgson of Astley Abbotts moved Amendment No. 84:
Page 17, line 27, leave out "and other supplementary and incidental"
The noble Lord said: Clause 13 is one of the shorter clauses of the Bill and is entitled,
"Power to specify bodies who may issue reporting standards".
The clause amends Section 257 of the Companies Act 1985 by enabling the Secretary of State to specify a body to issue standards relating to reports which the directors are required to prepare. Indeed, the Minister has just referred to this. Subsection (4B)(b) specifies that an order made by the Secretary of State,
"may contain such transitional and other supplementary and incidental provisions as the Secretary of State thinks fit".
We are well aware that this wording is identical to that found in Section 19 of the Companies Act 1989, as well as in several other Acts. But the Government will equally be aware that we, in principle, dislike open-ended powers. Perhaps the Minister could enlighten us as to why the Government think that "other supplementary and incidental provisions" will be needed in this case. We understand the need for "transitional provisions", but "supplementary provisions" are another matter. I beg to move.
Lord Sainsbury of Turville: This amendment would remove the ability of the Secretary of State to make supplementary and incidental provisions in the order specifying a body to prepare reporting standards, principally for the Operating and Financial Review.
We recognise that it is always desirable to limit the number of order-making powers to those which are precisely needed. In Clause 13 we have sought to ensure that the proposed provisions on reporting standards are as close as possible to the existing provisions on accounting standards. The power to make supplementary and incidental provisions reflects similar powers in Section 256(4) of the 1985 Act on accounting standards.
The noble Lord opposite tabled similar amendments to Clauses 4 and 14, and we have already debated that on Clause 4. In each case where powers are to be conferred by the Bill, we have considered how the powers may be exercised. The inclusion of the power to make supplementary and incidental provisions in Clause 13 was based on extensive precedents. By definition it is designed to cover those matters that may not become apparent until the order is drawn up. I therefore cannot tell him definitely how it might be used.
However, as we have so far found no convincing examples to show why the power might be needed in this particular instance, and in the light of the points made by the noble Lord, Lord Hodgson, I am happy to agree to consider further whether we could accept the amendment. I hope that, in the light of that assurance, the noble Lord will feel able to withdraw it today.
Lord Hodgson of Astley Abbotts: In the light of that reply, I shall withdraw the amendment very quickly indeed.
Amendment, by leave, withdrawn.
Clause 13 agreed to.
Clause 14 [Supervision of periodic accounts and reports of issuers of listed securities]:
5.30 p.m.
Lord Hodgson of Astley Abbotts moved Amendment No. 85:
Page 18, line 24, leave out "is to" and insert "may"
The noble Lord said: I wish to raise some specific points before moving on to debate the question whether Clause 14 should stand part of the Bill.
Amendment No. 85 raises a point concerning the rapidly increasing burdens to be placed on the FRRP. This amendment focuses specifically on this issue by proposing a change to the wording of subsection (7). As discussed, this subsection allows the FSA to refer certain cases which may not fall within its remit to the FRRP to review. It concludes with the words,
"the body [which is the FRRP] is to exercise those functions [the review of periodic accounts] in relation to that issuer as well".
The amendment would change "is to" to "may", giving necessary flexibility.
Since the responsibilities of the FRRP have increased to such an extent, it seems overly prescriptive to force extra cases on the FRRP which it previously would not have had to review. The amendment is designed to give the FRRP some manoeuvrability. It has also been tabled to probe the Minister to enlighten us as to whether the Government intend these extra responsibilities to be limited solely to the FRRP or whether there are other bodies in mind. Will other bodies or units help with any overflow or will these tasks be restricted to the FRRP? If other bodies are to participate, perhaps the Minister could enlighten us on which ones the Government think are likely to be appropriate?
What about the costs involved? Will the FSA have to pay any costs of investigating cases which it asks to be looked into? If not, what safeguards are in place to prevent the FRRP from becoming a free investigatory arm of the FSA? I beg to move.
Lord Sainsbury of Turville: I shall attempt to address the issues raised by the noble Lord, but perhaps I may first make the point that we have in mind that the FR RP would be the body to do this. We do not have any other bodies in mind.
Before I address the main issues raised, I think it would be helpful if I set out how the clause itself operates and why we have included subsection (7), the subject of this amendment.
The clause is about widening the scope of the Financial Reporting Review Panel. The FRRP is a well-respected and effective body which, as I have already explained, is moving on to a proactive footing as a result of the post-Enron review carried out by the FRR P itself and by the Co-ordinating Group on Audit and Accounting Issues.
Clause 14 expands the role of the FRRP. It does not specify the FRRP as the "appointed body", but it is our intention to appoint the Review Panel of the FRRP to perform this task. At present, the job of the FR RP is to look at the annual accounts of companies. It will continue to do that. It is an important part of maintaining confidence in corporate standards and it is a task that the FRRP has discharged very effectively.
But we are also concerned, of course, with establishing confidence in the financial markets more generally. Not all accounts are annual and not all bodies which trade securities on the UK markets are companies. We want to build on the FRRP's success by expanding its remit into these new areas.
This clause gives the Secretary of State the power to expand the remit of the FRRP in two directions to address these wider concerns. The first direction is in respect of which documents the FRRP will be checking. Company law requires publication only of annual accounts, and thus at present that is what it reviews. Interim accounts are a requirement purely of the listing rules, and this clause therefore enables us to bring those within the scope of the FRRP as well.
However, it is the second direction of expansion which is relevant to this amendment. This relates to the overlapping populations caught by company law and
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securities law. Many issuers whose securities are traded in the UK are not companies as defined in the Companies Act—they could be UK building societies which issue debt, or UK companies which issue equities and are established by Royal Charter. And, of course, there are a number of overseas companies which have listings in the UK, but fall outside the FRRP's current remit.
Again, we believe that for at least some of these cases, it makes sense for the Financial Reporting Review Panel to have a role in reviewing their accounts—but not necessarily in all cases. That is why subsection (5) states:
"A body may be appointed either generally or in respect of any of the following, namely … any particular class or classes of issuers".
Our intention is to appoint the FRRP in respect of some, but not all, of the total population of issuers. It would simply not make sense to ask the FRRP to keep some classes of issuer under continual review—for example, overseas companies that issue only specialist securities such as Eurobonds aimed at professional investors. We do not believe that those types of issuer should be the focus of the FRRP's attention. However—and this is where subsection (7) comes in—we do believe that there should be a "back-up" provision that allows the Financial Services Authority, on an exceptional basis, to refer accounts to the FRRP which fall outside its new remit. That would be done on an individual, case-by-case basis.
The point is that, in regard to such issuers, it will be the FSA and not the FRRP that keeps them under general review. But if the FSA in the course of this general review decides that the accounts of one particular issuer raise concerns, then the FSA will be able to refer those accounts to the FR RP for it to bring its expertise to bear.
The noble Lord's amendment seeks to change the requirement for the FRRP to consider such a referral into an invitation to the FRRP to consider it. In his version of subsection (7), the FR RP would be at liberty to decline that invitation. I ask the Committee to resist such an amendment. We must always keep in mind the underlying purpose behind this part of the Bill, of which it is sometimes easy to lose track. That purpose is to reassure the financial markets that the UK regime for financial reporting is robust.
That is why we need Clause 14. We need the markets to know that while the FSA keeps overall responsibility for enforcing the listing rules, it will for the first time be able to use the FRRP's expertise in checking accounts against the accounting requirements of those rules.
We need subsection (7) because it is no easy task to draw the line around the FRRP's remit, and we want to ensure that even where something falls outside that line, the option remains open for the FSA to call on the FRRP's expertise. The FSA must be able to do so categorically, not at the discretion of the FRRP, otherwise the reassurance that it is offering to the markets would be incomplete. If the FRRP were to decline the invitation to help, then the FSA would have

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to do the best it could on the basis of its own expertise, which in the specific area of accounting requirements is not on the same level as that of the FRRP.
What I have described is in fact the current situation. In respect of unincorporated entities and interim accounts, there is currently no role for the FRRP, and so the onus of checking such accounts already falls on the FSA alone. One could ask: if it isn't broken, why fix it? The answer is one which I believe applies to a number of the provisions in the Bill; namely, that we are in the business of locking stable doors before the horse bolts. In other words, we have not had an Enron or Parmalat-type scandal here as yet and we want to do everything we can to ensure that that remains the case. So while we agree that the current system works well enough, where we see the scope for improving it, we must do so.
One small but important way of improving the system is to ensure that the FSA can call on the expertise of the FRRP in respect of a larger class of issuers. That is what Clause 14 does. For Clause 14 to operate as effectively as possible, we need subsection (7) to state unambiguously that the FRRP "will look at"—not "may look at"—the accounts of particular issuers referred to it by the FSA where those are outside its remit.
Lord Hodgson of Astley Abbotts: Before the Minister finishes, will he address the issue of costs?
Lord Sainsbury of Turville: The issue of funding has always been recognised as a difficult one. We acknowledge the difficulty of resourcing and planning for work that is demand-led, as will always be the case when the FSA passes on cases to the FRRP. The cases that fall within the FRRP's remit itself will presumably be dealt with in the same way as the existing population under the proactivity regime. We would suggest that the way to control the costs of FSA referrals is through a memorandum of understanding with the FSA, setting out expectations and limits on how the provisions will be used in practice.
Lord Hodgson of Astley Abbotts: I should like to think about the specific aspect of costs. However, I am grateful to the Minister for explaining how the clause will operate. We are still concerned that the FSA operates in some controversial ways and that some of its actions have been quite controversial.
It seems undesirable, to put it no higher, that the FRRP could be brought into play to back up an action by the FSA which may be of a controversial nature. That is why we believe that in any reasonable case the FRRP would wish to support the FSA—it is a regulatory body like the FSA and would wish to do so—but it should not be forced to do so in cases where it felt that the FSA was either taking a controversial stand or did not think the point being made by the FSA justified it becoming involved. The clause puts the FRRP in a supplicant position that we feel is undesirable. That is why we wish to replace "is to" with "may".
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Having said that, I see the force of the Minister's points and we shall look again at his comments. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hodgson of Astley Abbotts moved Amendment No. 86:
Page 18, line 25, leave out subsection (8).
The noble Lord said: I can be very brief. I am going for a major prize after my success with Amendment No. 84. We have considered the merits of Clause 14. As the Minister has pointed out, it lays out in considerable detail how the system will operate. We are extremely grateful to him for that. But then we come to subsection (8), which blows the whole thing apart because it implies, "If we did not think of it before, we will have it like that now".
The full operational and financial impact on the FRRP of the open-ended provisions of subsection (8) seems undesirable. That is why Amendment No. 86 seeks to remove the subsection. I beg to move.
Lord Sainsbury of Turville: The amendment would remove the ability of the Secretary of State to insert additional requirements into an order appointing a body to carry out the functions set out in Clause 14. As we have made clear in the Explanatory Notes to the Bill, we intend that this body will be the review panel of the Financial Reporting Review Panel Limited.
The role of the FRRP will be one of monitoring compliance by issuers of listed securities with accounting requirements of the listing rules under subsection (2) of Clause 14. The FRRP will also be able to use the power to obtain the information provided by Clause 12 when carrying out these functions. We therefore consider that it is prudent to enable the Secretary of State to set requirements on the way the functions are exercised.
It is in the nature of such provisions that I cannot tell the Committee definitely how the power will be used. But examples are often helpful in this regard, provided that they are understood to be purely hypothetical. For example, we might want to set out in the order appointing the FRRP to carry out this function certain requirements about the way in which it prioritises the work that comes to it. We might want to use this power to set out a procedure for the FRRP to publish the results of its activities.
These are hypothetical and it is more than likely that no such provisions will in fact be deemed necessary. None the less, I hope that the Committee will agree that it is sensible to provide such a power should it subsequently be decided that something of this nature needs to be specified in the order.
It is perhaps worth making the point—before the question is asked—why we need the power here but not in Clause 13. The FRRP will have a monitoring role and investigative powers and it is therefore quite possible that the Secretary of State may wish to set limitations or requirements on the way it exercises those functions. The body to which Clause 13 refers has no monitoring function; it simply sets standards.

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It is therefore far less likely that the Secretary of State would consider it appropriate to impose any supplementary or incidental provisions on the body. I make the point merely to show that we are not completely arbitrary in our approach to these matters.
5.45 p.m.
Lord Hodgson of Astley Abbotts: I thank the Minister for his response. As regards Clause 13, on reflection, I see the need for flexibility. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 14 shall stand part of the Bill?
Lord Hodgson of Astley Abbotts: I wish to address the provisions of Clause 14 at a more general level and to debate the issue that it should stand part of the Bill. We seek to probe the Government's thinking about the extent of the clause, how the supervision will be carried out and whether the requirements of the clause beat our tests of being proportionate and workable.
Clause 14 empowers the Secretary of State to appoint a body to review accounts and reports of listed securities. We have had a number of explanatory briefings from the Institute of Directors and the Institute of Chartered Accountants of England and Wales, which have raised a number of points with us. At present, it appears that the remit of the Financial Reporting Review Panel (FRRP) is limited to examining the annual accounts of Companies Act companies for departures from accounting requirements and, where necessary, applying to the courts to order the preparation of revised accounts.
The proposals in Clause 14 would extend that remit, enabling the FRRP to review interim and other periodic reports produced by listed companies in accordance with the listing rules, to which the Minister referred earlier. As the Minister pointed out, the FRRP would also examine the annual interim reports of entities that issue listed securities but are not Companies Act companies. The Minister referred to UK building societies and overseas companies, although I am not sure how those tie in with our difficulties regarding extra-territoriality, as debated earlier. They would take us slap-bang into the extraterritorial issue again.
At present, interim reports are not required to be fully audited. Yet, in the Bill, they are to be under the review of the FRRP. Will that place undue pressure on all companies, whether Companies Act companies or not, to have interim reports audited? I draw the attention of Members of the Committee to the yardsticks against which I have said we must judge the Bill. One of those is whether the Government's proposals are proportionate. Are these potentially time-consuming and cost-consuming requirements proportionate? Is not sufficient transparency already available through the FRRP checking annual reports? What makes setting the new standard in statute necessary, and why now?
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We have also referred to the extension of the powers and duties of the FRRP under subsection (7) at the request of the Financial Services Authority. So the remit of the FRRP is to increase exponentially. As I see it, the remit of the FRRP, as proposed in the Bill, would be increased by the addition of all companies into the scope of its review, not just Companies Act companies; the requirement to review all interim reports—any period accounts and reports—not just annual reports and, additionally, the possibility of being requested by the FSA to review individual cases, such as those concerning specialist debt. Therefore, one can envisage a huge increase in the workload of the FRRP.
How is the FRRP to undertake these additional supervisory duties on its relatively modest budgetary estimates? Paragraph 246 of the Explanatory Notes gives some figures. It states:
"We estimate that the costs will increase, from around £2.8 million … to around £12 million per year by 2006".
Is that a realistic figure? The noble Lord, Lord Sharman, raised this issue at Second Reading. It is worth noting that the FSA budget now exceeds £200 million per annum. I have not checked the budget to determine how much is spent on enforcement, but it is probably between 10 and 25 per cent. So it alone is spending between £20 million and £50 million on enforcement.
How will the FRRP, with a total budget two years from now of £12 million per annum, carry out the functions contained in the provision? The Bill is not clear on that and on the necessity of the duties being imposed on it. It would be helpful to have an explanation of the Government's thinking on those points.
Lord Sainsbury of Turville: The intention behind this clause is simple, although the background is a little complex. Perhaps I can deal with two points in the noble Lord's speech. Extra-territoriality does not come into the issue, because we are dealing essentially with companies listed on the UK Stock Exchange. Obviously, the FSA already has a position on that. We are dealing with the listing situation. Funding is covered by the tripartite arrangement, which we shall debate when we come to a later clause.
The clause is about widening the scope of the Financial Reporting Review Panel. The FRRP is a well-respected and effective body. We have already discussed—in the context of Clauses 11 and 12, in particular—the fact that it is moving on to a proactive footing, and that the Bill is strengthening its role. Clause 14 expands its role, allowing us to make the most of its expertise and excellent reputation. At present, its job is to look at the annual accounts of companies. For company law purposes, that is sufficient. But we are also concerned, of course, with establishing confidence in the financial markets more generally. Not all accounts are annual, and not all bodies that trade securities on the UK markets are companies.

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Perhaps I may spell out in a little more detail the background, and how we arrived at the proposed arrangements. At present, the Financial Reporting Review Panel has the role of reviewing the annual accounts of certain listed companies and large private companies in Great Britain with a view to deciding whether to apply to court for the correction of defective accounts. It performs a similar function under Northern Ireland companies legislation. They check those accounts against the accounting requirements of the Companies Act 1985. But the panel's current function leaves some small gaps when it comes to reassuring the marketplace about the financial information published by UK issuers. The objective of the clause is to plug those gaps. Unfortunately, the interplay between company law and financial securities law is unavoidably complex. That, of course, is precisely the reason that we need to ensure that nothing is allowed to slip down any gaps between the two.
Under the Financial Services and Markets Act 2000, the Financial Services Authority (FSA) is required to maintain an official list of issuers. The FSA makes and enforces listing rules governing the admission of securities to the official list, and specifying the requirements on companies and other entities that list securities. Any issuer of securities listed in the UK must comply with the listing rules. A number of accounting requirements are contained within the listing rules, as one would expect.
Meanwhile, under the Companies Act 1985, the Financial Reporting Review Panel has been authorised to ensure the compliance of annual company accounts with the requirements of the Act. To that end, it is empowered to apply to the court for a declaration that accounts do not comply with the requirements of the Companies Act, and for an order requiring the directors of the company to prepare revised accounts.
For the purposes of explaining the clause, I need to start by pointing out three key differences between the financial services regime in respect of all listed entities, and the company law regime in respect of Companies Act companies. The first is the most straightforward: company law requires publication of annual accounts only. Interim accounts are a requirement purely of the listing rules; yet the accounts are prepared following the same accounting standards and are relied on in a similar way by shareholders and potential investors. It therefore seems logical to us—and to the Coordinating Group on Audit and Accounting Issues, which made the recommendation—for the Financial Reporting Review Panel to have a role in checking interim accounts in addition to annual ones.
However, because those are not company law requirements, the existing remedy of going to court for a restatement is not available. That is why, under subsection (2) of Clause 14, we are making provision for a body to be appointed to perform the functions of keeping under review the compliance of periodic accounts and reports produced in compliance with listing rules with the accounting requirements of those
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rules. The body appointed for that function is also given the function of informing the Financial Services Authority of any conclusions that it reaches. The FSA, as the body already tasked with enforcing the listing rules, will then decide on any corrective or punitive action. There are ranges of sanctions available to it under the Financial Services and Markets Act; nothing in the clause alters that.
The second and third differences relate to the overlapping populations caught by company law and securities law. There are a small number of UK issuers whose securities are traded but that are not companies as defined in the Companies Act—for example, some building societies that trade domestic debt, or companies that issue equities and are established by Royal Charter. There are a much larger number of overseas companies that have primary or secondary listings in the UK but are covered by the domestic law of their country of incorporation, not our company law.
Again, for at least some of these cases, it makes sense for the Financial Reporting Review Panel to have a role in reviewing the accounts. For example, the power could be used to extend the FRRP's remit to cover the accounts of overseas companies that have a primary listing in the UK, and the accounts of UK issuers that are not companies but which issue equities or domestic debt. But it will not be appropriate in all cases. For example, many overseas companies issue only specialist securities, such as Eurobonds, aimed at professional investors, and their accounts may not be prepared in accordance with international accounting standards. We do not believe that issuers such as I have just described should be the focus of the FRRP's attention.
There is still some work to be done with the FSA and the FRRP on deciding exactly how the interface between the two bodies should work. That is why the clause allows us to appoint a body—namely, the FRRP—in respect of any issuer of listed securities, but subsection (5)(a) then allows the body to be appointed in respect of particular classes of issuers.
I should also draw the Committee's attention to an important back-up provision. Subsection (7)(b) provides that the Financial Services Authority can refer particular issuers outside the remit of the FRRP, as expanded by this clause, to the FRRP on an individual basis, and that it will be able to exercise its statutory power and functions in regard to those issuers as well. The point is that the FR RP will not usually be required to keep those issuers under review as a matter of course, but will be required to look at them as a one-off exercise.
In summary, the FRRP has already built up an excellent reputation as an effective, independent regulatory body, and is being enhanced through the Bill and as a result of the post-Enron reviews. Therefore, we want the FRRP to take on additional responsibility for interim accounts of listed companies as well as its current functions with regard to annual company accounts. We also want it to take on responsibility for the accounts of certain listed entities

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that are not companies, where there is a real issue for the UK investor. In such cases, it would report to the FSA, which would decide the appropriate enforcement action. I move that this clause stand part of the Bill.
Lord Hodgson of Astley Abbotts: The Minister missed out two points. The first was the question of money. He paints a rosy picture of the FRRP chasing all sorts of villains all over the place, at the behest of the FSA, on a slim budget. I cannot see how a budget of £12 million will enable much to be done.
The second aspect was extra-territoriality, on which the Minister gave my question slightly short shrift. If one refers to the FRRP a non-UK company with a listing here, and it finds that there is a case to answer, it will presumably say that the company's accounts are defective. Presumably, in turn the sanction will be that the listing in the UK is withdrawn. I cannot see how commenting on the quality of an overseas non-UK-based company, and as such declining to continue to have its securities listed in the UK, is not an extraterritorial issue. It will strike at the credibility of that company, albeit that the hit would come from within the UK.
This is an important area, given London's international reputation in financial services. Although I would be delighted if the Minister commented further today, perhaps we should think more about the matter. There is a big issue of funding and of how we ensure that we can deal with extraterritorial points succinctly.
6 p.m.
Lord Sainsbury of Turville: The point is that this provision is in the context of listing in the UK. Clearly, there is a simple way of ensuring compliance—to say that one does not list in the UK. However, that is very different from talking about extra-territorial rights over the employees of a company in a different country. On that basis, the provision works.
Clause 14 agreed to.
Clause 15 [Application of provisions inserted by sections 11 and 12 to bodies appointed under section 14]:
Lord Evans of Temple Guiting moved Amendment No. 87:
Page 19, line 35, at end insert and
( ) the references in section 245F(4) and (5) to "the court" were to the High Court or, in Scotland, the Court of Session."
The noble Lord said: We are due to debate Clause 15 as a whole in a few moments, and I do not wish to pre-empt that debate. Rather, I shall explain this amendment in terms of the policy aims that it is intended to implement, focusing solely on that part of Clause 15 which applies Clause 12—the power to require documents, information and explanations—to a "prescribed body" under Clause 14. I will not discuss the other part of Clause 15 that correspondingly applies Clause 11—the Inland Revenue gateway—to the "prescribed body", as this is not relevant to the amendment that we have tabled.
As we have stated, we intend that the "prescribed body" under Clause 14 will be the Financial Reporting Review Panel—FRRP. At present, the FRRP checks that companies' annual accounts comply with the requirements of the Companies Act 1985. Clause 14 extends the FRRP's functions to include the checking of periodic accounts and reports of issuers of listed securities. The main policy aim underlying Clause 15 is to ensure that the FRRP has the same powers to require documents, information and explanations when it exercises these new functions as it will have in exercising its existing functions.
Under Clause 12, the FRRP will be able to apply to the court to make an order requiring the production of documents, information and explanations. However, "the court" referred to in Clause 12, on page 15, lines 41 and 43, is defined in Section 744 of the Companies Act 1985 as,
"the court having jurisdiction to wind up the company".
That is clearly appropriate in the context of Clause 12, which relates to the consideration of whether the annual accounts of a company comply with the Act.
However, Clause 14 is concerned with the supervision of "issuers of listed securities" that may or may not be a company. For example, an issuer could include some UK building societies. It is clearly necessary that the FRRP should be able to apply to a court to enforce its power to require documents, information and explanations in respect of issuers that are not companies when undertaking its duties under this clause. Therefore, it is no longer enough to rely on the definition of "the court" in Section 744, which relates only to companies. We must be specific and define the court to which the FRRP can apply when undertaking its functions under Clause 14. That is what this amendment does.
There has been no change of policy. This amendment is necessary to rectify an omission in order to allow the FRRP to apply to a court to enforce its powers in respect of all its functions. I beg to move.
On Question, amendment agreed to.
On Question, Whether Clause 15 shall stand part of the Bill?
Lord Hodgson of Astley Abbotts: I rise to speak to Clause 15. I did not wish to speak to the last amendment, because what I will say now will sweep up anything that I might have said about that.
According to the Explanatory Notes, Clause 15 permits the Inland Revenue to disclose information that it has obtained under Clause 11 to the Financial Reporting Review Panel—the body appointed under Clause 14. So far so good. However, the only people who could have possibly deduced that without reading those notes are those who wrote the clause. The clause is unintelligible at best. It is a perfect example—to return to the point made by the noble Lord, Lord Sharman—of why company law is in such urgent need of updating. Those problems have already been discussed at previous meetings of this Committee and at Second Reading. I am sorry, but I must again remind the Committee of what the Secretary of State

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said two years ago when the Government published "Modernising Company Law". She introduced the paper with the lines:
"The law has become encrusted with amendments and case law over generations … So the law needs to change. It needs to modernise and reform".
Considering what she said then, I hope that Clause 15 has shocked the Secretary of State, not only because of the inadequate response to that White Paper that this companies Bill represents, nor because this meagre response comes nearly two years after the White Paper was published, but, more significantly, because Clause 15 considerably adds to the problem of encrustation rather than reduces it.
Within the first three subsections of Clause 15 there is reference to no fewer than seven different pieces of legislation—two different Acts of Parliament and five different statutory instruments. To understand the relevance of the first 20 lines of this clause one would have had to have absorbed five different sections of the Companies Act 1985, checked to see whether they have since been updated in the Companies Act 1989, and then apply them to three of the previous clauses of this Bill. Additionally, the same would have to be done with five different paragraphs from the Companies (Northern Ireland) Order 1986.
When I first discussed this Bill at Second Reading I said that we should measure the Government's proposals against four tests—the third of which was that the proposals were clear and workable. Clause 15 would not pass such a test. The clause does not modernise and reform company law, as Patricia Hewitt put it; it merely has the effect of highlighting just how imperative it is to initiate a complete overhaul of company law. I invite the Minister to explain the clause without, in the words of that famous panel game, deviation, repetition or hesitation.
Lord Evans of Temple Guiting: I will rise to the challenge if the noble Lord, Lord Hodgson, wants me to. However, I had better warn him that I have a long speaking note followed by a defensive briefing, the first page of which reads, "There must be easier ways of saying this". Later, if he is still interested, I have another page entitled, "I don't understand a word of this provision. Take me through it subsection by subsection". I would be delighted to do that. I propose to go through the speaking note and, if the noble Lord, Lord Hodgson, or other Committee Members would like me to carry on, I am happy to do so. Otherwise, I would be more than happy to arrange for the subsequent speaking notes to be handed over tomorrow so that they can be read at leisure.
Clause 15 is complicated but it does precisely what its title says it does—it applies the provisions inserted by Clauses 11 and 12 of the Bill to the body that is appointed under Clause 14. Since the body we intend to appoint under Clause 14 is the Financial Reporting Review Panel, what it actually does is ensure that the panel is able to benefit from the provisions in Clauses 11 and 12 in respect of its new work as well as in respect of its current work.
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I will say a few words about the drafting. I believe that the clause looks much more complicated than it is because it ties together three previous clauses of the Bill, two of which amend existing companies legislation. Because the other one—Clause 14—relates to financial services and markets legislation, there is also some technical read-across in respect of issuers which are not Companies Act companies and in respect of Northern Ireland.
It is certainly true that one has to read the clause a number of times before its effect becomes apparent. I spent an hour on it yesterday afternoon, having turned off the cricket, and returned to it in the evening after I had had a couple of drinks, All of a sudden, it was tremendously intelligible. However, the Explanatory Note to the clause is useful. It states:
"The effect is that the FRRP will have the same power, and the same access to IR information, in respect of its activity under clause 14 (checking interim reports and reporting to the FSA) as it will when exercising its existing remit under Section 245C of the Companies Act 1985 (checking annual reports of Companies Act companies)".
I think that that is reasonably clear.
There remains only the question of why the clause needs seven subsections and numerous cross-references to achieve that effect. The answer is twofold. First, we must recall that the FRRP itself is not named in the legislation. Legally speaking, the person authorised to secure compliance by companies with the Companies Act requirements need not be the same entity as the body authorised by Clause 14 to review accounts against the listing requirements. In fact, both functions are to be carried out by the Financial Reporting Review Panel. However, because no specific person or body is named in the legislation, either in this Bill or the 1985 Act, the clause had to be drafted in such a way that it extended the Clause 11 gateway and the Clause 12 power to the Clause 14 body, without any assumption that it would be the same body as already authorised for the related function under the 1985 Act.
Secondly, the functions under Clause 14 relate to finance and securities legislation rather than companies legislation, so they do not map across precisely to the existing functions that the FRRP carries out under the 1985 Act. In particular, Clause 14 covers Northern Ireland as well as Great Britain. It covers issuers that are not companies as well as those that are companies, and it relies for its enforcement mechanism not on an application to court in respect of defective accounts, but on a report to the FSA. It is because of those differences that Clause 15 has to make some technically difficult adjustments to the provisions introduced through Clauses 11 and 12, which make it appear rather fiddly and less straightforward than it actually is. I beg to move that this clause stand part of the Bill.
Lord Hodgson of Astley Abbotts: That was a bravura performance by the Minister. Of course, I can understand the Explanatory Notes, but shortly they will be history. The Bill will become an Act and away those notes will go. There is no way that one can gather the purpose explained in the Explanatory Notes from

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the text of Clause 15. I do not doubt the sincerity and goodwill of the Minister, but there is always a doubt whether what is said in the Explanatory Notes is given effect in Clause 15. However, I am grateful to him for reading into the record the background to the clause. It will be helpful to outsiders looking at our proceedings. If there is further information, perhaps he will circulate it so that we can use it instead of a Mogadon sleeping pill.
Clause 15, as amended, agreed to.
Clause 16 agreed to.
Clause 17 [Levy to pay expenses of bodies concerned with accounting standards etc.]:
Lord Hodgson of Astley Abbotts moved Amendment No. 88:
Page 21, line 14, at end insert—
"(c) must take into account representation made to him by, or on behalf of, those who will pay the levy"
The noble Lord said: Amendment No. 88 concerns Clause 17 entitled "Levy to pay expenses of bodies concerned with accounting standards etc.". As the title suggests, the clause empowers the Secretary of State to make regulations imposing a levy for meeting the costs of the bodies under Clause 16 that have received delegated powers under Clause 3. I also wish to speak to Clause 17 stand part. However, first, I shall focus on a more specific point of concern.
Subsection (5) of the clause lists the considerations that the Secretary of State must make when determining the rate of the levy payable. The two considerations given in Clause 17(5)(a) and (b) focus on the expenses of the body that is to receive the grant. Amendment No. 88 adds a further consideration; that is, the need to seek the views of those who will pay the levy. It adds that the Secretary of State,
"must take into account representation made to him by, or on behalf of, those who will pay the levy".
Paragraph 88 of the Explanatory Notes states that those anticipated to produce this levy are listed companies and the members of the Consultative Committee of Accountancy Bodies—that is, the ICAEW. the ICAS, the ACCA, the ICAI, the Chartered institute of Management Accountants and the Chartered Institute of Public Finance and Accountancy. Since they are to be the source of part of the funding it seems right that the Secretary of State should be obliged to consult them before deciding on the levy payable. I beg to move.
6.15 p.m.
Lord Evans of Temple Guiting: As the noble Lord, Lord Hodgson, said, the core costs of the Financial Reporting Council are met by the Government, listed companies and the accountancy profession in equal parts. The case costs of the Accountancy Investigation and Discipline Board and the Audit Inspection Unit fall outside this arrangement. I make this point for clarity purposes. They are met by the accountancy profession and are not expected to be covered by any levy.
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The tripartite arrangement for funding core costs is entirely voluntary and has worked well until now. We hope very much that businesses and the profession will continue to contribute voluntarily in the future and that we will never have to use this levy power. The signs are very good. The FRC's initial consultation with business representative bodies suggests that they support our proposals to make the regulatory regime more robust and accept that business should contribute to the increased cost. The major accountancy bodies have also been supportive of the changes and the Government, under Clause 16. are seeking the power they need to contribute their share.
The aim of the levy provisions is to ensure that the Financial Reporting Council has security of funding, which is a key element of independence. The Government envisage that, as at present, the contribution of each of the three main funding constituencies—government, business and the accountancy profession—will represent one third of the total core costs of the FRC. It is not our intention to use the levy power to change this balance of funding or to impose a levy on bodies that are not currently part of the tripartite funding arrangements unless the FRC's activities are extended to cover other bodies.
I do not believe that the amendment is necessary. The FRC will have a new management board, one of the key tasks of which will be the preparation of the organisation's annual budget. Two of the members of the management board are the president of the CBI and the chairman of the CCAB, who are also directors of the FRC. As members of the management board, they will be aware of the business and accountancy profession contributors to the FRC's budget. As directors of the FRC, they will also be involved in the final approval of the budget by all five of the FRC's directors. Arrangements will also be made 10 keep the Government—the FRC's third financial sponsor—suitably informed and consulted about development of the budget each year.
Furthermore, it is our intention that listed company contributions should continue to be collected on behalf of the FRC by the FSA, along with the listing fee. The FSA consults listed companies annually on the level of the fee and we envisage that the contribution to the FRC will form part of that consultation. As with many other powers, the Secretary of State would of course take into consideration any relevant representation she received concerning the exercise of that power.
I hope that that explanation will satisfy the noble Lord, Lord Hodgson.
Lord Hodgson of Astley Abbotts: I am grateful to the Minister. I had not grasped that the CBI and the CCAB were ex officio involved in the preparation of the budget that leads to the setting of the fee levels. No doubt the noble Lord, Lord Sharman, would have put me right on that. But if they are ex officio involved, that provides the link that I was seeking in the amendment. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 17 shall stand part of the Bill?
Lord Hodgson of Astley Abbotts: I seek to probe the principles behind Clause 17. Perhaps I may begin by reminding the Committee of what the Bill, in essence, attempts to do. In Chapter 1 of Part 1, it sets up a new statutory regime for the oversight and regulation of the accountancy and audit profession, working alongside other bodies, in particular the chartered institutes, which have their own responsibilities under charter for the professional standards of their members.
The revised organisation, the FRC, will be responsible for the formulation of accounting, auditing and associated standards, and for the oversight of financial reporting. This is the work carried out by the APB, ASB and FRRP boards of the FRC. Mr Keith Masson's wonderful chart has kept us all on the straight and narrow. Of the FRC's other work, the disciplinary work of the AIDB is paid for by accounting bodies participating in that scheme, and the inspection work of the AIU is directly funded through audit registration fees.
The accounting/auditing standards and financial reporting work in the past was financed through the goodwill of the accountancy profession, which had established arrangements for developing such standards well before the Government decided they must be involved. The profession had been under no obligation to do this work but had done it purely voluntarily. If the profession had not undertaken that work, it would have had to have been addressed by the Government and funded in some way thereby.
The profession has undertaken to continue funding the new arrangements for standard setting in a tripartite fashion. As the Minister has pointed out, the other two partners are government and business. This will be a condition of their continuing to be recognised as supervisory bodies. The logic of that arrangement is perfectly clear. As the Minister said, the profession appears keen to continue to operate as a fully equal partner in the regulatory framework and should therefore be prepared to bear its share of the costs. These costs, incidentally, the profession is anxious to point out, are much more than the third that the other partners are paying once the case costs of the AIDB and the inspections costs of the AIU, which are funded entirely by the profession, are taken into account.
The issue that has been raised with us is what should happen if there is a move from a voluntary arrangement of equal partners to the operation of the statutory levy under Clause 17. As the Minister pointed out, Clause 17 is a reserve power which would be operated only if the voluntary arrangements broke down. But, presumably, at that point it would be safe to say that the chartered institutes would have ceased to be recognised supervisory bodies and would therefore no longer he full partners in the regulatory framework.
In such changed circumstances, is it in principle right to impose a levy of this nature on the profession merely because it has voluntarily made a contribution
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to the development of accounting and audit standards and the oversight of financial reporting in the past? The briefing and questions that we have received raise the issue of whether it is fair to impose this levy in the future for all time. What is the Government's thinking behind this?
The key reason so far proffered by the Government is the importance of demonstrating to jurisdictions abroad that the new FRC arrangements are "independent" and cannot be held to ransom by a profession withdrawing its share of the funding. But, if that really is the case, would it not be more satisfactory, and certainly demonstrate a greater degree of independence, if, in the event of voluntary arrangements breaking down, the independence of the statutory regulator were guaranteed through direct government funding?
Further, there are some broader principles at stake. Should the Bill include a clause which coerces payment from one particular segment of the community for the development of standards which benefit not only it, but the community in general?
Let us consider who might benefit from the development of accounting, auditing and financial reporting standards. Certainly the Government do, in ensuring the operation of fair markets based on reliable financial information; and certainly business does, because audit is a service to it, and it relies on good standards of accounting and financial reporting to operate credibly.
So if the present arrangements were to break down, how could auditing and accounting bodies be assured that they would not end up paying for the process at a time when their privileged position as recognised supervisory bodies has come to an end? It has been put to us that the operatives in professions or businesses are not normally expected to bear the costs of developing the standards under which they work. Dentists do not pay for the development of clinical standards; or doctors for the development of standards on intensive care; or lawyers for the costs of the development of the law they operate. I look forward to hearing the Government's response to this remote—we hope—but nevertheless possible scenario.
There is a final point on Clause 17. The Explanatory Notes explain the procedure by which statutory instruments giving effect to this clause are made. Paragraph 89 of the notes states:
"The first regulations made in respect of the levy power—and any further regulations which change the persons or bodies by whom the levy is payable—will be subject to the affirmative resolution procedure … Any other subsequent regulations will be subject to the negative resolution procedure".
Perhaps the Minister can explain where the quantum—the actual payable amount of the levy—fits into this. For example, will the initial amount of the levy be covered by the affirmative procedure, but subsequent increases by the negative procedure? If so, it hardly seems satisfactory or balanced.
Lord Evans of Temple Guiting: This clause will enable the Secretary of State, if necessary, to impose a levy to secure contributions to the funding of the

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independent regulator. At present—as we have heard over the past few minutes—the costs of the FRC are met by government, listed companies and the accountancy profession in equal parts. This is a voluntary arrangement and, as I said, has worked well until now.
The thrust of the changes we are making in this part of the Bill is to strengthen the independence of the regulatory regime. That is important for market confidence in the UK. Investors need to know that they can rely on company financial information. It is also important internationally, not least—as the noble Lord, Lord Hodgson, acknowledged—to persuade regulators in other countries that they can rely on our system.
A key element of independence is security of funding. That point is made consistently in the international arena by bodies such as the International Organisation of Securities Commissions and the Public Company Accounting Oversight Board. We need to be able to show that the FRC and its boards cannot be influenced by threats to withhold funding. So while I very much hope that contributors will continue to pay voluntarily, I believe that the power to impose a levy is absolutely necessary.
If we need to use this levy power, it may be some time in the future. For that reason, and because we recognise that the power is drawn widely in terms of the classes of person who may be required to pay the levy, we believe that it is right that the House should have an opportunity to debate the initial regulations setting the levy. Similarly, we think it right that any subsequent regulations which change the classes of person required to pay the levy should be debated by the House. I think that that is a very important protection in addressing the concern expressed by the noble Lord, Lord Hodgson, about the future.
Therefore, at this time I ask only that the Committee agree to the principle that a levy may be used, if necessary, to secure the funding of the FRC, in the knowledge that there will be an opportunity to debate the regulation providing for the levy if and when it becomes necessary to make use of the power.
Noble Lords have asked whether all regulations should not be subject to positive resolution. Since the first use—if any—of the levy could be several years in the future, it would, as I said, be appropriate for Parliament to have the opportunity to debate, under the affirmative procedure, the level at which the levy should be set and the classes of body that should be required to pay it. The Government consider that subsequent regulations varying the amount of the levy should be subject to negative resolution. However, if second or subsequent regulations should change the bodies or persons who will be required to pay, the Government consider that the affirmative procedure would be appropriate. As noble Lords will be aware, the Select Committee on Delegated Powers and Regulatory Reform considered that that was an appropriate level of parliamentary scrutiny.
The noble Lord, Lord Hodgson, asked whether, if the levy had been used and there was a subsequent move for a return to a voluntary system, the
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Government would be willing to consider it; and whether or not the law would prevent it. The regulations could be repealed, but the Government would need to look carefully at the reasons for the original breakdown of the voluntary arrangements.
I think that that is all I have to say on this at present and I hope that I have been able to reassure the noble Lord, Lord Hodgson, and any other Members of the Committee who have been worried by this clause.
6.30 p.m.
Lord Hodgson of Astley Abbotts: I am grateful to the Minister for that response. The need for independence is clearly understood on this side of the Committee but I am surprised that quantum is not within the affirmative resolution procedure. It seems to me that changes made to who pays are important and, from the way in which the Bill is drafted, it is clear that the Government accept that. But the amount they pay is just as important as who pays. I am surprised, therefore, that we could have a situation where. given the powers to be conferred, the negative procedure can be used for potentially dramatic increases. I hope that the Minister will think a little more about that. Quantum, as well as who pays, is an important issue. The point is worth considering again and I hope that the Minister will agree to that.
Clause 17 agreed to.
Clause 18 [Power to require documents and information]:
Lord Hodgson of Astley Abbotts moved Amendment No. 89:
Page 21, line 41, at beginning insert "Where there appears to be good reason"
The noble Lord said: We have now moved from Chapter 2 to Chapter 3 and are beginning a series of amendments on investigations. Clause 18 substitutes a new clause for existing Section 447 of the Companies Act 1985 giving the Secretary of State two powers. On the one hand, she can herself obtain documents from a company, as set out in subsection (2) on page 22, or, on the other hand, she can appoint an investigator to obtain documents from a company, as set out in subsection (3). In each case the power includes a power to require an explanation of the documents to be given by, among others, any officer or employee, or former officer or employee, of the company.
New Section 447 will preserve the distinction, on the one hand, of the power of the Secretary of State to require the production of documents and, on the other, the power of the Secretary of State to appoint investigators. But the most significant change to be introduced by this provision will be the extension of the power of the Secretary of State, and the power of investigators appointed by the Secretary of State, to seek information other than documents: the power to seek explanations of documents is instead to be expanded to be a power to require the provision of,
"such information (or information of such description) as may be so specified".
What is objectionable about new Section 447, and which this amendment seeks to address, is that it will omit the existing precondition that the Secretary of State must consider there to be "good reason" for the exercise of the powers under the section. Here we return to the point raised by the noble Lord, Lord Sharman, in another context earlier today. In existing Section 447, subsections (2) and (3) both begin with the words,
"The Secretary of State may at any time, if he thinks there is good reason to do so,…".
Paragraph 97 of the Explanatory Notes explains this omission on the grounds that the requirement for "good reason" is redundant given the restrictions imposed in any case by general administrative law provisions not to exercise powers on a trivial or irrelevant ground. However, the amendment of the statute specifically to exclude this requirement, which was previously explicit, is conspicuous and could be misunderstood. If it was deemed necessary to be included in existing Section 447, why is it disregarded in the redrafted section? Surely there can be no harm in making the requirement explicit so that the precondition for the exercise of the power can be readily appreciated by anyone in relation to whom the power is being exercised.
Without wishing to go over old ground, is it not extraordinary that the Minister should refuse to accept our amendments to Clause 8, Amendments Nos. 30, 34, 37 and 40, to leave out the word "vouchers", a clearly outdated term, on the grounds that any change to hallowed wording might lead the courts to draw the conclusion that the view of Parliament on a particular policy had changed? Yet to argue here that the words
"is good reason to do so"
can be dropped without the courts drawing a similar inference is surely extraordinary.
The Minister may not be concerned by this anomalous approach, but we are. I therefore beg to move.
Lord Sainsbury of Turville: As we have heard, this amendment would introduce to subsection (1) of new Section 447 the phrase,
"where there appears to be good reason".
A similar phrase appears twice in existing Section 447, but it has not been repeated in Clause 18, which provides for a new Section 447.
I think that this is simply a case of a pathetic barnacle that is hanging on to the ship. It now needs to be prised loose and thrown overboard. I shall explain why, in a modest way, we have taken the legislation forward and thus show that these words add absolutely nothing. Although it may appear at first sight that the Secretary of State can use her powers under new Section 447 on a whim, and for no good reason at all, she is of course constrained in the exercise of these powers, as she is in the exercise of her existing powers, by the usual principles of administrative law. Her use of these powers can be challenged in the courts.
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The courts can be asked to determine, in particular: whether a decision to use these powers was within the legal scope of the provision; whether it was made in pursuit of the policy and objects of the Act; and whether it was reasonable. As a matter of administrative law, the Secretary of State will need a good reason to act because she cannot act lawfully if she has a bad reason. She cannot act on grounds which are trivial, irrelevant or irrational.
It is as a result of this that, when we came to look at replacing Section 447, we concluded that it would be superfluous to include reference to the Secretary of State thinking that there is "good reason" to exercise her powers. As they stand, the references in Section 447 to "good reason" are not defined and the courts have given them no special meaning. They add nothing of substance. Clause 18 will substitute a new Section 447, but we intend no change of substance to the grounds for use of these powers or to the matters which can be investigated.
The removal of references to "good reason" does not add to the circumstances in which these powers can be exercised and it follows that putting them back in will not restrict those circumstances. I am sure that we can agree that we should avoid superfluous language, not least because superfluous words have a habit, over time, of acquiring or suggesting unexpected meanings. As I have said, this is a pathetic barnacle and we need to be rid of it. We look to the noble Lord for praise in this modest act of taking the legislation forward.
Lord Hodgson of Astley Abbotts: The Minister is removing a barnacle. He has given us an assurance that the omission of these words is not significant and that the courts can draw no other conclusion. Therefore I am happy to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hodgson of Astley Abbotts moved Amendment No. 90:
Page 22, line 12, at end insert—
"( ) Nothing in this section should result in a person being required to produce or disclose a document in respect of which legal professional privilege could be infringed."
The noble Lord said: In moving Amendment No. 90, I shall speak also to Amendments Nos. 91 and 91 A. We are still dealing with amendments to Clause 18 covering the power to require documents and information, and the provisions in Clause 19, entitled:
"Provision in relation to certain disclosures".
The amendments focus on specific issues that I should like the Government to address before we come to a general debate on whether Clause 18 should stand part of the Bill.
As we noted in the previous debate, Clause 18 would replace the existing Section 447 with a new section. We believe that the new Section 447 extends too far in relation to requiring the production by third parties of documents that are not documents of the company. The current legislation, under subsection 447(4), gives the Secretary of State the power to require production of documents from persons other than the company under investigation. As the Bill stands, it is argued that

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these powers will be changed in a manner that could lead to considerable difficulties because it opens the way to arguments over what documents other than those belonging to the company such other persons can be required to produce. The extension in this new draft legislation could, for example, allow the Secretary of State to require the production of audit working papers from the auditors, or memos by lawyers in relation to their clients that are internal to the partners of that law firm. Again, we are going back over some of the ground covered by the noble Lord, Lord Sharman, earlier. The information and documents that the appointed person may require appear to be unrestricted—the company must produce whatever documents or information "the investigator may specify", as stated at line 12 on page 22.
There is a strong case that only documents that are those of the company under investigation—whether held by it or any other person—or documents in the company's possession should be required to be produced. That explains the reasoning behind Amendment No. 91. That amendment adds a safeguard similar to previous Amendments Nos. 73 and 74. With the present drafting, it is not clear whether the information or documents that can be requested have to be related to the company. That surely should be the case, hence Amendment No. 91, which reads:
"( ) Any such information or documents must relate to the company specified by the Secretary of State under subsection (1)".
Clause 18 also raises concerns in relation to the protection of legal professional privilege. Although we accept the Government's aim to bring in measures that help to restore investor confidence in companies and financial markets following recent corporate failures, legal professional privilege should not be undermined by the provisions of the Bill.
It is clear that on receipt of a request for information or documentation from either the auditors or the investigators acting in accordance with powers granted by the Bill, the recipient of the request or notice will have to consider the status of the documentation and information requested. Lawyers in particular will also need to consider their duty of confidentiality, which is fundamental to the relationship of solicitor and client.
The ditty of confidentiality exists as an obligation both in law, having regard to the nature of the contract of retainer, and as a matter of conduct. There is a distinction between the duty to keep client affairs confidential and legal professional privilege. The duty of confidentiality extends to all matters communicated to a solicitor by the client or on behalf of the client, irrespective of the source of the information. Whether the document or information is also privileged is a separate legal issue, as not everything which a lawyer must keep confidential is privileged. Where a document is confidential and also privileged it should not have to be disclosed at all, for any reason.
We have had an extensive briefing on the issue from the Law Society. The Law Society's position is that legal professional privilege is a fundamental common law right which should be upheld. Legal professional
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privilege is recognised by the English court as a substantive common law right, as well as a human right recognised under Articles 6 and 8 of the European Convention on Human Rights. Legal professional privilege is a common law right which is an exception to the general rule that all relevant evidence is both admissible and compellable before a court or tribunal. That means that a person—in this context, a company is a legal person and would seek advice through the officers of the company—can openly consult his lawyer with confidence that those discussions and the advice received cannot be disclosed. Such advice cannot be effectively obtained unless the client is able to put all the facts before his lawyer without fear that they may afterwards be disclosed and used to his prejudice.
Although legal professional privilege originally came into being in the context of lawyers giving advice about litigation, commonly referred to as litigation privilege, it has long been extended to non-litigious business—advice privilege. That is so that communications passing between a party and his or their lawyers, acting in their capacity as a lawyer, are privileged from production provided that they are confidential and created for the purpose of seeking or giving legal advice or assistance. Those purposes have to be construed broadly.
Merely because a client is speaking or writing to his or her solicitor does not render that communication privileged, however. Privilege applies to only those communications that directly seek or provide advice. or where information is passed by the solicitor or the client to the other in the course of keeping each other informed so that advice may be sought or given as required. That will include advice on what should prudently and sensibly be done in the relevant legal context. The concept of advice privilege has recently been clarified in the decision of Three Rivers District Council & Others v The Governor & Company of the Bank of England of 1 March 2003, when the Court of Appeal confirmed that advice privilege applied only to advice on legal rights and obligations.
It has long been recognised that legal professional privilege belongs to the client, he or she alone can waive it, and that a lawyer is under a duty to protect his or her client's privilege. In the context of requests received from auditors or by investigators, it still remains the client company's decision whether to authorise specifically the company's lawyers or other persons to provide privileged information to them and thereby waive their right to privilege. Clause 18, if not deleted in its entirety, should at the very least be amended to ensure specifically that neither the company nor any other person has to disclose privileged material in the course of investigations. Amendment No. 90 would ensure that neither the company nor any other person has to disclose privileged material in the course of investigations.
Noble Lords might observe that mention is made of legal professional privilege, as regards Clause 18, in Clause 19(4). However, the Law Society argues that this provision does little to alleviate concern. The Law Society is concerned by the current wording of Clause

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19(4), because it appears to assume that privileged material will be disclosed. Therefore, this subsection seeks to absolve the lawyer from disclosing privileged material. The Law Society can see no justifiable reason why privileged material should be disclosed in the context of investigation under these provisions. An investigation should be based on evidence that is strong enough without having to waive legal professional privilege.
Clause 19 provides the lawyer with statutory protection from claims for breach of client confidentiality. That is all that this clause needs to do, since if Clause 18 is deleted in its entirety, or is amended to include a protection against the disclosure of privileged material, it does not need to go as far as is currently drafted in subsection (4). That is the reason for Amendment No. 91A, which seeks to remove subsection (4).
The policy of legal professional privilege requires that the client should be secure in the knowledge that protected documents and information will not be disclosed. It is incongruous that the Government, through the Department for Constitutional Affairs, on the one hand reaffirm the importance of legal professional privilege. A consultation paper issued by the Lord Chancellor's Department on 31 July 2002 states:
"Legal professional privilege is a cornerstone of the legal system. It serves the public interest because it recognises that it is in the interests of justice that a person consulting his legal adviser should be able to do so in confidence, since otherwise he may not feel able to be fully open about his position. This might impede his ability either to protect his rights or to defend himself properly in any subsequent action".
On the one hand, the Government are underlining and stressing the importance of legal professional privilege, only to be seriously encroaching on its scope in these clauses. I beg to move.
6.45 p.m.
Lord Sainsbury of Turville: With Amendment No. 91, noble Lords are concerned to limit the range of documents or information that the Secretary of State or investigator might require a company or third party to produce. They consider that documents or information must relate to the company that is the subject of the Secretary of State's inquiries or is being investigated. However, we believe that it is unsatisfactory for two reasons. First, it would introduce precisely the kind of uncertainty that proposed new Section 447 is intended to address, by leaving room for argument about what is considered to relate to the company. Secondly, the test would most likely be too narrow to cover all the kinds of information or documents that might be relevant to an investigation.
For example, it might be necessary to investigate a company operating a franchise arrangement which has made false claims about the franchises that it has sold. The investigator will want to be able to require documents and information from franchisees, to discover whether the company's sales forecast or the
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claims that it is making are correct. We doubt that such information could be said to relate to the company under investigation, though it would clearly be highly relevant to the investigation of the company.
Another example might be business plans or projections drawn up before a company was formed, identifying the thinking of the company's promoters. In examples such as these, we were not convinced that a test such as that proposed would be wide enough to give investigators access to all the relevant information.
Instead, we have taken a different approach to qualifying the use of the powers. Under new Section 447(1) the exercise of the Secretary of State's power to appoint investigators must be in relation to a company. As a result, any information or documents requested by the investigators will need to be relevant to the concern which prompted the Secretary of State to appoint investigators. The same qualification applies to the exercise of the Secretary of State's own powers under new Section 447(2).
Let me now move on to the treatment of documents or information covered by legal professional privilege. I should emphasise that we do not intend to make any changes to the existing principle that neither the Secretary of State nor the investigators can compel the disclosure of documents which could be withheld in civil proceedings on grounds of legal professional privilege. Here I am referring to subsection (2) of Section 452. As we are widening the powers in new Section 447 to cover information which is not recorded, we are also extending this protection so that it covers such non-documentary information. The relevant provisions for this are to be found in paragraph 20(b) of Schedule 2, in new Section 452(2), on pages 54 and 55. As a result, we believe that Amendment No. 90 is unnecessary.
I have spelt out those exact issues because it may be that some people have not read as far as that in connection with the clause and it is important to do so.
We have extended this principle to new Section 448A in Clause 19. New Section 448A provides immunity from liability for breach of confidence to any person who, in breach of a contractual or other duty of confidence, provides relevant information to the Secretary of State in good faith and in the belief that it will help assist inquiries to establish whether a formal investigation is appropriate.
Amendment No. 91A seeks to extend the immunity in the new section to third parties, other than lawyers, who disclose information covered by legal professional privilege. However, although the new section approaches disclosure from a different tangent, we can see no logic in allowing so much information to be volunteered by a third party to the Secretary of State than could be required by the exercise of the investigation powers in Part 14. New Section 448A provides a very significant legal immunity and this immunity needs to be kept within reasonable and proportionate limits.

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In other words, if we were to make the amendment we would confer immunity on legal professionals who break professional privilege. That is how I read it. I do not think that that is what the noble Lord seeks to achieve.
Lord Hodgson of Astley Abbotts: I am grateful to the Minister for his reassurance about the restrictions on the documents. I shall read carefully what he said. To be candid, the issues of legal professional privilege are quite abstruse; they are not easy for a non-lawyer to understand. I shall read carefully what the Minister said, consult again and perhaps come back on the issue at a later stage. To be honest, I cannot constructively respond at the moment because it is a difficult issue. As the Minister rightly pointed out, there are a number of places in the Bill where the issue arises. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 91 not moved.]
On Question, Whether Clause 18 shall stand part of the Bill?
Lord Hodgson of Astley Abbotts: We have just had a long debate about legal professional privilege and restrictions on the Secretary of State's power but we still have concerns about the provisions of Clause 18 and the arrangements within new Section 447. Another major change in the clause is the proposal to dispense with the procedural defences and simply to allow a court to decide whether or not an individual has a reasonable excuse for not producing a document or explanation.
Under the existing provisions, a director is liable to a relatively small fine; under the new provisions he can be dealt with as if he is guilty of contempt of court and be liable to an unlimited fine or imprisonment. It should be noted that, in theory at any rate, this is a considerable increase in potential liability.
From the discussions that we have had, we remain to be convinced that the increased powers for DTI investigators are necessary. There appears to be no evidence to suggest that DTI investigators have been substantively delayed or compromised because under present statute the DTI lacks some necessary power to proceed effectively. If the Minister or his officials have examples, it would be helpful if they could be shared with the Committee.
The briefing from the Law Society explains that the experience of solicitors who have been involved in DTI investigations is that the balance between the powers of the inspector and the protection of companies and third parties from over-extensive powers has been appropriate. DTI investigators' reports have, as a general rule, been very thorough and have not been qualified by their ability to reach a conclusion because documents or other information have not been provided and there has been no legal way of accessing them.
There is a concern that some of the safeguards that maintain this balance would be eroded by the provisions of the new legislation. We appreciate the
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Government's desire to address public concerns arising out of high profile business failures and the need to restore investor confidence. However, strengthening the company investigations regime will not directly address the various underlying causes of company failure. The clause seems only to strengthen the ability of the Secretary of State to report on company failure and does not appear to be necessary.
Lord Sainsbury of Turville: Clause 18 replaces Section 447 of the Companies Act 1985. Section 447 contains the powers used in the overwhelming majority of company investigations and it is central to the ability of the company investigations regime to uncover misconduct. But practical experience of Section 447 has identified a number of limitations. As a result, we are replacing Section 447 with a new section which widens and strengthens existing powers. The main aim is to improve investigators' access to relevant information, but I should emphasise that the new section does not change the circumstances in which, or the purposes for which, these investigation powers can be used.
It might be helpful if I begin with some background before turning to the detail of the clause. There is a range of powers in the Companies Act 1985 which allows the Secretary of State, or someone authorised by her, to inquire into the affairs of a company and related matters. In practice, these inquiries are mainly carried out in two ways: by appointing inspectors to investigate and report; or by authorising an individual, usually one of DTI's own investigators, to require a company to produce documents.
The first of these—the appointment of inspectors—now happens very rarely. In almost all cases nowadays the second mechanism is used and investigations into a company will be conducted, on a confidential basis, by an authorised individual. It is this kind of investigation with which Section 447 is concerned and which we are debating here.
As I said in the debate on Amendment No. 89, the Secretary of State may use her powers only where there is a sound basis for her to do so. This means, among other things, that investigators cannot go out randomly selecting companies to look at. Instead, an investigation will usually result from a complaint received from the public or from evidence passed on by another regulator. This information is then put through a thorough vetting process to establish whether investigation is warranted. Some 95 per cent of complaints are weeded out at this stage, either because an investigation is not justified or because the matters raised are more appropriate for other regulators. In 2002–03, around 350 investigations were carried out, affecting less than 0.04 per cent of registered companies. I want to emphasise that the process is designed to ensure that company investigations are carefully and appropriately targeted. Well-ordered and well-run companies are not the focus of attention of the powers.
Perhaps I may now turn to the detail. Currently, investigators can require a company to produce any documents that they specify. If documents which the

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investigators want to see are held by someone else, the investigators can require that other person to produce them. In addition, they can require an explanation of the documents from the person who produced them or any past or present officer or employee of the company.
However, there is no general power to require answers to questions unrelated to documents produced. Some companies use that to refuse to answer even the most straightforward questions or to help the investigators identify relevant documents. Some companies also choose to challenge whether relevant questions which occur to an investigator when he reads a document can truly be said to be requests for explanations of the document.
In addition, it is open to argument what kinds of documents—other than company documents or documents held to the company's order—a third party can be required to produce. That means that it may be difficult for an investigator to get hold of, for example, the internal papers of a trading partner or independent contractor. These papers may be highly relevant to uncovering wrongdoing on the part of the company.
Finally, aside from documents, third parties are often in a position to provide highly relevant information, but currently cannot be compelled to do so as a general rule. New Section 447 seeks to address these limitations, improving the access of the Secretary of State and investigators to relevant information from the company under investigation and improving the access of investigators to relevant information from third parties.
The Secretary of State will be able to require a company to produce documents and information. Of course, currently, the Secretary of State can require a company to produce documents, but the general power to require information is new. The Secretary of State will also be able to authorise an investigator to require the company under investigation or any other person to produce documents or provide information. That is a wider power than at present. Currently, there is no general power for investigators to require information.
We are also preserving a range of existing provisions supplementing the powers. Therefore, documents or information can be required to be produced at such time and place as is specified by the investigator or Secretary of State and they can be required immediately. Documents which are produced can be copied or extracts taken from them. A lien on a document will not be affected by production of the document in compliance with Section 447. Reference to "document" includes information recorded in any form—for example, on paper or electronically. Finally, information recorded other than in legible form—for example, electronically—can be required to be produced in legible form—for example, in "hard copy"—or in a form from which it can readily be rendered visible and legible—for example, on a floppy disk.
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As is currently the case, there will be no obligation to comply with a requirement under Section 447 to the extent that it would involve disclosing information which could be withheld in civil proceedings on grounds of legal professional privilege. There will continue to be a measure of protection against banks being forced to disclose confidential information about their customers' affairs. That is covered by Section 452, to which we are making minor and consequential amendments.
Turning to sanctions, we are repealing the existing offence of failing to comply with a requirement under Section 447. A new sanction is provided for by Clause 21, which allows the failure to be dealt with as though it were a contempt of court. It is crucial that company investigators have swift and ready access to all relevant information if they are to be successful. Most of the time investigators will be examining the activities of live companies in response to complaints from sources such as members of the public and other regulatory organisations. Depending on what an investigator finds, follow-up action may be appropriate; for example, criminal investigations or taking proceedings to wind up the company or disqualify the directors.
The company investigations regime is a key mechanism for identifying and dealing with misconduct. We must ensure that investigators have the right tools at their disposal to be effective. The noble Lord, Lord Hodgson, asked why we need these powers. In recent years, we have seen a steady rise in the number of complaints about misconduct in companies. In 2002–03, some 5,000 complaints against companies were received. That represents an increase of 44 per cent over the number of complaints received five years earlier in 1998–99, even though the number of registered companies rose only by 23 per cent during the same period.
As the number of complaints rises, investigators are finding that the limitations to the powers in Section 447, which I have outlined, are hampering their investigations. In carrying out an investigation, the preferred approach of the investigator is to build a relationship with the company based on co-operation. However, investigators are finding that they are meeting increasing resistance. In 2002–03, the average time for completion of an investigation was 213 days from receipt of a complaint against a target of 188 days. That had slipped from 207 days in 2001–02. The wider powers contained in new Section 447 are intended to address the kinds of resistance that investigators face. It is in everyone's interest that an investigation is completed as swiftly as possible.
On that basis, we think that Members of the Committee will understand that this clause is essential and should stand part of the Bill.
7 p.m.
Lord Hodgson of Astley Abbotts: I began to think that the Minister was detailing a wish list of everything that the Government would like to include in the Bill. Clearly, if there has been the increase in the number of complaints that the noble Lord said—I am sure that

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there has—and there are points of specific resistance that the clause will address, we are content that the clause should stand part of the Bill.
Clause 18 agreed to.
Clause 19 [Protection in relation to certain disclosures]:
[Amendment No. 91A not moved.]
Clause 19 agreed to.
Clause 20 [Power to enter and remain on premises]:
Lord Hodgson of Astley Abbotts moved Amendment No. 92:
Page 23, line 31, leave out "thinks" and insert "reasonably believes"
The noble Lord said: Our final two groups of amendments concern Clause 20, entitled, "Power to enter and remain on premises". Amendments Nos. 92 and 95 return to the "reasonably believes" argument. Clause 20 introduces new Section 453A, which provides powers for inspectors and investigators to enter and remain on premises that they believe are used for the purposes of the business of the company that they are investigating.
The proposed new power is broadly drafted. Under draft Section 453A(2) of the Bill,
"An inspector or investigator may at all reasonable times—

(a) require entry to relevant premises, and

(b) remain there for such period as he thinks necessary".

The key phrases are "thinks", "reasonable times", "relevant premises" and "remain there for such period of time as he thinks necessary".
Amendments Nos. 92 and 95 would replace "think" with "reasonably believes" in new subsections (1)(b) and (2)(h) of new Section 453A. Amended subsection (1)(b) would read that an inspector or investigator must "reasonably believe" that entering and remaining on the premises "will materially assist him". Amended subsection (2)(b) would read that an inspector, "may remain there for such period of time as he reasonably believes necessary". That new power considerably increases the search and entry powers under Section 448 of the Companies Act 1985. Under the existing powers, an inspector or investigator must obtain a search warrant on the basis of information given on oath.
[The Sitting was suspended for a Division in the House from 7.8 p.m. to 7.16 p.m.]
Lord Hodgson of Astley Abbotts: Before the Division Bell rang I was talking about the need to replace the word "thinks" in new Section 453A(1)(b) and 453A(2)(b) with the words "reasonably believes".
As currently drafted, the new clause increases considerably the search and entry powers under Section 448 of the Companies Act 1985. Under the existing powers, an inspector or investigator must obtain a search warrant on the basis of information given on oath by, or on behalf of, the Secretary of State, or by the investigator. The new powers are exercisable unilaterally by the inspector or investigator, if he thinks that they will materially assist his investigation of a company. In those
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circumstances, we believe that the use of the word "thinks" is too wide a definition and thus open to abuse. The test of reasonable belief is well established in law and would be a better test in the circumstances. I beg to move.
Lord Sainsbury of Turville: These amendments relate to the powers in new section 453A that allow an inspector or investigator to require entry to. and to remain on, premises. An inspector or investigator can exercise those powers only if he or she thinks that they will materially assist in the exercise of his or her functions—in other words, that they will advance the investigation. Once on the premises, the inspector or investigator can stay only for as long as he or she thinks necessary for the purpose. The word "thinks" is used in the new section; these amendments would replace it with the words "reasonably believes".
It is not necessary, however, to write in an express reasonableness requirement. Inspectors and investigators perform public functions and the ordinary principles of administrative law apply to their exercise of powers. If no reasonable person in the inspector's or investigator's position could think that to require access to the premises in question will advance the investigation, the power to require access will not be available.
An inspector or investigator's conclusion about how long he or she needs to stay on the premises will similarly be qualified. For example, if an inspector or investigator thinks that he or she needs to stay on the premises for the rest of the day, but a reasonable person in the inspector's or investigator's position would consider it necessary to stay for only half an hour, it will be unlawful for the inspector or investigator to stay for more than half an hour.
We are not seeking to give inspectors and investigators unlimited powers or to lay down entirely subjective tests for the exercise of those powers which would render such exercise effectively unchallengeable. But it would be undesirable to write express tests of reasonableness into this clause. That would have an uncertain effect on other powers in this part of the Bill which are not expressly qualified in that way.
Perhaps I should add that the power is not one of search and seizure, and no force can be used. That is why there is no question of a search warrant. In the light of what I have said, I ask the noble Lord to withdraw the amendment.
Lord Hodgson of Astley Abbotts: I think that the Minister was saying that, in administrative law, "thinks" equals "reasonably believes"—that they are effectively one and the same. If he will forgive me, I would like to reflect on that, talk outside and see if I am supported in that view. In the mean time, however, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hodgson of Astley Abbotts moved Amendment No. 93:
Page 23, line 33, at end insert "during normal office hours"
The noble Lord said: We continue, for the last time, with amendments to Clause 20. In moving Amendment No. 93, I shall also speak to Amendments Nos. 94, 96 and 97. Many of the arguments which applied to the previous set of amendments concerning overly broad and imprecise drafting of the Bill also apply to the issues dealt with in the amendments. The requirement for the power to be exercised only at reasonable times appears to regulate both the time of gaining entry and the time during which the inspector or investigator may remain on the premises. However, although the Explanatory Notes comment that:
"A visit to business premises outside the company's trading hours would not ordinarily be regarded as taking place at a reasonable time",
there is no guidance in the draft provisions themselves as to what that reasonable time might be.
Indeed, it seems to be contemplated in the draft provisions—proposed new Section 453B(5), at line 27 of page 24—that the inspectors or investigators can gain entry and remain on the premises when no person engaged in the company's business is present. Again there is no guidance on the period during which the inspectors or investigators can remain on the premises—which may, it should be noted, be domestic premises. The only requirement to be fulfilled is that the period is to be such as the inspectors or investigators judge necessary.
Under the circumstances it is desirable to limit the power, which could otherwise be used oppressively but with little prospect of effective challenge to obtain redress. We suggest that the right of entry should be restricted to normal office hours—hence Amendments Nos. 93 and 94. There is no justification for permitting dawn raids on the unilateral, unfettered decision of one person, much less for enabling inspectors or investigators to demand access at night. Simply relying on a reasonable time requirement to prevent such activity is insufficient.
Similarly, we suggest that the normal maximum period for remaining on the premises should be limited to one month. It should be remembered that that could include remaining in a person's home where the home is used for business purposes. Nevertheless, we accept there may be cases where that period would be insufficient. As the use of the power in the first place has to be authorised by the Secretary of State, it should be left to the Secretary of State to authorise any longer period for remaining on premises. That can be seen in Amendment No. 96, which inserts a provision that the inspector or investigator may remain on the premises for such period as he thinks necessary,
"not exceeding one month (or such longer periods as may be authorised by the Secretary of State)".
Moving from reasonable hours we come to "relevant premises". In proposed new Section 453A(3) relevant premises are defined as,
"premises which the inspector or investigator believes are used (wholly or partly) for the purposes of the company's business".
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According to the Explanatory Notes, at paragraph 119:
"If only a part of premises is used for the company's business, the power to require entry will enable the inspector or investigator to gain access to, and remain on, that part. This may involve passing through parts of the premises not used by the company … 'Relevant premises' also include any part of domestic premises which the inspector or investigator believes is used by the company for the purposes of its business, even if that part is also used for other purposes. The … investigator will be able to move around 'relevant premises' to which he or she has gained access and will not be confined only to a limited area (for example, one room".
If that is the intention, we are not clear that the drafting of the Bill achieves it. In the light of "wholly or partly", it could be construed that a house, part of which contains an office, would qualify in its entirety as "relevant premises". There is nothing in the draft statute that explicitly restricts the investigator's access to parts of the premises used for the company's business.
The proposed power goes too far in permitting inspectors and investigators to enter and remain on domestic premises. It is to be remembered that there is already an existing power to obtain a search warrant in Section 448 of the Companies Act 1985. The general utility of the proposed new power is surely not sufficient justification for the possible interference with privacy and family life in cases where the company's premises are also used for domestic purposes. That will probably be most often the case where the company under scrutiny is small.
Those reasons suggest that it would be right to include Amendment No. 97, which inserts at the end of proposed new Section 453A(3) in Clause 20 the requirement that the definition of "relevant premises" should,
"exclude any premises (or parts of premises) which are occupied by any individual as a dwelling".
I beg to move.
Lord Sainsbury of Turville: The amendments seek in different ways to limit the scope of the powers in proposed new Section 453A, and, I would argue, to restrict the likely effectiveness of the provisions.
Proposed new section 453A provides powers for inspectors and investigators to require access to, and to remain on, premises that they believe are used wholly or partly for the purposes of the business of the company they are investigating.
It can be critical to an investigation for inspectors or investigators to be able to gain access to company premises or to other premises where records of the company are held or its business is carried on. In many cases, that access is gained with the consent of the company under investigation. But there are a number of investigations each year where the progress of the investigation is frustrated by the delaying tactics of the company or its officers. In those cases, the ability to get on to the company's premises and to meet the people involved will enable the inspectors or investigators to exercise more effectively their powers to require the production of documents and information under Sections 434 or 447.

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Bearing that in mind, perhaps I may take each amendment in turn. Amendments Nos. 93 and 94 seek to limit the powers in new Section 453A so that they can be exercised only during "normal office hours". But it is very difficult to be certain about what are "normal office hours". Whose normal office hours are we talking about: those of the company under investigation, or those of businesses generally? Companies have widely differing hours of business; for example, although many companies may trade between 9 a.m. and 5.30 p.m., a company operating a call centre that wants to reach people at home might trade during weekday evenings.
I assume that the intention is that the powers should be exercisable only during the normal business hours of the company under investigation. Some companies do not have normal or regular hours of business at all. Further, it is the company itself that determines what are its normal hours of business, and some companies might vary their hours precisely in order to frustrate an investigation. So it is highly undesirable to attempt to limit the powers in that way.
However, we have sought to place a sensible limitation on the times when those powers can be exercised. We have provided that the powers can be exercised only at reasonable times. That is an important safeguard. A visit to premises at a time of day when a company that has regular trading hours is not trading is unlikely to be regarded as taking place at a reasonable time. But the circumstances will determine that. We cannot make hard and fast rules.
Amendment No. 96 seeks to control the amount of time that an inspector or investigator can spend on premises to which he or she has gained entry under new Section 453A. The apparent intention is to provide that an inspector or investigator can stay for a month at most, unless he or she is authorised to stay for longer by the Secretary of State.
I suggest that the amendment is unnecessary. The first line of subsection (2) qualifies not only paragraph (a) of that subsection but also paragraph (b). So, although an inspector or investigator can stay for as long as he or she thinks necessary to further his or her investigation, the inspector or investigator cannot remain on the premises at any time that is not a reasonable time. The inspector or investigator will have to leave when it ceases to be reasonable for the company or other occupier to have him or her there. I suggest that, in most circumstances, that will happen in a matter of hours rather than days or weeks.
By providing expressly, as this amendment seeks to do, that an inspector or investigator cannot stay for more than a month without additional authorisation, we would be implying that it could be perfectly reasonable in many cases for an inspector or investigator to remain on premises continuously for a month. That would be undesirable. It would weaken the safeguard provided by the "reasonable times" test.
Of course, an inspector or investigator may visit the same premises on more than one occasion. But the company is protected because the inspector or investigator will need to have the necessary grounds to
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require entry on each occasion. I should add that I do not think it would be desirable to have any specific limit on the amount of time which inspectors or investigators can spend on premises. The "reasonable times" test is a real safeguard, but it also allows each case to be judged on its particular circumstances.
Amendment No. 97 seeks to exclude people's homes from the definition of "relevant premises" in new Section 453A. "Relevant premises" are the premises to which an inspector or investigator is to be able to require access under this new section. As the new provisions stand, an inspector or investigator will be able to require access to any premises which he or she believes are used for the business of a company under investigation, including premises which are used both for that purpose and for other purposes too. This includes residential premises—for example, a director's home—if the inspector or investigator believes that these premises are also used for the purposes of the company's business.
It is important that inspectors and investigators should be able, in appropriate circumstances, to have access to residential premises used for a company's business. In practice, the companies which are investigated under Section 447 are predominantly small and it is under Section 447 that the overwhelming majority of company investigations are carried out. Many small companies use the home address of, for example, one or more of their directors as their registered office or trading address, and this address may be the only place where documents relevant to an investigation are kept. Indeed, in some cases the company's only business premises may also be residential premises.
There are great benefits to an investigation in having access to premises used for the company's business. It speeds up the process of acquiring relevant documents and information, helps to avoid possible obstruction and enables the inspectors or investigators to get a clear picture of the company's activities. This can only help the effective uncovering of fraud and malpractice. "Premises" here refers specifically to that part of the premises used for business. So that issue is taken into account in that way. In the light of what I have said, I would invite the noble Lord to withdraw Amendment No. 93 and not to move Amendments Nos. 93 to 97.
Lord Hodgson of Astley Abbotts: As I understand it, the Minister seems to think that writing in "one month" undermines the safeguards that are built into the Bill; that the "reasonable times" test is better; and that there is no justification for concern about people's privacy.
The amendments came indirectly from Mr George Bompas QC, a very experienced company lawyer in this field. He felt quite strongly that the balance was being shifted the wrong way. I should like to read what the Minister has said, talk to Mr Bompas to see whether he feels we need to take the matter further—he obviously knows a great deal more about it than I do—and, if necessary, bring it back again at the next stage. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 94 to 97 not moved.]
Clause 20 agreed to.
Clauses 21 and 22 agreed to.
Schedule 2 [Minor and consequential amendments relating to Part 1]:
Lord Sainsbury of Turville moved Amendments Nos. 98 and 99:
Page 53, line 35, at end insert—
"( ) An order under subsection (3) must not

(a) amend Schedule 15C by specifying a person unless the person exercises functions of a public nature (whether or not he exercises any other function);

GC 264

(b) amend Schedule 15D by adding or modifying a description of disclosure unless the purpose for which the disclosure is permitted is likely to facilitate the exercise of a function of a public nature."

Page 60, line 18, at end insert—
"A disclosure for the purpose of enabling or assisting a body appointed under section 14 of the Companies (Audit, Investigations and Community Enterprise) Act 2004 (supervision of periodic accounts and reports of issuers of listed securities) to exercise functions mentioned in subsection (2) of that section."
On Question, amendments agreed to.
Schedule 2, as amended, agreed to.
Lord Evans of Temple Guiting: This may be a convenient moment for the Committee to adjourn until Thursday at 3.15 p.m.
The Deputy Chairman of Committees (Lord Haskel): The Committee stands adjourned until Thursday.
The Committee adjourned at twenty-six minutes before eight o'clock.

  Ulster-Scots Agency
  Ulster-Scots Agency
  Food Safety Promotion Board
  Food Safety Promotion Board
  Northern Ireland: Smoking
  Northern Ireland: Smoking
  Tourism Ireland
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  House of Lords Refreshment Department: "Fair Trade" Produce
  House of Lords Refreshment Department: "Fair Trade" Produce
  Guantanamo Bay: British Detainees
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  Afghanistan
  Afghanistan
  China: Human Rights
  China: Human Rights
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  Oryx Natural Resources
  Oryx Natural Resources
  Entente Cordiale
  Entente Cordiale
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  Uganda
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  Licensing Act 2003
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  Food: Country of Origin Labelling
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  Defra: Consultants and Professional Advisers
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  Common Agricultural Policy
  Common Agricultural Policy
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  Regulations: Cost to Business
  Regulations: Cost to Business

  Draft Regional Transport Strategy for the South-East
  The Minister of State, Office of the Deputy Prime Minister (Lord Rooker)
  My right honourable friend the Minister for Housing and Planning has made the following Written Ministerial Statement.

  My right honourable friend the Deputy Prime Minister is today publishing for public consultation proposed changes to the draft regional transport strategy (RTS) for the south-east. They follow the public examination into the draft RTS in July 2003 and the panel report in October 2003.

  RTSs are an integral part of regional planning guidance (RPG) and the draft RTS for the south-east represents a revision to RPG9, as published in March 2001. On commencement of the Planning and Compulsory Purchase Bill the RTS will be part of a statutory regional spatial strategy (RSS).

  Other partial reviews of RPG9 are at various stages in the process. In particular, a public examination into the Milton Keynes and South Midlands sub-regional strategy is imminent, and the Secretary of State's proposed changes for the Ashford growth area will shortly be published.

  The RTS aims to achieve a transport system which progressively reaches the standards of the best in north-west Europe by promoting management of and investment in the system; rebalancing the structure and use of the transport system in favour of more sustainable modes; and supporting the regional spatial strategy, particularly managing and investing in interregional corridors and delivering urban renaissance and sub-regional objectives. This approach should also inform local authorities and other agencies in preparing relevant regional and local strategies.

  Overall the panel considered the draft RTS to be broadly compatible with RPG9, with commendably focussed policies. The panel did, however, recommend many changes. Aspects of the strategy which the panel proposed changes to include the selection of strategic corridors (the regional frame), the ranking of priority projects in the investment frameworks, car parking standards, community and demand-based transport, and walking and cycling.

  The panel supported the identification and development of regional transport hubs and connecting spokes as a core plank in the strategy. In place of the regional frame the panel identified the region's more important international gateways and interregional movement corridors. Alongside measures to facilitate urban renewal these elements were viewed as priorities for investment to deliver the spatial strategy.
  WS 30
  The Government support these aims and are grateful for the recommendations of the panel. However, one change to the panel's recommendations is necessary to ensure the strategy and its components are more coherently focussed and provide transparent direction for the future development of the regional strategy.

  A key issue for the region is the treatment of priorities. The panel proposed a priority list of 15 schemes, made up of nine heavy rail, one light rail, two bus and three road schemes. While we view establishing regional priorities as a key element in a future RTS, we were unconvinced that the panel identified the most important regional priorities.

  More specifically, the criteria used to identify priorities and the way in which the criteria were applied did not fully reflect the draft government guidance, which was published after the examination concluded. Furthermore, the application of the criteria was not transparent and resulted in a priority list that was largely focussed on a single mode and failed to identify affordability issues.

  The process of comprehensively reviewing R PG9 has already begun. As part of this work the regional assembly (RA) is intent on improving the evidence base by developing a robust approach to prioritisation, an activity that I am particularly keen to see progress on.

  I have today written to the RA with the proposed changes indicating areas where views are particularly sought from interested parties. There will now be a public consultation period on the proposed changes, which will end on 21 May.

  Copies of the relevant documents are available in the Libraries of the House and have been provided for all of the region's MPs, MEPs and local authorities.

  Armed Forces Personnel Administration Agency: Performance Targets 2004–05
  The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Bach)
  My honourable friend the Parliamentary Under-Secretary of State for Defence (Mr Ivor Caplin) has made the following Written Ministerial Statement.

  The key targets have been set for the chief executive of the Armed Forces Personnel Administration Agency (AFPAA) for the financial year 2004–05. The targets build upon progress made by the agency since it formed on 1 April 1997 and reflect the high level of service delivery required for pay, pensions and allowances, and a change programme to deliver new harmonised joint personnel administration for the Armed Forces.

  To deliver pay

  To make 99.9 per cent of all pay payments by the due date (excluding late payments caused by events determined to be outside the control of the agency).
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  To keep the monthly error rate of accuracy for the volume of payments within 0.1 per cent.

  To deliver pension services

  To make 99 per cent of all pension payments (including new awards) by the due date. (excluding late payments caused by events determined to be outside the control of the agency).

  To keep the monthly error rate of accuracy for the volume of payments within 0.1 per cent.

  To support the delivery of joint personnel administration programme

  Subject to main gate approval, joint personnel administration partnering agreement to be signed, by 30 September 2004 for the manufacture, roll-out and delivery.

  To commence the roll-out of joint personnel administration core system for the Royal Air Force, Royal Navy and Army by October 2005, May 2006 and October 2006 respectively.

  To transform the agency to deliver the full potential of the joint personnel administration environment

  To deliver joint personnel administration centre capability through six stages, commencing June 2004 Stage 1 and March 2005 Stage 2.

  To deliver 100 per cent of key critical path milestones in agency transition plan.

  To deliver a cost-effective change programme in accordance with departmental priorities

  To deliver 96 per cent of major change to ensure individual development projects are delivered to specification and schedule.

  To deliver 96 per cent of all minor change in accordance with joint change management team plans agreed by partner and customer.

  To develop targets for implementation in 2005–06 that will measure the delivery of pay, pensions and personnel services against service level agreements

  To achieve the agreed service levels of all performance assessment indicators (levels 4 and 5 of current contract Schedule 2) not already included in key targets 1 and 2.

  To meet approved efficiency targets for the delivery of core services

  To reduce the unit cost by 6 per cent in 2004–05 which will contribute to a 12 per cent reduction over a four-year period from 2002–03 for the delivery of core pay and personnel administration.

  Health Services for Prisoners
  The Parliamentary Under-Secretary of State, Department of Health (Lord Warner)
  My honourable friend the Parliamentary Under-Secretary of State for Health (Dr Stephen Ladyman) has made the following Written Ministerial Statement today.

  I am making this Statement with my honourable Friend the Minister for Correctional Services and Reducing Reoffending, Mr Paul Goggins.
  WS 32
  The prison population demonstrates high levels of morbidity, particularly in areas such as mental health and substance misuse. Historically, primary healthcare services to prisoners have been secured and delivered by the Prison Service independently of the NHS.

  A formal partnership between the Prison Service and the NHS was launched in 2000 to modernise health services for prisoners. In 2002, the Government announced their intention to move this partnership on to a new phase, with the Department of Heath assuming overall financial responsibility for these services from April 2003 and the transfer of full commissioning responsibility for prison health services to NHS PCTs by April 2006. A development network of prisons and PCTs was established to provide a testbed for this transfer at operational level.

  We are today announcing the NHS primary care trusts that will assume responsibility for commissioning primary healthcare services in their local prisons from April 2004. This is the initial phase of transfer of responsibility and involves 22 PCTs which have prisons within their boundaries. Of these 22, four have delegated commissioning responsibility to neighbouring PCTs, giving 18 PCTs the lead for local prison health partnerships.

  Covering 34 prisons across England, the 18 lead primary care trusts have demonstrated a clear understanding of the health needs of their local prison populations and have, in partnership with the prisons themselves, developed robust plans to improve health services for those populations. Funding for primary health services that was previously allocated through the Prison Service will be transferred to the relevant primary care trusts from April 2004. Funding for NHS secondary care services provided to prisoners is already within the financial baselines of PCTs. Investment in health services for prisoners is set to increase by over £40 million a year over the three-year period to March 2006. Responsibility for commissioning health services in all publicly run prisons in England will transfer to local primary care trusts by 1 Apri 1 2006.

  The 18 partnerships where commissioning responsibility will transfer from 1 April are:

  PCT

  Prisons

  Castlepoint & Rochford

  Bullwood Hall

  Doncaster East

  Lindholme

  Moorland

  Durham & Chester-le-Street

  Frank land

  Durham

  Low Newton

  Exeter

  Channings Wood1

  Dartmoor2

  Exeter

  Heart of Birmingham

  Birmingham

  Hounslow

  Feltham

  Huntingdon

  Littlehey

  Islington

  Holloway

  Pentonville

  Lambeth

  Brixton

  Leeds West

  Leeds

  North Liverpool

  Liverpool

  WS 33

  PCT

  Prisons

  Northumberland

  Acklington

  Castington

  Reading

  Reading

  Richmond & Twickenham

  Latchmere House

  South West Dorset

  Dorchester

  Guys Marsh3

  Portland

  Shepton Mallet4

  The Verne

  Weare

  Suffolk Coast

  Hollesley Bay

  Warren Hill

  WS 34

  PCT

  Prisons

  Swale

  Elmley

  Standford Hill

  Swaleside

  West Lincolnshire

  Lincoln

  Morton Hall

  1 Managed by Exeter on behalf of Teignbridge PCT

  2 Managed by Exeter on behalf of South Hams and West Devon PCT

  3 Managed by SW Dorset on behalf of North Dorset PCT

  4 Managed by SW Dorset on behalf of Mendip PCT